Transfer pricing:

The Finance Act, 2001, introduced, with effect from assessment year 2002-03 detailed Transfer Pricing regulations for computing the taxable income and expenditure from 'international transactions' between 'associated enterprises' on an 'arm's length' basis. Further, the Finance Act, 2012, widened the ambit of transfer pricing provisions to cover specified domestic transactions. These regulations, inter alia, also require the maintenance of prescribed documents and information including furnishing a report from an Accountant within the due date of filing the Return of Income.

For the year ended March 31, 2022, the Company had undertaken a study to comply with the said transfer pricing regulations for which the prescribed certificate of the Accountant has been obtained and this did not envisage any tax liability.

For the year ended March 31, 2023, the Company is in the process of carrying out a similar study to comply with the said transfer pricing regulations. However, based on the analysis of margins and considering that the terms of agreement with associated enterprises has not changed during the year, the Company is of the view that for the year ended March 31,2023, the transactions with the said enterprises are on an arm's length basis.

(ii) Terms and rights attached to equity shares

Equity shares have a par value of Rs.10. They entitle the holder to participate in dividends, and to share in the proceeds of winding up of the Company in proportion to the number of and amounts paid on the shares held. Every holder of equity shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

Provision for Litigations/ disputes

Provision for litigations/ disputes relates to certain employees compensation with respect to termination of employment. Such provision is recognised based on estimates made by the Company.

Provision for Warranties

Warranties against manufacturing and other defects, as per terms of contract(s) with the customer, are provided for based on estimates made by the Company. It is expected that this provision will be settled in the remaining unexpired warranty period ranging from twelve to eighteen months.

Provision for sales tax

Provision for sales tax relates to non-submission of statutory forms by customers to the Company. It is expected that this provision will be settled as and when the tax assessments are completed.

The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as at the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialized and adjustments for currency.

Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation related disclosures for contracts where the revenue recognized corresponds directly with the value to the customer of the Company's performance completed to date, typically those contracts where invoicing is on time and material, unit price basis and no information is provided about remaining performance obligations at March 31, 2023 that have an original expected duration of one year or less, as allowed by Ind AS 115.

Gratuity: The Company operates a gratuity plan, which is a defined benefit plan, through the "Ingersoll-Rand Employees Gratuity Trust". Every employee is entitled to a benefit equivalent to fifteen days salary last drawn for each completed year of service in line with the Payment of Gratuity Act, 1972. It is payable at the time of separation from the Company or retirement, whichever is earlier. The benefits vest after five years of continuous service. During the financial year ended March 31,2023, the company has removed the ceiling of gratuity limit of Rs.20.

Provident Fund: Provident fund for certain eligible employees was managed by the Company through the ""Ingersoll-Rand Employees Provident Fund Trust"" ('the Trust') for part of the previous year up to January 31, 2022. In line with the Provident Fund and Miscellaneous Provisions Act, 1952, the plan guaranteed interest at the rate notified by the Provident Fund authorities. The contributions were made to the fund at the rate of 12% of basic salary by the employer and employee, and this amount together with the interest accumulated thereon was payable to employees at the time of their separation from the Company or retirement, whichever is earlier.

During the previous year, the Company made an application to Employee's Provident Fund Organisation (EPFO) for surrender of Provident Fund exemption ('the surrender') w.e.f. 01 February 2022. The EPFO vide their letter no. MH/Mumbai(Powai)/Exemption/35 dated December 14, 2021 accepted the surrender request and permitted the Company to comply as un-exempted establishment with effect from February 01,2022 and make the contribution equal to a specified percentage of the eligible employee's salary directly to the Government administered fund as an un-exempted establishment.

The surrender involved liquidation of investments held by the Trust and payment of past accumulation (i.e., employer and employee contribution towards provident fund managed by the Trust including interest thereon) to EPFO. The investments held by the trust up to the date of surrender were liquidated and the proceeds thereof were transferred (including loss on sale of investments of Rs. 344.14 contributed by the Company) to EPFO towards past accumulation. Effective, February 01,2022, the contributions are made directly to the Government administered fund.

(#) Hourly employees: 6% for three years and 5% thereafter, Others: 10% (2022: Hourly employees: 6% for three years and 5% thereafter, Others: 10%).

Notes:

(a) The estimates of future salary increases, considered in actuarial valuation, takes into account, inflation, seniority, promotions and other relevant factors, such as demand and supply in the employment market.

(b) The expected rate of return on assets is determined based on the assessment made at the beginning of the year on the return expected on its existing portfolio, along with the estimated increment to the plan assets and expected yield on the respective assets in the portfolio during the year.

(c) The discount rate is based on the prevailing market yield on Government securities as at the Balance Sheet date for the estimated term of obligation.

(d) Provident Fund Trust set-up by the Company guarantees the interest rate earning and any shortfall thereof, would be met by the Company. The above plan assets, defined benefit obligations and benefit for future period is relating to the interest rate guarantee only. The Trust surrendered the Provident Fund exemption granted to the Company under Employees' Providents Fund & Miscellaneous Provisions Act, 1956 on its own volition w.e.f. February 01,2022.

The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability in the balance sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

Contribution towards provident fund for certain employees upto January 31, 2022 and all employees from February 01,2022 is made to the regulatory authorities which is a defined contribution plan. Both the eligible employees and the Company make monthly contributions to the Government administered provident fund scheme equal to a specified percentage of the eligible employee's salary. Amounts collected under the provident fund plan are deposited with in a Government administered provident fund. The Company has no further obligation to the plan beyond its monthly contributions. The Company's contribution to the provident fund is charged to Statement of Profit and Loss.

(c) Risk Exposure

Through its defined benefit plan, the Company is exposed to a number of risks. The most significant risks are: (a) Gratuity

(i) Interest rate risk : The defined benefit obligation calculated uses a discount rate based on government bonds. If bond yields fall, the defined benefit obligation will tend to increase.

(ii) Fund return risk : Lower the return on fund, higher the expected shortfall.

(iii) Salary inflation risk : Higher than expected increases in salary will increase the defined benefit obligation.

(iv) Demographic risk : This is the risk of variability of results due to factors like mortality, withdrawal, disability and retirement. The effect of these on the defined benefit obligation is not straight forward and depends upon the combination of salary increase, discount rate and attrition rate.

(v) Investment risk: The Company ensures that the investment positions are managed within an asset-liability matching (ALM) framework that has been developed to achieve long-term investments that are in line with the obligations under the employee benefit plans. Within this framework, the Company's ALM objective is to match assets to the obligations by investing in long-term interest bearing securities with maturities that match the benefit payments as they fall due. A large portion of assets consists of government and corporate bonds. The Company believes that investment in government and corporate bonds offer the best returns over the long term with an acceptable level of risk.

(d) Share - based payments

2017 Omnibus Incentive Plan ("2017 plan")

In May 2017, the Board of the ultimate holding company approved the 2017 Plan, which authorises the ultimate holding company to grant stock-based compensation awards to employees, directors and advisers. All the share based incentives vests over a period of four or five years and expire ten years from the date of grant.

A Employee option plan

Certain executives of the Company are eligible to participate in the employee share based payment plans of 'Ingersoll-Rand Inc., the ultimate holding company. The share based plans are assessed, managed and administered by the ultimate holding company. Under the plan, participants are granted options which vests over four years of service from the grant date. Once vested, the options remain exercisable till ten years from the date of grant.

Fair value of options granted

The fair value at grant date of options granted during the year ended March 31,2023 was USD 53.09 per option (March 31, 2022: USD 45.78). The fair value at grant date is determined using the Black Scholes model which takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. The value of options have been translated to Rupees at the year end closing rate.

B Restricted stock units - Executives

Restricted stock units (RSU) are share equivalents that are awarded to certain employees with a promise to issue actual shares to holders of the RSU at vesting. The RSU will vest in one-third installment over three years. Once they fully vest, each unit may be converted into a share at current value over an exercisable period of ten years.

The Company's activities expose it to market risk, liquidity risk and credit risk. The Company's risk management is carried out by the management under the policies approved of the Board of Directors that help in identification, measurement, mitigation and reporting all risks associated with the activities of the Company. These risks are identified on a continuous basis and assessed for the impact on the financial performance. Information on risks and the response strategy is escalated in a timely manner to facilitate timely decision making. Risk response strategy is formulated for key risks by management.

The below note explains the sources of risk which the Company is exposed to and how the Company manages the risk in the financial statements.

A Credit risk

Credit risk arises from cash and cash equivalents, security deposits carried at amortised cost and deposits with banks, as well as credit exposures to customers including outstanding receivables.

(i) Credit risk management

Credit risk is managed and assessed on an ongoing basis. Only high rated banks are accepted for banking transactions and placement of deposits. For other financial assets, the Company assesses and manages credit risk

based on internal credit rating system. Internal credit rating is performed for each class of financial instruments with different characteristics. The Company assigns the following credit ratings to each class of financial assets based on the assumptions, inputs and factors specific to the class of financial assets.

A : High quality assets, negligible credit risk.

B : Low quality assets, high credit risk.

C : Doubtful assets, credit-impaired.

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 any significant increase in credit risk, the Company compares the risk of default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers below indicators to assess credit risk :

1. Internal credit rating.

2. External credit rating (to extent available).

3. Any significant change in business, financial or economic conditions that are expected to cause a significant

change in the payer's ability to meet its obligations, including changes in operating results and payment status.

Macro economic information (such as regulatory changes, legal changes, interest rate changes) are incorporated as a part of the internal rating model.

Default of a financial asset is when the counterparty fails to make contractual payments within 365 days of when they fall due. This definition of default is determined by considering the business environment in which entity operates and other macro-economic factors.

A Risk management

The Company's objectives when managing capital are to:

(i) safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders and;

(ii) maintain an optimal capital structure to reduce the cost of capital.

The Company does not have any exposure towards debt except lease liability. Management regularly monitors rolling forecasts of liquidity position and cash on the basis of expected cash flows. In addition, the Company projects cash flows in major currencies and considers the level of liquid assets necessary to meet these.

Major customer

Revenue from one customer i.e. Ingersoll-Rand Industrial US Inc., USA is Rs.20,710.29 for the year ended March 31, 2023 (Ingersoll-Rand Industrial US Inc., USA for the year ended March 31, 2022 : Rs.14,956.36) which contributes more than 10% of the Company total revenue.

34 Events occurring after the reporting period

On 25 May 2023, the Board of Directors of the Company has proposed a dividend of Rs.20 per fully paid equity share. The proposed dividend is subject to the approval of shareholders in the ensuing annual general meeting.

37 The Company does not have any Benami property or any proceeding which is pending against the Company for holding any Benami property.

38 The Company has sanctioned working capital limits in excess of Rs.500 from banks or financial institutions on the basis of security of current assets, the quarterly returns or statements filed by the Company with such banks or financial institutions when requested by the bank, are in agreement with the books of account of the Company.

39 The Company has filed charges and satisfaction of charges with Registrar of Companies, where ever it is applicable.

40 The Companies (Accounts) Amendments Rules 2022 mandates maintenance of backup of company's books of account and other books and papers maintained in electronic mode on servers physically located in India on a daily basis with effect from August 5, 2022. The Company has evaluated several options during the financial year 202223 considering other important aspects such as mitigation of data and cyber security risks. The Company has now initiated actions and implementation is expected to be completed in due course of time. The Company is of the view that this does not have any material impact on its Financial Statements for the year ended March 31, 2023.

41 (i) The Company has not invested funds in any entity with the understanding that the Intermediary shall:

(a) directly or indirectly lend or invest in other entities by or on behalf of the company (ultimate beneficiaries) or

(b) provide any guarantee or security to or on behalf of the ultimate beneficiaries.

(ii) The Company has not received any fund from entities with an understanding that the Company shall:

(a) lend or invest in other entities identified by or on behalf of the funding Party (ultimate beneficiaries) or

(b) provide any guarantee or security on behalf of the ultimate beneficiaries.

42 The Company does not have any 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.

43 The Company has not traded or invested in crypto currency or virtual currency during the financial year.

44 Dividends

The Company paid dividend of Rs.20.00 per equity share during the year ended March 31, 2023 towards final dividend for the year ended March 31,2022. The Company has paid dividend of Rs.30.00 per equity share during the year ended March 31, 2023 towards interim dividend for the year ended March 31,2023.

Dividend declared by the Company are based on profits available for distribution. On May 25, 2023, the Board of Directors of the Company have proposed a dividend of Rs.20.00 per equity share in respect of the year ended March 31, 2023 subject to the approval of shareholders at the Annual General Meeting, and if approved, would result in a cash outflow of approximately Rs.6,313.60 Lakhs

45 The financial statements of the Company for the year ended March 31, 2022, were audited by the B S R & Co. LLP, Chartered Accountants, the predecessor auditor.

46 Prior year figures

Prior year's figures have been regrouped/ reclassified wherever necessary to conform to current year's classifications.