e) For the period of five years immediately preceding the balance sheet date
i) Details of number and class of shares allotted as fully paid up pursuant to contract(s) without payment being
received in cash
The Company has not allotted any shares pursuant to contracts without payment being received in cash
ii) Details of number and class of shares allotted as fully paid up by way of bonus shares:
Based on the approval by the shareholders in the Extra ordinary General Meeting held on December 11, 2017, the Company had allotted 431,177 number of fully paid Bonus shares on December 21, 2017 in the ratio of three equity shares of '100 each fully paid up for every four existing equity shares of '100 each fully paid up.
iii) Details of number and class of shares bought back:
The Company has not bought back any shares during the period of 5 years immediately preceding the balance sheet date
iv) Sub-division of shares:
The shareholders of the Company at the Extra ordinary General Meeting held on April 30, 2018 approved the subdivision of equity shares of '100/- each into equity shares having a face value of '5/- each. Consequently the total number of equity shareholding has changed to 20,121,600 equity shares of face value '5/- each from that date.
v) Initial Public Offering of shares:
The equity shares of the Company have been listed on BSE Limited and National Stock Exchange of India Limited on March 25, 2021 upon successful completion of the Initial Public Offer ('IPO' or 'the Public Offer'). The IPO involved (a) Fresh Issue of 10,06,711 equity shares and (b) Offer for Sale of 45,21,450 equity shares of face value of '5 each at an offer price of '1,490 per share.
A. Securities Premium represents premium received on equity shares issued, which can be utilised only in accordance with the provisions of the Companies Act 2013 for specified purposes.
B. General reserve is created from time to time by transferring profits from retained earnings and can be utilised for purposes such as dividend pay-out, bonus issue, etc.
C. Retained Earnings includes '5,542 Lakhs of revaluation reserve created due to Land revaluation on transition to Ind AS (01.04.2015), which will not be available for distribution of profits
D. Cash flow hedge reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of hedging instruments entered into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the hedging instruments that are recognised and accumulated in this reserve are reclassified to profit or loss only when the hedged transaction affects the profit or loss.
E. 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 and the dividend distribution policy of the Company. Thus, the amount reported in General Reserve is not entirely distributable.
In respect of the year ended March 31, 2023, the Board of Directors has proposed a final dividend of '11.25 per share of face value '5 each to be paid on fully paid equity shares. This equity dividend is subject to approval by shareholders at the forthcoming Annual General Meeting and has not been included as a liability in these financial statements. The proposed dividend is payable to all holders of fully paid equity shares. The total estimated equity dividend to be paid is '2,377 lakhs.
3.2 EMPLOYEE BENEFITS
The Union Ministry of Labour issued draft rules under section 67 of the Code on Wages Act on July 7, 2020 in the Gazette and the Act is yet to be effective
The three labour codes, the Occupational Health, Safety and Working Conditions Code 2020, the Industrial Relations Code 2020 and the Code on Social Security 2020 have been passed by the parliament and have also received the assent of the President of India on 28 September 2020. However, the date on which these Codes will come into effect has not been notified. The Company will assess the impact of these Codes and will record any related impact in the period these Codes become effective.
Defined Contribution Plan
The employee provident fund is in the nature of Defined Contribution Plan. The contribution made to the scheme is considered as expense in the statement of Profit and loss when the employee renders the related service. There is no other obligation other than the contribution payable to employee provident fund.
The total expenses recognised in statement of profit and loss of '480 lakhs (2021-22: '437 lakhs) represents contribution payable to these plans by the company at rates specified in the rules of the plan.
Defined Benefit Plans
a) The company extends Defined Benefit Plan in the form of gratuity to employees. The company makes annual contribution to gratuity fund administered by trustees and managed by SBI Life Insurance Company Ltd. The Company's liability is determined based on actuarial valuation done at the year end as per projected unit credit method. The 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 subject to the maximum of '20 lakhs. Vesting occurs upon completion of five years of service.
These plans typically expose the Company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.
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Investment risk
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For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may not be the fair value of instruments backing the liability. In such cases, the present value of the assets is independent of the future discount rate. This can result in wide fluctuations in the net liability or the funded status if there are significant changes in the discount rate during the inter-valuation period.
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Liquidity Risk
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Employees with high salaries and long durations or those higher in hierarchy, accumulate significant level of benefits. If some of such employees resign / retire from the company there can be strain on the cash flows.
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Market Risk
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Market risk is a collective term for risks that are related to the changes and fluctuations of the financial markets. One actuarial assumption that has a material effect is the discount rate. The discount rate reflects the time value of money. An increase in discount rate leads to decrease in Defined Benefit Obligation of the plan benefits & vice versa. This assumption depends on the yields on the corporate / government bonds and hence the valuation of liability is exposed to fluctuations in the yields as at the valuation date.
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Legislative Risk
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Legislative risk is the risk of increase in the plan liabilities or reduction in the plan assets due to change in the legislation / regulation. The government may amend the Payment of Gratuity Act thus requiring the companies to pay higher benefits to the employees. This will directly affect the present value of the Defined Benefit Obligation and the same will have to be recognised immediately in the year when any such amendment is effective.
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The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of each reporting year, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet. There was no change in the methods and assumptions used in preparing the sensitivity analysis from previous year.
i' Funding arrangements
The company has been fully funding the liability through a trust administered by an insurance company. Regular assessment of the increase in liability is made by the insurance company and contributions are being made to maintain the fund. Subject to credit risk of the insurance company & the asset liability mismatch risk of the investments, the Company will be able to meet the past service liability on the valuation date that falls due in the future.
The Company expects to make a contribution of '266 lakhs (as at March 31, 2022: '232 lakhs) to the defined benefit plans for the next financial year.
3.4 FINANCIAL INSTRUMENTS:
3.4a Capital Management:
The Company manages its capital to ensure that it will be able to continue as going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance.
The Company manages its capital structure and makes adjustments to it, in light of changes to economic conditions and the strategic objectives of the Company. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, buy back shares and cancel them, or issue new shares. The Company finances its operations by a combination of retained profit, bank borrowings, disposals of property assets and leases.
The Company monitors the capital structure on the basis of total debt to equity and maturity profile of the overall debt portfolio of the Company.
3.4b Financial risk management
In course of its business, the Company is exposed to certain financial risks that could have significant influence on the Company's business and operational / financial performance. These include market risk (including currency risk and interest rate risk), credit risk and liquidity risk.
The Board of Directors reviews and approves risk management framework and policies for managing these risks and monitors suitable mitigating actions taken by the management to minimise potential adverse effects and achieve greater predictability to earnings.
In line with the overall risk management framework and policies, the treasury function provides services to the business, monitors and manages through an analysis of the exposures by degree and magnitude of risks.
The Company uses derivative financial instruments to hedge risk exposures in accordance with the Company's policies as approved by the board of directors.
i. Market Risk
Foreign currency sensitivity analysis:
Movement in the functional currencies of the various operations of the Company against major foreign currencies may impact the Company's revenues from its 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 foreign exchange rate sensitivity is calculated for each currency by aggregation of the net foreign exchange rate exposure of a currency and a parallel foreign exchange rates shift in the foreign exchange rates of each currency by 1%, which represents Management's assessment of the reasonably possible change in foreign exchange rates.
The sensitivity of profit or loss to changes in the exchange rates arises mainly from foreign currency denominated financials instruments. The following table details the Company's sensitivity movement in the unhedged foreign
e posure:
Market risk is the risk that changes in market prices, liquidity and other factors that could have an adverse effect on realisable fair values or future cash flows to the Company. The Company's activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates as future specific market changes cannot be normally predicted with reasonable accuracy
A. Foreign currency risk management:
The Company undertakes transactions denominated in foreign currencies and thus it is exposed to exchange rate fluctuations. The Company actively manages its currency rate exposures, arising from transactions entered and denominated in foreign currencies, through treasury division and uses derivative instruments such as foreign currency forward contracts to mitigate the risks from such exposures. The use of derivative instruments is subject to limits and regular monitoring by management. The carrying amounts of the Company's foreign currency denominated monetary assets and monetary liabilities at the end of the reporting year are as follows.
The MTM of the above has been included in the balance sheet under 'Other Current Financial Asset' Note:1.14.
B. Interest rate risk management:
The Company is exposed to interest rate risk pertaining to funds borrowed at both fixed and floating interest rates. The risk of floating interest rates in foreign currency loans is managed by the Company by the use of interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring the most cost-effective hedging strategies.
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to interest rates at the end of the reporting year. For floating rate liabilities which are unhedged, the analysis is prepared assuming that the amount of the liability as at the end of the reporting year was outstanding for the whole year. An increase or decrease of 50 basis point in rupee interest rates and 25 basis points in USD libor rate 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.
In addition to the above, the Company has an Interest Rate Collar ('IRC'), to hedge the interest rate risks. The marked-to-market gain as at March 31,2023 is '139 lakhs (March 31,2022: Gain '37 Lakhs). The amount of gain recognised in OCI for the year ended March 31,2023 is '102 lakhs (March 31,2022 - Gain '122 Lakhs).
In case of currency swaps, the effective portion of cash flow hedges, is recognised in OCI in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the Statement of Profit and Loss. Amounts recognised as OCI are transferred to the Statement of Profit and Loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs when the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognised as OCI are transferred to the initial carrying amount of the non-financial asset or liability. The mark-to-market gain as at March 31,2023 is 'NIL (March 31,2022: gain of '218 lakhs). The amount of loss recognised in OCI for the year ended March 31,2023 is '218 lakhs (March 31,2022: gain of '45 lakhs). Also, the effect given to OCI on account of restatement loss of the underlying foreign currency loans for the year ended March 31,2023 is '242 lakhs (March 31,2022: loss of '249 lakhs).
Further, the Company has call options for principal payments of two of its foreign currency loan which are designated as a cash flow hedge. The marked-to-market gain as at March 31,2023 is '191 lakhs (March 31,2022: gain of '243 lakhs). The amount of loss recognised in OCI for the period year March 31, 2022 is '52 lakhs (March 31, 2022 -gain of '215 lakhs).
ii. Credit Risk:
Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations.
• Trade receivables:
The Company periodically assesses the financial reliability of customers taking into account the financial condition, current economic trends, analysis of historical bad debts and ageing of accounts receivable. These include customers, which have high credit-ratings assigned by international and domestic credit-rating agencies. Individual risk limits are set accordingly. The Company's trade and other receivables, including loans under customer financing activities, consists of a large number of customers, across geographies.
The company has used a practical expedient by computing the expected credit loss allowance for trade receivable based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking information.
Foreign currency and interest rate sensitivity analysis for swap contracts:
The company has taken interest rate swaps ('IRS') to hedge the interest rate risks. The marked-to-market gain as at March 31,2023 is '231 lakhs (March 31,2022 loss is '182 lakhs). The amount of gain recognised in OCI for the year ended March 31,2023 is '413 lakhs (March 31,2022 - gain '640 lakhs) and the amount of gain recognised in Statement of Profit and Loss for the ineffective portion of cash flow hedge for the year ended March 31,2023 is 'NIL (March 31,2022: gain of '14 lakhs).
• Other financial assets:
a. Craftsman Automation Singapore Pte Limited- wholly owned subsidiary (till January 21,2021):
Craftsman Automation Singapore Pte Limited was a wholly owned subsidiary and a sourcing office to the Company. The subsidiary was dissolved on June 21,2021. As the subsidiary company was defunct, there is no impact on the financial statements of the Group for the year ended March 31,2022.
b. Craftsman Europe B.V. Netherlands- wholly owned subsidiary:
The Company had granted interest-free loans to Craftsman Europe B.V. Earlier, the Company fair valued the loan based on an estimated contractual repayment schedule, and the difference between the initial fair value and the amount of cash advanced was considered as an additional capital contribution in the subsidiary (deemed equity) and accounted in the books.
Further, the management based on the information available and considering the future business plan, cash flow projections & forecasts is of the view that the recoverable amount of investment is more than the carrying amount of investments and there has not been any significant increase in the credit risk & loan being credit impaired as the subsidiary is operating on a self-sustaining basis and generating profits.
c. DR Axion India Private Limited - subsidiary:
The Company has acquired 76% of the equity share capital of DR Axion India Private Limited (DRAIPL) (8,57,65,631 shares of '10 each) for a total consideration of '37,500 lakhs. By virtue of the voting and other rights as per the share purchase agreement and shareholder agreement, DRAIPL has been assessed as a subsidiary of the Company in compliance with Ind AS 110 - 'Consolidated Financial Statements' with effect from February 1,2023.
iii. Liquidity Risk:
Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company has obtained fund and non-fund based working capital limits from various banks. The Company invests its surplus funds in bank fixed deposit, which carry minimal mark to market risks.
The table below summarizes the maturity profile remaining contractual maturity period at the balance sheet date for its non-derivative financial liabilities based on the discounted cash flows.
i) Financial assets and financial liabilities that are measured at fair value on a recurring basis as at the end
of each reporting year:
The fair value of financial instruments as referred to in note above have been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements).
3.6 Contingent Liabilities and Commitments a) Contingent Liabilities
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made.
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Contingent Liabilities
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As at March 31, 2023
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As at March 31, 2022
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a. Claims against the company not acknowledged as debt
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Excise Duty
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7
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7
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Value Added Tax
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18
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50
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Service tax
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67
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67
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Goods and Services Tax
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16
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16
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Income tax
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398
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1,821
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Stamp duty
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56
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56
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b. Sales Bills discounted
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1,908
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2,217
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The balances mentioned above are at amortized cost. Refer note 1.18
All term loans, both Rupee and Foreign Currency are secured by first pari passu charge on fixed assets of the Company. Also, a second pari passu charge on current assets of the Company are created for all term loans except for TL-22 to TL-26 which are secured by first pari passu charge on moveable fixed assets and second pari passu charge on current assets of the Company.
vi) The Company does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.
vii) Rental expense recorded for short-term leases was '128 lakhs for the year ended March 31,2023. (March 31,
20'::: '95 lalhw
viii) Total cash outflow for leases including short-term was '3,028 lakhs for the year ended March 31, 2023. (March 31,2022: '5,253 lakhs).
3.11 Segment Reporting:
The Company has reported segment information as per Indian Accounting Standard 108 "Operating Segments" (IND AS 108) read with SEBI's circular CIR/CFD/FAC/62/2016 dated 05 July 2016. Accordingly, the Company has identified the reportable segments based on end consumption of the products sold or services rendered and is consistent with performance assessment and resource allocation by the management. Segment revenue comprises sales and operational income allocable specifically to a segment. Un-allocable expenditure mainly includes corporate expenses, finance cost and other adminsitrative expenses. Un-allocable income primarily includes Other Income. During the year, the Chief Operating Decision Maker (CODM) has, based on the benefits of synergy and usage of similar resources, decided to carve out aluminium products from "Industrial & Engineering segment" and include with "Automotive - Aluminium Products segment" segments. Henceforth, the latter segment will be called as "Aluminium Products" segment. Comparable period figures have been reclassified accordingly.
3.13. e) During the year, the Company has not advanced or loaned or invested funds (either borrowed funds or share
premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that the Intermediary
shall
1) 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)
2) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries. 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
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) provided any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(Previous Year - NIL)
3.13. f) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year
ended March 31, 2023 (Previous Year - NIL)
3.14 Certain comparative figures have been reclassified to conform to the current year presentation.
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