(t) Provisions and contingent liabilities
A provision is recognised if, as a result of a past event, the Company has a present legal or
constructive obligation that can be estimated reliably, and it is probable that an outflow of economic
benefits will be required to settle the obligation. Provisions are determined by discounting the expected
future obligation at pre-tax rate that reflects current market assessments of the time value of money
risks specific to liability. They are not discounted where they are assessed as current in nature.
Provisions are not made for future operating losses.
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 with in 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 reliable
estimate of the amount cannot be made. Contingent assets are not recognised in the financial
statements but disclosed, where an inflow of economic benefit is probable.
Commitments are items that are not reported as liabilities as on reporting date. Capital commitments
are disclosed when there is a projected capital expenditure to spend on long-term assets over a period
of time. Other commitments are disclosed when there is an undertaking to fulfil quantified exports in
future years.
Provisions, contingent liabilities and contingent assets and commitments are reviewed at the end of
each reporting date.
(u) Taxation
Income tax expense represents the sum of tax currently payable and deferred tax. Current and deferred
tax are recognised in the Statement of Profit and Loss, except when they relate to items that are
recognised in Other Comprehensive Income or directly in equity, in which case, the current and
deferred tax are also recognised in Other Comprehensive Income or directly in equity respectively.
i. Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the
year and any adjustment to the tax payable or receivable in respect of previous years. The amount
of current tax reflects the best estimates of the tax amount expected to be paid or received after
considering the uncertainty, if any, related to income taxes. It is measured using tax rates (and tax
laws) enacted or substantively enacted by the reporting date.
Current tax assets and current tax liabilities are offset only if there is a legally enforceable right to
set off the recognised amounts, and it is intended to realise the asset and settle the liability on a
net basis or simultaneously.
ii. Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and
liabilities in the balance sheet and the corresponding tax bases used in the computation of taxable
profit. Deferred tax liabilities are generally recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible temporary differences to the extent
that it is probable that taxable profits will be available against which those deductible temporary
differences can be utilised. Such deferred tax assets and liabilities are not recognised if the
temporary difference arises from the initial recognition of other assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at the end of each reporting date and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available to
allow all or part of the asset to be recovered.
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the
extent that it has become probable that future taxable profits will be available against which they
can be used.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that
have been enacted or substantively enacted by the reporting date. The measurement of deferred
tax assets and liabilities reflects the tax consequences that would follow from the manner in which
the Company expects, at the reporting date, to recover or settle the carrying amount of its assets
and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off
current tax assets against current tax liabilities and when they relate to income taxes levied by the
same taxation authority and the Company intends to settle its current tax assets and liabilities on a
net basis.
(v) Segment reporting
The Company is primarily in the business of manufacturing and sale of cotton yarn blended (textile
product). The Board of Directors of the Company, which has been identified as being the Chief
Operating Decision Maker (CODM), evaluates the Company’s performance, allocate resources based
on the analysis of the various performance indicator of the Company as a single unit. Therefore, there
is only one reportable segment for the Company.
(w) Recent accounting pronouncements
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
March 31, 2024, MCA has not notified any new standards or amendments to the existing standards
applicable to the Company.
Nature and purpose of reserves/ other equity:
(a) Equity component of redeemable preference shares: Under previous GAAP, 5% redeemable non¬
cumulative preference shares of 7 65.00 Lakhs were classified as part of total equity. However, under Ind AS the
non-cumulative redeemable preference shares are compound financial instruments, where the liability component
outstanding at the date of transition is bifurcated by first valuing the debt component with the residual being equity.
The liability component is determined as the present value of the eventual redemption amount of 7 65.00 Lakhs of
preference shares, discounted at the rate at which the Company could issue a similar instrument with a similar
credit standing but without the feature of discretionary dividends during its life. At the transition date i.e.,
01.04.2016, 5% redeemable non-cumulative preference shares of 7 65.00 Lakhs were bifurcated into liability
component amounting to 7 21.95 Lakhs and the residual 7 43.05 Lakhs being equity. The preference shares of 7
65.00 Lakhs were redeemed at a pre-mature date during the financial year 2018-19. At the time of pre-mature
redemption of 5% redeemable non-cumulative preference shares of 7 65.00 Lakhs during the financial year 2018¬
19, an amount of 7 25.50 Lakhs were allocated from equity component of compound financial instrument and
residual 7 39.50 Lakhs from the liability component by taking the fair value of compound financial instrument at the
time of its redemption. After allocation of 7 25.50 Lakhs from equity component of compound financial instrument
at the time of its redemption, balance amount of 7 17.55 Lakhs is outstanding as on the Balance Sheet date.
(b) Capital redemption reserve: Capital redemption reserve has been created pursuant to the provisions of
Section 55 of the Companies Act, 2013 on account of redemption of preference shares out of the profits of the
Company.
(c) Retained earnings: Retained earnings are the profit that the Company has earned till date, less any transfers
to general reserve, dividends or other distributions paid to investors.
Remeasurements of the defined benefit plans which are the part of retained earnings represents the
following as per Ind AS 19, Employee Benefits:
(i) actuarial gains and losses;
(ii) the return on plan assets, excluding amounts included in net interest on the net defined benefit liability (asset);
and
(ii) any change in the effect of the asset ceiling, excluding amounts included in net interest on the net defined
benefit liability (asset).
(a) Nature of security and guarantee by directors or others:
Term loan from bank:
Term loan from Punjab National Bank is secured by:
A. Primary Security:
(i) Hypothecation of machinery, other assets and equipments purchased with the bank loan.
B. Collateral Security:
(i) First charge on all the existing (except assets financed by SIDBI) and future block assets of the Company.
(ii) Extension of first pari passu charge with SIDBI by way of equitable mortgage of factory land measuring 34
kanals and 14 marlas and building constructed thereon (20993.5 sq. yards) located at 9th KM Stone, Hisar Bhiwani
Road, VPO Dabra, Hisar, Haryana.
Term loan from Punjab National Bank is further covered by irrevocable and unconditional personal guarantee of
the directors of the Company namely Sh. Anurag Gupta, Smt. Sapna Kansal and Sh. Nikhil Goel.
Term loans from financial institution:
Term loans from financial institution i.e., Small Industries Development Bank of India (SIDBI) are secured by:
A. Primary Security:
(i) First charge by way of hypothecation in favour of SIDBI on all the movables of the borrower including plant and
machinery, equipment, miscellaneous fixed assets, machinery spares, tools and accessories etc. acquired/ to be
acquired under the project.
B. Collateral Security:
(i) First charge by way of hypothecation in favour of SIDBI of the entire movables of the borrower including plant,
equipment, machinery, machinery spares, miscellaneous fixed assets, tools, accessories, furniture, fixtures,
computers etc. which have already been charged to SIDBI for earlier assistances.
(ii) Extension of first pari passu charge with Punjab National Bank by way of equitable mortgage of factory land
measuring 34 kanals and 14 marlas and building constructed thereon (20993.5 sq. yards) located at 9th KM Stone,
Hisar Bhiwani Road, VPO Dabra, Hisar, Haryana.
(iii) Term loan from financial institution with sanctioned amount of ? 445.00 Lakhs is further guaranteed under
Partial Risk Sharing Facility for Energy Efficiency for not less than 75% of term loan.
(iv) Term loan from financial institution with sanctioned amount of? 300.00 Lakhs is further secured by pledge of
fixed deposit of ? 75.00 lakhs held with SIDBI.
Term loans from financial institution are further covered by irrevocable and unconditional personal guarantee of the
director of the Company namely Sh. Anurag Gupta (Managing Director of the Company), Smt. Sapna Kansal, Sh.
Nikhil Goel and Chief Executive Officer of the Company namely Sh. Naveen Kansal.
B. Financial risk management
The Company has exposure to the following risks arising from financial instruments:
- credit risk
- liquidity risk
- market risk
i. Risk management framework
The Company’s board of directors has overall responsibility for the establishment and oversight of the Company’s risk
management framework. The Board of Directors has established the processes to ensure that executive management
controls risks through the mechanism of properly defined risk management framework.
The Company's risk management policies are established to identify and analyse the risks faced by the Company, to set
appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems
are reviewed by the board regularly to reflect changes in market conditions and the Company’s activities. The Company,
through its policies and procedures, aims to maintain a disciplined and constructive control environment in which all
employees understand their roles and responsibilities.
ii. Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from the Company's receivables from customers.
The carrying amounts of financial assets represent the maximum credit risk exposure. The Company monitor credit risk
very closely both in domestic and export market. The Management impact analysis shows credit risk and impact
assessment as low.
Trade receivables
The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However,
management also considers the factors that may influence the credit risk of its customer base, including the default risk
associated with the industry and country in which customers operate.
The Company Management has established a credit policy under which each new customer is analysed individually for
creditworthiness before the Company's standard payment and delivery terms and conditions are offered. The
Company's review includes market check, industry feedback, past financials and external ratings, if they are available,
and in some cases bank references. Sale limits are established for each customer and reviewed monthly basis. Any
sales exceeding those limits require approval from the Company's management.
Most of the Company's customers have been transacting with the Company from past few years, and most of these
customers' balances are not credit-impaired at the reporting date except in few cases reported. Identifying
concentrations of credit risk requires judgement in the light of specific circumstances. The Company monitors ageing of
its trade receivables regularly and based on the same takes corrective action. Trade receivables having ageing more
than 180 days is monitored individually and loss allowance is created based on such assessment.
iii. Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another financial asset. The Company’s approach to manage liquidity is to
ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when liabilities are fallen due, under
both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s
reputation.
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of
fund through an adequate amount of committed credit facilities to meet obligations when due and to close out market
positions. Due to the dynamic nature of the underlying businesses, the Company maintains flexibility in funding by
maintaining availability under committed credit line.
Liquidity risk is managed by adequate reserves, banking facilities and reserve borrowing facilities, by continuously
monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities
C. Capital Management
The Company manages its capital to ensure the Company's abaility to continue as going concern and to create value for
shareholders by facilitating the meeting of long term and short term goals of the Company. The Company manages
capital risk in order to maximize shareholders’ profit by maintaining sound/optimal capital structure through monitoring of
financial ratios, such as net debt-to-equity ratio. The funding needs are met through equity, cash generated from
operations, long term and short term bank borrowings. Net debt includes interest bearing borrowings less cash and cash
equivalents and other bank balances.
B. Defined Benefit Plans
Gratuity
The Company provides for gratuity for its employees in India as per the Payment of Gratuity Act, 1972 (as
amended). Employees in continuous service for a period of 5 years are eligible for gratuity. The amount of
gratuity payable on retirement/termination is the employee's last drawn basic salary per month computed
proportionately for 15 days salary multiplied for the number of completed years of service. Gratuity liability
is being contributed to Group Gratuity cum Life Assurance Schemes administered by the Life Insurance
Corporation of India. The present value of the defined benefit obligations and the related current service
cost and past service cost, were measured using the Projected Unit Credit Method. The measurement
date used for determining retirement benefits for gratuity is 31st March.
These plans typically expose the Company to actuarial risks such as investment risk, interest rate risk,
longevity risk and salary risk.
Investment risk:
The probability or likelihood of occurrence of losses relative to the expected return on any particular
investment.
Interest rate risk:
The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an
increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value
of the liability.
Longevity risk:
The present value of defined benefit plan liability is calculated by reference to the best estimate of the
mortality of plan participants both during and after 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 is calculated with reference to the future salaries of
participants under the plan. Increase in salary due to adverse inflationary pressures might lead to higher
liabilities.
‘‘Shortfall in CSR Spent:
Amount remaining unspent as at 31st March, 2023 pertains to "other than ongoing projects"
which is required to be transferred to a Fund specified in Schedule VII to the Companies
Act, 2013 before the expiry of time limit as permitted under the second proviso to sub¬
section (5) of section 135 of the Act i.e. six months of the expiry of the financial year.
Accordingly, the Company has transferred the amount of ? 6.87 lakhs remaining unspent as
at 31st March, 2023 to PM CARES Fund during the current financial year before 30th
September, 2023.
43. Additional Regulatory Information as applicable to the Company:
(a) The Company has not granted any loans or advances in the nature of loans to promoters,
Directors, KMPs and the related parties (as defined under Companies Act, 2013), either severally
or jointly with any other person.
(b) There are no proceedings initiated or are pending against the Company for holding any benami
property under the Prohibition of Benami Property Transactions Act, 1988 and rules made
thereunder.
(c) The Company has borrowings from banks on the basis of security of current assets; and the
quarterly returns or statements of current assets filed by the Company with banks are in
agreement with the books of account of the Company and there are no material discrepancies.
(d) The Company has not been declared as willful defaulter by any bank or financial institution or other
lender.
(e) The Company has not used the borrowings from banks and financial institutions at the balance
sheet date other than the specific purpose for which it was taken.
(f) The Company does not have any transactions with companies struck off under Section 248 of the
Companies Act, 2013 or Section 560 of the Companies Act, 1956.
(g) The Company does not have any charges or satisfaction which are yet to be registered with the
Registrar of Companies beyond the statutory period.
(h) The Company is not a subsidiary or holding company of any other company.
(i) 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:
(i) 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
(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
(j) The Company has not received any fund from any person(s) or entity(ies), including foreign entities
("Funding Party") with the understanding (whether recorded in writing or otherwise) that the
Company shall:
(i) 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
(ii) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(k) There are no transactions which are 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 (such as, search or survey or any other relevant provisions of the Income Tax Act,
1961).
(l) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial
year.
In terms of our report of even date attached
for JAIN & ANIL SOOD For and on behalf of the Board of Directors
Chartered Accountants
Firm's Registration No. 010505N
(RAJESH KUMAR JAIN) (ANURAG GUPTA) (NIKHIL GOEL)
Partner Managing Director Director
Membership No. 088447 DIN-00192888 DIN-01741446
Place: Chandigarh
Date: 30th May, 2024
(SHARAD GOEL) (NIKITA SINGLA)
Chief Financial Officer Company Secretary
(NAVEEN KANSAL)
Chief Executive Officer
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