2.17 Provisions, contingent liabilities and contingent assets
Provisions for legal claims, service warranties, volume discounts and returns are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses. Provisions for restructuring are recognised by the Company when it has developed a detailed formal plan for restructuring and has raised a valid expectation in those affected that the Company will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase
in the provision due to the passage of time is recognised as interest expense.
The measurement of provision for restructuring includes only direct expenditures arising from the restructuring, which are both necessarily entailed by the restructuring and not associated with the ongoing activities of the Company.
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 or a reliable estimate of the amount cannot be made.
Contingent Assets are disclosed, where an inflow of economic benefits is probable.
2.18 Intangible assets
Intangible assets are stated at cost less accumulated amortization and impairment losses, if any Intangible assets acquired separately are measured on initial recognition at cost. Cost comprises the purchase price and any attributable expenditure on making the asset ready for its intended use. Intangible assets are amortised on a straight-line basis over their estimated useful economic life. The Company uses a rebuttable presumption that the useful life of an intangible asset will not exceed five years from the date when the asset is available for use. Amortization of intangible assets acquired or disposed off during the year is provided on pro-rata basis with reference to the date of acquisition or disposal.
The amortization period and the amortisation method are reviewed at each financial year end. If any changes are required in the amortisation period or the amortisation method as a result of such review, such changes are accounted for in accordance with IND AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors.
2.19 Financial instruments
Financial assets and financial liabilities are recognised when an entity becomes aparty to the contractual provisions of the instrument.
Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
• Debt instruments at fair value through other comprehensive income (FVTOCI)
• Debt instruments including derivatives and equity instruments at fair value through profit or loss (FVTPL)
• Equity instruments measured at fair value through other comprehensive income (FVTOCI) Equity investments
All equity investments in scope of Ind AS 109 are measured at fair value. For all equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to P&L, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity. The Company has made such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised when:
• The rights to receive cash flows from the asset have expired or
• The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company’s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
• Financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities, deposits, trade receivables and bank balance
• Financial assets that are equity instruments and are measured as at FVTOCI
• Lease receivables under Ind AS 116
• Trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115
The Company follows ‘simplified approach’ for recognition of impairment loss allowance on:
• Trade receivables
• All lease receivables resulting from transactions within the scope of Ind AS 116
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on 12-month ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date.
ECL is the difference between all contractual cash flows that are due to the company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR. When estimating the cash flows, an entity is required to consider:
• All contractual terms of the financial instrument (including prepayment, extension, call and similar options) over the expected life of the financial instrument. However, in rare cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument.
• Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms
As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forwardlooking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the Statement of Profit and Loss. This amount is reflected under the head ‘other expenses’ in the P&L. The balance sheet presentation for various financial instruments is described below:
• Financial assets measured as at amortised cost, contractual revenue receivables and lease
receivables: ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
• Loan commitments and financial guarantee contracts: ECL is presented as a provision in the balance sheet, i.e. as a liability.
• Equity instruments measured at FVTOCI: Since financial assets are already reflected at fair value, impairment allowance is not further reduced from its value. Rather, ECL amount is presented as ‘accumulated impairment amount’ in the OCI.
For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit risk to be identified on a timely basis.
The Company does not have any purchased or originated credit-impaired (POCI) financial assets, i.e., financial assets which are credit impaired on purchase/ origination.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below: Financial liabilities at fair value through profit or loss
Gains or losses on liabilities held for trading are recognised in the profit or loss. The Company has not designated any financial liability as at fair value through Statement of Profit and Loss.
Loans and borrowings
This is the category most relevant to the Company. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and
fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the Statement of Profit and Loss.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
2.20 Segment reporting
The Company is primarily engaged in the business of processing of milk andmanufacturing of dairy products. Therefore, the Company is of the view that revenuefrom processing of milk and manufacturing of dairy products is a single componentof the Company for assessing its performance. Hence, processing of milk andmanufacturing of dairy products is the only reportable segment. The Company’soperations are primarily in India, accordingly there is no reportable secondarygeographical segment.
2.21 Discontinued operations
During the year, there are no transactions relating to Discontinued operations, hence disclosure under Ind AS 105 notified under the Accounting Standards is not applicable for the current and previous financial year.
2.22 Revenue from contracts with customers
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company has generally concluded that it is the principal in its revenue arrangements, because it typically controls the goods or services before transferring them to the customer
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government. Goods and Service tax (GST) is not received by the Company on its own account. Rather, it is tax collected on value added to the commodity by the seller on behalf of the government. Accordingly, it is excluded from revenue. The specific recognition criteria described below must also be met before revenue is recognised
Sale of goods
Revenue from sale of goods in the course of ordinary activities is measured at the fair value of the consideration receivable, net of trade discounts and volume rebatesalso excludes taxes or amount collected from customers in its capacity as agent. Revenue is recognized when significant risks and rewards of their ownership are transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing effective control over, or managerial involvement with, the goods, and the amount of revenue can be measured reliably.
Interest income
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the
2.23 Leases
At inception of contract, the Company assesses whether the Contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. At inception or on reassessment of a contract that contains a lease component, the Company allocates consideration in the contract to each lease component on the basis of their relative standalone price.
Assets taken on lease - Short-term leases and leases of low-value assets:
The Company applies the short-term lease recognition exemption to its short-term leases. It also applies the lease of low-value assets recognition exemption that are considered to be low value. Lease payments on short-term leases and leases of low value assets are recognised as expense on a straight-line basis over the lease term.
Assets given on lease - As a lessor:
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Rental income from operating lease is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.
2.24 Dividend distribution to equity holders
The Company recognises a liability to dividend distributions to equity holders when the distribution is authorised and the distribution is no longer at the discretion of the Company. As per the corporate laws, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity. and Interim dividends is recorded as a liability on the date of declaration by the company’s Board of Directors.
32. Additional disclosure in relation to borrowings (Non-current and current financial liabilities)
a. Terms of secured cash credit facilities availed from banks and nature of security -
Cash credit limits availed from Union Bank of India is carrying floating rate of interest at 9.55% p.a. as on March 31, 2024 and9.55 % p.a. as on March 31, 2023. Facility is secured by hypothecation of inventories and trade receivables. Property, plant and equipment situated at Durga Dairy unit, Nunna is given as collateral security. Cash credit facility is also guaranteed by managing director in his personal capacity.
b. Terms of repayment of secured term loan from banks and nature of security
Term loan taken from Union Bank of India is repayable in 80 equal monthly instalments (excluding interest) of Rs. 11.75 lakhs each. Term loan carries floating rate of 9.55% p. a. as on March 31, 2024 and 9.55% p.a. as on March 31, 2023. Repayment of term loan commences from April 2024 and ends on November 2031. The term loan is secured by exclusive charge on Durga Dairy Units, Nunna and the proposed assets to be acquired with the term loan availed. Additionally, term loan is guaranteed by managing director in his personal capacity. (As per the request letter for extension of the moratorium period as submitted to the bank).
c. Terms of repayment of secured vehicle loan from banks and nature of security
Vehicle loan taken from Union Bank of India is repayable in 36 equal monthly instalments (including interest) of Rs.0.94 lakhs each. Vehicle loan carries floating rate of 9.70% p. a. as on March 31, 2024 and 9.70% p.a. as on March 31, 2023. Repayment of vehicle loan commences from September 2022 and ends on August 2025. The vehicle loan is secured by vehicle purchased with their finance.
d. Aggregate amount of cash credit facilities and other term loan from bank including interest accrued thereon guaranteed by managing director -
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 are a reasonable approximation of the fair values due to their short-term nature.
Calculation of fair values
The fair values of the financial assets and liabilities are defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair values are disclosed in Note 2.
44. Financial risk management framework -
The Company’s board of directors has overall responsibility for the establishment andoversight of the Company’s risk management framework. The board of directors hasestablished a Risk Management Framework which is reviewed and monitored by theRisk Management Committee. The Committee reports regularly to the board ofdirectors on its activities.
The Company’s risk management policies are established to identify and analyse therisks faced by the Company, to set appropriate limits and controls and to monitor risksand adherence to limits. The Company, through its training and established procedures,aims to maintain a disciplined and constructive control environment in which allemployees understand their roles and obligations.
The Company’s activities expose it to Credit risk and Liquidity risk.
A. Credit Risk
Credit risk refers to the risk of default on its obligation by the counterparty resulting ina financial loss.Based on the overall credit worthiness of Receivables coupled with their past trackrecord, Company expects No/Minimum risk with regard to its outstanding receivables.Also, there is a mechanism in place to periodically track the outstanding amount andassess the same with regard to its realisation. Company expects that all the debtors willbe realised in full, and accordingly, no provision has been made in the books of accountfor doubt receivables.
B. Liquidity Risk
The Company’s principal sources of liquidity are cash and cash equivalents, workingcapital facility with banks and the cash flows that are generated from operations.The Company manages liquidity risk by maintaining adequate reserves, bankingfacilities and by continuously monitoring, forecasting and actual cash flow and bymatching the maturity profiles of financial assets and liabilities.
45 Capital management -
Company’s Capital Management objectives are to:
• Ensure the company’s ability to continue as a going concern
• Provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
In order to achieve this overall objective, the Companies capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants, in certain cases, may permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current year and previous year. No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2024 and March 31, 2023.
Dividend to shareholders - The management has not recommended any dividend during the current financial year and previous financial year.
46. Disclosure in respect of Corporate Social Responsibility under Section 135 of Act and Rules made thereon -
During the year, the Company has spent Rs. 16.50 lakhs (March 31,2023: Rs. 11.42 lakhs) towards various schemes of corporate social responsibility as prescribed under section 135 of the Act. The details are:
As per Section 135 of the Act, a Corporate Social Responsibility(CSR) committee has been formed by the Company. The areas for CSR activities arepromoting education, adoption of schools, medical and other social projects. All theseactivities are covered under Schedule VII Act. The Companyhas spent an amount of Rs. 16.50 Lakhs (March 31, 2023: Rs. 16.44 Lakhs) towardsCSR activities based on the recommendations of CSR Committee constituted by theBoard. Expenses incurred on CSR activities are charged to the Statement of Profit andLoss under ‘Other Expenses’.
a. There is no capital expenditure is pending for completion and whose completion is overdue when compared to its original plan either as on March 31, 2024 and March 31, 2023.
vii. The Company has not made any expenditure towards intangible assets under development.
viii. The Company does not hold any benami properties. No proceeding initiated under The Benami Transactions (Prohibition) Act, 1988 (as amended) and rules made thereunder against the Company.
ix. The Company has borrowings from bank on the basis of security of current assets and the periodical revised statement of quarterly returns and statements of current assetsfiled with bank are in agreement with the books of accountfor the year ended on March 31, 2024 and March 31, 2023.
x. The Company has not been declared as wilful defaulter by any banks, financial institutions or other lenders.
xi The Company has not entered any transaction with struck of companies either in the current year or in the previous year.
xii. During the current year and previous year, there are no delays in filing of charge and satisfaction of charges.
xiii. The Company has not made any investment in associates, subsidiaries or joint ventures either in current year or in the previous year.
Reason for variance in financial ratios -
a. Current ratio is increased mainly due to decrease of short-term borrowing and decrease in trade payables for the year.
b. Return on equity ratio for the year is increased mainly due to increase of sales and operating profit for the year.
c. Inventory turnover ratio is increased mainly due to increase in sales and decrease of inventory for the year.
d. Trade payables ratio is decreased mainly due to decrease of inventory levels and prompt payment made to vendors on timely basis.
e. Net capital ratio and Net profit ratios are increased mainly due to improvement in working capital and increase in sales for the year.
xv. The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.
xvi. 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 Company (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 funds 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.
50. The Company does not have 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 (as amended) (‘the IT Act”) (such as, search or survey or any other relevant provisions of the IT Act. Hence specific disclosure is not given for the year ended on March 31, 2024 and March 31, 2023.
51. The Company has not traded or invested in crypto currency or virtual currency during the current or previous financial year.
52. Previous year numbers have been regrouped or reclassified where necessary.
As per our report of even dateFor For and on behalf of the Board of directors of
Anantha&AssociatesChartered Virat Crane Industries Limited
Accountants,Firm Reg. No. 010642S CIN:L74999AP1992PLC014392
CA Srinivasulu Anantha
G. V. S. L. Kantha Rao M. Himaja
Managing Director Director
M. No. 214253
DIN No.01846224 DIN No. 06505782
Place: Guntur
Date 30-05-2024 P.V. Srihari R. Adi Venkata Rama
Chief Financial Officer Company Secretary
Mem No. : A46744
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