Disclosure of information on fair value of the Company's investment properties
i) During the year ended 31 March 2024, the Company has classified Right-of-use of buildings relating to 7th and 8th Foor of SAS Tower, Gurugram into Investment property as per Ind AS 40. The fair value of the same 31 March, 2024 has been arrived at H 428.77 million on the basis on valuation carried by A2ZVALUERS, independent valuer not connected with the Company, using the market value by income approach. Independent valuer is a registered valuer as defined under Rule 2 of the Companies (Registered Valuers and Valuation) Rules, 2017. In estimating the fair value of the properties, the highest and best use of the properties is their current use.
ii) The property rental income earned by the Company from its Investment property, all of which is leased out under operating leases, amounted to H 20.12 million. Direct operating expenses arising on the investment property, all of which generated rental income in the year, amounted to Nil.
The Company had, in the earlier years purchased the business of "Dr.Bhanudas Yashwant Shinagare” engaged in the business of providing pathological diagnostics services in Pune, on a going concern basis for a purchase consideration of H 15.00 million (including goodwill of H 10.80 million).
Impairment of goodwill
For the purpose of impairment testing, goodwill has been allocated to the cash generating unit - 'Labs CGU'. The recoverable amount of cash-generating units is determined based on a value in use calculation which uses cash flow projections based on financial forecasts covering a five-year period, and a discount rate of 12.5% per annum (as at 31 March, 2023: 12.50% per annum).
Cash flow projections during the forecast period are based on the same expected gross margins and inflation throughout the forecast period. The cash flows beyond that five-year period have been extrapolated using a steady growth rate of 5% per annum (as at March 31,2023: 5% per annum;), which is the projected long-term average growth rate for Labs CGU. The directors believe that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash-generating unit. Based on impairment testing as above, the management believes that the recoverable amounts of goodwill are higher than their respective carrying amounts and hence no amounts are required to be recorded for impairment in the carrying amounts of goodwill.
The average credit period from service is 0-60 days. No interest is charged on the trade receivables for the amount overdue above the credit period. There are no customers who represent more than 5% of the total balance of trade receivables.
The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking information. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates as given in the provision matrix. The provision matrix at the end of the reporting period is as follows.
* Pursuant to the Scheme of Amalgamation ["the Scheme"] u/s 230 to 232 of the Companies Act, 2013 between the Company and its erstwhile wholly owned subsidiary company namely APL Institute of Clinical Laboratory & Research Private Limited [Transferor Company] and the approval of National Company Law Tribunal of Delhi and Ahmedabad, the authorised share capital of the transferor Company has been merged with authorised share capital of the Company. Also, refer to note 42A.
(iv) Terms/ rights attached to equity shares
The Company has only one class of equity shares having par value of H 10 per share, (Previous year H 10 per share). Each holder of equity shares is entitled to one vote per equity share. The Company declares and pays dividends in Indian Rupees. The final dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
(vi) There are no bonus shares issued by the Company and no shares have been issued for consideration other than cash and no shares have been bought back during the period of five years immediately preceeding the reporting date including the current year.
(vii) Share options granted under the Company's employee share options plans
(a) The shareholders of the Company approved 'Dr. Lal PathLabs Private Limited Employee Stock Option Plan 2010' ("ESOP 2010”) at the Annual General Meeting held on 20 August, 2010 to grant a maximum of 38,08,960 options (after considering bonus shares issued during the earlier year and subdivision of shares of H 100 each into 10 shares of H 10 each) to specified categories of employees of the Company. Each option granted and vested under the ESOP 2010 shall entitle the holder to acquire 1 equity share of H 10 each. As per resolution passed on 21 August, 2015, the Company approved to cease further grants under the ESOP 2010. Refer to note 45 for details of options granted, vested and issued under the ESOP 2010.
(b) The shareholders of the Company approved 'Dr. Lal PathLabs Employees Restricted Stock Unit Plan 2016' ('RSU 2016') at the Annual General Meeting held on 28 July, 2016 to grant a maximum of 12,44,155 Restricted Stock Units ("RSUs") to key employees and directors of the Company and it's subsidiaries. Each RSU granted and vested shall entitle the holder to acquire 1 equity share of H 10 each. Refer to note 45 for details of RSUs granted, vested and issued under RSU 2016.
(c) The shareholders of the Company approved 'Dr Lal PathLabs Employee Stock Option Plan 2022' ('ESOP 2022') at the Annual General Meeting held on 30 June, 2022 to grant a maximum of 12,50,278 options to employees of the Company and it's subsidiaries. Each option granted and vested under the ESOP 2022 shall entitle the holder to acquire 1 equity share of H 10 each. Refer to note 45 for details of options granted, vested and issued under ESOP 2022.
The general reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in general reserve will not be reclassified subsequently to profit or loss.
The above relates to share options granted by the Company under its employee share option plans. Upon exercise of the share options by the employees of the Company and it's subsidiaries, the proportionate cost of shares exercised is transferred to General Reserves after adjusting the cost of related treasury shares. Further information about share based payments to employees is set out in Note 45.
The final dividend of H 6 per equity share proposed in the previous year ended 31 March, 2023 which was approved by the members at the Annual General Meeting held on 31 May, 2023 and paid by the Company during the year in accordance with section 123 of the Act, as applicable.
The interim dividend of H 18 per equity share declared and paid by the Company during the year and until the date of approval of the Standalone Financial Statements is in compliance with section 123 of the Act.
The Board of Directors of the Company has proposed final dividend of H 6 per equity share (previous year ended 31 March, 2023 H 6 per equity share) for the year ended 31 March, 2024 which is subject to the approval of the members at the ensuing Annual General Meeting. The dividend proposed is in accordance with section 123 of the Act, as applicable.
During the year ended 31 March, 2012, the Company had constituted Dr. Lal PathLabs Employee Welfare Trust ("EWT Trust”) to acquire, hold and allocate/transfer equity shares of the Company to eligible employees from time to time on the terms and conditions specified under respective plans. The financial statements of the EWT Trust have been included in the financial statements of the Company, in accordance with the requirements of Ind AS.
Equity shares of the Company purchased from employees and primary market from time to time in the earlier years and held by EWT as at 31 March, 2024 aggregated to 264,725 equity shares (31 March, 2023: 4,27,299 equity shares) of face value H 10 each.
(a) On approval of the Scheme of Amalgamation between the Company (Transferee Company) and its erstwhile wholly owned subsidiary, namely Delta Ria and Pathology Private Limited (Transferor Company) by the Hon'ble New Delhi Bench and Hon'ble Ahmedabad Bench of the National Company Law Tribunal on 23 October 2018 and 11 December 2018 respectively, the difference between the carrying value of investments in the books of account of the Transferee Company and the amount of the net assets of the Transferor Company had been adjusted in Capital reserve amounting to H 33.00 million as stipulated in the scheme.
(b) On approval of the Scheme of Amalgamation between the Company (Transferee Company) and its erstwhile wholly owned subsidiary, namely APL Institute of Clinical Laboratory & Research Private Limited (Transferor Company) by the Hon'ble New Delhi Bench and Hon'ble Ahmedabad Bench of the National Company Law Tribunal on 13 May 2022 and 17 March 2023 respectively, the difference between the carrying value of investments in the books of account of the Transferee Company and the share capital of the Transferor Company had been adjusted in Capital reserve amounting to H 72.25 million as stipulated in the scheme. Refer to note 42A.
Particulars of term loans:
i) Security
Term loan from HDFC Bank Limited is secured by way of exclusive charge on the movable assets of plant and machinery and current assets of the Company both present and future
ii) Terms of repayment and interest rate
Term loan from HDFC Bank Limited (including current maturities) was repayable in 36 quarterly installments of H 208.33 Million starting from May 2022 and ending on March 2025, with put call option (applicable after 6 months) and carries interest which is linked to 3 month T-Bill and presently the effective rate is 7.34% p.a with quarterly reset.
iii) The Company has used the borrowings from banks for the specific purpose for which it was taken.
iv) The Company has borrowings from banks on the basis of security of current assets and is yet to submit the annual financial statements with the bank for which the Company has 90 days after the end of the financial year. No other returns were required to be filed with the bank.
Based on the information available with the Company, the balance due to micro and small enterprises as defined under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 is H 59.78 million (H 60.54 million on 31 March, 2023) and no interest has been paid or is payable during the year under the terms of the MSMED Act, 2006.
(i) The Company generates its entire revenue from contracts with customers for the services at a point in time. The Company is engaged mainly in the business of running laboratories for carrying out pathological investigations of various branches of bio-chemistry, hematology, histopathology, microbiology, electrophoresis, immuno-chemistry, immunology, virology, cytology, other pathological and radiological investigations.
(ii) Transaction price allocated to the remaining performance obligations
The Company has applied practical expedient in Ind AS 115 "Revenue from contract with customers" and and has accordingly not disclosed information about remaining performance obligations which are part of the contracts that have original expected duration of one year or less and where the Company has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity's performance completed to date.
Note 34: Income tax
The Company is subject to Indian Income Tax Act, 1961. The Company is assessed for tax on taxable profits determined for each fiscal year beginning on 1 April and ending on 31 March.
Statutory income taxes are assessed based on book profits prepared under generally accepted accounting principles in India ("Indian GAAP”) adjusted in accordance with the provisions of the (Indian) Income tax Act, 1961. Such adjustments generally relate to depreciation of property, plant and equipment, disallowances of certain provisions and accruals, deduction for tax holidays and similar exemptions, the use of tax losses carried forward and retirement benefit costs. Statutory income tax is charged at 22% (2022-23: 22%) plus a surcharge and education cess. The combined Indian statutory tax rate for the fiscal year 2022-23 and for the fiscal year 2023-24 was 25.168%.
Income tax returns submitted by companies are regularly subjected to a comprehensive review and challenge by the tax authorities.
During the year, the Income tax department has issued orders under section 147 read with 144B of the Income Tax Act, 1961 for disallowing unexplained expenditure of H 39.01 million and H 2.87 million, under section 69C of the Act, for the assessment years 2016-17 and 2019-20 respectively along with notice of demand under section 156 dated 16 March 2024 for H 26.30 milliohn and dated 18 March 2024 for H 4.20 million for the assessment years 2016-17 and 2019-20 respectively. Subsequent to the year end the Company has filed an appeal with the "Joint Commissioner (Appeals) or the Commissioner (Appeals)” dated 12 April 2024, within the stipulated time and has deposited an amount of H 30.50 million in respect thereof.
The management believes that the Company has strong chances of success in the above mentioned cases and hence no provision is considered necessary at this point in time as the likelihood of liability devolving on the Company is less than probable and hence these are included as contingent liabilities as at 31 March 2024.
Note 38: Segment Reporting
The Company is engaged solely in the business of running laboratories for carrying out pathological investigations of various branches of bio-chemistry, hematology, histopathology, microbiology, electrophoresis, immuno-chemistry, immunology, virology, cytology, other pathological and radiological investigations.
The Board of Directors of the Company, which has been identified as being the chief operating decision maker (CODM), evaluates the Company's performance, allocates resources based on the analysis of the various performance indicators of the Company as a single unit. Therefore there is no reportable segment for the Company, in accordance with the requirements of Indian Accounting Standard 108- 'Operating Segments', notified under the Companies (Indian Accounting Standard) Rules, 2015.
c) Information about major customers
No single customer contributed more than 10% or more to the Company's revenue during the years ended 31 March, 2024 and 31 March, 2023.
Note 39
The Board of Directors of the subsidiaries, Paliwal Medicare Private Limited (PMPL) and Paliwal Diagnostics Private Limited (PDPL) in their meetings held on 25 October, 2021 and 25 October, 2021 respectively have approved the "Scheme of Amalgamation" of PMPL with PDPL w.e.f. 1 April, 2021, the appointed date. As per the said scheme, the undertaking of PMPL shall stand transferred to and vested in PDPL on a going concern basis without any further act, deed of matter. The scheme of amalgamation is subject to approval by National Company Law Tribunal and other statutory approvals
Note 40
The Company had completed the acquisition of Suburban Diagnostics (India) Private Limited ("SDIPL") on November 12, 2021 as per the terms and conditions of the Share Purchase Agreement for a cash consideration of H 9,250.00 million plus certain performance linked payments capped at H 2,250.00 million and subject to certain adjustments. The Company had estimated the consideration for the purchase of shares of SDIPL on a fully dilutive basis, including for employee stock option's granted by SDIPL ("ESOP's") at H 9,667.10 million. Pursuant to completion of the aforesaid acquisition Suburban Diagnostics (India) Private Limited had become a wholly-owned subsidiary and the Company had invested H 9,488.69 million in SDIPL as at 31 March, 2022. SDIPL is primarily engaged in providing diagnostics and healthcare services.
Further, during the year ended 31 March 2023, out of the balance consideration, the Company has paid H 102.22 million and made further investment in its wholly owned subsidiary through acquisition of 42,875 equity shares of H 10 each at a premium. During the current year, the Company has made further investment H 7.71 million through acquistion of 3,232 equity shares of H 10 each at a premium.
(a) Total unspent amount for an ongoing project for the year ended 31 March 2023 is H 3.00 million, which has been transferred to 'separate CSR unspent account' on 28 April 2023, within a period of 30 days from the end of the financial year in compliance with the provisions of section 135(6) of the Act.
(b) The Company has spent an excess amount of H 1.41 million (31 March, 2023 : H 1.46 million) with respect to other than ongoing projects as approved by the Board of Directors in excess of the minimum requirement as per section 135 (5) of the Company Act, 2013. The Company intends to carry forward the excess amount spent during the current year of H 1.41 million (did not intend to carry forward the excess amount of H 1.46 million spent during the year ended 31 March 2023) with respect to other than ongoing projects to the next year.
(c) The shortfall for the year ended 31 March 2023 with respect to ongoing project of Indian Institute of Management, Ahmedabad (IIMA) relates to certain procedural delays as communicated by IIMA.
Note 42A
The Board of Directors in their meeting, held on 3 February, 2020, approved the "Scheme of Amalgamation" of APL Institute of Clinical Laboratory & Research Private Limited (Transferor Company), a wholly owned subsidiary, with the Company (Transferee Company) w.e.f. 1 April, 2020 (the appointed date). As per the said scheme the undertaking of this company shall stand transferred to and vested in the Company on a going concern basis without any further act, deed of matter.
The Scheme envisages transfer of all properties, rights, assets, interests and claims of the Transferor Company to the Transferee Company. Pursuant to the scheme coming into effect, all the equity shares held by the Transferee Company in Transferor Company stand automatically cancelled.
The Hon'ble New Delhi Bench and Hon'ble Ahmedabad Bench of the National Company Law Tribunal ("Hon'ble Tribunal" or "NCLT") sanctioned the Scheme of Amalgamation on May 13, 2022 and March 17, 2023 respectively. The Transferor Company was engaged in business of running laboratories for carrying out pathology investigation of patients in various disciplines of medical sciences.
The amalgamation has been accounted for under section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014. The difference between the carrying value of investments in the books of the Transferee Company and the amount of the share capital of Transferor Company has been adjusted in Capital Reserve as per the scheme. The financial statements for the year ended 31 March 2021 had accordingly been restated to give impact of amalgamation with effect from 1 April 2019 (appointed date 1 April 2020) in accordance with the 'pooling of interests' method stated in Appendix C of Ind AS 103 'Business Combinations'. Accordingly, the financial statements for the year ended 31 March, 2022 have also been restated to take the impact of the amalgamation
Note 43: Employee benefit plans43.1 Defined contribution plans
The Company operates defined contribution retirement benefit plans for all its qualifying employees. Where employees leave the plans prior to full vesting of the contributions, the contributions payable by the Company are reduced by the amount of forfeited contributions.
Employee benefit under defined contribution plan comprising of provident fund is recognised based on the amount of obligation of the Company to contribute to the plan. The contribution is paid to Provident Fund authorities which is expensed during the year.
The total expense recognised in profit or loss of H 102.65 million (for the year ended 31 March, 2023: H 101.68 million) represents contributions payable to provident fund by the Company at rates specified in the rules of the plans. As at 31 March, 2024, contributions of H 18.45 million (as at 31 March, 2023: H 17.13 million) due in respect of the reporting period had not been paid over to the plans. The amounts were paid subsequent to the end of the respective reporting periods.
43.2 Defined benefit plans
Gratuity: The Company operates a funded gratuity benefit plan. Gratuity liability arises on retirement, withdrawal, resignation, and death of an employee. The aforesaid liability is calculated on the basis of 15 days salary for each completed year of service, subject to a maximum of H 2.00 million. Vesting occurs upon completion of 4.5 years of service.
The present value of the defined benefit obligation and the related current service cost are measured using the Projected Unit Credit method with actuarial valuations being carried out at each balance sheet date.
1. The discount rate is based on the prevailing market yield of India Government securities as at the balance sheet date for the estimated term of obligations.
2. The estimate of future salary increases considered in actuarial valuation takes into account inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.
3. The expected return is based on the expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligations.
44 Effective 1 April, 2019, the Company adopted Ind AS 116 "Leases” to its leases using the modified retrospective approach with the option to measure the right-of-use asset at an amount equal to the lease liability (i.e. as per para C8(c) (ii) of Ind AS 116), adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet immediately before the date of initial application.
The Company has applied this standard to land leases and building leases etc. to evaluate whether these contracts contain lease or not. Based on evaluation of the terms and conditions of the arrangements, the Company has evaluated such arrangements to be leases. Under this standard, all lease contracts, with limited exceptions, are recognised in the financial statements by way of right-of-use assets and corresponding lease liabilities.
When measuring lease liabilities, the weighted average discount rate used to calculate the lease liability in the opening balance under Ind AS 116 on 1 April, 2019 was 11.25%.
On transition, the adoption of the new standard had resulted in reclassification of H 81.41 million from property, plant and equipment to right-of-use assets, reclassification of H. 76.35 million from prepaid rent- Other non-current assets to right-of-use assets, reclassification of H 0.82 million from prepaid rent- Other current assets to right-of-use assets, reclassification of H 12.17 million from Payment obligation-leasehold land- Other financial liabilities - non current to lease liabilities and reclassification of H 1.53 million from Payment obligation-leasehold land-Other financial liabilities - current to lease liabilities. There had been no impact on the retained earnings on initial application of the standard.
The Company recognises a lease liability measured at the present value of the remaining lease payments. The right-of-use assets are recognised at cost, which comprises the amount of the measurement of the lease liability adjusted for any lease payments made at or before the inception date of the lease
The Company has cash outflows for lease of underlying assets amounting to H 598.53 (31 March, 2023: H 546.42 million) out of which rent charges is amounting to H 145.14 million (31 March, 2023: H 69.31 million) which includes rentals for short term lease and low value lease.
44A The Company has used accounting software for maintaining its books of account for the year ended March 31, 2024 which has a feature of recording audit trail (edit log) facility as per the requirements of proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 and the same has operated throughout the year for all relevant transactions recorded in the software, except that the audit trail was not enabled throughout the year at the database level to log any direct data changes. However, the Company has established and maintained internal financial controls over financial reporting and such internal financial controls were operating effectively throughout the year.
Note 45 Share based paymentsNote 45.1 Employee Share Option Plan-201045.1.1 Details of employee share based plan of the Company
The shareholders of the Company approved 'Dr. Lal PathLabs Private Limited Employee Stock Option Plan 2010' ("ESOP 2010”) at the Annual General Meeting held on 20 August, 2010 to grant a maximum of 38,08,960 options to specified categories of employees of the Company. Each option granted and vested under the ESOP 2010 shall entitle the holder to acquire 1 equity share of H 10 each. The Company had granted 37,30,340 options till the year ended 31 March, 2015, all of which have all been vested as at 31 March 2019. As per resolution passed on 21 August, 2015, the Company approved to cease any further grants under the ESOP 2010.
Note 1: All options vest after 48-60 months from date of grant subject to satisfaction of vesting conditions. The exercise period is five years from the date on which the Company's shares were listed on a recognised stock exchange in India or a period of ten years from date of respective vesting, whichever period ends later. Options not exercised within exercise period lapses.
45.1.2 Fair value of share options granted in the year
There were no options granted during the years ended 31 March, 2024 and 31 March, 2023.
45.1.4 Share options exercised during the year
60,000 shared were exercised during the year
45.1.5 Share options outstanding at the end of the year
The share options outstanding at the end of the year has a weighted average exercise price of H 311.30 (as at 31 March, 2023: H 311.30) and a weighted average remaining contractual life of years 3.13 years (as at 31 March, 2023: 4.13 years)
Note 45.2 Restricted Share Option Plan45.2.1 Details of employee share based plan of the Company
The shareholders of the Company approved 'Dr. Lal PathLabs Employees Restricted Stock Unit Plan 2016' ('RSU 2016') at the Annual General Meeting held on 28 July, 2016 to grant a maximum of 12,44,155 Restricted Stock Units ("RSUs”) to key employees and directors of the Company and it's subsidiaries. Each RSU granted and vested shall entitle the holder to acquire 1 equity share of H 10 each. Under RSU 2016, for the performance year 201617, options of H 10 each granted to eligible employees is 2,25,000 out of which 6,225 options were forfeited on non satisfaction of vesting conditions. For the performance year 2017-18, options of H 10 each granted to eligible employees is 2,25,716 and 9,602 options were forfeited on non satisfaction of vesting conditions. Further, for the performance year 2018-19, options of H 10 each granted to eligible employees is 2,19,132 and 28,498 options were forfeited on non satisfaction of vesting conditions. Further, for the performance year 2019-20, options of H 10 each granted to eligible employees is 2,13,841 and 27,631 options were forfeited on non satisfaction of vesting conditions.Further, for the performance year 2020-21, options of H 10 each granted to eligible employees is 1,12,200 and 12,468 options were forfeited on non satisfaction of vesting conditions. Further, for the performance year 2021-22, options of H 10 each granted to eligible employees is 1,31,594 and 11,793 options were forfeited on non satisfaction of vesting conditions. Further, for the performance year 2022-23, options of H 10 each granted to eligible employees is 21,200 and 27,533 options were forfeited on non satisfaction of vesting conditions.
Further, for the performance year 2023-24, options of H 10 each granted to eligible employees is 20,200 and 10,962 options were forfeited on non satisfaction of vesting conditions. The Company has accounted for the expense of options proportionately for the period under employee cost on the basis of weighted average fair value.
45.2.5 Share options outstanding at the end of the year
The share options outstanding at the end of the year has a weighted average exercise price of H 10 (as at 31 March, 2023: H 10) and a weighted average remaining contractual life of 4.74 years (as at 31 March, 2023: 5.08 years)
Note 45.3 'Dr Lal PathLabs Employee Stock Option Plan 202245.3.1 Details of employee share based plan of the Company
The shareholders of the Company approved 'Dr. Lal PathLabs Private Limited Employee Stock Option Plan 2022' ("ESOP 2022") at the Annual General Meeting held on 30 June, 2022 to grant a maximum of 12,50,278 options to specified categories of employees of the Company. Each option granted and vested under the ESOP 2022 shall entitle the holder to acquire 1 equity share of H 10 each. The Company had granted 2,11,400 options till the year ended 31 March, 2023.
Note 1: All options vest before one year and not later than four years from date of grant of such options subject to satisfaction of vesting conditions. The exercise period is five years from the date of respective vesting or such other shorter period as may be decided by the Nomination and Remuneration Committee from time to time. Options not exercised within the exercise period lapse.
45.3.2 Fair value of share options granted in the year
The fair value of the options, calculated by an external valuer, was estimated on the date of grant using the Black-Scholes model with the following significant assumptions:
45.3.5 Share options outstanding at the end of the year
The share options outstanding at the end of the year has a weighted average exercise price of of H 1,930.05 (as at 31 March, 2023: H 1930.05) and a weighted average remaining contractual life of years 6.37 years (as at 31 March, 2023: 6.83 years)
Note 46 Financial instruments (a) Capital management
The Company's objectives when managing capital is to safeguard the ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders.
In order to maintain or adjust the capital structure, the Company adjusts the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.
The Company has investments in fixed deposits with banks and in mutual fund schemes wherein underlying portfolio is spread across securities issued by different issuers having different credit ratings. The credit risk of investments in debt mutual fund schemes is managed through investment policies and guidelines requiring adherence to stringent credit control norms based on external credit ratings.
(b) Financial risk management objective and policies
This section gives an overview of the significance of financial instruments for the Company and provides additional information on the balance sheet. Details of significant accounting policies, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 2.
Fair value of financial assets and financial liabilities that are not measured at fair value
Management considers that the carrying amounts of financial assets and financial liabilities recognised in the Standalone Financial Statements, except note no. 6, are at approximate of their fair values.
(d) Risk management framework
The Company's business is subject to several risks and uncertainties including financial risks. The Company's documented risk management polices act as an effective tool in mitigating the various financial risks to which the business is exposed to in the course of their daily operations. The risk management policies cover areas such as liquidity risk, interest rate risk, counterparty and concentration of credit risk and capital management. Risks are identified through a formal risk management programme with active involvement of senior management personnel and business managers. The Company's risk management process is in line with the corporate policy. Each significant risk has a designated 'owner' within the Company at an appropriate senior level. The potential financial impact of the risk and its likelihood of a negative outcome are regularly updated.
The risk management process is coordinated by the Management Assurance function and is regularly reviewed by the Company's Audit Committee. The overall internal control environment and risk management programme including financial risk management is reviewed by the Audit Committee on behalf of the board.
The risk management framework aims to:
- improve financial risk awareness and risk transparency
- identify, control and monitor key risks
- identify risk accumulations
- provide management with reliable information on the Company's risk situation
- improve financial returns
Treasury management
The Company's 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 of the Company through internal risk reports which analyses exposures by degree and magnitude of risks. These risks include market risk (including currency risk and interest rate risk), credit risk and liquidity risk.
Treasury management focuses on capital protection, liquidity maintenance and yield maximisation.
Financial risk
The Company's Board of Directors approves financial risk policies comprising liquidity, foreign currency, interest rate and counterparty credit risk. The Company does not engage in the speculative treasury activity but seeks to manage risk and optimise interest through proven financial instruments.
(i) Liquidity risk
The Company requires funds for short-term operational needs and has been rated by CRISIL Limited (CRISIL) for its banking facilities.
The Company remains committed to maintaining a healthy liquidity, gearing ratio and strengthening the balance sheet. The maturity profile of the Company's financial liabilities and realisability of financial assets based on the remaining period from the date of balance sheet to the contractual maturity date is given in the table below. The figures reflect the contractual cash obligation of the Company.
Fixed rate financial assets are largely interest bearing fixed deposits held by the Company. The returns from these financial assets are linked to bank rate notified by Reserve Bank of India as adjusted on periodic basis. The Company does not charge interest on overdue trade receivables. Trade payables are non interest bearing and are normally settled up to 30 days terms. Mutual fund investments have debt securities as underlying assets and are exposed to floating interest rates. The exposure of the Company's borrowing to interest rate changes at the end of the reporting period depends on the expected movement of market interest rate.
The sensitivity analysis below has been determined based on the exposure to interest rates at the end of the reporting period. For floating rate assets, the analysis is prepared assuming the amount of the assets balance at the end of the reporting period was outstanding for the whole year. A 50 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.
(iii) Credit risk
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties and after obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Company is exposed to credit risk for receivables, cash and cash equivalents, bank balances other than cash and cash equivalents, investments and loans.
Credit risk management considers available reasonable and supportable forward-looking information including indicators like external credit rating (as far as available), macro-economic information (such as regulatory changes, government directives, market interest rate).
Only high rated banks are considered for placement of deposits. Bank balances are held with reputed and creditworthy banking institutions.
For short-term investments, counterparty limits are in place to limit the amount of credit exposure to any one counterparty. Defined limits are in place for exposure to individual counterparties in case of mutual funds schemes.
None of the Company's cash equivalents are past due or impaired. Regarding trade and other receivables, the Company has accounted for impairment based on expected credit losses method as at 31 March, 2024 and 31 March, 2023 based on expected probability of default.
b. The Company had 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, that are repayable on demand or without specifying any terms or period of repayment.
c. The Company was not holding any benami property and no proceedings were initiated or pending against the Company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder.
d. The Company had not been declared a wilful defaulter by any bank or financial institution or other lender (as defined under the Companies Act, 2013) or consortium thereof, in accordance with the guidelines on wilful defaulters issued by the Reserve Bank of India.
e. The Company did not have any transactions with struck off companies under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956.
f. The Company did not have any charges or satisfaction which were yet to be registered with ROC beyond the statutory period.
g. The Company has not traded or invested in Crypto currency or Virtual Currency during year ended 31 March, 2024.
h. The Company has not advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) any funds to or in any other persons or entities, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, 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 on behalf of the Ultimate Beneficiaries.
i. The Company has not received any funds from any persons or entities, including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, 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 provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
j. The Company did not have any transaction which had not been recorded in the books of account that had 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).
k. The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with the Companies (Restriction on number of Layers) Rules, 2017.
l. During the year no scheme of arrangements has been approved by the Competent Authority in terms of section 230 to 237 of the companies Act, 2013. The Company had
disclosed that the effect of scheme of arrangements and the same had been accounted for in the books of account of the Company 'in accordance with the Scheme' and 'in accordance with accounting standards' and there is no deviation in this regard.
51 The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.
52 There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company
53 The Standalone Financial Statements were approved by the Board of Directors and authorised for issue on 10 May 2024.
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