rangsons electronics pvt ltd Management discussions
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion is intended to convey managements perspective on our financial condition and results of operations for the Fiscals ended March 31, 2023, 2022 and 2021. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our Restated Summary Statement, including the schedules, notes and significant accounting policies thereto, and the sections entitled “Summary of Financial Information” and “Financial Information ” on pages 67 and 225, respectively. The Restated Summary Statement has been prepared in accordance with Ind AS, Section 26 of the Companies Act, the SEBIICDR Regulations and the Guidance Note on “Reports in Company Prospectuses (Revised 2019) ” issued by the ICAI. Ind AS differs in certain material respects from IFRS and US GAAP. See “Risk Factors - Significant differences exist between Ind AS and other accounting principles, such as U.S. GAAP and IFRS, which investors outside India may be more familiar with and may consider material to their assessment of our business, results of operations, financial condition and cash flows. ” on page 58.
Unless the context otherwise requires, in this section, references to “we ”, “us ” or “our ” refers to our Company, Cyient DLM Limited. Unless the context otherwise requires, references to our “customer” or “customers” shall be deemed to include affiliates or group entities of our customers, as applicable.
This discussion contains forward-looking statements and reflects our current views with respect to future events and our financial performance and involves numerous risks and uncertainties, including, but not limited to, those described in the section entitled “Risk Factors” on page 26. Actual results could differ materially from those contained in any forward-looking statements and for further details regarding forward-looking statements, kindly refer to the section entitled “Forward-Looking Statements” on page 16. Unless otherwise stated or unless the context otherwise requires, the financial information of our Company used in this section has been derived from the Restated Summary Statement. Unless noted otherwise, some of the industry related information in this section is obtained or extracted from the Frost & Sullivan Report (which is a paid report and was commissioned by us solely in connection with the Offer).
Our fiscal year ends on March 31 of each year. Accordingly, unless otherwise stated, all references to a particular fiscal year are to the 12-month period ended March 31 of that year.
Overview
We are one of the leading integrated Electronic Manufacturing Services (“EMS”) and solutions providers (Source: Frost & Sullivan Report) with capabilities across the value chain and the entire life cycle of a product. We were incorporated on June 30, 1993. We have over 22 years of experience in developing high mix, low-to-medium volume highly complex systems, we are a qualified supplier to global OEMs in the aerospace and defence, medical technology and industrial sectors. ‘Low volume, high mix (LVHM) is a type of a contract manufacturing setup which typically has a very high emphasis on quality and customization which changes according to the requirements of the customer.
We leverage the design capabilities of our Promoter, Cyient Limited, a leading engineering services provider with over three decades of domain expertise providing engineering and design solutions globally with a focus on multiple industries (Source: Frost & Sullivan Report). Our Electronic Manufacturing Services are provided as Build to Print (“B2P”) and Build to Specification (“B2S”) services to our clients. Our B2P solutions involve our client providing the design for the product for which we provide agile and flexible manufacturing services. Our B2S services involve utilising our Promoters design capabilities to design the relevant product based on the specifications provided by the client and manufacturing the product. Our solutions primarily comprise: (i) printed circuit board (“PCB”) assembly (“PCBA”), (ii) cable harnesses, and (iii) box builds which are used in safety critical systems such as cockpits, inflight systems, landing systems, and medical diagnostic equipment.
The EMS market is witnessing strong tailwinds. The India EMS is a sizeable industry, contributing to 2.2% (USD 20 billion) of the global EMS market in 2022. Indias EMS industry is the fastest growing among all countries at a CAGR of 32.3% and is expected to contribute 7.0% (USD 80 billion) of the global EMS market in 2026. There continues to be a strong push from the government to make India an ideal location for electronics manufacturing in the region. With clear benefits in terms of production efficiency, reduced overhead, labour costs, and faster new product introductions, OEMs today continue to collaborate with EMSs to develop their products. In addition, OEMs are also increasingly moving product design and development processes, to EMS partners (Source: Frost & Sullivan Report). We are well positioned to take advantage of these tailwinds on the back of our solutions-oriented approach, client-focused service and track record of reliability. Being a wholly- owned subsidiary of Cyient Limited, our relationship with our Promoter allows us to benefit from its reputation, customer relationships, global salesforce, network and technical expertise, making us one of the industrys leading integrated EMS and solutions providers in India (Source: Frost & Sullivan Report).
Our customers belong to a diverse range of high-entry-barrier industries that have stringent quality and qualification requirements. We enjoy long-term relationships as an integrated partner to multiple marquee customers such as Honeywell International Inc. (“Honeywell”), Thales Global Services S.A.S (“Thales”), ABB Inc, Bharat Electronics Limited and Molbio
Diagnostics Private Limited, having had an average relationship of over 11 years as on March 31, 2023 with the aforementioned customers. We provide services across the product life cycle for our clients by acting as an integrated service provider who can support their manufacturing and after-market services needs, as well as their design needs by leveraging our Promoters design team. As a strategic partner to clients across highly regulated industries, we enjoy long-term relationships with high customer stickiness and a high proportion of repeat business, which allows us to have visibility on future revenue and a stable client base.
Our manufacturing infrastructure comprises three facilities spread across two states in India, at Mysuru, Hyderabad and Bengaluru, with a total manufacturing area of 229,061 sq. ft. Our Mysuru facility has a manufacturing area of 65,929 sq. ft. and is primarily engaged in the manufacture of PCBA, cable harnesses and box builds for clients in the aerospace and defence industries. Our Hyderabad facility, which is located in a special economic zone, has a manufacturing area of 150,932 sq. ft. and is primarily engaged in the manufacture of PCBA, cable harnesses and box builds for clients based in non-aerospace and nondefence industries, such as medical technology and healthcare. Our Bengaluru facility has a manufacturing area of 12,200 sq. ft. and is focused on high-precision manufacturing. Some of the items manufactured include, body valves, hinges, elbow adaptors, assemblies like bracket assembly, lanyard assembly and hinge arm locking assembly etc. Our manufacturing facilities have received various quality and standard certifications, details of which are set out in “ - Our Manufacturing Facilities on page 175. Further, we have a workforce of 656 qualified and skilled manufacturing personnel as on March 31, 2023, which is further supported by a new product introduction (NPI) and engineering team of a total of 67 persons as on March 31, 2023, which helps us support our clients on technical aspects and provide value added services like design for assembly, design for manufacturing, design for testing, design for packaging, and process engineering to our clients. Our NPI capabilities are dedicated towards supporting seamless product introduction for our customers, through to market launch, and assisting them optimize the time to market for a new product.
We have a diversified Board with an average of over seven years in the EMS industry, which is supplemented by our professional management team, with an average of over 20 years of industry experience. Our senior management team includes our Managing Director, Rajendra Velagapudi, Chief Executive Officer and Business Head, Anthony Montalbano, our Senior Vice President and Chief Operating Officer, Ram Dornala and our Chief Financial Officer, Shrinivas Appaji Kulkarni. We believe our experienced and dedicated management team also enables us to capture market opportunities, formulate and execute business strategies, manage customer expectations and proactively address changes in market conditions.
Significant Factors Affecting Our Results of Operations
Our results of operations have been, and will be, affected by many factors, some of which are beyond our control. The following is a discussion of certain factors that have had, and will continue to have, a significant effect on our financial condition and results of operations:
Market and economic conditions
We derive a significant portion of our revenue from sales of complex and high mix, low-to-medium volume highly complex systems, primarily supplying to our clients engaged in the aerospace and defence, medical technology and industrials sectors in India and internationally. The level of demand for our products depends primarily on conditions in these sectors in our target markets which, in turn, depend to a large extent on general economic conditions in these markets. General economic factors that can affect demands in these sectors, therefore, demands for the products that we manufacture, include, among others:
• global oil prices, which impact the sectors in which our clients operate and consequently our industry;
• global and local economic or fiscal instability;
• global and local political and regulatory measures and developments, such as tax incentives or other subsidies, and environmental policies;
• global and local fiscal and monetary dynamics, such as rises or falls in interest rates (resulting in greater or lesser ability by customers to borrow money, including for automotive purchases), foreign exchange rates and inflation rates;
• general levels of GDP growth in a country or region, and growth in personal disposable income in that country or region;
• demographic conditions and population dynamics, such as the absolute size of a market and the growth rates of the population in that market; and
• cost of raw materials and labour.
The cyclical nature of general economic conditions and, therefore, of such sectors means that our results of operations can fluctuate substantially from period to period. We expect that these economic factors and conditions in our industry, particularly changes in changes in technologies, customer preferences, government policies and interest rates, will continue to be the most important factors affecting our revenues and results of operations. Other factors, such as our competitiveness, quality and pricing, have an effect on our market share and our ability to win customers in competitive situations.
Maintaining our customer relationships
Almost all of our revenue from operations arises from sales of our products and rendering of services to our customers. As key customers typically have specific requirements, we believe that our continued relationships with these customers plays a significant role in determining our continued success and results of operations. Our strategic partnership model and our ability to develop and deepen our relationships with our customers has accelerated our growth and allowed us to enjoy a position of one of the leading EMS and solutions providers (Source: Frost & Sullivan Report). We also focus on assisting customers meet their requirements across the spectrum of their engagement with us, including in terms of cost, productivity, product reliability and low time to market. This, together with our high delivery standards and performance excellence, has enabled us to acquire, service and deepen and lengthen our relationship with diverse range of high-level clients ranging from startups to industry leaders. We are dependent on certain of our key customers, especially Honeywell International Inc., Thales Global Services S.A.S, ABB Inc., Bharat Electronics Limited and Molbio Diagnostics Private Limited. For further details, see “Risk Factors - Our business is dependent on the sale of our products to certain key customers. Our top 10 customers constituted 91.08% of our total revenue from operations for the year ended March 31, 2023. Further, as at March 31, 2023, our Trade Receivables were f 1,617.48 million. The loss of any of our key customers or loss of revenue from sales to our customers or any defaults or delays in payment by a significant portion of our customers could have a material adverse effect on our business, results of operations, financial condition and cash flows." on page 26. Further, a substantial portion of our business is derived from repeat contracts from customers, which constitutes 99.96 %, 99.85% and 99.74% of our total revenue from operations for the Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively. Our long-term contracts with our clients, have a term ranging between three years and more than 15 years. The demand for our products from our customers has a significant impact on our results of operations and financial condition. The loss of any one of our key customers or a significant reduction in demand from such customers could have an adverse effect on our business, results of operations, financial condition and cash flows. Our supply arrangements with our customers also require us to meet certain standards and performance obligations and our failure to meet such specifications could result in a reduction of business from them, termination of contracts or additional costs and penalties, all of which may adversely impact our results of operations and financial condition. Adherence to quality standards is a critical factor in our manufacturing process as any defects in the products manufactured by our Company or failure to comply with the technical specifications of our customers may lead to termination of our contracts or cancellation of the orders placed by our customers.
Raw material and labour costs
Raw material costs which consist of cost of material consumed and changes in inventory of finished goods and work in progress constitute the most significant portion of our expenses. Our costs of material consumed and changes in inventory of finished goods and work in progress for Fiscals 2021, 2022 and 2023 were Rs.4,952.93 million, Rs.5,439.62 million and Rs.6,452.14 million, representing 77.76%, 74.67% and 76.96% of our total income respectively. Cost of materials consumed primarily consists of the cost of raw materials that we consume in the manufacture of our products (our primary raw materials are (a) electronics such as semiconductors and passives; (b) mechanicals such as machining, sheet metal, plastics and aluminum; (c) cables and connectors; and (d) consumables and packing).
We primarily purchase raw materials in line with the terms and prices that are agreed with our suppliers from time to time. Prices for these raw materials are linked to commodity markets, which, in turn, depend on changes in global economic conditions, industry cycles, transportation costs, supply-and-demand dynamics, attempts by individual producers to capture market share, and market speculation, among other factors, and are thus subject to fluctuation. In addition to market fluctuations, our average raw material prices can be affected by contractual arrangements and hedging strategies, if any. Our suppliers are associated with us through purchase orders, and we do not enter into definite-term agreements with them. See “Risk Factors - We depend on third party suppliers for raw materials and components, which are on a purchase order basis. For the year ended March 31, 2023, our cost of raw materials consumed attributed to our top five and top 10 suppliers constituted 30. 78% and 43.02% respectively, of our total cost of raw materials consumed. Our suppliers may not perform, or be able to perform their conditions in a timely manner, or at all and any delay, shortage, interruption, reduction in the supply of or volatility in the prices ofraw materials on which we rely may have a material adverse effect on our business, results of operations, financial condition and cash flows." on page 35.
While in practice we have passed the increase in the cost of raw materials onto our customers, our cash flows may still be adversely affected due to any gap in time between the date of procurement of those raw materials and the date on which we can reset the component prices for our customers so as to account for the increase in the prices of such raw materials. In addition, we may not be able to pass all of our raw material price increases to our customers. Our ability to adjust pricing terms with customers varies based on our specific customer relationships, market practice with respect to the particular raw material or component and other factors such as raw material content and whether medium-term price fluctuations have been factored into our component prices at the time of price finalisation. As a result, for some of our customers, we may in some instances bear the risk of price increases that occur. Further, an increase in raw material prices may result in increased prices for our customers products, which may in turn result in decreased demand for their products and, consequently, the components that we supply for their products.
Employee benefit expense comprise our second largest expense after raw material costs. In fiscals 2021, 2022 and 2023, our employee benefit expense represented 7.36%, 7.09% and 7.72% of our total income respectively. We seek to improve our operational efficiency by reducing our employee benefit expenses as a percentage of our total incomes, notwithstanding that we are continuing to expand our business and manufacturing facilities. We have entered into a memorandum of settlement with the representatives of our workers in our Mysuru facility, which is valid until March 31, 2025, and shall be valid thereafter unless terminated by either of the parties. Further, with respect to the workers at our Hyderabad facility, we have standing orders certified and authenticated by the Office of the Development Commissioner, Vishakhapatnam Special Economic Zone, Ministry of Commerce and Industry, Government of India on March 16, 2022 under the Industrial Employment (Standing Orders) Act, 1946 and the Telangana State Industrial employment (Standing Orders) Rules, 1953 (“Standing Orders”). Rising wages in India as well as any change in applicable labour laws, may have a material impact on our costs.
Operating costs and efficiencies
Given the nature of our business, operating costs and efficiencies are critical to maintaining our competitiveness and profitability. Our profitability is partially dependent on our ability to spread fixed production costs over our production volumes.
Our operations are integrated across the product cycle and coordinated through concurrent engineering and design, machine building and automation. This vertical integration of our operations has enabled us to streamline our production processes, achieve shorter development and delivery times, exercise greater control over key inputs and processes, enhance quality control and increase supply security. We continually undertake efforts to reduce our costs, such as negotiating discounts, outsourcing non-critical processes, reducing energy usage and rationalising our labour. Our ability to reduce our operating costs in line with customer demand is subject to risks and uncertainties, as our costs depend, in part, on external factors beyond our control.
In the highly regulated industries that our customers belong to, adherence to quality standards is crucial since the products are mission-critical for the customer with a high criticality of failure. In order to maintain the quality standards and comply with the design specifications of our customers, we follow a stringent quality control mechanism, and we also have a separate team of engineers responsible for quality assurance. We also incur certain costs in order to ensure that the products that we supply to our customers are of high quality and free of defects. Such costs relate to matters such as capital expenditure, testing and validation, systems deployment and rejection and re-working of products. Any failure to comply with the design specifications of our customers, may lead to cancellations of our contracts and loss of reputation. Quality control therefore is critical to our operations and a failure to prevent the passing down of defects to our customers may make us liable to pay significant damages.
Exchange rates
Although our Companys reporting currency is in Indian Rupees, we transact a significant portion of our business in several other currencies. Further, a part of our revenues is derived from sales to customers based outside of India. In fiscals 2021, 2022 and 2023, our total revenues from contracts with customers with geographical location outside India were Rs.2,295.19 million, Rs.3,241.23 million and Rs.4,968.03 million, respectively, which represented 36.55%, 44.98% and 59.71% of our total revenue, respectively. The exchange rate between the Indian Rupee and the currencies in which we receive payments for such exports, i.e. primarily the USD and Euro, has fluctuated in the past and our results of operations have been impacted by such fluctuations in the past and may be impacted by such fluctuations in the future. For example, during times of strengthening of the Indian Rupee, we expect that our overseas sales and revenues will generally be negatively impacted as foreign currency received will be translated into fewer Indian Rupees. However, the converse positive effect on depreciation of the Indian Rupee may not be sustained or may not show an appreciable impact in our results of operations in any given financial period due to other variables impacting our results of operations during the same period. Moreover, we expect that our cost of borrowing as well as our cost of imported raw materials, overseas professional costs, freight and other expenses incurred by us may rise during a sustained depreciation of the Indian Rupee against USD or Euro.
Certain portions of our income and expenses are generated or incurred in other currencies and certain portions of our assets (trade receivables and cash and cash equivalents) and liabilities (trade payables and borrowings) are in other currencies, such as USD, Euro, GBP, AUD, JPY and SGD. Therefore, our exchange rate risk primarily arises from currency mismatches between our income and our expenditure which we seek to mitigate by matching income currency to expenditure currency to the extent possible.
We do not have a formal hedging policy and accordingly, may be subject to foreign currency exposure and fluctuations in the exchange rates between the Indian Rupee and other currencies.
Our Critical Accounting Policies
The significant accounting policies followed by us in the preparation of our Restated Summary Statement are set out below.
Judgements
In the process of applying our Company accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:
Determining the lease term of contracts with renewal and termination options - Company as lessee
Our Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, 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. Our Company based its assumptions and estimates on parameters available when the Restated Summary Statement 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 our Company. Such changes are reflected in the assumptions when they occur.
Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arms length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that our Company is not yet committed to or significant future investments that will enhance the assets performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. These estimates are most relevant to goodwill and other intangibles with indefinite useful lives recognised by our Company.
Provision for expected credit losses of trade receivables
Our Company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognized from initial recognition of the receivables. As a practical expedient, our Company uses a provision matrix to determine impairment loss of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. The ECL loss allowance (or reversal) during the year is recognized in the statement of profit and loss.
At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. Our Companys historical credit loss experience and forecast of economic conditions may also not be representative of customers actual default in the future.
Taxes
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
Defined benefit plans (gratuity benefits)
The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds where remaining maturity of such bond correspond to expected term of defined benefit obligation.
The mortality rate is based on publicly available mortality tables. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates.
Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model.
The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
Goodwill
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, our Company reassesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in OCI and accumulated in equity as capital reserve. However, if there is no clear evidence of bargain purchase, the entity recognises the gain directly in equity as capital reserve, without routing the same through OCI.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of our Companys cashgenerating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
A cash generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.
Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, our Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted through goodwill during the measurement period, or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date. These adjustments are called as measurement period adjustments. The measurement period does not exceed one year from the acquisition date.
Foreign currency translation
Functional and presentation currency
The Restated Summary Statement are presented in Indian rupees, which is the functional and presentation currency of our Company.
Transactions and balances
In preparing the Restated Summary Statement of our Company, transactions in currencies other than the entitys functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. Foreign-currency denominated monetary assets and liabilities are translated at the exchange rate prevailing on the balance sheet date. Exchange gains and losses arising on settlement and restatement are recognized in the statement of profit and loss.
Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled.
Property, plant and equipment
Property, plant and equipment are initially recognized at cost. The initial cost of property, plant and equipment comprises its purchase price, including non-refundable duties and taxes net of any trade discounts and rebates.
The cost of property, plant and equipment includes interest on borrowings (borrowing cost) directly attributable to acquisition, construction or production of qualifying assets subsequent to initial recognition, property, plant and equipment are stated at cost less accumulated depreciation (other than freehold land, which are stated at cost) and accumulated impairment losses, if any. capital work in progress is stated at cost, net of accumulated impairment loss, if any.
Our Company depreciates property, plant and equipment over their estimated useful lives using the straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed, based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support.
Type of asset |
Useful life of the Company | As per Schedule II of Act |
Buildings |
Refer Note 1 below |
|
Plant & Machinery |
5-15 Years (refer note 2 below) | 15 years |
Tools & Equipment |
5 Years (refer note 2 below) | 10 years |
Furniture & Fixtures |
10 Years | 10 years |
Electrical Installations |
10 Years | 10 Years |
Vehicles |
10 Years | 10 Years |
Computers & Servers |
3-5 Years | 3-6 Years |
Office Equipment |
5 Years | 5 Years |
Notes:
1. Buildings constructed over leasehold land are depreciated over remaining lease term of land or life as specified under Schedule II of the Act, whichever is lower.
2. Our Company, based on technical assessment made by technical expert and management estimate, depreciates certain items of Plant & Machinery, Computers & Servers and Tools & Equipment over estimated useful lives which are different from the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
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 is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
On transition to Ind AS (i.e. 1 April 2016), our Company has elected to continue with the carrying value of all Property, plant and equipment measured as per the previous GAAP and use that carrying value as the deemed cost of Property, plant and equipment.
Intangible assets
Intangible assets are stated at cost less accumulated amortization and accumulated impairment. Intangible assets are amortized over their estimated useful life on a straight-line basis as follows:
Type of asset |
Useful life |
Computer software |
3 years |
An intangible asset is de-recognized on disposal, or when no future economic benefits are expected from use. Gains or losses arising from de-recognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in ‘other income of statement of profit and loss when the asset is de-recognized. Amortization methods and useful lives are reviewed periodically at each financial year end.
On transition to Ind AS (i.e. 1 April 2016), our Company has elected to continue with the carrying value of all intangible assets measured as per the previous GAAP and use that carrying value as the deemed cost of intangible assets.
Amortization methods and useful lives are reviewed periodically at each financial year end.
Leases
Company as lessee
Our Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
At the date of commencement of the lease, our Company recognizes a right-of-use asset (“ROU”) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, our Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements include the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
i) Right-of-use assets
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses and adjusted for any remeasurement of lease liabilities.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The right-of-use assets are also subject to impairment.
ROU asset |
Useful lives |
Leasehold land |
19 years |
Buildings |
3-10 years |
ii) Lease liabilities
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of the leases. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made or a change in the assessment of extension or termination options. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments).
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
Income taxes:
The income tax expense or credit for the period is the tax payable or tax receivable on the taxable income based on the applicable income tax rate in India and adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
Current and deferred tax is recognized in statement of profit and loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
The current tax and deferred tax calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in India.
Deferred tax is provided in full, using the balance sheet method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Restated Summary Statement. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill. Deferred tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit/loss.
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.
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 assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax for the year. MAT credit is recognized in accordance with tax laws in India as a deferred tax asset only to the extent that is probable that our Company will pay normal income tax during the specified period i.e. the period for which MAT credit is allowed to be carried forward. Our Company reviews the MAT credit at each balance sheet date and writes down the carrying amount of MAT credit entitlement to the extent there is no longer convincing evidence to the effect that our Company will pay normal income tax during the specified period.
In the situations where one or more units in our Company are entitled to a tax holiday under the Income tax Act, 1961 enacted in India or tax laws prevailing in the respective tax jurisdictions where they operate, no deferred tax (asset or liability) is recognized in respect of temporary differences which reverse during the tax holiday period, to the extent the concerned entitys gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of temporary differences which reverse after the tax holiday period is recognized in the year in which the temporary differences originate. However, our Company restricts recognition of deferred tax assets to the extent it is probable that sufficient future taxable income will be available against which such deferred tax assets can be realized. For recognition of deferred taxes, the temporary differences which originate first are considered to reverse first.
Inventories:
Inventories are valued at the lower of cost and net realizable value.
Costs of inventories are determined on a weighted average basis. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
Inventories are valued in accordance with the below method of valuation.
(i) Raw materials & consumables: Valued at cost or net realizable value whichever is less. Cost includes purchase costs and other costs incurred in bringing the inventories to their present location and condition.
(ii) Stores and spares: Valued at cost. Cost includes purchase costs and other costs incurred in bringing the inventories to their present location and condition.
(iii) Work in progress & finished Goods: Valued at cost or net realizable value whichever is less. Costs includes direct material costs, wages and applicable overheads.
Cash and cash equivalents:
Cash comprises cash on hand, in bank and demand deposits with banks. Our Company considers all highly liquid financial instruments, which are readily convertible into cash and have original maturities of three months or less from the date of purchase, to be cash equivalents. Such cash equivalents are subject to insignificant risk of changes in value.
Cash flows are reported using indirect method, whereby profit / (loss) after tax is adjusted for the effects of transaction of taxes, non- cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of our Company are segregated based on the available information.
Provisions and contingent liabilities
Provisions
Provisions are recognized when our Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.
Provisions are measured at the present value of managements best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognized as an interest expense. Provisions are not recognized for future operating losses.
Provisions for onerous contracts are recognized when the expected benefits to be desired by our Company from a contract are lower than unavoidable costs of meeting to future obligations under the contract and are measured at the present value of lower than expected net cost of fulfilling the contract and expected cost of terminating the contract.
Contingencies
Contingent liability is disclosed for all possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of our Company (or) present obligations arising from past events where it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or a sufficiently reliable estimate of the amount of the obligation cannot be made. Contingent liabilities are not recognized in the Restated Summary Statement but discloses its existence in the Restated Summary Statement unless the probability of outflow of resources is remote. A contingent asset is neither recognized nor disclosed in the Restated Summary Statement.
Revenue recognition
Revenue from contracts with customers is recognised, on the basis of approved contracts, when control of the goods or services are transferred to the customer at an amount that reflects the consideration entitled in exchange for those goods or services. Our Company is the principal as it typically controls the goods or services before transferring them to the customer.
Revenue from sale of goods is recognised at the point in time when control of the goods is transferred to the customer, generally upon delivery of the goods. Revenue from rendering of services is recognised over time by measuring the progress towards complete satisfaction of performance obligations at the reporting period.
Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable consideration) allocated to that performance obligation. The arrangement with customer specify services to be rendered which meet criteria of performance obligations. For allocation, transaction price, our Company measures the revenue in respect of each performance obligation of a contract at its relative standalone selling price. The transaction price of goods sold and services rendered is net of variable consideration. Variable consideration includes incentives, volume rebates, discounts etc., which is estimated at contract inception considering the terms of various schemes with customers and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved. It is reassessed at end of each reporting period.
Trade receivables
A receivable is recognised if an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).
Contract liabilities
A contract liability is recognised if a payment is received, or a payment is due (whichever is earlier) from a customer before our Company transfers the related goods or services. Contract liabilities are recognised as revenue when our Company performs under the contract (i.e., transfers control of the related goods or services to the customer).
Generally, our Company receives advances from few of its customers. . If there is manufacturing lead time of more than 1 year after signing the contract and receipt of payment, then there is a significant financing component for these contracts considering the length of time between the customers payment and the transfer of the goods. As such, the transaction price for these contracts is discounted, using the interest rate implicit in the contract (i.e., the interest rate that discounts the cash selling price of the equipment to the amount paid in advance). This rate is commensurate with the rate that would be reflected in a separate financing transaction between our Company and the customer at contract inception. Using the practical expedient in Ind AS 115, our Company does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer of the promised good or service to the customer and when the customer pays for that good or service will be one year or less.
Interest Income
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to our Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
Government grants/incentives
Government grants are recognized when there is a reasonable assurance that:
a) Our Company will comply with the conditions attached to them; and
b) The grant will be received.
Export entitlements from government authorities are recognized in the statement of profit and loss when the right to receive credit as per the terms of the scheme is established in respect of the exports made by our Company, and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds. Grants are recognized net of attributable expenses.
Employee benefit plans
Employee benefits include provided fund, employees state insurance scheme, gratuity fund and compensated absences.
Post-employment obligations:
Defined contribution plans:
Contributions in respect of Employees Provident Fund which are defined contribution schemes, are made to a fund administered and managed by the Government of India and are charged as an expense based on the amount of contribution required to be made and when service are rendered by the employees.
Defined benefit plans
Gratuity:
Our Company accounts for its liability towards Gratuity based on actuarial valuation made by an independent actuary as at the balance sheet date using projected unit credit method. The liability recognized in the balance sheet in respect of the gratuity plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of the plant assets.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The net interest cost is calculated by applying the discount rate to the net balance of the defined obligation and the fair value of plan assets. This cost is included in the employee benefit expense in the statement of profit and loss. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in the statement of profit and loss as past service cost.
Compensated absences:
The employees of our Company are entitled to compensate absences. The employees can carry -forward a portion of the unutilized accrued compensated absence and utilize it in future periods or receive cash compensation at retirement or termination of employment for the unutilized accrued compensated absence. Our Company records an obligation for compensated absences in the period in which the employee renders the services that increase this entitlement. Our Company measures the expected cost of compensated absence based on actuarial valuation made by an independent actuary as at the balance sheet date on projected unit credit method.
Share based payments
Our Company recognizes compensation expense relating to share based payments in the statement of profit and loss, using fair value in accordance with Ind AS 102, Share based payments.
The stock options are measured at the fair value of the equity instruments at the grant date, based on option valuation model (Black Scholes model). The fair value determined at the grant date of the stock options is expensed on a straight-line basis over the vesting period, based on our Companys estimate of the equity instruments that will eventually vest, with a corresponding increase in share-based payments reserve in equity.
At the end of each reporting period, our Company revises its estimate of the number of equity instruments expected to vest. The impact of the original estimates, if any, is recognised in statement of profit and loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the share-based payments reserve in equity. The equity settlement component is not remeasured at each reporting date. The cash settlement component is remeasured at each reporting date and at settlement date based on the fair value of the liability with any changes in the fair value recognised in the statement of profit and loss.
Other short-term employee benefits
Other short-term employee benefits and performance incentives expected to be paid in exchange for the services rendered by employees are recognized during the period when the employee renders service.
Operating Segments
Our Companys Chief operating decision maker is the Managing Director and Chief Executive Officer who evaluates Companys performance and allocates resources based on an analysis of various performance indicators by business verticals and geographical segmentation of customers.
Our Company is engaged in providing total electronic manufacturing solutions single operating segment “Total electronic manufacturing solutions” which is considered as the primary business segment.
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 or sale.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
Financial instruments
a) Initial recognition:
Financial assets and financial liabilities are recognized when a company entity becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value except trade receivables. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial 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 financial liabilities, as appropriate, 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. Trade receivables that do not contain a significant financing component or for which our Company has applied the practical expedient are measured at the transaction price determined under Ind AS 115.
b) Subsequent Measurement:
(i) Financial assets
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
All recognized financial assets are subsequently measured in their entirety at either amortized cost or fair value, depending on the classification of the financial assets
Classification of financial assets:
Financial assets carried at amortized cost:
A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at fair value through other comprehensive income:
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Our Company has made an irrevocable election for its investments which are classified as equity instruments to present the subsequent changes in fair value in other comprehensive income based on its business model.
Financial assets at fair value through profit or loss:
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss.
(ii) Financial liability:
All financial liabilities are subsequently measured at amortized cost using the effective interest method. For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either contingent consideration recognized by our Company as an acquirer in a business combination to which Ind AS 103 applies or is held for trading or it is designated as at FVTPL.
A financial liability is classified as held for trading if:
• It has been incurred principally for the purpose of repurchasing it in the near term; or
• on initial recognition it is part of a portfolio of identified financial instruments that our Company manages together and has a recent actual pattern of short-term profit-taking; or
• It is a derivative that is not designated and effective as a hedging instrument.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest paid on the financial liability and is included in the ‘Other income line item.
However, for non-held-for-trading financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognized in other comprehensive income, unless the recognition of the effects of changes in the liability s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss, in which case these effects of changes in credit risk are recognized in profit or loss. The remaining amount of change in the fair value of liability is always recognized in profit or loss. Changes in fair value attributable to a financial liabilitys credit risk that are recognized in other comprehensive income are reflected immediately in retained earnings and are not subsequently reclassified to profit or loss.
Financial Liability subsequently measured at amortized cost
Financial liabilities that are not held-for-trading and are not designated as at FVTPL 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 on the effective interest method. Interest expense that is not capitalized as part of costs of an asset is included in the Finance costs line item
c) Foreign exchange gains and losses:
For foreign currency denominated financial assets measured at amortized cost and FVTPL, the exchange differences are recognized in profit or loss except for those which are designated as hedging instruments in a hedging relationship.
Changes in the carrying amount of investments in equity instruments at FVTOCI relating to changes in foreign currency rates are recognized in other comprehensive income.
For the purposes of recognizing foreign exchange gains and losses, FVTOCI debt instruments are treated as financial assets measured at amortized cost. Thus, the exchange differences on the amortized cost are recognized in profit or loss and other changes in the fair value of FVTOCI financial assets are recognized in other comprehensive income.
For financial liabilities that are 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 ‘Other income.
The fair value of financial 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 liabilities that are measured as at FVTPL, the foreign exchange component forms part of the fair value gains or losses and is recognized in profit or loss.
d) De-recognition of financial assets and liabilities:
Financial assets
Our Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If our Company retains substantially all the risk and rewards of ownership of a transferred financial asset, our Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.
On de-recognition of a financial asset in its entirety, the difference between the assets carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss if such gain or loss would have otherwise been recognized in profit or loss on disposal of that financial asset.
Financial liabilities
Our Company derecognizes financial liabilities when, and only when, our Companys obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in statement of profit and loss.
Determination of fair values
In determining the fair value of its financial instruments, our Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair value include discounted cash flow analysis, available quoted market prices and dealer quotes. All methods of assessing fair value result in general approximation of value, and such value may never actually be realized.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, 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, our Company considers the characteristics of asset or liability of market participants when pricing the asset or liability at the measurement date.
Fair value for measurement and/or disclosure purposes in these Restated Summary Statement is determined on such a basis, except for share-based payment transactions that are within the scope of Ind AS 102, leasing transactions that are within the scope of Ind AS 116, and measurements that have some similarities to fair value but are not fair value, such as net realizable value in Ind AS 2 or value in use in Ind AS 36.
In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
Impairment of assets
Financial assets
Our Company recognises loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through statement of profit and loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL.
For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised as an impairment gain or loss in statement of profit and loss.
For trade receivables, our Company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognized from initial recognition of the receivables. As a practical expedient, our Company uses a provision matrix to determine impairment loss of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. The ECL loss allowance (or reversal) during the year is recognized in the statement of profit and loss.
Non-financial assets
Intangible assets, Intangible assets under development, property, plant and equipment and ROU assets 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 fair value less cost to sell and the 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 CGU to which the asset belongs. Intangible assets under development are tested for impairment annually. Our Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of our Companys CGUs to which the individual assets are allocated.
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 amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
Earnings per share:
Our Company presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of our Company by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
Principal Components of our Statement of Profit and Loss
The following descriptions set forth information with respect to the key components of our statement of profit and loss.
Our Income
Revenue from Operations
Our revenue from operations primarily consist of sale of goods and rendering of services.
The sale of products consist of sale of printed circuit boards, cable harness and box builds. Rendering of services includes billing for non-recurring expenditure (NRE) services i.e., one-time expenses incurred or services rendered in relation to a project, for which we invoice the relevant customer.
Other Income
The key components of our other income are: (i) interest income on fixed deposits with banks; (ii) export incentives; and (iii) foreign exchange gain (net)
Our Expenses
Our expenses primarily consist of the following:
• Cost of materials consumed consists of raw material and intermediaries, required for the manufacturing of finished goods.
• Changes in inventories of finished goods and work-in-progress are an adjustment of the opening and closing stock of finished goods and work-in-progress at the end of the fiscal;
• Employee benefits expense consists of salaries and wages including bonus, contribution to provident and other funds, share based payments from holding company employees and staff welfare expenses;
• Finance costs includes interest expense on borrowings from banks, related parties, others and lease liabilities;
• Depreciation and amortization expense comprises of depreciation expense on property, plant and equipment, right of use assets and amortization of intangible assets; and
• Other expenses primarily includes freight outwards, marketing expenses, expenses on power and fuel, stores and spares consumed and other miscellaneous expenses.
Our Tax Expenses
Elements of our tax expense are as follows:
• Current tax: Our current tax is the amount of tax payable based on the taxable profit for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961
• Deferred tax: Deferred tax is recognized based on the difference between taxable profit and book profit due to the effect of timing differences. Our deferred tax is measured based on the applicable tax rates and tax laws that have been enacted or substantively enacted by the relevant balance sheet date.
Other Comprehensive Income / (loss) for the year
The other comprehensive income consists of items that will not be reclassified subsequently to the statement of profit or loss which consists of remeasurement of gains/(losses) on net defined benefit liability and income tax effect on items.
Total Comprehensive Income for the year
Total comprehensive income for the year consists of profit for the year and total other comprehensive income / (loss) for the year.
Our Results of Operations
The following table sets forth a breakdown of our restated results of operations for the years ended March 31, 2023, 2022 and 2021, and each item as a percentage of our total income for the years indicated:
Particulars |
Year ended March 31, 2023 |
Year ended March 31, 2022 |
Year ended March 31, 2021 |
|||
| Rs. in million | (%) of Total Income | Rs. in million | (%) of Total Income | Rs. in million | (%) of Total Income | |
Income |
||||||
Revenue from operations |
8,320.33 | 99.25 | 7,205.33 | 98.91 | 6,280.28 | 98.61 |
Other income |
63.11 | 0.75 | 79.51 | 1.09 | 88.83 | 1.39 |
Total income |
8,383.44 | 100.00 | 7,284.84 | 100.00 | 6,369.11 | 100.00 |
Expenses |
||||||
Cost of materials consumed |
6,341.53 | 75.64 | 5,552.88 | 76.23 | 4,778.52 | 75.03 |
Change in inventories of finished goods and work-in-progress |
110.61 | 1.32 | (113.26) | (1.55) | 174.41 | 2.74 |
Employee benefits expense |
646.94 | 7.72 | 516.52 | 7.09 | 468.63 | 7.36 |
Finance costs |
315.16 | 3.76 | 219.75 | 3.02 | 207.70 | 3.26 |
Depreciation and amortisation expense |
194.15 | 2.32 | 192.86 | 2.65 | 184.62 | 2.90 |
Other expenses |
343.45 | 4.10 | 408.79 | 5.61 | 399.28 | 6.27 |
Total expenses |
7,951.84 | 94.85 | 6,777.54 | 93.04 | 6,213.16 | 97.55 |
Profit before tax |
431.60 | 5.15 | 507.30 | 6.96 | 155.95 | 2.44 |
Tax expense / (benefit) |
||||||
- Current tax |
129.71 | 1.55 | 96.35 | 1.32 | 5.03 | 0.08 |
- Deferred tax |
(15.38) | (0081 | 13.00 | 0.18 | 32.78 | 0.51 |
Total tax expense / (benefit) |
114.33 | 1.36 | 109.35 | 1.50 | 37.81 | 0.59 |
Profit for the year |
317.27 | 3.78 | 397.95 | 5.46 | 118.14 | 1.85 |
Other Comprehensive Income (OCT) |
||||||
Items that will not be reclassified subsequently to statement of profit or loss |
||||||
(a) Remeasurement gains/(losses) of net defined benefit |
2.28 | 0.03 | (4.47) | (0.06) | 1.84 | 0.03 |
Particulars |
Year ended March 31, 2023 |
Year ended March 31, 2022 |
Year ended March 31, 2021 |
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| Rs.in million | (%) of Total Income | Rs.in million | (%) of Total Income | Rs.in million | (%) of Total Income | |
liability |
||||||
(b) Income tax relating to items that will not be classified to profit or loss |
(0.57) | (0.01) | 1.12 | 0.02 | (0.52) | (0.01) |
Total other comprehensive income / (loss) for the year, net of tax |
1.71 | 0.02 | (3.35) | (0.05) | 1.32 | 0.02 |
Total comprehensive income for the year, net of tax |
318.98 | 3.80 | 394.60 | 5.42 | 119.46 | 1.88 |
Fiscal 2023 compared to Fiscal 2022
Total income: Our total income increased by 15.08% from Rs.7,284.84 million in fiscal 2022 to Rs.8,383.44 million in fiscal 2023.
This increase was primarily due to an increase in revenue from operations. This increase was mainly due to the following:
• Revenue from sale of goods: Our revenue from sale of goods increased by 14.26% from Rs.7,155.57 million in fiscal 2022 to Rs.8,176.09 million in fiscal 2023. This was primarily due to an increase in the volume of products sold, increase in revenue from the customers in the industrial sector and an increase in revenue from customers in the aerospace and defence industry.
• Revenue from rendering of services: Our revenue from rendering of services increased by 189.87% from Rs.49.76 million in fiscal 2022 to Rs.144.24 million in fiscal 2023. This was primarily due to billing for non-recurring expenditure (NRE) services, i.e., one-time expenses incurred or services rendered in relation to a project, for which we invoice the relevant customer.
• Other income: Our other income decreased by 20.63% from Rs.79.51 million in fiscal 2022 to Rs.63.11 million in fiscal 2023. This decrease was primarily due to decrease in export incentives from Rs.45.28 million in fiscal 2022 to Rs.3.63 million in fiscal 2023 and reversal of expected credit loss allowance (net) of Rs.13.15 million in fiscal 2022, which was partially offset by an increase in interest income on financial assets carried at amortised cost - bank deposits from Rs.16.09 million in fiscal 2022 to Rs.30.01 million in fiscal 2023.
Total expenses: Our total expenses increased by 17.33% from Rs.6,777.54 million in fiscal 2022 to Rs.7,951.84 million in fiscal 2023. This increase was mainly due to the following factors:
• Cost of materials consumed: Our cost of materials consumed totaled to Rs.6,341.53 million in fiscal 2023, an increase of 14.20% from Rs.5,552.88 million in fiscal 2022. The increase was mainly due to an increase in our revenue from operations.
• Changes in inventories of finished goods and work-in-progress: Changes in inventories of finished goods and work-inprogress was Rs.110.61 million in fiscal 2023, as compared to Rs.(113.26) million in fiscal 2022. This was primarily due a decrease in finished goods by Rs.54.64 million and a decrease in work-in-progress by Rs.55.97 million.
• Employee benefits expense: Our employee benefits expense totaled Rs.646.94 million in fiscal 2023, an increase of 25.25% over Rs.516.52 million in fiscal 2022. This increase was primarily due to an increase in salaries and wages, including bonus from Rs.477.28 million in fiscal 2022 to Rs.568.73 million in fiscal 2023. This increase was due to an increase in the number of employees employed by us and annual compensation increments.
• Finance costs: Our finance cost totaled Rs.315.16 million in fiscal 2023, an increase of 43.42% over our finance costs of Rs.219.75 million in fiscal 2022. This increase was primarily due to an increase in interest on borrowings from banks and borrowings from related parties.
• Depreciation and amortisation expense: Our depreciation and amortisation expense totaled Rs.194.15 million in fiscal 2023, an increase of 0.67% over depreciation and amortisation expense of Rs.192.86 million in fiscal 2022. This marginal increase was primarily due to additions to property, plant and equipment of Rs.75.02 million in Fiscal 2023.
• Other expenses: Our other expenses decreased by 15.98% from Rs.408.79 million in fiscal 2022 to Rs.343.45 million in fiscal 2023. This was primarily due to a decrease in (i) freight outwards from Rs.133.14 million in fiscal 2022 to Rs.55.88 million in fiscal 2023; (ii) marketing expenses from Rs.68.98 million in fiscal 2022 to Rs.17.81 million in fiscal 2023; and (iii) legal and professional charges from Rs.29.76 million in fiscal 2022 to Rs.11.03 million in fiscal 2023. The decrease in other expenses was in line with our budgets for the year and cost initiatives taken during the year.
Profit before tax: As a result of the factors outlined above, our profit before tax was Rs.431.60 million in fiscal 2023 as compared to the profit before tax of Rs.507.30 million in fiscal 2022.
Tax expense
• Current tax: We recorded a current tax expense of Rs.129.71 million in fiscal 2023 as compared to a current tax expense of Rs.96.35 million in fiscal 2022.
• Deferred tax: We recorded a deferred tax benefit of Rs.15.38 million for fiscal 2023 as compared to a deferred tax expense of Rs.13.00 million for fiscal 2022.
Our enacted tax rates for Fiscal 2023 and Fiscal 2022 was 25.17% and increase in tax expense in Fiscal 2023 as compared to Fiscal 2022 was due to deferred tax asset not recognised earlier/ (deferred tax liability reversing) during tax holiday period Fiscal 2022 of Rs.14.58 million.
Profit for the year: As a result of the factors outlined above, our profit for the year was Rs.317.27 million in fiscal 2023 as compared to the profit for the year of Rs.397.95 million in fiscal 2022.
Total other comprehensive income / (loss) for the year: Our total other comprehensive income for the year was Rs.1.71 million in fiscal 2023 as compared to total other comprehensive loss for the year of Rs.3.35 million in fiscal 2022. This was primarily due to remeasurement gain in net defined benefit liability due to actuarial valuation.
Total comprehensive income for the year: As a result of the factors outlined above, our total comprehensive income for the year in fiscal 2023 was Rs.318.98 million as compared to a total comprehensive income for the year of Rs.394.60 million in fiscal 2022.
Fiscal 2022 compared to Fiscal 2021
Total income: Our total income increased by 14.38% from Rs.6,369.11 million in fiscal 2021 to Rs.7,284.84 million in fiscal 2022. This increase was primarily due to an increase in revenue from operations. This increase was mainly due to the following:
• Revenue from sale of goods: Our revenue from sale of goods increased by 14.67% from Rs.6,239.96 million in fiscal 2021 to Rs.7,155.57 million in fiscal 2022. This was primarily due to an increase in the volume of products sold, increase in revenue from the customers in the energy sector and an increase in revenue from customers in the aerospace and defence industry.
• Revenue from rendering of services: Our revenue from rendering of services increased by 23.41% from Rs.40.32 million in fiscal 2021 to Rs.49.76 million in fiscal 2022. This was primarily due to an increase in billing for non-recurring expenditure (NRE) services, i.e., one-time expenses incurred or services rendered in relation to a project, for which we invoice the relevant customer.
• Other income: Our other income decreased by 10.49% from Rs.88.83 million in fiscal 2021 to Rs.79.51 million in fiscal 2022. This decrease was primarily due to decrease in miscellaneous income from Rs.9.81 million in fiscal 2021 to Rs.0.33 million in fiscal 2022 and due to liabilities no longer required, written back of Rs.14.55 million in fiscal 2021, which was partially offset by reversal of expected credit loss allowance (net) of Rs.13.15 million in Fiscal 2022.
Total expenses: Our total expenses increased by 9.08% from Rs.6,213.16 million in fiscal 2021 to Rs.6,777.54 million in fiscal 2022. This increase was mainly due to the following factors:
• Cost of materials consumed: Our cost of materials consumed totaled to Rs.5,552.88 million in fiscal 2022, an increase of 16.21% from Rs.4,778.52 million in fiscal 2021. The increase was mainly due to an increase in the volume of products sold.
• Changes in inventories of finished goods and work-in-progress: Changes in inventories of finished goods and work-inprogress was Rs.(113.26) million in fiscal 2022, as compared to Rs.174.41 million in fiscal 2021. This was primarily due a decrease in finished goods by Rs.71.71 million and an increase in work-in-progress by Rs.184.97 million. The decrease in finished goods was due to an increase in sales which led to a decrease in closing stock of finished goods.
• Employee benefits expense: Our employee benefits expense totaled Rs.516.52 million in fiscal 2022, an increase of 10.22% over Rs.468.63 million in fiscal 2021. This increase was primarily due to a 15.05% increase in salaries and wages, including bonus from Rs.414.83 million in fiscal 2021 to Rs.477.28 million in fiscal 2022. This increase was due to an increase in the number of employees employed by us and annual compensation increments.
• Finance costs: Our finance cost totaled Rs.219.75 million in fiscal 2022, an increase of 5.08% over our finance costs of Rs.207.70 million in fiscal 2021. This increase was primarily due to an increase in other borrowing costs and in interest on borrowings from related parties and interest on lease liabilities.
• Depreciation and amortisation expense: Our depreciation and amortisation expense totaled Rs.192.86 million in fiscal 2022, an increase of 4.46% over depreciation and amortisation expense of Rs.184.62 million in fiscal 2021. This marginal
increase was primarily due to an addition in the fixed assets such as buildings, plant and equipment, furnitures and fixtures and computers and intangible assets such as computer software.
• Other expenses: Our other expenses increased by 2.38% from Rs.399.28 million in fiscal 2021 to Rs.408.79 million in fiscal 2022. This was primarily due to an increase in (i) freight outwards from Rs.101.05 million in fiscal 2021 to Rs.133.14 million in fiscal 2022; (ii) marketing expenses from Rs.62.78 million in fiscal 2021 to Rs.68.98 million in fiscal 2022; (iii) stores and spares consumed from Rs.19.44 million in fiscal 2021 to Rs.29.05 million in fiscal 2022; (iv) repairs and maintenance on machinery from Rs.18.44 million in fiscal 2021 to Rs.28.22 million in fiscal 2022; and (v) miscellaneous expenses from Rs.34.21 million in fiscal 2021 to Rs.47.05 million in fiscal 2022. The increase in other expenses was in line with the increase in revenues from operations.
Profit before tax: As a result of the factors outlined above, our profit before tax was Rs.507.30 million in fiscal 2022 as compared to the profit before tax of Rs.155.95 million in fiscal 2021.
Tax expense
• Current tax: We recorded a current tax expense of Rs.96.35 million in fiscal 2022 as compared to a current tax expense of Rs.5.03 million in fiscal 2021. This increase was primarily due to an increase in profit before tax.
• Deferred tax: We recorded a deferred tax expense of Rs.13.00 million for fiscal 2022 as compared to a deferred tax expense of Rs.32.78 million for fiscal 2021. This decrease was primarily due to reversal of timing differences.
Profit for the year: As a result of the factors outlined above, our profit for the year was Rs.397.95 million in fiscal 2022 as compared to the profit for the year of Rs.118.14 million in fiscal 2021.
Total other comprehensive income for the year: Our total other comprehensive loss for the year was Rs.3.35 million in fiscal 2022 as compared to total other comprehensive income for the year Rs.1.32 million in fiscal 2021. This was primarily due to actuarial loss on net defined benefit plans, such as gratuity.
Total comprehensive income for the year: As a result of the factors outlined above, our total comprehensive income for the year in fiscal 2022 was Rs.394.60 million as compared to a total comprehensive income for the year of Rs.119.46 million in fiscal 2021.
Liquidity and Capital Resources
Capital Requirements
For Fiscals 2021, 2022 and 2023, we met our funding requirements, including capital expenditure, satisfaction of debt obligations, investments, taxes, working capital requirements and other cash outlays, principally with funds generated from operations and optimisation of operating working capital, with the balance principally met using external borrowings.
The following table sets forth information on cash and cash equivalents as at the dates indicated:
Particulars |
For the year ended March 31, 2023 | For the year ended March 31, 2022 | For the year ended March 31, 2021 |
| ( Rs.in million) | |||
Cash and cash equivalents at the end of the year |
773.41 | 768.59 | 146.69 |
The following table sets forth certain information concerning our cash flows for the years ended March 31, 2023, March 31, 2022 and March 31, 2021 indicated:
Particulars |
For year ended March 31, 2023 | For year ended March 31, 2022 | For year ended March 31, 2021 |
| ( Rs.in million) | |||
Net cash flow from operating activities |
521.05 | 485.37 | 349.28 |
Net cash flow used in investing activities |
(1,418.41) | (324.14) | (9.01) |
Net cash flow from / (used in) financing activities |
740.35 | 460.67 | (428.16) |
Net cashflow from operating activities
For fiscal 2023, our net cash flow from operating activities was Rs.521.05 million which primarily comprised of (i) profit for the year of Rs.317.27 million which was adjusted primarily for, among other things, finance costs of Rs.296.59 million, depreciation and amortisation expense of Rs.194.15 million and tax expense of Rs.114.33 million (ii) changes in working capital; and (iii) income taxes paid, net. Changes in working capital primarily included, inter-alia, increase in inventories of Rs.1,555.21 million and increase in other assets and other financial assets of Rs.352.61 million and increase in provisions, other liabilities and other financial liabilities of Rs.871.83 million and increase in trade payables of Rs.913.80 million. Net cash flow from operating activities also included income taxes paid, net of Rs.168.44 million.
For fiscal 2022, our net cash flow from operating activities was Rs.485.37 million which primarily comprised of (i) profit for the year of Rs.397.95 million which was adjusted primarily for, among other things, finance costs of Rs.190.61 million, depreciation and amortisation expense of Rs.192.86 million and tax expense of Rs.109.35 million (ii) changes in working capital; and (iii) income taxes paid, net. Changes in working capital primarily included, inter-alia, increase in inventories of Rs.1,141.15 million and increase in other assets and other financial assets of Rs.181.92 million and increase in provisions, other liabilities and other financial liabilities of Rs.228.01 million, which is partially offset by decrease in trade receivables of Rs.758.78 million. Net cash flow from operating activities also included income taxes paid, net of Rs.62.04 million.
For fiscal 2021, our net cash flow from operating activities was Rs.349.28 million which primarily comprised of (i) profit for the year of 18.14 million which was adjusted primarily for, among other things, finance costs of Rs.188.47 million, depreciation and amortisation expense of Rs.184.62 million and tax expense of Rs.37.81 million (ii) changes in working capital; and (iii) income taxes paid, net. Changes in working capital primarily included, inter-alia, increase in trade receivables of Rs.1,722.86 million and increase in trade payables of Rs.820.72 million which is partially offset by decrease in inventories of Rs.671.30 million and decrease in provisions, other liabilities and other financial liabilities of Rs.123.21 million. Net cash flow from operating activities also included income taxes received, net of Rs.0.73 million.
Net cashflow used in investing activities
For fiscal 2023, our net cash flow used in investing activities was Rs.1,418.41 million which was primarily investment in deposits of Rs.2,413.61 million and investments in equity instruments of Rs.892.00 million which was partially offset by proceeds from maturity / withdrawal of deposits of Rs.1,960.50 million.
For fiscal 2022, our net cash flow used in investing activities was Rs.324.14 million which was primarily investment in deposits of Rs.323.00 million and payment towards purchase of property, plant and equipment and intangible assets of Rs.84.14 million which was partially offset by proceeds from maturity / withdrawal of deposits of Rs.68.58 million.
For fiscal 2021, our net cash flow used in investing activities was Rs.9.01 million which was primarily investment in deposits of Rs.305.00 million and payment towards purchase of property, plant and equipment and intangible assets of Rs.273.87 million which was significantly offset by proceeds from maturity / withdrawal of deposits of Rs.536.80 million.
Net cashflow from / (used in) financing activities
For fiscal 2023, our net cash flow from financing activities was Rs.740.35 million which primarily comprised of proceeds from current borrowings of Rs.3,950.00 million which was partially offset by repayment of current borrowings of Rs.3,893.07 million.
For fiscal 2022, our net cash flow from financing activities was Rs.460.67 million which primarily comprised of proceeds from current borrowings of Rs.2,551.91 million which was partially offset by repayment of current borrowings of Rs.1,961.18 million.
For fiscal 2021, our net cash flow used in financing activities was Rs.428.16 million which primarily comprised of repayment of current borrowings of Rs.2,136.20 million which was partially offset by proceeds from current borrowings of Rs.1,645.17 million.
Capital Expenditure
The table below provides details of our net cash outflow on capital expenditure for the financial years ended March 31, 2023, 2022 and 2021, respectively:
| (Rs. in million) | |||
Particulars |
For the year ended March 31, 2023 | For the year ended March 31, 2022 | For the year ended March 31, 2021 |
Payment towards purchase of property, plant and equipment and intangible assets |
(76.20) | (84.14) | (273.87) |
Planned Capital Expenditure
Our planned capital expenditure for Fiscal 2024 shall be primarily used for capability enhancement, general infrastructure and replacement of plant and machinery and IT equipment.
Indebtedness
As of March 31, 2023, we had total borrowings amounting to Rs.3,144.74 million, which consisted of secured working capital loans from banks, and unsecured intercorporate loans from our Promoter. For further details related to our indebtedness, see “Financial Indebtedness" on page 304.
Contractual Obligations
The table below provides details regarding the contractual maturities of significant financial liabilities (excluding borrowings and lease liabilities) as of March 31, 2023.
| (Rs. in million) | |||
Particulars |
As of March 31, 2023 |
||
| Less than 1 year | 1-2 years | 2 years or more | |
Trade Payables |
2,852.62 | - | - |
Other Financial Liabilities |
76.49 | 41.58 | 124.74 |
Contingent Liabilities
As of March 31, 2023, there are no contingent liabilities as per Ind AS 37.
Off-Balance Sheet Transactions
We have not entered into any off-balance sheet transactions.
Market Risks
Market risk is the risk that the fair value of future cash flows of a financial asset will fluctuate because of changes in market prices. Our activities expose us to a variety of financial risks, including the effects of changes in foreign currency exchange rates and interest rates.
Commodity Price Risk
We are exposed to fluctuation in prices of semi conductors, passives, sheet metal, plastics and aluminium, cables and connectors and electronic integrated circuits which is used by our Company as raw-materials. The prices of these products are volatile which depends on the demand supply factors in the Indian and international markets. The volatility in the prices of these commodities can have significant impact on our Companys income and net profit.
We have a risk management framework aimed at prudently managing the risk arising from the volatility in commodity prices. Our commodity risk is managed centrally through well-established trading operations and control processes.
Interest Rate Risk
Interest rate risk is the risk that the fair value of future cash flows of an exposure will fluctuate because of changes in market interest rates. Our exposure to the risk of changes in market interest rates relates primarily to our Companys debt obligations with floating interest rates. Any changes in the interest rates environment may impact future cost of borrowings. Our management monitors the movements in interest rates and wherever possible, reacts to material movements in such interest rates by restructuring its financing arrangements.
Currency Risk
Foreign currency risk is the risk that fair value of future cash flow of an exposure will fluctuate because of changes in foreign exchange rates. Our exposure to the risk of changes in foreign exchange rates relates primarily to our operating activities. We have foreign currency trade payables and receivables and are therefore, exposed to foreign exchange risks. We do not have a formal hedging policy and our management undertakes natural hedging of foreign currency exposure to mitigate foreign exchange risks.
Liquidity risk
Liquidity risk is the risk that our Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses. Our objective is to maintain a balance between continuity of funding and flexibility through the use of letter of credit and working capital limits. Our Company ensures it has sufficient cash to meet operational needs while maintaining sufficient margin on its undrawn borrowing facilities at all times on the basis of expected cash flow.
Credit risk
Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. We are exposed to credit risks from our operating activities, which primarily include trade receivables and from our financing activities, including deposits with banks and other financial instruments. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which our Company grants credit terms in the normal course of business. Our Company establishes an allowance for doubtful debts and impairment that represents its estimate of expected losses in respect of trade receivables. Our Companys exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment.
Inflation Risk
In recent years, India has experienced relatively high 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.
Total turnover of each major industry segment
Our Companys operations fall within a single operating "Electronic manufacturing solutions" which is considered as the primary reportable business segment.
Unusual or Infrequent Events or Transactions
Except as described in this Prospectus, there have been no events or transactions to our knowledge that have in the past or may in the future affect our business operations or financial performance which may be described as “unusual” or “infrequent”.
Known Trends or Uncertainties
Other than as described in “Risk Factors” and this “Managements Discussion and Analysis ofFinancial Condition and Results of Operations” on pages 26 and 281, respectively, to our knowledge there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on our revenue or income from continuing operations.
Future Relationships Between Expenditure and Income
Other than as described in “Risk Factors” on page 26 and “Managements Discussion and Analysis of Financial Condition and Results of Operations” on page 281, to our knowledge there are no known factors which we expect will have a material adverse impact on our operations or finances.
New Product or Business Segments
Other than as described in “Our Business” on page 162 there are no new products or business segments in which we operate.
Competitive Conditions
We expect competitive conditions in our industry to further intensify as new entrants emerge and as existing competitors seek to emulate our business model and offer similar products. For further details, please refer to “RiskFactors” and “Our Business beginning on pages 26 and 162, respectively.
Seasonality of Business
Our business is not seasonal in nature.
Significant Dependence on a Single or Few Customers or Suppliers
We do not have any significant dependence on a single or few suppliers. However, we are dependent on certain of our key customers. For further details, see “Risk Factors - Our business is dependent on the sale of our products to certain key customers. Our top 10 customers constituted 91.08% of our total revenue from operations for the year ended March 31, 2023. Further, as at March 31, 2023, our Trade Receivables were f 1,617.48 million. The loss of any of our key customers or loss of revenue from sales to our customers or any defaults or delays in payment by a significant portion of our customers could have a material adverse effect on our business, results of operations, financial condition and cash flows.” on page 26.
Significant Economic Changes
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. See “- Significant Factors Affecting Our Results of Operations” on page 282.
Significant Developments after March 31, 2023
Except as disclosed below, to our knowledge, there is no subsequent development after the date of our financial statements contained in this Prospectus which materially and adversely affects, or is 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:
Our Company has, in consultation with the BRLMs, on June 6, 2023, allotted 4,075,471 Equity Shares, on a preferential basis for an aggregate consideration of Rs.1,080.00 million, at a price of Rs.265.00 per Equity Share (including a premium of Rs.255.00 per Equity Share).
2024, IIFL Securities Ltd. All Rights Reserved
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Risk Disclosure on Derivatives
- 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
- On an average, loss makers registered net trading loss close to Rs. 50,000.
- Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
- Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.
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2024, IIFL Securities Ltd. All Rights Reserved
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ATTENTION INVESTORS
- Prevent Unauthorized Transactions in your demat / trading account Update your Mobile Number/ email Id with your stock broker / Depository Participant. Receive information of your transactions directly from Exchanges on your mobile / email at the end of day and alerts on your registered mobile for all debits and other important transactions in your demat account directly from NSDL/ CDSL on the same day." - Issued in the interest of investors.
- KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
- No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."
www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.
Risk Disclosure on Derivatives
- 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
- On an average, loss makers registered net trading loss close to Rs. 50,000.
- Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
- Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.
Copyright © IIFL Securities Ltd. All rights Reserved.
Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213, IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
We are ISO 27001:2013 Certified.
This certificate demonstrates that IIFL as an organization has defined and put in place best-practice information security processes.