2.12 Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past
event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made
of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the
obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying
amount is the present value of those cash flows (when the effect of the time value of money is material).
Contingent assets are disclosed in the financial statements by way of notes to accounts when an inflow of economic
benefits is probable.
Contingent liabilities are disclosed in the financial statements by way of notes to accounts, unless possibility of an
outflow of resources embodying economic benefits is remote.
2.13 Financial instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual
provisions of the instrument. Financial assets and liabilities are initially measured at fair value. Transaction costs that
are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial
assets and financial liabilities at fair value through profit and loss) are added to or deducted from the fair value
measured on initial recognition of financial asset or financial liability. The transaction costs directly attributable to
the acquisition of financial assets and financial liabilities at fair value through profit and loss are immediately
recognised in the statement of profit and loss.
Effective Interest method
The effective Interest method is a method of calculating the amortised cost of a financial instrument and of
allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly
discounts future cash receipts or payments through the expected life of the financial instrument, or where
appropriate, a shorter period.
A. Financial assets
Cash and bank balances:
Cash and bank balances consist of:
Cash and cash equivalents - which includes cash in hand, deposits held at call with banks and other short term
deposits which are readily convertible into known amounts of cash, are subject to an insignificant risk of
change in value and have maturities of less than one year from the date of such deposits. These balances with
banks are unrestricted for withdrawal and usage.
Other bank balances - which includes balances and deposits with banks that are restricted for withdrawal and
usage.
Financial assets at amortised cost:
Financial assets are subsequently measured at amortised cost if these financial assets are held within a
business model whose objective is to hold these assets in order to collect contractual cash flows and the
contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
Financial assets measured at fair value through other comprehensive income:
Financial assets are measured at fair value through other comprehensive income if these financial assets are
held within a business model whose objective is to hold these assets in order to collect contractual cash flows
or to sell these financial assets and the contractual terms of the financial asset give rise on specified dates to
cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at fair value through profit or loss:
Financial assets are measured at fair value through profit or loss unless it is measured at amortized cost or at
fair value through other comprehensive income on initial recognition.
Impairment of financial Assets:
The Company assesses at each balance sheet date whether a financial asset or a group of financial assets is
impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company
recognizes lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a
financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to
12 month expected credit losses or at an amount equal to lifetime expected losses, if the credit risk on the
financial asset has increased significantly since initial recognition.
De-recognition of financial assets:
The Company de-recognises a financial asset only when the contractual rights to the cash flows from the asset
expire, or it transfers the financial asset and substantially all risks and rewards of ownership of the asset to
another entity. If the Company neither transfers nor retains substantially all the risks and rewards of
ownership and continues to control the transferred asset, the Company recognises its retained interest in the
assets and an associated liability for amounts it may have to pay.
If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the
Company continues to recognise the financial asset.
On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and
the sum of the consideration received and receivable is recognized in statement of profit and loss.
B. Financial liabilities and equity instruments
Classification as debt or equity
Financial liabilities and equity instruments issued by the Company are classified according to the substance of
the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of the company after
deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue
costs, if any.
Financial Liabilities
Trade and other payables are initially measured at fair value, net of directly attributable costs, and are
subsequently measured at amortised cost, using the effective interest rate method where the time value of
money is significant. Interests bearing issued debt are initially measured at fair value and are subsequently
measured at amortised cost using the effective interest rate method.
De-recognition of financial liabilities
The Company de-recognises financial liabilities when, and only when, the Company's obligations are
discharged, cancelled or they expire.
Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount is included in the Balance Sheet where there is a
legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or
realise the asset and settle the liability simultaneously.
2.14 Segment reporting
Operating segments are identified and reported taking into account the different risk and returns, the organization
structure and the internal reporting systems.
2.15 Current & non-current classification
All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle
(twelve months) and other criteria set out in the Schedule III to the Act.
2.16 Leases
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.
Company as a lessee
The Company accounts for each lease component within the contract as a lease separately from non-lease
components of the contract and allocates the consideration in the contract to each lease component on the basis of
the relative standalone price of the lease component and the aggregate standalone price of the non-lease
components.
The Company recognises right-of-use asset representing its right to use the underlying asset for the lease term at the
lease commencement date. The cost of the right-of-use asset measured at inception shall comprise of the amount of
the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement
date less any lease incentives received, plus any initial direct costs incurred and an estimate of costs to be incurred
by the lessee in dismantling and removing the underlying asset or restoring the underlying asset or site on which it is
located. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated
impairment losses, if any and adjusted for any remeasurement of the lease liability. The right-of-use assets is
depreciated using the straight-line method from the commencement date over the shorter of lease term or useful
life of right-of-use asset. The estimated useful lives of right-of-use assets are determined on the same basis as those
of property, plant and equipment. Right-of-use assets are tested for impairment whenever there is any indication
that their carrying amounts may not be recoverable. Impairment loss, if any, is recognised in the statement of profit
and loss.
The Company measures the lease liability at the present value of the lease payments that are not paid at the
commencement date of the lease. The lease payments are discounted using the interest rate implicit in the lease, if
that rate can be readily determined. If that rate cannot be readily determined, the Company uses incremental
borrowing rate. For leases with reasonably similar characteristics, the Company, on a lease-by-lease basis, may adopt
either the incremental borrowing rate specific to the lease or the incremental borrowing rate for the portfolio as a
whole. The lease payments shall include fixed payments, variable lease payments, residual value guarantees,
exercise price of a purchase option where the Company is reasonably certain to exercise that option and payments
of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the
lease. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the
lease liability, reducing the carrying amount to reflect the lease payments made and remeasuring the carrying
amount to reflect any reassessment or lease modifications or to reflect revised in-substance fixed lease payments.
The Company recognises the amount of the re-measurement of lease liability due to modification as an adjustment
to the right-of-use asset and statement of profit and loss depending upon the nature of modification. Where the
carrying amount of the right-of-use asset is reduced to zero and there is a further reduction in the measurement of
the lease liability, the Company recognises any remaining amount of the re-measurement in statement of profit and
loss.
The Company has elected not to apply the requirements of Ind AS 116 Leases to short-term leases of all assets that
have a lease term of 12 months or less and leases for which the underlying asset is of low value. The lease payments
associated with these leases are recognised as an expense on a straight-line basis over the lease term.
Company as a lessor
At the inception of the lease the Company classifies each of its leases as either an operating lease or a finance lease.
The Company recognises lease payments received under operating leases as income on a straight-line basis over the
lease term. In case of a finance lease, finance income is recognised over the lease term based on a pattern reflecting
a constant periodic rate of return on the lessor's net investment in the lease. When the Company is an intermediate
lessor it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of
a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying
asset. If a head lease is a short-term lease to which the Company applies the exemption described above, then it
classifies the sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, the Company applies Ind AS 115 Revenue from
contracts with customers to allocate the consideration in the contract.
2.17 Government Grants
Government grants and subsidies are recognized when there is reasonable assurance that the Company will comply
with the conditions attached to them and the grants / subsidy will be received. Government grants whose primary
condition is that the Company should purchase, construct or otherwise acquire capital assets are presented by
deducting them from the carrying value of the assets. The grant is recognized as income over the life of a depreciable
asset by way of a reduced depreciation charge.
Export benefits are accounted for in the year of exports based on eligibility and when there is no uncertainty in
receiving the same.
Government grants in the nature of promoters' contribution like investment subsidy, where no repayment is
ordinarily expected in respect thereof, are treated as capital reserve. Government grants in the form of non¬
monetary assets, given at a concessional rate, are recorded on the basis of their acquisition cost. In case the non¬
monetary asset is given free of cost, the grant is recorded at a nominal value.
Other government grants and subsidies are recognised as income over the periods necessary to match them with the
costs for which they are intended to compensate, on a systematic basis.
2.18 Cash and cash equivalents
The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of
cash that are subject to an insignificant risk of change in value and having original maturities of three months or less
from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which
are unrestricted for withdrawal and usage.
2.19 Fair Value Measurement
Fair value is 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 under current market conditions.
The Company categorizes assets and liabilities measured at fair value into one of three levels depending on the
ability to observe inputs employed in their measurement which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2 inputs are inputs that are observable, either directly or indirectly, other than quoted prices
included within level 1 for the asset or liability.
• Level 3 inputs are unobservable inputs for the asset or liability reflecting significant modifications to
observable related market data or Company's assumptions about pricing by market participants.
Note 30: DEFINED BENEFIT PLAN
Defined contribution plans
The Company is contributing toward Provident Fund of employees. Under the scheme the Company is contributing a specified percentage of the salary to the fund and
is depositing to the Recognized provident fund.
Defined benefit plans
The Company is contributing towards Gratuity Fund of employees. Under the scheme the Company pays premium to the Life Insurance Corporation (LIC) of India based
on their actuarial calculation. Further, the company has also actuarial calculation done from an independent actuary and any difference in the premium paid to LIC and
the liability calculated is accordingly accounted.
Investment Risk
The present value of the defined benefit plan liability is calculated using a discount rate determined by reference to the market yields on government bonds
denominated in Indian Rupees. If the actual return on plan asset is below this rate, it will create a plan deficit.
Interest Risk
A decrease in the bond interest rate will increase the plan liability. However, this will be partially offset by an increase in the return on the plan's debt
investments.
Longevity Risk
The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after
their employment. An increase in the life expectancy of the plan participants will increase the plan's liability.
Salary Risk
The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the
plan participants will increase the plan's liability.
Note 33.2: FINANCIAL RISKS MANAGEMENT
In the course of business, amongst others, the Company is exposed to several financial risks such as Credit Risk, Liquidity Risk, Interest Rate Risk, Exchange Risk and
Commodity Price Risk.
These risks may be caused by the internal and external factors resulting into impairment of the assets of the Company causing adverse influence on the achievement of
Company's strategies, operational and financial objectives, earning capacity and financial position.
The Company has formulated an appropriate policy and established a risk management framework which encompass the following process:
• identify the major financial risks which may cause financial losses to the company
• assess the probability of occurrence and severity of financial losses
• mitigate and control them by formulation of appropriate policies, strategies, structures, systems and procedures
• Monitor and review periodically the adherence, adequacy and efficacy of the financial risk management system
The Company enterprise risk management system is monitored and reviewed at all levels of management, Internal Auditors, Audit Committee and the Board of
Directors from time to time.
(A) COMMODITY PRICE RISK
The main raw materials which company procures are global commodities and their prices are to a great extent linked to the movement of crude prices directly or
indirectly. The pricing policy of the Company's final product is structured in such a way that any change in price of raw materials is passed on to the customers in the
final product however, with a time lag which mitigates the raw material price risk.
With regard to the finished products, the Company has been operating in a global competitive environment which continues to keep downward pressure on the prices
and the volumes of the products.
In order to combat this situation, the Company formulated manifold plans and strategies to develop new customers & focus on new innovative products. In addition, it
has also been focusing on improvement in product quality and productivity. With these measures, Company counters the competition and consequently commodity
price risk.
(1) FOREIGN CURRENCY RISK
The company is exposed to the foreign currency risk from transactions. Transactional exposures are arising from the transactions entered into foreign currency.
Management keeps a close watch of the maturity of the financial assets in foreign currency and payment obligations of the financial liabilities.
The carrying amounts of the Company's foreign currency denominated monetary assets and monetary liabilities at the end of the reporting periods are as follows:
(2) INTEREST RATE RISK
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's
fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor
the future cash flows will fluctuate because of a change in market interest rates. Further, the Company's investments in deposits is with banks and electricity authorities
and therefore do not expose the Company to significant interest rates risk. The Company's variable rate borrowing is subject to interest rate risk. However, the
management considers the impact of fair value interest rate risk on variable rate borrowings to be immaterial.
(B) CREDIT RISK
Credit Risk refers to the risks that arise on default by the counterparty on its contractual obligation resulting into financial loss to the company. The company may carry
this Risk on Trade and other receivables, liquid assets and some of the non current financial assets. In case of Trade receivables, the company has framed appropriate
policy for extending credits period & limit to each customer based on their profile, financial position and their external rating etc. The collections of trade dues are
strictly monitored. In case of Export customers, even credit guarantee insurance is also obtained for each and every customer.
The credit risk on cash & cash equivalent, investment in fixed deposits, liquid funds and deposits are insignificant as counterparties are banks or mutual funds with high
credit ratings assigned by the trading agencies of international repute.
(C) LIQUIDITY RISK
Liquidity Risk arises when the company is unable to meet its short term financial obligations as and when they fall due.
The company maintains adequate liquidity in the system so as to meet its all financial liabilities timely. In addition to this, the company's overall financial position is
very strong so as to meet any eventuality of liquidity tightness.
Fair Value hierarchy disclosures:
Level Financial Instruments measured using quoted prices. This includes listed equity instruments, traded bonds, ETF's and mutual funds that have quoted prices. The
fair value of all equity instruments (including bonds) which are traded in stock exchanges is valued using the closing prices as at the reporting period. The mutual
funds are valued using the closing NAV.
Level Financial Instruments that are not traded in an active market (for example traded bonds, over the counter derivatives) is determined using valuation techniques
which maximize the use of observable market data and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an
instrument are observable, the instrument is included in level 2.
Level Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). This is the case of unlisted equity securities, contingent
consideration and indemnification asset included in level 3.
The management has carried out analysis of financial assets and liabilities for all the reporting periods and has concluded that there are no financial assets and
liabilities to be considered at fair value and disclosed under Level 1, Level 2 or Level 3 and all the financial assets and liabilities are at its carrying value which is equal to
the fair value measured at amortised cost.
The carrying amounts of trade receivables, cash and cash equivalent, bank balances, current loans, current other financial assets, trade payables, current borrowings
and other current financial liabilities are considered to be the same as their fair values, due to their short term nature.
The carrying amounts of non current financial loans are considered to be the same as their fair value as it consist of security deposit with Government Organisations
such as Electricity companies, which are interest bearing and are close to the fair value. Also, it consist of loans given to employees which are also interest bearing and
are close the fair value.
The carrying amount of non current other financial assets are considered to be the same as their value as it consist of interest bearing fixed deposits having maturity of
more than 12 months and are close to the fair value.
Note 43 :
(i) The Company do not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
(ii) The Company do not have any transactions with companies struck off.
(iii) The Company do not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
(iv) The Company have not traded or invested in Crypto currency or Virtual Currency during the year.
(v) The Company have 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: 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 provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
(vi) The Company have 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:
(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.
(vii) The Company do not have any such transaction which is not recorded in the books of accounts and that has been surrendered or disclosed as income duringthe
year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961)
(viii) The company holds all the title deeds of immovable property in its name.
(ix) There is no Scheme of Arrangements approved by the Competent Authority in terms of sections 230 to 237 of the Companies Act, 2013.
(x) The company is not declared as wilful defaulter by any bank or financial Institution or other lender.
Note 44 :
The figures of previous year have been re-arranged and regrouped wherever necessary to make them comparable with those of the current year and according to
requirements of the schedule III of the Companies Act, 2013.
The balance sheet has been prepared in absolute numbers and then converted into lakhs to meet the presentation requirement as per Companies Act, accordingly the
variance on account of decimals rounding-off may exist.
Note 45 : Code on Social Security, 2020 :
The Code on Social Security, 2020 ('Code') relating to employee benefits during employment and post- employment benefits received Presidential assent in September
2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified. The Company will assess
the impact of the Code when it comes into effect and will record any related impact after the Code becomes effective.
The accompanying notes are integral part of the Financial Statements
As per our report of even date attached
For Shah Mehta And Bakshi For and on behalf of the Board of Directors
Chartered Accountants Purity Flexpack Ltd
Firm Registration No. 103824W CIN : L25200GJ1988PLC010514
Kalpit Bhagat Anil Patel Kunal Patel
Partner Chairman & Managing Director Director & CFO
Membership No. 142116 DIN: 00006904 DIN: 00106545
Matrikaa Sharma
Company Secretary
Place: Vadodara Place: Vanseti
Date: 27.05.2024 Date: 27.05.2024
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