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KEC International Ltd.

Notes to Accounts

NSE: KECEQ BSE: 532714ISIN: INE389H01022INDUSTRY: Power - Transmission/Equipment

BSE   Rs 693.95   Open: 681.15   Today's Range 673.45
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769.00
You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (Rs.) 17848.36 Cr. P/BV 4.73 Book Value (Rs.) 146.70
52 Week High/Low (Rs.) 770/444 FV/ML 2/1 P/E(X) 101.39
Bookclosure 25/07/2023 EPS (Rs.) 6.85 Div Yield (%) 0.43
Year End :2023-03 

Note 8.1 Brands include brand of the power transmission business amounting ' 240 crore which was acquired by the Company under the High Court approved Composite Scheme of Arrangement (the ‘Scheme’) in an earlier year. In terms of the Scheme, the brand is being amortised by the Company over its useful life, which based on an expert opinion is estimated to be of 20 years. The remaining amortisation period is 2 years (as at March 31,2022 - 3 years).

Note 8.2 Non Compete fees paid on acquisition of KEC Spur Infrastructure Private Limited. (formerly known as Spur Infrastructure Private Limited) are amortized on straight line basis over the term of Non Compete agreement i.e. 3 years. The remaining amortisation period is 1 year (as at March 31, 2022 - 2 years).

Note 9.1 During the year, the Company has acquired 17,661,765 shares of USD 1 each (previous year 11,176,768 shares of USD 1 each) of KEC Investment Holding, Mauritius.

Note 9.2 This represents investment in preference shares of KEC Investment Holdings, Mauritius. These shares are compulsorily convertible into equity shares with a conversion ratio of one is to four. The issuer has the option of early conversion as well with above fixed ratio. There is no mandatory dividend payout year on year. Considering the said terms, the investment has been classified as equity.

Note 9.3 As per Article of Association of the ‘RP Goenka Group of Companies Employees Welfare Association (Entity)’, no portion of income or property shall be paid or transferred directly or indirectly, by way of dividend, bonus or otherwise by way of profit to members of the Entity. Any surplus upon winding up or dissolution of the Entity shall not be distributed amongst the members of the Entity but shall be given or transferred to such other companies having objects similar to the objects of this Entity, to be determined by the members of the Entity at or before the time of dissolution or in default thereof, by the High Court of Judicature that has or may acquire jurisdiction in the matter.

As, there are significant restrictions on the ability of the Entity to transfer funds to the Company in the form of cash dividends, the fair value of the Company’s investment in the Entity is concluded to be equal to cost.

Note 9.4 a) As at March 31,2023 The Company has made impairment provision of ' 172.79 crore (previous year : ' 97.34 crore) for its investments in KEC Investment Holdings, Mauritius, due to significant losses incurred by the Company’s step down subsidiary in Brazil i.e. SAE Towers Brasil Torres de Transmissao Ltda (a wholly owned subsidiary of SAE Towers Holdings LLC, USA). Provision for impairment of investment is recognised to the extent the recoverable value of investments is lower than the carrying value of investments. The recoverable value of investments was calculated using value in use method. The value in use is determined based on discounted cash flow projections prepared after considering significant judgments while finalizing assumptions on growth in revenues, EBITDA and discount rates. Provision for impairment of investments in subsidiary company has been presented as an Exceptional Item. (Refer note 47).

b) The Company has also made below impairment provisions for its investments in various subsidiaries. Impairment is provided due to losses incurred by these subsidiaries from its operations. Provision for impairment of investment is calculated by comparing the recoverable value of these investments (as per value in use) and the carrying value of investments. Provision for impairment of investments in subsidiary companies has been presented as an Exceptional Item. (Refer note 47). Details of impairment provision as at March 31,2023 is as follows :

i) Impairment of Investment in RPG Transmission Nigeria Limited : ' 0.17 crore (Previous year ' 0.17 crore)

ii) I mpairment of Investment in KEC Global FZ-LLC-Ras UL Khaimah, United Arab Emirates : ' Nil (Previous year ' 1.19 crore)

iii) Impairment of Investment in KEC Power India Private Limited : ' 0.50 crore (Previous year ' 0.50 crore)

iv) Impairment of Investment in KEC Global Mauritius ' 0.12 crore (Previous year ' Nil). The Company is under liquidation.

Note 9.5 The Company, on October 13, 2021, acquired 100% equity shares of KEC Spur Infrastructure Private Limited (formerly known as Spur Infrastructure Private Limited) (‘Spur’) for purchase consideration of ' 56.93 crore. Consequently, Spur became a wholly owned subsidiary of the Company from the aforesaid date.

Note 9.6 The liquidation process of KEC Global FZ, LLC has been completed and the said entity has been de-registered effective March 8, 2023. Accordingly, investment in equity instruments of the said subsidiary amounting to ' 1.19 Cr has been written off on the aforesaid date.

Note 9.7 KEC Global Mauritius undertook buyback of 348,000 shares for total consideration of ' 2.78 crore [(Refer note 9.4b(iv)]. The Company is in the process of liquidation.

Note 15.1 Transfer of financial assets

The Company has discounted trade receivables with an aggregate carrying amount of ' 177.54 crore (during the previous year ended March 31, 2022 ' 153. 19 crore) with banks for cash proceeds of '175.47 crore during the current year (during the previous year ended March 31, 2022 is ' 151.95 crore). These arrangements are “non-recourse” to the Company and accordingly, the Company has derecognised these receivables as at March 31, 2023. Amount of interest charged to profit and loss with respect to the underlying debtors (purchased by bank) is ' 2.07 crore. (during the previous year '1.24 crore).

Further the Company has discounted certain trade receivables with the banks “with recourse” to the Company. The carrying amount of such receivables as at March 31, 2023'68.05 crore (As at March 31, 2022'42.88 crore) are recognised as trade receivables and corresponding carrying amount of associated liabilities of ' 68.05 crore (As at March 31,2022'42.88 crore) are recognised as secured borrowings and there are restrictions on further selling and pledging of these receivables.

Note 15.2 Receivable from related party is ' 143.78 crore (As at March 31,2022'23.67 crore).

The contract assets represents amount due from customer, primarily relate to the Company’s rights to consideration for work executed but not billed at the reporting date. The contract assets are transferred to receivables when the rights become unconditional, that is when invoice is raised on achievement of contractual milestones. This usually occurs when the Company issues an invoice to the customer.

The contract liabilities represents amount due to customer, primarily relate to invoice raised on customer on achievement of milestones for which revenue to be recognised over the period of time. (Refer note 34)

(a) The Company has signed Memorandum of understanding (MOU) against which the Company had received sales consideration amounting to ' 9.41 crore (as at March 31,2022'9.41 crore) [Refer note 35 (a)]. However, the title and possession of the land is yet to be transferred due to pending approvals from regulatory authorities.

(b) Land situated at plot no. A03 of Raebareli plant was held for sale as on March 31, 2022. During the current year, this land has been sold for sales consideration of ' 4.15 crore and resulting profit on sale of land of ' 2.32 crore recognised in other income. (Refer note 39)

Note 23.3 The Company has only one class of Equity Shares having a face value of ' 2 each. Every member shall be entitled to be present, and to speak and vote and upon a poll the voting right of every member present in person or by proxy shall be in proportion to his share of the paid- up equity share capital of the Company. The Company in its General Meeting may declare dividends to be paid to members, but no dividends shall exceed the amount recommended by the Board, but the Company in its General Meeting may declare a lower dividend.

In the event of liquidation of the Company, the holders of Equity Shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts.

(a) Term loans*From banks: Secured

(i) ' 32.87 crore (As at March 31, 2022 '45.62 crore) External Commercial Borrowing loan secured by first and excluve

charge over construction Equipments both present and future at all projects site relating to its Transsmission, Railway and Civil business in India. Repayment terms are three equal yearly installments starting from August, 2023. Interest rate is 3M LIBOR 160 bps.

Unsecured:

' Nil (As at March 31, 2022 '150 crore) unsecured Term loan from Axis Bank. Repayment terms are in two equal half yearly installments September 05, 2023 and March 14, 2024. The Fixed interest rate is 6.80% p.a.

(b) From Other Parties Secured:

' 200 crore (As at March 31,2022 ' Nil) Loan from a financial instution which is secured by security stated against Note 30.1.(i) Repayment will be on April 29, 2024 and September 24, 2024. The interest rates are in the ranges from 8.46% to 8.87% p.a.

As at March 31, 2023 and March 31,2022, the Company was in compliance with all of its debt covenants for borrowings

Note 30.1 Loans repayable on demand from banks :Secured:

(i) ' 1,023.68 crore (As at March 31,2022 '570.89 crore) obtained from consortium of banks which are secured by first pari passu

charge on the entire current assets of the Company, both present and future (except specific export receivables financed by financial institutions and banks), second pari passu charge on fixed assets of the Company’s manufacturing facilities situated at Jaipur, Jabalpur and Nagpur factories and further secured by first pari passu charge on flat situated at Juhu, Mumbai in favour of working capital consortium bankers. The interest rates are in the ranges from 5% to 8.70% p.a. (previous year ranges from 5 % to 9.15% p.a).

(ii) ' 13.80 crore (As at March 31, 2022 ' Nil), pertains to a jointly controlled operation at Saudi Arabia secured by irrevocable

Corporate Guarantee from the Company. The interest rates were in the ranges of 6.87% p.a to 7.25% p.a.

(iii) ' Nil (As at March 31, 2022 ' 100 crore), secured by GST receivable. The interest rates were in the ranges from 5.10%

p.a. to 5.15% p.a.

Note 30.2 Other short-term borrowings

(a) From Banks-secured

(i) ' 415.21 crore (As at March 31,2022'502.48 crore) PCFC and FCNRB loans secured by security stated in Note 30.1(a) (i) above. The interest rates are in the ranges from 3.81% to 6.22% p.a. (previous year ranges from 0.50% to 1.70% p.a.).

(ii) ' 9.17 crore (As at March 31,2022'42.88 crore) debtors bill discounting secured by assignment of certain book debt at Abu Dhabi projects. The interest rates are in the ranges from 3.30% to 7.53% p.a. (previous year interest rate ranges between 2.90% to 3.30 % p.a.).

(iii) ' 38.49 crore (As at March 31,2022 ' Nil) pertains to a jointly controlled operation at Saudi Arabia secured by irrevocable Corporate Guarantee from the Company. The interest rates were in the ranges of 6.87% p.a to 7.25% p.a.

(iv) '15.68 crore (As at March 31,2022 ' 1.90 crore) secured by assignment of certain book debts and irrevocable Corporate Guarantee from the Company. The interest rates are in the ranges from 4.20% to 7.90% p.a. (previous year rate ranges from 4.20% to 7.90% p.a.).

(v) ' 43.55 crore - (As at March 31,2022 ' Nil) debtors bill discounting secured by assignment of certain book debt for Cable projects. The interest rates are in ranges from 8.00% to 8.55% p.a.

Unsecured:

(i) '16.95 crore (As at March 31,2022 65.93) unsecured purchase and service bill discounting from various banks registered under Receivable Exchange of India Limited (RXIL) portal for Micro & Small Enterprises vendors. The interest rates ranges from 4.29% to 8.00 % p.a. (previous year interest rate ranges from 4.39% to 6.50 % p.a.)

(ii) ' 450 crore (As at March 31, 2022 ' Nil). The interest rates ranges from 7.00% to 8.05% p.a.

(b) From Other PartiesSecured:

(i) ' Nil (As at March 31,2022'190.80 crore) loan from a financial institution secured by security stated against Note 30.1 (i)

above. The interest rates were in the ranges from 3.05% to 5% p.a.

Unsecured:

(i) ' 296.18 crore (As at March 31, 2022'768.28 crore) being listed commercial papers which carries interest rate ranges between 7.90% p.a. to 8.20% p.a. (previous year 4.53% p.a. to 5.18% p.a.). Maturity for current year commercial paper ranges from 85 days to 90 days (Previous year maturity ranges from 90 days to 180 days).

(ii) ' 0.47 crore (As at March 31, 2022 ' Nil) being unsecured loan taken from a wholly owned subsidiary. Interest rate is 8.20% p.a.

Note 30.3 Current Maturities of Long Term BorrowingsSecured:

' 16.44 crore (As at March 31,2022 - Nil) External Commercial Borrowing loan secured by first charge over construction Equipments

present at all projects site relating to its Transmission, Railway and Civil business in India. Repayment terms are in three equal yearly

instalments starting from August, 2023. Interest rate is 3M LIBOR 160 bps.

Unsecured:

' 150 crore (As at March 31,2022 - Nil) Loan repayment is in Two equal installment due on September 05, 2023 and March 14, 2024.

The Fixed interest rate is 6.80% p.a.

b) (i) KEC International Limited (the Company) holds 51.10% share capital in ‘Al-Sharif Group and KEC Limited’, located in Saudi Arabia (Al Sharif JV), having a joint arrangement with the JV partner Power Line Contracting Company which hold 48.90% in Al Sharif JV. Al Sharif JV is a “Subsidiary” of the Company under the Companies Act, 2013. However, based on the control assessment under Ind AS, considering the nature of arrangement, Al Sharif JV has been classified as jointly controlled operation. In addition to this, Al Sharif JV is a limited liability company whose legal form confers separation between the parties to the joint arrangement and the Company itself, the internal agreements (contractual arrangements) entered into between the parties to the joint arrangements for the execution of projects (turnkey contracts) reverses or modifies the rights and obligations conferred by the legal form, and establishes and define their respective rights and obligations on these projects. As per these contractual arrangements, the parties to the joint arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.

ii) The Company accounts for assets, liabilities, revenue and expenses relating to its interest in jointly controlled operations based on the internal agreements/ arrangements entered into between the parties to the joint arrangements for execution of projects, which in some cases are different than the ownership interest disclosed above. Accordingly, the Company has recognised its share in total income from operations '2,280.49 crore (for the year ended March 31, 2022 '1,346.18 crore), total expenditure (including tax) ' 2,209.20 crore (for the year ended March 31, 2022 ' 1,332.01 crore), total assets as at March 31, 2023'2,083.08 crore (as at March 31, 2022 ' 1,251.99 crore) and total liabilities as at March 31,2023 '1,805.99 crore (as at March 31,2022 ' 1,063.23 crore) in Jointly Controlled Operations.

iii) Apart from the Joint Venture (JV) agreements disclosed above in note no. 50 (a), the Company has entered into certain Joint Venture (JV) agreements with other entities for execution of various projects. Though the legal form of all these joint arrangements is a “joint venture”, these JVs are not jointly controlled by both the parties as per the requirements of “IND-AS 111 - Joint Arrangements”. The work is carried out by each JV partner based on the scope defined for respective parties. Accordingly, the Company has recognised revenue, expenses, assets and liabilities related to its own share of work in financial statements and respective financial statements of these JVs are not considered for the purpose of consolidation.

iv) Figures in respect of the Company’s Jointly Controlled Operations as mentioned above, have been incorporated on the basis of financial statements audited by the auditors of the respective Jointly Controlled Operations.

NOTE 51 - REVENUE FROM CONTRACTS WITH CUSTOMERS51.1 Disaggregation of revenue from contracts with customers

The Company has determined the categories for disaggregation of revenue considering the types / nature of contracts. The Company derives revenue from the transfer of goods and services ‘over time’ or ‘in time’ based on an assessment of the transfer of control as per the terms of the contract in the following major product lines and geographical regions:

The Company recognised revenue amounting to ' 483.38 crore (for the year ended March 31,2022, ' 345.13 crore) in the current reporting period that was included in the Amount due to customers for contract works balance i.e. contract liabilities as of March 31,2022.

51.2 Unsatisfied performance obligations

The aggregate amount of transaction price allocated to performance obligations that are unsatisfied as at the end of reporting period March 31, 2023 is ' 27,447 crore (for the year ended March 31, 2022, ' 21,137 crore). On an average, transmission, distribution, railway and civil composite contracts have a life cycle of 2-3 years and other businesses performance obligations are met over a period of one or less than one year. Management expects that around 50% to 60% of the transaction price allocated to unsatisfied contracts as of March 31,2023 will be recognised as revenue during next reporting period depending upon the progress on each contract. The remaining amount is expected to be recognised in subsequent years, largely in year 2. The amount disclosed above does not include variable consideration.

51.3 There are no reconciliation items of revenue recognised from contracts with customers and contract price.

51.4 I n case of transmission and distribution projects, where the goods are procured from a third party, the Company makes an assessment on the impact of revenue recognition with respect to uninstalled materials. Considering the Company is significantly involved in designing and manufacturing the procured material and there is no significant time gap involved between transfer of control and installation, there is no impact on revenue recognized. There is significant judgement involved in making this assessment.

(a) Total cash outflow for leases during current financial year is ' 14.79 crore (previous year '14.77 crore).

(b) Additions to the right of use assets during the current financial year is ' 0.21 crore (previous year '44.92 crore).

(c) There are no sale and leaseback transactions.

(d) Payments associated with short-term leases of equipment, vehicles and all leases of low-value assets are recognised on straight line basis as an expense in profit or loss.

(e) Short term leases are leases with a lease of 12 months or less. There are no low value assets during the current year.

(f) When measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease payments using its incremental borrowing rate. The weighted average incremental borrowing rate applied is 7.23% p.a. (Previous year: 7.25% p.a.).

Note 52.1

The Company has applied the practical expedient for all qualifying rent concessions and the concessions have been accounted as variable lease payments in the period in which they are granted.

NOTE 53 - CAPITAL MANAGEMENT

The Company manages its capital to ensure that the Company will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity. The capital structure of the Company consists of net debt (borrowings as detailed in Notes 25 and 30 offset by cash and cash equivalents in Notes 16 and 17) and total equity of the Company. The Company is not subject to any externally imposed capital requirements.The Company monitors capital using a gearing ratio, which is net debt divided by total equity.

The Company sets the amount of capital in proportion to its overall financing structure, i.e. equity and financial liabilities. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.

The carrying amounts of current trade receivables, current financial assets, cash and bank balances, loans, trade payables, current borrowings, current financial liabilities and current lease liabilities are considered to be approximately equal to their fair value.

III. Assets and liabilities which are measured at FVPL or FVOCI

This note provides information about how the Company determines fair values of various financial assets and financial liabilities measured at FVPL or FVOCI. Fair value of the Company’s financial assets and financial liabilities are measured on a recurring basis at the end of each reporting period.

B Financial risk management

Sensitivity for above net exposures:

The sensitivity of profit or loss to changes in the exchange rates arises mainly from foreign currency denominated financial instruments and the impact on other components of equity arises from financial instruments in the books of jointly controlled operations and branches whose functional currency is other than INR.

The Company’s Corporate Treasury function provides services to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company. These risks include market risk (including currency risk, interest rate risk and commodity price risk), credit risk and liquidity risk.

54B.1 Market risk

The Company seeks to minimise the effects of currency risk and commodity price risk by using derivative and non derivative financial instruments to hedge risk exposures. The Company has Risk Management Policies to mitigate the risks in commodity prices and foreign exchange. The use of financial derivatives and non-derivatives is governed by the Company’s policies approved by the Board of Directors (BOD), which provide written principles to use financial derivatives and non-derivative financial instruments, to hedge currency risk and commodity price risk. The Company does not enter into or trade financial instruments, including derivative financial instruments and non-derivative financial instruments, for speculative purposes.

The Treasury Department prepares and submits the report on performance along with the other details relating to forex and commodity transaction to the Risk Management Committee. The periodical forex management report and commodity risk report as reviewed and approved by the Risk Management Committee is placed before the Audit Committee for review.

The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates (see Notes 54B.1 (a) and 54B.1 (b) below) and commodity prices (see Note 54B.1 (c) below). The Company enters into a variety of derivative financial instruments to manage its exposure to foreign currency risk, interest rate risk and commodity price risk including:

- foreign currency forward contracts to hedge the exchange rate risk arising from execution of international projects.

(b) Interest rate risk management

The Company is exposed to interest rate risk because the Company borrows funds at both fixed and floating interest rates. The Company’s exposure to changes in interest rates relates primarily to the Company’s outstanding floating rate debt. While most of the Company’s outstanding debt in local currency is on fixed rate basis and hence not subject to interest rate risk, a major portion of foreign currency debt is linked to international interest rate benchmarks like SOFR. Company’s rupee borrowings are linked to variability in Bank MCLR rate, repo rate and T bill rates.

- Commodity Over the Counter (OTC) derivative contracts to hedge the price risk for base metals such as Copper, Aluminium, Zinc and Lead.

Derivatives are only used for economic hedging purposes and not as speculative investments. All such transactions are carried out within the approved guidelines set by the Board of Directors.

(a) Foreign currency risk management

The Company operates internationally and is exposed to foreign exchange risk arising from foreign currency transactions in various currencies. Foreign currency risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Company’s functional currency (INR). The risk is measured through a forecast of highly probable foreign currency cash flows. The objective of the hedges is to minimize the volatility of the INR cash flows.

Interest rate sensitivity

The sensitivity analysis below have been determined based on the exposure to interest rates for non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point increase or decrease is used for the purpose of sensitivity analysis.

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Company’s :

Profit for the year ended March 31,2023 would decrease/increase by ' 3.94 crore (for the year ended March 31,2022: decrease/ increase by ' 3.64 crore). This is mainly attributable to the Company’s exposure to interest rates on its variable rate borrowings.

(c) Commodity price risk

The Company is exposed to movement in metal commodity prices of Copper, Aluminium, Zinc and Lead. Most of our contracts with the Indian customers are backed by a price variation for most of these metals. However, profitability in case of firm price orders is impacted by movement in the prices of these metals. The Company has a well defined hedging policy approved by Board of Directors of the Company, which to a large extent takes care of the commodity price fluctuations and minimizes the risk. For base metals like Aluminium, Copper, Zinc and Lead, the Company either places a firm order on the supplier or hedges its exposure on the London Metal Exchange (LME) directly. Refer note 54C, for further details on commodity derivative contracts

54B.2 Liquidity risk management

The Board of Directors of the Company have established an appropriate liquidity risk management framework for the management of the Company’s short-term, medium-term and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of the financial assets and liabilities.

The following table details the Company’s remaining contractual maturity for its financial liabilities with agreed repayment periods. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The table includes both interest and principal cash flows. To the extent that interest flows are linked to floating rate, the undiscounted amount is derived from interest rate at the end of the reporting period. The contractual maturity is based on the earliest date on which the Company may be required to pay.

The Company directly reduces the gross carrying amount of a financial asset when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The amounts of financial assets are net of an allowance for expected credit losses, estimated by the Company and based, in part, on the age of specific receivable balance and the current and expected collection trends. When assessing the credit risk associated with its receivables, the Company also considers the other financial and non-financial assets and liabilities recognized within the same project to provide additional indications on the Company’s exposure to credit risk. As such, in addition to the age of its Financial Assets, the Company also considers the age of its contracts in progress, as well as the existence of any deferred revenue or down payments on contracts on the same project or with the same client.

The Company has used practical expedient by computing expected credit loss allowance for trade receivable and contract assets by taking into consideration payment profiles of sales over a period of 36 months before the reporting date and the corresponding historical credit loss experiences within this period for each Strategic Business Unit (SBU). The historical loss rates are adjusted to reflect current and forward looking information taking into account the macro economic factors affecting the ability of the customers to settle the receivables. The expected credit loss is based on the ageing of the days, the receivables due and the expected credit loss rate. In addition, in case of event driven situation as litigations, disputes, change in customer’s credit risk history, specific provisions are made after evaluating the relevant facts and expected recovery.

The Company has access to various fund/non-fund based bank financing facilities. The amount of unused borrowing facilities (fund and non-fund based) available for future operating activities and to settle commitments is ' 8,987.52 crore as at March 31, 2023 (' 8,274.64 crore as at March 31,2022).

54B.3 Credit Risk Management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks, foreign exchange transactions and other financial instruments. The Company’s major customers includes government bodies and public sector undertakings. Further, many of the International projects are funded by the multilateral agencies such as World Bank, African Development Bank, Asian Development Bank, etc. For private customers, the Company evaluates the creditworthiness based on publicly available financial information and the Company’s historical experiences. The Company’s exposure to its counterparties are continuously reviewed and monitored by the Chief Operating Decision Maker (CODM).

Credit period varies as per the contractual terms with the customers. Company doesn’t have significant financing component in the contracts with customers.

Concentration risk: As at the year ending March 31, 2023 only one customer is exceeding 10% of the Company’s total trade receivables, which were one as at March 31,2022.

In addition the Company is exposed to credit risk in relation to financial guarantees given by the Company on behalf of its subsidiaries and jointly controlled operations (net of Company’s share). The Company’s maximum exposure in this respect is the maximum amount the Company could have to pay if the guarantee is called on (net of Company’s share in jointly controlled operations), as at March 31,2023 is 2,227.21 crores (as at March 31,2022; ' 925.64 crore). These financial guarantees have been issued to the banks / customers on behalf of the subsidiaries and jointly controlled operations under the agreements entered into by the subsidiaries/ jointly controllled operations with the banks / customers. Based on management’s assessment as at the end of the reporting period, the Company considers the likelihood of any claim under the guarantee is remote.

Cash and cash equivalents:

The cash and cash equivalents are held with bank and financial institution counterparties with good credit rating.

Other Bank Balances:

Other bank balances are held with bank and financial institution counterparties with good credit rating.

Derivatives:

The derivatives are entered into with bank and financial institution counterparties with good credit rating.

Other financial assets:

Other financial assets are neither past due nor impaired.

Brief description of the plans1 Defined contribution plans

(A) Superannuation

All eligible employees are entitled to benefits under Superannuation, a defined contribution plan. The Company makes yearly contributions until retirement or resignation of the employee. The Company recognises such contributions as an expense when incurred. The Company has no further obligations beyond its yearly contribution.

(B) Provident Fund

The Company makes contribution to respective regional provident fund commissioners in relation to the workers employed at factories located at Butibori, Jaipur, Jabalpur, Mysore and Vadodara. The Company recognises such contributions as an expense when incurred. The Company has no further obligations beyond its yearly contribution.

(C) Employees’ State Insurance Corporation

The Company makes contribution towards Employees State Insurance scheme operated by ESIC Corporation. The contributions payable to these plans by the Company are at rates specified in the rules of the scheme. The Company recognises such contributions as an expense when incurred. The Company has no further obligations beyond its yearly contribution.

2 Defined Benefit Plans

(A) Gratuity

(i) Company and its Jointly Controlled Operations in India

The Company & its jointly controlled operations (JCO) in India has an obligation towards gratuity, a funded defined benefit retirement plan covering eligible employees. The plan provides for lump sum payment to vested employees at retirement, death while in employment or on termination of the employment of an amount equivalent to 15 days / one month salary, as applicable, payable for each completed year of service or part thereof in excess of six months in terms of the Gratuity scheme of the Company/JCOs in India or as per payment of the Gratuity Act, 1972 whichever is higher. Vesting occurs upon completion of four years & 240 days of service.

The Company has set up an income tax approved trust fund to finance the plan liability. The trustees of the trust fund are responsible for the overall governance of the plan. The Company makes contribution to the plan. There are no minimum funding requirement for the plan in India. The trustees of the gratuity fund have a fiduciary responsibility to act according to the provisions of the trust deed and rules.

(ii) Jointly Controlled operation in Saudi (Al Sharif JV)

The Jointly Controlled Operation has an obligation towards an unfunded defined benefit retirement plan i.e. End Service Benefit plan, (akin to gratuity) covering eligible employees. The benefits payable are as under:

For Service Less Than 5 years 1/2 * Service * Applicable salary

For Service more Than 5 years First Five Years: 1/2 * Service * Applicable Salary

Beyond 5 Years: Service * Applicable Salary

The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method as at March 31,2023.

(B) Provident Fund

The Company has established ‘KEC International Limited Provident Fund’ in respect of employees, other than factory workers, to which both the employee and the employer make contribution equal to 12% of the employee’s basic salary respectively. The Company’s contribution to the provident fund for all employees, are charged to the Statement of Profit and Loss. In case of any liability arising due to shortfall between the return from its investments and the administered interest rate, the same is required to be provided for by the Company.

NOTE 61 - Figures in respect of the Company’s overseas branches in Abu Dhabi, Afghanistan, Algeria, Bangladesh, Bhutan, Burkina Faso, Burundi, Cameroon, Egypt, Ethiopia, Georgia, Ghana, Guinea, Ivory Coast, Jordan, Kenya, Kuwait, Lebanon, Libya, Malaysia, Mali, Moldova, Morocco, Mozambique, Nepal, Nicaragua, Nigeria, Oman, Papua New Guinea, Philippines, Senegal, Sierra Leone, South Africa, Sri Lanka, Tanzania, Thailand, Togo, Tunisia, Uganda, and Zambia have been incorporated on the basis of financial statements (the Branch Returns) audited by the auditors of the respective branches.

NOTE 59 - The Company is primarily engaged in Engineering, Procurement and Construction business (EPC) relating to infrastructure interalia products, projects and systems and related activities for power transmission, distribution, railway, civil, cable and other EPC businesses. Information reported to and evaluated regularly by the Chief Operational Decision Maker (CODM) i.e. Managing Director for the purpose of resource allocation and assessing performance focuses on the Company as a whole. The CODM reviews the Company’s performance on the analysis of profit before tax at an overall entity level. Accordingly, there is no other separate reportable segment as defined by Ind AS 108. “Segment Reporting”. As the Company also prepares the consolidated financial statements (CFS), other relevant segment information is disclosed in the CFS.

NOTE 62 - During previous year ended March 31, 2022, the Company had recorded a charge of ' 43.64 crore net of provision towards write-off of its receivables, consequent to the order of the Supreme Court of South Africa, dated October 6, 2021, in a case with a customer in South Africa.

NOTE 63 - The Company has issued unsecured Commercial Papers from time to time. These Commercial Papers are having a Credit Rating of CRISIL A1 and IND A1 and are Listed on BSE Limited. During the year ended March 31,2023, the Company has repaid interest and principal of all Commercial Papers on their respective due dates. Refer note 30.2.

NOTE 64 -

(a) The Company is executing a few projects in Afghanistan, which are currently on hold due to force majeure event. The Company is closely monitoring the situation and expects to resume work once the geopolitical environment in Afghanistan is resolved. The Company does not expect any material financial impact due to this event as the projects are funded by international funding agencies (Asian Development Bank, USAID and World Bank). As at March 31,2023, the Company has a net exposure of ' 252 crore (translated at period end exchange rate) including Afghanistan branch exposure of ' 79.20 crore, after netting off advances, liabilities (including contract liabilities) and proposed settlement with a funding agency. The Company is in regular discussions with its customer and the funding agencies to release payments against the outstanding receivables, which has been responded positively by them. Further, the bank guarantees issued for the projects in view of the ongoing force majeure are not being renewed beyond their existing validity date(s) except bank guarantees in respect of one project which has been renewed pursuant to the direction of the Hon’ble Bombay High Court. In respect of all projects under execution, the Hon’ble Bombay High Court has injuncted the banks and the customer from invoking, making or receiving payment under the bank guarantees.

(b) The following note has been included in the financial statement of Afghanistan branch, which is reproduced as under:

“The KEC International Ltd- Afghanistan Branch (the “Company”) is executing few projects in Afghanistan. These projects are currently on hold due to force majeure event. The Company is closely monitoring the situation and expects to resume work once the geopolitical environment in Afghanistan is resolved. These Projects are funded by international funding agencies such as Asian Development Bank, USAID, and World Bank. Therefore, the Company does not expect any material financial impact.

The Company has a net exposure of USD 90,87,881 (equivalent to INR.79.20 crores) after netting off advances, liabilities (including contract liabilities) and insurance cover as at Mar 31,2023. The Company is in regular discussion with the funding agencies and the customers for releasing payment against the outstanding receivables, which has been responded positively by them. Further, the bank guarantees issued for the aforesaid ongoing projects are currently not enforceable due to force majeure event.”

NOTE 66 - The Auditors of Branches located in Sri Lanka, South Africa and a jointly controlled operation at South Africa have given an Emphasis of matter paragraph, in relation to going concern assumption used for preparation of financial statements. Basis Company’s assessment, the Company can adequately source the funding required at the mentioned branches and the Jointly Controlled Operation.

NOTE 67 - During the previous year ended March 31, 2022, the Company had received ' 0.50 crore towards government grant from Government of Rajasthan for setting up an Oxygen plant under Special package for Medical oxygen. The Company has amortised the grant based on useful life of the plant and recognised income for current year of ' 0.02 crore under other income (Refer note 39). The balance amount of grant is shown as “Deferred Grant” in non-current liability ' 0.45 crores (Refer note 29) and other current liability of ' 0.02 crore (Refer note 35). The Company doesn’t have any unfulfilled conditions and other contingencies attached to the same.

NOTE 68 - DETAILS OF BENAMI PROPERTY HELD:

No proceedings have been initiated on or are pending against the Company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.

NOTE 69 - WILFUL DEFAULTER:

The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.

forming part of the Financial Statements as at and for the year ended March 31, 2023 NOTE 71 - DETAILS OF CRYPTO CURRENCY OR VIRTUAL CURRENCY:

The Company has not traded or invested in crypto currency or virtual currency during the current or previous year.

NOTE 72 - COMPLIANCE WITH NUMBER OF LAYERS OF COMPANIES:

The Company has complied with the number of layers prescribed under the Companies Act, 2013.

NOTE 73 - UNDISCLOSED INCOME:

There is no income surrendered or disclosed as income during the current or previous year in the tax assessments under the Income Tax Act, 1961, that has not been recorded in the books of account.

NOTE 74 - VALUATION OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSET:

The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the current or previous year.

NOTE 75 - REGISTRATION OF CHARGES OR SATISFACTION WITH REGISTRAR OF COMPANIES:

There are certain charges which are historic in nature, and it involves practical challenges in obtaining no-objection certificates (NOCs) and/or getting requisite formalities completed towards charge satisfaction from the charge holders of such charges, despite repayment of the underlying loans. The Company is in the continuous process of getting the charge satisfaction e-form filed and processed with MCA, within the timelines, as and when it receives NOCs/confirmation from the respective charge holders.

NOTE 76 - UTILISATION OF BORROWINGS AVAILED FROM BANKS AND FINANCIAL INSTITUTIONS:

The borrowings obtained by the Company from banks and financial institutions have been applied for the purposes for which such loans were taken.

NOTE 77 - The Company has approved its financial statements in its board meeting dated May 03, 2023.

Signatures to Notes 1 to 77 which form an integral part of financial statements.

 
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