Impairment loss on certain investments in subsidiaries and joint ventures has been recognised considering the performance of these companies and their future projections.
The Company has capital assets and long-term investments in subsidiaries, associates and joint ventures which are measured at cost less impairment or at fair value through profit or loss. The management assesses the performance of these entities as well as capital assets including the future projections, relevant economic and market conditions in which they operate to identify if there is any indicator of impairment in the carrying value of the investments and capital assets. In case indicators of impairment exist, the impairment loss is measured by estimating the recoverable amounts based on the higher of (i) 'fair value less cost of disposal' determined using market price information, where available, and (ii) 'value-in-use' estimates determined using discounted cash flow projections, where available. The fair value less costs of disposal is determined using the market approach. The future cash flow projections are specific to the entity based on its business plan and may not be the same as those of market participants. The future cash flows consider key assumptions such as volume projections, margins, terminal growth rates, etc. with due consideration for the potential risks given the current economic environment in which the entity operates. The discount rates used with required tax rates based on weighted average cost of capital and reflects market's assessment of the risks specific to the asset as well as time value of money. The recoverable amount estimates are based on judgments, estimates, assumptions and market data as on reporting date and ignore subsequent changes in the economic and market conditions.
During the year ended 31st March, 2023, the performance of certain capital assets, subsidiaries, associates and joint ventures along with capital allocation decisions, coupled with the relevant economic and market indicators including external investors price discovery, and inflationary trends resulted in indicators of impairment in respect of certain entities and Assets. Accordingly, the Company determined the recoverable amounts of the long term assets and other exposures related to these entities, other assets and recorded a provision of Rs. 2,573.29 crores (2022 : Rs. 813.06 crores) for the year ended 31st March, 2023. The value-in-use calculation use discount rates ranging from 11.0% - 25.0% and the terminal growth rates ranging from 2.0% -5.0%.
Gratuity
The Company operates a gratuity plan covering qualifying employees. The benefit payable is the greater of the amount calculated as per the Payment of Gratuity Act or the Company scheme applicable to the employee. The benefit vests upon completion of five years of continuous service and once vested it is payable to employees on retirement or on termination of employment. In case of death while in service, the gratuity is payable irrespective of vesting. The Company makes annual contribution to the group gratuity scheme administered by the Life Insurance Corporation of India through its Gratuity Trust Fund.
Post - retirement medical
The Company provides post retirement medical cover to select grade of employees to cover the retiring employee and their spouse upto a specified age through mediclaim policy on which the premiums are paid by the Company. The eligibility of the employee for the benefit as well as the amount of medical cover purchased is determined by the grade of the employee at the time of retirement.
Post - retirement housing allowance
The Company operates a post retirement benefit scheme for a certain grade of employees in which a monthly allowance determined on the basis of the last drawn basic salary at the time of retirement, is paid to the retiring employee in lieu of housing.
Though its defined benefit plans the Company is exposed to a number of risks, the most significant of which are detailed below:
Asset Volatility
The plan liabilities are calculated using a discount rate set with references to government bond yields; if plan assets under perform compared to this yield, this will create or increase a deficit. The defined benefit plans may hold equity type assets, which may carry volatility and associated risk.
Changes in bond yields
A decrease in government bond yields will increase plan liabilities, although this is expected to be partially offset by an increase in the value of the plans’ investment in debt instruments.
Inflation risk
The present value of some of the defined benefit plan obligations are calculated with 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. The post retirement medical benefit obligation is sensitive to medical inflation and accordingly, an increase in medical inflation rate would increase the plan’s liability.
Life expectancy
The present value of defined benefit plan obligation is calculated by reference to the best estimate of the mortality of plan participants, both during and after the employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.
The Company has allotted 55,24,219 Ordinary (Equity) Shares of Rs. 10 each, 10,00,000 Ordinary (Equity) Shares of Rs. 10 each, 1,73,53,034 Ordinary (Equity) Shares of Rs. 5 each, 19,11,628 Ordinary (Equity) Shares of Rs. 5 each and 52,00,000 Ordinary (Equity) Shares of Rs. 5 each in the years ended 31st March, 2002, 31st March, 2010, 31st March, 2011, 31st March, 2014 and 31st March, 2015 respectively to the Mahindra & Mahindra Employees’ Stock Option Trust (“M&M ESOP Trust") set up by the Company. The Trust holds these shares for the benefit of the employees and issues them to the eligible employees as per the recommendations of the Compensation Committee.
Options granted under Mahindra & Mahindra Limited Employees Stock Option Scheme - 2000 (“2000 Scheme") vest in 4 equal instalments on the expiry of 12 months, 24 months, 36 months and 48 months from the date of grant. The options may be exercised on any day over a period of five years from the date of vesting. Number of vested options exercisable is subject to a minimum of 50 or number of options vested whichever is lower.
Options granted under Mahindra & Mahindra Limited Employees Stock Option Scheme - 2010 (“2010 Scheme") vest in
i) 5 equal instalments on the expiry of 12 months, 24 months, 36 months, 48 months and 60 months or
ii) 5 equal instalments on the expiry of 36 months, 48 months, 60 months, 72 months and 84 months or
iii) 4 instalments bifurcated as 20% on the expiry of 18 months, 20% on the expiry of 30 months, 30% on the expiry of 42 months and 30% on the expiry of 54 months or
iv) 4 equal instalments on the expiry of 12 months, 24 months, 36 months and 48 months or
v) 3 instalments bifurcated as 33.33% on the expiry of 12 months, 33.33% on the expiry of 24 months and 33.34% on the expiry of 36 months. or
vi) 2 instalments bifurcated as 50% on the expiry of 12 months and 50% on the expiry of 24 months or
vii) 2 instalments bifurcated as 40% on the expiry of 36 months and 60% on the expiry of 60 months
The exercise period of above options range from 1 year to 6 years from the date of vesting. Number of vested options exercisable is subject to a minimum of 50 or number of options vested whichever is lower.
The Company’s capital management strategy is to effectively determine, raise and deploy capital so as to create value for its shareholders. The same is done through a mix of either equity and/or preference and/or convertible and/or combination of short term/long term debt as may be appropriate.
The Company determines the amount of capital required on the basis of its product, capital expenditure, operations and strategic investment plans. The same is funded through a combination of capital sources be it either equity and/or preference and/or convertible and/or combination of short term/long term debt as may be appropriate.
The capital structure is monitored on the basis of net debt to equity and maturity profile of overall debt portfolio of the Company.
38. Financial instruments
Financial Risk Management Framework
In the course of its business, the Company is exposed to certain financial risks namely credit risk, interest risk, currency risk & liquidity risk. The Company's primary focus is to achieve better predictability of financial markets and seek to minimize potential adverse effects on its financial performance.
The financial risks are managed in accordance with the Company's risk management policy which has been approved by its Board of Directors.
1. Market Risk Management
Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates etc. could affect the Company's income or the value of its holdings of financial instruments including cash flow. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while maximising the return.
(a) Currency Risk
The Company's exposure to currency risk relates primarily to the Company's operating activities including anticipated sales, purchases and borrowings where the transactions are denominated in a currency other than the Company's functional currency.
The Company's foreign currency exposures are managed in accordance with its Foreign Exchange Risk Management Policy which has been approved by its Board of Directors. The Company hedges its foreign currency risk mainly by way of Forward Covers. Other derivative instruments may be used if deemed appropriate.
(ii) Interest Rate sensitivity
The sensitivity analyses below have been determined based on exposure to interest rate for both derivative and non-derivative instruments at the end of reporting period. For floating rate liabilities, analysis is prepared assuming the amount of liability outstanding at the end of the reporting period, was outstanding for the whole year.
2. Credit Risk Management
Credit Risk refers to the risk that a 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 obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Company’s exposure are continuously monitored.
(b) Trade Receivables
The Company applies the simplified approach to provide for expected credit losses prescribed by Ind AS 109, which permits the use of the lifetime expected loss provision for all trade receivables. The Company has computed expected credit losses based on a provision matrix which uses historical credit loss experience of the Company. Forward-looking information (including macroeconomic information) has been incorporated into the determination of expected credit losses. The Company has taken dealer deposits, bank guarantees etc. which are considered as collateral and these are considered in determination of expected credit losses, where applicable.
42. Segment information Operating Segments
The reportable segments of the Company are Automotive and Farm Equipment. The segments are largely organised and managed separately according to the organisation structure that is designed based on the nature of products and services and profile of customers. Operating segments are reported in a manner consistent with the internal reporting provided to the Executive Chairman and Managing Director jointly regarded as the Chief Operating Decision Maker (“CODM"). Description of each of the reportable segments for all periods presented, is as under.
(a) Automotive: This segment comprises of sale of automobiles, spares, mobility solutions, Construction Equipment and related services;
(b) Farm Equipment: This segment comprises of sale of tractors, implements, spares and related services;
(c) Others: This segment comprise of Powerol, Two Wheelers and Spares Business Unit.
The CODM evaluates the Company’s performance and allocates resources based on an analysis of various performance indicators by operating segments. The CODM reviews revenue and gross profit as the performance indicator for all of the operating segments.
The measurement of each segment’s revenues, expenses and assets is consistent with the accounting policies that are used in preparation of the financial statements. Segment profit represents the profit before interest and tax.
43. Contingent Liability & Commitments:
(A) Contingent Liability:
(a) Claims against the Company not acknowledged as debts comprise of:
(i) Excise Duty, Sales Tax and Service Tax claims disputed by the Company relating to issues of applicability and classification aggregating Rs. 2,979.46 crores (2022 : Rs. 1,258.47 crores) before tax.
(ii) Other matters (excluding claims where amounts are not ascertainable) : Rs. 274.11 crores (2022 : Rs. 146.58 crores) before tax.
(b) Taxation matters:
(i) Demands against the Company not acknowledged as debts and not provided for, in respect of which the Company is in appeal and exclusive of the effect of similar matters in respect of assessments remaining to be completed:
- Income-tax : Rs. 1,422.26 crores (2022 : Rs. 547.40 crores) net off MAT credit.
(ii) Items in respect of which the Company has succeeded in appeal, but the Income-tax Department is pursuing/likely to pursue in appeal/ reference and exclusive of the effect of similar matters in respect of assessments remaining to be completed:
- Income-tax matters : Rs. 469.19 crores (2022 : Rs. 412.03 crores).
(c) In respect of (a) & (b) above, it is not practicable for the Company to estimate the closure of these issues and the consequential timings of cash flows, if any.
(d) Financial guarantee given on behalf of Subsidiaries/Associates/Joint Ventures companies [Refer Note 38 (2) (a)].
(B) Commitments:
(i) The estimated amount of contracts remaining to be executed on capital account and not provided is Rs. 2,581.34 crores (2022 : Rs. 1,864.85 crores) and other commitments Rs. 17.78 crores (2022 : Rs. 6.90 crores).
(ii) Uncalled liability on partly paid equity shares of Subsidiary(ies) company as at 31st March, 2023 Rs. 1,535.50 crores (2022 : Rs. 10.50 crores)
44. Other information:
(A) Research and Development expenditure
(a) In recognised Research and Development units:
(i) Expensed to Profit or Loss, including certain expenditure based on allocations made by the Company, aggregate Rs. 705.06 crores (2022 : Rs. 757.52 crores) [excluding depreciation and amortisation of Rs. 1,274.99 crores (2022 : Rs. 942.34 crores)].
(ii) Development expenditure incurred during the year Rs. 1,413.09 crores (2022 : Rs. 1,383.00 crores).
(iii) Capitalisation of assets Rs. 251.15 crores (2022 : Rs. 463.51 crores).
(b) In other units:
(i) Expensed to Profit or Loss, including certain expenditure based on allocations made by the Company, aggregate Rs. 134.56 crores (2022 : Rs. 123.56 crores) [excluding depreciation and amortisation of Rs. 169.85 crores (2022 : Rs. 133.49 crores)].
(ii) Development expenditure incurred during the year Rs. 137.17 crores (2022 : Rs. 80.10 crores).
(iii) Capitalisation of assets Rs. 51.35 crores (2022 : Rs. 8.83 crores).
(B) (i) The Scheme of Merger by Absorption of a subsidiary, Mahindra Electric Mobility Limited ('MEML’) with the Company and their respective Shareholders ('the Scheme’) has been approved by the Mumbai Bench of National Company Law Tribunal on 13th January, 2023. The Scheme has taken effect from the appointed date i.e., 1st April, 2021.
|