MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our Restated Consolidated Financial Information. Unless the context requires otherwise, the financial information in this Information Memorandum is derived from our audited consolidated summary statement of assets and liabilities as at June 30, 2023, March 31, 2023, March 31, 2022, and March 31, 2021 and the audited consolidated summary statement of profit and loss (including other comprehensive income), audited cash flow statement and changes in equity for the three months ended June 30, 2023, Fiscals 2023, 2022, and 2021 of our Company together with the summary statement of significant accounting policies, and other explanatory information thereon. For further details, please see "Financial Information".
A scheme of arrangement involving (I) TVS Holdings Limited (formerly known as Sundaram Clayton Limited)
(the "Demerged Company"), erstwhile TVS Holdings Private Limited and erstwhile VS Investments Private
Limited and their respective shareholders and creditors and Sundaram-Clayton Limited (formerly known as Sundaram - Clayton DCD Limited) (the "Resulting Company") and its shareholders and creditors ("Composite Scheme of Arrangement"), in accordance with Sections 230 to 232 and other applicable provisions of the
Companies Act, 2013 has been approved by the Honble NCLT, Chennai on March 6, 2023. Inter alia, the Scheme provides, for demerger, transfer and vesting of the Demerged Undertaking (as defined in the Scheme) from the Demerged Company into the Resulting Company on a going concern basis and issue of Equity Shares and Preference Shares by the Resulting Company to the shareholders of the Demerged Company, in consideration thereof, in accordance with Section 2(19AA) of the Income Tax Act and reduction and cancellation of the entire pre Scheme share capital of the Resulting Company.
The discussion of our financial conditions in this section has been undertaken on a consolidated basis. The Company did not have any subsidiaries until August 11, 2023 but however, pursuant to the Composite Scheme of Arrangement coming into effect, our Company has 3 direct subsidiaries and 4 indirect subsidiaries as part of transfer and vesting of the Demerged Undertaking to the Resulting Company. And therefore, the financial statements prepared by our Company for the periods ended June 30, 2023, March 31 2023, March 31, 2022, March 31, 2021 were prepared on a consolidated basis.
Some of the information contained in the following discussion, including information with respect to our plans and strategies, contain forward-looking statements that involve risks and uncertainties. You should read the section "Forward Looking Statements" for a discussion of the risks and uncertainties related to those statements and also the section "Risk Factors" for a discussion of certain factors that may affect our business, results of operations or financial condition.
OVERVIEW
Our Company is part of the TVS - Sundaram Clayton group and is an automotive component manufacturing company in India. Our automotive components business comprises a diverse product offering catering to the the automotive and non-automotive segments, both in India and globally. The Company is also engaged in business of precision aluminium cast products and production of high-pressure die-casting ("HPDC"), low-pressure die-casting ("LPDC") and gravity die-castings ("GDC") for two-wheelers, passenger vehicles, LCVs and HCVs. Our manufacturing facilities have equipment for production, testing and quality assurance to produce a wide variety of aluminium castings used in the various product segments. The Companys facilities can produce GDC ranging in weight from 250g to 24 kg, HPDC ranging in weight from 100g to 25 kg and LPDC ranging in weight from 2.5 kg to 18 kgs. This has been made possible with infrastructure that includes in-house alloying, 97 PDC machines (of locking force ranging from 250 tonnes to 3,200 tonnes), 72 GDC stations, 23 LPDC machines and 554 machining centres. The Company supplies a variety of machined castings to leading domestic and global vehicle OEMs and Tier 1 customers , who are leading manufacturers of engines, passenger vehicles (2W & 4W) and light and heavy vehicles. Our Company delivers automotive component products to customers in more than seven countries including the United States, Brazil, Sweden, Germany, France, UK and Japan amongst others. We have five manufacturing plants.
We recorded total revenue of 521.05 crores, 2,052.78 crore, 1,692.42 crore and 1,127.95 crores for the quarter ended June 30, 23 and Financial Year ended March 31, 2023, March 31, 2022 and March 31, 2021, respectively. We had recorded an EBITDA of 28.33 crore, 124.37 crore, 189.64 crore and 139.56 crore for the quarter ended June 30, 2023 and Financial Years ended March 31, 2023, March 31, 2022 and March 31,
2021, respectively.
SIGNIFICANT FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIAL RESULTS
Macroeconomic conditions and trends in the automotive industry
As a company operating in India, south-east Asia, the USA and Europe, with customers worldwide, we are affected by the general macroeconomic conditions in a number of countries and, in particular, trends and conditions in the automotive industry. We believe that economic growth will propel demand for automotive components and automobiles in the future. However, a reduction in consumer spending in the developing countries, including India, could adversely impact our business and results of operations. See "Industry Overview" for a discussion on macroeconomic conditions in India and a more detailed description of the automobile and automotive component industries in the markets that we operate.
Raw material costs
We need substantial amounts of raw materials in our automotive components business. We purchase large volumes of aluminium for use in our die-casting process and steel sheets, coils, strips and bars for use in the motor vehicle segment. The prices of most of our raw materials including aluminium increased significantly for the Financial Year ended March 31, 2023 as compared to the Financial Year ended March 31, 2022 reflecting an increased demand domestically and globally.
Implementation of our capital expansion program
In order to remain competitive, we have to develop newer products in relation to our automotive component business so that we are able to cater to the renewed requirements of our OEM customers. Our OEM customers develop newer models of automobiles and upgrade their existing automobiles offering from time to time, and we have to modify/customize our products offering in order to supply as per the new product specifications set out by our OEM customers. Our capital expenditure is largely targeted at (i) customizing our manufacturing facilities so that we can tailor our products offering according to the requirements of our OEM customers, (ii) increasing our production efficiency and (iii) improving the quality and range of our products. Further, we develop newer models and upgrade our products from time to time to cater to the evolving requirements of automobile manufacturers in India and other international markets. Developing newer models or upgrading existing models of our products for the constantly evolving automobiles require extensive capital expenditure.
If these new models or upgrades of existing models, as the case may be, fail to make a mark in the automobile markets, we may lose all or part of our capital expenditure incurred in relation to developing these automobile components, as the case may be. Further, any failure to manage our capital expenditure program may result in costs that are greater than expected or result in significant delays. For further details, please see "Risk Factors Our Company has substantial capital expenditure and working capital requirements and may require additional financing to meet those requirements, which could have an adverse effect on our results of operations and financial condition".
Purchasing patterns of our principal customers in relation to our automotive components business
The purchasing patterns of our principal OEM customers have a significant impact on our results of operations. Our sales are particularly affected by the inventory and production levels of our principal OEM customers. We cannot predict when our OEM customers will decide to either build or reduce inventory levels or whether new inventory levels will approximate historical inventory levels. This may result in variability in our sales. Uncertainty regarding inventory levels may be increased by favourable consumer financing programs initiated by OEMs which may accelerate sales that otherwise would occur in future periods. We have historically experienced sales declines due to OEMs scheduled shutdowns or shutdowns resulting from unforeseen events.
The effect of changes in purchasing patterns may be further heightened by the fact that we do not typically enter into firm commitment long-term agreements with our customers and instead rely on purchase orders to govern the volume and other terms of sale of our products. Any changes in purchasing patterns may require immediate changes in our own production processes.
We believe that our strong relationship with our principal OEM customers enables us to predict their purchasing pattern. Certain of our customers have approached us to assist them in the development of new products which ensures predictability and stability in our future orders. In addition, for certain of our principal customers, we believe that we are responsible for producing the entire requirement of a particular product, which reduces the uncertainty in the purchasing patterns.
Technological Advances and Competition
The development of products in the automotive components industry is closely linked to technological advances. Our success will substantially depend on our ability to anticipate technological development trends and our ability to identify, develop and commercialise newer and more advanced technologies and products that our customers may demand in the future in a timely and cost-effective manner. We currently operate research and development centres to identify and meet new technological trends. We also intend to incur significant R&D expenditure in the current Fiscal with the objective of maintaining and improving the reliability of our products and automobile components manufactured by us.
Our Current Funding and Availability of Cost Effective Funding
We have relied on bank borrowings and cash generated from our operations to fund our working capital and capital expenditure requirements. As of March 31, 2023, on a consolidated basis, we had an aggregate outstanding indebtedness of 1,081.84 crore, under our financing agreements. Our finance cost /interest expense was 21.27 crore, 60.05 crore, 46.39 crore and 47.47 crore for the quarter ended June 30, 2023 and Financial
Years ended March 31, 2023, March 31, 2022 and March 31, 2021, respectively on a consolidated basis. Our debt service costs, as well as our overall cost of funding, depend on many external factors, including developments in the regional credit markets and, in particular, interest rate movements and the existence of adequate liquidity in the debt markets. We believe that the future availability of cost effective funding will be crucial and the non-availability of such funding at favourable terms or at all could affect our business, financial condition and results of operations.
RECENT DEVELOPMENTS
Except as disclosed below, there are no significant events since our last balance sheet date, i.e., March 31, 2023.
Pursuant to Part V of the Composite Scheme of Arrangement and with effect from the Appointed Date 4 in accordance with the provisions of the Companies Act, 2013 the provisions of Section 2(19AA) of the Income Tax Act, the Demerged Undertaking along with all its assets, liabilities, contracts, loan, debentures, duties and arrangements, obligations and permits has been demerged from Demerged Company and transferred to and vested in Resulting Company as a going concern, so as to become the assets, liabilities, contracts, arrangements, loan, debentures and permits of our Company with effect from Appointed Date 4. In consideration of the demerger of the Demerged Undertaking into our Company pursuant to the provisions of the Composite Scheme of Arrangement, we have issued and allotted, on a proportionate basis to each shareholder of Demerged Company:
a. One fully paid-up equity share of 5 (Rupees five) each, credited as fully paid-up, for every 1 (one) equity share of 5 (Rupees five) each of Demerged Company held by such shareholder and whose name is recorded in the register of members and records of the depository as members of the Demerged Company as on the Record Date 2; and
b. One fully paid-up preference share of 10 (Rupees ten) each, credited as fully paid-up, for every 1000 (Thousand) preference shares of 10 (Rupees ten) each of Demerged Company held by such shareholder and whose name is recorded in the register of members and records of the depository as members of the Demerged Company as on the Record Date 2 (together, ("Resulting Company New Shares").
In view of the above, the Demerged Company has fixed August 24, 2023 as the Record Date 2 for the purpose of determining the eligible shareholders holding equity shares and preference shares of the Demerged Company entitled to receive the Resulting Company New Shares.
Further, the Scheme Implementation Committee of the Company at its meeting dated August 31, 2023 approved the allotment of 2,02,32,104 Equity Shares and 8,73,032 Preference Shares to the eligible shareholders of the Demerged Company.
SEGMENT INFORMATION
Our financial results are prepared and presented with one business segment i.e automotive components. Our total revenue and results before interest and tax of automotive component segment is presented below for the periods indicated.
Period ended |
Total Revenue |
Result before interest and tax |
||
Amount (in ) |
Percentage (%) |
Amount (in ) |
Percentage (%) |
|
| June 30, 2023 | 521.05 | 100.00 | (11.68) | 100.00 |
| March 31, 2023 | 2,052.78 | 100.00 | (26.41) | 100.00 |
| March 31, 2022 | 1,692.42 | 100.00 | 49.05 | 100.00 |
| March 31, 2021 | 1,127.95 | 100.00 | 58.54 | 100.00 |
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies mentioned herein are relating to the restated consolidated financial statements of Sundaram-Clayton Limited (Formerly known as Sundaram - Clayton DCD Limited) and its subsidiaries and associates.
I. Brief description of the Company
Sundaram -Clayton Limited ("the Company") is a public limited company incorporated in India having registered office located at "Chaitanya", 12, Khader Nawaz Khan Road, Nungambakkam Chennai 600006, Tamil Nadu, India. The Company together with its subsidiaries and associates (collectively referred to as the "Group") operate in a wide range of activities such as manufacturing of automotive vehicles, automotive components, spare parts & accessories thereof, housing development and financial services.
II. Composite scheme of arrangement
The Board of Directors of the Company at its meeting held on February 09, 2022, had approved the Composite scheme of arrangement amongst Sundaram Clayton Limited ("Transferee Company" or "Demerged Company"), TVS Holdings Private Limited ("Transferor Company 1") , VS Investments Private Limited
("Transferor Company 2") and Sundaram-Clayton Limited (formerly known as Sundaram - Clayton DCD Limited) ("Resulting Company") and their respective shareholders and creditors, under section 230 to 232 and other applicable provisions of the Companies Act, 2013, which inter-alia envisaged the following:
i) issue of Preference Shares of SCL (as defined hereinafter) by way of bonus to the shareholders of SCL (as defined hereinafter) by utilising the general reserves/ retained earnings;
ii) the amalgamation of the Transferor Company 1 (as defined hereinafter) with the Transferee Company (as defined hereinafter) and cancellation of the share capital of the Transferee Company held by the Transferor Company 1 and the consideration thereof;
iii) the amalgamation of the Transferor Company 2 (as defined hereinafter) with the Transferee Company and cancellation of the share capital of the Transferee Company held by the Transferor Company 2 and the consideration thereof; and
iv) the demerger, transfer and vesting of the Demerged Undertaking (as defined hereinafter) from the Demerged Company (as defined hereinafter) into the Resulting Company (as defined hereinafter) on a going concern basis, reduction and cancellation of the paid-up share capital of the Resulting Company held by the Demerged Company and the consequent issue of shares of the Resulting Company by the Resulting Company to the shareholders of the Demerged Company.
The Honble NCLT, Chennai has approved the Scheme vide its order dated March 6, 2023 under the applicable provisions of the Companies Act, 2013. Certified copy of the said order of the NCLT was received by the Company on March 6, 2023 and filed with the Registrar of Companies on March 14, 2023.
Accordingly, the Board of Directors of the respective companies at its meeting held on August 11, 2023 have decided to give effect to the ‘PART V of the scheme in the following manner based on the order of Honble
NCLT:
"PART V deals with the transfer and vesting of the Demerged Undertaking from the Demerged Company into the
Resulting Company, reduction and cancellation of the existing equity share capital of the Resulting Company held by the Demerged Company and the consideration thereof with effective from such Appointed date August 11,
2023".
As per the Scheme, the Company will transfer assets and liabilities of TVS Holdings private Limited and VS investments to TVS Holdings Limited (formerly known as Sundaram - Clayton Limited) at the respective book values from the appointed date. Also, Sundaram-Clayton Limited will transfer assets and liabilities of Manufacturing Business to the Sundaram-Clayton Limited (formerly known as Sundaram - Clayton DCD Limited) at their respective book values from the appointed date.
III. Basis of preparation of Restated Consolidated Financial Information
As per the scheme of arrangement, Part V of the scheme was carried out with effect from August 11, 2023 (Demerger of SCL from TVSH Limited) was done and which in case has a requirement of providing the restated consolidated financial statements to IM and respective stakeholders.
i) Audited consolidated financial statements of the Group as at and for the year ended March 31, 2023, March 31, 2022 and March 31, 2021 and Limited Reviewed Results for the quarter ended 30th June 2023, which were prepared in accordance with the Indian Accounting Standard (referred to as "Ind AS") as prescribed under Section 133 of the Act read with Companies (Indian Accounting Standards) Rules 2015, as amended and other accounting principles generally accepted in India, which have been approved by the Board of Directors at their meeting held on May 5, 2023, May 6, 2022, April 28, 2021 and July 25, 2023, respectively.
ii) Subsidiaries which are located outside India whose financial statements and other financial information have been prepared in accordance with accounting principles generally accepted in their respective countries. The Holding Companys Management has converted financial statements of such subsidiaries located outside India from accounting principles generally accepted in their respective countries to accounting principles generally accepted in India. These conversion adjustments made by The Holding Companys Management.
iii) Audited financial statements in respect of associates had been included in the Restated Consolidated Financial Information of the Group as at the year ended March 31, 2023, March 31, 2022 and March 31, 2021and unaudited for the quarter ended June 30, 2023 have been included for consolidation.
The Restated Consolidated Financial Information as approved by the Board of the Directors at their meeting held on August 11, 2023 has been prepared for inclusion in this Information Memorandum (‘IM) prepared by the company in connection with the proposed listing of its equity shares ("Proposed Listing") prepared in accordance with the checklist provided by Bombay Stock Exchange ("BSE") and National Stock Exchange ("NSE") for in-principle approval in relation to any scheme of arrangement states that the IM should contain the information about the Company and its group companies in line with the disclosure requirement applicable for public issue. Further as per SEBI Master Circular dated Jun 20, 2023 on Scheme of Arrangement by Listed entities also states about the requirements to be given in an advertisement before commencement of trading that it should contain Restated Audited Financials for the previous three Financial Years and stub period prior to the date of listing. Hence for the purpose of disclosure in the IM, IM should contain restated consolidated financial information, in line with disclosure requirements for public issues. The disclosure requirements applicable for public issues form part of Schedule VI of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended
("SEBI ICDR Regulations") and accordingly, all disclosure requirements mentioned therein in relation to public issues would be applicable to the information memorandum. Further, Clause (11) of the SEBI ICDR
Regulations provides for ‘Financial Statements required to be disclosed in the offer document.
These Restated Consolidated Financial Information have been prepared on a historical cost basis, except for certain financial instruments such as derivative financial instruments and other financial instruments held for trading, which have been measured at fair value and assets classified as held for sale, which have been measured at lower of carrying value and fair value less cost to sell.
The Restated Consolidated Financial Information are presented in Indian Rupees (INR) and all values are rounded to the nearest crore, except when otherwise indicated.
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the Groups share of the post-acquisition profits or losses of the investee in profit and loss and the Groups share of other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates are recognised as a reduction in the carrying amount of the investment.
When the Groups share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Groups interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies adopted by the group.
Restated Consolidated Financial Information are prepared using uniform accounting policies for like transactions and other events in similar circumstances. If a subsidiary/associate of the Group uses accounting policies other than those adopted in the restated consolidated financial information for like transactions and events in similar circumstances, appropriate adjustments are made to that Group subsidiarys/associates financial statements in preparing the restated consolidated financial information to ensure conformity with the Groups accounting policies.
However, no subsidiaries and associates have followed different accounting policies than those followed by the Group for the preparation of these restated consolidated financial information. The restated financial information of all entities used for the purpose of consolidation are drawn up to same reporting date as that of the parent Group.
The Restated Consolidated Financial Information of all subsidiaries incorporated outside India are converted on the following basis: (a) Income and expenses are converted at the average rate of exchange applicable for the period/year and (b) All assets and liabilities are translated at the closing rate as on the Balance Sheet date. The exchange difference arising out of period/year end translation is debited or credited as "Foreign Exchange Translation Reserve" forming part of Other Comprehensive Income and accumulated as a separate component of other equity.
IV. Presentation of Restated Consolidated Financial Information
The Group presents its Statement of Assets and Liabilities in order of liquidity in compliance with the Division III of the Schedule III to the Companies Act, 2013. An analysis regarding recovery or settlement within 12 months after the reporting date (current) and more than 12 months after the reporting date (noncurrent) is presented. Financial assets and financial liabilities are generally reported gross in the balance sheet. They are only offset and reported net when, in addition to having an unconditional legally enforceable right to offset the recognised amounts without being contingent on a future event, the parties also intend to settle on a net basis in the normal course of business.
V. Consolidation procedure:
a) Combine like items of assets, liabilities, equity, income, expenses and cash flows of the parent with those of its subsidiaries. For this purpose, income and expenses of the subsidiary are based on the amounts of the assets and liabilities recognised in the Restated Consolidated Financial Information at the acquisition date.
b) Offset (eliminate) the carrying amount of the parents investment in each subsidiary and the parents portion of equity of each subsidiary.
c) Eliminate in full intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between entities of the Group (profits or losses resulting from intragroup transactions that are recognised in assets, are eliminated in full). Income Taxes applies to temporary differences that arise from the elimination of profits and losses resulting from intragroup transactions.
Profit or loss and each component of OCI are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.
All intra-group assets, liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:
a) Derecognises the assets (including goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost
b) Derecognises the carrying amount of any non-controlling interests c) Derecognises the cumulative translation differences recorded in equity d) Recognises the fair value of the consideration received e) Recognises the fair value of any investment retained f) Recognises any surplus or deficit in profit or loss g) Recognises that distribution of shares of subsidiary to Group in Groups capacity as owners
h) Reclassifies the parents share of components previously recognised in OCI to profit or loss or transferred directly to retained earnings, if required by other Ind ASs as would be required if the Group had directly disposed of the related assets or liabilities.
VI. Principles of Consolidation
a) Business Combination:
Business combination: Ind AS 103 - Business combinations ("Ind AS 103") provides for the accounting principles to be applied in case of business combinations (like acquisition method accounting using fair values of the assets transferred, liabilities incurred to the previous owners of the acquire, equity interests issued and contingent consideration). Considering the complexities involved in application of Ind AS 103 and for providing relaxation to the first time adopters of Ind AS, Ind AS 101 provides for following options to be made at transition date:
i) Not to apply Ind AS 103 retrospectively to past business combinations that occurred before the transition date
ii) Or, Re-state all the business combinations that occurred before the transition date or that occurred from a particular date (pre-transition date) till the date of transition and accordingly apply Ind AS 103.
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. Acquisition related costs are recognised in profit or loss as incurred. The acquirees identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition are recognised at their fair value at the acquisition date, except certain assets and liabilities that are required to be measured as per the applicable standard.
Purchase consideration in excess of the Companys interest in the acquirees net fair value of identifiable assets, liabilities and contingent liabilities is recognized as goodwill. Excess of the Companys interest in the net fair value of the acquirees identifiable assets, liabilities and contingent liabilities over the purchase consideration is recognised, after reassessment of fair value of net assets acquired, in the Capital Reserve.
The Group combines the financial statements of the parent and its subsidiaries line by line adding together, items of assets, liabilities, equity, income and expenses. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests (if any) in the results and equity of subsidiaries are shown separately in the consolidated statement of profit and loss, consolidated statement of changes in equity and balance sheet, respectively.
b) Use of estimates
The preparation of financial statements requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and notes thereto. The management believes that these estimates and assumptions are reasonable and prudent. However, actual results could differ from these estimates. Any revision to accounting estimates is recognised prospectively in the current and future period. The estimates and underlying assumptions are reviewed on an ongoing basis.
This note provides an overview of the areas that involved a higher degree of judgment or complexity. It also provides an overview of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgments is included in the relevant notes together with the information about the basis of calculation for each affected line item in the financial statements.
c) Significant estimates and judgments
The areas involving significant estimates or judgments are:
i) Estimation of fair value of unlisted securities ii) Estimation of defined benefit obligation iii) Estimation of useful life of Property, Plant and Equipment iv) Estimation of product warranty
d) Cost Recognition
Costs and expenses are recognised when incurred and are classified according to their nature. Expenditure are capitalized where appropriate, in accordance with the policy for internally generated intangible assets and represents employee costs, stores and other manufacturing supplies, and other expenses incurred for construction and product development undertaken by the Group.
e) Revenue recognition
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 transaction price of goods sold and services rendered is net of variable consideration on account of various discounts and schemes offered by the Group as part of the contract.
i) Sale of automotive vehicles, parts and automotive components:
Revenue from sale of products is recognised when significant risk and rewards of ownership pass to the customers, as per the terms of the contract and it is probable that the economic benefits associated with the transaction will flow to the Group.
ii) Sale of Services:
Revenue from Services is recognised in the accounting period in which the services are rendered and when invoices are raised.
f) Property, Plant and Equipment
Freehold Land is stated at historical cost. All other items of Property, Plant and Equipment are stated at cost of acquisition/construction less accumulated depreciation / amortization and impairment, if any. Cost includes:
i) purchase price, ii) taxes and duties, iii) labour cost, and iv) Directly attributable overheads incurred up to the date the asset is ready for its intended use. v) Government grants that are directly attributable to the assets acquired.
However, cost excludes GST, to the extent credit of the duty or tax is availed of.
Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as separate asset is derecognized when replaced. All other repairs and maintenance are charged to the Statement of Profit and Loss during the reporting period in which they are incurred.
Government grants relating to the purchase of property, plant and equipment are capitalized and included as cost to fixed assets.
Gains or losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the Statement of Profit and Loss within Other gains/ (losses).
g) Depreciation
i) Depreciation on tangible fixed assets is charged over the estimated useful life of the asset or part of the asset (after considering double/triple shifts) as evaluated by a Chartered Engineer, on straight line method and in accordance with Ind AS 16, taking into consideration both usage, useful life and legal limitations on the use of assets, on straight line method, in accordance with Part A of Schedule II to the Companies Act, 2013. Depreciation is adjusted for the proportionate usage with reference to the assets expected capacity or physical output during the reporting period
ii) The estimated useful life of the tangible fixed assets as assessed by the Chartered Engineer and followed by the Group is furnished below:
Description |
Years |
| Factory building and other buildings | 5 to 64 |
| Plant and Equipment | 4 to 21 |
| Electrical Equipment | 15 |
| Furniture and Fixtures | 4 to 10 |
| Computers | 3 to 4 |
| Mobile phones | 1 to 2 |
| Vehicles | 5 to 6 |
iii) Tools and dies used for two wheelers are depreciated based on quantity of components manufactured and the life of tools and dies, subject to a maximum of 5 years. Tools and dies used for three wheeler operations are depreciated over a period of 9 years.
iv) The residual value for all the above assets are retained at 5% of the cost except for Mobile phones for which nil residual value is considered. Residual values and useful lives are reviewed, and adjusted, if appropriate, for each reporting period.
v) On tangible fixed assets added / disposed off during the year, depreciation is charged on pro-rata basis for the period for which the asset was purchased and used.
vi) Depreciation in respect of tangible assets costing individually less than Rs.5, 000/- is provided at 100%.
h) Intangible assets
Other intangible assets
Intangible assets acquired separately:
Intangible assets with finite useful lives that are acquired separately and the estimated useful life is more than one year, is capitalised and carried at cost less accumulated amortisation and accumulated impairment losses.
Internally-generated intangible assets - research and development expenditure:
Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally generated intangible asset arising from development phase of internal project is recognised, if and only if, the conditions under the Ind AS 34 - Intangible Asset, are fulfilled. If the conditions are not fulfilled the same is recognised in profit and loss in the period in which it is incurred.
The intangible assets are amortised on straight line basis over its useful life, viz., 2 years in the case of software, 8 years in case of acquired brands and trade marks and 6 to 10 years in the case of Design, Development and Technical knowhow.
i) Impairment
At each balance sheet date, the Group assesses whether there is any indication that any property, plant and equipment and intangible assets may be impaired. If any such impairment exists the recoverable amount of an asset is estimated to determine the extent of impairment, if any. Where it is not possible to estimate the recoverable amount of an individual asset, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units).
The group estimates the recoverable amount of the cash-generating unit (CGUs) to which the asset belongs/or the individual and property, plant and equipment and intangible assets.
When necessary, the entire carrying amount of the Equity accounted investments is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount.
An impairment loss is recognized for the amount by which the assets carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assets/CGUs fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset (or cash generating unit) for which the estimates of future cash flows have not been adjusted.
Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
j) Foreign currency translation
i) Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency). i.e. in Indian rupees (INR) and all values are rounded off to nearest crores except where otherwise indicated.
ii) Transactions and balances
Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of transaction.
Foreign currency monetary assets and liabilities such as cash, receivables, payables, etc., are translated at year end exchange rates.
Non-monetary items denominated in foreign currency such as investments, fixed assets, etc., are valued at the exchange rate prevailing on the date of transaction.
Exchange differences arising on settlement of transactions and translation of monetary items are recognised as income or expense in the year in which they arise. iii) Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
assets and liabilities are translated at the closing rate at the date of that balance sheet
income and expenses are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and
all resulting exchange differences are recognised in other comprehensive income.
k) Hedge accounting
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either:
hedges of the fair value of recognized assets or liabilities or a firm commitment (fair value hedges)
hedges of a particular risk associated with the cash flows of recognized assets and liabilities and highly probable forecast transactions (cash flow hedges), or
hedges of a net investment in a foreign operation (net investment hedges).
The Group documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.
The fair values of various derivative financial instruments used for hedging purposes are disclosed in Note 33. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in the other comprehensive income in cash flow hedging reserve within equity, limited to the cumulative change in fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating to the ineffective portion is recognized immediately in the Statement of Profit and Loss, within other gains/ (losses).
When forward contracts are used to hedge forecast transactions, the Group generally designates only the change in fair value of the forward contract related to the spot component as the hedging instrument. Gains or losses relating to the effective portion of the change in the spot component of the forward contracts are recognized in other comprehensive income in cash flow hedging reserve within equity. In some cases, the entity may designate the full change in fair value of the forward contract (including forward points) as the hedging instrument. In such cases, the gains and losses relating to the effective portion of the change in fair value of the entire forward contract are recognized in the cash flow hedging reserve within equity.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects the Statement of Profit and Loss (for example, when the forecast sale that is hedged takes place).
When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative deferred gain or loss and deferred costs of hedging in equity at that time remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, the cumulative gain or loss and deferred costs of hedging that were reported in equity are immediately reclassified to the Statement of Profit and Loss within other gains/ (losses).
l) Inventories
Inventories are valued at the lower of cost and net realizable value.
i. Cost of raw materials, components, stores, spares, work-in-process and finished goods are determined on a moving average basis.
ii. Cost of finished goods and work-in-process comprises of direct materials, direct labour and an applicable proportion of variable and fixed overhead expenditure, fixed overhead expenditure absorbed on the basis of normal operating capacity.
iii. Costs are assigned to individual items of inventory on the basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
iv. Materials and supplies held for use in production of inventories are not written down if the finished products in which they will be used are expected to be sold at or above cost. Slow and non-moving material, obsolescence, defective inventories are duly provided for.
Land held for development/sale by the real estate subsidiary is valued at the lower of cost and net realizable value. Cost includes cost of acquisition and all related costs.
m) Employee benefits
i) Short term obligations:
Short term obligations are those that are expected to be settled fully within 12 months after the end of the reporting period. They are recognized upto the end of the reporting period at the amounts expected to be paid at the time of settlement.
ii) Other long term employee benefit obligations:
The liabilities for earned leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are, therefore, recognized and provided for at the present value of the expected future payments to be made in respect of services provided by employee upto the end of reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in Other Comprehensive Income.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for atleast twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
iii) Post-employment obligation:
The Group operates the following post-employment schemes:
a) Defined benefit plans such as gratuity for its eligible employees, pension plan for eligible senior managers; and
b) Defined contribution plan such as provident fund.
iv) Pension and gratuity obligation:
The liability or asset recognized in the balance sheet in respect of defined benefit pension and gratuity plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on the 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 benefit obligation and the fair value of plan assets. This cost is included in 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 (net of deferred tax). They are included in retained earnings in the statement of changes in equity and in the balance sheet.
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.
v) Provident fund:
The eligible employees of the Group are entitled to receive benefits in respect of provident fund, a defined contribution plan, in which both employees and the Group make monthly contributions at a specified percentage of the covered employees salary. The provident fund contributions are made to an irrevocable trust set up by the Group. The Group is generally liable for annual contributions and any shortfall in the fund assets based on the Government specified minimum rates of return and recognizes such contributions and shortfall, if any, as an expense in the year in which it is incurred.
vi) Bonus plans:
The Group recognizes a liability and an expense for bonus. The Group recognizes a provision where contractually obliged or where there is a past practice that has created a constructive obligation.
n) Taxes on income
Tax expense comprises of (i) current tax and (ii) deferred tax.
The income tax expense or credit for the period is the tax payable on the current periods taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities. Also for the purposes of restated financials statements the current tax has been proportionately apportioned and taken into account of resulting entity
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill. Deferred income 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 or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred tax assets are recognized 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.
Current and deferred tax is recognized in profit or 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.
o) Government Grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.
Government grants receivable as compensation for expenses or financial support are recognized in profit or loss of the period in which it becomes available.
Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to profit or loss on a straight-line basis over the expected lives of the related assets and presented within other income.
In case of waiver of duty under EPCG licence, such grant is considered as revenue grant and recognized in
"Other Income" on completion of export obligation as approved by Regulatory Authorities. p) Provisions and contingent liabilities i) Provision:
A provision is recorded when the Group has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation and the amount can be reasonably estimated. The estimated liability for product warranties is accounted based on technical evaluation, when the products are sold.
Provisions are evaluated 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 interest expenses.
ii) Contingent liabilities:
Wherever there is a 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 the entity or a present obligation that arises from past events but is not recognized because (a) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or (b) the amount of the obligation cannot be measured with sufficient reliability are considered as contingent liability. Show cause notices are not considered as Contingent Liabilities unless converted into demand.
q) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The group has identified the following business segments as reportable segments, (on the basis of products and production process) viz. Automotive components. r) Leases
Leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Company. Contracts may contain both lease and non-lease components. The Company allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate for which the Company is a lessee, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
fixed payments (including in-substance fixed payments), less any lease incentives receivable
variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date amounts expected to be payable by the Company under residual value guarantees the exercise price of a purchase option if the Company is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Company, the lessees incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Company:
where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Company which does not have recent third party financing, and makes adjustments specific to the lease, e.g. term, country, currency and security.
The Company is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Variable lease payments that depend on sales are recognized in profit and loss in the period in which the condition that triggers those payments occurs.
Right-of-use assets are measured at cost comprising the following:
the amount of the initial measurement of lease liability
any lease payments made at or before the commencement date less any lease incentives received any initial direct costs, and
Restoration costs.
Right-of-use assets are generally depreciated over the shorter of the assets useful life and the lease term on a straight-line basis. If the Company is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying assets useful life.
Payments associated with short-term leases of equipment and all leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture.
s) Cash and Cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
t) Trade receivables
Trade receivables are recognized initially at actual cost less provision for doubtful debts.
u) Contract Liabilities
A contract liability is the obligation to transfer goods to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognized when the consideration is received. Contract liabilities are recognized as revenue when the Company performs under the contract.
v) Investments and Other financial assets
i) Classification
The Group classifies its financial assets in the following categories:
Those to be measured subsequently at fair value (either through other comprehensive income, or through statement of profit and loss), and
Those measured at amortized cost.
The classification depends on the entitys business model for managing the financial assets and the contractual terms of the cash flow.
ii) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus (in the case of a financial asset not a fair value through profit or loss) transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in the Statement of Profit and Loss.
Debt Instruments:
Subsequent measurement of debt instruments depends on the Groups business model for managing the asset and the cash flow characteristics of the asset. There are two measurement categories into which the Group classifies its debt instruments.
Amortized Cost:
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. A gain or loss on debt instrument that is subsequently measured at amortized cost and is not part of a hedging relationship is recognized in the Statement of Profit and Loss when the asset is de-recognized or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
Fair Value through profit or loss:
Assets that do not meet the criteria for amortized cost or Fair Value through Other Comprehensive Income (FVOCI) are measured at Fair Value Through Profit or Loss (FVTPL). A gain or loss on a debt instrument that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss and presented in the statement of profit and loss within other gains / (losses) in the period in which it arises. Interest income from these financial assets is included in other income.
Equity instruments:
The Group subsequently measures all investments in equity (except of the subsidiaries / associates) at fair value. Where the Groups management has elected to present fair value gains and losses on equity investments in other comprehensive income, there will be no subsequent reclassification of fair value gains and losses to profit or loss. Dividends from such investments are recognized in the Statement of Profit and Loss as other income when the Groups right to receive payments is established.
Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately. Where the Group elects to measure fair value through profit and loss, changes in the fair value of such financial assets are recognized in the statement of profit and loss.
Impairment of financial assets
The Group assesses on a forward looking basis the expected credit losses associated with its assets carried at amortized cost and FVOCI debt instruments. The impairment methodology applied depends on whether there has been significant increase in credit risk. Note 34(A) and Note 35 details how the Group determines whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected credit losses to be recognized from initial recognition of the receivables.
For loans given by financial enterprise the impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 35 details how the Group determines whether there has been a significant increase in credit risk.
Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.
iii) Derecognition of financial assets
A financial asset is derecognised only when:
the Group has transferred the rights to receive cash flows from the financial asset or
The Group retains the contractual rights to receive the cash flows of the financial asset, but expects a contractual obligation to pay the cash flows to one or more recipients.
Where the entity has transferred an asset, the Group evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised, if the Group has not retained control of the financial asset. Where the Group retains control of the financial asset, the asset is continued to be recognized to the extent of continuing involvement in the financial asset.
iv) Income recognition
Interest income:
Interest income from debt instruments is recognized using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying value of a financial asset. While calculating the effective interest rate, the Group estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options), but does not consider the expected credit losses.
Dividend income:
Dividends are recognized in statement of profit and loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the Group, and the amount of dividend can be reliably measured.
w) Borrowings
Borrowings are initially recognized at fair value, net of transaction cost incurred. Borrowings are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction cost) and the redemption amount is recognized in the Statement of Profit and Loss over the period of the borrowings, using the effective interest rate method. Fees paid on the established loan facilities are recognized as transaction cost of the loan, to the extent that it is probable that some or all the facility will be drawn down.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in the Statement of Profit and Loss as other gain/(loss).
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for over or atleast 12 months after the reporting period.
x) Current and Non-current classification
The Group presents assets and liabilities in the balance sheet based on current / non-current classification.
Cash or cash equivalent is treated as current, unless restricted from being exchanged or used to settle a liability for atleast twelve months after the reporting period. In respect of other assets, it is treated as current when it is:
expected to be realized or intended to be sold or consumed in the normal operating cycle held primarily for the purpose of trading expected to be realized within twelve months after the reporting period.
All other assets are classified as non-current.
A liability is treated as current when:
it is expected to be settled in the normal operating cycle
it is held primarily for the purpose of trading
it is due to be settled within twelve months after the reporting period, or
there is no unconditional right to defer the settlement of the liability for atleast twelve months after the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. In Groups considered view, twelve months is its operating cycle for all entities within the Group other than real estate.
The normal operating cycle in respect of operation relating to real estate project depends on signing of agreement, size of the project, phasing of the project, type of development, project complexities, approvals needed and realization of project into cash and cash equivalents and range from 3 to 7 years. Accordingly, assets and liabilities have been classified into current and non-current based on operating cycle.
y) Borrowing Cost
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. Other borrowing costs are expensed in the period in which they are incurred.
z) Earnings Per Share (EPS)
As per the scheme, new equity shares were allotted at 1:1 ratio to shareholders of Resulting Company as per scheme. The EPS is calculated based on that number of shares.
Basic earnings per share is computed by dividing the profit after tax by the weighted average number of new equity shares of Resulting Company as per the scheme of arrangement.
Diluted earnings per share is computed by dividing the profit after tax as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.
RESULTS OF OPERATIONS
The following table sets forth certain items derived from our Restated Consolidated Financial Information for the quarter ended June 30, 2023 and Financial Years ended March 23, 2023, March 31, 2022 and March 31, 2021, expressed in absolute terms and as a percentage of total revenue from operations for the periods indicated:
Particulars |
Period ended June 30, 2023 | Fiscal ended March 31, 2023 | Fiscal ended March 31, 2022 | Fiscal ended March 31, 2021 | ||||
(in crore) |
(%) |
(in crore) |
(%) |
(in crore) |
(%) |
(in crore) |
(%) |
|
Revenue from operations |
||||||||
| (a) Sale of products | 514.57 | 98.67 | 2,025.82 | 98.20 | 1,657.17 | 97.71 | 1,116.68 | 97.99 |
| (b) Sale of services | 0.92 | 0.18 | 0.13 | 0.01 | 0.13 | 0.01 | 0.13 | 0.01 |
(c) Other operating revenues |
5.56 |
1.07 |
26.83 |
1.30 |
35.12 |
2.07 |
11.14 |
0.98 |
| Other income | 0.43 | 0.08 | 10.20 | 0.49 | 3.61 | 0.21 | 11.65 | 1.02 |
| Total Revenue | 521.48 | 100 | 2,062.98 | 100 | 1,696.03 | 100 | 1,139.60 | 100 |
| Expenses | ||||||||
Cost of materials consumed |
285.80 |
54.81 |
1,130.63 |
54.81 |
956.04 |
56.37 |
575.81 |
50.53 |
| Purchases of Stock-in- | - | - | - | - | - | - | - | - |
| Trade | ||||||||
Changes in inventories of finished goods, work-in-process and |
(11.91) |
(2.28) |
(2.01) |
(0.10) |
(85.33) |
(5.03) |
(22.13) |
(1.94) |
| Stock-in-Trade | ||||||||
Employee benefits expense |
79.48 |
15.24 |
277.87 |
13.47 |
195.84 |
11.55 |
164.69 |
14.45 |
| Finance costs | 21.27 | 4.08 | 60.05 | 2.91 | 46.39 | 2.74 | 47.47 | 4.17 |
Depreciation and amortization expense |
37.11 |
7.12 |
143.88 |
6.97 |
130.72 |
7.71 |
79.67 |
6.99 |
| Other expenses | 139.51 | 26.75 | 521.89 | 25.30 | 436.35 | 25.73 | 270.04 | 23.70 |
| Total expenses | 551.26 | 105.71 | 2,132.31 | 103.36 | 1680.01 | 99.06 | 1,115.55 | 97.89 |
Profit before exceptional and extraordinary items and tax |
(29.78) |
(5.71) |
(69.33) |
(3.36) |
16.02 |
0.94 |
24.05 |
2.11 |
| Exceptional items | ||||||||
| One Time Voluntary | (3.33) | (0.64) | (17.10) | (0.83) | (13.48) | (0.79) | (13.00) | (1.14) |
| Separation Costs | ||||||||
Profit before extraordinary items and tax |
(33.11) |
(6.35) |
(86.43) |
(4.19) |
2.54 |
0.15 |
11.05 |
0.97 |
| Extraordinary items | - | - | - | - | - | - | ||
| Profit before tax | (33.11) | (6.35) | (86.43) | (4.19) | 2.54 | 0.15 | 11.05 | 0.97 |
| Tax expense: | ||||||||
| (1) Current tax | (7.25) | (1.39) | (27.48) | (1.33) | (16.54) | (0.98) | (4.21) | (0.37) |
| (2) Deferred tax | 4.68 | 0.90 | 6.10 | 0.30 | (2.71) | (0.16) | (54.39) | (4.77) |
Profit/(Loss) for the year |
(35.68) |
(6.84) |
(107.81) |
(5.23) |
(16.71) |
(0.99) |
(47.56) |
(4.17) |
Share of Profit/(Loss) of associates |
0.16 |
0.03 |
(0.03) |
(0.001) |
0.12 |
0.01 |
0.02 |
0.002 |
| Profit (Loss) | (35.52) | (6.81) | (107.84) | (5.23) | (16.59) | (0.98) | (47.54) | (4.17) |
Other information
The following table sets forth our EBITDA and EBITDA margin for the three months period ended June 30, 2023 and Financial Years ended March 31, 2023, March 31, 2022 and March 31, 2021:
Particulars |
Three month period ended June 30, 2023 |
Fiscal ended March 31, 2023 |
Fiscal ended March 31, 2022 |
Fiscal ended March 31, 2021 |
| EBITDA (in crore) | 28.33 | 124.37 | 189.64 | 139.56 |
| EBITDA margin (%) | 5.44 | 6.06 | 11.21 | 12.37 |
Revenue
Revenue from operations
Our revenue from operations (on a consolidated basis) accounted for 99.92%, 99.51%, 99.79% and 98.98% of our total revenue for the three months period ended June 30, 2023 and the Financial Years ended March 31, 2023, March 31, 2022 and March 31, 2021 respectively.
We report revenue from operations under the following segments: (i) revenue from the sale of products; (ii) revenue from the sale of services; and (iii) other operating revenues.
i) Revenue from the sale of products:
We generate revenue from the sale of:
Sale of aluminium die castings for two wheelers, passenger cars and commercial vehicles; and
Sale of energy generated from windmills. ii) Revenue from the sale of services:
This comprises lease income and sale of IT services to other companies.
iii) Other operating revenues:
We generate other operating revenue from sale of scrap and export incentives.
Other income
Our other income primarily comprises interest income, dividends received, gains from the sale of investments, profits from the sale of fixed assets and other non-operating income.
Expenses
Cost of materials consumed
Cost of materials consumed comprises purchases of raw materials and components (including changes in inventories of finished goods, work-in-process and Stock-in-Trade).
Purchases of stock-in-trade
Purchases of stock-in-trade comprises spare parts and engine oil for motor vehicles segment.
Changes in inventories of finished goods, work-in-process and stock-in-trade
This pertains to difference between closing stock and opening stock of finished goods, work-in-process and stock-in- trade.
Employee benefits expense
Employee benefits expense includes salaries and wages, contribution to provident fund, pension fund and other funds, leave salary and welfare expenses.
Finance costs
Finance costs include interest costs payable by us for short term and long term borrowings including working capital loans, other borrowing costs and costs in relation to foreign exchange fluctuations.
Depreciation and amortization expense
Depreciation and amortization expense includes depreciation of building, plant and machinery, furniture, fixtures, office equipments, motor vehicles, computers and software.
Other expense
Other expenses primarily comprise stores, spares and tools consumed in operations, rental expenses, repairs of buildings, plants and equipment, packing and freight charges, marketing expenses, legal and professional fees.
Tax expense
Income tax expense comprises current tax and deferred tax expense or credit computed in accordance with the relevant provisions of the Income Tax Act.
Current tax expense is determined based on the taxable income of the year at the prevailing tax rates.
Deferred tax asset or liability is recognized in the books of accounts to the extent that it is probable that taxable income will be available in future periods against which it can be set-off. The carrying amount of the deferred tax asset or liability is reviewed at the end of each reporting period.
Financial Year ended March 31, 2023 Compared to Financial Year ended March 31, 2022
Revenue
Our total revenue increased by 21.64% from 1,696.03 crore for the Financial Year ended March 31, 2022 to 2,062.98 crore for the Financial Year ended March 31, 2023.
i) Revenue from operations:
Our revenue from operations increased by 21.29% from 1,692.42 crore for the Financial Year ended March 31, 2022 to 2,052.78 crore for the Financial Year ended March 31, 2023.
ii) Revenue from the sale of products:
Our revenue from the sale of our products increased by 22.25% from 1,657.1 for the Financial Year ended March 31, 2022 to 2,025.82 crore for the Financial Year ended March 31, 2023.
iii) Revenue from the sale of services:
Our revenue from sale of our services stayed constant over the periods being 0.13 crore .
iv) Other operating revenues:
Our other operating revenues decreased by 23.60% from 35.12 crore for the Financial Year ended March 31, 2022 to 26.83 crore for the Financial Year ended March 31, 2023 primarily due to reduction in export incentives.
Other income
Our other income increased by 182.55% from 3.61 crore for the Financial Year ended March 31, 2022 to 10.20 crore for the Financial Year ended March 31, 2023 primarily due to an increase in gain on foreign currency transactions and conversion.
Expenses
Our total expenses increased by 26.92% from 1,680.01 crore for the Financial Year ended March 31, 2022 to 2,132.31 crore for the Financial Year ended March 31, 2023.
i) Cost of materials consumed and Purchases of stock-in-trade:
Our cost of material consumed increased by 18.26% from 956.04 crore for the Financial Year ended March 31, 2022 to 1,130.63 crore for the Financial Year ended March 31, 2023 primarily due to increase in production volumes and to meet the increased demand in our automotive components segment.
ii) Employee benefits expense:
Our expenses towards employee benefits increased by 41.89% from 195.84 crore for the Financial Year ended March 31, 2022 to 277.87 crore for the Financial Year ended March 31, 2023. The increase is in line with the average yearly increase in salary/ benefits granted to our employees.
iii) Finance costs:
Our financing costs increased by 29.45% from 46.39 crore for the Financial Year ended March 31, 2022 to 60.05 crore for the Financial Year ended March 31, 2023. The increase was primarily attributable to an increase in the base lending rate by Indian banks during the year and the replacement of low interest rate bearing foreign currency denominated debt with higher interest bearing domestic loans. iv) Depreciation and amortization expense:
Our depreciation and amortization expense increased by 10.07% from 130.72 crore for the Financial
Year ended March 31, 2022 to 143.88 crore for the Financial Year ended March 31, 2023 primarily due to certain additions to our fixed assets during the periods under review.
v) Other expense
Our other expenses increased by 19.60% from 436.35 crore for the Financial Year ended March 31, 2022 to 521.89 crore for the Financial Year ended March 31, 2023 primarily due to increase in power costs and logistics expense.
Profit before tax
As a result of the foregoing, our overall profit before tax decrease from 2.66 crore for the Financial Year ended March 31, 2022 to a loss of 86.46 crore for the Financial Year ended March 31, 2023.
Tax expense
Our tax expense increased by 11.02% from 19.25 crore for the Financial Year ended March 31, 2022 to 21.38 crore for the Financial Year ended March 31, 2023.
Profit for the year
As a result of the foregoing, our loss after tax for the Financial Year ended March 31, 2023 was 107.84 crore as compared to 16.59 crore for the Financial Year ended March 31, 2022.
Financial Year ended March 31, 2022 Compared to Financial Year ended March 31, 2021
Revenue
Our total revenue increase by 48.83% from 1,139.60 crore for the Financial Year ended March 31, 2021 to
1,696.03 crore for the Financial Year ended March 31, 2022.
Revenue from operations
Our revenue from operations increased by 50.04% from 1,127.95 crore for the Financial Year ended March 31, 2021 to 1,692.42 crore for the Financial Year ended March 31, 2022.
i) Revenue from the sale of products.
Our revenue from the sale of our products increased by 48.40% from 1,116.68 Crore for the Financial Year ended March 31, 2021 to 1,657.17 crore for the Financial Year ended March 31, 2022.
ii) Revenue from the sale of services.
Our revenue from sale of our services stayed constant over the periods being 0.13 Crore .
iii) Other operating revenues.
Our other operating revenues increased by 215.26% from 11.14 crore for the Financial Year ended March 31, 2021 to 35.12 crore for the Financial Year ended March 31, 2022.
Other income
Our other income decreased by 69.01% from 11.65 crore for the Financial Year ended March 31, 2021 to
3.61 crore for the Financial Year ended March 31, 2022 primarily due to an decrease in Gain on foreign currency transactions and translation.
Expenses
Our total expenses increased by 50.60% from 1,115.55 crore for the Financial Year ended March 31, 2021 to 1,680.01 crore for the Financial Year ended March 31, 2022.
Cost of materials consumed and Purchases of stock-in-trade
Our cost of material consumed increased by 66.03% from 575.81 crore for the Financial Year ended March 31, 2021 to 956.04 crore for the Financial Year ended March 31, 2022 primarily due to increase in production volumes and to meet the increase demand in our automotive components segment.
Employee benefits expense
Our expenses towards employee benefits increased by 18.91% from 164.69 crore for the Financial Year ended March 31, 2021 to 195.84 crore for the Financial Year ended March 31, 2022. The increase is in line with the average yearly increase in salary/ benefits granted to our employees.
Finance costs
Our financing costs decreased by 2.28% from 47.47 crore for the Financial Year ended March 31, 2021 to
46.39 crore for the Financial Year ended March 31, 2022.
Depreciation and amortization expense
Our depreciation and amortization expense increased by 64.08% from 79.67 crore for the Financial Year ended March 31, 2021 to 130.72 crore for the Financial Year ended March 31, 2022 primarily due to certain additions to our fixed assets during the periods under review.
Other expense
Our other expenses increased by 61.59% from 270.04 crore for the Financial Year ended March 31, 2021 to
436.35 crore for the Financial Year ended March 31, 2022 primarily due to increase in power costs and marketing expense.
Profit before tax
As a result of the foregoing, our overall profit before tax decrease from 11.07 crore for the Financial Year ended March 31, 2021 to a 2.66 crore for the Financial Year ended March 31, 2022.
Tax expense
Our tax expense decreased by 67.14% from 58.60 crore for the Financial Year ended March 31, 2021 to
19.25 crore for the Financial Year ended March 31, 2022.
Profit for the year
As a result of the foregoing, our loss after tax for the Financial Year ended March 31, 2022 was 16.59 crore as compared to 47.54 crore for the Financial Year ended March 31, 2021.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2023, our Company had cash and bank balances amounting to 127.16 crore. Our cash and cash balances primarily consist of cash at hand, fixed deposits with more than one years maturity, cheques/drafts at hand and balance held with banks. Our primary liquidity requirements have been to finance our raw material/auto component purchases for our manufacturing operations. Our business requires a significant amount of working capital. We expect to meet our working capital and liquidity requirements for the next 12 months primarily from cash flows from our operations, loans from banks and financial institutions.
Cash flows
Set forth below is a table of selected information from our consolidated statements of cash flows for the three months period ended June 30, 2023 and the Financial Years ended March 31, 2023, March 31, 2022 and March 31, 2021.
(In crore)
Particulars |
Three months period ended June 30, 2023 |
Fiscal ended March 31, 2023 |
Fiscal ended March 31, 2022 |
Fiscal ended March 31, 2021 |
| Net cash from/(used in) operating activities | (2.34) | 126.15 | 104.97 | 110.86 |
| Net cash from/(used in) investing activities | (57.36) | (185.97) | (99.02) | (46.15) |
| Net cash from/(used in) financing activities | 83.11 | 39.96 | 96.56 | (106.96) |
| Net increase/(decrease) in cash and cash equivalents | 23.41 | (19.86) | 102.51 | (42.25) |
| Cash and cash equivalents at the beginning of the year | 103.75 | 123.61 | 21.10 | 63.35 |
| Cash and cash equivalents at the end of the year | 127.16 | 103.75 | 123.61 | 21.10 |
Net cash generated from/(used in) operating activities
Our net flows generated from operating activities for the three months period ended June 30, 2023 primarily comprised of operating profit before working capital changes for 25.60 crore, which was adjusted for a decrease in working capital adjustments of 20.69 crore and taxes of 7.25 crore.
Our net flows generated from operating activities for the Financial Year ended March 31, 2023 primarily comprised of operating profit before working capital changes for 107.27 crore, which was adjusted for an increase in working capital adjustments of 46.36 crore and taxes of 27.48 crore.
Our net flows generated from operating activities for the Financial Year ended March 31, 2022 primarily comprised of operating profit before working capital changes for 180.45 crore, which was adjusted for a decrease in working capital adjustments of 58.94 crore and taxes of 16.54 crore.
Our net flows generated from operating activities for the Financial Year ended March 31, 2021 primarily comprised of operating profit before working capital changes for 126.99 crore, which was adjusted for a decrease in working capital adjustments of 11.92 crore and taxes of 4.21 crore.
Net cash generated from/(used in) investing activities
Our cash flow used in investment activities for the three months period ended June 30, 2023 primarily comprised net purchase of fixed assets of 56.70 crore, Interest income of 0.41 crore and net purchase of investments of 1.07 crore.
Our cash flow used in investment activities for the Financial Year ended March 31, 2023 primarily comprised net purchase of fixed assets of 186.94 crore, Interest income of 0.97 crore and net purchase of investments is NIL.
Our cash flow used in investment activities for the Financial Year ended March 31, 2022 primarily comprised net purchase of fixed assets of 99.61 crore, Interest income of 1.08 crore and net purchase of investments of 0.49 crore.
Our cash flow used in investment activities for the Financial Year ended March 31, 2021 primarily comprised net purchase of fixed assets of 46.74 crore, Interest income of 1.80 crore and net purchase of investments of 1.22 crore.
Net cash generated from/(used in) financing activities
Our net cash generated from financing activities for the three months period ended June 30, 2023 was primarily comprised of increase in loans 101.91 crore which was offset by finance cost of 21.27 crore and others net increase of 2.47 crore.
Our net cash generated from financing activities for the Financial Year ended March 31, 2023 primarily comprised an increase in loans of 127.49 crore which was offset by finance cost of 60.05 crore and other net decrease of 27.47 crore.
Our net cash generated from financing activities for the Financial Year ended March 31, 2022 was primarily comprised of increase in loans availed of 56.90 crore, which was offset by finance cost of 46.39 Crore and other net increase of 86.05 crore.
Our net cash generated from financing activities for the Financial Year ended March 31, 2021 was primarily comprised of net loan repayment of 45.03 crore, which was offset by finance cost of 47.47 crore and other net decrease of 14.46 crore.
ASSETS
Our fixed assets primarily consist of freehold and leasehold land, buildings, furniture and fixtures, plant and machinery, office equipment, vehicles, computers and software. Investments include investments in equity securities of listed and unlisted companies.
With respect to our current assets, inventories include raw materials, work in process and finished goods. Trade receivables include receivables with respect to sale of goods and services.
FINANCIAL INDEBTEDNESS
The following table sets forth our consolidated secured and unsecured debt position as at June 30, 2023, March 31, 2023, March 31, 2022 and March 31, 2021:
(in crore)
Particulars |
Amount outstandi ng as at June 30, 2023 |
Amount outstandi ng as at March 31, 2023 |
Amount outstanding as at March 31, 2022 |
Amount outstandi ng as at March 31, 2021 |
Secured Loans |
||||
| Term loans from banks | 234.79 | 230.22 | 249.76 | 376.51 |
| Term loans from other parties | 8.28 | 8.12 | 7.51 | 6.95 |
| Short term loans from banks repayable | 173.74 | 140.52 | 66.97 | 48.11 |
| on demand | ||||
| Total (A) | 416.81 | 378.86 | 324.24 | 431.57 |
Unsecured Loans |
||||
| Term loans from banks | 543.07 | 546.24 | 405.98 | 265.34 |
| Short term loans from banks | 123.12 | 56.02 | 123.56 | 100.11 |
| 0.1% Non-Convertible Redeemable | 0.87 | 0.87 | 0.87 | 0.87 |
| Preference Shares | ||||
| Debentures | 99.88 | 99.85 | 99.70 | 99.55 |
| Total (B) | 766.94 | 702.98 | 630.11 | 465.87 |
| Total (A+B) | 1,183.75 | 1,081.84 | 954.35 | 897.44 |
Note: Short terms loans are loans which have tenure of less than one year
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any have any off-balance sheet arrangements, derivative instruments, swap transactions or relationships with unconsolidated instruments that would have been established for the purpose of facilitating off-balance sheet transactions.
CONTINGENT LIABILITIES
The following table provides our consolidated contingent liabilities as of June 30, 2023, March 31, 2023, March 31, 2022 and March 31, 2021:
(in crore)
| Particulars | As at three months period ended June 30, 2023 |
As at year ended March 31, 2023 |
As at year ended March 31, 2022 |
As at year ended March 31, 2021 |
| Contingent liability not provided for Claims against the Company not acknowledged as debt | 60.13 |
60.13 |
0.77 |
0.83 |
| Guarantees excluding Financial Guarantees | - | - | 0.59 | 0.59 |
| Other money for which the Company is contingently liable | - |
4.47 |
6.03 |
11.50 |
| Estimated amount of contracts remaining to be executed on capital account | 219.14 |
210.65 |
10.89 |
22.21 |
| Others | - | - | - | - |
| Total | 279.27 | 275.25 | 18.28 | 35.13 |
RELATED PARTY TRANSACTIONS
We have engaged in the past, and may engage in the future, in transactions with related parties, including with our affiliates and certain key management members on an arm‘s length basis. For details in relation to the related party transactions, see "Financial Information" on page 111.
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