Notes to Accounts of Diffusion Engineers Ltd.

Mar 31, 2025

2.14 Provisions

A Provision is recognised when the Company has a
present obligation (legal or constructive) as a result
of a past event and it is probable that an outflow
of resources embodying economic benefits will be
required to settle the obligation and a reliable estimate
can be made of the amount of the obligation.

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

2.15 Contingent Liabilities

Contingent liability is disclosed for (i) Possible
obligation which will be confirmed only by the future
events not wholly within the control of the company or
(ii) Present obligations arising from past events where
it is not probable that an outflow of resources will be

required to settle the obligation or a reliable estimate
of the amount of the obligation cannot be made.

Contingent Assets

Contingent assets are not recognised in the financial
statements. A contingent asset is disclosed where an
inflow of economic benefits is probable. Contingent
assets are assessed continually and , if it is virtually
certain that an inflow of economic benefits will arise,
the asset and related income are recognised in the
period in which the change occurs.

2.16 Financial Instruments:

A financial instrument is any contract that gives rise to
a financial asset of one entity and a financial liability or
equity instrument of another entity.

(a) Financial assets

Financial assets include cash and cash equivalents,
trade and other receivables, investments
in securities and other eligible current and
non-current assets.

At initial recognition, all financial assets are
measured at fair value. Such financial assets are
subsequently classified under one of the following
three categories according to the purpose for
which they are held. The classification is reviewed
at the end of each reporting period.

Financial assets at amortised cost: At the date of
initial recognition, are held to collect contractual
cash flows of principal and interest on principal
amount outstanding on specified dates. These
financial assets are intended to be held until
maturity. Therefore, they are subsequently
measured at amortised cost by applying the
Effective Interest Rate (EIR) method to the gross
carrying amount of the financial asset. The EIR
amortisation is included as interest income in the
profit or loss. The losses arising from impairment
are recognised in the profit or loss.

Financial assets at fair value through other
comprehensive income: At the date of initial
recognition, are held to collect contractual
cash flows of principal and interest on principal
amount outstanding on specified dates, as well as
held for selling. Therefore, they are subsequently
measured at each reporting date at fair value,
with all fair value movements recognised in Other
Comprehensive Income (OCI). Interest income
calculated using the Effective Interest Rate (EIR)
method, impairment gain or loss and foreign
exchange gain or loss are recognised in the
Statement of Profit and Loss. On derecognition

of the asset, cumulative gain or loss previously
recognised in Other Comprehensive Income
is reclassified from the OCI to Statement of
Profit and Loss.

Financial assets at fair value through profit or
loss: At the date of initial recognition, financial
assets are held for trading, or which are measured
neither at Amortised Cost nor at Fair Value through
OCI. Therefore, they are subsequently measured
at each reporting date at fair value, with all fair
value movements recognised in the Statement of
Profit and Loss.

Investment in Equity shares of subsidiaries and
associates are valued at cost.

The Company derecognises a financial asset when
the contractual rights to the cash flows from the
financial asset expire or it transfers the financial
asset and the transfer qualifies for derecognition
under Ind AS 109.

The company assesses impairment based on
the expected credit losses (ECL) model to all its
financial assets measured at amortised cost.

(b) Financial liabilities

Financial liabilities include long-term and short¬
term loans and borrowings, trade and other
payables and other eligible current and non¬
current liabilities.

All financial liabilities are recognised initially at
fair value and, in the case of loans and borrowings
and other payables, net of directly attributable
transaction costs. After initial recognition,
financial liabilities are classified under one of the
following two categories:

Financial liabilities at amortised cost: After
initial recognition, such financial liabilities are
subsequently measured at amortised cost by
applying the Effective Interest Rate (EIR) method
to the gross carrying amount of the financial
liability. The EIR amortisation is included in finance
expense in the profit or loss.

Financial liabilities at fair value through profit
or loss: which are designated as such on initial
recognition, or which are held for trading. Fair
value gains / losses attributable to changes in own
credit risk is recognised in OCI. These gains / losses
are not subsequently transferred to Statement of
Profit and Loss. All other changes in fair value of
such liabilities are recognised in the Statement of
Profit and Loss.

The Company derecognises a financial liability
when the obligation specified in the contract is
discharged, cancelled or expires.

2.17 Revenue Recognition

Revenue from contracts with customer

Revenue from contract with customers is recognised
when the Company satisfies performance obligation
by transferring promised goods and services to the
customer. Performance obligations are satisfied at the
point of time when the customer obtains controls of the
asset. Revenue is measured based on transaction price,
which is the fair value of the consideration received or
receivable, stated net of discounts, returns and goods
& service tax. Transaction price is recognised based on
the price specified in the contract, net of the estimated
sales incentives/ discounts if any.

Rental income

Rental income from investment property is recognised
as part of revenue from operations in profit or loss on a
straight-line basis over the term of the lease.

Dividend and interest income

Dividend income from investments is recognised
when the shareholder''s right to receive payment has
been established (provided that it is probable that the
economic benefits will flow to the Company and the
amount of income can be measured reliably).

Interest income from a financial asset is recognised
when it is probable that the economic benefits will
flow to the 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, which is the rate
that exactly discounts estimated future cash receipts
through the expected life of the financial asset to that
asset''s net carrying amount on initial recognition.

Receipts from insurance claims are accounted after the
same is approved by the insurance company.

2.18 Earnings per share

Basic earnings per share are calculated by dividing the
profit for the period attributable to equity shareholders

by the weighted average number of equity shares
outstanding during the period. For the purpose of
calculating diluted earnings per share, the profit for
the period attributable to equity shareholders and
the weighted average number of shares outstanding
during the period are adjusted for the effects of all
dilutive potential equity shares.

2.19 Segment Reporting

Operating segments are reported in a manner
consistent with the internal reporting provided to
the Chief Operating Decision Maker (CODM) of the
Company. The CODM is responsible for allocating
resources and assessing performance of the operating
segments of the Company.

As a result of the Management review mechanism,
the Company has one segment "Welding Fabrication
Technology and Engineering" which includes
Manufacturing, Trading and Job Work.since Company
has only one Segment separate disclosure not given

2.20 Cash and Cash Equivalents

Cash and cash equivalents in the balance sheet
comprise cash at banks, cash on hand and highly liquid
short-term deposits with an original maturity of three
months or less, which are subject to an insignificant risk
of changes in value.

2.21 Statement of Cash Flows

Statement of Cash flows is reported using the indirect
method, whereby profit for the year is adjusted for
the effects of transactions of 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 the Company are segregated
based on the available information.

2.22 Operating Cycle

Based on the nature of products / activities of the
Company and the normal time between acquisition of
assets and their realisation in cash or cash equivalents,
the Company has determined its operating cycle as 12
months for the purpose of classification of its assets and
liabilities as current and non-current

Rights, preferences and restrictions attached to the equity shares

The Company has issued only one class of equity shares having a face value of ? 10/- per share. Each holder of equity shares is
entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed by board
of directors is subject to the approval of shareholders in the ensuing Annual General Meeting. In the event of liquidation of
the company, the holder of equity shares will be entitled to receive remaining assets of the Company after distribution of all
preferential amounts. The distribution will be in proportion to the number of equity shares held by the share holders.

Description of Reserves
Retained earnings

Retained earnings represents surplus/accumulated earnings of the Company and are available for distribution to
shareholders.

Securities premium

Securities premium is used to record the premium received on issue of shares.Issue Expenditure related to IPO has been
adjusted against the Securities Premium . It is utilised in accordance with the provisions of the Companies Act, 2013.

Issue of Shares

The equity shares of the Company have been listed on National Stock Exchange of India Limited ("NSE") and on BSE Limited
("BSE") on October 4, 2024 by completing Initial Public Offer (''''the IPO") of 93,55,000 equity shares of face value of '' 10/-each
at an issue price of '' 168/-per equity share (including share premium of '' 158/-per equity share) aggregating to '' 1,571.64
million and 50,000 equity shares to employees of face value of '' 10 each and an issue price of '' 160/- per equity shares
(including share premium of '' 150/- per equity share) aggregating to '' 8 million. Total amount aggregating to '' 1,579.64
million. '' 750.07 million was received from Anchor investors on 25^th September 2024 and subsequently allotment was done
on 1^st October 2024.

Capital Redemption Reserve

In FY 2001-02 company completed the Buy-Back of 4,72,150 equity shares of '' 10/- each at a Premium of '' 25.62 per share.
The total consideration paid was '' 1,68, 17,981/- out of which the Premium of '' 1,20,96,481/- was paid by utlising the share
premium account. The company has also transferred '' 47,21,500/- to the capital redemption reserve account from General
Reserve as a consequent to the Buy-Back of shares.

Capital Reserve

The company started creating the capital reserve for receipt of state subsidy from the year 1992-93.

General reserves

General Reserve represents appropriation of retained earnings and are available for distribution to shareholders

As per our report of even date For and on behalf of the Board of Directors of

For PGS & Associates Diffusion Engineers Limited

Chartered Accountants
F.R.N. : 0122384W

PREMAL H GANDHI PRASHANT N. GARG NITIN N GARG

Partner Chairman & Managing Director Director

Membership Number: 111592 DIN :- 00049106 DIN :- 08558736

Place : Mumbai Place : Nagpur Place : Nagpur

UDIN : 25111592BMMJFJ8535 Date : 15-05-2025 Date : 15-05-2025

Date : 15-05-2025

RAMESH KUMAR NARASINGHBHAN ABHISHEK MEHTA CHANCHAL JAISWAL

Chief Executive Officer Chief Financial Officer Company Secretary

Place : Nagpur Place : Nagpur Place : Nagpur

Date : 15-05-2025 Date : 15-05-2025 Date : 15-05-2025

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Mar 31, 2024

The following methods and assumptions were used to estimate the fair values:

Cash and short-term deposits, trade receivables, loans, trade payables, and other current financial assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

Long-term receivables/payables are evaluated by the Company based on parameters such as interest rates, risk factors, individual creditworthiness of the counterparty and the risk characteristics of the financed project. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables.

All foreign currency denominated assets and liabilities are translated using exchange rate at reporting date.

Fair Value Hierarchy

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Inputs other than the quoted prices included within Level 1 that are observable for the asset or liability, either

directly or indirectly; and

Level 3: Inputs based on unobservable market data.

B. Financial Risk Management

Diffusion engineers limited is exposed primarily to market risk (fluctuation in foreign currency exchange rates & interest rate), credit, liquidity which may adversely impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment & seeks to mitigate potential adverse effects on the financial performance of the Company.

1. Capital Management :

The company’s capital management objectives are:

(i) The Board policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The board of directors monitors the return on capital employed.

(ii) The Company manages capital risk by maintaining sound/optimal capital structure through monitoring of financial ratios, such as debt-to-equity ratio and net borrowings-to-equity ratio on a monthly basis and implements capital structure improvement plan when necessary.

(iii) The Company uses debt equity ratio as a capital management index and calculates the ratio as the net debt divided by total equity. Net debts and total equity are based on the amounts stated in the financial statements.

(iv) Debt Equity Ratio is as follows:			(Rs. in Million)
	Particulars	Year ended 31 March 2024	Year ended 31 March 2023
	Debt (A)	337.08	475.98
	Equity (B)	1,783.19	1,366.62
	Debt Equity Ratio (A/B)	0.19	0.35

2. Credit Risk :

(i) Credit risk is the risk of financial loss arising from counter-party failure to repay or service debt according to the contractual terms or obligations. Credit risk encompasses both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.

(ii) Financial instruments that are subject to concentration of credit risk principally consists of trade receivables, investments, derivative financial instruments and other financial assets. None of the financial instruments of the Company results in material concentration of credit risk.

3. Liquidity Risk :

Liquidity Risk Management : Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

Maturities of Borrowings : The following table details the Company’s expected maturity for borrowings :
Exposure to Risk	Year ended	Year ended
	31 March 2024	31 March 2023
Interest bearing borrowings: On Demand	337.08	446.38
Less than 180 Days	-	10.13
181-365 Days		2.78
More than 365 Days		16.69

4. Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes. The Company’s exposure to market risk is primarily on account of foreign currency exchange rate risk.

a) Foreign Currency Exchange Rate Risk :

The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, where any transaction references more than one currency or where assets / liabilities are denominated in a currency other than the functional currency of the respective entities. Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in AED, US Dollar, Australian Dollar, Great Britain Pound, Euro, JPY against the respective functional currencies of the Company. The Company, as per its risk management policy, evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks & uses derivative instruments primarily to hedge foreign exchange (if required).

Foreign Currency Sensitivity :

The following tables demonstrate the sensitivity to a reasonably possible change in foreign currency exchange rates, with all other variables held constant. The impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities.

b) Interest Rate Risk :

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of change in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s debt obligations with floating interest rates.

Interest Rate Sensitivity :

The sensitivity analyses below have been determined based on exposure to interest rate. For variable rate liabilities, analysis is prepared assuming the amount of liability outstanding at the end of the reporting period was outstanding for the whole year. With all other variables held constant, the Company’s profit before tax is affected through the impact on variable rate borrowings, as follows:

Total Debt represents Current Borrowings Non Current Borrowings.

Shareholders Equity represents Equity Share Capital Other equity

Earnings available for debt service represents Profit Before Tax Depreciation and Amortizations Interest on Debt Debt Service represents Interest on Debt Scheduled Principal Repayment of Non Current Borrowings Net Sales represents Domestic Sales Export Sales Scrap Sales Capital Employed represents Total Equity Borrowings

Note-43

Proposed Dividend

Board of Directors proposes 2.5% Final Dividend on Equity shares subject to approval in AGM.

Note-44

Other Amendments with respect to Schedule III

The Company does not have any Benami property, where any proceedings have been initiated or pending against the company for holding any Benami property.

The company is not declared as wilful defaulter by any bank or financial Institution or other lender The Company does not have any transactions with Companies struck off.

The Company has not traded or invested in Crypto currency or Virtual currency during the financial year.

The company has filed certain Adjudication/Regularization Applications before the Registrar of Companies, Mumbai.

The Company has not advanced or loaned or invested funds to any other person / entities, including foreign entities (intermediaries) with the understanding that the intermediary shall:

(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (ultimate beneficiaries) or

(ii) provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries.

The company have not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the company shall:

(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (ultimate beneficiaries) or

(ii) provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries.

The Company does not have any transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).

Diffusion Eurasia Muhendislik Sanayi Ve Ticaret Anonim Sirketi ( DEMSTAS ) is a company incorporated in Turkey as a Company on February 16, 2024 registered with the IZMIR Trade Registry Office under Trade Registry number 253826. The registered office of DEMSTAS is situated at Adalet Mah. Anadolu Cad. Megapol Tower No: 4l I Kapi No: 101 Bayrakli/Izmir. Holding was agreed as follows :

Diffusion Engineers Limited - 70%

Gurkhan Gokhan - 30%

Total Share capital proposed was 2,50,000 Turkish Lira and 25% of the same 62,500 turkish Lira was paid by Gokhan Gurcan. Contribution of Diffusion Engineers Limited was to be done within 24 months from the date of registration.

As on 31st March the company had not invested any amount in the said company. On 21st May 2024, company transferred 1,75,000 Turkish Lira in the company as their 70% capital contribution.

Note-45

Previous year’s figures have been regrouped / rearranged wherever necessary, to conform to the current year’s classification / disclosure.