Details of borrowings:
(i) Cash Credit (CC) mentioned in (a) amounting to ' Nil (March 31, 2023: ' Nil) and Over draft (OD) mentioned in (b)
amounting to ' Nil (March 31, 2023: ' 157.08 Lakhs obtained from Indian Bank ' 26.24 Lakhs and from HDFC Bank' 130.84 Lakhs) are secured by way of:
Primary Security: Inventories, Other Current Assets and Trade Receivables
Collateral Security:
HDFC Bank
- Signature Tower Building, 11 Kothaguda Village and 12 floor of Signature Tower building of 25000 Sq Ft, SY No:6 Kondapur, Kothaguda-500084.
- Delhi 1, Apartment NH 24 adjacent to Akshardham No. T-27-06-04, Fifth floor of 1969 Sq Ft, Common Wealth Games, Village - 110092.
- Delhi 2, Apartment NH 24 adjacent to Akshardham No. T-27-01-03, Ground floor of 2654.3 Sq Ft, Common Wealth Games, Village - 110092.
- Delhi 3, Apartment NH 24 adjacent to Akshardham No. T-20-07-04, Sixth floor of 1969.52 Sq Ft, Common Wealth Games, Village - 110092.
- Delhi 4, Apartment NH 24 adjacent to Akshardham No. T-20-01-02, Ground floor of 2654.32 Sq Ft, Common Wealth Games, Village - 110092.
Indian Bank
- Corporate Office/Building Admeasuring 2540 Sq yards Located at B-42, Industrial Estate, Sanath nagar, Hyderabad-500018.
EXIM Bank
- Industrial Plot of Land Admeasuring 2034.10 Sq Meters located at Plot No 99/2, IDA Cherlapally, Cherlapally village, Kapra Mandal, Medchal, Telangana.
ICICI Bank
- Plot No: 35,36,37 Hardware Park, Maheshwaram Mandal, Raviyala Village, Hyderabad - 501510.
AXIS Bank
- First Pari Passu charge on entire Current Assets of the Company, both Present and Future and the First Pari Passu charge on Collateral Property shared along with ICICI.
Other Details:
The Avg.Rate of Interest of CC is 9.73% p.a of and Cash credit is the sub-limit of ' 3,000 Lakhs of total limits of ' 25,600 Lakhs which consists of Bank Guarantee, Letter of Credit, Pre and Post Shipment Credit, PSR and Corporate Card Limits.
(ii) Borrowings mentioned in (c) are secured by the hypothecation of respective vehicles for which loans are availed.
(iii) Borrowings mentioned in (e) is the financial liability component of CCDs issued during the previous year which is carried at interest rate of 8.50% p.a.
36. EARNINGS PER SHARE
Basic EPS amounts are calculated by dividing the profit for the year attributable to equity holders by the weighted average number of Equity shares outstanding during the year
Diluted earnings per share is calculated by dividing the profit/(loss) attributable to equity holders (after adjusting for interest on the Compulsory convertible debentures) by the weighted average number of equity shares outstanding during the period/year plus the weighted average number of equity shares that would be issued on conversion of all the dilutive potential equity shares into equity shares.
(b) Defined benefit plan
The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of continuous service gets a gratuity on retirement at 15 days last drawn basic salary for each completed year of service. The scheme is funded with an insurance Company in the form of a qualifying insurance policy.
The weighted average duration of the defined benefit plan obligation at the end of the reporting period (based on discounted cash flows 4.26 years. (March 31, 2023: 4.17 years).
38. CONTINGENT LIABILITIES AND COMMITMENTS
(a) Contingent liabilities
I) Claims against the Company not acknowledged as debts:
i) On account of Direct Tax matters - ' 441.48 Lakhs (March 31, 2023: ' 441.48 Lakhs)
ii) On account of Indirect Tax matters (Central Excise Duty) - ' 823.40 Lakhs (March 31, 2023: ' 823.40 Lakhs)
The Company is contesting the demands and the management, including its tax advisors, believe that its position will likely be upheld in the appellate process with respect to Direct Tax and Indirect tax matters. No tax expense has been accrued in the financial statements for the tax demand raised. The Management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the Company's financial position and results of operations.
Note:
Income tax demands mainly include the appeals filed by the Company before various appellate authorities against the disallowance by income tax authorities of certain expenses being claimed and and the computation of, or eligibility of, the Company's use of certain tax incentives or allowances. During the year, the Company has reassessed the existing possible obligations, accordingly considered under contingent liability.
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II) Guarantees
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Particulars
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March 31, 2024
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March 31, 2023
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Corporate Guarantee issued infavour of customer(s) of
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Unistring Tech Solutions Private Limited
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1,012.44
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(b) Commitments
Estimated amount of contracts remaining to be executed on capital account and not provided for:
At March 31, 2024, the Company has commitments of ' 412.96 Lakhs relating to construction of new factory building at Maheswaram (March 31, 2023: ' 36.32 Lakhs relating to renovation of factory buildings at Maheswaram).
Key managerial personnel of the Company is covered by the Company's gratuity policy and is eligible for compensated absences along with other employees of the Company. The proportionate amount of gratuity and compensated absences cost pertaining to them have not been included in the aforementioned disclosure as these can not be determined on an individual basis.
The transactions with related parties are made on terms equivalent to those that prevail in arm's length transactions. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates. Outstanding balances at the year-end are unsecured.
Operating Segments
The Company's operations predominantly consist of Military Training & Operations. The Company's Chief Operating Decision Maker (CODM) review the operations of the Company as a single reportable segment and operations from other than Training & Simulation does not qualify as a reportable segment as these operations are not material. Hence there are no reportable segments under Ind AS 108. Accordingly, the Company has only one operating and reportable segment, the disclosure requirements specified in paragraphs 22 to 30 are not applicable.
The fair value of trade receivables, other financial assets, cash and cash equivalents, other bank balances, loans, borrowings, trade payables and other financial liabilities approximate their carrying amount largely due to short-term nature of these instruments.
Investment in subsidiaries have been accounted at historical cost. Since, these are scoped out of Ind AS 109 for the purpose of measurement, the same are not disclosed in the table above.
B. Measurement of fair values i. Transfer between Level 1 and 2
There have been no transfers from Level 2 to Level 1 or vice-versa in the current year and no transfers in either direction in previous year
43. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company's financial liabilities comprise mainly of borrowings, trade payables and other payables. The Company's financial assets comprise mainly of investments, cash and cash equivalents, other balances with banks, loans, trade receivables and other receivables.
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 Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework. In performing its operating, investing and financing activities, the Company is exposed to the Credit risk and Liquidity risk.
i) Market Risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes. The
Company's exposure to market risk is primarily on account of interest rate risk. Financial instruments affected by market risk include loans, borrowings and deposits.
a. Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's debt obligations with floating interest rates.
The Company is having current borrowings in the form of working capital, Compulsory Convertible Debentures (CCDs) and current maturities of vehicle loan. There is a fixed rate of interest in case of vehicle loan, Compulsory Convertible Debentures (CCDs) hence, there is no interest rate risk associated with these borrowings. The Company is exposed to interest rate risk associated with working capital facility due to floating rate of interest.
The following analysis is performed for reasonably possible movements in key variables with all other variables held constant, showing the impact on profit before tax. The correlation of variables will have significant effect in determining the ultimate impact of interest rate risk, but to demonstrate the impact due to changes in variables, variables had to be changed on an individual basis. It should be noted that movements in these variables are non-linear The method used for deriving sensitivity information and significant variables have not been changed from the previous period.
As at March 31, 2024 and March 31,2023, Current borrowings (Working capital facility) of ' Nil Lakhs and ' 157.08 Lakhs, respectively, were subject to variable interest rates.
b. Foreign currency risk
Foreign currency 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 exposure to the risk of changes in foreign exchange rates relates primarily to the Company's operating activities (when revenue or expense is denominated in a foreign 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.
Any movement in the functional currency of the various operations of the Company against major foreign currencies may impact the Company's revenue in international business. The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks.
Exchange gain of ' 53.21 Lakhs and ' 20.25 Lakhs has been recognised in the standalone statement of profit and loss for the years ended March 31, 2024 and March 31, 2023 respectively.
payments are made against bank guarantee which safeguards the credit risk associated with such payments. Impairment losses on financial assets have been made after factoring contractual terms and other indicators.
Financial instruments and cash deposits
The cash and cash equivalent with banks are in the form of short term deposits with maturity period of up to 1 year The Company has a well structured Risk Mitigation Policy whereby there are present limits for each bank based on its net worth and earning capacity which is reviewed on a periodic basis. The Company has not incurred any losses on account of default from banks on deposits.
The credit risk in respect of other financial assets is negligible as they are mostly due from government department/other parties.
Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the top management on an annual basis, and may be updated throughout the year subject to approval of the Company board of directors.
The limits are set to minimize the concentration of risks and therefore mitigate financial loss through counterparty's potential failure to make payments.
iii) Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet commitments associated with financial instruments that are settled by delivering cash or another financial asset. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value.
ii) Credit Risk
Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Company. Credit risk arises from credit exposures from trade receivables, advances given to suppliers (for procurement of goods, services and capital goods), cash and cash equivalent with banks, security deposits and loans.
Trade receivables and other receivables
the credit risk of the Company is managed at a corporate level by the risk management committee which has established the credit policy norms for its customers. The Company expects to continue to derive most of its revenue from the Indian Defence Services under the contracts of the Ministry of Defence (MoD),consequent to which the Company has a negligible credit risk associated with such receivables.
Provision for expected credit losses
As the debtors are predominantly the Government of India (Indian Defence Services, Ministry of Home Affairs),Public Sector Undertakings where the counter-parties have sufficient capacity to meet the obligations and where the risk of default is negligible. Accordingly, impairment on account of expected credit losses is being assessed on a case to case basis in respect of dues outstanding for significant period of time as per the accounting policy. Further, management believes that the unimpaired amounts that are due is collectable in full, based on historical payment behaviour and extensive analysis of customer credit risk.
In a few cases credit is extended to customers based on market conditions after assessing the solvency of the customer and the necessary due diligence to determine credit worthiness. Advance
The Company has an established liquidity risk management framework for managing its short term, medium term and long term funding and liquidity management requirements. The Company's exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Company manages the liquidity risk by maintaining adequate funds in cash and cash equivalents. The Company also has adequate credit facilities agreed with banks to ensure that there is sufficient cash to meet all its normal operating commitments in a timely and cost-effective manner
The table below analyses derivative and non-derivative financial liabilities of the Company into relevant maturity groupings based on the remaining period from the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
At present, the Company does expects to repay all liabilities at their contractual maturity. In order to meet such cash commitments, the operating activity is expected to generate sufficient cash inflows.
44. CAPITAL MANAGEMENT
For the purpose of the Company's capital management, capital includes issued capital and all other equity reserves attributable to the equity shareholders of the Company. The primary objective of the Company when managing capital is to safeguard its ability to continue as a going concern and to maintain an optimal capital structure so as to maximize shareholder value.
Gearing ratio:
The Company monitors capital using gearing ratio, which is net debt divided by total capital plus net debt. The Company's policy is to keep the gearing ratio within 50%. In order to achieve this overall objective, the Company makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. The Company aims to ensure that it meets the financial covenants attached to the interest bearing loans and borrowings that define the capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowings in the current year
*As at March 31, 2024 and March 31, 2023, Gearing Ratio is negative on hence represented as Nil.
45. EMPLOYEE STOCK OPTION SCHEME
a) The objective of the Employee Stock Option Scheme is to attract and retain talent and align the interest of employees with the Zen Technologies Limited as well as to motivate them to contribute to its growth and profitability. The Company adopts Senior Executive Plan in granting Stock options to its Senior Employees. (Employee Stock Option Plan-2021).
During the Annual General Meeting held on 28 August 2021, Zen Technologies Limited introduced the Employee Stock Option Plan-2021, which was subsequently ratified by the shareholders on September 29, 2022, in accordance with SEBI Regulations. The plan received in-principle approval from the National Stock Exchange of India Limited and BSE Limited to issue a maximum of
4,000,000 equity shares with a face value of ' 1/- each, under the Zen Technologies Limited Employee Stock Option Plan-2021.
To facilitate the implementation of the ESOP scheme, the ESOS trust borrowed funds of ' 10 Crores from the Company, as approved by the Board of Directors on 30 October 2021. The trust utilized these funds to purchase 4,81,524 shares from the secondary market, with a total consideration of ' 966.13 Lakhs, for allocation to eligible employees under the ESOS scheme. And trust further borrowed as of March 31, 2023, these shares were acquired. During the year, ESOS trust borrowed funds of ' 5.75 Crores and utilised such funds to Purchase 1,59,876 shares from secondary Market with total consideration of ' 601.53 Lakhs.
During the Nomination and Remuneration Committee meeting on October 28, 2023, it was decided, in compliance with the Zen Technologies Limited Employee Stock Option Plan-2021 and relevant laws and regulations, to grant 22,500 Employee
Stock Options (ESOPs) to eligible employees as identified and determined by the committee. The exercise price for these options is set at ' 100/- (Rupees Hundred Only) per option.
In the standalone financial statements, the Company had adopted the policy of consolidating the ESOP Trust, the related loan and advances appearing in the standalone financialstatements of the Company were eliminated and investment in own shares the Company held by the trust is shown as treasury shares in "other equity".
As at March 31, 2024, the ESOP Trust purchased 6,41,400 shares from secondary market for an aggregate consideration of ' 1567.66 Lakhs.
During the year, Trust has repaid amount of ' 127.6 Lakhs from the proceeds realised on exercise of options
The fair value of the share-based payment options granted on is determined using the black scholes model using the following inputs at the grant date which takes in to account the exercise price, the term of the option, the share price at the grant date, and the expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
46. EXCEPTIONAL ITEMS
During the FY2021-22 Company filed total insurance claim of' 712.00/- Lakhs, Out of which entity received an ad-hoc amount of ' 200.00/- Lakhs in the previous year and the total insurance claim has been revised to a total of ' 656 Lakhs under the assessment with Insurance Company against the claim lodged with reference to a loss of property, plant and equipment that were destroyed due to a fire at the Company's Demonstration Centre located at Maheshwaram Hardware Park near Shamshabad Airport on November 30, 2021.During the year the compnay had additoinally received ' 240.90/- Lakhs as full and final settlement from the insurance Company.
The entity has recognised the expenditure incurred in the process of replacing the assets lost and renovation of building which is damaged and the same has been accounted as Capital work-in-progress (Refer Note 4C) after capitalization of identifiable items which are ready for intended use by the management.
Further, Company has recognised the loss of ' 27.96 Lakhs pertaining to a loss of property plant and equipment under exceptional items in the Statement of Profit and Loss during the financial year 2021-22.
During the Current financial year the Company has received an amount of ' 240.90/- Lakhs as full and final settlement from the insurance claim out of total revised claim of ' 656 Lakhs and thus the Company has received ' 440.90/- Lakhs as a total claim from the insurance Company.
48. DIVIDEND PROPOSED AND PAID
The final dividend on shares is recorded as a liability on the date of the approval by the shareholders. The Company declares and pays dividends in Indian Rupees. Companies are required to pay/distribute dividend after deducting applicable withholding income taxes. The remittance of dividends outside India is governed by Indian law on foreign exchange and is also subject to withholding tax at applicable rates.
Net after elimination of amount of ' 1.28 Lakhs (' 0.28 Lakhs in March 31, 2023) pertaining to purchase of shares (Treasury Shares) held by Zen Technologies Limited Employee Welfare Trust for ESOP Scheme-2021.
During the year ended March 31, 2024, on account of final dividend for FY 2022-23, the Company has incurred a net cash outflow of ' 166.81 Lakhs. The Board of Directors at its meeting on May 4, 2024, recommended a final dividend of ' 1/- per equity share for the financial year ended March 31, 2024. This payment is subject to the approval of shareholders in the ensuing Annual General Meeting (AGM) to be held in September 2024 and if approved, equity shares for considering dividend which would result in a net cash outflow of approximately ' 840.44 Lakhs.
49. COMPULSORILY CONVERTIBLE DEBENTURES
On 25 November 2021, the Company has made a preferential allotment of 40,64,267 10% Compulsorily convertible debentures having face value of ' 213/- each, for cash, for an aggregate amount of up to ' 86,57,65,551/-, which shall be converted into equal number of equity shares of ' 1/- each at a premium of ' 212/- with in a period of 18 months.
We have accounted this instrument as per Ind AS 109. Financial Instruments, by considering the same as Compound Financial Instrument. This instrument consists of 2 components.
1) Mandatory interest payment by the Company for a fixed amount at a fixed future date and this component is treated as a Financial liability - Borrowings (Note-18 & 21). The financial liability is done by measuring the net present value of
the discounted cashflows of interest payment. The discount rate we have considered is HDFC Bank's CC Rate of interest which is 8.50% p.a as the same have tenure near to the CCD.
2) As the holder of the instrument has the option to convert the
CCDs into Equity shares on or before 18 months and even in case of holder not exercising the conversion option before 18 months, each CCD shall be automatically be converted into Equity share of ' 1/- each at a premium of ' 212/- on the last date of the 18 month i.e May 24, 2023 without any action of the investor Hence we have treated this component as a equity and presented the same under ""Other Equity"" in Note 17.7. The carrying amount of the equity instrument is determined by deducting the fair value of the financial liability from the fair value of the CCDs as a whole.
On May 24, 2023,as the period of 18 months ends the CCDs has been converted in to the Equity Shares of ' 1/- each at a premium of' 212/-, as a result of which there is an increase in the Share capital (Note-16)
50. RESEARCH & DEVELOPMENT EXPENSES
There are 2 units in which Research & Development operations were conducted by the Company. Location of the units were as follows:
Unit - I: B-42 Industrial Estate, Sanath Nagar, Hyderabad - 500018.
The advance given to others subsidiaries are in the nature of trade
advances against orders for supply of goods & services and hence
not require to disclose as per regulation 53 (f) read with para A of
Schedule V of Securities And Exchange Board Of India (Listing
Obligations And Disclosure Requirements) Regulations, 2015.
52. OTHER STATUTORY INFORMATION
(i) The Company does not hold any Investment Property.
(ii) The Company has not revalued its property, plant and equipment and intangible assets during the year
(iii) The Company do not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder.
(iv) The Company has not been declared as wilful Defaulter by any bank or financial institution or other lender
(v) The Company do not have any transactions with companies struck off under Section 248 of the Companies Act, 2013 or Section 560 of Companies Act, 1956.
(vi) The Company do not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
(vii) The Company have not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries); or
(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
(viii) The Company have not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries); or
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(ix) The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year
(x) The Company have 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, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.
(xi) The Company has borrowings from banks, secured by hypothecation of inventories and by charge on book debts and other assets of the Company, and quarterly returns or statements of current assets filed by the Company are in agreement with books of accounts without any material discrepancies.
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