Aeroflex Industries Ltd Management Discussions

<dhhead>MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS</dhhead>

 

You should read the following discussion and analysis of our financial condition and results of operations, and our assessment of the factors that may affect our prospects and performance in future periods, together with our Restated Consolidated Financial Statements for the Fiscals 2023, 2022 and 2021, including the notes thereto and reports thereon, each included in this RHP.

 

This Red Herring Prospectus may include forward-looking statements that involve risks and uncertainties, and our actual financial performance may materially vary from the conditions contemplated in such forward looking statements as a result of various factors, including those described below and elsewhere in this Red Herring Prospectus Herring Prospectus. For further information, see "Forward-Looking Statements" on page 27. Also read "Risk Factors" on page 37, for a discussion of certain factors that may affect our business, financial condition or results of operations.

 

Unless otherwise indicated or the context otherwise requires, the financial information for Fiscals 2023, 2022 and 2021included herein is derived from the Restated Consolidated Financial Statements, included in this Red Herring Prospectus Herring Prospectus. For further information, see "Restated Consolidated Financial Statements" on page 221.

 

Our Company’s Fiscal commences on April 01 and ends on March 31 of the immediate subsequent year, and references to a particular Fiscal are to the 12 months ended March 31 of that particular year. Unless the context otherwise requires, in this section, references to "we", "us", "our", "our Company" or "the Company", refers to Aeroflex Industries Limited.

 

Unless otherwise indicated, industry and market data used in this section has been derived from the Flexible Flow Solutions Market in India dated March 29, 2023 issued by D&B and commissioned and paid by us in connection with the Offer.

 

Overview

 

We are manufacturers and suppliers of environment friendly metallic flexible flow solution products including braided hoses, unbraided hoses, solar hoses, gas hoses, vacuum hoses, braiding, interlock hoses, hose assemblies, lancing hose assemblies, jacketed hose assemblies, exhaust connectors, exhaust gas recirculation (EGR) tubes, expansion bellows, compensators and related end fittings collectively known as flexible flow solutions catering to global as well as domestic markets. We export our products to more than 80 countries including Europe, USA and others. For Fiscals 2023,2022 and 2021 our exports were ?2,171.80 million, ?2,035.59 million and ?1,171.15 million which constituted 80.60%, 84.53%, and 80.90% of our revenue from operations respectively .We supply our products to a wide spectrum of industries for controlled flow of all forms of substances including air, liquid and solid. For the Fiscals March 31, 2023, 2022 and 2021, we served total 723, 606 and 538 customers out of

which we served 217, 190 and 169 customers across 51, 49 and 43 countries respectively and 506 , 416 and 369 domestically.

 

 

Significant Factors Affecting Our Results of Operations

 

 

Cost and Availability of Raw Materials and Dependence on Key Suppliers

 

Our key raw materials are stainless steel coils of various grades, stainless steel wires and fittings made of various materials. Our cost of goods sold comprises of cost of materials consumed and changes in inventories of finished goods. For the Fiscals ended March 31, 2023, 2022 and 2021, our cost of goods sold was ? 1700.64 million, ? 1,560.62 million, ? 935.57 million respectively constituting 63.11%, 64.81%, and 64.62% of our revenue from operations. Our results of operations and financial conditions are significantly dependent on the availability and cost of raw materials specifically stainless steel coils and stainless steel wires.

 

We procure majority of stainless steel coils from international markets where we have maintained strong relationships with the suppliers over the period. We fulfill our demand for stainless steel coils from Indian market

also. We procure stainless steel wires and fittings made of various materials including stainless steel, polytetrafluoroethylene, and other materials from Indian and international markets. For the Fiscals ended March 31, 2023, 2022 and 2021, our raw materials purchase from out of India as a % of total raw material purchases were 45.22%, 45.81% and 47.10% respectively.

 

We do not enter into long term sourcing contracts with our suppliers and all our purchases are based on individual purchase orders placed with our suppliers. Prices are negotiated for each purchase order with the respective supplier. While selecting our suppliers, we consider cost, grade, quality, time to fulfill, supplier’s history and experience and capacities. We are significantly dependent on few raw material suppliers and are sourcing of raw material from top 5 suppliers for the Fiscal ended March 31, 2023 and March 31, 2022 was 75.24% and 75.11% respectively. Also, our raw materials supply and pricing can be volatile due to a number of factors beyond our control, including global demand and supply, general economic and political conditions, transportation and labour costs, labour unrest, natural disasters, competition, import duties, tariffs and currency exchange rates, and there are inherent uncertainties in estimating such variables, regardless of the methodologies and assumptions that we may use. Any volatility in prices of stainless steel can significantly affect our raw material costs. However, our Company continuously tracks the changes in raw material prices and adopts stricter measures to address such fluctuations. Our raw materials inventory was equal to 46 days of consumption as on March 31, 2023 based on our restated consolidated financial statements. If we are not able to compensate for or pass on our increased costs to customers, such price increases could have a material adverse impact on our result of operations, financial condition and cash flows.

 

Our finished products are tested by our in-house testing team through various processes and thereafter by the customer, pursuant to which, we strive to minimise the probability of defects in such products; however, in the event, delivered materials are defective on account of any unforeseen circumstances such as including any accident or damage during transit or adverse weather conditions, we might face warranty and damages claims from our customers. Production errors may lead to product recalls which could also lead to compensation claims and significantly damage our reputation and the confidence of present and potential customers and could have an adverse effect on our results of operations.

 

 

Dependency on end-se Industries

 

Our revenues are dependent on the end-use industries that use our products for their various requirements and usages. The following table sets forth a breakdown of our revenue from operations from various industry segments, in absolute terms and as a percentage of total revenue from operations, for the periods indicated:

(? in million)

Industry /	Fiscal 2023 Fiscal 2022 Fiscal 2021
Sector	Revenue % Revenue % Revenue %

 

 

 

 

 

 

 

Petrochemicals

 

 

 

 

 

 

The demand for the end products manufactured by our customer is affected by a number of factors including, but

not limited to (a) our customers’ failure to successfully market their products or to compete effectively, (b) loss

of market share, which may lead our customers to reduce or discontinue the purchase of our products, (c) economic conditions of the markets in which our customers operate, and (d) global macroeconomic conditions, among others. Further, many of our end user industries are subject to various applicable regulations. Therefore, our results of operations are dependent on demand from the end-user industries. Any decrease in demand in those industries may result in increased inventories which may lead to increase in holding costs thereby impacting our results of operations and financial condition.

 

 

Foreign Exchange Fluctuation Risk

 

A significant portion of our revenue from operations is derived from export of our products. Similarly, majority of our raw material requirements are fulfilled from imports. This gives us significant exposure to foreign currencies for buying and selling while we prepare our financial statements in Indian Rupees. For the Fiscals ended March 31, 2023, 2022 and 2021, our revenue from operations from exports were ? 2171.80 million, ? 2,035.59 million and ? 1,171.15 million respectively, representing 80.60%, 84.53% and 80.90% of our revenue from operations based on our restated consolidated financial statements. Similarly, for the Fiscals ended March 31, 2023, 2022 and 2021, our raw materials purchase from out of India as a % of total raw material purchases were 45.22%, 45.81% and 47.10% respectively. We do not hedge our foreign currency exposure for buying and selling various foreign currencies. Accordingly, we are affected by fluctuations in exchange rates among the U.S. Dollar, Indian Rupees and other foreign currencies. For the Fiscals ended March 31, 2023, 2022 and 2021, we recorded foreign currency exchange gains of ? 53.13 million, ? 32.37 million and ? 19.21 million respectively, due to fluctuations in foreign exchange rates. There can be no assurance that we will continue to record exchange gains only from foreign exchange fluctuations or any hedging measures which we may take will enable us to avoid the effect of any adverse fluctuations in the value of the Indian Rupee against the U.S. Dollar or other foreign currencies.

 

 

Presentation of Financial Information

 

Our Restated Consolidated Ind AS Summary Statement of Assets and Liabilities as at March 31, 2023, March 31, 2022 and March 31, 2021, and the Restated Consolidated Ind AS Summary Statement of Profit and Loss (including other comprehensive income), Cash Flows and Changes in Equity, for the Fiscals ended March 31, 2023, March 31, 2022 and March 31, 2021, together with the summary of significant accounting policies and explanatory information thereon (collectively, the "Restated Consolidated Financial Statements"), have been derived from our Audited Consolidated Financial Statements as at and for the years ended March 31, 2023, March 31, 2022 and March 31, 2021, prepared in accordance with Ind AS, and restated in accordance with the SEBI ICDR Regulations and the Guidance Note on Reports in Company Prospectuses (Revised 2019) issued by the Institute of Chartered Accountants of India, as amended.

 

 

NOTE 2: SIGNIFICANT ACOUNTING POLICIES

 

Significant accounting policies adopted by the Group are as under:

 

1. Basis of Preparation of Financial Statements:
1. Statement of Compliance with Ind AS :

These financial statements have been prepared in accordance with Indian Accounting Standards (referred as Ind AS) as prescribed under Section 133 of the Companies Act, 2013 (the "Act") read with the Companies (Indian Accounting Standards) Rules, as amended from time to time. The financial statements have been prepared in accordance with the relevant presentation requirement of the companies Act, 2013.

2. Basis of Preparation:

The financial statements are prepared in accordance with the Indian Accounting Standards (Ind AS) under the historical cost convention on accrual basis, except for certain financial assets and liabilities that are measured at fair value at the end of each reporting period as explained in the accounting policies. Historical cost is generally based on the fair value of the considerations given in exchange for goods and services. Fair value is the price that

would be received to sale an assets or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.

The financial statements are presented in Indian Rupee (INR), which is the functional currency of the holding company. The functional currency of the foreign subsidiary is the currency of the primary economic environment in which the entity operates. The recorded foreign currency transactions of the foreign subsidiary, which are forming part of its profit & loss account has be translated at the average exchange rate for the year. Foreign currency denominated monetary assets and liabilities are retranslated at the exchange rate prevailing on the balance sheet date and exchange gain and loss arising prevailing on the settlement and restatement are recognized in the profit & loss account. Non-monetary assets and liabilities that are measured in terms of historical cost in foreign currencies and are not been retranslated. The significant accounting policies used in preparation of the financial statement are discussed in the respective notes. All amounts disclosed in financial statements and notes have been rounded off to the INR in Millions with two decimal, unless otherwise stated.

3. Current or Non-current classification

All assets and liabilities has been classified as current and noncurrent as per the group’s normal operating cycle.

An asset is classified as current when it is:

1. Expected to be realized or intended to be sold or consumed in normal operating cycle.
2. Expected to be realized within twelve months after the reporting period. Or
3. Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All the other assets are classified as non-current.

 

A liability is classified current when

1. It is expected to be settled in normal operating cycle;
2. It is due to be settled within twelve months after the reporting period; or
3. There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period

 

The company classifies all other liabilities as non-current. Deferred Tax Assets and Liabilities are classified as non-current assets and liabilities respectively.

 

1. Use of estimates and judgements:

 

The preparation of financial statements requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

 

 

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

 

This note provides a list of the significant accounting policies adopted in the preparation of these financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.

 

1. Property, plant and equipment and Other intangible assets:

Property, plant and equipment

Property, plant and equipment represent a significant proportion of the asset base of the Group. The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Group’s assets are determined by the Management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology.

Recognition and measurement:

Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the Property, plant and equipment until it is ready for use, as intended by the management. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to Statement of Profit and Loss during the period.

Capital work-in-progress for production, supply of administrative purposes is carried at cost less accumulated impairment loss, if any, until construction and installation are complete and the asset is ready for its intended use. Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as advances under other current assets and the cost of assets not ready to use before such date are disclosed under ‘Capital work- in- progress’. Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in the Statement of Profit and Loss when incurred. The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in the Statement of Profit and Loss.

Depreciation methods, estimated useful lives:

Depreciation is provided by the holding company (other than Free hold Land and capital work-in-progress) on Written Down Value (WDV) method for the estimated useful life of assets. The estimated useful lives of assets are as follows:

Factory Building 30 Years

Addition to factory Building for the year 10 Years

Server and Networks 6 Years

Plant & Machinery 25 Years

Computer 3 Years

Vehicles 6 Years

Workshop Tools & Equipment 8 Years

Testing Equipment’s 5 Years

Office Equipment 5 Years

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Electrical Installation 5 Years

Furniture & Fixtures 10 Years

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Fixed Assets purchased for specific projects will be depreciated over the periods of the project or the useful life stated as above, whichever is shorter.

Depreciation on assets acquired/ purchased, sold/discarded during the year is provided on a pro-rata basis from the date of each addition till the date of sale/retirement.

The economic useful life of assets is assessed based on a technical evaluation, taking into account the nature of assets, the estimated usage of assets, the operating conditions of the assets, past history of replacement, anticipated

technological changes, maintenance history, etc. The estimated useful life is reviewed at the end of each reporting period, with effect of any change in estimate being accounted for on a prospective basis.

Where the cost of part of the asset is significant to the total cost of the assets and the useful life of that part is different from the useful of the remaining asset, useful life of that significant part is determined separately. Depreciation of such significant part, if any, is based on the useful life of that part.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment, determined as the difference between the sales proceeds and the carrying amount of the asset, is recognized in the Statement of Profit or Loss.

Impairment:

Property, plant and equipment are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the net selling price and its value in use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs. If such assets are considered to be impaired, the impairment to be recognized in the Statement of Profit and Loss is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in the Statement of Profit and Loss if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated depreciation) had no impairment loss been recognized for the asset in prior years.

1. Other Intangible Assets :

Intangible assets which are forming part of the holding company balance sheet are stated at acquisition cost, net of accumulated amortization. The Company amortized intangible assets over their estimated useful lives using the Written Down method. The estimated useful lives of intangible assets are as follows: Computer Software 6 years

Intangible assets with finite lives are assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at each financial year ended or period ended.

2. Investments :

The Group do not have any categorized investment other than the investment by the holding company in its foreign subsidiary which has been shown at the historical cost in the books of holding company and the same has been nullified on consolidation of the Balance sheets.

3. Foreign Currency Transactions:
1. Functional and presentation currency :

Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Indian rupee (INR) in Lakhs, which is the holding Company’s functional and presentation currency.

2. Transactions and balances :

On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount at the exchange rate between the functional currency and the foreign currency at the date of the transaction.

Gains/Losses arising out of fluctuation in foreign exchange rate between the transaction date and settlement date are recognized in the Statement of Profit and Loss.

All monetary assets and liabilities in foreign currencies are restated at the year end at the exchange rate prevailing at the year end and the exchange differences are recognized in the Statement of Profit and Loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Foreign exchange fluctuation for the outstanding amount towards the imported capital goods, has been attributed to the cost of the fixed assets. Further the foreign exchange fluctuation for the outstanding amount of the foreign currency term loan has been shown separately under the exceptional item in the profit & loss account consistently.

4. Revenue Recognition :

The Group recognizes revenue from contracts with customers based on a comprehensive assessment model as set out in Ind AS 115 ‘Revenue from contracts with customers’. The Group identifies contract(s) with a customer and its performance obligations under the contract, determines the transaction price and its allocation to the performance obligations in the contract and recognizes revenue only on satisfactory completion of performance obligations. Revenue is measured at fair value of the consideration received or receivable. Revenue from the sale of goods in the course of ordinary activities is recognized at the transaction price when the goods are transferred to the customer. The transaction price is the amount of consideration to which the group expects to be entitled in exchange for transferring promised goods to a customer, excluding amounts collected on behalf of third parties (for example, goods and service tax). The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. The goods are considered as transferred when the customer obtains control of those goods or as per the specific terms with customers for the supplies made by the company.

Sale of services & Other Operating Revenue:

Revenue from services are recognized in the accounting period in which service are rendered. For fixed price contracts, revenue is recognized based on actual services provided to the end of the reporting period as a proportion of the total services to be provided. As the company has material export & import activates therefore Profit and gains from the foreign exchange fluctuation from the receipts & payments of debtors & creditors and on their restatement at the period ended is forming part of the other operating revenue of the group.

Other Income:

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the company and the amount of income can be measured reliably in the group. Interest income is accrued on a time basis, by reference to the principal outstanding and at the normal interest rate as applicable. Other Income in the group has been recorded where no significant uncertainty as to measurability or collectability exists.

5. Taxation :

The group has two major tax jurisdictions, which is in India and the US and the group Companies file tax returns in India and other overseas jurisdictions. Significant judgments are involved in determining the provision for income taxes, including amount expected to be paid / recovered for uncertain tax positions. In assessing the realizability of deferred income tax assets, the Management considers whether some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred income tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred income tax assets are deductible, the Management believes that the Group will realize the benefits of those deductible differences. The amount of the deferred income tax assets considered realizable, however Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it relates to items recognized directly in Other Comprehensive Income.

Current Tax:

The current Tax payable is based on the taxable profit for the year. Taxable profit differs from profit before tax as reported in the statement of profit or loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The current tax is calculated using the tax rates that have been enacted or substantially enacted by the end of the reporting period.

Provisions for current income taxes are presented in the balance sheet after offsetting advance tax & TDS paid. The holding company has adopted the Taxation bracket where in the MAT liability do not attract to the company and has done the provisions accordingly where as for the subsidiary company the rules of the overseas country are adopted.

Deferred Tax:

Deferred income tax is provided in full, using the balance sheet approach, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in financial statements. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the end of the period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred tax assets are recognized for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.

Current tax and deferred tax for the period:

Current and deferred tax are recognized by the group in the Statement of Profit or Loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. No deferred tax provisions has been made for the undistributed gains or losses of the subsidiary company.

6. Business Combinations:

The group account for its business combinations under acquisition method of accounting. The holding company has acquired equity in its foreign subsidiary directly on its incorporation therefore no other cost or valuation for the same required on acquisition. The additional equity investment made by the holding company in the equity of the subsidiary company during the period ended has been made at par and also such Business combination arising on transfer of the interest in the entities that are under common control and has accounted at historical cost.

7. Borrowing costs:

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. Interest income earned on the temporary investment of specific borrowings, pending their expenditure on qualifying assets is deducted from the borrowing cost eligible for capitalization. All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

8. Provisions :

Provisions are recognized when the group has a present obligation (legal or constructive) as a result of past event, it is probable that the group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of time value of money is material).

When some or all of the economic benefits required to settle, provisions are expected to be recovered from a third party, a receivable is recognized as an asset it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

9. Contingent liabilities and contingent assets :

Contingent liability is disclosed after careful evaluation of facts, uncertainties and possibility of reimbursement, unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not accounted in the financial statements unless an inflow of economic benefits is probable.

10. Financial instruments:

Financial assets and liabilities are recognized when the Group becomes a party to the contractual provisions of the instruments and are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or liabilities on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

FINANCIAL ASSETS:

Initial recognition and measurement

At initial recognition, financial asset is measured at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

Classification and subsequent measurement

For purposes of subsequent measurement, financial assets are classified in following categories:

1. at amortized cost; or
2. at fair value through other comprehensive income; or
3. at fair value through profit or loss.

The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. These include trade receivables, loans, deposits, balances with banks, and other financial assets with fixed or determinable payments.

Fair value through profit or loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through profit or loss. Interest income from these financial assets is included in other income.

Impairment:

The group applies the expected credit loss model for recognizing impairment loss on financial assets measured at amortized cost, other contractual right to receive cash or other financial assets not designated at fair value through profit or loss. The loss allowance for a financial instrument is equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. If the credit risk on a financial instrument has not increase significantly since initial recognition, the group measures the loss allowance for that financial instrument at an amount equal 12-month expected credit losses. 12-month expected credit losses are portion of the lifetime expected credit losses and represent the lifetime cash shortfalls that will result if the default occurs within 12 months after the reporting date.

For trade receivables or any contractual right to receive cash or another financial assets that results from transactions that are within the scope of Ind AS 18, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses. The Company has used a practical expedient permitted by Ind AS 109 and determines the expected credit loss allowance based on a provision matrix which takes into account historical credit loss experience and adjusted for forward looking information.

De-recognition:

The group derecognizes financial asset when the contractual right to the cash flows from the asset expires, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the asset and an associated liability for the amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of the transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.

On de-recognition of a financial asset, the difference between the assets carrying amount and the sum of consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income, if any, is recognized in the Statement of Profit or Loss if such gain or loss would have otherwise been recognized in profit or loss on disposal of the financial asset.

FINANCIAL LIABILITIES:

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss and at amortized cost, as appropriate. All financial liabilities are recognized initially at fair value and, in the case of borrowings and payables, net of directly attributable transaction costs.

Classification

Financial liabilities and equity instruments issued by the group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the group are recognized at the proceeds received.

Subsequent measurement

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Gains or losses on liabilities held for trading are recognized in the Statement of Profit and Loss.

Financial liabilities (that are not held for trading or not designated at fair value through profit or loss) are measured at amortized cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortized cost, are determined based in the effective interest method.

Effective interest method is a method of calculating amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Foreign exchange gains and losses for assets & liabilities:

Financial Assets and liabilities denominated in a foreign currency and are measured at amortized cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortized cost of the instruments and are recognized in the Statement of Profit or Loss.

The fair value of financial Assets and liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. For financial Assets and liabilities that are measured at fair value through profit or loss, the foreign exchange component forms part of the fair value gains or losses and is recognized in the Statement of Profit and Loss except in case of the amount outstanding to creditors towards the fixed assets purchased in earlier years and amount is outstanding payable, in that case every year the difference in the exchange fluctuation has been adjusted towards the cost of the fixed assets so purchased and has uniformly followed the practice.

De-recognition :

Financial assets liabilities are derecognized when, and only when, the obligations are discharged, cancelled or have expired. An exchange with a lender of a debt instruments with substantially different terms is accounted for as an extinguishment of the original financial assets and liability and recognition of a new financial assets and liability. Similarly, a substantial modification of the terms of an existing financial assets and liability is accounted for as an extinguishment of the original financial assets and liability and the recognition of a new financial assets and liability. The difference between the carrying amount of a financial assets and liability is derecognized and the consideration paid or payable is recognized in the Statement of Profit or Loss.

11. Employee Benefits :

Short-term Employee Benefits:

Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the year in which the employees render the related service are recognized in respect of employees’ services up to the end of the year and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.

Post-employment benefits

1. Defined contribution plans

Employees benefits in the form of the Company’s contribution to Provident Fund, Pension scheme, Superannuation Fund and Employees State Insurance are defined contribution schemes. Payments to defined contribution retirement plans are recognized as expenses when the employees have rendered the service entitling them to the contribution

Provident fund: The employees of the holding Company are entitled to receive benefits in respect of provident fund, a defined contribution plan, in which both employees and the Company make monthly contributions at a specified percentage of the covered employees’ salary (currently 12% of employees’ salary). The contributions as specified under the law are made to the provident fund and pension fund administered by the Regional Provident Fund Commissioner. The Company recognizes such contributions as an expense when incurred.

1. Defined benefit plans

The defined benefit obligation recognized in the balance sheet represents the actual deficit or surplus in the Companys defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.

The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.

Gratuity: The holding Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service. Vesting occurs upon completion of five years of service. The Company has made payments for the annual applicable gratuity liability to LIC gratuity Scheme where the gratuity liability will be paid to the employees by LIC when the same is due to pay. The liability for the defined gratuity benefit plan is provided on the basis of actuarial valuation carried out by Life Insurance corporation of India.

12. Inventories :

Inventories are valued at after reviewing the cost and net realizable value considering the various other related parameters and uniformity of the valuation. Costs incurred in bringing each product to its present location and condition are accounted for as follows:

Raw materials, packaging materials and stores and spare parts are valued at after reviewing the cost and net realizable value considering the various other related parameters and uniformity of the valuation. Cost includes purchase price, freight inwards and other expenditure incurred in bringing such inventories to their present location and condition. In determining the cost, weighted average cost method is used. Work in progress, manufactured finished goods and traded goods are valued at cost of production till the date work completed. Cost of work in progress and manufactured finished goods is determined on the weighted average basis and comprises direct material, cost of conversion and other costs incurred in bringing these inventories to their present location and condition. Cost of traded goods is determined on a weighted average basis. Provision of obsolescence on inventories is considered on the basis of management’s estimate based on demand and market of the inventories. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and the estimated costs necessary to make the sale. The comparison of cost and net realizable value is made on item by item basis.

13. Cash and cash equivalents:

Cash and cash equivalents comprise cash in hand and short-term deposits with original maturities of three months or less that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

14. Earnings Per Share :

The group reports basic and diluted earnings per share (EPS) in accordance with Indian Accounting Standard 33 "Earnings per Share". Basic EPS is computed by dividing the net profit or loss attributable to ordinary equity holders by the weighted average number of equity shares outstanding during the period. Diluted EPS is computed by dividing the net profit or loss attributable to ordinary equity holders by weighted average number of equity shares outstanding during the year as adjusted for the effects of all dilutive potential equity shares (except where the results are anti-dilutive).

NOTE 4. Significant accounting judgments, estimates and assumptions :

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future years.

The key assumptions concerning the future and other key sources of estimation uncertainty at the period ended, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

1. Impairment of property, plant and equipment :

Determining whether property, plant and equipment is impaired requires an estimation of the value in use of the cash-generating unit. The value in use calculation requires the management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. When the actual future cash flows are less than expected, a material impairment loss may arise. property, plant and equipment which are out dated or not in use are impaired and shown at the net releasable value and difference to the written down value and net releasable value is transferred to profit & loss account for the year.

2. Useful lifes of property, plant and equipment:

The Company reviews the estimated useful lives of property, plant and equipment at the end of each reporting period.

3. Provision for litigations and contingencies:

The provision for litigations and contingencies are determined based on evaluation made by the management of the present obligation arising from past events the settlement of which is expected to result in outflow of resources embodying economic benefits, which involves judgements around estimating the ultimate outcome of such past events and measurement of the obligation amount. Due to the judgements involved in such estimations the provisions are sensitive to the actual outcome in future periods

4. Recognition of Deferred Tax Assets :

 

The extent to which deferred tax assets can be recognized is based on an assessment of the profitability of the Group Company’s future taxable income against which the deferred tax assets can be utilized. The holding Company has identified and has also recognized deferred tax for the Depreciation difference. Groups other entity provisions has been adjusted from their standalone financials and the net effect of the same has been taken in Balance Sheet.

 

 

NOTE 46: OTHER NOTES:

 

1. In the opinion of the Board of Directors of the group, the current assets are approximately of the value stated if realized in the ordinary course of business. The provisions for all known liabilities are adequate and are not in excess of the amount considered reasonably necessary. Sundry debtors and creditors balances which are not receivable or payable due to the operational reasons, has been written off or written back during the reporting period/year and accounted accordingly.
2. Additional liability if any, arising pursuant to respective assessment under various fiscal statues, shall be accounted for in the year of assessment. Also interest liability for the delay payment of the statutory dues, if any, has been accounted for in the year in which the same are being paid.
3. Balances of Debtors & Creditors & Loans & Advances taken & given are subject to confirmation and are subject to consequential adjustments, if any. Debtors & creditors balances has been shown separately and

the advances received & paid from/to the parties is shown as advance from customers and advance to suppliers.

1. Micro, Small & Medium Enterprises :

The company has amount due to suppliers under Micro, Small and Medium Enterprises Development Act 2006 (MSMED) as at March 31, 2023. The following informations has been given in respect to such suppliers who have identified themselves as "Micro, Small & Medium Enterprises" under Micro, Small and Medium Enterprises Development Act, 2006 (MSMED):

(? in Millions)

Outstanding Amount 88.31 0.87 5.55

As per the management the company is holding the term sheet with many of such supplier for which the payment terms is agreed for over and above the period of 45 days. There are overdue outstanding amount for such suppliers for which no interest provision is made. As per the management such provision has not been made because as the same is mutually agreed by the parties as per their term sheet of payment towards the supplies made by them. Whereas there is overdue outstanding amount of ?32.64 Million’s for which no such agreement exist and also the provision for interest has not been made in the financial statement for the year ended March 31, 2023.

2. As per informations available, the company has no transactions which are not recorded in the books of accounts and which are surrendered or disclosed as income during the during the year ended 31^st March 2021, 2022 & 2023 in the tax assessment or in search or survey or under any other relevant provisions of the Income Tax Act, 1961.
3. Title deeds of all the immovable properties held by the group are in the name of the company. No revaluation of the property, plant and equipment’s and intangible assets held by the group were done during the previous year, as the management is in the opinion that the same is not material and the same will be reviewed in the subsequent years. Further the group is not holding any leased assets which is required to be disclosed separately.
4. The company has not been declared as willful defaulter by any bank or financial Institution or any other lender during the reporting period.
5. The consolidated restated financial statements has been authorized for issue by the Board of Directors on dated 12^th July 2023.
6. All amounts disclosed in the consolidated restated financial statements and notes have been rounded off to the nearest millions and decimal thereof as per the requirements of Schedule III to the Companies act, 2013, unless otherwise stated.
7. The holding company has declared dividend for the FY 2021-22 in the Annual General meeting of the company held on September 16, 2022. The dividend so declared has been accounted and adjusted from the accumulated brought forward balance of the profit & loss account.
8. EVENT AFTER REPORTING PERIOD:

In the Annual General Meeting of the Company held on 8^th July, 2023 the Company has declared final dividend

of ?0.20/- per fully paid up equity share of face value ?2/- each for the financial year ended March 31, 2023.

9. Previous years figures have been regrouped/reclassified wherever necessary to correspond with the current

period’s classification/disclosure in the restated financial statement.

Notes from "1" to " 45 " form an integral part of the Accounts.

Key Performance Indicators and Non-GAAP Financial Measures

In addition to our financial results determined in accordance with Ind AS, we consider and use certain non-GAAP financial measures and key performance indicators that are presented below as supplemental measures to review and assess our operating performance. Our management does not consider these non-GAAP financial measures and key performance indicators in isolation or as an alternative or substitutive to the Restated Consolidated Financial Information. We present these non-GAAP financial measures and key performance indicators because we believe they are useful to our Company in assessing and evaluating our operating performance, and for internal planning and forecasting purposes. We believe these non-GAAP financial measures could help investors as an additional tool to evaluate our ongoing operating results and trends with a more granular view of our financial performance. The Profit After Tax of our Company increased from ?60.11 million in Fiscal March 31, 2021 to

?301.52 million in Fiscal March 31, 2023 majorly due to increase in revenue from operations leading to economics of sale, changes in inventories of work in progress and finished goods and significant decrease in finance cost.

(except rations and percentages, all figures are in ? million)

Particulars	As at for the fiscal year ended March 31,
	2023	2022	2021
Revenue from Operations 1	2694.61	2,408.00	1,447.74
Total number of customers served (Nos.) 2	723	606	538
Total capacity utilisation (%) 3	83.16%	90.41%	71.01%
Exports revenue as % of revenue operations 4 from	80.60%	84.53%	80.90%
Foreign currency gain / (loss) 5	53.13	32.37	19.21
Cost of goods operations 6 sold as % of revenue from	63.11%	64.81%	64.62%
EBITDA 7	540.33	466.92	223.35
EBIT 8	488.14	425.08	185.57
PAT 9	301.52	275.06	60.11
EBITDA Margin 10	20.05%	19.39%	15.43%
PAT Margin 11	11.19%	11.41%	4.15%
Net Worth 12	1140.93	862.23	587.17
Total Borrowings 13	450.06	391.27	530.68
Return on Equity (ROE) 14	26.43%	31.90%	10.24%
Return on Capital Employed (ROCE) 15	31.91%	36.29%	17.13%
Earnings per Share (EPS) 17	2.64	2.41	0.53
Net Asset Value (NAV) per Share 18	9.98	7.54	5.14
Debt to Equity Ratio 19	0.39	0.45	0.90
Fixed Asset Turnover Ratio 20	4.85	5.26	3.37

Notes:

1. Revenue from Operations = Sum of revenue from sale of products and other operating revenue as per the Restated Consolidated Financial Information
2. Total number of unique customers served during the period from sale of products
3. Total production of all types of hoses, braiding and assemblies during the period divided by the installed capacity during that period
4. Total revenue from exports as a % of revenue from operations during the period. Historically, majority of our revenue from operations has been derived from exports hence this is an important metric.
5. Net gain on foreign currency exchange rate fluctuation. Since majority of our revenue is derived in foreign currencies, this is an important metric for our internal reporting purposes.
6. Sum of cost of material consumed and changes in inventories of work in progress & finished goods as a % of revenue from operations. This provides information on the gross margin generated by our Company
7. EBITDA= sum of (i) profit for the period/year, (ii) tax expense, (iii) finance costs, and (iv) depreciation and amortisation expenses, less other income. However, it does not include the impact of extraordinary and exceptional items
8. EBIT = sum of (i) profit for the period/year, (ii) tax expense, and (iii) finance costs, less other income. However, it does not include the impact of extraordinary and exceptional items
9. PAT= profit after tax as per the Restated Consolidated Financial Information
10. EBITDA Margin= EBITDA divided by revenue from operations
11. PAT Margin= Restated Consolidated Profit for the period/year divided by Total Income
12. Net Worth= sum of equity share capital and other equity as per the Restated Consolidated Financial Information
13. Total Borrowings= sum of non-current borrowings and current borrowings
14. Return on Equity= Restated Consolidated Profit for the period/year divided by Net Worth
15. Return on Capital Employed= EBIT divided by Capital Employed
16. Capital Employed = Net Worth + Total Borrowing – Cash and cash equivalents available for free use
17. Earnings Per Share (EPS)= Restated Consolidated profit for the year divided by weighted average number of equity shares during the year / period
18. Net Asset Value per Share is calculated as Net Worth divided by total number of equity shares outstanding as on the last day of the year / period
19. Debt-Equity Ratio is calculated as Total Borrowings divided by Net Worth.
20. Fixed Asset Turnover Ratio is calculated as revenue from operations divided by property, plant and equipment as at the end of the year / period.
21. Pursuant to a resolution passed at the general meeting of shareholders dated February 15, 2023, our Company approved to split each equity share of face value of ? 10 each into 5 equity shares of face value of ? 2 each. Accordingly, the issued, subscribed and paid-up capital of the Company was subdivided from 2,28,64,074 equity shares of face value of ? 10 each to 11,43,20,370 equity shares of face value of ? 2 each. The impact of split of shares has been retrospectively considered for the computation of earnings per share and net asset value per equity share above, as per the requirement / principles of Ind AS 33, as applicable.

 

Principal Components of Income and Expenditure Income

Our total income comprises of revenue from operations and other income.

 

 

Revenue from Operations

 

Our revenue from operations comprises of revenue from (i) sale of products; and (ii) other operating revenue. Sale of products comprises of sale of flexible flow solutions including hoses, assemblies and fittings and braiding in exports and domestic markets. Other operating revenue comprises of sale of scrap, gain on foreign exchange fluctuation and other operating income.

 

Below is the breakdown of our revenue from operations for the period reported

 

(? in million)

Particulars	For the fiscal ended March 31,
	2023 2022 2021

 

 

Sale of products
Exports sales	2,171.80	2,035.59	1,171.15
Domestic sales	433.45	294.28	226.16
Sub-total (A)	2,605.26	2,329.87	1,397.32
Other operating income
Sale of scrap	21.94	15.81	8.25
Gain on foreign exchange fluctuation	53.13	32.37	19.21
Other operating revenue	14.28	29.96	22.96
Sub-total (B)	89.35	78.13	50.42
Revenue from operations (A)+(B)	2,694.61	2,408.00	1,447.74

 

 

Below is the further breakdown of our sale of products reported on a restated consolidated basis, by type of products:

(? in million)

Hoses 1,693.01 1,665.11 1.009.99

Particulars	For the fiscal ended March 31,
	2023 2022 2021

 

 

Assemblies & Fittings	792.55	555.66	339.36
Braiding	105.96	51.76	35.63
Other Products	13.72	57.34	12.33
Revenue from sale of products	2,605.26	2,329.87	1,397.32

 

 

Other Income: Our other income comprises of (i) interest income on fixed deposits; (ii) other interest income; (iii) write-back of sundry balances; and (iv) insurance claims.

 

 

(? in million)

Particulars	For the fiscal ended March 31,
	2023 2022 2021

 

Interest Income

On fixed deposits designated as amortized cost	0.04	0.06	0.61
On others	0.13	0.47	-
Sundry Balances Written Back (Net)	-	-	-
Insurance Claim	-	1.39	-
Total Other Income	0.17	1.92	0.61
Expenditure

 

 

Our expenses comprise of (i) cost of materials consumed (ii) changes in inventories of work in progress and finished goods (iii) Employee benefits expense (iv) finance costs (v) depreciation and amortisation expense and

1. other expenses.

 

1. Cost of materials consumed: Cost of materials consumed comprises of raw materials and packaging materials consumed for production of hoses, braiding, interlocks and assemblies. The primary raw materials involved in manufacturing of our products include stainless steel coils of various grades, stainless steel wires and fittings. It also includes consumption of nitrogen and argon gas. Packaging materials consumed mainly include plywood reel, plywood pallet, pinewood pallet, MS trolly, MS rod, MS patti, MS angles and boxes made of various materials including paper, plywood, pinewood and wooden box.
2. Changes in inventories of work in progress and finished goods: Changes in inventories of work in progress and finished goods consist of costs attributable to increase or decrease in inventory levels of work in progress and finished goods in the current fiscal/period over the previous fiscal/period.
3. Employee benefits expense: Employee benefits expense consists of (i) salary, wages, bonus and other allowances; (ii) contribution to provident fund and ESI; (iii) gratuity and compensated absences expenses; and (iv) staff welfare expenses.
4. Finance costs: Finance costs comprise of (i) interest on borrowings availed from banks, related parties and others; (ii) processing fee and stamp duty on borrowings availed; and (iii) Finance management charges, among others.
5. Depreciation and amortisation expense: Depreciation and amortisation expense comprises of (i) depreciation on our property, plant and equipment; and (ii) amortisation of intangible assets.
6. Other expenses: Other expenses mainly comprise of:
1. repairs and maintenance expenses: relating to regular maintenance of our plant and machineries and factory building;
2. power and fuel expenses: relating to the electricity used for production;
3. export freight, handling & clearing expenses: relating to expenses incurred in the transportation of our finished goods from our facility to customer’s delivery locations;
4. freight inward and outward relates to expenses incurred in the transportation of our raw material and other purchases, from suppliers’ locations to our factory premises. Freight outward expenses relate to transportation of goods to our customers’ locations from our factory premises.
5. insurance expense include employee group health and group term insurance, marine insurance, industrial risk insurance, commercial general liability, cyber-crime insurance, directors’ & officers’ liability insurance, among others.
6. In addition to the above other expenses include office expense, license and consultancy fees, conveyance, rates and taxes, professional fee, bank charges and commission, other commission, computer expenses, wages, travelling expenses, printing and stationery, testing and calibration and among others.
1. Exceptional items:

Our exceptional items include profit / loss on sale of fixed assets, loss on impairment of assets and gain / loss on foreign exchange translation relating to Foreign Currency Term Loan availed by our Company.

2. Tax expense:

Our tax expense represents the tax payable on the current period’s taxable income based on the applicable income tax rate adjusted by income tax payable for earlier years and deferred tax charges or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period).

Deferred tax charges or credits and the corresponding deferred tax liabilities or assets are recognized using the tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled or the asset realized. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Deferred tax is reviewed at each balance sheet date and written down or written up to reflect the amount that is reasonably certain, as the case may be, to be realized.

Results of Operations information based on the Restated Consolidated Financial Information

The following table sets forth certain information with respect to our results of operations for the Fiscals ended March 31, 2023, March 31, 2022 and March 31, 2021, the components of which are also expressed as a percentage of total income for such periods:

Particulars		For the Fiscal ended March 31,
		2023			2022			2021
		(? in million) %			(? in million) %			(? in % million)
Revenue from	2,694.61		99.99%	2,408.00		99.92%	1,447.74		99.96%
operations
Other income	0.17		0.01%	1.92		0.08%	0.61		0.04%
Total income	2,694.78		100.00%	2,409.92		100.00%	1,448.35		100.00%

Expenses
Cost of materials	1878.47	69.71%	1,563.30	64.87%	944.82	65.23%
consumed
Changes in inventories	(177.84)	(6.60%)	(2.68)	(0.11%)	(9.24)	(0.64%)
of work in progress and
finished goods
Employee benefits	231.51	8.59%	175.20	7.27%	131.40	9.07%
expense
Finance costs	45.50	1.69%	62.51	2.59%	89.40	6.17%
Depreciation and	52.19	1.94%	41.84	1.74%	37.78	2.61%
amortisation expense
Other expenses	222.13	8.24%	205.26	8.52%	157.41	10.87%
Total expenses	2,251.98	83.57%	2,045.43	84.88%	1,351.56	93.32%
Profit before exceptional items and tax	442.80	16.43%	364.48	15.12%	96.78	6.68%
Exceptional items	(30.72)	(1.14%)	4.14	0.17%	(16.30)	(1.13%)
Profit before tax	412.08	15.29%	368.62	15.30%	80.49	5.56%
Tax expense:
Current tax	101.85	3.78%	83.30	3.46%	-	-
Short/ (Excess)	6.49	0.24%	(0.03)	(0.00%)	-	-
provision for earlier
years
Deferred tax liability/	2.22	0.08%	10.29	0.43%	20.38	1.41%
(assets)
Total tax expense	110.56	4.10%	93.57	3.88%	20.38	1.41%
Profit for the period /	301.52	11.19%	275.06	11.41%	60.11	4.15%
year
Other comprehensive	0.04	0.00%	0.01	0.00%	0.03	0.00%
income
Total comprehensive	301.57	11.19%	275.06	11.41%	60.14	4.15%
income for the period /
year

Results of operations for the Fiscal 2023 compared with Fiscal 2022

(except percentages, all figures are in ? million)

	2023	2022
Revenue from operations	2694.61	2,408.00	11.90%
Other income	0.17	1.92	(91.06%)
Total income	2,694.78	2,409.92	11.82%
Expenses
Cost of materials consumed	1878.47	1,563.30	20.16%
Changes in inventories of work in progress and (177.84) (2.68) 6539.23%
finished goods
Employee benefits expense	231.51	175.20	32.14%
Finance costs	45.50	62.51	(27.20%)
Depreciation and amortisation expense	52.19	41.84	24.73%
Other expenses	222.13	205.26	8.22%
Total expenses	2,251.98	2,045.43	10.10%
Profit before exceptional items and tax	442.80	364.48	21.49%
Exceptional items	(30.72)	4.14	(842.08%)
Profit before tax	412.08	368.62	11.79%
Tax expense:

Current tax	101.85	83.30	22.27%
Short/ (Excess) provision for earlier years	6.49	(0.03)	-
Deferred tax liability/ (assets)	2.22	10.29	(78.42%)
Total tax expense	110.56	93.57	18.16%
Profit for the year	301.52	275.06	9.62%
Other comprehensive income	0.04	0.01	754.52%
Total comprehensive income for the year	301.57	275.06	9.63%

Total Income

Our total income in Fiscal 2023 increased by 11.82 % to ? 2694.78 million from ? 2409.92 million in Fiscal 2022 primarily on account of following:

Revenue from operations

Below is the breakdown of our revenue from operations for Fiscal 2023 and 2022:

Particulars For the fiscal ended 2023		March 31, 2022	% Change
Sale of products
- Export	2171.80	2,035.59	6.69%
- Domestic	433.45	294.28	47.29%
Sub-total (A)	2,605.26	2,329.87	11.82%
Other operating revenue
Sale of scrap	21.94	15.81	38.81%
Gain on foreign exchange fluctuations	53.13	32.37	64.15%
Other operating revenue	14.28	29.96	(52.33%)
Sub-total (B)	89.35	78.13	14.36%
Total (A+B)	2,694.61	2,408.00	11.90%

Our revenue from sale of products increased by 11.82% to ? 2605.26 million in Fiscal 2023 from ? 2329.87 million in Fiscal 2022, primarily led by strong demand in our domestic markets where our revenue grew by 47.29% to ? 433.45 million in Fiscal 2023 from ? 294.28 million in Fiscal 2022. In domestic markets, we served total of 506 customers during Fiscal 2023 as against 416 customers during Fiscal 2022. Similarly, our revenue from exports market grew by 6.69% to ? 2171.80 million in Fiscal 2023 from ? 2035.59 million in Fiscal 2022. In exports markets, we served total of217 customers during Fiscal 2023 as against 190 served during Fiscal 2022.

Our other operating revenue increased by 14.36% to ? 89.35 million in Fiscal 2023 from ? 78.13 million in Fiscal 2022 mainly due to increase in revenue from sale of scrap by 38.81%, gain on foreign exchange fluctuations by 64.15% and other operating revenue decreased by 52.33% in Fiscal 2023 over Fiscal 2022.

Other income

Below is the breakdown of our other income and percentage change in Fiscal 2023 over Fiscal 2022:

Particulars For the fiscal ended March 31, % Change 2023 2022
Interest income
- On fixed deposits	0.04	0.06	(22.43%)
- On others	0.13	0.47	(72.79%)
Insurance claim	-	1.39	(-100.00%)
Total other income	0.17	1.92	(91.06%)

Our other income decreased by 91.06% to ? 0.17 million in Fiscal 2023 from ? 1.92 million in Fiscal 2022 mainly due to decrease in other interest income by ? 0.34 million, and Interest Income by ? 0.02 million. There was no amount pertaining to Insurance claim in Fiscal 2023 as compared to ? 1.39 million in Fiscal 2022.

Expenses

Our expenses in Fiscal 2023 increased by 10.10% to ? 2,251.98 million from ? 2,045.43 million in Fiscal 2022

primarily on account of following:

Cost of materials consumed

Our cost of materials consumed increased by 20.16 % to ? 1,878.47 million in Fiscal 2023 from ? 1,563.30 million in Fiscal 2022. In line with increase in our revenue from sale of products by 11.82% in Fiscal 2023, our material consumption also showed similar growth. Our cost of material consumed was 69.71% of our total income in Fiscal 2023 compared to 64.87 % in Fiscal 2022.

Changes in inventories of work in progress and finished goods

Change in inventories of work in progress and finished goods were (? 177.84) million in Fiscal 2023 as compared to (?2.68) million in Fiscal 2022. Following table explains the opening and closing inventories of work in progress and finished goods:

(? in million)

	2023	2022
Work-in –progress	293.59	73.87	297.42%
Finished Goods	30.29	72.17	(58.03%)
Total	323.88	146.05	121.77%
(? in million except days of inventories)
Particulars	For the fiscal ended 2023	March 31, 2022	% Change
Total cost of material consumed	1,878.47	1,563.30	20.16%
Changes in inventories of work in progress and (177.84) (2.68) (6,539.23%)
finished goods
Total cost of goods sold	1,700.64	1,560.62	8.97%
Days of inventories of raw materials*	46	50	(7.36%)
Days of inventories of work in progress*	63	17	264.70%
Days of inventories of finished goods*	7	17	(61.48%)

*Days of inventories of raw materials, work in progress and finished goods is a Non-GAAP measure calculated as follows:

Days of raw materials = total of inventories of raw material / cost of materials consumed * 365 Days of work in progress = total of inventories of work in progress / cost of goods sold * 365 Days of finished goods = total of inventories of finished goods / cost of goods sold * 365

We believe that this additional Non-GAAP information could help investors as an additional tool to evaluate our inventory levels.

Employee benefits expense

Our employee benefits expense increased by 32.14% to ? 231.51 million in Fiscal 2023 from ? 175.20 million in

Fiscal 2022. Below is the breakdown of our employee benefits expense:

(? in million)

Particulars	For the fiscal end 2023	ed March 31, 2022	% Change
Salaries, wages, bonus and other allowances	201.63	154.66	30.37%
Contribution to provident fund and ESI	8.40	6.85	22.63%
Gratuity and compensated absences expenses	8.96	0.49	1740.17%
Staff welfare expenses	12.52	13.21	(5.19%)

Total employee benefits expense	231.51	175.20	32.14%
Employee benefits expense as a % of total income	8.59%	7.27%

As on March 31, 2023 there were 383 full time employees in our Company as compared to 328 full time employees as on March 31, 2022 resulting in net addition of 55 employees during Fiscal 2023.

Finance costs

Our finance costs decreased by 27.20% to ? 45.50 million in Fiscal 2023 from ? 62.51 million in Fiscal 2022 Below is the breakdown of our finance costs:

(? in million)

Interest on borrowing ;	2023	2022
- To Bank	23.47	39.47	(40.53%)
- To Others	4.98	16.64	(70.08%)
Processing Fee & Stamp duty	4.40	1.51	191.71%
Professional Fee (Finance Management Charges)	11.18	4.20	166.24%
Interest Paid to Creditors	1.47	0.68	115.77%
Total finance costs	45.50	62.51	(27.20%)
Total Outstanding Borrowings	450.06	391.27	15.02%

Our total borrowings increased by 15.02% to ? 450.06 million as on March 31, 2023 against ? 391.27 million as on March 31, 2022. During the Fiscal 2023, our Company had availed certain borrowings which were repaid during the same fiscal and also certain borrowings were availed during the third quarter, accordingly the interest cost was incurred for the proportionate period only for the new borrowings. Additionally, some loans which were repaid in full during Fiscal 2023 had significant portion of principal forming part of the equated monthly installment. This led to a decrease in our finance costs for Fiscal 2023 over Fiscal 2022.

Below is the further breakdown of our borrowings as on March 31, 2023 and 2022:

(? in million)

Particulars	As on March 2023	31, 2022	% Change
Non-current borrowings
Secured term loan from bank	166.72	148.66	12.15%
Secured working capital term loan from bank	28.93	58.40	(50.46%)
Secured vehicle loan from bank	1.21	2.81	(56.85%)
Current maturities of long term borrowings	182.64	141.41	29.16%
Total non-current borrowings (A)	379.50	351.27	8.04%
Current borrowings
Unsecured borrowings from related parties	-	-	-
Unsecured borrowings from other parties	70.56	40.00	76.40%
Total current borrowings (B)	70.56	40.00	76.40%
Total borrowings (A + B)	450.06	391.27	15.02%

Depreciation and amortisation expense

Our depreciation and amortisation expense increased by 24.73% to ? 52.19 million in Fiscal 2023 from ? 41.84 million in Fiscal 2022. Our gross carrying amount of property, plant and equipment and intangible assets increased by 13.17% to ? 1,264.68 million as on March 31, 2023 from ? 1,117.54 million as on March 31, 2022.

Other expenses

Our other expenses increased by 8.22% to ? 222.13 million in Fiscal 2023 from ? 205.26 million in Fiscal 2022

Below is the breakdown of our other expenses for Fiscal 2023 and 2022 and % change in each line item:

(? in million)

Particulars	For the fiscal ended March 31, 2023 2022		Change %
Advertisement expense	0.40	-	100%
Repair & maintenance	56.72	58.43	(2.92%)
Export freight, handling & clearing	22.58	32.47	(30.46%)
Power & fuel	25.76	29.26	(11.97%)
Office expenses	13.73	18.69	(26.54%)
License & consultancy fees	14.70	7.76	89.30%
Freight inward	6.64	6.71	(1.13%)
Insurance	5.71	5.84	(2.27%)
Freight outward & octroi	10.53	5.77	82.41%
Conveyance expenses	5.22	5.32	(1.88%)
Bank charges and commission	3.28	3.58	(8.37%)
Rates & taxes	1.37	5.24	(73.94%)
Wages	7.28	3.42	112.57%
Sundry balances written off	3.16	3.01	4.80%
Commission	3.85	2.58	49.17%
Computer expenses	4.39	2.54	72.62%
Travelling	18.26	2.09	773.57%
Printing & stationary	2.21	1.92	15.16%
Testing & calibration	1.37	1.76	(21.89%)
Telephone & internet	2.27	1.44	58.16%
Other expenses	8.87	5.26	68.71%
CSR Activity expenses	3.83	0.30	1,175.00%
Donation Paid	-	1.85	(100%)
Total other expenses	222.13	205.26	8.22%

Reasons for increase in our major other expenses

1. repairs and maintenance expenses decreased by 2.92% to ? 56.72 million in Fiscal 2023 from ? 58.43 million in Fiscal 2022. The decrease was marginal in nature.
2. export freight, handling & clearing expenses decreased by 30.46 % to ? 22.58 million in Fiscal 2023 from ? 32.47 million in Fiscal 2022. The decrease was mainly on account of decrease in freight rates of the Shipping line during the fiscal 2023 and also due to increase of reimbursement of freight due to increase in CIF consignment
3. power and fuel expenses decreased by 11.97% to ? 25.76 million in Fiscal 2023 from ? 29.26 million in Fiscal 2022. The decrease was due to efficiencies achieved on account of modifications carried out in plant and machinery and proper maintenance of equipment;
4. office expenses decreased by 26.54% to ? 13.73 million in Fiscal 2023 from ? 18.69 million in Fiscal 2022 . Implementation of SAP and relevant technological upgradation has led to reduction of cost ;
5. License and consultancy fees expense increased by 89.30% to ? 14.70 million in Fiscal 2023 from ? 7.76 million in Fiscal 2022 mainly due to increase in consultancy charges towards procurement of international licenses and standards;
6. freight inward expenses decreased by 1.13% to ? 6.64 million in Fiscal 2023 from ? 6.71 million in Fiscal 2022 mainly due to change in our International Commercial Terms (‘INCO Terms’) and due to reduction in logistics rates;
1. insurance expenses decreased by 2.26% to ? 5.71 million in Fiscal 2023 from ? 5.84 million in Fiscal 2022. The decrease was marginal in nature;
2. Freight outward & octroi expenses increased by 82.41% to ? 10.53 million in Fiscal 2023 from ? 5.77 million in Fiscal 2022 mainly due to variation in geography wise domestic sales and also increase in the sales volume of domestic assembly sales;

 

 

Exceptional items

 

Our exceptional loss was ? 30.72 million in Fiscal 2023 as compared to exceptional gain of ? 4.14 million in Fiscal 2022. The gain was primarily attributable to loss of ? 30.77 million in Fiscal 2023 on account of foreign exchange translation of Foreign Currency Term Loan availed by us, as against gain of ? 4.13 million in Fiscal 2022.

 

 

Profit before tax

 

As a result of the foregoing, our profit before tax increased by 11.79% to ? 412.08 million in Fiscal 2023 from ?

368.62 million in Fiscal 2022.

 

 

Tax expense

 

Our total tax expense (including current tax, deferred tax charge / (credit) and income tax pertaining to earlier years) increased by 18.16% to ? 110.56 million in Fiscal 2023 from ? 93.57 million in Fiscal 2022. The increase was mainly on account of increase in current tax to ? 101.85 million in Fiscal 2023 as against ? 83.30 million in Fiscal 2022.The increase in current tax is also due to increase in profit before tax.

 

 

Profit for the year

 

As a result of the foregoing, our profit after tax for the year increased by 9.62% to ? 301.52 million in Fiscal 2023 from ? 275.06 million in Fiscal 2022.

 

 

Other comprehensive income

 

We recorded a total other comprehensive income of ? 0.04 million in Fiscal 2023 as compared to ? 0.01 million in Fiscal 2022. This was primarily on account of exchange differences on translation of financial statements of foreign operations (i.e. our UK Subsidiary).

 

 

Total comprehensive income for the year

 

As a result of the foregoing, our total comprehensive income increased by 9.63% to ? 301.57 million in Fiscal 2023 from ? 275.06 million in Fiscal 2022.

 

 

Results of operations for the Fiscal 2022 compared with Fiscal 2021

(except percentages, all figures are in ? millions)

Particulars	For the fiscal ended 2022	March 31, 2021	% Change
Revenue from operations	2,408.00	1,447.74	66.33%
Other income	1.92	0.61	214.13%
Total income	2,409.92	1,448.35	66.39%
Expenses
Cost of materials consumed	1,563.30	944.82	65.46%
Changes in inventories of work in progress and finished goods	(2.68)	(9.24)	(71.02%)
Employee benefits expense	175.20	131.40	33.34%

Particulars For the fiscal ended 2022		March 31, 2021	% Change
Finance costs	62.51	89.40	(30.08%)
Depreciation and amortisation expense	41.84	37.78	10.75%
Other expenses	205.26	157.41	30.40%
Total expenses	2,045.43	1,351.56	51.34%
Profit before exceptional items and tax	364.48	96.78	276.59%
Exceptional items	4.14	(16.30)	125.40%
Profit before tax	368.62	80.49	358.00%
Tax expense:
Current tax	83.30	-
Short/ (Excess) provision for earlier years	(0.03)
Deferred tax liability/ (assets)	10.29	20.38	(49.49%)
Total tax expense	93.57	20.38	359.21%
Profit for the year	275.06	60.11	357.59%
Other comprehensive income	0.01	0.03	(83.56%)
Total comprehensive income for the year	275.06	60.14	357.36%

 

 

Total Income

 

Our total income in Fiscal 2022 increased by 66.39% to ? 2,409.92 million from ? 1,448.35 million in Fiscal 2021 primarily on account of following:

 

 

Revenue from operations:

 

Below is the breakdown of our revenue from operations for Fiscal 2022 and 2021:

 

 

(? in million)

Particulars For the fiscal ended 2022		March 31, 2021	% Change
Sale of products
- Export	2,035.59	1,171.15	73.81%
- Domestic	294.28	226.16	30.12%
Sub-total (A)	2,329.87	1,397.32	66.74%
Other operating revenue
Sale of scrap	15.81	8.25	91.67%
Gain on foreign exchange fluctuations	32.37	19.21	68.49%
Other operating revenue	29.96	22.96	30.45%
Sub-total (B)	78.13	50.42	54.96%
Total (A+B)	2,408.00	1,447.74	66.33%

 

 

Our revenue from operations increased by 66.33% to ? 2,408.00 million in Fiscal 2022 from ? 1,447.74 million in Fiscal 2021, primarily led by strong demand in our exports markets where our revenue grew by 73.81% to ? 2,035.59 million in Fiscal 2022 from ? 1,171.15 million from Fiscal 2021. In exports markets, we served total of 190 customers during Fiscal 2022 as against 169 total customers served during Fiscal 2021. Our revenue from domestic market grew by 30.12% to ? 294.28 million in Fiscal 2022 from ? 226.61 million in Fiscal 2021. In domestic markets, we served total of 416 customers during Fiscal 2022 as against 369 served added during Fiscal 2021.

 

Our other operating revenue increased by 54.96% to ? 78.13 million in Fiscal 2022 from ? 50.42 million in Fiscal 2021 mainly due to increase in revenue from scrap by 91.67% and gain on foreign exchange fluctuations by 68.49% and other operating revenue by 30.45% in Fiscal 2022 over Fiscal 2021.

 

 

Other income:

Below is the breakdown of our other income and percentage change in Fiscal 2022 over Fiscal 2021:

 

 

(? in million)

 

Interest income on fixed deposits	2022	2021
- On fixed deposits	0.06	0.61	(90.62%)
- On others	0.47	-	100.00%
Insurance claim	1.39	-	100.00%
Total other income	1.92	0.61	214.13%

 

 

Our other income increased by 214.13% to ? 1.92 million in Fiscal 2022 from ? 0.61 million in Fiscal 2021 mainly due to increase in other income by ? 0.47 million, increase in insurance claim by ? 1.39 million. However, the increase was partially offset by decrease in interest income on fixed deposits by 90.62% to ? 0.06 million in Fiscal 2022 from ? 0.61 million in Fiscal 2021.

 

 

Expenses

 

Our expenses for Fiscal 2022 increased by 51.34% to ? 2,045.43 million from ? 1,351.56 million in Fiscal 2021 primarily on account of following:

 

 

Cost of materials consumed

 

Our cost of materials consumed increased by 65.46% to ? 1,563.30 million in Fiscal 2022 from ? ? 944.82 million in Fiscal 2021. In line with increase in our revenue from sale of products by 66.74 % in Fiscal 2022, our material consumption also showed similar growth. Our cost of material consumed was 64.87% of our total income in Fiscal 2022 compared to 65.23% in Fiscal 2021.

 

 

Changes in inventories of work in progress and finished goods

 

Change in inventories of work in progress and finished goods was (? 2.68) million in Fiscal 2022 as compared to

? (? 9.24) million in Fiscal 2021. Following table explains the opening and closing inventories of finished goods and work in progress:

 

(? in million)

 

	2022	2021
Work-in –progress	73.87	100.23	(26.30%)
Finished Goods	72.17	43.14	67.31%
Total	146.05	143.37	1.87%
(? in million except days of inventories)
Particulars For the fiscal ended March 31, % Change
	2022	2021
Total cost of material consumed	1563.30	944.82	65.46%
Changes in inventories of work in progress and finished goods	(2.68)	(9.24)	(71.02%)
Total cost of goods sold	1,560.62	935.57	66.81%
Days of inventories of raw materials*	50	77
Days of inventories of work in progress*	17	39
Days of inventories of finished goods*	17	17

 

*Days of inventories of raw materials, work in progress and finished goods is a Non-GAAP measure calculated as follows:

Days of raw materials = total of inventories of raw material / cost of materials consumed * 365 Days of work in progress = total of inventories of work in progress / cost of goods sold * 365 Days of finished goods = total of inventories of finished goods / cost of goods sold * 365

We believe that this additional Non-GAAP information could help investors as an additional tool to evaluate our inventory levels.

 

Employee benefits expense

 

Our employee benefits expense increased by 33.34% to ? 175.20 million in Fiscal 2022 from ? 131.40 million in Fiscal 2021. Below is the breakdown of our employee benefits expense:

 

(? in million)

 

	2022	2021
Salaries, wages, bonus and other allowances	154.66	117.79	31.30%
Contribution to provident fund and ESI	6.85	5.48	24.98%
Gratuity and compensated absences expenses	0.49	0.08	531.13%)
Staff welfare expenses	13.21	8.05	64.02%
Total employee benefits expense	175.20	131.40	33.34%
Employee benefits expense as a % of total income	7.27%	9.07%

 

 

As on March 31, 2022, there were 328 full time employees of our Company as compared 258 full time employees as on March 31, 2021 resulting in net addition of 70 employees in Fiscal 2022.

 

 

Finance costs

 

Our finance costs decreased by 30.08% to ? 62.51 million in Fiscal 2022 from ? 89.40 million in Fiscal 2021which is in line with decrease in our total borrowings in Fiscal 2022. Below is the breakdown of our finance costs:

 

 

(? in million)

 

Interest on borrowing ;	2022	2021
- To Bank	39.47	53.09	(25.64%)
- To Related Parties	-	21.58	(100.00%)
- To Others	16.64	7.97	108.92%
Processing Fee & Stamp duty	1.51	4.77	(68.39%)
Professional Fee (Finance Management Charges)	4.20	-	100.00%
Interest Paid to Creditors	0.68	1.99	(65.87%)
Total finance costs	62.51	89.40	(30.08%)
Total Outstanding Borrowings	391.27	530.68	(26.27%)

 

 

Our total borrowings decreased by 26.27% ? 391.27 million as on March 31, 2022 against to ? 530.68 million as on March 31, 2021. This decrease led to a decrease in our finance costs for the Fiscal 2022 over Fiscal 2021. Below is the further breakdown of our borrowings as on March 31, 2022 and 2021:

 

(? in million)

 

Non-current borrowings	2022	2021
Secured term loan from bank	148.66	267.12	(44.35%)
Secured working capital term loan from bank	58.40	85.68	(31.83%)
Secured vehicle loan from bank	2.81	-	100.00%
Current maturities of long term borrowings	141.41	96.82	46.05%
Total non-current borrowings (A)	351.28	449.62	(21.87%)
Current borrowings
Unsecured borrowings from related parties	-	60.79	(100.00%)
Unsecured borrowings from other parties	40.00	20.28	97.26%

 

 

	2022	2021
Total current borrowings (B)	40.00	81.06	(50.66%)
Total borrowings	391.27	530.68	(26.27%)

 

 

Depreciation and amortisation expense

 

Our depreciation and amortisation expense increased by 10.75% to ? 41.84 million in Fiscal 2022 from ? 37.78 million in Fiscal 2021. Our gross carrying amount of property, plant and equipment and intangible assets increased by 6.65% to ? 1,128.29 million as on March 31, 2022 from ?1,057.90 million as on March 31, 2021.

 

 

Other expenses

 

Our other expenses increased by 30.40% to ? 205.26 million in Fiscal 2022 from ? 157.41 million in Fiscal 2021. Below is the breakdown of our other expenses for Fiscal 2022 and 2021 and % change in each line item:

(? in million)

 

	2022	2021
Repair & maintenance	58.43	42.45	37.62%
Export freight , handling & clearing	32.47	15.72	106.53%
Power & fuel	29.26	21.10	38.70%
Office expenses	18.69	13.27	40.83%
License & consultancy fees	7.76	6.25	24.17%
Freight inward	6.71	5.15	30.35%
Insurance	5.84	3.45	69.50%
Freight outward & octroi	5.77	9.15	(36.90%)
Conveyance expenses	5.32	5.08	4.78%
Bank charges and commission	3.58	2.61	36.99%
Rates & taxes	5.24	1.35	287.95%
Wages	3.42	3.29	3.91%
Sundry balances written off	3.01	9.15	(67.06%)
Commission	2.58	1.41	83.31%
Computer expenses	2.54	2.10	21.11
Travelling	2.09	0.19	989.22%
Printing & stationary	1.92	1.61	19.17%
CSR Activities Expenses	0.30	-	100%
Donation paid	1.85	2.45	(24.50%)
Testing & calibration	1.76	1.43	23.17%
Telephone & internet	1.44	1.24	16.03%
MVAT of earlier year	-	2.86	(100%)
Late delivery charges	-	1.95	(100%)
Other expenses	5.26	8.96	(37.95%)
Total other expenses	205.26	157.41	30.40%

 

 

 

Reasons for increase in our major other expenses:

 

1. repairs and maintenance expenses increased by 37.62% to ? 58.43 million in Fiscal 2022 from ? 42.45 million in Fiscal 2021. The increase was mainly on account of repair and maintenance of our plant & machinery and building.
2. export freight, handling & clearing expenses increased by 106.53% to ? 32.47 million in Fiscal 2022 from ? 15.72 million in Fiscal 2021. The increase was mainly on account of increase in our export revenues in Fiscal 2022 coupled with increase in freight rates during the fiscal;
1. power and fuel expenses increased by 38.70% to ? 29.26 million in Fiscal 2022 from ? 21.10 million in Fiscal 2021. The increase was in line with increase in our overall business activity in Fiscal 2022 over Fiscal 2021;.
2. office expenses increased by 40.83% to ? 18.69 million in Fiscal 2022 from ? 13.27 million in Fiscal 2021 mainly due to amount incurred on temporary shedding. Additionally, the increase was in line with increase in our overall activity in Fiscal 2022 over Fiscal 2021;
3. License and consultancy fees decreased 24.17% to ? 7.76 million in Fiscal 2022 from ? 6.25 million in Fiscal 2021 mainly due to increase in consultancy charges of employee recruitment toward new recruitment of employees;
4. freight inward expenses increased by 30.35% to ? 6.71 million in Fiscal 2022 from ? 5.15 million in Fiscal 2021 mainly due to increase in our purchases of raw materials and consumables on account of increase in our overall activity;
5. insurance expenses increased by 69.50% to ? 5.84 million in Fiscal 2022 from ? 3.45 million in Fiscal 2021 mainly due to increase in insurance cost for employees. Our overall number of employees also increased during the Fiscal year 2022;
6. Freight outward & octroi expenses decreased by 36.90% to ? 5.77 million in Fiscal 2022 from ? 9.15

million in Fiscal 2021 mainly due to decrease in the freight rates by our logistics vendors.

 

 

Exceptional items

 

Our exceptional loss decreased to ? 4.14 million in Fiscal 2022 from loss of ? 16.30 million in Fiscal 2021. The gain was primarily on account of attributable to gain of ? 4.13 million in Fiscal 2022 on account of foreign exchange translation of Foreign Currency Term Loan availed by us, as against loss of ? 16.30 million in Fiscal 2021.

 

 

Profit before tax

 

As a result of the foregoing, our profit before tax increased by 358.00% to ? 368.62 million in Fiscal 2022 from

? 80.49 million in Fiscal 2021.

 

 

Tax expense

 

Our total tax expense (including current tax, deferred tax charge / (credit) and income tax pertaining to earlier years) increased by 359.21 % to ? 93.57 million in Fiscal 2022 from ? 20.38 million in Fiscal 2021. The increase was mainly on account of increase in current tax to ? 83.30 million in Fiscal 2022 as against Nil in Fiscal 2021 (There was no current tax expense in Fiscal 2021 due to availment of set off of carried forward losses of earlier years). The increase in current tax is also due to increase in profit before tax. However, the increase was partially set off by decrease in deferred tax expense by ? 10.08 million in Fiscal 2022.

 

 

Profit for the year

 

As a result of the foregoing, our profit after tax for the year increased by 357.59% to ? 275.06 million in Fiscal 2022 from ? 60.11 million in Fiscal 2021.

 

 

Other comprehensive income:

 

We recorded a total other comprehensive income of ? 0.01 million in Fiscal 2022 as compared to ? 0.03 million in Fiscal 2021. This was primarily on account of exchange differences on translation of financial statements of foreign operations (i.e. our UK Subsidiary.)

 

 

Total comprehensive income for the year:

As a result of the foregoing, our total comprehensive income increased by 357.36% to ? 275.06 million in Fiscal 2022 from ? 60.14 million in Fiscal 2021.

 

 

Liquidity and Capital Resources

 

Historically, we have been able to finance our capital requirements and the expansion of our business and operations through a combination of funds generated from our operations, equity infusions from shareholders and debt financing, and we expect to continue to do so. Our primary capital requirements are working capital for our operations and capital expenditures.

 

We believe that after taking into account the expected cash to be generated from our business and operations, the Net Proceeds from the Fresh Issue and the proceeds from our existing bank loans, we will have sufficient capital to meet our anticipated capital requirements for our working capital and capital expenditure requirements for the 12 months following the date of this Red Herring Prospectus.

 

As at the Fiscal ended March 31, 2023, 2022 and 2021, we had cash and cash equivalents (comprising of cash on hand and balances with banks excluding fixed deposits) of ? 61.32 million, ? 82.05 million and ? 34.77 million respectively and balance in fixed deposit of ? 1.21 million, ? 1.23 million and ? 1.15 million respectively, as per our Restated Consolidated Financial Statements.

 

 

Cash Flows

 

The table below summarizes our cash flows for the Fiscals 2023, 2022 and 2021:

 

 

(? in million)

Particulars	March 31, 2023	March 31, 2022	March 31, 2021
Net cash generated from operating activities	37.88	320.63	120.88
Net cash from/ (used) in investing activities	(94.56)	(133.85)	(29.09)
Net cash (used)/generated from financing activities	35.92	(139.41)	(103.87)
Net (decrease)/increase in cash and cash equivalents	(20.76)	47.37	(12.08)
Cash and Cash Equivalents at the beginning of the year	83.29	35.92	48.00
Cash and Cash Equivalents at the end of the year	62.53	83.29	35.92

 

 

 

Operating Activities Fiscal 2023

Our net cash used in operating activities was ? 37.88 million during Fiscal 2023. Our restated profit before tax was ? 412.08 million during the Fiscal ended March 31, 2023 and adjustments to reconcile restated profit before tax to operating profit before working capital changes majorly consisted of depreciation and amortisation expense of ? 52.19 million, amongst others, which was partially offset by provision for tax of ? 108.34 million. Operating profit before working capital changes was ? 355.98 million during Fiscal ended March 31, 2023. The main working capital adjustments during Fiscal ended March 31, 2023, included increase in inventories by ? 201.85 million and increase in trade receivables by ? 143.58 million, amongst others. This was partially offset by decrease in other current assets by ? 71.48 million and increase in trade payables by ? 24.46 million, amongst others.

 

 

Fiscal 2022

Our net cash generated from operating activities was ? 320.63 million during Fiscal 2022. Restated profit before tax was ? 368.62 million during the Fiscal ended March 31, 2022 and adjustments to reconcile restated profit before tax to operating profit before working capital changes majorly consisted of depreciation and amortisation expense of ? 41.84 million, amongst others, which was partially offset by provision for tax of ? 83.27 million. Operating profit before working capital changes was ? 327.20 million during Fiscal ended March 31, 2022. The main working capital adjustments during Fiscal ended March 31, 2022, included an increase in trade receivables of ? 188.32 million, increase in inventories of ? 15.02 million and decrease in other current assets of ? 115.31 million, decrease in other current liabilities of ? 67.97 million, amongst others. This was partially offset by increase in trade payables of ? 61.52 million, amongst others.

 

 

Fiscal 2021

 

Our net cash generated from operating activities was ? 120.88 million during the Fiscal 2021. Restated profit before tax was ? 80.49 million for Fiscal ended March 31, 2021 and adjustments to reconcile restated profit before tax to operating profit before working capital changes majorly consisted of depreciation and amortisation expense of ? 37.78 million. Operating profit before working capital changes was ? 118.30 million during Fiscal 2021. The main working capital adjustments during Fiscal 2021 included increase in inventories of ? 25.67 million, increase in trade receivables of ? 42.03 million and increase in other current assets of ? 17.04 million, amongst others. This was partially offset by a increase in trade payables of ? 65.85 million and increase in other current liabilities of ?

22.06 million, amongst others.

 

 

Investing Activities

 

 

Fiscal 2023

 

Net cash used in investing activities was ? 94.56 million for the in Fiscal 2023, primarily on account of capital

expenditure made in property, plant and equipment and intangible assets.

 

 

Fiscal 2022

 

Net cash used in investing activities was ? 133.85 million in Fiscal 2022. This was primarily on account of capital expenditure made in property, plant and equipment and intangible assets of ? 133.85 million.

 

 

Fiscal 2021

 

Net cash used in investing activities was ? 29.09 million in Fiscal 2021. This was primarily on account of capital expenditure made in property, plant and equipment and intangible assets of ? 29.09 million.

 

 

 

Financing Activities

 

 

Fiscal 2023

 

Net cash generated in financing activities during Fiscal ended March 31, 2023 was ? 35.92 million which primarily consisted of proceeds from short term borrowings (net) of ? 71.79 million, the same was offset with outflows towards repayment of long term borrowings of ? 13.00 million and dividend payment of ?22.86 million.

 

 

Fiscal 2022

 

Net cash used in financing activities during Fiscal ended March 31, 2022 was ? 139.41 million which primarily consisted of repayment of long term borrowings (net) of ? 142.94 million. This was partially offset by proceeds from short term borrowings of ? 3.52 million.

 

 

Fiscal 2021

Net cash used in financing activities during Fiscal ended March 31, 2021 was ? 103.87 million which primarily consisted of repayment of long term borrowings (net) of ? 22.98 million and repayment of short term borrowings of ? 80.89 million.

 

 

 

Financial Indebtedness

 

As on March 31, 2023 the total outstanding borrowings of our Company aggregated to ? 450.06 million, which included long-term borrowings of ? 196.86 million (including current maturities of long term debt of ? 182.64 million) and short-term borrowings of ? 253.20 million. We propose to repay certain of secured loans to the extent of ? 350.00 million out of the Net Proceeds. For further details, please refer to chapter titled, "Financial Indebtedness" and "Objects of the Offer" beginning on page 225 and 99 of this Red Herring Prospectus.

 

The following table sets forth certain information relating to our outstanding indebtedness as of March 31, 2023, and our repayment obligations in the periods indicated:

 

 

(? in million)

Particulars	As at March 31, 2023
	Total Due within one Due beyond one year year

 

 

Long Term Secured Borrowings
Term Loans (secured)	211.57	182.64	28.93
Working Capital Loan (secured)	166.72	-	166.72
Vehicle Loans (secured)	1.21	-	1.21
Total Long Term Secured term borrowings
Short Term Unsecured Borrowings
Unsecured Loan	70.56	70.56	-
Total Short Term Unsecured Borrowings
Total Borrowings	450.06	253.20	196.86
Contingent Liabilities and Off-Balance Sheet Arrangements

 

 

As of March 31, 2023, our Company did not have any contingent liabilities and off balance sheet arrangements

as per "Ind AS 37 – Provisions, Contingent Liabilities and Contingent Assets", that have not been provided for.

 

Except as disclosed in the Restated Consolidated Financial Statements or elsewhere in this Red Herring Prospectus

, there are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that we believe are material to investors.

 

 

Contractual Obligations and Commitments

 

As on March 31, 2023, our Company did not have contractual obligations or capital commitments.

 

 

Capital Expenditure

 

During Fiscals 2023, 2022 and 2021, our capital expenditures, were ? 154.01 million, ? 134.00 million and ?

28.77 million respectively. The following table sets forth gross addition to our fixed assets for the periods indicated:

 

(? in million)

Particulars	Fiscal 2023	Fiscal 2022	Fiscal 2021
Property, Plant & Equipment	146.90	132.35	24.65
Intangible Assets	7.11	1.65	4.12
Total	154.01	134.00	28.77

 

Note: This is based on the Gross block of our property, plant and equipment and intangible assets. For further

information, see "Restated Consolidated Financial Statements" on page 221. Related Party Transactions

We enter into various transactions with related parties in the ordinary course of business. Primarily such transactions include remuneration to directors and KMP, payment of dividend, loans taken and repayment and sale of our products among others. For further details relating to our Related Party Transactions, see "Note 41 – Related Party Information as per Ind AS 24" on page F-44 under chapter titled "Restated Consolidated Financial Statements" beginning on page 221 of this Red Herring Prospectus .

 

 

Auditor’s Observations

 

There have been no reservations/ qualifications/ adverse remarks/ matters of emphasis highlighted by our statutory auditors which requires adjustments in Restated Consolidated Financial Statements as of and for the years ended March 31, 2021, 2022 and 2023.

 

 

Quantitative and Qualitative Disclosures about Market Risk

 

In the course of our business, we are exposed to certain financial risks such as credit risk, liquidity risk, market risk and price risk.

 

 

Market Risks

 

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, could affect our income. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimizing the return. We are exposed to market risk primarily related to foreign exchange rate risk (currency risk) and interest rate risk. Accordingly, our exposure to market risk is a function of borrowing activities and revenue generating and operating activities in foreign currencies.

 

 

Commodity Price Risk

 

Commodity price risk is the possibility of impact from changes in the prices of raw materials. We are exposed to market risk with respect to the prices of certain raw materials used for our products, including different components or grades of steel coil, wires and fittings, which are primary raw materials for the products manufactured at our facility. The costs for these materials are based on commodity prices and are subject to fluctuations. The costs of components sourced from outside manufacturers may also fluctuate based on their availability from suppliers.

 

 

Foreign Currency Risk

 

Our Company is subject to the risk that changes in foreign currency values impact the Company’s exports revenue and imports of raw material. The risk exposure is with respect to various currencies viz. USD, Euro and other foreign currencies. The risk is measured through monitoring the net exposure to various foreign currencies and the same is minimized to the extent possible.

 

Our Companys risk to foreign exchange fluctuations arises mainly from foreign currency transactions, primarily with respect to the trade receivables and trade payables. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not our Company’s functional currency. We export our products to various countries across the globe where our invoices are denominated in USD or EUR or any other foreign currency. Similarly we import raw materials such as steel coil and fittings, the

prices of which are denominated in USD or EUR or any other foreign currency. Changes in currency exchange rates influence our results of operations. We are naturally hedged to an extent as we import raw materials and export our finished goods. In addition, our revenues are split between domestic sales in India and overseas sales. However, there can be no assurance that fluctuations in the value of the Indian Rupee against USD or EUR or any other foreign currency will not have an effect on our results of operations.

 

The following table sets forth our exposure to foreign currency risk expressed in ? million, as at March 31, 2023,

as per our Restated Consolidated Financial Statements:

 

Financial Assets as at March 31, 2023 685.34

Financial liabilities as at March 31, 2023 433.86

 

 

Interest Rate Risk

 

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Our Company’s exposure to the risk of changes in market interest rates relates primarily to our Company’s long-term debt obligations with floating interest rates. Our Company’s main interest rate risk arises from long-term borrowings with variable rates, which expose us to cash flow interest rate risk. We mitigate risk by structuring our borrowings to achieve a reasonable, competitive cost of funding. There can be no assurance that we will be able to do so on commercially reasonable terms, or that these agreements, if entered into, will protect us adequately against interest rate risks.

 

 

Credit Risk

 

Credit risk is the risk of financial loss to the Company if the counterparty fails to meet its contractual obligations. The Company is exposed to credit risk from its operating activities (primarily trade receivables). However, the credit risk on account of financing activities, i.e., balances with banks is very low, since the Company holds all the balances with approved bankers only.

 

 

Trade receivables: Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the customers outstanding balances to which the Company grants credit terms in the normal course of business. Concentration of credit risk with respect to trade receivables are limited, as the Company’s customer base is large, reputed and having good credit credential as well as that they are long standing customers. All trade receivables are reviewed and assessed for default on a quarterly basis. Historical experience of collecting receivables of the Company is supported by low level of past default and hence the credit risk is perceived to be low.

 

 

Liquidity risk

 

Liquidity risk is the risk the Company faces in meeting its obligations associated with its financial liabilities. The Company’s approach in managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, Management considers both normal and stressed conditions.

 

Our objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans and finance leases. We closely monitor our liquidity position and deploy a robust cash management system. We aim to minimise these risks by generating sufficient cash flows from current operations, which in addition to the available cash and cash equivalents and sufficient committed fund facilities, will provide liquidity. The liquidity risk is managed on the basis of expected maturity dates of the financial liabilities. The carrying amounts are assumed to be reasonable approximation of fair value

 

 

Effect of Inflation

In recent years, India has experienced moderate rates of inflation. While we believe inflation has not had any material impact on our business and results of operations, inflation generally impacts the overall economy and business environment and hence could affect us.

 

 

Unusual or Infrequent Events or Transactions

 

Except as described in this Red Herring Prospectus, to our knowledge, there have been no unusual or infrequent events or transactions that have in the past or may in the future affect our business operations or future financial performance.

 

 

Significant Economic Changes that Materially Affected or are Likely to Affect Income from Continuing Operations

 

Our business has been subject, and we expect it to continue to be subject, to significant economic changes that materially affect or are likely to affect income from continuing operations identified above in "– Significant Factors Affecting our Results of Operations and Financial Conditions" and the uncertainties described in "Risk Factors" on pages 227 and 37 respectively.

 

 

Known Trends or Uncertainties that Have had or are Expected to Have a Material Adverse Impact on Sales, Revenue or Income from Continuing Operations

 

Our business has been subject, and we expect it to continue to be subject, to significant economic changes arising from the trends identified above in "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Significant Factors Affecting our Results of Operations" and the uncertainties described in "Risk Factors" beginning on pages 225 and 37, respectively. To our knowledge, except as discussed in this Red Herring Prospectus, there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on sales, revenue or income of our Company from continuing operations.

 

 

Expected Future Changes in Relationship between Costs and Revenues, in Case of Events Such as Future Increase in Labour or Material Costs or Prices that will Cause a Material Change are Known

 

Other than as described in "Risk Factors", "Our Business" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" beginning on pages 37, 153 and 225 respectively, to our knowledge there are no known factors that may adversely affect our business prospects, results of operations and financial condition.

 

 

Status of any Publicly Announced New Products or Business Segments

 

Except as disclosed elsewhere in the RHP, we have not announced and do not expect to announce in the near future any new products or business segments.

 

 

Competitive Conditions

 

We operate in a competitive environment. Please refer to chapter titled "Our Business", "Industry Overview" and "Risk Factors" on pages 153, 125, 37 respectively, for further details on competitive conditions that we face in our business.

 

 

Extent to which Material Increases in Net Sales or Revenue are due to Increased Sales Volume, Introduction of New Products or Services or Increased Sales Prices

 

Changes in revenue in the last three Fiscals are as described in "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Fiscal 2023 compared to Fiscal 2022" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Fiscal 2022 compared to Fiscal 2021".

 

 

Significant Dependence on a Single or Few Suppliers or Customers

The percentage of contribution of our Company’s customers and suppliers vis a vis the revenue from operations and raw materials purchases respectively for Fiscal ended as on March 31, 2023 and Fiscal ended as on March 31, 2022, based on Restated Consolidated Financial Statements are as follows:

 

 

Particulars	Suppliers Customers
	For the year ended For the year ended For the year ended For the year ended March 31, 2023 March 31, 2022 March 31, 2023 March 31, 2022

 

 

Top 5 (%)	74.49	74.52	24.10	33.02
Top 10 (%)	81.24	82.27	31.38	40.74
Seasonality of Business

 

 

The nature of our business is not seasonal.

 

 

Significant Developments after March 31, 2023 that may affect our results of operations

 

To our knowledge, except as disclosed below and except as set out in this Red Herring Prospectus Herring Prospectus, in the opinion of the Board of Directors of our Company, no circumstances have arisen since the date of the last financial statements as disclosed in this Red Herring Prospectus which materially or adversely affect or are likely to affect, our operations or profitability, or the value of our assets or our ability to pay our material liabilities within the next 12 months.

 

 

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