p) Provisions, contingent liabilities and contingent assets
i. Provisions are recognised when there is a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
ii. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or nonoccurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
iii. A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Company. Contingent assets are not recognized in the financial statements. However, contingent assets are assessed continuously and if it is virtually certain that an inflow of economic benefits will arise, the assets and the related income are recognised in the period in which the change occurs.
q) Contributed equity
Equity shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
r) Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and on hand and short-term deposit with original maturity upto three months, which are subject to insignificant risk of changes in value.
For the purpose of presentation in the statement of cash flows, cash and cash equivalents consists of cash and short-term deposit, as defined above, net of outstanding bank overdraft but including other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
s) Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, In the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 -Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
At each reporting date, the management analyses the movements in the values of assets and liabilities which are required to be remeasured or re-assessed as per the Company's accounting policies. For this analysis, the Management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents. The Management also compares the change in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable.
t) Rounding off
All amounts disclosed in the standalone financial statements and notes have been rounded off to the nearest million as per the requirements of Schedule Ill, unless otherwise stated. Any amount appearing in financial statements as ?'0' represents amount less than ?500,000.
iii) Recent pronouncements
As on the date of release of these standalone financial statements, Ministry of Corporate Affairs has not issued new standards/ amendments to accounting standards which are effective from 01 April 2024.
3. Significant estimates, judgements and assumptions
The preparation of financial statements in conformity with Ind AS requires the management to make estimates, assumptions and exercise judgement in applying the accounting policies that affect the reported amount of assets, liabilities and disclosure of contingent liabilities at the date of financial statements and the reported amounts of income and expenses during the year. The Management believes that these estimates are prudent and reasonable and are based on the Management's best knowledge of current events and actions. Actual results could differ from these estimates and differences between actual results and estimates are recognised in the periods in which the results are known or materialised. This note provides an overview of the areas that involves a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed.
A. Defined benefit obligation
The cost of post-employment and other long term benefits is determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include determination of discount rates, expected rate of return on assets, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
B. Fair value of financial instruments
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. In applying the valuation techniques, management makes maximum use of market inputs and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.
C. Share-based payments
Estimating fair value for share-based payment requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. The estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the option, volatility and dividend yield and making assumptions about them.
D. Impairment of Goodwill
Impairment exists when the carrying value of an asset or cash generating unit (CGU) exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm's length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the budget for the future years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset's performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year.
E. Impairment of financial assets
The impairment provisions for financial assets disclosed are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Company's past history,
existing market conditions as well as forward looking estimates at the end of each reporting period. The Company reviews carrying value of its investments when there is indication for impairment.
F. Impairment of non-financial assets
At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than biological assets, investment property, inventories, contract assets and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.
G. Taxes
The Company periodically assesses its liabilities and contingencies related to income taxes for all years open to scrutiny based on latest information available. The Company records its best estimates of the tax liability in the current tax provision. The management believes that they have adequately provided for the probable outcome of these matters.
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits.
H. Contingencies
In the normal course of business, contingent liabilities may arise from litigation and other claims against the Company.
Significant judgement is made when evaluating, among other factors, the probability of unfavorable outcome and the ability to make a reasonable estimate of the amount of potential loss.
I. Leases
Ind AS 116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The Company makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to the Company's operations and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances. After considering current and future economic conditions, the Company has concluded that no changes are required to lease period relating to the existing lease contracts. The Company uses its incremental borrowing rate to measure lease liabilities.
J. Government Grant
The Company has accrued income for Government grant related to assets in the ratio of fulfilment of obligations associated with the grant received. Key assumptions involved pertain to estimation on reasonability of compliance with the conditions attached to grants and benefits availed from Government scheme.
K. Useful life and residual value of property, plant and equipment (PPE) and intangible assets
Useful lives of PPE and intangible assets are based on the life prescribed in Schedule II to the Companies Act, 2013. In cases, where the useful lives are different from that prescribed in Schedule II, they are based on technical evaluation (internal and/or external), taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers' warranties and maintenance support. Assumptions also need to be made, when it is assessed, whether an asset may be capitalized and which components of the cost of the asset may be capitalized.
f) Employees Stock Option Scheme (ESOPS):
During year ended 31 March 2021, the Company had instituted an EPL Employee Stock Option Scheme 2020 ("the Scheme") as approved by the Board of Directors for issuance of stock options to the eligible employees of the Company and of its subsidiaries, other than promoters or person belonging to promoter group.
During year ended 31 March 2021, pursuant to the said Scheme 2020, 3,836,089 stock options convertible into 3,377,134 equity shares of ?2 each at an exercise price of Rs 161 per share and 458,955 equity shares of Rs 2 each at an exercise price of ?268 per share were granted to eligible employees, being the market price as defined in the Securities and Exchange Board of India (Share Based Employee Benefits) Regulation, 2014 (SEBI Regulation). During year ended 31 March 2022, 1,526,718 stock options convertible into equivalent equity shares of Rs 2 each at an exercise price of Rs 161 per share were granted to eligible employee. During the previous year, 108,226 stock options convertible into equivalent equity shares of Rs 2 each at an exercise price of Rs 161 per share were granted to eligible employee. During the current year, further 1,095,474 stock options convertible into equivalent equity shares of Rs 2 each at an exercise price of Rs 161 per share were granted to eligible employee. Subject to terms and conditions of the Scheme, the said options will vest in a phased manner in every year during the next five years, as per the provisions of the Scheme.
g) The Board of Directors at its meeting held on 26 April 2018, recommended issue of bonus equity shares, in the ratio of one equity share of Rs 2 each fully paid up for every one equity share of the Company held by the shareholders as on a record date. The above issue of bonus shares was approved by the shareholders in the annual general meeting held on 13 June 2018 and accordingly the Company allotted 157,181,664 equity shares of ?2 each fully paid up bonus shares by capitalisation of securities premium amounting to ?314 million during that year.
h) There are no shares bought back or shares issued for consideration other than cash except for bonus equity shares described in point (g) above, during five years preceding 31 March 2024.
i) Forfeited equity shares consist of 35,725 partly paid up equity shares and 21,395 fully paid up bonus shares forfeited during earlier year. The amount of ?0.1 million in relation to the forfeiture will be transferred to reserves upon cancellation of these shares.
J) Pursuant to the scheme of amalgamation of Creative Stylo Packs Private Limited ('CSPL' or 'transferor company') with the Company, on 05 November 2022 the Company allotted its 2,339,186 equity shares in the ratio of 2,500 fully paid-up equity shares of ?2 each for every 927 fully paid-up equity shares of Rs.10 each of CSPL to the specified shareholders of the transferor company.
ii) Fair value hierarchy
a) Financial Instrument measured at Fair Value
The fair values of the financial assets and liabilities are the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into three levels prescribed under the Indian Accounting Standards. An explanation for each level is given below.
Level 1: Level 1 hierarchy includes financial instruments measured using closing net asset value.
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. Instruments in the level 2 category for the Company include foreign exchange forward contracts.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in this level.
b) Financial Instrument measured at Amortised cost
The carrying amount of financial assets and financial liabilities measured at amortised cost in the Financial Statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled in short term.
iv) Valuation techniques used to determine fair value:
The fair value of mutual funds is determined using unquoted price and the fair value of foreign exchange forward contracts is determined using forward exchange rates at the balance sheet date.
41 (A) Financial risk management
The Company has exposure to the following risks arising from financial instruments:
• Credit risk;
• Liquidity risk;
• Market risk - Foreign currency;
• Market risk - Interest rate; and
• Market risk - Mutual fund price risk
A Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counter party to a financial instrument fails to meet its contractual obligations.
The Company is exposed to credit risk from its operating activities (primarily trade receivables), lease rental deposits, deposits with banks and other financial instruments. Credit risk arises from the possibility that counter party may not be able to settle their obligations as agreed.
i) Trade receivables
The Company extends credit to customers (including related parties) in the normal course of business. The Company considers factors such as financial conditions / market practices, credit track record in the market, analysis of historical bad debts and past dealings for extension of credit to customers. Individual credit limits are set accordingly. The Company monitors the payment track record of the customers and ageing of receivables. Outstanding customer receivables are regularly monitored. The Company considers the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets. The Company takes advances and security deposits from some of its customers, which mitigate the credit risk to an extent.
iv) Other financial instruments- assets
The Company considers factors such as track record, size of the institution, market reputation, financial strength/rating and service standards to select the banks with which balances and deposits are maintained. Generally, the balances are maintained with the institutions from whom the Company has also availed borrowings. Security deposits against leasing of premises/Equipments are refundable upon closure of the lease. Mutual fund investments are made in liquid and overnight plans of renowned asset management company only. The credit risk associated with bank, security deposits and mutual fund investments is relatively low.
B Liquidity risk
i) Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at a reasonable price. For the Company, liquidity risk arises from obligations on account of financial liabilities - borrowings, trade payables, derivative instruments and other financial liabilities.
The Company's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. The Company manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of the financial assets and liabilities. The Company regularly monitors liquidity position through rolling forecast based on estimated free cash flow generated from business. It maintains adequate sources of financing including loans, debt, and overdraft from banks. It also enjoys strong access to domestic capital markets across various debt instruments.
C Market risk
Market risk Is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. The sensitivity analysis excludes the impact of movements in market variables on the carrying value of post-employment benefit obligations provisions and on the non-financial assets and liabilities. The sensitivity of the relevant profit and loss item is the effect of the assumed changes in respective market risks.
The Company's activities expose it to risks on account of changes in foreign currency exchange rates and interest rates. The Company uses derivative financial instruments such as foreign exchange forward contracts of varying maturity depending upon the underlying contract as a risk management strategy to manage its exposures to foreign exchange fluctuations and interest rate.
i Foreign currency risk
Currency risk is the risk that the fair value or future cash flows fluctuate because of changes in market prices. The Company is exposed to foreign exchange risk on their receivables, payables and foreign currency loans which are mainly held in the United State Dollar ("USD"), the Japanese Yen ("JPY"), the Pound Sterling ("GBP"), the Euro ("EUR"), the Swiss Franc ("CHF") and Chinese Yuan ("CNY"). Consequently, the Company is exposed primarily to the risk that the exchange rate of the Indian Rupee ("INR") relative to the USD, the JPY, the GBP, the EUR, the CHF, and the CNY may change in a manner that has a material effect on the reported values of the Company's assets and liabilities that are denominated in these foreign currencies.
The Company evaluates exchange rate exposure arising from foreign currency transactions and follows established risk management policies, including minimising cross currency transactions, using natural hedge and the use of derivatives like foreign exchange forward contracts to minimise the impact to results of the exchange rate movements. The unhedged exposures are maintained and kept to minimum feasible.
iii Mutual fund price risk
The value of mutual fund investments determined using closing published net asset value and measured at fair value through profit and loss as at 31 March 2024 is Nil (31 March 2023: ?150 million). A 10% change in price for year ended 31 March 2024 would result in an impact of Nil (31 March 2023: ?15 million).
41 (B) Capital Management
Risk management
The Company manages its capital structure and makes necessary adjustments in light of changes in economic conditions and the requirement of financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders, issue new shares or raise / retire debt. The primary objective of the Company's capital management is to maximise the shareholders' value.
Loan covenants
Borrowing contain certain debt covenants relating to limitation on indebtedness, debt-equity ratio, debt to EBITDA ratio, intr coverage ratio and debt service coverage ratio. The limitation on indebtedness covenant gets suspended once the Company m prescribed criteria. The debt covenant related to limitation on indebtedness remained suspended as of the date of adoption of i statements. The Company has also satisfied all other aforesaid debt covenants, to the extent prescribed in the respective sanction c The deferred sales tax loans do not carry any debt covenant.
42 Share-based payments
Employee stock option plan 2020
a) During year ended 31 March 2021, the Company had instituted an EPL Employee Stock Option Scheme 2020 ("Scheme 2020") as ; the Board of Directors for issuance of stock options to the eligible employees of the Company and of its subsidiaries, other than th or person belonging to promoter group.
During year ended 31 March 2021, pursuant to the said Scheme 2020, 3,836,089 stock options convertible into 3,377,134 equi ?2 each at an exercise price of Rs 161 per share and 458,955 equity shares of Rs 2 each at an exercise price of ?268 per share w to eligible employees, being the market price as defined in the Securities and Exchange Board of India (Share Based Employ Regulation, 2014 (SEBI Regulation). During year ended 31 March 2022, 1,526,718 stock options convertible into equivalent equity 2 each at an exercise price of Rs 161 per share were granted to eligible employee. During the previous year, 108,226 stock options into equivalent equity shares of Rs 2 each at an exercise price of Rs 161 per share were granted to eligible employee. During the i further 1,095,474 stock options convertible into equivalent equity shares of Rs 2 each at an exercise price of Rs 161 per share wer eligible employee.
Subject to terms and conditions of the Scheme 2020, the said options will vest in a phased manner in every year during the next 1 per the provisions of the Scheme 2020.
hi Evnanca aiicinn frrtm ehara Kaca/I nawmant trancartinnc
Notes:
(I) The weighted average share price at the date of exercise of options exercised during the year ended 31 March 2024 was ?200.34. No options were exercised during year ended 31 March 2023.
(ii) Lapsed on account of employees resigned without exercising.
(iii) The weighted average remaining life of options outstanding at the end of year 31 March 2024 is 3.18 years (31 March 2023 is 3.43 years). 43 Employee benefit obligation
The disclosures of employee benefits as defined In the Ind AS 19 - "Employee Benefits" are given below:
a. The Company makes annual contributions to the employees' gratuity fund scheme, a funded defined benefit plan which Is managed by the Life Insurance Corporation of India and HDFC Bank. The gratuity benefit plan Is governed by the Payment of Gratuity Act, 1972. Under the Gratuity Act, employees are entitled to specific benefit at the time of retirement or termination of the employment on completion of five years or death while in employment. The level of benefit provided depends on the member's length of service and salary at the time of retirement/ termination age. The present value of obligation is determined based on actuarial valuation using the projected unit credit method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
iv. The following is the summary of practical expedients elected on initial application:
a. Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than twelve months of lease term on the date of initial application.
b. Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application.
v. Other disclosures:
a. The principal portion and interest portion of the lease payments aggregating ?151 million (31 March 2023 : ?151 million) have been separately disclosed in the statement of cash flows under cash flows from financing activities.
b. Lease contracts entered by the Company, majorly pertains for buildings taken on lease to conduct its business in the ordinary course and data and technology equipment taken on lease for data storage and data hosting. The Company does not have any major lease restrictions and commitment towards variable rent as per the contract.
63 Ministry of Corporate Affairs (MCA) introduced a new requirement for companies under the proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 inserted by the Companies (Accounts) Amendment Rules, 2021 requiring companies, which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in the books of account along with the date when such changes were made and ensuring that the audit trail is not disabled.
The Company has used an accounting software - SAP for maintaining its standalone books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software at an application level. However, the audit trail feature was not enabled at database level during the year. Further, the audit trail feature is not tampered with in respect of accounting software, where such feature is enabled.
64 Figures for the previous year have been re-grouped/ re-arranged wherever necessary. The impact of the same is not material to the users of standalone financial statements.
These are notes to the Standalone Financial Statements referred to in our report of even date.
For Walker Chandiok & Co LLP For and on behalf of the Board of Directors
Chartered Accountants
Firm Registration No. 001076N / N500013 Anand Kripalu Sharmila Abhay Karve
Managing Director and Direct0r
Chief Executive Officer (Din - 05018751)
Rakesh R. Agarwal (DIN - 00118324)
Partner
Membership No.: 109632 Deepak Goyal Onkar Ghangurde
Chief Financial Officer Company Secretary
Membership No: ACS 30636
Place: Mumbai Place: Mumbai
Date: 28 May 2024 Date: 28 May 2024
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