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Notes to Accounts of Rossari Biotech Ltd.
Mar 31, 2025
Impairment of Goodwill
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to the CGU or groups of CGUs, which benefit from the synergies of the acquisition. The Company internally reviews the goodwill for impairment for the acquired business.
Value in use is calculated using cash flow projections over a period of 5 years, with amounts based on medium term strategic plan. Any major variations to strategic plan, based on experience are incorporated in the calculations. Cash flows beyond the 5 year period are extrapolated using a long term growth rate.
Management reviews the carrying value of respective CGU including goodwill annually to determine whether there has been any impairment. This involves making an assessment of the value of respective CGU and comparing it to the carrying value. If the assessed value is lower than the carrying value, then an impairment charge is recognised to reduce the carrying value to this amount.
Key assumptions in the budgets and plans include future revenue volume/price growth rates, associated future levels of marketing support, cost-base of manufacture and supply and directly associated overheads. These assumptions are based on historical trends and future market expectations and the markets and geographies in which they operate.
Other key assumptions applied in determining value in use are
(a) long term growth rate - Cash flows beyond the five-year period are extrapolated using the estimated long-term growth rate applicable for the geographies, with reference to historical economic growth rates. The growth rate assumed for the current financial year was 3%.
(b) discount rate - The discount rate is based on a Weighted Average Cost of Capital (WACC) for comparable companies operating in similar markets and geographies. The pre-tax discount rate assumed for the current financial year was 13.5%.
The Company has performed sensitivity analysis around the base assumptions and has concluded that no reasonable possible changes in key assumptions would cause the recoverable amount to be less than the carrying value.
to employees of Unitop for employee retention bonus). During the year ended 31st March, 2023, the Company had acquired additional 15% stake for a consideration of Rs. 916.56 million from the Sellers (including Rs. 24.00 million paid to employee of Unitop for bonus). During the previous year ended 31st March, 2024, the Company had paid bonus of Rs. 8.0 million to an employee of Unitop. Further, the Company was to acquire the remaining 20% equity shares subject to completion of the customary terms and conditions as defined in the Share Purchase Agreement (SPA). However, as the Sellers and erstwhile promoter of Unitop have not complied with certain obligations and conditions under the SPA, the remaining 20% (i.e. the last tranche) was not acquired by the Company. The Sellers and erstwhile promoter had invoked a Put Option under the SPA for the remaining 20% shares,which the Company has contested, and currently the matter is subjudice and under arbitration.
6.2 On 1st September, 2021, the Company had completed the acquisition of 76% equity shares of Tristar Intermediates Private Limited for a consideration of '' 821.41 million from the existing shareholders. During the year ended 31st March, 2023, the Company had acquired additional 8% stake for a consideration of '' 92.75 million from the existing shareholder. During the previous year ended 31st March, 2024, the remaining 16% equity shares for a consideration of '' 169.33 million has been acquired on 12th April, 2023.
6.3 On 31st May, 2024, the Company has incorporated a wholly owned subsidiary âRossari Global DMCC'' in UAE.
6.4 On 24th December, 2024, the Company has incorporated a wholly owned subsidiary âRossari International Limited Company'' in Kingdom of Saudi Arabia.
18.1 During the year, the Company has issued 115,000 and 2,800 equity shares of the Face Value of '' 2/- each, at the exercise price of '' 425/- and '' 687/- each including a premium of '' 423/- and '' 685/- each respectively under Employee Stock Option Plan. During the previous year, Company had issued 90,480 equity shares of the Face Value of '' 2/- each, at the exercise price of '' 425/- including a premium of '' 423/- under Employee Stock Option Plan. Information relating to Employee Stock Option Plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the reporting period, is set out in note 34.1.
b) Terms of Rights, preferences and restrictions attached to equity shares
The Company has only one class of equity shares having a par value of '' 2/- per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
Description of Nature and purpose of other equity:
Retained Earnings:
Retained earnings represent the amount of accumulated earnings.
Securities premium is created when shares are issued at premium. The reserve can be utilised in accordance with the provisions of the Companies Act, 2013.
Employee Stock Options Outstanding:
Employee Stock Options Outstanding represents reserve in respect of equity settled share options granted to the Company''s employees in pursuance of the Employee Stock Option Plan.
Details of Dividends proposed:
The Board of Directors has recommended dividend of Re. 0.50 per share on the face value of '' 2.00 each (25%), subject to approval by the Members at the forthcoming Annual General Meeting of the Company.
34.1 Employee Stock Option plan
The Company has implemented - Rossari Employee Stock Option Plan, 2019 (âESOP 2019â) as approved by the shareholders of the Company and the Nomination & Remuneration Committee (NRC) of the Board of Directors (the âBoard'').
As per the ESOP 2019, the Board of Directors at Board Meeting dated 12th December, 2019 granted ESOPs to the eligible employees to acquire equity shares of the Company, that vests in a graded manner. The vested options can be exercised within two years from respective vesting date or the period as specified by Nomination & Remuneration Committee as specified in the ESOP 2019. The number of options granted is calculated in accordance with the experience and performance- based formula recommended by the Board and approved by the NRC.
The Company has granted 7,05,000 Employee Stock Options under ESOP 2019 to its identified employees. This grant is effective from 12th December, 2019. These shall vest as per the vesting schedule approved by the Board and NRC and can be exercised over the exercise period as approved in the meeting held on 12th December, 2019.
This was further Modified/revised in accordance with the resolution passed by the Nomination and Remuneration Committee of the Board of Directors of the Company at their meeting held on 22nd July, 2020. The exercise price of the shares granted under the scheme was reduced from '' 475 to '' 425.
The scheme was ratified by the shareholders at its extraordinary general meeting held on 17th April, 2021.
The Company has granted in aggregation 57,000 Employee Stock Options under ESOP 2019 to its identified employees approved in the NRC meeting held on 14th May, 2021 and Board Meeting held on 17th July, 2021, 30th October, 2021 respectively. During the current year, the Company has granted 22,200 Employee Stock Options under ESOP 2019 to its identified employees approved in the NRC meeting held on 29th April, 2024. These shall vest as per the vesting schedule approved by the Board and NRC and can be exercised over the exercise period as approved in the Board meeting.
(i) Estimated amount of contracts remaining to be executed of Property, Plant & Equipment''s (net of advances) and not provided for '' 132.30 million (31st March, 2024 - '' 38.41 million).
(ii) Other Commitments related to acquisition of balance equity share capital of Unitop Chemicals Private Limited (Unitop) as per the contractual arrangement amounting to '' 868.58 million (31st March, 2024 - Unitop Chemicals Private Limited (Unitop) and Tristar Intermediates Private Limited '' 886.66 million) (refer note 6.1 and 6.2).
(iii) Additionally, the acquisition of Unitop have retention payouts payable to the eligible key employees of Unitop, subject to their continuous employment amounting to '' 16.00 million (31st March, 2024 - '' 16.00 million).
(iv) During the year, the Company has given corporate guarantee on behalf of its wholly owned subsidiary (including 2 step down subsidiaries) amounting to '' 1,347.90 million outstanding as on 31st March, 2025 (31st March, 2024 - Nil) (Refer note 44).
NOTE 45: EMPLOYEE BENEFITS Defined contribution plan
The Company makes contributions towards Provident Fund, Employee''s State Insurance Corporation (ESIC) for qualifying employees. The Company has recognised '' 11.34 million (31st March, 2024 - '' 10.74 million), being Company''s contribution to Provident Fund and ESIC, as an expense and included in note 34 - Employee Benefit Expenses in the Statement of Profit and Loss.
Defined benefit plani. Gratuity plan (Funded)
The Gratuity Benefits are classified as Post-Retirement Benefits as per Ind AS 19 and the accounting policy is outlined as follows.
As per Ind AS 19, the service cost and the net interest cost would be charged to the profit or loss. Actuarial gains and losses arise due to difference in the actual experience and the assumed parameters and also due to changes in the assumptions used for valuation. The Company recognises these remeasurements in the Other Comprehensive Income (OCI).
When the benefits of the plan are changed, or when a plan is curtailed or settlement occurs, the portion of the changed benefit related to past service by employees, or the gain or loss on curtailment or settlement, is recognised immediately in the Statement of Profit and Loss when the plan amendment or when a curtailment or settlement occurs.
Through its gratuity plans the Company is exposed to a number of risks, the most significant of which are detailed below:
It is the risk that benefits will cost more than expected. This can arise due to one of the following reasons:
Adverse Salary Growth Experience: Salary hikes that are higher than the assumed salary escalation will result into an increase in obligation at a rate that is higher than expected.
Variability in mortality rates: If actual mortality rates are higher than assumed mortality rate assumption then the Gratuity Benefits will be paid earlier than expected. Since there is no condition of vesting on the death benefit, the acceleration of cashflow will lead to an actuarial loss or gain depending on the relative values of the assumed salary growth and discount rate.
Variability in withdrawal rates: If actual withdrawal rates are higher than assumed withdrawal rate assumption then the Gratuity Benefits will be paid earlier than expected. The impact of this will depend on whether the benefits are vested as at the resignation date.
For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may not be the fair value of instruments backing the liability. In such cases, the present value of the assets is independent of the future discount rate. This can result in wide fluctuations in the net liability or the funded status if there are significant changes in the discount rate during the inter-valuation period.
Employees with high salaries and long durations or those higher in hierarchy, accumulate significant level of benefits. If some of such employees resign/retire from the Company, there can be strain on the cash flows.
Market risk is a collective term for risks that are related to the changes and fluctuations of the financial markets. One actuarial assumption that has a material effect is the discount rate. The discount rate reflects the time value of money. An increase in discount rate leads to decrease in Defined Benefit Obligation of the plan benefits & vice versa. This assumption depends on the yields on the corporate/government bonds and hence the evaluation of liability is exposed to fluctuations in the yields as at the valuation date.
Legislative risk is the risk of increase in the plan liabilities or reduction in the plan assets due to change in the legislation/ regulation. The government may amend the payment of gratuity act thus requiring the companies to pay higher benefits to the employees. This will directly affect the present value of the defined benefit obligation and the same will have to be recognised immediately in the year when any such amendment is effective.
The current service cost and net interest cost for the year pertaining to Gratuity expenses have been recognised in âGratuity Fund and Compensated Absences Expensesâ in the Statement of Profit and Loss. The Remeasurements of the net defined benefit liability are included in Other Comprehensive Income. The Compensated Absences expenses of '' 7.08 million (31st March, 2024 - '' 6.09 million) have been recognised as part of âEmployee Benefit Expensesâ in the Statement of Profit and Loss.
The Company''s lease asset classes primarily consist of leases for land and buildings. The lease period for these contracts varies from 11 months to 5 years, in certain cases, mainly relating to rent of (parts of) buildings, with extension options. The Right-of-use assets and Lease liabilities as disclosed below, do not include short term and low value leases.
The Company does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.
Rent expense recorded for short-term leases was '' 18.74 million (31st March, 2024 - '' 23.95 million).
Leases not yet commenced to which Company is committed amounts to '' 22.16 million (31st March, 2024 - '' 18.63 million) for a lease term of 5 years.
The table below provides details regarding the contractual maturities of lease liabilities on an undiscounted basis as at 31st March, 2025:
The Company manages its capital so as to safeguard its ability to continue as a going concern and to optimise returns to shareholders through the optimisation of the debt and equity balance. The capital structure of the Company is based on management''s judgement of its strategic and day-to-day needs with a focus on total equity so as to maintain investor, customer, creditors and market confidence.
The management and the Board of Directors monitor the return on capital as well as the level of dividends to shareholders.
During the year, the Company has complied with all the financial covenants with respect to all the facilities obtained from various banks.
The Company may take appropriate steps in order to maintain, or if necessary, adjust, its capital structure.
The Company has formulated and implemented a policy on risk management, so as to develop an approach to identify, assess and manage the various risks associated with our business activities in a systematic manner. The policy lays down guiding principles on proactive planning for identifying, analysing and mitigating material risks, both external and internal, and covering operational, financial and strategic risks. After risks have been identified, risk mitigation solutions are determined to bring risk exposure levels in line with risk appetite. The Company''s risk management policies and systems are reviewed regularly to reflect changes in market conditions and our business activities. The Company''s business activities are exposed to a variety of financial risks, namely Credit risk, Liquidity risk, Currency risk, Interest risks.
The Company''s size and operations result in it being exposed to the market risks that arise from its use of financial instruments namely Currency risk and Interest risk. These risk may affect the Company''s income and expenses, or the value of its financial instruments. The Company''s exposure to and management of this risk is explained below.
The Company is exposed to exchange rate risk as certain portion of the revenues and expenditure including inter-company loans are denominated in foreign currencies. The Company imports certain raw materials, the price of which we are required to pay in foreign currency, which is mostly the U.S. dollar or Euro. Products that we export are paid for in foreign currency, which together acts as a natural hedge. Any appreciation/depreciation in the value of the Rupee against U.S. dollar, Euro or other foreign currencies would decrease / increase the Rupee value of debtors/ creditors. For exposure beyond natural hedge, the Company uses foreign exchange derivatives such as foreign exchange forward contracts to minimize the risk.
Interest rate risk results from changes in prevailing market interest rates, which can cause a change in the fair value of fixed-rate instruments and changes in the interest payments of the variable-rate instruments. Our operations are funded to a certain extent by borrowings. Our current loan facilities carry interest at variable rates. The management is responsible for the monitoring of the Company''s interest rate position. Various variables are considered by the management in structuring the Company''s borrowings to achieve a reasonable, competitive cost of funding.
The Company is exposed to price risks arising from mutual fund investments.
The sensitivity analysis below have been determined based on the exposure to mutual fund price risks at the end of the reporting year.
Liquidity riskLiquidity risk management
Liquidity risk is the risk that we will encounter difficulties in meeting the obligations associated with our financial liabilities that are settled by delivering cash or another financial asset. Our approach to managing liquidity is to ensure that we have sufficient liquidity or access to funds to meet our liabilities when they are due.
i. Maturity profile of financial liabilities:
The following table shows the maturity analysis of the Company''s financial liabilities based on contractually agreed undiscounted cash flows along with its carrying value as at the Balance Sheet date.
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from operating activities, primarily from trade receivables. The Company''s customer base majorly has creditworthy counterparties which limits the credit risk. The Company''s exposures are continuously monitored and wherever necessary it obtains advances/Letter of Credit to minimize the risk.
NOTE 50: TRADE RECEIVABLE AND ADVANCES
The Company applies the simplified approach to provide for expected credit losses prescribed by Ind AS 109, which permits the use of the lifetime expected loss provision for all trade receivables/Advances. Management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry and country in which customers operate and the Company''s significant payment terms ranges from 60 to 120 days. The Company measures the expected credit loss of trade receivables based on historical trend, industry practices and the business environment in which the entity operates. Loss rates are based on actual credit loss experience and past trends. Based on the historical data, appropriate provision towards expected loss on non collection of receivables and doubtful advances is considered.
(b) Fair value of the financial instruments is classified in various fair value hierarchies based on the following three levels:
⢠Level 1: Quoted prices (unadjusted) in active market for identical assets or liabilities.
⢠Level 2: Inputs other than quoted price included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
The fair value of financial instruments that are not traded in an active market is determined using market approach and valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.
⢠Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
If one or more of the significant inputs is not based on observable market data, the fair value is determined using generally accepted pricing models based on a discounted cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk of counterparty.
The fair value of trade receivables, trade payables and other Current financial assets and liabilities is considered to be equal to the carrying amounts of these items due to their short-term nature.
(i) Details of benami property held
No proceedings have been initiated on or are pending against the Company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.
(ii) Borrowing secured against current assets
The Company has sanctioned borrowings/facilities from banks on the basis of security of current assets. The quarterly returns or statements of current assets filed by the Company with banks and financial institutions are in agreement with the books of account.
The Company has not been declared willful defaulter by any bank or financial institution or any lender.
(iv) Relationship with struck off companies
The Company has no transactions with the companies struck off under Companies Act, 2013 or Companies Act, 1956.
(v) Compliance with number of layers of companies
The Company has complied with the number of layers prescribed under the Companies Act, 2013.
(vi) Compliance with approved scheme(s) of arrangements
The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.
(vii) Utilisation of borrowed funds and share premium
The Company has not advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
a. 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
b. provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries
The Company has 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:
a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
b. provide any guarantee, security or the like on behalf of the ultimate beneficiariesâ
There is no income surrendered or disclosed as income during the current or previous year in the tax assessments under the Income Tax Act, 1961, that has not been recorded in the books of account.
(ix) Details of crypto currency or virtual currency
The Company has not traded or invested in crypto currency or virtual currency during the current or previous year.
(x) Valuation of PP&E, intangible asset and investment property
The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the current or previous year.
(xi) Title deeds of immovable properties not held in name of the Company
The title deeds of all the immovable properties (other than properties where the Company is the lessee and the lease agreements are duly executed in favour of the lessee), as disclosed in notes 3a and 3b to the financial statements, are held in the name of the Company.
(xii) Registration of charges or satisfaction with Registrar of Companies
There are no charges or satisfaction which are yet to be registered with the Registrar of Companies beyond the statutory period.
The Ministry of Corporate Affairs (MCA) has prescribed a requirement for companies under the proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014, inserted by the Companies (Accounts) Amendment Rules, 2021 requiring companies, which use accounting software for maintaining their books of account, to only use such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in the books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.
The Company uses an accounting software - âSAP Riseâ (SaaS based) for maintaining its books of account which has a feature of recording audit trail (edit log) facility. Presently, the log has been activated at the application level. The database of the accounting software is operated by a third-party software service provider and the availability of audit trail (edit logs) are not covered in the âIndependent Service Auditor''s Assurance Report on the design and operation of controls'''' (âType 2 report'' issued in accordance with ISAE 3402, Assurance Reports on Controls at a Service Organisation) at database level. The audit trail has been preserved by the Company as per the statutory requirements for record retention at the application level from 1st April 2023. Type 2 report does not cover the preservation of audit trail at the database level..
NOTE 57 : Other than those disclosed elsewhere, there are no other subsequent events that occurred after the reporting date.
NOTE 58 : Previous year figures have been regrouped to make them comparable with the current year figures, which are not material.
Mar 31, 2024
Impairment of Goodwill
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to the CGU or groups of CGUs, which benefit from the synergies of the acquisition. The Company internally reviews the goodwill for impairment for the acquired business.
Value in use is calculated using cash flow projections over a period of 5 years, with amounts based on medium term strategic plan. Any major variations to strategic plan, based on experience are incorporated in the calculations. Cash flows beyond the 5 year period are extrapolated using a long term growth rate.
Management reviews the carrying value of respective CGU including goodwill annually to determine whether there has been any impairment. This involves making an assessment of the value of respective CGU and comparing it to the carrying value. If the assessed value is lower than the carrying value, then an impairment charge is recognised to reduce the carrying value to this amount.
Key assumptions in the budgets and plans include future revenue volume/price growth rates, associated future levels of marketing support, cost-base of manufacture and supply and directly associated overheads. These assumptions are based on historical trends and future market expectations and the markets and geographies in which they operate.
Other key assumptions applied in determining value in use are
(a) I ong term growth rate - Cash flows beyond the five-year period are extrapolated using the estimated long-term growth rate applicable for the geographies, with reference to historical economic growth rates. The growth rate assumed for the current financial year was 4%.
(b) discount rate - The discount rate is based on a Weighted Average Cost of Capital (WACC) for comparable companies operating in similar markets and geographies. The pre-tax discount rate assumed for the current financial year was 14.91%.
The Company has performed sensitivity analysis around the base assumptions and has concluded that reasonable possible changes in key assumptions would not cause the recoverable amount to be less than the carrying value.
6.1 On 26th August, 2021, the Company had completed the acquisition of 65% equity shares of Unitop Chemicals Private Limited (Unitop) for a consideration of '' 2,709.46 million from the existing shareholders (including '' 12.00 million paid to employees of Unitop for employee retention bonus). During the previous year, the Company had acquired additional 15% stake for a consideration of '' 916.56 million from the existing shareholder (including '' 24.00 million paid to employee of Unitop for bonus). During the current year, the Company has paid to employee of Unitop bonus of '' 8.0 million. Further, the remaining 20% equity shares will be acquired in third tranche subject to completion of the customary terms and conditions as defined in the Share Purchase Agreement(SPA).
6.2 On 1st September, 2021, the Company had completed the acquisition of 76% equity shares of Tristar Intermediates Private Limited for a consideration of '' 821.41 million from the existing shareholders. During the previous year, the Company had acquired additional 8% stake for a consideration of '' 92.75 million from the existing shareholder. During the current year, the remaining 16% equity shares for a consideration of '' 169.33 million has been acquired on 12th April, 2023.
6.3 On 10th August, 2023, the Company has incorporated a wholly owned subsidiary âRossari Bangladesh Limited'' in Bangladesh.
11.1. The Company has written down the value of Inventories basis comparison with net realisable value, by '' 7.22 million (31st March, 2023 - '' 7.22 million) and included in changes in inventories of finished goods, work-in-progress and stock in trade in Statement of profit and loss.
11.2 From 1st April, 2022, Company has changed the method of computation of cost towards inventory valuation from First In First Out (FIFO) method to Weighted Average Computation (WAC) Method, which is the most prevalent method followed in the Specialty Chemicals industry. The impact due to the aforesaid change is not significant to the financial statements for the current and previous period. Accordingly, the accounting impact of the same had been applied prospectively.
11.3. The Company has sanctioned credit facilities from banks which are secured interalia by hypothecation of inventories.
11.4. The method of valuation of inventories is stated in sub note 6 of Note 2A.
15.1 Other Loans mainly includes loans to employees.
15.2 Loans given to employees as per the Company''s policy are not considered for the purposes of disclosure under Section 186(4) of the Companies Act, 2013.
15.3 Loans to related party represents loan given to Buzil Rossari Private Limited (wholly owned subsidiary) for general business purpose. The said loan is repayable on demand and carries an interest rate of 8% p.a. (31st March, 2023 - 8% p.a.).
Fixed Deposits includes deposits earmarked with Electricity authority '' 2.32 million and lien against letter of credit and bank guarantees '' 8.47 million (31st March, 2023 - Nil).
Refer Note 50 for disclosures related to credit risk and Note 51 for expected credit loss model of trade receivables and related financial instrument disclosures.
18.1 During the year, the Company has issued 90,480 equity shares of the Face Value of '' 2/- each, at the exercise price of '' 425/-each including a premium of '' 423/- each under Employee Stock Option Plan. During the previous year, Company had issued 99,100 equity shares of the Face Value of '' 2/- each, at the exercise price of '' 425/- each including a premium of '' 423/- each under Employee Stock Option Plan. Information relating to Employee Stock Option Plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the reporting period, is set out in note 35.1.
b) Terms of Rights, preferences and restrictions attached to equity shares
The Company has only one class of equity shares having a par value of '' 2/- per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
Description of Nature and purpose of other equity:Retained Earnings:
Retained earnings represent the amount of accumulated earnings.
Securities premium is created when shares are issued at premium. The reserve can be utilised in accordance with the provisions of the Companies Act, 2013.
Employee Stock Options Outstanding:
Employee Stock Options Outstanding represents reserve in respect of equity settled share options granted to the Company''s employees in pursuance of the Employee Stock Option Plan.
Notes:Details of Dividends proposed:
The Board of Directors has recommended dividend of '' 0.50 per share on the face value of '' 2.00 each (25%), subject to approval by the Members at the forthcoming Annual General Meeting of the Company.
20.1 Term Loan carries an interest rate of 3 months Treasury Bill plus 1.85%. Term Loan is repayable in 18 equal quarterly instalments from the 9th month from date of first drawdown. Term loan is till the month of September 2027.
20.2 Term loan is secured by first pari passu charge created by hypothecation of all present & future moveable property, plant and equipment.
35.1 Employee Stock Option plan
The Company has implemented - Rossari Employee Stock Option Plan, 2019 (âESOP 2019â) as approved by the shareholders of the Company and the Nomination & Remuneration Committee (NRC) of the Board of Directors (the âBoard'').
As per the ESOP 2019, the Board of Directors at Board Meeting dated 12th December, 2019 granted ESOPs to the eligible employees to acquire equity shares of the Company, that vests in a graded manner. The vested options can be exercised within two years from respective vesting date or the period as specified by Nomination & Remuneration Committee as specified in the ESOP 2019. The number of options granted is calculated in accordance with the experience and performance- based formula recommended by the Board and approved by the NRC.
The Company had granted 7,05,000 Employee Stock Options under ESOP 2019 to its identified employees. This grant is effective from 12th December, 2019. These shall vest as per the vesting schedule approved by the Board and NRC and can be exercised over the exercise period as approved in the meeting held on 12th December, 2019.
This was further modified/revised in accordance with the resolution passed by the Nomination and Remuneration Committee of the Board of Directors of the Company at their meeting held on 22nd July, 2020. The exercise price of the shares granted under the scheme was reduced from '' 475 to '' 425.
The scheme was ratified by the shareholders at its extraordinary general meeting held on 17th April, 2021.
The Company had granted in aggregation 57,000 Employee Stock Options under ESOP 2019 to its identified employees approved in the NRC meeting held on 14th May, 2021 and Board Meeting held on 17th July, 2021, 30th October, 2021 respectively. During the current year, the Company has granted 15,800 Employee Stock Options under ESOP 2019 to its identified employees approved in the NRC meeting held on 29th April, 2023. These shall vest as per the vesting schedule approved by the Board and NRC and can be exercised over the exercise period as approved in the Board meeting.
Expected volatility has been based on an evaluation of annual volatility of peer group prevailing in the year of grant.
In respect of Options granted under the Employee Stock Option Plan, the accounting is done as per requirements of Ind AS 102. Consequently, employee benefit expenses include '' 5.15 million (31st March, 2023: '' 8.34 million) being expenses on account of share based payments, after adjusting for reversals on account of options lapsed. The amount excludes '' 4.09 million (31st March, 2023: '' 1.52 million) charged to subsidiaries / associate for options issued to their employees.
The Company deals in Specialty chemicals and considering that the nature of products and the predominant risk and returns of the products are similar, the Company has only one operating segment. Hence, revenue from external customers shown under geographical information is representative of revenue based on products.
Note 44: CommitmentsCommitments
(i) Estimated amount of contracts remaining to be executed of Property, Plant & Equipment''s (net of advances) and not provided for '' 38.41 million (31st March, 2023 - '' 175.60 million).
(ii) Other Commitments related to acquisition of balance equity share capital of Unitop Chemicals Private Limited(Unitop) as per the contractual arrangement amounting to '' 886.66 million (31st March, 2023 - Unitop Chemicals Private Limited(Unitop) and Tristar Intermediates Private Limited '' 1,055.99 million) (refer note 6.1 and 6.2).
(iii) Additionally, the acquisition of Unitop has retention payouts payable to the eligible key employees of Unitop, subject to their continuous employment amounting to '' 16.00 million (31st March, 2023 - '' 24.00 million).
Note 46: Employee benefits Defined contribution plan
The Company makes contributions towards Provident Fund, Employee''s State Insurance Corporation (ESIC) for qualifying employees. The Company has recognised '' 10.74 million (31st March, 2023 - '' 10.59 million), being Company''s contribution to Provident Fund and ESIC, as an expense and included in Note 35 - Employee Benefit Expenses in the Statement of Profit and Loss.
Defined benefit plani. Gratuity plan
The Gratuity Benefits are classified as Post-Retirement Benefits as per Ind AS 19 and the accounting policy is outlined as follows.
As per Ind AS 19, the service cost and the net interest cost would be charged to the profit or loss. Actuarial gains and losses arise due to difference in the actual experience and the assumed parameters and also due to changes in the assumptions used for valuation. The Company recognises these remeasurements in the Other Comprehensive Income (OCI).
When the benefits of the plan are changed, or when a plan is curtailed or settlement occurs, the portion of the changed benefit related to past service by employees, or the gain or loss on curtailment or settlement, is recognised immediately in the Statement Profit or Loss when the plan amendment or when a curtailment or settlement occurs.
Through its gratuity plans, the Company is exposed to a number of risks, the most significant of which are detailed below:
It is the risk that benefits will cost more than expected. This can arise due to one of the following reasons:
Adverse Salary Growth Experience: Salary hikes that are higher than the assumed salary escalation will result into an increase in obligation at a rate that is higher than expected.
Variability in mortality rates: If actual mortality rates are higher than assumed mortality rate assumption then the Gratuity Benefits will be paid earlier than expected. Since there is no condition of vesting on the death benefit, the acceleration of cash flow will lead to an actuarial loss or gain depending on the relative values of the assumed salary growth and discount rate.
Variability in withdrawal rates: If actual withdrawal rates are higher than assumed withdrawal rate assumption then the Gratuity Benefits will be paid earlier than expected. The impact of this will depend on whether the benefits are vested as at the resignation date.
For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may not be the fair value of instruments backing the liability. In such cases, the present value of the assets is independent of the future discount rate. This can result in wide fluctuations in the net liability or the funded status if there are significant changes in the discount rate during the inter-valuation period.
Employees with high salaries and long durations or those higher in hierarchy, accumulate significant level of benefits. If some of such employees resign/retire from the Company, there can be strain on the cash flows.
d) Market Risk
Market risk is a collective term for risks that are related to the changes and fluctuations of the financial markets. One actuarial assumption that has a material effect is the discount rate. The discount rate reflects the time value of money. An increase in discount rate leads to decrease in Defined Benefit Obligation of the plan benefits & vice versa. This assumption depends on the yields on the corporate/government bonds and hence the evaluation of liability is exposed to fluctuations in the yields as at the valuation date.
Legislative risk is the risk of increase in the plan liabilities or reduction in the plan assets due to change in the legislation/ regulation. The government may amend the payment of gratuity act thus requiring the companies to pay higher benefits to the employees. This will directly affect the present value of the defined benefit obligation and the same will have to be recognised immediately in the year when any such amendment is effective.
The current service cost and net interest cost for the year pertaining to Gratuity expenses have been recognised in âGratuity Fund and Compensated Absences Expensesâ in the Statement of Profit and Loss. The Remeasurements of the net defined benefit liability are included in Other Comprehensive Income. The Compensated Absences expenses of '' 6.09 million (31st March, 2023 - '' 8.36 million) have been recognised as part of âEmployee Benefit Expensesâ in the Statement of Profit and Loss.
The Company''s lease asset classes primarily consist of leases for land and buildings. The lease period for these contracts varies from 11 months to 5 years, in certain cases, mainly relating to rent of (parts of) buildings, with extension options. The Right-of-use assets and Lease liabilities as disclosed below, do not include short term and low value leases.
(a) Right of Use Assets:
The movement in Right of use assets has been disclosed in Note 3b.
Movement in Lease Liabilities
The Company does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.
Rent expense recorded for short-term leases was '' 23.95 million (31st March, 2023 - '' 23.11 million)
Leases not yet commenced to which Company is committed amounts to '' 18.63 million (31st March, 2023 - Nil) for a lease term of 5 years.
The table below provides details regarding the contractual maturities of lease liabilities on an undiscounted basis as at 31st March, 2024 (31st March, 2023 - Nil):
The Company manages its capital so as to safeguard its ability to continue as a going concern and to optimise returns to shareholders through the optimisation of the debt and equity balance. The capital structure of the Company is based on management''s judgement of its strategic and day-to-day needs with a focus on total equity so as to maintain investor, customer, creditors and market confidence. The management and the Board of Directors monitor the return on capital as well as the level of dividends to shareholders.
During the year, the Company has complied with all the financial covenants with respect to all the facilities obtained from various banks.
The Company has formulated and implemented a policy on risk management, so as to develop an approach to identify, assess and manage the various risks associated with the business activities in a systematic manner. The policy lays down guiding principles on proactive planning for identifying, analysing and mitigating material risks, both external and internal, and covering operational, financial and strategic risks. After risks have been identified, risk mitigation solutions are determined to bring risk exposure levels in line with risk appetite. The Company''s risk management policies and systems are reviewed regularly to reflect changes in market conditions and our business activities. The Company''s business activities are exposed to a variety of financial risks, namely Credit risk, Liquidity risk, Currency risk and Interest risk.
Market Risk
The Company''s size and operations result in it being exposed to the market risks that arise from its use of financial instruments namely Currency risk and Interest risk. These risks may affect the Company''s income and expenses, or the value of its financial instruments. The Company''s exposure to and management of this risk is explained below.
Currency Risk
The Company is exposed to exchange rate risk as certain portion of the revenues and expenditure are denominated in foreign currencies. The Company imports certain raw materials, the price of which it is required to pay in foreign currency, which is mostly the U.S. dollar or Euro. Products that it exports are paid for in foreign currency, which together acts as a natural hedge. Any appreciation/ depreciation in the value of the Rupee against U.S. dollar, Euro or other foreign currencies would decrease / increase the Rupee value of debtors/ creditors. For exposure beyond natural hedge, the Company uses foreign exchange derivatives such as foreign exchange forward contracts to minimise the risk.
Interest rate risk results from changes in prevailing market interest rates, which can cause a change in the fair value of fixed-rate instruments and changes in the interest payments of the variable-rate instruments. Our operations are funded to a certain extent by borrowings. Our current loan facilities carry interest at variable rates. The management is responsible for the monitoring of the Company''s interest rate position. Various variables are considered by the management in structuring the Company''s borrowings to achieve a reasonable, competitive cost of funding.
The Company is exposed to price risks arising from mutual fund investments.
The sensitivity analysis below have been determined based on the exposure to mutual fund price risks at the end of the reporting year.
Liquidity riskLiquidity risk management
Liquidity risk is the risk that we will encounter difficulties in meeting the obligations associated with our financial liabilities that are settled by delivering cash or another financial asset. Our approach to managing liquidity is to ensure that we have sufficient liquidity or access to funds to meet our liabilities when they are due.
i. Maturity profile of financial liabilities:
The following table shows the maturity analysis of the Company''s financial liabilities based on contractually agreed undiscounted cash flows along with its carrying value as at the Balance Sheet date.
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. We are exposed to credit risk from our operating activities, primarily from trade receivables. The Company''s customer base majorly has creditworthy counterparties which limits the credit risk. The Company''s exposures are continuously monitored and wherever necessary we take advances/Letter of Credits to minimise the risk.
Note 51: Trade receivable and advances
The Company applies the simplified approach to provide for expected credit losses prescribed by Ind AS 109, which permits the use of the lifetime expected loss provision for all trade receivables/Advances. The Company measures the expected credit loss of trade receivables based on historical trend, industry practices and the business environment in which the entity operates. Loss rates are based on actual credit loss experience and past trends. Based on the historical data, loss on collection of receivables is not material.
The Company has not offset financial assets and financial liabilities, unless permissible contractually.
(b) Fair value of the financial instruments is classified in various fair value hierarchies based on the following three levels:
⢠Level 1: Quoted prices (unadjusted) in active market for identical assets or liabilities.
⢠Level 2: Inputs other than quoted price included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
⢠The fair value of financial instruments that are not traded in an active market is determined using market approach and valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.
⢠Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
If one or more of the significant inputs is not based on observable market data, the fair value is determined using generally accepted pricing models based on a discounted cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk of counterparty.
The fair value of trade receivables, trade payables and other Current financial assets and liabilities is considered to be equal to the carrying amounts of these items due to their short-term nature.
Note 56: Additional regulatory information required by Schedule III
(i) Details of benami property held
No proceedings have been initiated on or are pending against the Company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.
(ii) Borrowing secured against current assets
The Company has sanctioned borrowings/facilities from banks on the basis of security of current assets. The quarterly returns or statements of current assets filed by the Company with banks and financial institutions are in agreement with the books of account.
The Company has not been declared willful defaulter by any bank or financial institution or any lender.
(iv) Relationship with struck off companies
The Company has no transactions with the companies struck off under Companies Act, 2013 or Companies Act, 1956.
(v) Compliance with number of layers of companies
The Company has complied with the number of layers prescribed under the Companies Act, 2013.
(vi) Compliance with approved scheme(s) of arrangements
The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.
(vii) Utilisation of borrowed funds and share premium
The Company has not advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
a. 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
b. provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries
The Company has 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:
a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries)
b. provide any guarantee, security or the like on behalf of the ultimate beneficiaries.
There is no income surrendered or disclosed as income during the current or previous year in the tax assessments under the Income Tax Act, 1961, that has not been recorded in the books of account.
(ix) Details of crypto currency or virtual currency
The Company has not traded or invested in crypto currency or virtual currency during the current or previous year.
(x) Valuation of PP&E, intangible asset and investment property
The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the current or previous year.
(xi) Title deeds of immovable properties not held in name of the Company
The title deeds of all the immovable properties (other than properties where the Company is the lessee and the lease agreements are duly executed in favour of the lessee), as disclosed in notes 3a and 3b to the financial statements, are held in the name of the company.
(xii) Registration of charges or satisfaction with Registrar of Companies
There are no charges or satisfaction which are yet to be registered with the Registrar of Companies beyond the statutory period.
The Ministry of Corporate Affairs (MCA) has prescribed a new requirement for companies under the proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014, inserted by the Companies (Accounts) Amendment Rules, 2021 requiring companies, which use accounting software for maintaining its books of account, to only use such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in the books of account along with the date when such change was made and ensuring that the audit trail cannot be disabled.
The Company uses an accounting software, âSAP Riseâ (SaaS based) for maintaining its books of account which has a feature of recording audit trail (edit log) facility. Presently, the log has been activated at the application level. The database of the accounting software is operated by a third-party software service provider and the availability of audit trail (edit logs) are not covered in the âIndependent Service Auditor''s Assurance Report on the design and operation of controls (âType 2 report'' issued in accordance with ISAE 3402, Assurance Reports on Controls at a Service Organisation) at database level.
Note 58: Previous year figures have been regrouped to make them comparable with the current year figures, which are not material.
Mar 31, 2023
Impairment of Goodwill
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to the CGU or groups of CGUs, which benefit from the synergies of the acquisition. The Company internally reviews the goodwill for impairment for the acquired business.
Value in use is calculated using cash flow projections over a period of 5 years, with amounts based on medium term strategic plans. Any major variations to strategic plan, based on experience are incorporated in the calculations. Cash flows beyond the 5 year period are extrapolated using a long term growth rate.
Management reviews the carrying value of respective CGU including goodwill annually to determine whether there has been any impairment. This involves making an assessment of the value of respective CGU and comparing it to the carrying value. If the assessed value is lower than the carrying value, then an impairment charge is recognised to reduce the carrying value to this amount.
Key assumptions in the budgets and plans include future revenue volume/price growth rates, associated future levels of marketing support, cost-base of manufacture and supply and directly associated overheads. These assumptions are based on historical trends and future market expectations and the markets and geographies in which they operate.
Other key assumptions applied in determining value in use are
(a) I ong term growth rate - Cash flows beyond the five-year period are extrapolated using the estimated long-term growth rate applicable for the geographies, with reference to historical economic growth rates. The growth rate assumed for the current financial year was 4%.
(b) discount rate - The discount rate is based on a Weighted Average Cost of Capital (WACC) for comparable companies operating in similar markets and geographies. The pre-tax discount rate assumed for the current financial year was 14.91%.
The Company has performed sensitivity analysis around the base assumptions and has concluded that no reasonable possible changes in key assumptions would cause the recoverable amount to be less than the carrying value.
6.1 During the previous year, on 26th August, 2021, the Company had completed the acquisition of 65% equity shares of Unitop Chemicals Private Limited (Unitop) for a consideration of '' 2,709.46 million from the existing shareholders (including '' 12.00 million paid to employees of Unitop for employee retention bonus). During the current year, the Company has acquired additional 15% stake for a consideration of '' 916.56 million from the existing shareholder (including '' 24.00 million paid to employee of Unitop for bonus). Further, the remaining 20% equity shares will be acquired in third tranche subject to completion of the customary terms and conditions as defined in the Share Purchase Agreement.
6.2 During the previous year, on 1st September, 2021, the Company had completed the acquisition of 76% equity shares of Tristar Intermediates Private Limited for a consideration of '' 821.41 million from the existing shareholders. During the current year, the Company has acquired additional 8% stake for a consideration of '' 92.75 million from the existing shareholder. Subsequent to year end, the remaining 16% equity shares has been acquired on 12th April, 2023.
6.3 During the previous year, the Company has acquired the remaining 40% stake i.e. 200,000 equity shares for a consideration of '' 20.00 million for Rossari Consumer Products Private Limited (formerly known as Rossari Personal Care Products Private Limited) (âthe subsidiary companyâ) making it a wholly owned subsidiary of the Company w.e.f. 23rd July, 2021. Includes deemed investment amounting to '' 0.71 million (31st March, 2022 - '' 0.71 million).
6.4 During the previous year, the Company had completed the acquisition of 50.10% equity shares of Romakk Chemicals Private Limited for a consideration of '' 75.10 million.
11.1. The cost of Inventories recognised as an expense during the year was '' 7,931.78 million (31st March, 2022 - '' 9,053.80 million), including in respect of write down of inventories to net realisable value '' 7.22 million (31st March, 2022 - '' 4.46 million).
11.2. From 1st April, 2022, Company has changed the method of inventory valuation from First In First Out (FIFO) method to Weighted Average Computation (WAC) Method, which is the most prevalent method followed in the Specialty Chemicals industry. The impact due to the aforesaid change is not significant to the financial statements for the current and previous period. Accordingly, the accounting impact of the same has been applied prospectively.
11.3. The Company has sanctioned credit facilities from banks which are secured interalia by hypothecation of inventories.
11.4. The method of valuation of inventories is stated in sub note (vii) of Note 2.
13.1 Refer Note 42 for receivables outstanding from Related Parties.
13.2 Refer Note 47 for disclosures related to credit risk and Note 48 for impairment of trade receivables under expected credit loss model and related disclosures.
13.3 Allowance for expected credit loss is based on lifetime expected credit loss method as specified under simplified approach as per Ind AS 109.
13.4 Trade receivables are hypothecated to banks against working capital facility sanctioned from the bank.
15.1 Other Loans mainly includes loans to employees
15.2 Loans given to employees as per the Company''s policy are not considered for the purposes of disclosure under Section 186(4) of the Companies Act, 2013.
15.3 Loans to related party represents loan given to Buzil Rossari Private Limited (wholly owned subsidiary) for general business purpose. The said loan is repayable on demand and carries an interest rate of 8% p.a. (31st March 2022 - 8% to 9% p.a.).
18.1 During the year ended 31st March, 2021, the Board of Directors at its meeting held on 23rd March, 2021., interalia approved the issue of 3,012,046 equity shares on preferential basis for cash consideration. Consequently, the shareholder of the Company at its Extra Ordinary General meeting held on 17th April, 2021 has approved issue of 3,012,046 shares of face value of '' 2 each on preferential basis at '' 996 per share aggregating to '' 3,000.00 million to certain parties. During the previous year, pursuant to Section 42 and 62 and other applicable provisions, if any, of the Companies Act, 2013 read with rules made there under and as per the approval of the Members of the Company, the Board of Directors of the Company at their meeting held on 21st April, 2021 allotted 3,012,046 Equity Shares of the Face Value of '' 2/- each, at the issue price of '' 996/- each including a premium of '' 994/- each on preferential basis by way of a private placement.
18.2 During the year, the Company has issued 99,100 equity shares of the Face Value of '' 2/- each, at the exercise price of '' 425/-each including a premium of '' 423/- each under Employee Stock Option Plan. During the previous year, Company had issued 114,950 equity shares of the Face Value of '' 2/- each, at the exercise price of '' 425/- each including a premium of '' 423/- each under Employee Stock Option Plan. Information relating to Employee Stock Option Plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the reporting period, is set out in note 32.1.
b) Terms of Rights, preferences and restrictions attached to equity shares
The Company has only one class of equity shares having a par value of '' 2/- per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
Description of Nature and purpose of other equity:Retained Earnings:
Retained earnings represent the amount of accumulated earnings.
Securities premium is created when shares are issued at premium. The reserve can be utilised in accordance with the provisions of the Companies Act, 2013.
20.1 Term Loan carries an interest rate of 3 months Treasury Bill plus 1.85%. Term Loan is repayable in 18 equal quarterly repayments from the 9th month from date of first drawdown. Term loan is till the month of September 2027.
20.2 Term loan is secured by first pari passu charge created by hypothecation of all present & Future Moveable property, plant and equipment.
32.1 Employee Stock Option plan
The Company has implemented - Rossari Employee Stock Option Plan, 2019 (âESOP 2019â) as approved by the shareholders of the Company and the Nomination & Remuneration Committee (NRC) of the Board of Directors (the âBoard'').
As per the ESOP 2019, the Board of Directors at Board Meeting dated 12th December, 2019 granted ESOPs to the eligible employees to acquire equity shares of the Company, that vests in a graded manner. The vested options can be exercised within two years from respective vesting date or the period as specified by Nomination & Remuneration Committee as specified in the ESOP 2019. The number of options granted is calculated in accordance with the experience and performance- based formula recommended by the Board and approved by the NRC.
The Company has granted 705,000 Employee Stock Options under ESOP 2019 to its identified employees. This grant is effective from 12th December, 2019. These shall vest as per the vesting schedule approved by the Board and NRC and can be exercised over the exercise period as approved in the meeting held on 12th December, 2019.
This was further Modified/revised in accordance with the resolution passed by the Nomination and Remuneration Committee of the Board of Directors of the Company at their meeting held on 22nd July, 2020. The exercise price of the shares granted under the scheme was reduced from '' 475 to '' 425.
The scheme was ratified by the shareholders at its extraordinary general meeting held on 17th April, 2021.
During the previous year, the Company has granted inaggregation 57,000 Employee Stock Options under ESOP 2019 to its identified employees approved in the NRC meeting held on 14th May, 2021 and Board meeting held on 17th July, 2021, 30th October, 2021 respectively. These shall vest as per the vesting schedule approved by the Board and NRC and can be exercised over the exercise period as approved in the Board meeting.
Expected volatility has been based on an evaluation of annual volatility of peer group prevailing in the year of grant.
In respect of Options granted under the Employee Stock Option Plan, the accounting is done as per requirements of Ind AS 102. Consequently, employee benefit expenses include '' 8.34 million (31st March, 2022: '' 15.50 million) being expenses on account of share based payments, after adjusting for reversals on account of options lapsed. The amount excludes '' 1.52 million (31st March, 2022: '' 2.90 million) charged to subsidiary / associate for options issued to their employees.
The Company deals in Specialty chemicals and considering the nature of products and the predominant risk and returns of the product are similar, the Company has only one operating segment. Hence, revenue from external customers shown under geographical information is representative of revenue based on products.
The operating segments have been reported in a manner consistent with the internal reporting provided to Managing Director, who is the Chief Operating Decision Maker(CODM) and responsible for allocating resources and assessing the performance of operating segments. Accordingly, the reportable segment is only one segment i.e. specialty chemicals.
The Company is not reliant on revenues from transactions with any single external customer and had only one customer who contributes to more than 10% of its revenues.
Note 40: Details of CSR Expenditures
Expenditure incurred on Corporate Social Responsibility(CSR) under section 135 of the Companies Act, 2013 is as under:
A. Gross amount required to be spent by the Company during the year is '' 19.98 million (31st March, 2022 - '' 17.09 million)
(i) Estimated amount of contracts remaining to be executed of Property, Plant & Equipment''s (net of advances) and not provided for '' 175.60 million (31st March, 2022 - '' 22.87 million).
(ii) Other Commitments related to acquisition of balance equity share capital of Unitop Chemicals Private Limited(Unitop) and Tristar Intermediates Private Limited as per the contractual arrangement amounting to '' 1,055.99 million (31st March, 2022 - '' 1,711.70 million) (refer note 6.1 and 6.2).
(iii) Additionally, the acquisition of Unitop have retention payouts payable to the eligible key employees of the Unitop, subject to their continuous employment amounting to '' 24.00 million (31st March, 2022 - '' 48.00 million).
Note 43: Employee benefits Defined contribution plan
The Company makes contributions towards Provident Fund, Employee''s State Insurance Corporation (ESIC) for qualifying employees. The Company has recognised '' 10.59 million (31st March, 2022 - '' 8.53 million), being Company''s contribution to Provident Fund and ESIC, as an expense and included in note 32 - Employee Benefit Expenses in the Statement of Profit and Loss.
Defined benefit plani. Gratuity plan
The Gratuity Benefits are classified as Post-Retirement Benefits as per Ind AS 19 and the accounting policy is outlined as follows.
As per Ind AS 19, the service cost and the net interest cost would be charged to the profit or loss. Actuarial gains and losses arise due to difference in the actual experience and the assumed parameters and also due to changes in the assumptions used for valuation. The Company recognises these remeasurements in the Other Comprehensive Income (OCI).
When the benefits of the plan are changed, or when a plan is curtailed or settlement occurs, the portion of the changed benefit related to past service by employees, or the gain or loss on curtailment or settlement, is recognised immediately in the profit or loss account when the plan amendment or when a curtailment or settlement occurs.
Through its gratuity plans the Company is exposed to a number of risks, the most significant of which are detailed below:
It is the risk that benefits will cost more than expected. This can arise due to one of the following reasons:
Adverse Salary Growth Experience: Salary hikes that are higher than the assumed salary escalation will result into an increase in obligation at a rate that is higher than expected.
Variability in mortality rates: If actual mortality rates are higher than assumed mortality rate assumption then the Gratuity Benefits will be paid earlier than expected. Since there is no condition of vesting on the death benefit, the acceleration of cashflow will lead to an actuarial loss or gain depending on the relative values of the assumed salary growth and discount rate.
Variability in withdrawal rates: If actual withdrawal rates are higher than assumed withdrawal rate assumption then the Gratuity Benefits will be paid earlier than expected. The impact of this will depend on whether the benefits are vested as at the resignation date.
For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may not be the fair value of instruments backing the liability. In such cases, the present value of the assets is independent of the future discount rate. This can result in wide fluctuations in the net liability or the funded status if there are significant changes in the discount rate during the inter-valuation period.
Employees with high salaries and long durations or those higher in hierarchy, accumulate significant level of benefits. If some of such employees resign/retire from the Company, there can be strain on the cash flows.
Market risk is a collective term for risks that are related to the changes and fluctuations of the financial markets. One actuarial assumption that has a material effect is the discount rate. The discount rate reflects the time value of money. An increase in discount rate leads to decrease in Defined Benefit Obligation of the plan benefits & vice versa. This assumption depends on the yields on the corporate/government bonds and hence the evaluation of liability is exposed to fluctuations in the yields as at the valuation date.
Legislative risk is the risk of increase in the plan liabilities or reduction in the plan assets due to change in the legislation/ regulation. The government may amend the payment of gratuity act thus requiring the companies to pay higher benefits to the employees. This will directly affect the present value of the defined benefit obligation and the same will have to be recognised immediately in the year when any such amendment is effective.
The Company does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.
Rent expense recorded for short-term leases was '' 23.11 million (31st March, 2022 - '' 35.37 million)
The Company''s lease asset classes primarily consist of leases for land and buildings. The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange of consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially all the economic benefits from the use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
The Company manages its capital so as to safeguard its ability to continue as a going concern and to optimise returns to shareholders through the optimisation of the debt and equity balance. The capital structure of the Company is based on management''s judgement of its strategic and day-to-day needs with a focus on total equity so as to maintain investor, customer, creditors and market confidence.
The management and the Board of Directors monitor the return on capital as well as the level of dividends to shareholders.
NOTE 46: Financial Risk Management Framework
The Company has formulated and implemented a policy on risk management, so as to develop an approach to identify, assess and manage the various risks associated with our business activities in a systematic manner. The policy lays down guiding principles on proactive planning for identifying, analysing and mitigating material risks, both external and internal, and covering operational, financial and strategic risks. After risks have been identified, risk mitigation solutions are determined to bring risk exposure levels in line with risk appetite. The Company''s risk management policies and systems are reviewed regularly to reflect changes in market conditions and our business activities. The Company''s business activities are exposed to a variety of financial risks, namely Credit risk, Liquidity risk, Currency risk, Interest risks.
The Company''s size and operations result in it being exposed to the market risks that arise from its use of financial instruments namely Currency risk and Interest risk. These risk may affect the Company''s income and expenses, or the value of its financial instruments. The Company''s exposure to and management of this risk is explained below.
The Company is exposed to exchange rate risk as certain portion of the revenues and expenditure are denominated in foreign currencies. The Company imports certain raw materials, the price of which we are required to pay in foreign currency, which is mostly the U.S. dollar or Euro. Products that we export are paid for in foreign currency, which together acts as a natural hedge. Any appreciation/ depreciation in the value of the Rupee against U.S. dollar, Euro or other foreign currencies would decrease / increase the Rupee value of debtors/ creditors. For exposure beyond natural hedge, the Company had foreign exchange derivatives upto 31st March, 2022 such as foreign exchange forward contracts to minimise the risk
Interest rate risk results from changes in prevailing market interest rates, which can cause a change in the fair value of fixed-rate instruments and changes in the interest payments of the variable-rate instruments. Our operations are funded to a certain extent by borrowings. Our current loan facilities carry interest at variable rates. The management is responsible for the monitoring of the Company''s interest rate position. Various variables are considered by the management in structuring the Company''s borrowings to achieve a reasonable, competitive cost of funding.
Liquidity risk management
Liquidity risk is the risk that we will encounter difficulties in meeting the obligations associated with our financial liabilities that are settled by delivering cash or another financial asset. Our approach to managing liquidity is to ensure that we have sufficient liquidity or access to funds to meet our liabilities when they are due.
i. Maturity profile of financial liabilities:
The following table shows the maturity analysis of the Company''s financial liabilities based on contractually agreed undiscounted cash flows along with its carrying value as at the Balance Sheet date.
Note 47: Credit Risk management
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. We are exposed to credit risk from our operating activities, primarily from trade receivables. The Company''s customer base majorly has creditworthy counterparties which limits the credit risk. The Company''s exposures are continuously monitored and wherever necessary we take advances/Letter of Credits to minimize the risk.
Note 48: Trade receivable and advances
The Company applies the simplified approach to provide for expected credit losses prescribed by Ind AS 109, which permits the use of the lifetime expected loss provision for all trade receivables/Advances. The Company has computed expected credit losses based on actual basis. Forward-looking information (including macroeconomic information) has been incorporated into the determination of expected credit losses.
If the change in rates decline by a similar percentage, there will be opposite impact of similar amount on Profit Before Tax and Pre-tax Equity Effect.
The sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.
The sensitivity analysis below has been determined based on exposure to interest rate for both Term Loans & Working Capital loans.
The following table demonstrates the sensitivity in interest rates on that portion of loans and borrowings which are not hedged, with all other variables held constant, the Company''s profit before tax is affected through the impact on floating rate borrowings, as follows:
Note 50: Offsetting Of balances:
The Company has not offset financial assets and financial liabilities, unless permissible contractually.
Note 51: Fair Value Disclosures
Fair value of the financial instruments is classified in various fair value hierarchies based on the following three levels:
⢠Level 1: Quoted prices (unadjusted) in active market for identical assets or liabilities.
⢠Level 2: Inputs other than quoted price included within level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
⢠The fair value of financial instruments that are not traded in an active market is determined using market approach and valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.
⢠Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
If one or more of the significant inputs is not based on observable market data, the fair value is determined using generally accepted pricing models based on a discounted cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk of counterparty.
Note 51: Fair Value Disclosures (Contd.)
The fair value of trade receivables, trade payables and other Current financial assets and liabilities is considered to be equal to the carrying amounts of these items due to their short-term nature.
All financial liabilities and financial assets have no material impact.
Note 52: Acquisition of Business during the year ended 31st March, 2022
On 1st May, 2021, the Company had completed the acquisition of the Defoamer Business of Trio Chemicals and Allied Products (âTrio'') at a total consideration of '' 52.50 million. Trio is into the business of manufacturer of Defoamers and qualifies as a business as defined in Ind AS 103. Trio was acquired to gain the synergies from the combined business.
(a) There was no outstanding obligation on account of debt as on 31st March 2022.
(b) During the previous year, the Company has not earned any income on the investments held in Subsidiaries and Associate. Note 54: Additional Regulatory Information Required By Schedule III
(i) Details of benami property held
No proceedings have been initiated on or are pending against the Company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.
(ii) Borrowing secured against current assets
The Company have sanctioned borrowings/facilities from banks on the basis of security of current assets. The quarterly returns or statements of current assets filed by the Company with banks and financial institutions are in agreement with the books of accounts.
(iii) Wilful defaulter
The Company has not been declared wilful defaulter by any bank or financial institution or any lender.
(iv) Relationship with struck off companies
The Company has no transactions with the companies struck off under Companies Act, 2013 or Companies Act, 1956.
(v) Compliance with number of layers of companies
The Company has complied with the number of layers prescribed under the Companies Act, 2013.
(vi) Compliance with approved scheme(s) of arrangements
The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.
(vii) Utilisation of borrowed funds and share premium
The Company has not advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
a. 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
b. provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries
The Company has 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:
a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
b. provide any guarantee, security or the like on behalf of the ultimate beneficiaries
(viii) Undisclosed Income
There is no income surrendered or disclosed as income during the current or previous year in the tax assessments under the Income Tax Act, 1961, that has not been recorded in the books of account.
(ix) Details of crypto currency or virtual currency
The Company has not traded or invested in crypto currency or virtual currency during the current or previous year.
(x) Valuation of PP&E, intangible asset and investment property
The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the current or previous year.
(xi) Registration of charges or satisfaction with Registrar of Companies
There are no charges or satisfaction which are yet to be registered with the Registrar of Companies beyond the statutory period.
Note 55: Figures for previous year have been regrouped wherever considered necessary.
Mar 31, 2022
Impairment of Goodwill
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to the CGU or groups of CGUs, which benefit from the synergies of the acquisition. The Company internally reviews the goodwill for impairment for the acquired business.
Value in use is calculated using cash flow projections over a period of 5 years, with amounts based on medium term strategic plans approved by the Board. Any major variations to strategic plan, based on experience are incorporated in the calculations. Cash flows beyond the 5 year period are extrapolated using a long term growth rate.
Management reviews the carrying value of goodwill annually to determine whether there has been any impairment. This involves making an assessment of the value of goodwill and comparing it to the carrying value. If the assessed value is lower than the carrying value, then an impairment charge is recognised to reduce the carrying value to this amount.
Key assumptions in the budgets and plans include future revenue volume/price growth rates, associated future levels of marketing support, cost-base of manufacture and supply and directly associated overheads. These assumptions are based on historical trends and future market expectations (also considering the possible effect of COVID-19, if any) and the markets and geographies in which they operate.
Other key assumptions applied in determining value in use are
(a) long term growth rate - Cash flows beyond the five-year period are extrapolated using the estimated long-term growth rate applicable for the geographies, with reference to historical economic growth rates. The growth rate assumed for the current financial year was 4%.
(b) discount rate - The discount rate is based on a Weighted Average Cost of Capital (WACC) for comparable companies operating in similar markets and geographies. The pre-tax discount rate assumed for the current financial year was 22.4%.
The Company has performed sensitivity analysis around the base assumptions and has concluded that no reasonable possible changes in key assumptions would cause the recoverable amount to be less than the carrying value.
6.1 During the previous year, Rossari Personal Care Private Limited (âthe subsidiary companyâ) had split its equity shares of the face value of '' 100 each to face value of '' 10 each resulting in the increase of equity shares to 10,000 from 1,000 equity shares. Further the subsidiary company had issued bonus shares in the ratio 1:29 thereby increasing the number of equity shares to 300,000.
During the year ended 31st March, 2022, the Company has acquired the remaining 40% stake i.e. 200,000 equity shares for a consideration of '' 20.00 million making it a wholly owned subsidiary of the Company w.e.f. 23rd July, 2021.
Includes deemed investment amounting to '' 0.71 million (31st March, 2021 - '' 0.71 million).
6.2 During the previous year, the Company had acquired the balance 40% stake in Buzil Rossari Private Limited aggregating to 2,928,615 number of shares from BUZIL-WERK Wagner GmbH & Co for a total consideration of '' 45.91 million making it a wholly owned subsidiary of the Company.
6.3 On 26th August, 2021, the Company has completed the acquisition of 65% equity shares of Unitop Chemicals Private Limited (Unitop) for a consideration of '' 2,709.46 million from the existing shareholders (including '' 12.00 million paid to employees of Unitop for employee retention bonus). Further the remaining 35% equity shares will be acquired in multiple tranches for '' 1,452.50 million, subject to the customary terms and conditions as defined in the Share Purchase Agreement.
6.4 On 1st September, 2021, the Company has completed the acquisition of 76% equity shares of Tristar Intermediates Private Limited for a consideration of '' 821.41 million from the existing shareholders. Further the remaining 24% equity shares will be acquired in multiple tranches for '' 259.20 million, subject to the customary terms and conditions as defined in the Share Purchase Agreement.
6.5 On 25th November, 2021, the Company has completed the acquisition of 50.10% equity shares of Romakk Chemicals Private Limited for a consideration of '' 75.10 million.
18.1 During the previous year, the Company has completed the Initial Public Offer (IPO) of 11,676,470 Equity Shares of the face value of '' 2/- each at an issue price of '' 425/- per Equity Share, comprising offer for sale of 10,500,000 shares by Selling Shareholders and fresh issue of 1,176,470 shares. The Equity Shares of the Company were listed on July 23, 2020 on BSE Limited and National Stock Exchange of India Limited.
18.2 During the year ended on 31st March, 2021, the Board of Directors at its meeting held on 23rd March, 2021, interalia approved the issue of 3,012,046 equity shares on preferential basis for cash consideration. Consequently, the shareholder of the Company at its Extra Ordinary General meeting held on 17th April, 2021 has approved issue of 3,012,046 shares of face value of '' 2 each on preferential basis at '' 996 per share aggregating to '' 3,000.00 million to certain parties. During the current year, pursuant to Section 42 and 62 and other applicable provisions, if any, of the Companies Act, 2013 read with rules made there under and as per the approval of the Members of the Company, the Board of Directors of the Company at their meeting held on 21st April, 2021 allotted 3,012,046 Equity Shares of the Face Value of '' 2/- each, at the issue price of '' 996/- each including a premium of ''994/- each on preferential basis by way of a private placement.
18.3 During the year, company has issued 114,950 equity shares of the Face Value of '' 2/- each, at the exercise price of '' 425/- each including a premium of '' 423/- each under Employee Stock Option Plan. Information relating to Employee Stock Option Plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the reporting period, is set out in note 30.1.
b) Terms of Rights, preferences and restrictions attached to equity shares
The Company has only one class of equity shares having a par value of '' 2/- per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
Description of Nature and purpose of other equity:
Retained Earnings:
Retained earnings represent the amount of accumulated earnings.
Securities premium is created when shares are issued at premium. The reserve can be utilised in accordance with the provisions of the Companies Act, 2013.
Employee Stock Options Outstanding:
Employee Stock Options Outstanding represents reserve in respect of equity settled share options granted to the Company''s employees in pursuance of the Employee Stock Option Plan.
30.1 Employee Stock Option plan
The Company has implemented - Rossari Employee Stock Option Plan, 2019 (âESOP 2019â) as approved by the shareholders of the Company and the Nomination & Remuneration Committee (NRC) of the Board of Directors (the âBoard'').
As per the ESOP 2019, the Board of Directors at Board Meeting dated 12th December, 2019 granted ESOP''s to the eligible employees to acquire equity shares of the Company, that vests in a graded manner. The vested options can be exercised within two years from respective vesting date or the period as specified by Nomination & Remuneration Committee as specified in the ESOP 2019. The number of options granted is calculated in accordance with the experience and performance- based formula recommended by the Board and approved by the NRC.
The Company has granted 705,000 Employee Stock Options under ESOP 2019 to its identified employees. This grant is effective from 12th December, 2019. These shall vest as per the vesting schedule approved by the Board and NRC and can be exercised over the exercise period as approved in the meeting held on 12th December, 2019.
This was further Modified/revised in accordance with the resolution passed by the Nomination and Remuneration Committee of the Board of Directors of the Company at their meeting held on 22 nd July, 2020. The exercise price of the shares granted under the scheme was reduced from '' 475 to '' 425.
The scheme was ratified by the shareholders at its extraordinary general meeting held on 17th April, 2021.
During the year, the Company has granted 57,000 Employee Stock Options under ESOP 2019 to its identified employees. These shall vest as per the vesting schedule approved by the Board and NRC and can be exercised over the exercise period as approved in the Board meeting.
NOTE 39: CONTINGENT LIABILITY AND COMMITMENTS:Commitments
(i) Estimated amount of contracts remaining to be executed of Property, Plant & Equipment''s (net of advances) and not provided for '' 22.87 million (31st March, 2021 - '' 51.33 million).
(ii) Other Commitments related to acquisition of balance equity share capital of Unitop Chemicals Private Limited(Unitop) and Tristar Intermediates Private Limited as per the contractual arrangement amounting to '' 1,711.70 million (31st March, 2021 - Nil) (refer note 6.3 and 6.4).
(iii) Additionally, the acquisition of Unitop have retention payouts payable to the eligible key employees of the Unitop, subject to their continuous employment amounting to '' 48.00 million (31st March, 2021 - Nil).
NOTE 40: RELATED PARTY DISCLOSURE:
i. List of Related Parties:
a) Subsidiary Companies
Rossari Personal Care Products Private Limited (Formerly known as Neutron Impex Private Limited)
Buzil Rossari Private Limited (from 31st August, 2020)
Unitop Chemicals Private Limited (w.e.f. 26th August, 2021)
Tristar Intermediaries Private Limited (w.e.f. 1st September, 2021)
b) Joint venture
Buzil Rossari Private Limited (upto 30th August, 2020)
c) Associate
Romakk Chemicals Private Limited (w.e.f. 25th November,2021)
d) Key Managerial Persons (KMP)
Mr. Edward Menezes
Mr. Sunil Chari
e) Relatives of KMP Ms. Anita Menezes Ms. jyotishna Chari Mr. Mikhail Menezes Mr. Yash Chari
f) Enterprises on which key managerial persons or their relatives are able to exercise significant influence
Rossari Biotech (India) Private Limited
NOTE 41: EMPLOYEE BENEFITS Defined contribution plan
The Company makes contributions towards Provident Fund, Employee''s State Insurance Corporation (ESIC) for qualifying employees. The Company has recognised '' 8.53 million (31st March, 2021 - '' 7.28 million), being Company''s contribution to Provident Fund and ESIC, as an expense and included in note 30 - Employee Benefit Expenses in the Statement of Profit and Loss.
Defined benefit plani. Gratuity plan
The Gratuity Benefits are classified as Post-Retirement Benefits as per Ind AS 19 and the accounting policy is outlined as follows.
As per Ind AS 19, the service cost and the net interest cost would be charged to the profit or loss. Actuarial gains and losses arise due to difference in the actual experience and the assumed parameters and also due to changes in the assumptions used for valuation. The Company recognises these remeasurements in the Other Comprehensive Income (OCI).
When the benefits of the plan are changed, or when a plan is curtailed or settlement occurs, the portion of the changed benefit related to past service by employees, or the gain or loss on curtailment or settlement, is recognised immediately in the profit or loss account when the plan amendment or when a curtailment or settlement occurs.
Through its gratuity plans the Company is exposed to a number of risks, the most significant of which are detailed below:
a) Actuarial Risk
It is the risk that benefits will cost more than expected. This can arise due to one of the following reasons:
Adverse Salary Growth Experience: Salary hikes that are higher than the assumed salary escalation will result into an increase in obligation at a rate that is higher than expected.
Variability in mortality rates: If actual mortality rates are higher than assumed mortality rate assumption then the Gratuity Benefits will be paid earlier than expected. Since there is no condition of vesting on the death benefit, the acceleration of cashflow will lead to an actuarial loss or gain depending on the relative values of the assumed salary growth and discount rate.
Variability in withdrawal rates: If actual withdrawal rates are higher than assumed withdrawal rate assumption then the Gratuity Benefits will be paid earlier than expected. The impact of this will depend on whether the benefits are vested as at the resignation date.
b) Investment Risk
For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may not be the fair value of instruments backing the liability. In such cases, the present value of the assets is independent of the future discount rate. This can result in wide fluctuations in the net liability or the funded status if there are significant changes in the discount rate during the inter-valuation period.
c) Liquidity Risk
Employees with high salaries and long durations or those higher in hierarchy, accumulate significant level of benefits. If some of such employees resign/retire from the Company, there can be strain on the cash flows.
d) Market Risk
Market risk is a collective term for risks that are related to the changes and fluctuations of the financial markets. One actuarial assumption that has a material effect is the discount rate. The discount rate reflects the time value of money. An increase in discount rate leads to decrease in Defined Benefit Obligation of the plan benefits & vice versa. This assumption depends on the yields on the corporate/government bonds and hence the evaluation of liability is exposed to fluctuations in the yields as at the valuation date.
e) Legislative Risk
Legislative risk is the risk of increase in the plan liabilities or reduction in the plan assets due to change in the legislation/regulation. The government may amend the payment of gratuity act thus requiring the companies to pay higher benefits to the employees. This will directly affect the present value of the defined benefit obligation and the same will have to be recognised immediately in the year when any such amendment is effective.
The Company does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.
Rent expense recorded for short-term leases was '' 35.37 million (31st March, 2021 - '' 32.78 million)
The Company''s lease asset classes primarily consist of leases for land and buildings. The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange of consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially all the economic benefits from the use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
The Company manages its capital so as to safeguard its ability to continue as a going concern and to optimise returns to shareholders. The capital structure of the Company is based on management''s judgement of its strategic and day-to-day needs with a focus on total equity so as to maintain investor, customer, creditors and market confidence.
The management and the Board of Directors monitor the return on capital as well as the level of dividends to shareholders.
The Company may take appropriate steps in order to maintain, or if necessary, adjust, its capital structure. The Company does not have any borrowings as at 31st March, 2022 and 31st March, 2021.
NOTE 44: FINANCIAL RISK MANAGEMENT FRAMEWORK
The Company has formulated and implemented a policy on risk management, so as to develop an approach to identify, assess and manage the various risks associated with our business activities in a systematic manner. The policy lays down guiding principles on proactive planning for identifying, analysing and mitigating material risks, both external and internal, and covering operational, financial and strategic risks. After risks have been identified, risk mitigation solutions are determined to bring risk exposure levels in line with risk appetite. The Company''s risk management policies and systems are reviewed regularly to reflect changes in market conditions and our business activities. The Company''s business activities are exposed to a variety of financial risks, namely Credit risk, Liquidity risk, Currency risk, Interest risks. For COVID related disclosures refer note 2 (i)(e) in our critical estimates and judgements.
The Company''s size and operations result in it being exposed to the market risks that arise from its use of financial instruments namely Currency risk. This risk may affect the Company''s income and expenses, or the value of its financial instruments. The Company''s exposure to and management of this risk is explained below.
The Company is exposed to exchange rate risk as certain portion of the revenues and expenditure are denominated in foreign currencies. The Company imports certain raw materials, the price of which we are required to pay in foreign currency, which is mostly the U.S. Dollar or Euro. Products that we export are paid for in foreign currency, which together acts as a natural hedge. Any appreciation/depreciation in the value of the Rupee against U.S. Dollar, Euro or other foreign currencies would decrease / increase the Rupee value of debtors/ creditors. For exposure beyond natural hedge, the Company uses foreign exchange derivatives such as foreign exchange forward contracts to minimise the risk.
Liquidity riskLiquidity risk management
Liquidity risk is the risk that we will encounter difficulties in meeting the obligations associated with our financial liabilities that are settled by delivering cash or another financial asset. Our approach to managing liquidity is to ensure that we have sufficient liquidity or access to funds to meet our liabilities when they are due.
NOTE 45: CREDIT RISK MANAGEMENT
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. We are exposed to credit risk from our operating activities, primarily from trade receivables. The Company''s customer base majorly has creditworthy counterparties which limits the credit risk. The Company''s exposures are continuously monitored and wherever necessary we take advances/Letter of Credits to minimise the risk.
NOTE 46: TRADE RECEIVABLE AND ADVANCES
The Company applies the simplified approach to provide for expected credit losses prescribed by Ind AS 109, which permits the use of the lifetime expected loss provision for all trade receivables/Advances. The Company has computed expected credit losses based on actual basis. Forward-looking information (including macroeconomic information) has been incorporated into the determination of expected credit losses Reconciliation of allowance for expected credit loss in respect of trade receivables:
If the change in rates decline by a similar percentage, there will be opposite impact of similar amount on Profit Before Tax and Pre-tax Equity Effect.
The sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.
NOTE 48: OFFSETTING OF BALANCES:
The Company has not offset financial assets and financial liabilities, unless permissible contractually.
NOTE 49: FAIR VALUE DISCLOSURES
Fair value of the financial instruments is classified in various fair value hierarchies based on the following three levels:
⢠Level 1: Quoted prices (unadjusted) in active market for identical assets or liabilities.
⢠Level 2: Inputs other than quoted price included within level 1 that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices).
⢠The fair value of financial instruments that are not traded in an active market is determined using market approach and valuation
techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If significant
inputs required to fair value an instrument are observable, the instrument is included in Level 2.
⢠Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
If one or more of the significant inputs is not based on observable market data, the fair value is determined using generally accepted pricing models based on a discounted cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk of counterparty.
The fair value of trade receivables, trade payables and other Current financial assets and liabilities is considered to be equal to the carrying amounts of these items due to their short-term nature.
All financial liabilities and financial assets have no material impact.
Financial instruments measured using fair value.
NOTE 52: ADDITIONAL REGULATORY INFORMATION REQUIRED BY SCHEDULE III
(i) Details of benami property held
No proceedings have been initiated on or are pending against the Company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.
(ii) Borrowing secured against current assets
The Company have sanctioned borrowings/facilities from banks on the basis of security of current assets. The quarterly returns or statements of current assets filed by the Company with banks and financial institutions are in agreement with the books of accounts.
(iii) Wilful defaulter
The Company has not been declared wilful defaulter by any bank or financial institution or any lender.
(iv) Relationship with struck off companies
The Company has no transactions with the companies struck off under Companies Act, 2013 or Companies Act, 1956.
(v) Compliance with number of layers of companies
The Company has complied with the number of layers prescribed under the Companies Act, 2013.
(vi) Compliance with approved scheme(s) of arrangements
The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.
(vii) Utilisation of borrowed funds and share premium
The Company has not advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
a. 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
b. provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries.
The Company has 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:
a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
b. provide any guarantee, security or the like on behalf of the ultimate beneficiaries
(viii) Undisclosed Income
There is no income surrendered or disclosed as income during the current or previous year in the tax assessments under the Income Tax Act, 1961, that has not been recorded in the books of account.
(ix) Details of crypto currency or virtual currency
The Company has not traded or invested in crypto currency or virtual currency during the current or previous year.
(x) Valuation of PP&E, intangible asset and investment property
The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the current or previous year.
(xi) Registration of charges or satisfaction with Registrar of Companies
There are no charges or satisfaction which are yet to be registered with the Registrar of Companies beyond the statutory period.
NOTE 53: Figures for previous periods have been regrouped wherever considered necessary.
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