Nature and purpose of reserves:
Securities Premium
Securities Premium reserve is created due to premium on issue of shares. These reserve are utilized in accordance with provision of the Companies Act, 2013.
General Reserve
Under the erstwhile Companies Act, 1956, a general reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations. The purpose of these transfers was to ensure that if a dividend distribution in a given year is more than 10% of the paid up capital of the Company for that year, then the total dividend distribution is less than the total distributable reserve for that year.
Consequent to introduction of Companies Act, 2013, the requirement of mandatory transfer of a specified percentage of the net profit to general reserves has been withdrawn and the Company can optionally transfer any amount from the Surplus of profit or loss to the General Reserve.
Share Based Payment Reserve
The Company, vide resolution passed by the shareholders on December 4, 2020, has reserved issuance of 13,12,795 number
of Equity Shares to its eligible employees and its subsidiary companies under the Anupam - Employee Stock Option Plan, 2020 ('ESOP-2020'). The Nomination and Remuneration Committee/Compensation Committee ("Committee") has granted 13,12,760 number of Equity Shares and 1,07,075 number of Equity Shares at a price of ? 225/- per option under Grant 1 and Grant 2 on December 10, 2020 and January 20, 2022, respectively. The Options, which remain unvested or unexercised and have lapsed due to resignations/non-acceptance of the granted Options by the employees, have been pooled back in the Employees Stock Options Pool and are available for re-grant. Out of 56,080 number of Options available in the pool, the Committee has granted 6,260 number of Equity Shares at a price of ? 225/- per Option under Grant 3 on January 9, 2023. The Options would vest over a period of 1/2/3 years from the date of grant based on specified criteria. (Refer Note 31.1 ).
During the Current Financial Year 3,90,832 number of Equity Share were exercised till expiry of the period as per the terms of Grant 1 (Vest 1) and therefore the amount of ? 8.74 Million - representing the fair value of option which was credited to Share Based Payment Reserve under SOCE is transferred to Securities Premium from Share based payment reserve.
Note 16A:
As per Ind AS 109 "Financial Instruments" and Ind AS 113 "Fair Value Measurements", term loans taken from banks are financial instruments and accordingly the processing fee paid on bank loans is to be valued at fair valuation and recognised as "Term loan deferred processing fee" which is amortised as "Deferred interest expense" over the period of term loan using effective interest rate for each bank loan taken during the year.
30. CONTINGENT LIABILITIES AND COMMITMENTS
Contingent Liabilities Capital Commitments
Estimated amount of contracts remaining to be executed on capital account and not provided for (Net of Capital Advances) as on March 31, 2023 is ? 1,374.02 Million (Previous year ? 415.00 Million).
31. EMPLOYEE BENEFITS
Employee Gratuity fund scheme is for the purpose of the Defined Benefits. The Company is making annual contributions for gratuities to funds administered by trustees and managed by insurer (LIC) for amounts notified by the insurer. The present value of obligation under such defined benefit plan is determined based on actuarial valuation carried out by an independent actuary.
The Company has paid premium under Staff Gratuity EGGS Scheme with the LIC. Accordingly, all the required disclosures are provided in the financial statements to the extent details available from actuarial valuation report and LIC gratuity valuation report respectively.
These plans typically expose the Group to actuarial risks such as: Investment risk, interest rate risk, longevity risk and salary risk.
Investment risk
The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting year on government bonds. If the return on plan asset is below this rate, it will create a plan deficit. Currently, for the plan in India, it has a relatively balanced mix of investments in government securities, and other debt instruments.
Interest risk
A fall in the discount rate which is linked to the Government Security Rate will increase the present value of the liability requiring higher provision. A fall in the discount rate generally increases the mark to market value of the assets depending on the duration of asset.
Salary risk:
The present value of the defined benefit plan liability is calculated by reference to the future salaries of members. As such, an increase in the salary of the members more than assumed level will increase the plan's liability.
Concentration risk:
Plan is having a concentration risk as all the assets are invested with the insurance Company and a default will wipe out all the assets. Although probability of this is very less as insurance companies have to follow regulatory guidelines.
Except for those financial instruments for which the carrying amounts are mentioned in the above table, the Company considers that the carrying amounts recognized in the financial statements approximate their fair values.
For financial assets that are recognized at fair value, the carrying amounts are equal to the fair values.
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices.
Level 2: The fair value of the financial instruments that are not traded in active market is determined using valuation techniques which maximize the use of observable market data and rely 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 significant inputs is not based on observable market data, the instrument is included in level 3.
Valuation techniques used to determine the fair values:
The fair value of the forward exchange contract is determined using forward exchange rate at the balance sheet date. The fair value of cross currency interest rate swap is calculated as the present value of future cash flow based on available foreign exchange rates.
A. Liquidity risk
Liquidity risk refers to insufficiency of funds to meet the financial obligations. Liquidity risk management implies maintenance of sufficient cash and the availability of funding through an adequate amount of committed credit lines to meet obligations when due.
The Company has access to undrawn borrowing facilities at the end of each reporting year.
The inflows/(outflows) disclosed in the above table represent the contractual undiscounted cash flows relating to derivative financial liabilities held for risk management purposes and which are not usually closed out before contractual maturity.
B. Credit risk
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. An analysis of financial assets shows that no asset was impaired or requiring consideration in determining impairment.
C. Market risk
With the entity having varied geographical spread of revenue, and with the price being determined, primarily by demand and supply, the entity is not exposed to any market risk that require sensitivity analysis akin to any specific market such that profit or loss or equity of the entity would get affected by changes in the relevant risk variable.
Currency risk
The Company is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the USD Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Company’s functional currency. The risk is measured through a forecast of highly probable foreign currency cash flows. The objective of the hedges is to minimise the volatility of the cash flows of highly probable forecast transactions by hedging the foreign exchange inflows on regular basis.
Currency risks related to the principal amounts of the Company’s foreign currency receivable/payables have not been hedged using forward contracts.
In respect of other monetary assets and liabilities denominated in foreign currencies, the Company’s policy is to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.
Interest rate risk
The Company’s main interest rate risk arises from long-term borrowings with variable rates, which expose the Company to cash flow interest rate risk. Currently the Company's borrowings are within acceptable risk levels, as determined by the management.
Fair value sensitivity analysis for fixed-rate instruments
The Company does not account for any fixed-rate financial assets or financial liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss.
Hedge Accounting
The Company’s business objective includes safe-guarding its earnings against foreign exchange fluctuations. The Company has adopted a structured risk management policy to hedge all these risks within an acceptable risk limit and an approved hedge accounting framework which allows for Fair Value hedges and Cash Flow hedges. Hedging instruments include forwards contracts to achieve this objective. The table below shows the position of hedging instruments and hedged items as on the balance sheet date.
Cash flow hedge
The objective of hedge accounting is to represent, in the Company's financial statements, the effect of the Company's use of financial instruments to mange exposures arising from particular risks that could affect profit or loss. The Company's exposure to foreign currency risk as at March 31, 2023 is stated below.
During the year ended March 31, 2023, the Company has designated specific foreign exchange cross currency forward contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions. The related hedge transactions for balance in cash flow hedge reserve as at March 31, 2023 are expected to occur and reclassified to Statement of Profit and Loss within thirty six months.
The Company determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of its forecasted cash flows. 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, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.
If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for in the Statement of Profit and Loss at the time of the hedge relationship rebalancing.
38. OTHER STATUTORY INFORMATION:
(i) There is no balance outstanding on account of any transaction with companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956.
(ii) 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 the Company (Ultimate Beneficiaries); or
(b) Provide any guarantee, security or the like to or on behalf of the Ultimate beneficiaries.
(iii) 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 will:
(a) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf the Funding Party (Ultimate Beneficiaries); or
(b) Provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(iv) The Company has not entered into any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income-tax Act 1961.
39. Figures for the previous year have been regrouped/reclassified to conform to the figures of the current year.
40. APPROVAL OF FINANCIAL STATEMENT
The Financial Statements were approved for issue by the Board of Directors on May 3, 2023.
The Board of Directors have declared a 3rd Interim Dividend of ' 1.50/- per fully paid up Equity Share of ' 10/- each for the Financial Year 2022-23 in the Board Meeting dated May 3, 2023.
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