b) Terms and rights attached to equity shares
The Company has 662,611,445 equity shares having (March 31, 2024: 530,089,156 equity shares) par value of H 6/- each fully paid up. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends, if any, in Indian rupees. The dividend proposed if any, by the Board of Directors is subject to the approval of the Shareholders in ensuing annual general meeting.
In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
Nature and purpose of other equity
(i) Securities premium
Securities premium is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013. On February 24, 2025, the Rights Issue Committee of the Board of Directors of the Company approved issuance of 13,25,22,289 Equity Shares of Face Value of H 6 each at a price of H 26.40 per Rights Equity Share (including Premium of H 20.40 per Rights Equity Share), in the ratio of 1 Rights Equity Share for every 4 existing fully paid equity shares held by the eligible equity shareholders as on March 01, 2025, the Record Date. Rights issue expenses of H 217 lakhs has been adjusted against securities premuim account.
(ii) General reserve
General Reserve represents appropriation of profit by the Company. General reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income.
(iii) Retained Earnings
Retained earnings comprises of prior years as well as current year's undistributed earnings after taxes.
Nature and purpose of other reserve Cash flow hedging reserve
The cash flow hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges. The cumulating gain or loss arising on changes in the fair value of the designated portion of hedging instruments that are recognised and accumulated under the heading of cash flow reserve will be reclassified to statement of profit and loss only when the hedged transaction affects the profit or loss or included as a basis adjustment to the non-financial hedged item.
(i) Term loan
Rupee term loan of H Nil ( March 31, 2024: H 1,930 Lakhs (including current maturities of H 965 Lakhs) (Previous year H 2,895 Lakhs, including current maturities of H 965 Lakhs) is secured as per details below:
1. First Pari Passu charge on Property, plant and equipment and Right-of-use assets of the Company both present and future.
2. Second Pari Passu charge on all current assets of the Company both present and future.
3. Corporate Guarantee by Welspun Corp Limited.
The Rupee term loan carries interest rate of 8.72%-9.25% p.a. (March 31, 2024: 8.26%-8.85% p.a.). varies from bank to bank. It is reset after every 3 months based on the RBI interest rate. Interest are charged either on 3MT-Bill plus margin or 1 YR MCLR plus margin.
a. The non-cumulative redeemable preference shares carry dividend of 12% per annum;
b. The non-cumulative redeemable preference shares are redeemable at par on February 19, 2033 or any date before based on the availability of the cash flow.
Cash credit from banks is secured by way of:
i. First Pari Passu charge on all current assets of the Company both present and future.
ii. Second Pari Passu charge on Property, plant and equipment and Right-of-use assets of the Company both present and future.
iii. Corporate Guarantee by Welspun Corp Limited.
Interest on cash credit ranges from 8.72% to 9.25% (March 31,2024: 8.50% to 9.65%) varies from bank to bank. It is reset after every 3 months based on the RBI interest rate. Interest are charged either on 3 months T-Bill plus margin or 1 year MCLR plus margin.
20 (b) Trade payables for acceptances represents the interest bearing credit offered by the supplier which is secured against Usance Letter of Credit (LC) Under this arrangement, the supplier is eligible to receive payment from negotiating bank prior to the expiry of the credit period. The interest for the credit period payable to the bank on maturity of the LC has been presented under Finance Cost.
The Company is primarily engaged in the business of manufacture and distribution of steel and steel products and revenue from such products is derived from transfer at a point in time which is shown under sale of products as above.
Revenue from operations is same as contract price and no discount or any other adjustments required to be done.
The amount of H 582 lakhs included in contract liabilities at 31 March 2024 has been recognised as revenue during the year ended 31 March 2025. (The amount of H 498 lakhs included in contract liabilities at 31 March 2023 has been recognised as revenue during the year ended 31 March 2024).
No information is provided about remaining performance obligations at 31 March 2025 or at 31 March 2024 that have an original expected duration of one year or less, as allowed by Ind AS 115.
The Company applies the optional practical expedient to immediately expense sales commission since the amortisation period of the asset that would have been recognised is one year or less.
32 Going Concern
During the current year, the Company has raised funds by way of Rights issue, for an aggregate amount of H 34,986 lakhs to the eligible equity shareholders. The net worth of the Company is positive as at March 31, 2025. The Company also has positive cashflows for the year ended March 31, 2025.
The Company is confident of its ability to meet the funds requirement and to continue its business as a going concern and accordingly, the financial statements have been prepared on that basis.
33 In the FY 2022-23, the Company reassessed the nature of 12% Non-Cumulative Redeemable Preference Shares (NCRPS), resulting in change in liability portion of the same. On initial recognition the fair value of the instrument is bifurcated into liability and equity component. The fair value of the liability component on initial recognition was determined as the present value of the eventual redemption amount discounted at the market rate of return. The equity component was the residual amount. (Refer Note 16 a(iv))
34 The Company is eligible for refund of State Goods and Service Tax paid through cash ledger under the “Scheme for Relief and Concessions to the viable sick industrial enterprises” issued by the Government of Gujarat Industries & Mines Department. The scheme was launched by the Government of Gujarat for the rehabilitation of sick enterprises registered with the Board for Industrial and Financial Reconstruction/ Gujrat Board for Industrial and Financial Reconstruction. During the year, the Company has recognised an income of H 1,559 Lakhs (Previous year - H 1,181 Lakhs) on account of such refund and the same has been recognised under the head 'Other Income'.
B. Defined Benefit Obligations (i) Gratuity
The Company has a defined benefit gratuity plan in India, governed by the Payment of Gratuity Act, 1972. The plan entitles an employee, who has rendered at least five years of continuous service, to gratuity at the rate of fifteen day wages for every completed year of service or part thereof in excess of six months, based on the rate of wages last drawn by the employee concerned. The gratuity plan is unfunded and the Company does not make any contributions to funds.
This defined benefit plans expose the Company to actuarial risks, such as interest rate risk.
37
a)
|
Contingent liabilities and capital commitments Contingent liabilities
The Company has contingent liabilities as at the year end in respect of:
|
|
|
As at
March 31, 2025
|
As at
March 31, 2024
|
b)
|
Claims against the Company not acknowledged as debts
|
255
|
328
|
Disputed indirect taxes:
|
|
|
Sales tax/ Value Added Tax
|
20
|
20
|
It is not practicable for the Company to estimate the timings of cash outflows, if any, in respect of above pending resolution of the respective proceedings.
The Company does not expect any re-imbursements in respect of the above contingent liabilities.
Capital commitments
Capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows:
|
|
|
As at
March 31, 2025
|
As at
March 31,2024
|
|
Estimated amount of contracts remaining to be executed on capital account (net of advances):
|
2,031
|
21
|
38 Segment information
a) Description of segments and principle activities
The Company's chief operating decision maker consists of the Board of Directors (BOD) and Chief Executive Officer (CEO) of the Company who examines the Company's performance only from the product perspective and has accordingly, identified only one reportable segment which is manufacturing and sale of steel and steel products.
b) The chief operating decision maker primarily uses a measure of profit before tax as included in the internal management report to assess the performance of the operating segment which is measured consistently with profit or loss in the financial statements.
The Company has unabsorbed tax losses and depreciation that are available for offseting against future taxable profits of the Company. The Company had recognised deferred tax assets on the brought forward losses and unabsorbed depreciation
The Company has unabsorbed tax losses and depreciation that are available for offsetting against future taxable profits of the Company. In view of the profit made during the financial year 2023-24 and expected continued profitability in future. The Company has recognised net deferred tax asset of H 3,340 lakhs as at March 31, 2025 (H 3,387 lakhs as at March 31, 2024). Based on the projection of taxable profit for the next 3 years on prudent basis.
Estimation of Deferred tax recoverable Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the same can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. The Company has recognised deferred tax assets on carries forward losses and accumulated depreciation. The Company has made losses in the past. In the current year, the Company has made taxable profit and is expected to continue to make profit in the future. Hence the Company has recognises deferred tax assets based on projected profit in the next four years. The Company will continue to evaluate the expected recovery and recognises additional deferred tax assets in the future as considered appropriate.
In the previous year the Company had recognised deferred tax assets on carried forward losses as the Company has made taxable profit and expected to continue to make profit in the future. However, in the current year the company's performance has seen dip in quarter two and then has been improving every quarter, but full year has seen lower profit than previous year. The Company has not made any changes to deferred tax assets based on projected profit in the next three years. The Company will continue to evaluate the expected recovery and recognises additional deferred tax assets in the future as considered appropriate.
b) Fair value hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.
Level 1: This hierarchy includes financial instruments measured using quoted prices. There is no item under this category as at March 31, 2025 and as at March 31, 2024.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted securities.
e) Valuation techniques used to determine fair value
The fair values of liability component of Compound financial instrument (Borrowing) is based on discounted cash flows using a credit adjusted borrowing rate as at the reporting date.
The fair value of forward contracts is determined using forward exchange rates prevailing with Authorised Dealers dealing in foreign exchange.
The fair value of bonds and government securities are derived based on the indicative quotes of price and yields prevailing in the market or latest available prices.
(i) The carrying amounts of cash and cash equivalents, other bank balances, trade receivables, current borrowings including accrued interest, trade payables and other current financial liabilities are considered to be the same as their fair values due to their short term nature.
(ii) The fair values and carrying values of borrowings (other than that referred in (i) above ) are materially the same.
43 Financial risk management objectives and policies
The Company's activities expose it to market risk, liquidity risk and credit risk. In order to minimise any adverse effects on the financial performance of the Company, derivative financial instruments, such as foreign exchange forward contracts are entered to hedge certain foreign currency risk exposures. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments.
This note explains the sources of risk which the Company is exposed to and how the Company manages the risk and the impact of hedge accounting in the financial statements.
The Company's risk management is carried out by treasury department under policies approved by the board of directors. Treasury department identifies, evaluates and hedges financial risks. The board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments and investment of excess liquidity. There is no change in objectives, policies and process for managing the risk and methods used to measure the risk as compared to previous year.
A Credit risk on financial assets
Credit risk is the risk that counterparty will not meet its obligation under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with bank, foreign exchange transactions and other financial instruments. The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. 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 at the date of initial recognition.
a) Trade receivables
Trade receivables are typically unsecured and are derived from revenue earned from customers. Credit risk has been managed by the Company 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.
Receivables are deemed to be past due or impaired with reference to the Company's normal terms and conditions of business. The expected loss rates are based on the payment profile of sales over of a period of 36 months before the reporting date and the corresponding historical credit losses experienced within this period.
The credit quality of the Company's customers is monitored on an ongoing basis and assessed for impairment where indicators of such impairment exist. The Company uses simplified approach (i.e. lifetime expected credit loss model) for impairment of trade receivables/ contract assets. The solvency of the debtor and their ability to repay the receivable is considered in assessing receivables for impairment. Where receivables have been impaired, the Company actively seeks to recover the amounts in question and enforce compliance with credit terms.
The Company was engaged in the production of Stainless Steel, Pipe and Alloy. The Company had significant loss allowance on trade receivables from Alloy business. However, the Company is not producing Alloy products currently. Based on the past exposure, there is low credit risk or allowance of trade receivable required on steel and pipe business. Exposures of trade receivable broken into ageing bucket. The Company's trade receivable do not carry a significant financing element. Hence, trade receivables are measured at transaction price. The Company makes a loss allowance using simplified approach for expected credit loss and on a case to case basis.
b) Other financial assets
The Company maintains exposure in cash and cash equivalents, other bank balances, derivative financial instruments. Credit limits and concentration of exposures are actively monitored by the Company.
Expected credit loss for other than trade receivables has been assessed and based on life-time expected credit loss, no loss allowance provision has been required.
B Liquidity risk
Liquidity risk is the risk that the Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses. The Company's objective is to, at all times maintain optimum levels of liquidity to meet its cash and collateral requirements. The Company closely monitors its liquidity position and deploys a robust cash management system. It maintains adequate sources of financing including debt and overdraft from banks at an optimised cost. The company is also supported by holding company as and when the need arises.
The Company maximum exposure to credit risk for the components of the balance sheet at March 31, 2024 and March 31,2023 is the carrying amounts. The liquidity risk is managed on the basis of expected maturity dates of the financial liabilities. The average credit period taken to settle trade payables is about 45 -180 days. The other payables are with short-term durations. The carrying amounts are assumed to be a reasonable approximation of fair value.
b) Maturities of financial liabilities
The tables below analyse the Company's financial liabilities into relevant maturity groupings based on their contractual maturities for:
' All non-derivative financial liabilities, and derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows.
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not material.
C Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk. Financial instruments affected by market risk include loans and borrowings, deposits and derivative financial instruments.
(i) Foreign currency risks
The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts.
The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments, highly probable forecast transactions and foreign currency required at the settlement date of certain receivables/payables. The use of foreign currency forward contracts is governed by the Company's strategy approved by the board of directors, which provide principles on the use of such forward contracts consistent with the Company's risk management policy and procedures.
Foreign currency exposures specifically covered by forward exchange contracts as at year end are as follows:
The Company's exposure to foreign currency risk at the end of the reporting period expressed in equivalent in Rupees Lakhs is as follows:
Derivative financial instruments such as foreign exchange forward contracts are used for hedging purposes and not as trading or speculative instruments.
Foreign currency exposures not specifically covered by forward exchange contracts as at year end are Nil.
Foreign currency sensitivity
The Company does not have any unhedged foreign currency exposure, hence there is no foreign currency exchange risk. (ii) 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.
Company has interest rate risk exposure mainly from changes in rate of interest on borrowing & on deposit with bank. The interest rate is disclosed in the respective notes to the financial statements of the Company. The Company's fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107. The following table analyses the breakdown of the financial assets and liabilities by type of interest rate:
The Company uses forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments, highly probable forecast transactions and foreign currency required at the settlement date of certain receivables/payables. The use of forward contracts is governed by the Company's strategy approved by the board of directors, which provide principles on the use of such forward contracts consistent with the Company's risk management policy.
The Company's hedging policy only allows for effective hedge relationships to be established. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. The Company enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item, and so a qualitative assessment of effectiveness is performed. If changes in circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the critical terms of the hedging instrument, the Company uses the hypothetical derivative method to assess effectiveness. Ineffectiveness is recognised on a cash flow hedge and net investment hedge where the cumulative change in the designated component value of the hedging instrument exceeds on an absolute basis the change in value of the hedged item attributable to the hedged risk. In hedges of foreign currency forecast sale and purchase transactions, hedges of interest rate risk and hedges of net investment, as applicable, this may arise if:
(i) The critical terms of the hedging instrument and the hedged item differ (i.e. nominal amounts, timing of the forecast transaction, interest resets changes from what was originally estimated), or
(ii) Differences arise between the credit risk inherent within the hedged item and the hedging instrument. There were no ineffectiveness recognised in the statement of profit and loss during March 31, 2025 and March 31, 2024.
44 Capital management
For the purpose of the Company's capital management, capital includes issued equity capital, securities premium and all other equity reserves attributable to the equity holders. The primary objective of the Company's capital management is to maximise the shareholder value.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company's policy is to keep optimum gearing ratio. The Company includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents.
49 Note on Rights Issue
A) On February 24, 2025, the Rights Issue Committee of the Board of Directors of the Company approved issuance of 13,25,22,289 Equity Shares of Face Value of H 6 each at a price of H 26.40 per Rights Equity Share (including Premium of H 20.40 per Rights Equity Share), in the ratio of 1 Rights Equity Share for every 4 existing fully paid equity shares held by the eligible equity shares as on 1st March 2025, the Record Date.
The Rights Issue Committee (the “Committee”) of the Company at its meeting held on March 24, 2025 approved the allotment of 13,25,22,289 fully paid-up Equity Shares at an issue price of H 26.40 per Rights Equity Share (including a premium of H 20.40 per Rights Equity Share) to eligible equity shareholders, pursuant to the Rights Issue.
The objects of the Rights Issue are to utilize the Net Proceeds for Repayment and/or Prepayment, in full or in part, of certain outstanding borrowings availed by the Company and General corporate purposes.
i) The company has raised H 34,986 lakhs.
ii) During the year ended 31st March 2025, the Company has utilized H 28,790 lakhs from the rights issue proceeds for repayment of borrowings and general corporate purpose as mentioned above.
iii) Balance proceeds from the rights issue is temporarily parked in the fixed deposits with bank.
B) There has been no deviation in the use of proceeds of the Rights Issue, from the objects stated in the Offer document.
50 Additional regulatory requirements under Schedule III
(i) Details of Benami Property held
No proceedings have been initiated on or are pending against the company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.
(ii) Borrowing secured against current assets
The Company has borrowings from banks on the basis of security of current assets. The quarterly returns or statements of current assets filed by the Company with banks and financial institutions are in agreement with the books of accounts.
(iii) Willful defaulter
The company has not been declared willful defaulter by any bank or financial institution or government or any government authority.
(iv) Relationship with struck off companies
The company has no transactions with the companies struck off under Companies Act, 2013 or Companies Act, 1956.
(v) Compliance with number of layers of companies
The company has complied with the number of layers prescribed under the Companies Act, 2013.
(vi) Compliance with approved scheme(s) of arrangements
The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.
(vii) Utilisation of borrowed funds and share premium
The company has 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 group (Ultimate Beneficiaries) or
b. provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries
The Company has 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
(viii) Undisclosed income
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.
(ix) Details of crypto currency or virtual currency
The company has not traded or invested in crypto currency or virtual currency during the current or previous year.
(x) Valuation of PP&E and intangible asset
The company has not revalued its property, plant and equipment (including Right-of-Use assets) or intangible assets or both during the current or previous year.
xi) Title deeds of immovable properties not held in name of the company
The title deeds of all the immovable properties (other than properties where the Company is the lessee and the lease agreements are duly executed in favour of the lessee), as disclosed in Note 3(a) on property, plant and equipment and 3(b) on right of use assets to the financial statements, are held in the name of the Company, except for the following:
(xii) Utilisation of borrowings availed from banks and financial institutions
The borrowings obtained by the company from banks and financial institutions have been applied for the purposes for which such loans were taken.
(xiii) Registration of Charges or satisfaction with Registrar of Companies (ROC)
The Company does not have any charge or satisfaction not registered with the ROC beyond the statutory period.
51 Core Investment Companies (CIC)
Management has assessed that there are three CIC in the Group ('Companies in the Group' is as defined in Master Direction -Core Investment Companies (Reserve Bank) Directions, 2016, as amended).
|