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Triveni Engineering & Industries Ltd. Notes to Accounts
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You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (Rs.) 6809.92 Cr. P/BV 2.56 Book Value (Rs.) 121.76
52 Week High/Low (Rs.) 417/255 FV/ML 1/1 P/E(X) 3.80
Bookclosure 09/02/2024 EPS (Rs.) 81.86 Div Yield (%) 1.04
Year End :2023-03 

(a) Contract assets are initially recognised for revenue earned but not billed pending successful achievement of milestones. Upon achievement of milestones and billing, contract assets are reclassified to trade receivables. A trade receivable represents the Company’s right to an amount of consideration that is billed to the customer and which become due unconditionally (i.e. only the passage of time is required before payment of the consideration is due). Different businesses of the Company have their different credit terms [refer note 40(i)].

Contract costs incurred to date plus recognised profits or less recognised losses are compared with progress billings raised on the customer - any surplus is considered as contract assets and shown as amounts due from customers under long-duration construction & supply contracts, whereas any shortfall is considered as contract liabilities and shown as the amounts due to customers under long-duration construction & supply contracts. Amounts billed for work performed which will become due upon fulfillment of specified conditions is considered as contract assets and shown as customer

retentions. Amounts received before the related work is performed is considered as contract liabilities and is shown as advances from customers.

(b) Significant changes in contract assets and liabilities:

Increase in contract assets (Due from customers under long-duration construction & supply contracts) has resulted due to substantial work carried out during the current year pending billing due to non-achievement of contractual milestones, mainly in respect of wastewater treatment projects in the industrial segment.

Decrease in contract assets (customer retentions) is mainly due to the release of retentions by the customer upon fulfillment of specified conditions in respect of sewage/wastewater treatment projects in the municipal/industrial segment.

Increase in contract liabilities (Amount due to customers under long-duration construction & supply contracts) is due to the reason that against the billing done during the current year, the revenue recognised in accordance with Ind AS 115 Revenue from Contracts with Customers is lower, mainly in respect of sewage/water treatment projects in the municipal segment.

Increase in contract liabilities (Advances from Customers) is mainly on account of receipt of advance against sugar export orders executed in the following year.

(c) Revenue recognised in relation to contract liabilities:

The following table shows how much of the revenue recognised in the current reporting period relates to carried-forward contract liabilities and how much relates to performance obligations that were satisfied in a prior year.

(i) The cost of inventories recognised as an expense during the year was ' 551546.31 lakhs (31 March 2022: ' 384704.51 lakhs).

(ii) Refer note 18(i) for information on charges created on inventories.

(iii) The mode of valuation of inventories has been stated in note 1(l).

(iv) All inventories are expected to be utilised/sold within twelve months except certain items of stores and spares, which are utilised on need basis. Quantum of such stores and spares, which may be utilised beyond one year, is not determinable and is not expected to be material with reference to the total value of inventories.

(v) For impairment losses recognised during the year refer note 24 & 32.

(vi) I n addition to the cost of inventories recognised as expense as mentioned in (i) above, there are write-downs of inventories to net realisable value amounting to ' 62.57 lakhs [31 March 2022: write-downs of ' 396.91 lakhs] which are also recognised as an expense/income during the year and included in ‘Changes in inventories of finished goods, stock-in-trade and work-in-progress’ in statement of profit and loss.

(ii) Terms and rights attached to equity shares

The Company has only one class of equity shares with a par value of ' 1/- per share. The holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of equity shares are entitled to receive the remaining assets of the Company, after meeting all liabilities and distribution of all preferential amounts, in proportion to their shareholding.

(v) Buy-back of equity shares

During the year, the Company has completed buy-back of 2,28,57,142 (31 March 2022: Nil) equity shares of ' 1/-each [representing 9.45% of total pre buy-back paid up equity share capital of the Company] from the shareholders of the Company on a proportionate basis, through the tender offer route under the Securities and Exchange Board of India (Buy-back of Securities), Regulations 2018, at a price of ' 350 per equity share for an aggregate amount of ' 80000 lakhs. Accordingly, the Company has extinguished 2,28,57,142 fully paid up equity shares of ' 1 each (in dematerialized form) and the fully paid up equity share capital of the Company (post extinguishment) is 21,88,97,968 shares of ' 1/- each. The Company has funded the buy-back (including transaction costs incurred in relation thereto) from its securities premium, general reserve and retained earnings. In accordance with section 69 of the Companies Act, 2013, the Company has transferred an amount of ' 228.57 lakhs to capital redemption reserve which is equal to the nominal value of the shares bought back from retained earnings.

The aggregate number of equity shares bought back during a period of five financial years immediately preceding the financial year ended 31 March 2023 is 1,61,90,000 equity shares (31 March 2022: 1,61,90,000 equity shares)

(i) Information about individual provisions and significant estimates

(a) Warranty

The Company provides warranties on certain products, undertaking to repair or replace the items that fail to perform satisfactorily during the warranty period. Provisions made represent the amount of expected cost of meeting such obligations of rectifications / replacements based on best estimate considering the historical warranty claim information and any recent trends that may suggest future claims could differ from historical amounts. It also includes provisions made towards contractual obligations to replace certain parts under an Operation and Maintenance contract. The timing of the outflows is expected to be within a period of two years.

(b) Cost to completion

The provision represents costs of materials and services further required for substantially completed construction contracts.

(c) Arbitration / Court-case claims

Represents the provision made towards certain claims awarded against the Company in legal proceedings which have been challenged by the Company before appropriate authorities. The timing of the outflows is uncertain.

(i) Secured by pledge/hypothecation of the stock-in-trade, raw material, stores and spare parts, work-in-progress and trade receivables and second charge created/to be created on the properties of all the Engineering units and immovable property at New Delhi and third charge on the properties of Sugar, Co-Generation and Distillery units of the Company on pari-passu basis. Interest rates on the above loans outstanding as at the year end ranges between 7.35% to 8.45% (weighted average interest rate: 7.45% p.a.).

(ii) Commercial papers issued during the previous year at an interest rate of 4.25% p.a. for a tenor of 80 days, was fully repaid during the current year.

(iii) There are no differences in the figures reported in the quarterly returns/statements filed with the banks vis-a-vis the books of accounts. For the determination of drawing power for sugar stocks, the Company follows the guidelines of the RBI as prescribed for commodities covered under selective credit control.

(i) Capital creditors as at 31 March 2023 include ' 109.87 lakhs (31 March 2022: ' 120.93 lakhs) outstanding balance of micro enterprises and small enterprises (refer note 47).

(ii) Security deposits as at 31 March 2023 include ' 370 lakhs (31 March 2022: ' 390 lakhs) deposits from sugar selling agents which are interest bearing subject to fulfillment of terms and conditions. These deposits are repayable on cessation of contractual arrangements. Interest payable is normally settled annually.

(iii) There are no amounts as at the year end which are due and outstanding to be credited to the Investors Education and Protection Fund.

NOTE 36: SEGMENT INFORMATION

(i) Description of segments and principal activities

The operating segments are classified under two major businesses which the Company is engaged in, and are briefly described as under:

Sugar & Allied Businesses

(a) Sugar : The Company is a manufacturer of white crystal sugar, having seven manufacturing plants situated in the state of Uttar Pradesh. The sugar is sold to wholesalers and institutional users as well as in the export market. The Company uses its captively produced bagasse, generated as a by-product in the manufacturing of sugar, as a feed stock for generating power. Apart from meeting the captive power requirements of sugar plants and distilleries, the surplus power is exported to the state grid. Molasses, another by-product in the manufacturing of sugar, is used as raw material for producing alcohol/ ethanol. The Company sells the surplus molasses and bagasse after meeting its captive requirements.

(b) Distillery : The Company with its two distilleries having total capacity of 400 kilo-litres per day (KLPD) located at Muzaffarnagar and Sabitgarh in the state of Uttar Pradesh, uses molasses produced in manufacture of sugar as the principal raw material in production of ethanol and extra neutral alcohol. During the year, the Company has commissioned a greenfield dual feed 200 KLPD (160 KLPD on grain) distillery at its sugar unit at Milak Narayanpur and a new grain based 60 KLPD distillery at Muzaffarnagar, thereby increasing the Company’s overall distillation capacity to 660 KLPD. Under its Alcoholic Beverages vertical forming part of this segment, country liquor is produced at the bottling facility in the premises of the existing distillery

at Muzaffarnagar, to facilitate forward integration of distillery operations.

Engineering Businesses

(a) Power transmission : This business segment is focused on high speed and niche low speed gears & gear boxes covering supply to OEMs, after market services and retrofitment of gearboxes, catering to the requirement of power sector, other industrial segments and defence. The manufacturing facility is located at Mysore, Karnataka.

(b) Water/Wastewater treatment : The business segment operates from Noida, Uttar Pradesh and provides engineered-to-order process equipment and comprehensive solutions in the water and wastewater management. This segment includes EPC contracts, Hybrid Annuity Model projects and O&M.

The ‘Other Operations’ mainly include selling sugar and certain FMCG products under the Company’s brand name/private labeling; and retailing of diesel/petrol through a Company operated fuel station.

The above reportable segments have been identified based on the significant components of the enterprise for which discrete financial information is available and reviewed by the chief operating decision maker (CODM) to assess the performance and allocate resources to the operating segments.

There are no geographical segments as the volume of exports is not significant and the major turnover of the Company takes place indigenously. There is no major reliance on few customers or suppliers.

NOTE 37: EMPLOYEE BENEFIT PLANS

(i) Defined contribution plans

(a) The Company contributes to certain defined contribution retirement benefit plans under which the Company pays fixed contributions to separate entities (funds) or financial institutions or state managed benefit schemes. The Company has no further payment obligations once the contributions have been paid. Following are the schemes covered under defined contributions plans of the Company:

Provident Fund Plan & Employee Pension Scheme: The Company makes monthly contributions at prescribed rates towards Employee Provident Fund/ Employee Pension Scheme administered and managed by the Government of India.

Employee State Insurance: The Company makes prescribed monthly contributions towards Employees State Insurance Scheme.

Superannuation Scheme: The Company contributes towards afund established to provide superannuation benefit to certain employees in terms of Group Superannuation Policies entered into by such fund with the Life Insurance Corporation of India.

National Pension Scheme: The Company makes contributions to the National Pension Scheme fund in respect of certain employees of the Company.

(ii) Defined benefit plan (Gratuity)

(a) The Company operates a defined benefit retirement plan under which the Company pays certain defined benefit by way of gratuity to its employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement/ termination of employment or upon death of an employee, based on the respective employees’ salary and years of employment with the Company.

(b) Risk exposure

The plan typically exposes the Company to number of actuarial risks, the most significant of which are detailed below:

Investment risk: The plan liabilities are calculated using a discount rate set with references to government bond yields as at end of reporting period; if plan assets underperform compared to the government bonds discount rate, this will create or increase a deficit.

Interest risk: 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 plan’s debt instruments.

Life expectancy: The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants during their employment. A change in the life expectancy of the plan participants will impact 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.

Attrition rate: The present value of the defined benefit plan liability is impacted by the rate of employee turnover, disability and early retirement of plan participants. A change in the attrition rate of the plan participants will impact the plan’s liability.

Majority of the plan assets held comprise amounts invested in traditional plans of group gratuity schemes offered by specified life insurance companies. The investment in traditional group gratuity scheme of life insurance companies ensures protection of the capital sum invested and interest earned. Balance investments comprise a mix of investments comprising central government securities, state government securities, other debt instruments. The Company has a risk management strategy which defines exposure limits and acceptable credit risk rating and are generally held to maturity. The Company, thorugh the Trust, has during the year made a change in its process to manage its investment risks, whereby majority of the plan assets are now invested with specified life insurance companies to manage the investment risk and in return earns either interst thereon at a fixed specified rate or at a rate as declared annually at its discretion by the life insurance companies. The Company does not face any risk of capital erosion on such investments made with the life insurance companies.

The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In the event of change in more than one assumption, the impact would be different than stated above. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to prior period.

(i) Defined benefit liability (gratuity) and employer contributions

The Company remains committed to fund all gratuity payments falling due and shall strive to gradually reduce the deficit in funding of its obligation in the coming years.

The Company expects to contribute ' 1117.12 lakhs to the defined benefit plan relating to gratuity during the next financial year.

The weighted average duration of the defined gratuity obligation (on discounted cash flow basis) as at 31 March 2023 is 6 years (31 March 2022: 6 years).

The remuneration of key management personnel is determined by the remuneration committee having regard to the performance of individuals, market trends and applicable provisions of Companies Act, 2013.

(iv) Remuneration and outstanding balances of key management personnel does not include long term employee benefits by way of gratuity and compensated absences, which are payable only upon cessation of employment and provided on the basis of actuarial valuation by the Company.

The Company has provided corporate guarantees amounting to ' 15800 lakhs (31 March 2022: ' 10000 lakhs) in connection with loans agreed to be granted by the lender to wholly owned subsidiaries of the Company. Outstanding balance of loans under such lending arrangements as at 31 March 2023 is ' 8886.40 lakhs (31 March 2022: ' 6421.99 lakhs).

(vi) Terms & conditions:

(a) Transactions relating to dividends and buyback of shares were on same terms and conditions that applied to other shareholders.

(b) Loans to subsidiaries were given at normal commercial terms & conditions at prevailing market rate of interest.

(c) Other transactions are made on terms equivalent to those that prevail in arm’s length transactions.

(d) The outstanding balances at the year-end are unsecured and settlement to take place in cash.

NOTE 39: CAPITAL MANAGEMENT

For the purpose of capital management, capital includes net debt and total equity of the Company. The primary objective of the capital management is to maximize shareholders’ value along with an objective to keep the leverage in check in view of cyclical capital intensive sugar business of the Company.

One of the major businesses of the Company is the sugar business, which is seasonal. The entire production takes place in about six months and is sold throughout the year. It thus necessitates maintaining high levels of sugar inventory requiring high working capital funding. Sugar business being a cyclical business, it is prudent to avoid high leverage and the resultant high finance cost. It is the endeavour of the Company to prune down debts to acceptable levels based on its financial position.

The Company may resort to further issue of capital for projects which can not be fully funded through internal accruals/debt and/or to finance working capital requirements.

The Company monitors capital structure through gearing ratio represented by debt-equity ratio (debt/total equity). In addition to the gearing ratio, the Company also looks at non-current debt to operating profit ratio (non-current debt/EBlTDA) which provides an indication of adequacy of earnings to service the debts. The Company diligently negotiates the terms and conditions of the loans and ensures adherence to all the financial covenants. The Company generally incorporates a clause in loan agreements for prepayment of loans without any premium. The gearing ratio and non-current debt/EBlTDA ratio for the Company as at the end of reporting period were as follows:

No changes were made in the objectives, policies or processes for managing capital during the years ended 31 March 2023 and 31 March 2022.

The Company is not subject to any externally imposed capital requirements.

NOTE 40: FINANCIAL RISK MANAGEMENT

The Company’s principal financial liabilities comprise borrowings, trade payables and other payables. The main purpose of the financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include loans, trade and other receivables and cash and bank balances. The Company also holds certain investments, measured at fair value through profit or loss and enters into derivative transactions, which are not extensive.

The Company’s activities expose it mainly to market risk, liquidity risk and credit risk. The monitoring and management of such risks is undertaken by the senior management of the Company and there are appropriate policies and procedures in place through which such financial risks are identified, measured and managed. The Company has a specialised team to undertake derivative activities for risk management purposes and such team has appropriate skills, experience and expertise. It is the Company policy not to carry out any trading in derivative for speculative purposes. The Audit Committee and the Board are regularly apprised of the exposures and risks every quarter and mitigation measures are extensively discussed.

(i) Credit risk

Credit risk is associated with the possibility of a counterparty defaulting on its contractual obligations to pay, resulting in financial loss to the Company. The Company is exposed to credit risks from its operating activities, primarily trade receivables and retentions. The credit risks in respect of deposits with the banks, foreign exchange transactions and other financial instruments are nominal. As required, the Company also advances loans to its subsidiary companies and there is some credit risk associated with it.

(a) Credit risk management

The customer credit risk is managed by each business subject to the Company’s established policy, procedure and controls relating to customer credit risk management. Various businesses require different processes and policies to be followed based on the business risks, industry practice and customer profiles.

In the case of Sugar business, majority of the sales are made either against advance payments or at a very short credit period upto 7-10 days through established sugar agents whereas in Cogeneration, forming part of sugar business, and Distillery, most of the sales are made to Government customers, such as, State Electricity Board (UPPCL) and Oil Marketing Companies (OMCs). There may be delays in receiving payments from UPPCL but the risk in respect of realisation of dues is minimal. In Power transmission business, it is the policy of the Company to receive payment prior to delivery of the material except in the case of some well established OEMs, including group companies and public sector undertakings, where credit up to 90 days is extended. Water business is engaged in Engineering, Procurement and Construction (EPC) business in the municipal and industrial sectors where it is customary to have prescribed retentions which are payable upon completion of the project and after satisfactory performance of the plant.

I n order to contain the business risk especially with respect to long-duration construction & supply contracts, creditworthiness of the customer is ensured through scrutiny of its financials, status of financial closure of the project, if required, market reports and reference checks. The Company remains vigilant and regularly assesses the financial position of customers during execution of contracts with a view to restrict risks of delays and default. In view of its diversified business profile and considering the size of the Company, credit risks from receivables are well contained on an overall basis.

The impairment analysis is performed on each reporting period on individual basis for major customers. In addition, a large number of receivables are grouped and assessed for impairment collectively. The calculation of impairment loss is based on historical data of losses, current conditions and forecasts and future economic conditions. The Company’s maximum exposure to credit risk at the reporting date is the carrying amount of each financial asset as detailed in note 6, 7, 8, 9 and 12.

In the case of Water and Power transmission businesses, the percentage receivables to external sales is high whereas the overall ratio for the Company is much lower. In the case of EPC projects undertaken by Water business, the receivables are high as per the norms of the industry and terms of the tender. A majority of such projects are executed for the municipalities and before bidding for any contract, the Water business carries out due-diligence to ensure that the customer has made satisfactory funding arrangements. In the case of Power transmission business, negotiated credit is given to reputed OEMs. The percentage receivables to external sales is high due to higher year end sales.

Overall, the credit risk from receivable is low in view of diverse businesses and government customers.

(b) Provision for expected credit losses

Basis as explained above, life time expected credit loss ("ECL”) is determined on trade receivables except in cases where advance payment terms are prescribed or payment is due from Central / State Government or Government Authorities / entities where there is no track record of short receipts. ECL arising from delays in receiving payments from the Government customers pursuant to sale of goods or under construction contracts are not considered if such delays are commonly prevalent in the industry and / or the delays are not exceeding

one year. All other short receipts, other than arising from expense claims offset by the counter-party, are duly considered in determining ECL. In view of the business model of the Company’s engineered-to-order products and the profile of trade receivables, the determination of provision based on age analysis may not be realistic and hence, the provision of expected credit loss is determined for the total trade receivables outstanding as on the reporting date. This provision for ECL is made in addition to the specific credit losses, if any, provided on specific financial assets.

(ii) Liquidity risk

The Company uses liquidity forecast tools to manage its liquidity. The Company operates capital intensive sugar business and has obligation to timely make cane price payments within the statutory time period. The Company is able to organise liquidity through own funds and through working capital loans. The Company has good relationship with its lenders, has not defaulted at any point of time in the past and is maintaining healthy credit ratings (viz. short term A1 and long term AA with stable outlook from ICRA), as a result of which it does not experience any difficulty in arranging funds from its lenders. However, when the sugar fundamentals are unfavourable, either due to market forces or due to excessive cane pricing by the Government, the payment of cane price gets delayed though it is the endeavour of the Company to make cane payment on a priority basis. It is the objective and focus of the Company to reduce debts to be able to meet the cyclicalities of the sugar business.

In view of seasonal nature of sugar business, which is a dominant business of the Company, there is a peak build-up of sugar inventories at the year end, resulting in peak working capital requirement. With the liquidation of such inventories over the year, the working capital requirement is gradually reduced. Thus, the current ratio computed at the year end is not a reflection of average and realistic ratio for the year.

(a) Maturities of financial instruments

Maturities of non-derivative financial liabilities:

The following table details the remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The amounts disclosed in the table have been drawn up based on the undiscounted cash flows of financial liabilities. The contractual maturity is based on the earliest date on which the Company may be required to pay.

Maturities of derivative financial instruments:

The Company enters into derivative contracts (foreign exchange forward contracts) that are generally settled on a net basis to manage some of its foreign currency exposures. Derivative liabilities (net) of ' 75.86 lakhs as at 31 March 2023 (31 March 2022: Derivative assets (net) 109.21 lakhs), shall mature within one year from reporting date.

(iii) Market risk

The Company is exposed to following key market risks:

(a) Interest rate risk on loans and borrowings

(b) Sugar price risk

(c) Other market risks

(a) Interest rate risk

Most of the borrowings availed by the Company are subject to interest on floating rate basis linked to the MCLR (Marginal Cost of funds based Lending Rate). In view of the fact that the total borrowings of the Company are quite substantial, the Company is exposed to interest rate risk.

The strategy of the Company to opt for floating interest rates is helpful in maintaining market related realistic rates. Further, most of the loans and borrowings have a prepayment clause through which the loans could be prepaid without any prepayment premium. The said clause helps the Company to arrange debt substitution to bring down the interest costs or to prepay the loans out of the surplus funds held. The interest rate risk is largely mitigated as 99.3% of the long term debts as at 31 March 2023 (31 March 2022: 99.6% of long term debts) comprises loans carrying concessional interest rates/interest subvention.

(b) Sugar price risk

The sugar prices are dependent inter-alia on domestic and global sugar balance - higher supplies lead to softening of sugar prices whereas higher demand than available supplies lead to hardening of sugar prices. The Company sells most of its sugar in the domestic market where there are no effective mechanism available to hedge sugar prices in view of limited breadth in the commodity exchanges. The Company also exports sugar in the years of surplus production based on Government policy on exports.

Adverse changes in sugar price impact the Company in the following manner:

- The Company values sugar stocks at lower of cost and net realisable value (NRV). In the event, the cost of production of sugar is higher than the NRV, the stocks are written down to NRV leading to recognition of loss on such inventory.

- The Company is a large producer of sugar and even a small variation in the sugar price leads to significant impact on the profitability of the Company.

The cost of production of sugar is generally lower than the net realisable value of sugar and hence, chances of significant losses due to inventory write down are low. Further, the Central Government has prescribed Minimum Selling Price (MSP) for sugar, which is subject to revision from time to time. It ensures that there is no steep decline in the sugar prices.

(c) Other market risks

The other market risks includes Equity price risk and Foreign currency risk.

Equity price risk in respect of listed and non listed equity securities which are susceptible to market price risk arising from uncertainties about future value of the investment securities. In view of nominal value of investments being held by the Company, other than in the subsidiaries which are measured at cost, the magnitude of risk is only nominal.

The Company is exposed to foreign currency exchange risk on certain contracts in connection with export and import of goods and services. The Company mitigates such risk through entering into off-setting derivative contracts with Banks, mainly foreign exchange forward contracts, of appropriate maturity and amounts at adequate intervals. The impact of sensitivity of such foreign exchange fluctuations on the overall financial performance and position of the Company is nominal.

In respect of firm commitments under certain contracts involving receipt of consideration in foreign currency, the Company has chosen to follow hedge accounting to hedge the risks attributable to the cash flows in respect of such firm commitments. The foreign exchange risk arises in respect of the movement in the foreign currency from the time the contract is negotiated/entered into and till the time the consideration under the contract is actually settled. In accordance with its risk management strategy, the Company manages such risks, generally by entering into foreign exchange forward contracts for the appropriate maturity with banks. The risk mitigation strategy involves determination of the timing and the amount of hedge to be taken in a progressive manner, with a view to protect the exchange rate considered at the time of acceptance of the contract. The Company, generally hedges the foreign currency risk directly to INR and for hedge accounting, designates a hedge ratio of generally 1:1 in respect of all such cash flow hedges. Besides monitoring the movements in the foreign exchange market, the Company also takes the advice of outside consultants in arriving at its hedging decision. Refer note 1(s) for further details on accounting policy in respect of hedge accounting.

Level 1: Level 1 hierarchy includes financial instruments measured using quoted unadjusted market prices in active markets for identical assets or liabilities. This includes listed equity instruments that have quoted price. The fair value of all equity instruments which are traded in the stock exchanges is valued using the closing price as at the reporting date.

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise 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 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

There are no transfers between levels 1 and 2 during the year.

(iii) Valuation technique used to determine fair value

Specific valuation techniques used to value financial instruments include the fair value of derivatives (viz. foreign exchange forward contracts) is determined using market observable inputs, including prevalent forward rates for the maturities of the respective contracts and interest rate curves as indicated by banks and third parties.

All of the resulting fair value estimates are included in level 2.

(iv) Valuation processes

The Corporate finance team has requisite knowledge and skills in valuation of financial instruments. The team headed by Group CFO directly reports to the audit committee on the fair value of financial instruments.

(v) The management considers that the carrying amounts of financial assets and financial liabilities recognised in the financial statements approximate their fair values.

NOTE 43: LEASES As Lessee

Assets taken under lease mainly includes various residential, office, godown premises and plots of land. These are generally not noncancellable leases (except for few premises) having unexpired period upto sixty six years. Except a few, the leases are generally renewable by mutual consent and on mutually agreeable terms. The Company has given refundable interest free security deposits under certain lease agreements. There is no contingent rent, sublease payments or restriction imposed in the lease agreement.

As Lessor

The Company has given certain portion of its office / factory premises under operating leases [including lease of investment property (refer note 4)]. These leases are not non-cancellable and are extendable by mutual consent and at mutually agreeable terms. The gross carrying amount, accumulated depreciation and depreciation recognised in the statement of profit and loss in respect of such portion of the leased premises are not separately identifiable. There is no impairment loss in respect of such premises. No contingent rent has been recognised in the statement of profit and loss. There are no minimum future lease payments as there are no non-cancellable leases. Lease income is recognised in the statement of profit and loss under "Other income” (refer note 24). Lease income earned by the Company from its investment properties and direct operating expenses arising on the investment properties for the year is set out in note 4.

NOTE 44: COMMITMENTS

As at

As at

31-Mar-23

31-Mar-22

Estimated amount of contracts remaining to be executed on capital account and not provided for (after adjusting advances aggregating to ' 295.87 lakhs (31 March 2022: ' 1413.12 lakhs))

5737.98

6125.01

NOTE 45: CONTINGENT LIABILITIES AND CONTINGENT ASSETS Contingent liabilities

As at 31-Mar-23

As at 31-Mar-22

Claims against the Group not acknowledged as debts:

(i) ‘Claims (excluding further interest thereon) which are being contested by the Company and in respect of which the Company has paid amounts aggregating to ' 370.83 lakhs (31 March 2022: ' 693.49 lakhs), under protest pending final adjudication of the cases:

9374.18

7940.70

Sl. Particulars No.

Amount of contingent Amount paid liability

31-Mar-23 31-Mar-22 31-Mar-23 31-Mar-22

1 Sales tax 29.04 243.41 14.52 88.52

2 Excise duty 552.23 545.18 288.76 279.74

3 GST 63.32 - 0.42 -

4 Interest on delayed 5973.50 5973.50 - -payment of cane

price *

5 Others 2756.09 1178.61 67.13 325.23

* Amount of contingent liability on account of interest on delayed payment of cane price for the sugar seasons 2012-13, 2013-14 and 2014-15 in respect of which the Hon’ble Allahabad High Court had passed an order directing the Cane Commissioner of the State to decide the matter afresh, taking into consideration certain additional factors. The Cane Commissioner is understood to have filed an affidavit in a contempt proceeding, specifying interest rates on delayed cane price payments but no such order of the Cane Commissioner has been served on the Company or industry association and such order, if served, may be legally challenged.

(ii) The Company is contingently liable in respect of short provision against

disputed income tax liabilities (excluding determination of final interest payable thereon) of ' 2637.14 lakhs (31 March 2022: ' 2565.11 lakhs) against which ' 748.36 lakhs (31 March 2022: ' 698.92 lakhs) stands paid. The disputed income tax liability mainly arises on the issue of taxability of unrealised incentives, majority of which have been held to be non-taxable in the first appeal filed by the Company against which the Department has filed appeals before the Tribunal.

2637.14

2565.11

(iii) Liability arising from claims / counter claims/ interest in arbitration/ court cases, claims of certain employees/ex-employees and in respect of service tax, if any, on certain activities of the Company which are being contested by the Company.

Indeterminate

Indeterminate

The amount shown above represent the best possible estimates arrived at on the basis of available information. The uncertainties, possible payments and reimbursements are dependent on the outcome of the different legal processes which have been invoked by the Company or the claimants, as the case may be, and therefore cannot be predicted accurately. The Company engages reputed professional advisors to protect its interests and has been advised that it has strong legal position against such disputes.

Contingent assets

Based on management analysis, there are no material contingent assets as at 31 March 2023 and as at 31 March 2022.

NOTE 46: REGULATORY FEES

The Government of Uttar Pradesh vide its order dated 24 December 2021 imposed regulatory fees of ' 20/quintal on sale/ transfer of molasses. UP Sugar Mills Association has challenged the imposition of the regulatory fees before the Hon’ble Allahabad High Court. Pending final outcome of the matter, the Company, on a conservative basis, accounted for the liability aggregating to ' 1674.74 lakhs (including ' 636.33 lakhs till 31 March 2022) in respect of fee paid on sale/transfer of molasses and molasses held in stock. This has resulted in the profit before tax of current financial year being adversely impacted by an amount of ' 1216.74 lakhs and balance ' 458.00 lakhs is included in the carrying value of sugar inventories.

NOTE 47: DISCLOSURES OF MICRO ENTERPRISES AND SMALL ENTERPRISES

Based on the intimation received by the Company from its suppliers regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006, the relevant information is provided here below:

31-Mar-23

31-Mar-22

The principal amount and the interest due thereon remaining unpaid to any supplier at the end of each accounting year; as at the end of the year (i) Principal amount (refer note 19 & 20)

971.67

919.10

(ii) Interest due on above

-

-

The amount of interest paid by the buyer in terms of section 16 of Micro, Small and

-

-

Medium Enterprises Development Act, 2006 (27 of 2006), along with the amount of the payment made to the supplier beyond the appointed day during each accounting year.

The amount of interest due and payable for the period of delay in making payment

(which has been paid but beyond the appointed day during the year) but without adding the interest specified under the Micro, Small and Medium Enterprises Development Act, 2006

The amount of interest accrued and remaining unpaid at the end of each accounting

year; and

The amount of further interest remaining due and payable even in the succeeding

years, until such date when the interest dues above are actually paid to the small enterprise, for the purpose of disallowance of a deductible expenditure under section 23 of the Micro, Small and Medium Enterprises Development Act, 2006

NOTE 50: RECENT ACCOUNTING PRONOUNCEMENTS

Ministry of Corporate Affairs, vide notification dated 31 March 2023, has made following amendments to Ind AS which are effective from 1 April 2023 and applicable to the Company:

(i) Ind AS 1 Presentation of Financial Statements: Amendment requires companies to disclose their "material accounting policy information” instead of their "significant accounting policies” and prescribes circumstances under which an accounting policy information shall be considered to be material.

(ii) Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors: The amendment has replaced the definition of "change in acounting estimate” with the definition of "accounting estimates” and included other amendments to help entities distinguish changes in accounting estimates from changes in accounting policies.

(iii) I nd AS 12 Income Taxes: Exemption for initial recognition of deferred tax is now narrowed and exclude transactions which gives rise to equal taxable and deductible temporary differences. The amendment seeks to reduce diversity in the reporting of deferred tax on leases and decommissioning obligations.

The Company intends to adopt these standards when they become effective. Based on preliminary assessment, the Company does not expect these amendments to have any significant impact on its financial statements.

NOTE 51: COMPARATIVES

The Company has reclassified certain items of financials of comparative year to conform to this year’s classification, however, impact of these reclassification are not material.

NOTE 52: APPROVAL OF STANDALONE FINANCIAL STATEMENTS

The standalone financial statements were approved for issue by the Board of Directors on 25 May 2023 subject to approval of shareholders.


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