m) PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
Provisions are recognised when there is a present obligation as a result of past event, it is probable that the company will be required to settle the obligation and a reliable estimate of the amount of obligation can be made. Where the effect of time value of money is material, the amount of provision is the present value of the expenditure to be required to settle the obligation. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
Contingent liability is disclosed for (i) Possible obligation which will be confirmed only by future events not wholly within the control of the Company or (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. The company does not recognise contingent liabilities but the same are disclosed in the notes.
Contingent assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.
n) FINANCIAL INSTRUMENTS Initial recognition:
The company recognizes financial assets and liabilities when it becomes a party to the contractual provisions of the instruments. All financial assets and liabilities are recognized at fair value on initial recognition. Transaction
costs that are directly attributable to the acquisition or issue of financial assets and liabilities (other than the financial assets and liabilities at fair value through profit and loss) are added to or deducted from the fair value of financial assets and liabilities, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition or issue of financial assets and liabilities at fair value through profit or loss are recognized immediately in profit or loss.
Subsequent measurement:
i) Financial assets carried at amortized cost:
A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order 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..
(ii) Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets 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. Further, in cases where the Company has made an irrevocable election based on its business model, for its investments which are classified as equity instruments, the subsequent changes in fair value are recognized in other comprehensive income.
(iii) Financial assets at fair value through profit or loss
A financial asset which is not classified in any of the above categories is subsequently fair valued through profit or loss.
De-recognition of financial asset
The company de-recognises financial assets when the contractual right to the cash flows from the asset expires or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
(iv) Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest method. The effective method is a method of calculating the amortization cost of a financial liability and of allocating interest expense over the relevant period. The effective interest is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability to the net carrying amount on initial recognition.
The company de-recognises financial liabilities when the company’s obligations are discharged, cancelled or expired. The difference between the initial carrying amount of the financial liabilities and their redemption value is recognized in the statement of profit and loss over the contractual terms using the effective interest method.
o) EARNING PER EQUITY SHARE
Basic earning per equity share is computed by dividing the net profit attributable to the equity shareholders of the company by the weighted average number of equity shares during the period. The company did not have any potentially dilutive securities in any of the years presented.
The number of equity shares are adjusted retrospectively for all periods presented for any share splits and bonus shares issues including for changes effected prior to the approval of financial statements by the board of directors.
p) CASH FLOW STATEMENT
Cash flows are reported using indirect method whereby the profit 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 items of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financial activities of the company are segregated.
q) DIVIDENDS
Final dividends on shares are recorded as a liability on the date of approval by the shareholders i.e the year in which the dividends are approved and interim dividends are recorded as a liability on the date of declaration by the company’s board of directors.
r) RECENT ACCOUNTING PRONOUNCEMENTS
Ministry of Corporate Affairs ("MCA”) notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. During the year ended March 31, 2024, MCA had not notified any new standards or amendments to the existing standards applicable to the Company
This amendment has introduced a definition of ‘accounting estimates’ and included amendments to Ind AS 8 to help entities distinguish changes in accounting policies from changes in accounting estimates. This amendment does not have any impact on financial statements.
Retained earnings : Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, dividends or other distributions paid to shareholders.
Securities premium : Securities Premium represents the surplus of proceeds received over the face value of shares, at the time of issue of shares. This reserve can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.
General reserve : General Reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the General Reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the General Reserve will not be reclassified subsequently to statement of profit and loss.
Revaluation Surplus : Revaluation surplus represents revaluation of its immovable properties being land and buildings at its fair market value and the resultant excess of its fair value over its book value is transferred to other equity as Revaluation surplus.
The company also made delays in repayment of instalments agregating to Rs.930.22 lakahs to Union bank of India and Indian bank which varies from 1 day to 83 days.
6) The company availed term loans and working capital loans from Union bank of India and Indian bank and as at 31.12.2023, the company has defaulted in repayment of term loan instalments (Incl. interest) to the extent of Rs.5491.16 lakhs. The banks have classified these loans as NPA and issued notices on 10.1.2024 for recovery of these dues u/s 13(2) r.w.s 13(3) of SARFAESI Act, 2002. Further, the banks also taken possession of the properties offered as security u/s 13(4) of the said Act. The company applied for restructure of these loans and same is pending with the lender banks.
7) All the borrowings were utilised for the purpose for which they were raised.
8) The company is not declared as wilful defaulter by any bank or financial institution in accordance with the guidelines issued on wilful defaulters issued by Resrve Bank of India.
The Company makes Provident Fund and Employees’ State Insurance Scheme contributions which are defined contribution plans, for qualifying employees. The Company recognised Rs. 33.20 lakhs (Year ended March 31, 2023: Rs. 37.08 lakhs) for provident fund contributions, and Rs. 7.40 lakhs (Year ended March 31, 2023: Rs. 8.02 lakhs) towards Employees’ State Insurance Scheme contributions in the Statement of Profit and Loss.
The Company provides to the eligible employees defined benefit plans in the form of gratuity.The gratuity plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days’ salary payable for each completed year of service. Vesting occurs upon completion of five continuous years of service. The measurement date used for determining retirement benefits for gratuity is March 31.
The assets, liabilities and surplus / (deficit) position of the defined benefit plans at the Balance Sheet date were:
The categories used are as follows:
This note provides information about how the Company determines fair values of various financial assets and financial liabilities.
Fair value of the Company’s financial assets and financial liabilities are measured at fair value on a recurring basis.
Some of the Company’s financial assets are measured at the fair value at the end of each reporting period.
The Company has disclosed financial instruments such as cash and cash equivalents, other bank balances, trade receivables, trade payables and Short Term Borrowings at carrying value because their carrying amounts approximate the fair value because of their short term nature. Difference between carrying amounts and fair values of bank borrowings, other financial assets and financial liabilities subsequently measured at amortised cost is not significant in each of the years presented.
The Company financial liabilities comprise mainly of borrowings, trade payables and other payables. The Company financial assets comprise mainly of cash and cash equivalents, trade and other receivables.
The Company’s business activities are exposed to a variety of financial risks namely credit risk, liquidity risk and foreign currency risk. The Company’s senior management has the overall responsibility for establishing and governing the Company’s risk management framework. The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set and monitor appropriate risk limits and controls, periodically review the changes in market conditions and reflect the changes in the policy accordingly. The key risks and mitigating actions are also placed before the Board of Directors of the Company.
A. Credit Risk
Credit risk is the risk of financial loss to the Company if a customer fails to meet its contractual obligation. To manage this, the company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends and analysis of historical bad debts and ageing of the account receivables. Individual risk limits are set accordingly.
Concentration of credit risk with respect to trade receivables are limited, due to Company’s customer base being large and diverse. All trade receivables are reviewed and assessed for default on a monthly basis.
On historical experience of collecting receivables is that credit risk is low. Hence, trade receivables are considered to be a single class of financial assets.
Other financial assets
The Company maintains exposure in cash and cash equivalents and margin money deposits with banks.
The Company’s maximum exposure of credit risk as at March 31, 2024 and March 31, 2023 is the carrying value of each class of financial assets.
B. Foreign currency risk management
"Foreign currency risk is the risk that the Fair value or Future cashflows of an exposure will fluctuate due to changes in foreign currency rates. Exposures can arise on account of various assets and liabilities which are denominated in currencies other than indian rupee. The Company has not entered into any forward exchange contract to hedge against currency risk.”
The Company manages currency exposures within prescribed limits. The aim of the Company’s approach to management of currency risk is to leave the Company with no material residual risk.
A 5% strengthening of the INR against key currencies to which the Company is exposed would have led to approximately an additional Rs. 0.29/- gain in the Statement of Profit and Loss. A 5% weakening of the INR against these currencies would have led to an equal but opposite effect.
C. Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. Also, the Company has availed credit limits with banks. The Company maintained a cautious liquidity strategy, with a positive cash balance throughout the year ended March 31, 2024 and March 31, 2023 . Cash flow from operating activities provides the funds to service the financial liabilities on a day to day basis. Due to unfavourable market conditions, the company is incurring continous losses and is unable to meet its financial committments to banks as and when due and an amount of Rs. 5491.16 lakhs is pending due to the banks as on 31.3.2024. The company is taking necessary steps to repay the said debt and is in the process of negoitiations with the banks for restructure of its debt obligations.
The Company regularly maintains the rolling forecasts to ensure it has sufficient cash on an on-going basis to meet operational needs. Any short-term surplus cash generated, over and above the amount required for working capital management and other operational requirements, is retained as cash and cash equivalents (to the extent required) and any excess if any, is invested in interest bearing term deposits.
The company is repaying its borrowings as per the schedule of repayment and no amount was pending for remittance beyond its due date. Except of some normal delays.
All the amounts due to trade payables falls due within one year and the company is able to meet its obligations within the due dates.
In case of borrowings from banks, the maturity pattern and status on overdues has been given under Note no. 14 and 19.
The table summarises the maturity pattern of the company’s financial liabilities based on contractual undiscounted payments.
Interest rate risk is the risk that the fair value of future cash flows of the financial instruments will fluctuate because of changes in market interest rates. In order to optimize the Company’s position with regards to interest income and interest expenses and to manage the interest rate risk, the managment performs a comprehensive corporate interest rate risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.
According to the Company, interest rate risk exposure is only for floating rate borrowings. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 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.
Equity share capital and other equity are considered for the purpose of Company’s capital management.
The Company manages its capital so as to safeguard its ability to continue as a going concern and to optimise returns to shareholders. The capital structure of the Company is based on Management’s judgment of its strategic day-to-day needs with a focus on total equity so as to maintain investor, creditors and market confidence.
The Management and the Board of Directors monitors the return on capital as well as the level of dividends to shareholders. The Company may take appropriate steps in order to maintain, or is necessary, adjust its capital structure. The funding requirement is met through a mixture of equity, internal fund generation and other non current borrowings. The company monitors capital using geraing ratio which is debt divided by total capital.
Additional regulatory and other information as required by the Schedule III to the Companies Act 2013
(a) Relationship with Struck off Companies
The Company did not have any transactions with Companies struck off under Section 248 of Companies Act, 2013 or Section 560 of Companies Act,1956 considering the information available with the Company.
(b) Compliance with number of layers of companies
The Company do not have any parent company and accordingly, compliance with the number of layers prescribed under clause (87) of section 2 ofthe Act read with Companies (Restriction on number of Layers) Rules, 2017 is not applicable for the year under consideration.
(c) Scheme of arrangements
There are no Scheme of Arrangements approved by the Competent Authority in terms of sections 230 to 237 of the Companies Act, 2013 during theyear.
(d) Advance or loan or investment to intermediaries and receipt of funds from intermediaries
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 anyother person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that theIntermediary shall (i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of thecompany (Ultimate Beneficiaries) or (ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
The company has also 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 (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 theUltimate Beneficiaries.
(e) Undisclosed Income
The Company do not have any transaction which are not recorded in the books of accounts that has been surrendered or disclosed as income in thetax assessments under the Income Tax Act, 1961 during any of the years.
(f) Details of Crypto Currency or Virtual
The company has not traded or invested in Crypto currency or vitrual currency during the financial year.
(g) The company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period
48. The term loans and working capital loans borrowed by the company from the banks were classified as Nonperforming assets (NPA’s) by Union bank of India and Indian bank and an amount of Rs.5491.16 lakhs was overdue for payment as on 31.3.2024 towards instalments in respect of term loans borrowed. The banks have classified these loans as NPA and issued notices on 10.1.2024 for recovery of these dues u/s 13(2) r.w.s 13(3) of SARFAESI Act, 2002. Further, the banks also taken possession of the properties offered as security u/s 13(4) of the said Act. The company applied for restructure of these loans and same is pending with the lender banks.
49. The Board of directors has not recommended any dividend for the financial year ended 31.3.2024.
50. Previous year figures have been regrouped where ever necessary.
As per our report of even date For BRAHMAYYA & CO
Firm Registration Number : 000513S Chartered Accountants
For and on behalf of the Board
Sd/- Sd/-
(Karumanchi Rajaj) P Venkateswara Reddy
Managing Director
Partner
Membership No: 202 309 Sd/-
G.V. Krishna Reddy
Place : Guntur Joint Managing Director
Date : 29-5-2024 Sd/-
M.V. Subba Reddy
UDIN : 23202309BGVTIG8915 Whole Time Director & CFO