3.10 Provisions, Contingent Liabilities and Contingent Assets (Ind AS 37)
• Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a
past event and 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.
Provisions are discounted, if the effect of the time value of money is material, using pre-tax rates that reflects
the risks specific to the liability. When discounting is used, an increase in the provisions due to the passage of
time is recognised as finance cost. These provisions are reviewed at each Balance Sheet date and adjusted to
reflect the current best estimates.
Necessary provision for doubtful debts, claims, etc., are made if realisation of money is doubtful in the
judgement of the management.
• Contingent Liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by
the occurrence or non-occurrence of one or more uncertain future events beyond the control of the company
or a present obligation that is not recognized because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a
liability that cannot be recognized because it cannot be measured reliably. Contingent liabilities are disclosed
separately.
Show cause notices issued by various Government authorities are considered for evaluation of contingent
liabilities only when converted into demand.
• Contingent Assets
Where an inflow of economic benefits is probable, the Company discloses a brief description of the nature of
the contingent assets at the end of the reporting period, and, where practicable, an estimate of their financial
effect. Contingent assets are disclosed but not recognized in the financial statements.
3.11 Financial Instruments (Ind AS 109)
• Capital management
The Company manages its capital to ensure that entities in the Company will be able to continue as going
concern, while maximizing the return to stakeholders through the optimization of the debt and equity balance.
The Company determines the amount of capital required on the basis of annual operating plans and long-term
product and other strategic investment plans. The funding requirements are met through equity, long-term
borrowings and other short-term borrowings.
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.
• Financial risk management objectives
The treasury function provides services to the business, co-ordinates access to domestic and international
financial markets, monitors and manages the financial risks relating to the operations through internal risk
reports which analyse exposures by degree and magnitude of risks. These risks include market risk (including
currency risk, interest rate risk and other price risk), credit risk and liquidity risk.
The Company seeks to minimize the effects of these risks by using natural hedging financial instruments and
forward contracts to hedge risk exposures. The use of financial derivatives is governed by the Company's
policies approved by the board of directors, which provide written principles on foreign exchange risk, the use
of financial derivatives, and the investment of excess liquidity. The Company does not enter into or trade
financial instruments, including derivative financial instruments, for speculative purposes.
• Market risk
Market risk is the risk of any loss in future earnings, in realizable fair values or in future cash flows that may
result from a change in the price of a financial instrument. The Company's activities expose it primarily to the
financial risks of changes in foreign currency exchange rates and interest rates. The Company actively
manages its currency and interest rate exposures through its finance division and uses derivative instruments
such as forward contracts and currency swaps, wherever required, to mitigate the risks from such exposures.
The use of derivative instruments is subject to limits and regular monitoring by appropriate levels of
management.
• Foreign currency risk management
The Company undertakes transactions denominated in foreign currencies; consequently, exposures to
exchange rate fluctuations arise. The Company actively manages its currency rate exposures through a
centralised treasury division and uses natural hedging principles to mitigate the risks from such exposures. The
use of derivative instruments, if any, is subject to limits and regular monitoring by appropriate levels of
management.
There are no carrying amounts of the Company's foreign currency denominated monetary assets and monetary
liabilities at the end of the reporting period.
• Foreign currency sensitivity analysis
Movement in the functional currencies of the various operations of the Company against major foreign
currencies may impact the Company's revenues from its operations. Any weakening of the functional currency
may impact the Company's cost of imports and cost of borrowings and consequently may increase the cost of
financing the Company's capital expenditures. The foreign exchange rate sensitivity is calculated for each
currency by aggregation of the net foreign exchange rate exposure of a currency and a simultaneous parallel
foreign exchange rates shift in the foreign exchange rates of each currency by 2%, which represents
management's assessment of the reasonably possible change in foreign exchange rates. The sensitivity
analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation
at the period end for a 2% change in foreign currency rates.
In management's opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk
because the exposure at the end of the reporting period does not reflect the exposure during the year.
• Interest rate risk management
The Company is exposed to interest rate risk because it borrows funds at both fixed and floating interest rates.
The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate
borrowings and by the use of interest rate swap contracts. Hedging activities are evaluated regularly to align
with interest rate views and defined risk appetite, ensuring the most cost-effective hedging strategies are
applied. Further, in appropriate cases, the Company also effects changes in the borrowing arrangements to
convert floating interest rates to fixed interest rates.
• Interest rate sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for both
derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the
analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was
outstanding for the whole year. A 25-basis point increase or decrease is used when reporting interest rate risk
internally to key management personnel and represents management's assessment of the reasonably possible
change in interest rates.
• Credit risk management
Credit risk arises when a customer or counterparty does not meet its obligations under a customer contract or
financial instrument, leading to a financial loss. The Company is exposed to credit risk from its operating
activities primarily trade receivables and from its financing/ investing activities, including deposits with banks
and foreign exchange transactions. The Company has no significant concentration of credit risk with any
counterparty.
• Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure is
the total of the carrying amount of balances with banks, short term deposits with banks, trade receivables,
margin money and other financial assets excluding equity investments.
• Trade Receivables
Trade receivables are consisting of a large number of customers. The Company has credit evaluation policy for
each customer and, based on the evaluation, credit limit of each customer is defined. Wherever the Company
assesses the credit risk as high, the exposure is backed by either bank, guarantee/letter of credit or security
deposits.
The Company does not have higher concentration of credit risks to a single customer. As per simplified
approach, the Company makes provision of expected credit losses on trade receivables using a provision matrix
to mitigate the risk of default in payments and makes appropriate provision at each reporting date wherever
outstanding is for longer period and involves higher risk.
• Investments, Derivative Instruments, Cash and Cash Equivalents and Bank deposits
Credit Risk on cash and cash equivalents, deposits with the banks/financial institutions is generally low as the
said deposits have been made with the banks/financial institutions, who have been assigned high credit rating
by international and domestic rating agencies.
Credit Risk on Derivative Instruments is generally low as the Company enters into the Derivative Contracts with
the reputed Banks.
Investments of surplus funds are made only with approved Financial Institutions/Counterparty. Investments
primarily include investment in units of quoted Mutual Funds, quoted Bonds, Non-Convertible Debentures
issued by Government/Semi-Government Agencies/PSU Bonds/High Investment grade Corporates etc. These
Counterparties have low credit risk. The Company has standard operating procedures and investment policy for
deployment of surplus liquidity, which allows investment in debt securities and mutual fund schemes of debt
and arbitrage categories and restricts the exposure in equity markets.
• Offsetting related disclosures
Offsetting of cash and cash equivalents to borrowings as per the consortium agreement is available only to the
bank in the event of a default. Company does not have the right to offset in case of the counter party's
bankruptcy, therefore, these disclosures are not required.
• Liquidity risk management
Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity
risk management is to maintain sufficient liquidity and ensure that funds are available for use as per
requirements. The Company invests its surplus funds in bank fixed deposit, which carry minimal mark to
market risks. The Company also constantly monitors funding options available in the debt and capital markets
with a view to maintaining financial flexibility.
Fair value of financial assets and financial liabilities that are not measured at fair value (but fair value
disclosures are required): NIL
3.12 Revenue Recognition (Ind AS 115)
• Sale of Power
Sale of power is recognised at the point of generation of power from the plant and stock points. Wherever the
company enters into power sharing agreement, income is recognised net of power share. Revenue is measured
at the fair value of the consideration received or receivable, taking into account contractually defined terms of
payment.
• Interest Income
Interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the
estimated future cash payments or receipts over the expected life of the financial instrument or a shorter
period, where appropriate, to the gross carrying amount of the financial asset or to the amortised cost of a
financial liability. When calculating the effective interest rate, the Company estimates the expected cash flows
by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call
and similar options) but does not consider the expected credit losses.
• Other Income
Dividend income is recognized when the company's right to receive dividend is established by the reporting
date. Income from sale of CER (Carbon Credits) is accounted for based on eligibility criteria.
3.13 Leases (IND AS 116)
In accordance with the standard, the Company has recognized Right-of-Use (ROU) assets and corresponding
lease liabilities for all applicable lease arrangements, except for short-term leases of less than 12 months and
leases of low-value assets which have been accounted for on a straight-line basis over the lease term. The
lease liabilities have been measured at the present value of future lease payments, discounted using the
Company's incremental borrowing rate.
The ROU assets have been measured at cost, comprising the amount of the initial lease liability, lease
payments made at or before the commencement date, and any initial direct costs, adjusted for lease incentives
received. The ROU asset is depreciated on a straight-line basis over the lease term, while the lease liability is
reduced over time using the effective interest method.
The Company has also appropriately accounted for refundable security deposits by discounting them to present
value and recognizing the difference as a component of the ROU asset. The accounting treatment and
disclosures are in accordance with the principles and requirements of Ind AS 116.
for Venkatesh & Co., For on Behalf of Board
Chartered Accoutants
FRN: 004636S
CA Dasaraty V
Partner INIiranjan Ravindranath K S
Raosaheb Jagtap
M No: 026336 DIN: 01237606 DIN: 00848817
. Whole-time
Director .
UDIN: 25026336BMIMZD5610 Director
Chennai., 30th May 2025
Hari Babu N K Sharath
DIN: 06422543 C°mpany
Secretary
Director -
Finance
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