p. Provisions, Contingent Liabilities and Contingent Assets:
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects current market assessment of time value of money and, where appropriate, the risks specific to the liability. Unwinding of the discount is recognized in the Statement of Profit and Loss as a finance cost. Provisions are reviewed at each reporting date and are adjusted to reflect the current best estimate.
Contingent liabilities are also 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. Claims against the Company where the possibility of any outflow of resources in settlement is remote, are not disclosed as contingent liabilities.
Contingent assets are not recognized in financial statements since this may result in the recognition of income that may never be realized. However, when the realization of income is virtually certain, then the related asset is not a contingent asset and is recognized.
q. Earnings Per Share:
The basic Earnings Per Share ("EPS”) is computed by dividing the net profit/(loss) after tax for the year attributable to the equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the period is adjusted for events of bonus issue and share split, if any that have changed the number of equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted EPS, net profit/(loss) after tax for the year attributable to the equity shareholders and the weighted average number of equity shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
r. Cash and Cash Equivalent:
Cash and cash equivalents in the Balance Sheet comprise cash at bank and in hand, including fixed deposit with originalmaturity period of three months or less and short-term highly liquid investments with an original maturity of three
months or less, that are readily convertible into cash which are subject to insignificant risk of changes in value and are held for the purpose of meeting short-term cash commitments.
s. Segment Reporting:
Identification of Segments:
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the company’s management to make decisions for which discrete financial information is available. Operating Segments are identified based on monitoring of operating results by the chief operating decision maker (CODM) separately for the purpose of making decision about resource allocation and performance assessment.
Operating Segment is identified based on the nature of products and services, the different risks and returns, and the Internal Business Reporting System.
Based on the management approach as defined in Ind AS 108, the management evaluates the Company’s performance and allocates resources based on an analysis of various performance indicators by business segments and geographic segments.
t. Cash Dividend to Equity Holders of the Company:
The Company recognises a liability to make cash distributions to equity holders of the Company when the distribution is authorised and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in other equity.
NOTE 1(B) CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES, ASSUMPTIONS AND KEY SOURCE OF ESTIMATION UNCERTAINTY
The preparation of the financial statements in conformity with Ind AS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are included in the following notes:
(i) Useful Lives of Property, Plant & Equipment:
Property, Plant and Equipment represent a significant proportion of the asset base of the Company. The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life. The useful lives of the Company’s assets are determined by the management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technical or commercial obsolescence arising from changes or improvements in production or from a change in market demand of the product or service output of the asset.
(ii) Defined Benefit Plans and Compensated Absences:
The cost of the defined benefit plans, compensated absences and the present value of the defined benefit obligation are based on actuarial valuation using the projected unit credit method. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates.
Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
(iii) Expected Credit Losses on Financial Assets:
The impairment provisions of financial assets are based on assumptions about risk of default and expected timing of collection. The Company uses judgment in making these assumptions and selecting the inputs to the impairment calculation, based on the Company’s past history, customer’s creditworthiness, existing market conditions as well as forward looking estimates at the end of each reporting period.
(iv) Fair Value measurement of Financial Instruments:
When the fair values of financials assets and financial liabilities recorded in the Balance Sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques, including the discounted cash flow model, which involve various judgements and assumptions.
Maturity profile:
The sensitivity analyses above have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period and may not be representative of the actual change. It is based on a change in the key assumption while holding all other assumptions constant. When calculating the sensitivity to the assumption, the method (Projected Unit Credit Method) used to calculate the liability recognized in the balance sheet has been applied. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared with the previous period.
100% of the plan assets held by gratuity trust comprises of employees group gratuity scheme with TANFAC Employees Gratuity Trust Fund. The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market. The expected rate of return on plan assets given by Actuary.
The Company contributed ' Nil (P.Y. ' Nil) to gratuity trust for contribution to Aditya Birla Sun Life Insurance during the financial year 2023-24.
b) Disclosure in respect of leave entitlement liability:
Leave entitlement is short term benefit which is recognized as an expense at the un-discounted amount in the year in which the related service is rendered and disclosed under other current liabilities.
c) Death in service benefit:
The Company has taken group term policy from an insurance Company to cover its obligation for death in service benefit given to eligible employees. The insurance premium of ' 18.78 lakhs (P.Y. ' 22.42 lakhs) is recognized in Statement of Profit and Loss.
d) The Company contributes towards Employees Provident Fund, Employees State Insurance Scheme and Labour Welfare Fund. The aggregate amount contributed and charged to Statement of Profit and Loss is ' 103.65 lakhs (P.Y. ' 90.75 lakhs).
28.2 Related Party Disclosure:
Disclosures as per Ind AS 24 - ‘Related Party Disclosures’ are given below:
28.5 Fair Value Measurement:
The management assessed that cash and bank balances, trade receivables, trade payables, cash credits and other financial assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
The Company has established the following fair value hierarchy that categorises the values into 3 levels. The inputs to valuation techniques used to measure fair value of financial instruments are:
• Level 1: This hierarchy uses quoted (unadjusted) prices in active markets for identical assets or liabilities.
• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
28.6 Financial risk management objectives and policies:
The Company’s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include trade and other receivables, investments, and cash & cash equivalents that derive directly from its operations.
The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. It is the Company’s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below:
a) Material Risk:
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises of foreign currency risk. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables, payables and borrowings. The sensitivity analyses in the following sections relate to the position as at 31st March, 2024 and 31st March, 2023.
The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at 31st March, 2024 and 31st March, 2023.
(i) Foreign currency risk
The Company may also have foreign currency exchange risk on procurement of raw materials. The Company manages this foreign risk using derivatives, wherever required to mitigate or eliminate the risk.
Foreign currency sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in rate of USD, with all other variables held constant. The impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities.
b) Credit Risk:
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables).
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 a significant increase in credit risk the Company compares the risk of default occurring on asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information such as:
i. Actual or expected significant adverse changes in business;
ii. Actual or expected significant changes in the operating results of the counterparty;
iii. Financial or economic conditions that are expected to cause a significant change to the counterparty’s ability to meet its obligations;
iv. Significant increase in credit risk on other financial instruments of the same counterparty;
v. Significant changes in the value of the collateral supporting the obligation or in the quality of the third-party guarantees or credit enhancements.
Financial assets are written off when there are no reasonable expectations of recovery, such as a debtor failing to engage in a repayment plan with the Company.
Assets in the nature of Investment, security deposits, loans and advances are measured using 12 months expected credit losses (ECL). Balances with Banks is subject to low credit risk due to good credit rating assigned to these banks. Trade receivables are measured using life time expected credit losses.
c) Liquidity Risk:
Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at reasonable price. The Company determines its liquidity requirements in the short, medium and long term. This is done by drawing up cash forecast for short- and medium-term requirements and strategic financing plans for long term needs. Management monitors the Company’s liquidity position through rolling forecasts on the basis of expected cash flows.
d) Capital Management:
For the purposes of the Company’s capital management, capital includes issued capital, share premium and all other equity reserves attributable to the equity holders. The Company aims to manage its capital efficiently so as to safeguard its ability to continue as a going concern and to optimise returns to our shareholders.
The capital structure of the Company is based on management’s judgement of the appropriate balance of key elements in order to meet its strategic and day-to-day needs. We consider the amount of capital in proportion to risk and manage the capital structure in light of changes in economic conditions and the risk characteristics of the underlying assets.
The Company’s policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain future development and growth of its business. The Company will take appropriate steps in order to maintain, or if necessary, adjust, its capital structure.
Reason for CSR Funds unspent:
Not applicable as the Company has spent more than the amount to be spent during the year ending March 31, 2024 and March 31, 2023.
28.12 Registrar of Charges:
The Register of Charges of the Company as per MCA records shows some old charges of various Banks amounting to ' 7,186 Lakhs lying open, which the Company maintains that those charges were satisfied during earlier years and necessary forms were filed with the MCA manually when there were no online filing requirements. Company is taking steps to correct the MCA records.
28.13 Additional regulatory Disclosures:
To the best of information of management of the Company, Additional regulatory information required to be given pursuant to Gazette notification for Amendments in Schedule III to Companies Act, 2013 dated 24 March 2021 effective from 01 April 2021 is disclosed wherever applicable. Further, the following disclosures are not applicable to the Company:
i) Disclosure on Revaluation of property, plant and equipment and intangible assets from Registered Valuers is not applicable to company since no revaluation was done by the Company during the year.
ii) No proceeding has been initiated or pending against the Company for holding any benami property under the Benami Transactions (Prohibition) Act,1988 (us of 1988) and rules made thereunder.
iii) The Company has not been declared a wilful defaulter by any bank or financial institution or other lender.
iv) Transactions with Struck off Companies*
During the year, the Company has not entered into any transaction with companies struck off under Section 248 of the Companies Act, 2013 or Section 560 of Companies Act, 1956.
*based on information available as on the date of reporting.
v) As per clause (87) of Section 2 and Section 186 (1) of the Companies Act, 2013 and Rules made thereunder, the company is in Compliance with the number of layers as permitted under the said provisions.
vi) The Company has not carried out any scheme of arrangement which is approved by regulatory authorities during the year.
vii) The Company has not traded or invested in Crypto currency or virtual currency during the financial year.
viii) There are no transactions recorded in books of account reflecting surrender/disclosure of income in the assessment under Income Tax Act, 1961.
ix) During the year no loans/advances in the nature of Loans have been given to Promoters, Directors, KMP and Related Parties.
x) The company does not have investment in subsidiary companies and accordingly the disclosure as to whether the company has complied with the number of layers of companies prescribed under clause (87) of Section 2 of the Act read with the Companies (Restriction on number of Layers) Rules, 2017 is not applicable.
xi) (a) In the opinion of the Management, no funds (which are material either individually or in the aggregate) have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other person(s) or entity(ies), including foreign entity ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, 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 provided any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
xi) (b) In the opinion of the Management, no funds (which are material either individually or in the aggregate) have been received by the Company from any person(s) or entity(ies), including foreign entity ("funding parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the funding parties ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
28.14 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. For the year ended 31 March 2024, MCA has not notified any new standard or amendments to the existing standards applicable to the Company.
28.15 Dividend:
The Board of Directors in their meeting held on 21st April 2023 had recommended final dividend
of ' 6.50 per share totaling ' 648.37 lakhs for the financial year 2022-23 and the said dividend was transferred to the Dividend Warrant Account in September 2023 after confirmation by members in their General Meeting held on 27th September 2023.
The Board of Directors have recommended dividend of ' 7.00 per share totaling ' 698.25 Lakhs for the financial year 2023-24 subject to the approval of shareholders in the forthcoming Annual General Meeting
28.16 During the financial year ended March 31, 2024, the Company Secretary, Mr. H. Narayana Rao, tendered resignation effective from 19th February 2024. As of the date of this report, the company has initiated the process to appoint a new Company Secretary in accordance with the relevant provisions of the Companies Act 2013 and the listing regulations but the vacancy is yet to be filled, hence the financial statements have not been authenticated by the Company Secretary. The resignation of the Company Secretary, however does not have a direct financial impact on the company's financial statements for the year ended March 31, 2024
28.17 The accounting software used by the Company, to maintain its Books of account have a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all transactions recorded in the software. The Company has an established process of regularly identifying shortcomings, if any, and updating technological advancements and features including audit trail. The shortcomings identified during the course of audit are being reviewed and corrective action is being taken wherever required.
28.18 Previous year figures are regrouped or rearranged wherever considered necessary.
As per our report of even date attached
For Singhi & Co., For and on behalf of the Board of Directors of
Chartered Accountants TANFAC Industries Limited
Firm Registration No. 302049E CIN: L24117TN1972PLC006271
Sd/- Sd/- Sd/-
Sudesh Choraria N.R. Ravichandran Afzal Harunbhai Malkani M.R. Sivaraman
Partner Chief Financial Officer Director Director
Membership No. 204936 DIN: 07194226 DIN: 00020075
Sd/-
K. Sendhil Naathan
Place: Chennai Managing Director
Date: 22.04.2024 DIN: 08850046
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