The quarterly returns or statements filed by the Company for working capital limits with its bankers are in agreement with the books of account of the Company except for statements filed for quarters June, 2022 and September, 2022, where the variances were observed in the value of inventory between the amount reported as per the books of account for respective quarters and amount as reported in the quarterly statements. The stock reported to the Banks in these quarters was lower compared to the books (June 2022 quarter the value of inventory was reported lower by Rs. 2,075.98 lakhs and September 2022 quarter the value of inventory was reported lower by Rs. 2,341.48 lakhs) This was mainly due to the fact that value of inventory which was in transit, discontinued
operations inventory and difference due to valuation of inventory due to valuation as per accounting standard, which is normally
done at the time of limited review/ audit. Since the inventory value reported was lower the Company has not revised the stock
statement that it had already submitted.
Non-Current Borrowings
1. Term Loan(s) from Bajaj Finance Limited are secured by mortgage of certain immovable property(ies) owned by the Promoters. The Term Loans are repayable in 76 and 79 quarterly instalments commencing from November, 2017 and May, 2018 respectively and carries an interest of 11.60% p.a. (March 31, 2022: 10.75% p.a.) payable monthly.
2) Term Loan from HDFC Bank Limited is secured by first pari passu charge on the entire present and future movable (plant and machinery) and immovable fixed assets of the Company and second pari passu charge on the entire present and future current assets viz. stocks of raw material, stock in process, finished goods, consumable stores and spares and book debts of the Company. The Term Loan is repayable in 72 equal monthly instalments commencing from September, 2022 and carries an interest of 8.40% p.a. (March 31, 2022: 7.95% p.a.) payable monthly.
3) Term Loan from Citibank N.A. is secured by first pari passu charge on the entire present and future movable (plant and machinery) and immovable fixed assets of the Company and second pari passu charge on the entire present and future current assets viz. stocks of raw material, stock in process, finished goods, consumable stores and spares and book debts of the Company. The Term Loan is repayable in 16 equal quarterly instalments from April, 2022 and carries an interest of 11.74% p.a. (March 31, 2022: 8.25% p.a) payable monthly.
4) Term Loan (foreign currency loan) from Citibank N.A. is secured by first pari passu charge on the entire present and future movable (plant and machinery) and immovable fixed assets of the Company and second pari passu charge on the entire present and future current assets viz. stocks of raw material, stock in process, finished goods, consumable stores and spares and book debts of the Company. The Term Loan is repayable in 16 equal quarterly instalments commencing from March, 2023 and carries an interest of 2.50% p.a. (March 31, 2022: 2.50% p.a.) payable monthly.
5) Term Loan(s) from State Bank of India are secured by first pari passu charge on the entire present and future movable (plant and machinery) and immovable fixed assets of the Company and second pari passu charge on the entire present and future current assets viz. stocks of raw material, stock in process, finished goods, consumable stores and spares and book debts of the Company. The Term Loans are repayable in 78 and 48 equal monthly instalments commencing from October, 2019 and October, 2020 respectively and carries an interest of 9.80% p.a. and 10.05% p.a. (March 31, 2022: 9.80% p.a. and 10.05% p.a.) respectively payable monthly.
6) Term Loan from ICICI Bank is secured by first pari passu charge on the entire present and future movable (plant and machinery) and immovable fixed assets of the Company and second pari passu charge on the entire present and future current assets viz. stocks of raw material, stock in process, finished goods, consumable stores and spares and book debts of the Company. The Term Loan is repayable in 48 equal monthly instalments commencing from March 2024 and carries an interest of 9.15% p.a. (March 31, 2022: Nil) payable monthly.
7) Vehicle Loans availed from HDFC Bank are secured by hypothecation of respective vehicles taken on loan. Each loan is repayable in equal monthly instalments from the month subsequent to the disbursement of the loan. Interest is payable on monthly basis and ranges from 6.25% p.a to 10.00% p.a. (March 31, 2022: 6.25% p.a to 10.00% p.a.)
Current Borrowings
1) Working capital facilities including packing credit and foreign bill discounting from HDFC Bank Limited are secured by first pari passu charge on the entire present and future current assets viz. Stocks of raw material, stock in process, finished goods, consumable stores and spares and book debts of the Company and second pari passu charge on the entire present and future movable (plant and machinery) and immovable fixed assets of the Company. The rate of interest for cash credit is 9.43% p.a. [March 31, 2022: 7.90% p.a.] and for other facilities is SOFR plus 250 bps [March 31, 2022: LIBOR plus 250 bps].
2) Working capital facilities including packing credit and foreign bill discounting from Citibank N.A. are secured by first pari passu charge on the entire present and future current assets viz. Stocks of raw material, stock in process, finished goods, consumable stores and spares and book debts of the Company and second pari passu charge on the entire present and future movable (plant and machinery) and immovable fixed assets of the Company. The rate of interest for cash credit is 9.25% p.a. [March 31, 2022: 9.25% p.a.]
3) Working capital facilities including packing credit and foreign bill discounting from ICICI Bank Limited are secured by first pari passu charge on the entire present and future current assets viz. Stocks of raw material, stock in process, finished goods, consumable stores and spares and book debts of the Company and second pari passu charge on the entire present and future movable (plant and machinery) and immovable fixed assets of the Company. The rate of interest for cash credit is 9.25% p.a. [March 31, 2022: 9.25% p.a.]
4) Working capital loan facilities including packing credit and foreign bill discounting from State Bank of India are secured by secured first pari passu charge on the entire present and future current assets viz. Stocks of raw material, stock in process, finished goods, consumable stores and spares and book debts of the Company and second pari passu charge on the entire present and future movable (plant and machinery) and immovable fixed assets of the Company. The rate of Interest for cash credit is 7.95% p.a. [March 31, 2022: 7.95% p.a.]
5) The unsecured loans from related parties, in which directors are interested, are carrying interest @ 9.00% p.a., [March 31, 2022: 9.00% p.a.] and are repayable on demand.
A. CAPITAL MANAGEMENT
For the purpose of Company's capital management, capital includes Issued Equity Capital, Securities Premium, and all other Equity Reserves attributable to the Equity Shareholders of the Company. The primary objective of the Company's Capital Management is to maximise the Shareholder's Value.
The Company manages its capital structure and makes adjustments in the light of changes in economic conditions and requirements of the financial covenants and to continue as a going concern. The Company monitors using a gearing ratio which is net debts divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings, less cash and short term deposit.
B. FINANCIAL RISK MANAGEMENT
The Company's principal financial liabilities comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the operations of The Company. The principal financial assets include trade and other receivables and short term deposits.
The Company has assessed market risk, credit risk and liquidity risk to its financial liabilities.
a) Market risk
Is the risk of loss of future earnings, fair values or cash flows that may result from a change in the price of a financial instrument, as a result of interest rates, foreign exchange rates and other price risks. Financial instruments affected by market risks, primarily include loans , borrowings , foreign currency receivables and payables .
i) Interest rate risks
Interest rate risk can be either fair value interest rate or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rate. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing investments will fluctuate because of fluctuations in the interest rates.
Fair value sensitivity analysis for fixed-rate instruments
The Company does not account for any fixed-rate financial assets or financial liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss.
Fair value sensitivity analysis for floating-rate instruments
The Company does not account for any floating-rate financial assets or financial liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss.
ii) Commodity Price Risks
The Company is affected by price stability of certain commodity due to significantly increase volatility of certain commodities , the Company has entered into contracts with the customers that has provision to pass on the change in raw material prices. The Company has risk management framework aimed at prudently managing the risk arising from volatility in commodity prices.
(b) Credit Risk Management
It is the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Company. It arises from cash and cash equivalents, investments as well as credit exposure to customers.
The Company holds cash and cash equivalents with banks which are having highest safety rankings and hence has a low credit risk.
Trade and other receivables
The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company also has an external credit risk insurance cover with ECGC Policy. The Company uses Expected Credit Loss (ECL) Model to assess the impairment loss or gain.
(c) Liquidity Risk Management
Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at reasonable price. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of credit facilities to meet obligations when due. The Company's treasury team is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management. Management monitors the Company's liquidity position through rolling forecasts based on expected cash flows.
B. Measurement of fair values
Valuation techniques and significant unobservable inputs
The management assessed that cash and cash equivalents, trade receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
The Fair Value of financial assets included is the amount at which the instrument could be exchanged in a current transaction between willing parties.
The following methods and assumptions were used to estimate the fair value.
1. The Fair values of Mutual Funds and Quoted Equities are based on NAV / Quoted Price at the reporting date.
2. Non current financial assets / liabilities measured at amortised cost - Discounted cash flow technique : The valuation model considers present value of expected payments discounted using an appropriate discounting rate.
3. The Company enters into Derivative financial instruments with counterparties principally with Banks with investment grade credit ratings. The Interest Rate swaps is valued using valuation techniques which employs the use of market observable inputs namely, Marked-to-Market.
c) Disclosure required by the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations,2015; and section 186(4) of the Companies Act,2013 :
1. Amount of Loans and advances in the nature of loans outstanding from subsidiaries Rs. Nil (Previous Year Rs. Nil)
2. Loans to employees have been considered to be outside the purview of disclosure requirements.
3. Investment by Loanee in the shares of the Company- Not applicable (Previous Year Not applicable)
d) There are no material transactions with respect to struck off companies as mentioned under section 248 of the Companies Act, 2013 or section 560 of the Companies Act, 1956.
e) Disclosures as per IND AS - 19 - employee benefits
The Company make contributions towards provident fund, in substance a defined benefit retirement plan and towards pension and superannuation funds which are defined contribution retirement plans for qualifying employees. The Company are liable to pay to the provident fund to the extent of the amount contributed and any shortfall in the fund assets based on Government specified minimum rates of return relating to current services. Such contribution and shortfall if any, are recognised as an expense in the year in which these are incurred.
The Company make annual contributions to the Employees' Gratuity Trust, for funding the defined benefit plans for qualifying employees. The scheme provides for lump sum payment to vested employees at retirement or death while in employment or on termination of employment. Employees, upon completion of the vesting period, are entitled to a benefit equivalent to either half month, three fourth month and full month salary last drawn for each completed year of service depending upon the completed years of continuous service in case of retirement or death while in employment. In case of termination, the benefit is equivalent to fifteen days salary last drawn for each completed year of service in line with the Payment of Gratuity Act, 1972. Vesting occurs upon completion of five years of continuous service.
The trustees of the trust fund are responsible for the overall governance of the plan and to act in accordance with the provisions of the trust deed and rules in the best interests of the plan participants. They are tasked with periodic reviews of the solvency of the fund and play a role in the long-term investment, risk management and funding strategy.
(i) Remuneration does not include provisions made for Gratuity as it is determined on an actuarial basis for the Company as a whole.
(ii) The transactions with related parties are made on terms equivalent to those that prevail in arm's length transactions. Outstanding balances other than unsecured loan at the year-end are unsecured and interest free. There have been no guarantees provided or received for any related party receivables or payables. For the year ended 31 March 2023, the Company has not recorded any impairment of receivables relating to amounts owed by related parties (31 March 2022: Rs. Nil). This assessment is undertaken in each financial year through examining the financial position of the related party and the market in which the related party operates.
g) Segment Information
The operations of the Company are limited to two segment viz. (i) Filtration, Drying and Other Equipment (ii) Glass Lined Equipment
The accounting policies adopted for segment reporting are in line with the accounting policy of the Company with following additional policies for segment reporting.
a) Revenue and Expenses have been identified to a segment on the basis of relationship to operating activities of the segment. Revenue and Expenses which relate to enterprise as a whole and are not allocable to a segment on reasonable basis have been disclosed as “Unallocable”.
b) Segment Assets and Segment Liabilities represent Assets and Liabilities in respective segments. Tax related assets and other assets and liabilities that cannot be allocated to a segment on reasonable basis have been disclosed as “Unallocable”
l) Contingent Liabilities not provided for:
(i) Claims not acknowledged as debts:
(a) There is a pending litigation against the Company for compensation of loss of profit of Rs. 500.00 lakhs. The Court has decided the judgement in favour of the Company, however the mater has been referred to the High Court, in the opinion of the management, no provision is considered necessary.
(b) Disputed Service Tax for the period 2008 to 2013 is Rs. 16.47 lakhs (Prevous Year Rs. 16.47 lakhs) pending before CESTAT, against which the Company has made payment of Rs. 5.19 lakhs(Prevous Year Rs. 5.19 lakhs).
(c) Disputed Service Tax for the period 2012 to 2015 is Rs. 29.07 lakhs (Previous Year Rs. 29.07 lakhs) pending before CESTAT, against which the Company has made payment of Rs. 5.09 lakhs(Prevous Year Rs. 5.09 lakhs).
(d) Disputed Service Tax for the period 2013 to 2017 is Rs. 22.92 lakhs (Previous Year Rs. 29.48 lakhs) pending before CESTAT, against which the Company has made payment of Rs. 4.01 lakhs(Prevous Year Rs. 5.16 lakhs).
m) Discontinuing Operations:
a) Description of Discontinuing Operations:
i) The Company had chemical manufacturing operations at Plot No.B-1,B-3,B-4 & A-7, Maroli udhyognagar, Maroli, Navsari, Gujarat for manufacture of chemical product.
The Company had passed a circular resolution dated 22nd May, 2020 for discontinuing of its chemical unit operations at Maroli.
ii) The Company started disposing of its Assets in the year 2020-21.
b) Business or Geographical segment:
The Discontinuing Unit is engaged in the business of chemicals and has business estiblesment only in India.
c) Date or period in which the discontinuance is expected to be completed if known or determinable:
The management of the Company has already initiated steps towards disposal. However the date or period in which the discontinuation is expected to be completed is not determinable as the process for disposal is still in progress as at March 31, 2023.
n) The amount due and paid during the year to “Investor Education and Protection Fund” is Rs. 17.43 lakhs (Previous Year - Rs. 5.43 lakhs).
o) Corporate Social Responsibility
As per Section 135 of the Companies Act, 2013, a Company, meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities. The areas for CSR activities are eradication of hunger and malnutrition, promoting education, art and culture, healthcare, destitute care and rehabilitation, environment sustainability, disaster relief, COVID-19 relief and rural development projects. A CSR committee has been formed by the Company as per the Act. The funds were primarily utilized through the year on these activities which are specified in Schedule VII of the Companies Act, 2013:
p) Subsequent events post balance sheet
i) The Board has recommended dividend @ 55% (Rs. 1.10) per equity share and declared dividend @ 9.5% W(Rs. 0.38) per preference share at its meeting held on 29th May, 2023.
q) Previous period’s figures have been regrouped and/or rearranged, wherever considered necessary.
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