Notes to Accounts of Varroc Engineering Ltd.

Mar 31, 2026

L) Provisions
General

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

If the effect of the time value of money is material,
provisions are discounted using a current pre-tax
rate that reflects, when appropriate, the risks
specific to the liability. When discounting is used,
the increase in the provision due to the passage
of time is recognised as a finance cost.

Warranty provisions

Provisions for warranty-related costs are
recognised when the product is sold or service
provided to the customer. Initial recognition is
based on historical experience. The initial estimate
of warranty-related costs is revised annually.

Coupon scheme provision

Provision for coupon scheme is recognised based
on historical coupon redemption information and
any recent trends towards supplies pertaining to
other than OEMs. These coupons are expected
to be redeemed within 2 to 3 years.

Onerous contracts

If the Company has a contract that is onerous,
the present obligation under the contract is
recognised and measured as a provision.

M) Earnings Per Share

(i) Basic earnings per share

Basic earnings per share is calculated by
dividing the profit attributable to owners of
the Company by the weighted average

number of equity shares outstanding during
the reporting period. The weighted average
number of equity shares outstanding during
the period and for all periods presented is
adjusted for events, such as bonus shares,
other than the conversion of potential equity
shares that have changed the number
of equity shares outstanding, without a
corresponding change in resources.

(ii) Diluted earnings per share

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

N) Cash and Cash Equivalents

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

For the purpose of the statement of cash flows,
cash and cash equivalents consist of cash
and short-term deposits, as defined above,
net of outstanding bank overdrafts as they are
considered an integral part of the Company''s
cash management. Bank overdraft are
shown within borrowings in current liabilities in
the balance sheet.

O) Segment reporting

In accordance with paragraph 4 of notified Ind
AS 108 "Operating segments", the Company has
disclosed segment information only on the basis
of the consolidated financial statements.

P) Financial Instruments
Financial Assets

Initial Recognition and measurement

Financial assets are classified, at initial recognition,
as subsequently measured at amortised cost,
fair value through other comprehensive income
(OCI), and fair value through profit or loss.

The classification of financial assets at initial
recognition depends on the financial asset''s
contractual cash flow characteristics and the
company''s business model for managing them.
With the exception of trade receivables that do
not contain a significant financing component or
for which the company has applied the practical
expedient, the company initially measures a
financial asset at its fair value plus, in the case of a
financial asset not at fair value through Statement
of Profit and Loss, transaction costs. Trade
receivables that do not contain a significant
financing component or for which the company
has applied the practical expedient are measured
at the transaction price determined under Ind AS
115. Refer to the accounting policies for Revenue
from contracts with customers.

In order for a financial asset to be classified and
measured at amortised cost or fair value through
OCI, it needs to give rise to cash flows that
are ‘solely payments of principal and interest
(SPPI)'' on the principal amount outstanding. This
assessment is referred to as the SPPI test and is
performed at an instrument level. Financial assets
with cash flows that are not SPPI are classified
and measured at fair value through profit or loss,
irrespective of the business model.

The company''s business model for managing
financial assets refers to how it manages its
financial assets in order to generate cash flows.
The business model determines whether cash
flows will result from collecting contractual
cash flows, selling the financial assets, or both.
Financial assets classified and measured at
amortised cost are held within a business model
with the objective to hold financial assets in order
to collect contractual cash flows while financial
assets classified and measured at fair value
through OCI are held within a business model
with the objective of both holding to collect
contractual cash flows and selling.

Purchases or sales of financial assets that require
delivery of assets within a time frame established
by regulation or convention in the marketplace
(regular way trades) are recognised on the trade

date, i.e., the date that the company commits
to purchase or sell the asset.

Subsequent measurement

For purposes of subsequent measurement,

financial assets are classified in four categories:

- Financial assets at amortised cost

(debt instruments)

- Financial assets at fair value through other

comprehensive income (FVTOCI) with
recycling of cumulative gains and losses
(debt instruments)

- Financial assets designated at fair value
through OCI with no recycling of cumulative
gains and losses upon derecognition
(equity instruments)

- Financial assets at fair value through

Statement of Profit and Loss

Debt instruments at amortized cost

A ‘debt instrument'' is measured at the amortized
cost if both the following conditions are met:

(a) The asset is held within a business model
whose objective is to hold assets for
collecting contractual cash flows, and

(b) Contractual terms of the asset give rise on
specified dates to cash flows that are solely
payments of principal and interest (SPPI) on
the principal amount outstanding.

This category is the most relevant to the Company.
After initial measurement, such financial assets
are subsequently measured at amortized cost
using the effective interest rate (EIR) method.
Amortized cost is calculated by taking into
account any discount or premium on acquisition
and fees or costs that are an integral part of EIR.
The EIR amortization is included in finance costs/
income in the Statement of Profit and Loss. The
losses arising from impairment are recognised in
the Statement of Profit and Loss. This category
generally applies to trade and other receivables.

Equity investments

All equity investments in scope of Ind-AS 109 are
measured at fair value. Equity instruments which
are held for trading are classified as at FVTPL. For
all other equity instruments, the Company may
make an irrevocable election to present in other
comprehensive income subsequent changes
in the fair value. The Company makes such an
election on an instrument-by-instrument basis.
This classification is made on initial recognition
and is irrevocable.

Equity instruments included within the FVTPL
category are measured at fair value with all
changes recognised in Statement of Profit and Loss.

Derecognition

A financial asset (or, where applicable,
a part of a financial asset or part of a
company of similar financial assets) is primarily
derecognised (i.e. removed from the Company
balance sheet) when:

- The rights to receive cash flows from the
asset have expired, or

- The Company has transferred its rights to
receive cash flows from the asset or has
assumed an obligation to pay the received
cash flows in full without material delay
to a third party under a “"pass-through””
arrangement; and either (a) the company
has transferred substantially all the risks and
rewards of the asset, or (b) the Company has
neither transferred nor retained substantially
all the risks and rewards of the asset, but has
transferred control of the asset.

When the Company has transferred its rights to
receive cash flows from an asset or has entered
into a pass-through arrangement, it evaluates
if and to what extent it has retained the risks
and rewards of ownership. When it has neither
transferred nor retained substantially all of the risks
and rewards of the asset, nor transferred control
of the asset, the Company continues to recognize
the transferred asset to the extent of the Company
continuing involvement. In that case, the

Company also recognizes an associated liability.
The transferred asset and the associated liability
are measured on a basis that reflects the rights
and obligations that the Company has retained.

Impairment of financial assets

In accordance with Ind-AS 109, the Company
applies expected credit loss (ECL) model for
measurement and recognition of impairment
loss on the following financial assets and credit
risk exposure:-

(a) Financial assets that are debt instruments,
and are measured at amortized cost e.g.
loans, debt securities, deposits, trade
receivables and bank balance

(b) Trade receivables or any contractual right
to receive cash or another financial asset

The Company follows ‘simplified approach'' for
recognition of impairment loss allowance on:

Trade receivables

In respect of other financial assets E.g. debt
securities, deposits, bank balances etc), the
Company generally invests in instruments
with high credit rating and consequently low
credit risk. In the unlikely event that the credit
risk increases significantly, from inception of
investment, lifetime ECL is used for recognising
impairment loss on such assets.

Lifetime ECL are the expected credit losses
resulting from all possible default events over the
expected life of a financial instrument.

ECL is the difference between all contractual
cash flows that are due to the company is in
accordance with the contract and all the cash
flows that the entity expects to receive (i.e. all
cash shortfalls), discounted at the original EIR.
When estimating the cash flows, an entity is
required to consider:

- All contractual terms of the financial
instrument (including prepayment,
extension, call and similar options) over the
expected life of the financial instrument.

As a practical expedient, the Company uses a
provision matrix to determine impairment loss
allowance on portfolio of its trade receivables.
The provision matrix is based on its historically
observed default rates over the expected life
of the trade receivables and is adjusted for
forward-looking estimates. At every reporting
date, the historical observed default rates are
updated and changes in the forward-looking
estimates are analysed.

ECL impairment loss allowance (or reversal)
recognised during the period is recognised
as income/expense in the Statement of Profit
and Loss (P&L). This amount is reflected under
the head ‘other expenses'' in the P&L. The
balance sheet presentation for various financial
instruments is described below:

Financial assets measured at amortized cost,
contract assets:

ECL is presented as an allowance, i.e. as an
integral part of the measurement of those
assets in the balance sheet. The allowance
reduces the net carrying amount. Until the asset
meets write-off criteria, the Company does not
reduce impairment allowance from the gross
carrying amount.

For assessing increase in credit risk and
impairment loss, the Company combines
financial instruments on the basis of shared
credit risk characteristics with the objective of
facilitating an analysis that is designed to enable
significant increases in credit risk to be identified
on a timely basis.

Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial
recognition, as financial liabilities at fair value
through Statement of Profit and Loss, loans and
borrowings, payables, as appropriate.

All financial liabilities are recognised initially at fair
value and, in the case of loans and borrowings
and payables, net of directly attributable
transaction costs.

The Company''s financial liabilities include trade
and other payables, loans and borrowings
including bank overdrafts

Loans and borrowings

This is the category most relevant to the
Company. After initial recognition, interest¬
bearing loans and borrowings are subsequently
measured at amortized cost using the effective
interest rate ( EIR) method. Gains and losses are
recognised in Statement of Profit and Loss when
the liabilities are derecognised as well as through
the EIR amortization process.

Amortized cost is calculated by taking into
account any discount or premium on acquisition
and fees or costs that are an integral part of the
EIR. The EIR amortization is included as finance
costs in the Statement of Profit and Loss. This
category generally applies to interest bearing
loans and borrowings.

Derecognition

A financial liability is derecognised when the
obligation under the liability is discharged or
cancelled or expires when an existing financial
liability is replaced by another from the same
lender on substantially different terms, or the
terms of an existing liability are substantially
modified, such an exchange or modification
is treated as the derecognition of the original
liability and the recognition of a new liability. The
difference in the respective carrying amounts is
recognised in the Statement of Profit and Loss.

Fair value measurement

The Company measures financial instruments,
such as, derivatives and investments at fair value
at each balance sheet date.

Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an
orderly transaction between market participants
at the measurement date. The fair value
measurement is based on the presumption that
the transaction to sell the asset or transfer the
liability takes place either:

- In the principal market for the asset
or liability, or

- In the absence of a principal market, in
the most advantageous market for the
asset or liability

The principal or the most advantageous market
must be accessible by the Company. The
fair value of an asset or a liability is measured
using the assumptions that market participants
would use when pricing the asset or liability,
assuming that market participants act in their
economic best interest.

A fair value measurement of a non-financial
asset takes into account a market participant''s
ability to generate economic benefits by using
the asset in its highest and best use or by selling it
to another market participant that would use the
asset in its highest and best use.

The Company uses valuation techniques that
are appropriate in the circumstances and for
which sufficient data are available to measure
fair value, maximizing the use of relevant
observable inputs and minimizing the use of
unobservable inputs. All assets and liabilities for
which fair value is measured or disclosed in the
financial statements are categorised within the
fair value hierarchy, described as follows, based
on the lowest level input that is significant to the
fair value measurement as a whole:

Level 1 — Quoted (unadjusted) market prices in
active markets for identical assets or liabilities

Level 2 — Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is directly or indirectly observable

Level 3 — Valuation techniques for which the
lowest level input that is significant to the fair
value measurement is unobservable

For assets and liabilities that are recognised in
the financial statements on a recurring basis, the
Company determines whether transfers have
occurred between levels in the hierarchy by

re-assessing categorisation (based on the lowest
level input that is significant to the fair value
measurement as a whole) at the end of each
reporting period.

For the purpose of fair value disclosures, the
Company has determined classes of assets and
liabilities on the basis of the nature, characteristics
and risks of the asset or liability and the level of
the fair value hierarchy as explained above.

This note summarizes accounting policy for fair
value. Other fair value related disclosures are
given in the relevant notes.

Disclosures for valuation methods, significant
estimates and assumptions (Note 2A)

Quantitative disclosures of fair value
measurement hierarchy (Note 42)

Financial instruments (including those carried at
amortized cost) (Note 43, 44 and 45)

Derivative financial instruments and hedge
accounting

Initial recognition and subsequent measurement

The Company uses derivative financial
instruments, such as forward currency contracts
and interest rate swaps, to hedge its foreign
currency risks and interest rate risks, respectively.
Such derivative financial instruments are initially
recognised at fair value on the date on which
a derivative contract is entered into and
are subsequently re-measured at fair value.
Derivatives are carried as financial assets when
the fair value is positive and as financial liabilities
when the fair value is negative.

Any gains or losses arising from changes in the
fair value of derivatives are taken directly to
Statement of Profit and Loss, except for the
effective portion of cash flow hedges, which
is recognised in OCI and later reclassified to
Statement of Profit and Loss when the hedge
item affects Statement of Profit and Loss or
treated as basis adjustment if a hedged forecast

transaction subsequently results in the recognition
of a non-financial asset or non-financial liability.

For the purpose of hedge accounting, hedges
are classified as:

1 Fair value hedges when hedging the
exposure to changes in the fair value
of a recognised asset or liability or an
unrecognised firm commitment

2 Cash flow hedges when hedging the
exposure to variability in cash flows that
is either attributable to a particular risk
associated with a recognised asset or liability
or a highly probable forecast transaction or
the foreign currency risk in an unrecognised
firm commitment

Hedges of a net investment in a foreign operation-

At the inception of a hedge relationship, the
Company formally designates and documents
the hedge relationship to which the Company
wishes to apply hedge accounting and the
risk management objective and strategy for
undertaking the hedge. The documentation
includes the Company''s risk management
objective and strategy for undertaking hedge,
the hedging/ economic relationship, the hedged
item or transaction, the nature of the risk being
hedged, hedge ratio and how the entity will
assess the effectiveness of changes in the hedging
instrument''s fair value in offsetting the exposure to
changes in the hedged item''s fair value or cash
flows attributable to the hedged risk. Such hedges
are expected to be highly effective in achieving
offsetting changes in fair value or cash flows and
are assessed on an ongoing basis to determine
that they actually have been highly effective
throughout the financial reporting periods for
which they were designated.

Hedges that meet the strict criteria for
hedge accounting are accounted for, as
described below:

Cash flow hedges

The effective portion of the gain or loss on the
hedging instrument is recognised in OCI in the
cash flow hedge reserve, while any ineffective
portion is recognised immediately in the
Statement of Profit and Loss.

The Company uses derivative contracts as
hedges of its exposure to foreign currency risk in
forecast transactions and firm commitments. The
ineffective portion relating to foreign currency
contracts is recognised in finance costs.

Amounts recognised as OCI are transferred to
Statement of Profit and Loss when the hedged
transaction affects Statement of Profit and Loss,
such as when the hedged financial income
or financial expense is recognised or when a
forecast sale occurs. When the hedged item is
the cost of a non-financial asset or non-financial
liability, the amounts recognised as OCI are
transferred to the initial carrying amount of the
non-financial asset or liability.

If the hedging instrument expires or is sold,
terminated or exercised without replacement
or rollover (as part of the hedging strategy),
or if its designation as a hedge is revoked, or
when the hedge no longer meets the criteria for
hedge accounting, any cumulative gain or loss
previously recognised in OCI remains separately
in equity until the forecast transaction occurs or
the foreign currency firm commitment is met.

Q) Contingent liabilities

A disclosure for a contingent liability is made
where there is a possible obligation that arises
from past events and the existence of which
will be confirmed only by the occurrence or
non-occurrence of one or more uncertain
future events not wholly within the control of the
Company or a present obligation that arises from
the past events where it is either not probable
that an outflow of resources will be required to
settle the obligation or a reliable estimate of the
amount cannot be made.

R) Changes in accounting policies and disclosures
New and amended standards

The Company applied for the first-time certain
standards and amendments, which are effective
for annual periods beginning on or after April 01,
2025. The Company has not early adopted any
standard, interpretation or amendment that has
been issued but is not yet effective.

(i) Amendments to Ind AS 21 - Lack of
exchangeability

The Ministry of Corporate Affairs (MCA)
notified the Companies (Indian Accounting
Standards) Amendment Rules, 2025, which
amend Ind AS 21, The Effects of Changes in
Foreign Exchange Rates to specify how an
entity should assess whether a currency is
exchangeable and how it should determine
a spot exchange rate when exchangeability
is lacking. The amendments also require
disclosure of information that enables users
of its financial statements to understand how
the currency not being exchangeable into
the other currency affects, or is expected to
affect, the entity''s financial performance,
financial position and cash flows.

The amendments are effective for
annual reporting periods beginning on
or after April 01, 2025. When applying the
amendments, an entity cannot restate
comparative information.

The amendments do not have a
material impact on the Company''s
financial statements.

(ii) Amendments to Ind AS 1 - Classification
of Liabilities as Current or Non-current and
Non-current Liabilities with Covenants

In August 2025, the MCA notified
amendments to paragraphs 69 to 76 of
Ind AS 1 to specify the requirements for
classifying liabilities as current or non¬
current. The amendments clarify:

• What is meant by a right to
defer settlement

• That a right to defer must exist at the
end of the reporting period

• That classification is unaffected by the
likelihood that an entity will exercise
its deferral right

• That only if an embedded derivative in
a convertible liability is itself an equity
instrument would the terms of a liability
not impact its classification

In addition, a requirement has been
introduced to require disclosure when a
liability arising from a loan agreement is
classified as non-current and the entity''s
right to defer settlement is contingent
on compliance with future covenants
within twelve months.

If there is a breach of a material covenant
of a long term loan arrangement on or
before the end of the reporting period,
resulting in the liability becoming payable
on demand as at the reporting date, and
the lender agrees—after the reporting
period but before the financial statements
are approved for issue—not to demand
repayment for at least 12 months as a
consequence of the breach, this shall be
treated as an adjusting event. Accordingly,
the entity is not required to classify the
liability as current.

The amendments are effective for
annual reporting periods beginning on
or after April 01 , 2025 retrospectively in
accordance with Ind AS 8.

The company has no impact of these
amendments in its classification criteria of
current and non-current liabilities.

(iii) Amendments to Ind AS 7 and Ind AS 107 -
Supplier Finance Arrangements

In August 2025, the MCA notified
amendments to Ind AS 7 Statement of Cash
Flows and Ind AS 107 Financial Instruments:
Disclosures to clarify the characteristics of

supplier finance arrangements and require
additional disclosure of such arrangements.
The disclosure requirements in the
amendments are intended to assist users of
financial statements in understanding the
effects of supplier finance arrangements
on an entity''s liabilities, cash flows and
exposure to liquidity risk.

As a result of implementing the amendments,
the Company has provided additional
disclosures about its supplier finance
arrangement. Please refer to Note 24.

(iv) International Tax Reform—Pillar Two Model
Rules - Amendments to Ind AS 12

In August 2025, the MCA notified
amendments to Ind AS 12 Income Taxes
in response to the OECD''s BEPS Pillar Two
rules and include:

• A mandatory temporary exception
to the recognition and disclosure
of deferred taxes arising from the
jurisdictional implementation of the
Pillar Two model rules; and

• Disclosure requirements for affected
entities to help users of the financial
statements better understand an
entity''s exposure to Pillar Two income
taxes arising from that legislation,
particularly before its effective date.

The mandatory temporary exception - the
use of which is required to be disclosed
- applies immediately. The remaining
disclosure requirements apply for annual
reporting periods beginning on or after
April 01,2025 but not for any interim periods
ending on or before March 31,2026.

The amendments had no impact on
the Company''s standalone financial
statements as the Company is not in scope
of the Pillar Two model rules

Recent accounting pronouncements

Standards issued but not yet effective

The new and amended standards that
are notified by the Ministry of Corporate
Affairs (MCA), but not yet effective, up to
the date of issuance of the Company''s
financial statements are disclosed below.
The Company will adopt these new
and amended standards, when they
become effective.

(i) Amendments to Ind AS 1 - Classification
of Liabilities as Current or Non-current
and Non-current Liabilities with
Covenants and Ind AS 10 Events after
the Reporting Period

Ind AS 10 has been amended to
remove the previous treatment under
which a lender''s post-reporting-date
waiver granted before the financial
statements were approved for issue
of a breach of a material covenant
in a long-term loan arrangement that
occurred on or before the end of the
reporting period, resulting in the liability
becoming payable on demand at the
reporting date, was regarded as an
adjusting event.

For annual reporting periods beginning
on or after April 01 , 2026 any breach
of a covenant—whether material or
immaterial—occurring on or before the
reporting date will, in accordance with
Ind AS 1, require the related liability
to be classified as current, unless the
lender has granted a waiver of the
breach on or before the reporting
date and has agreed not to demand
repayment for at least 12 months after
the reporting date as a consequence
of the breach. Such a waiver shall be
treated as an adjusting event.

The amendments are effective for
annual reporting periods beginning on
or after April 01,2026 retrospectively in
accordance with Ind AS 8.

Note 2A: Significant accounting judgements,
estimates and assumptions

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

Judgements

In the process of applying the Company''s
accounting policies, following are significant
judgements made by the management:

1) Revenue from contracts with customers

The Company provides product
development/engineering services to
its customers. Under Ind AS 115, the
Company has determined that such
services generally do not constitute a
separate performance obligation under
the contracts with customers but are
part of the performance obligation of
the Company to supply finished goods to
the customer. Accordingly, under Ind AS
115, revenue from product development/
engineering services is recognised over
the period of production from the start of
production (SOP) date. Payments received
from customers in respect of such services
before SOP date are considered as
contract liability. Further, the Company has
determined that the costs incurred in respect
of product development/engineering
services are eligible to be capitalised as
intangible assets and accordingly such
costs have been presented as ‘Capitalised

development cost'' under Intangible assets
(also refer note 5).

Development of toolings for the customers
has been identified by the Company to
be a separate performance obligation.
Further,the Company has determined that
the performance obligation in respect
of development of toolings is satisfied at
a point in time.

2) De-recognition of trade receivables under
factoring arrangements

The Company enters into non-recourse
factoring arrangements for its trade
receivables with various banks/financial
institutions. The Company derecognizes
the receivables from its books if it transfers
substantially all the risks and rewards
of ownership of the financial asset (i.e.
receivables). The assessment of de¬
recognition of trade receivables under the
factoring arrangements is complex and
requires judgement (refer note 12).

3) Allowability of deduction on write-off of
loans to subsidiary under the Income Tax
Act, 1961

During the year ended March 31, 2024,
the Company derecognised (written-off)
loans given to VarrocCorp Holding BV
(‘VCHBV''), Netherlands including interest
on such loans aggregating to H 13,533.33
million(including H 1,736.89 million by Varroc
Polymers Limited (‘VPL''), wholly owned
subsidiary, now merged with the Company
as explained in Note 54(c)) after making
requisite submissions to AD Bank. The
Company claimed this write-off on loans as
an allowable business loss, considering that
these loans extended to VCHBV were in the
nature of trade investments to derive benefits
for the Company''s businesses rather than
for earning dividend/capital appreciation.
The Company obtained legal opinions from
two independent senior counsels who have
supported their view on claiming this write-

off of loans as an allowable business loss.
Accordingly, VPL considered this loss as tax
deductible for computation of current tax
provision to the extent of H 437.14 million
and the Company recognised deferred tax
asset of Rs 2,968.93 million during the year
ended March 31, 2024. Deferred tax asset
on such losses available for set off against
future income is H 211.18 million as at March
31, 2026 (March 31,2025: H 1,378.38 million).
Significant management judgement
involved with respect to deductibility of
such expenditure under Income tax Act,
1961 considering the same as business
expenditure (refer note 23).

Estimates and assumptions

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

1) Defined benefit plans

The cost of the defined benefit gratuity
plan and the present value of the gratuity
obligation are determined using actuarial
valuation. An actuarial valuation involves
making various assumptions that may differ
from actual developments in the future.
These include the determination of the
discount rate, future salary increases and
mortality rates. Due to the complexities
involved in the valuation and its long-term
nature, a defined benefit obligation is highly

sensitive to changes in these assumptions.
All assumptions are reviewed at each
reporting date.

Further details about gratuity obligation are
given in Note 41.

2) Deferred taxes

At each reporting date, the Company
assesses whether the realization of future tax
benefits is sufficiently probable to recognize/
carry forward deferred tax assets. This
assessment requires the use of significant
estimates/assumptions with respect to
assessment of future taxable income.
The recorded amount of total deferred
tax assets could change if estimates of
projected future taxable income change
or if changes in current tax regulations are
enacted. (Refer note 23 for details)

3) Provision for warranty and claims

Warranties are provided for a specified
period of time. The estimated liability for
warranties is recorded when the products
are sold. These estimates are established
using historical information on the nature,
frequency and average cost of warranty
claims and our estimates regarding possible
future incidence based on actions on
product failures.

The Company estimates the provisions
towards claims basis probability of expenses
arising out of claims from legal disputes
that have present obligations as a result of
past events and it is probable that outflow
of resources will be required to settle the
obligations. These provisions for warranties
and claims are reviewed at the end of each
reporting date and are adjusted to reflect
the current best estimates.

4) Useful life of property, plant and equipment
and intangible assets:

The Company uses its technical expertise
along with historical and industry trends

for determining the economic useful life
of assets. The useful lives are reviewed by
management periodically and revised,
if appropriate. In case of a revision, the
unamortised amount is charged over the
remaining useful life of the assets.

5) Impairment of non-current investments
(other than financial assets)

Impairment exists when the carrying value
of an asset or cash generating unit exceeds
its recoverable amount, which is the higher
of its fair value less costs of disposal and
its value in use. The fair value less costs of
disposal calculation is based on available

data from binding sales transactions,
conducted at arm''s length, for similar assets
or observable market prices less incremental
costs for disposing of the asset. The value in
use calculation is based on a DCF model.
The cash flows are derived from the budget
for the next five years and do not include
restructuring activities that the Company is
not yet committed to or significant future
investments that will enhance the asset''s
performance of the CGU being tested.
The recoverable amount is sensitive to the
discount rate used for the DCF model as well
as the expected future cash-inflows and the
growth rate used for extrapolation purposes.

There are no CWIP for which completion is overdue or has exceeded its cost compared to its original budget.

Capital work in progress mainly comprises Factory building, plant and machinery, vehicle and factory equipments
under installation.

Notes:

(i) Refer note 47 for disclosure of contractual commitments for the acquisition of property, plant and equipment.

(ii) Office building includes premises on ownership basis in a Co-operative Society H 6.3 Million, including cost of
shares therein of H 125/- per share.

(iii) Refer note 20 for disclosures relating to charges/securities created against PP&E

(iv) The title deeds for all the immovable properties are in the name of the Company as at March 31, 2026,
except as follows:-

Note 1 : The title of the asset transferred pursuant to the scheme of amalgamation are in the process of being
transferred in the name of the Company.(refer note 54 (c)

Note 2 : Period held has been considered from the appointed date as defined in the scheme of amalgamation.

(v) Transition to Ind AS: On transition to Ind AS (i.e. April 01,2017), the Company has elected to continue with the
carrying value of all property, plant and equipment measured as per previous GAAP and use that carrying
value as the deemed cost of property, plant and equipment.

There are no CWIP for which completion is overdue or has exceeded its cost compared to its original budget.

Capital work in progress mainly comprises Factory building, plant and machinery, vehicle and factory equipments
under installation.

Notes:

(i) Refer note 47 for disclosure of contractual commitments for the acquisition of property, plant and equipment.

(ii) Office building includes premises on ownership basis in a Co-operative Society H 6.3 Million, including cost of
shares therein of H 125/- per share.

(iii) Refer note 20 for disclosures relating to charges/securities created against PP&E

(iv) The title deeds for all the immovable properties are in the name of the Company as at March 31,2025, except
for the following:

Note 1: The title of the asset transferred pursuant to the scheme of amalgamation are in the process of being
transferred in the name of the Company.

Note 2: Period held has been considered from the appointed date as defined in the scheme of amalgamation.

Note 3: Subsequent to March 31,2025, title deeds of Freehold land having Gross carrying amount of Rs 98.60 million
have been transferred in the name of the Company.

(v) Transition to Ind AS: On transition to Ind AS (i.e. April 01, 2017), the Company has elected to continue with the
carrying value of all property, plant and equipment measured as per previous GAAP and use that carrying
value as the deemed cost of property, plant and equipment.

Goodwill acquired through business combination has been allocated to the CGUs Plant 3300 - Bangalore [earlier known
as Team Concepts Private limited (‘TCPL'')- merged with the Company in FY 2020-21] for impairment testing .

Carrying amount of goodwill allocated TCPL - CGUs as at March 31,2026 and March 31,2025 is H 183.90 million.

The Company performed its annual impairment test for years ended March 2026 and March 2025 on March 31,2026 and
March 31, 2025 respectively. The Company considers the relationship between the fair value (based on DCF) of each
CGU and its book value, among other factors, when reviewing for indicators of impairment.

The recoverable amount of the CGU, has been determined based on a value in use calculation using cash flow projections
for a period of five years from financial budget approved by senior management. As a result of the analysis, management
did not identify impairment.

Key assumptions used for value in use calculations for CGUs which have Goodwill amounts which are significant in
comparison to the total carrying amount of goodwill are as follows:

The Company has lease contract premises/building used for its operations with lease terms of 2-10 years, and for lease
hold land with lease term of 30-99 years The Company''s obligations under its leases are secured by the lessor''s title to the
leased assets. The Company is restricted from assigning and subleasing the leased assets.

The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment
(mainly Laptops) (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not
contain a purchase option).

Credit risk

There are no trade receivables which have significant increase in credit risk as at March 31,2026 and March 31,2025 other
than disclosed above.

Credit period

Trade receivables are non-interest bearing and are generally on payment terms of 30 to 120 days.

No trade or other receivable are due from directors or other officers of the Company either severally or jointly with any
other person. Nor any trade or other receivable are due from firms or private companies respectively in which any director
is a partner, a director or a member, except as disclosed in note 46.

Pursuant to an arrangement with certain banks, the company has sold to the banks certain of its trade receivable on
a non-recourse basis. The receivables sold were mutually agreed upon with the respective bank after considering the
creditworthiness and contractual terms with the customers. The company has transferred substantially all the risks and
rewards of ownership of such receivables sold to the bank, and accordingly, the same were derecognised in the Balance-
sheet . As at March 31 , 2026, the amount of trade receivable derecognised pursuant to the aforesaid arrangement
H 7,582.94 mn (March 31,2025 : H 6,993.36 mn)

Note (a): KTM AG, one of the customer of the Company, filed for insolvency and the Court admitted restructuring with
self administration in Austria. Considering these developments, the Company has recognised a provision for the expected
credit loss of trade receivables as exceptional item amounting to H12.10 million for the year ended March 31,2025.

Nature and purpose of reserves
Retained Earnings

Retained earnings are the profits/(loss) that the Company has earned/incurred till date, less any transfers to general
reserve or other reserve as well as dividends or other distributions paid to shareholders. Retained earnings include re¬
measurement loss / (gain) on defined benefit plans, net of taxes that will not be reclassified to Statement of Profit and Loss.
The amount is available for distribution to the shareholders.

General reserve

General reserve is the retained earning of the Company which is kept aside out of the Company''s profits to meet future
(known or unknown) obligations.

Capital reserve

Capital reserve is not available for distribution as dividend.

Securities premium

Securities premium is used to record the premium on issue of shares. It is utilised in accordance with the provisions of the
Companies Act, 2013.

Nature of Security

1) Rupee Term Loans from Banks are secured by:

(a) HSBC BANK

(i) Working Capital Term Loan (WCTL) of H 435 Million having outstanding balance of H 181.25 Million, by way
of Guaranteed Emergency Credit Line (GECL) under ECLGS scheme of National Credit Guarantee Trustee
Company Ltd. (NCGTC) is secured by way of second pari-passu charge on current assets of the Company
along with other banks. Further secured by second charge on movable PPE of the Company situated at:

(1) Varroc Engineering Limited, Plant IV - Plot No. M-140-141, MIDC Industrial Area, Waluj, Chhatrapati
Sambhaji Nagar (Aurangabad) 431 136, Maharashtra

(2) Varroc Engineering Limited, Corporate Office, Plot No. L-4, MIDC Industrial Area, Waluj, Chhatrapati
Sambhaji Nagar (Aurangabad) 431 136, Maharashtra

(3) Varroc Engineering Limited, Pant Nagar - Plot No.20 Sector 9, Integrated Industrial Area, Pant Nagar,
Dist. Udhamsingh Nagar, Uttarakhand

(4) Varroc Engineering Limited, Plant V - Plot No. 6/2, MIDC Industrial Area, Waluj, Chhatrapati Sambhaji
Nagar (Aurangabad) - 431 136, Maharashtra

(5) Varroc Engineering Limited, R&D, Plot No. 6/2, MIDC Industrial Area, Waluj , Chhatrapati Sambhaji
Nagar (Aurangabad) - 431 136, Maharashtra

(ii) Term Loan of INR 1,000 Million availed in November 2023 outstanding balance as on March 31,2026 H 437.50
million is secured by way of hypothecation of movable fixed assets of the following plants:

(1) Varroc Engineering Limited, Plant IV - Plot No. M-140-141, MIDC Industrial Area, Waluj, Chhatrapati
Sambhaji Nagar (Aurangabad) 431 136, Maharashtra

(2) Varroc Engineering Limited, Corporate Office, Plot No. L-4, MIDC Industrial Area, Waluj, Chhatrapati
Sambhaji Nagar (Aurangabad) 431 136, Maharashtra

(3) Varroc Engineering Limited, Pant Nagar - Plot No.20 Sector 9, Integrated Industrial Area, Pant Nagar,
Dist. Udhamsingh Nagar, Uttarakhand

(iii) New Term Loan of INR 1,300 Million availed in March 2026 outstanding balance as on March 31, 2026
H 1,300 million is secured as exclusive charge by way of hypothecation of movable fixed assets of the
following plants:

(1) Varroc Engineering Limited - 4W Lighting Plant - Gut No. 51 to 59, Plot No. 1, Bhamboli, Chakan, Pune
410 501, Maharashtra

(2) Varroc Engineering Limited - Forging Plant - Plot No. L-4, MIDC Industrial Area, Waluj, Chhatrapati
Sambhaji Nagar (Aurangabad) 431 136, Maharashtra

(b) Induslnd Bank

(i) IndusInd Bank Ltd Rupee Term loan of H 1,000 Million (balance as on March 31, 2026 H 703.75 million)
is secured on exclusive first charge by way of Hypothecation of Fixed Assets of the following plants of
Company situated at :

(1) Varroc Engineering Limited, Plot No. E-4, MIDC, Waluj, Chhatrapati Sambhaji Nagar (Aurangabad) -
431136 (M.S.) : Movable Fixed Assets

(2) Varroc Engineering Limited, Plot No. B-24 & 25, MIDC, Chakan, Pune - 410501 (M.S.) : R&D Centre
Movable Fixed Assets

(3) Varroc Engineering Limited, Gat No. 12/1 and Gat No. 12/2 situated at Village Shivaji Nagar , Tal. Sakri,
Dist. Dhule (M.S.) : Movable Fixed Assets

(4) Varroc Engineering Limited, Plot No. 103/4, Maswad, GIDC, Expansion Estate, Halol-II, Dist. Panchmahal,
Gujarat - 389 350 : Movable and Immovable Fixed Assets

(5) Varroc Engineering Limited, Gut No. 390, Takve Bk, Tal. Maval, Dist. Pune : Movable Fixed Assets

(6) Varroc Engineering Limited, Plot No. K - 103, MIDC, Waluj, Chhatrapati Sambhaji Nagar (Aurangabad)
- 431136 (M.S.) - Movable and Immovable Fixed Assets

2) Borrowings pertaining to following charges have been repaid, however the Company is in process of filing charge

satisfaction documents as at March 31,2026:

(a) Tata Capital: Immovable fixed assets located at

(1) Varroc Engineering Limited, Plot No.20 Sector 9, Integrated Industrial Area, Pant Nagar, Dist. Udhamsingh
Nagar, Uttrakhand

(b) HSBC: Immovable fixed asset located at:

(1) Varroc Engineering Limited, Plant IV - Plot No. M-140-141, MIDC Industrial Area, Waluj, Chhatrapati Sambhaji
Nagar (Aurangabad) 431 136, Maharashtra

(2) Varroc Engineering Limited, Corporate Office, Plot No. L-4, MIDC Industrial Area, Waluj, Chhatrapati
Sambhaji Nagar (Aurangabad) 431 136, Maharashtra

(3) Varroc Engineering Limited, Pant Nagar - Plot No.20 Sector 9, Integrated Industrial Area, Pant Nagar, Dist.
Udhamsingh Nagar, Uttarakhand

(4) Varroc Engineering Limited, Plant V - Plot No. 6/2, MIDC Industrial Area, Waluj, Chhatrapati Sambhaji Nagar
(Aurangabad) - 431 136, Maharashtra

5) Varroc Engineering Limited, R&D, Plot No. 6/2, MIDC Industrial Area, Waluj , Chhatrapati Sambhaji Nagar
(Aurangabad) - 431 136, Maharashtra

(c) IndusInd Bank Ltd. - Immovable fixed asset located at:

(1) Varroc Engineering Limited, Survey no. 128-1 b & 129b, Ezhichur village, Taluka Sriperumbudur,
Kancheepuram, Chennai.

(2) Varroc Engineering Limited, Plot no. 601-A & B, Sector III, Pithampur, Dist. Dhar, Madhya Pradesh, and

(3) Varroc Engineering Limited, Revenue Survey Nos. 533, 534 & 537 of Mouje Karasanpura, Taluka Mandal,
District Ahmedabad, Gujarat

3) During the year, the following Term Loans & Non-Convertible Debentures have been fully re-paid and were outstanding

as on March 31,2025 against the following securities:

(a) Saraswat Co. operative Bank Ltd. Term loan of H 750 million was secured on exclusive charge by way of mortgage

of immovable properties situated at:

(1) Varroc Engineering Limited, Plot no E-88 , MIDC, Ranjangaon, Tal. Shirur, Dist. Pune, Maharashtra

(2) Varroc Engineering Limited, Plot No M-165-167, MIDC Industrial Area, Waluj , Chhatrapati Sambhaji Nagar
(Aurangabad) - 431 136, Maharashtra

(b) ICICI BANK Ltd. Rupee Term Loan of of H1,250 Million was secured on exclusive charge by way of mortgage of

the immovable properties situated at:

(1) Varroc Engineering Limited, B-3020 & 3040, Marvel Edge, Viman Nagar, Pune, Maharashtra

(2) Varroc Engineering Limited, Plot No. 35-A, Udyog Vihar, Greater Noida, Uttar Pradesh

(3) Varroc Engineering Limited, 58^th Mile Stone, Opp. Mittal Orchards, Village Binola, Dist. Gurgaon, Haryana State

(4) Varroc Engineering Limited, Plot No. 136-B, Harohalli Industrial Area, Kanakapura Taluk, Ramanagara
Distt. Karnataka

(5) Varroc Engineering Limited, Plot No. 271 & 272(P), Nara Sapura Industrial Area, Nara Sapura, Dist. Kolar -
563133 Karnataka State

(c) IndusInd Bank Ltd Rupee Term loan of H 1,250 Million was secured on exclusive charge by way of Hypothecation
on Movable and Immovable Fixed Assets of the following plants of Company situated at :

(1) Varroc Engineering Limited, Gut No. 390, Takve Bk, Tal. Maval, Dist. Pune - 412106 (M.S.) : Immovable Fixed Assets

(2) Varroc Engineering Limited, Plot No. E-88, MIDC, Ranjangaon, Tal. Shirur, Dist. Pune (M.S.) : Movable Fixed Assets

(3) Varroc Engineering Limited, Gut No. 99, Village Pharola, Tal. Paithan, Dist. Chhatrapati Sambhaji Nagar -

431105 : Immovable Fixed Assets

(d) 8.60% Non-Convertible Debentures of H 100,000 each was secured on exclusive charge by way of Hypothecation
on the specific identified movable properties situated at:

(1) Varroc Engineering Limited, Plot No. B-24 & 25, MIDC, Chakan, Pune - 410501, Maharashtra

(2) Varroc Engineering Limited, (Valves), Plot No. L-4, MIDC, Waluj, Chhatrapati Sambhaji Nagar (Aurangabad)
- 431 136, Maharashtra

(3) Varroc Engineering Limited, (Forging), Plot No. L-4, MIDC, Waluj, Chhatrapati Sambhaji Nagar (Aurangabad)
-431 136, Maharashtra

(4) Varroc Engineering Limited, Lighting Plant, Plot No. B-14, MIDC, Chakan, Pune - 410501, Maharashtra

(5) Varroc Engineering Limited, Lighting Plant, Plot No. 1(P), Gut No. 51 to 59, Village Bhambholi, Tal. Khed, Dist.
Pune- 410501, Maharashtra

4) Debt covenants :

Bank loans contain certain debt covenants relating to limitation on indebtedness, debt-equity ratio, net borrowings
to EBITDA ratio and debt service coverage ratio which are to be tested on half yearly or annual basis. All covenants
in respect of non-current borrowings are complied as at March 31,2026 an

---

Mar 31, 2025

Note 4 : Goodwill

Goodwill acquired through business combination has been allocated to the CGUs Plant 3300 - Bangalore [earlier known as Team Concepts Private limited (''TCPL'')- merged with the Company in FY 2020-21] for impairment testing .

Carrying amount of goodwill allocated TCPL - CGUs as at March 31, 2025 and March 31, 2024 is H 183.90 million.

The Company performed its annual impairment test for years ended March 2025 and March 2024 on March 31, 2025 and March 31, 2024 respectively. The Company considers the relationship between the fair value (based on DCF) of each CGU and its book value, among other factors, when reviewing for indicators of impairment.

The recoverable amount of the CGU, has been determined based on a value in use calculation using cash flow projections from financial budget approved by senior management. As a result of the analysis, management did not identify impairment.

Note 6 - Right of use assets

The Company has lease contract for premises/building used for its operations with lease terms of 2-10 years, and for lease hold land with lease term of 30-99 years The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. The Company is restricted from assigning and subleasing the leased assets.

The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (mainly Laptops) (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option).

The Company had total cash outflows for leases of H 471.09 million for the year ended March 31, 2025 (previous year : H 413.95 million). The company does not have non-cash additions to right-of-use assets and lease liabilities for the year ended March 31, 2025

(iii) Extension and termination options

As at March 31, 2025, the Company has no potential future rental payments relating to periods following the exercise date of extension and termination options that are not included in the lease term.

Credit risk

There are no trade receivables which have significant increase in credit risk as at March 31, 2025 and March 31, 2024 other than disclosed above.

Credit period

Trade receivables are non-interest bearing and are generally on payment terms of 30 to 120 days.

No trade or other receivable are due from directors or other officers of the Company either severally or jointly with any other person. Nor any trade or other receivable are due from firms or private companies respectively in which any director is a partner, a director or a member, except as disclosed in note 47.

Pursuant to an arrangement with certain banks, the company has sold to the banks certain of its trade receivable on a non-recourse basis. The receivables sold were mutually agreed upon with the respective bank after considering the creditworthiness and contractual terms with the customers. The company has transferred substantially all the risks and rewards of ownership of such receivables sold to the bank, and accordingly, the same were derecognized in the Balance-sheet. As at March 31, 2025, the amount of trade receivable derecognized to the aforesaid arrangement H 6,993.36.mn (March 31, 2024 : H 6,139.71.mn)

Note (a): KTM AG, one of the customer of the Company, filed for insolvency and the Court admitted restructuring with self administration in Austria. Considering these developments, the Company has recognised a provision for the expected credit loss of trade receivables as exceptional item amounting to H12.10 million for the year ended March 31, 2025.

(b) Rights, preferences and restrictions attached to equity shares

The Company has equity shares having a par value of H 1 per share (previous year Re.1 per share). In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend.

Nature and purpose of reserves General reserve

General reserve is the retained earning of the Company which is kept aside out of the Company''s profits to meet future (known or unknown) obligations.

Capital reserve

Capital reserve is not available for distribution as dividend.

Securities premium

Securities premium is used to record the premium on issue of shares. It is utilised in accordance with the provisions of the Companies Act, 2013.

Note 20A Proposed dividend on equity shares

Proposed dividend for the year ended March 31, 2025 Of H 152.79 million at H 1 per share (March 31,2024 Nil). Proposed dividend is subject to approval at annual general meeting and is not recognised as a liability at March 31, 2025.

Nature of Security

1) Rupee Term Loans from Banks are secured by:

(a) HSBC BANK

(i) Working Capital Term Loan (WCTL) of H 400 Million and INR 435 Million having outstanding balance of H 100.00 Million and H200.00 Million respectively, by way of Guaranteed Emergency Credit Line (GECL) under ECLGS scheme of National Credit Guarantee Trustee Company Ltd. (NCGTC) are secured by way of second pari-passu charge on current assets of the Company along with other banks. Further secured by second charge on movable fixed assets of the Company situated at:

(1) Varroc Engineering Limited, Plant IV - Plot No. M-140-141, MIDC Industria Area, Waluj, Chhatrapati Sambhaji Nagar (Aurangabad) 431 136, Maharashtra

(2) Varroc Engineering Limited, Corporate Office, Plot No. L-4, MIDC Industria Area, Waluj, Chhatrapati Sambhaji Nagar (Aurangabad) 431 136, Maharashtra

(3) Varroc Engineering Limited, Pant Nagar - Plot No.20 Sector 9, Integrated Industrial Area, Pant Nagar, Dist. Udhamsingh Nagar, Uttarakhand

(ii) Term Loan of H 1,000 Million availed in November 2023 outstanding balance as on March 31, 2025. H 906.25 million

(1) Varroc Engineering Limited, Plant IV - Plot No. M-140-141, MIDC Industrial Area, Waluj, Chhatrapati Sambhaji Nagar (Aurangabad) 431 136, Maharashtra

(2) Varroc Engineering Limited, Corporate Office, Plot No. L-4, MIDC Industrial Area, Waluj, Chhatrapati Sambhaji Nagar (Aurangabad) 431 136, Maharashtra

(3) Varroc Engineering Limited, Pant Nagar - Plot No.20 Sector 9, Integrated Industrial Area, Pant Nagar, Dist. Udhamsingh Nagar, Uttarakhand

(b) ICICI BANK

(i) ICICI BANK Rupee Term Loan of of H 1250 Million having outstanding balance of H747.62 million is secured on exclusive charge basis by way of mortgage of immovable properties situated at:

(1) B-3020 & 3040, Marvel Edge, Viman Nagar, Pune, Maharashtra

(2) Plot No. 35-A, Udyog Vihar, Greater Noida, Uttar Pradesh

(3) 58th Mile Stone, Opp. Mittal Orchards, Village Binola, Dist. Gurgaon, Haryana State

(4) Plot No. 136-B, Harohalli Industrial Area, Kanakapura Taluk, Ramanagara Distt. Karnataka

(5) Plot No. 271 & 272(P), Nara Sapura Industrial Area, Nara Sapura, Dist. Kolar - 563133 Karnataka State"

(c) Induslnd Bank

(i) IndusInd Bank Ltd Rupee Term loan of H 1,000 Million (balance as on 31st March 2025 H468.75 million) is secured on exclusive first charge by way of Hypothecation of Fixed Assets of the following plants of Company situated at :

(1) Plot No. E-4, MIDC, Waluj, Aurangabad - 431136 (M.S.) : Movable Fixed Assets

(2) Plot No. B-24 & 25, MIDC, Chakan, Pune - 410501 (M.S.) : R&D Centre Movable Fixed Assets

(3) Gat No. 12/1 and Gat No. 12/2 situated at Village Shivaji Nagar , Tal. Sakri, Dist. Dhule (M.S.) : Movable Fixed Assets

(4) Plot No. 103/4, Maswad, GIDC, Expansion Estate, Halol-II, Dist. Panchmahal, Gujarat - 389 350 : Movable and Immovable Fixed Assets

(5) Gut No. 390, Takve Bk, Tal. Maval, Dist. Pune : Movable Fixed Assets

(6) Plot No. K - 103, MIDC, Waluj, Chhatrapati Sambhaji Nagar (Aurangabad) - 431136 (M.S.)

(ii) IndusInd Bank Ltd Rupee Term loan of H 1250 Million (balance as on 31st March 2025 H 125.00 million) is secured on exclusive first charge by way of Hypothecation on Movable and Immovable Fixed Assets of the following plants of Company situated at :

(1) Gut No. 390, Takve Bk, Tal. Maval, Dist. Pune - 412106 (M.S.) : Immovable Fixed Assets

(2) Plot No. E-88, MIDC, Ranjangaon, Tal. Shirur, Dist. Pune (M.S.) : Movable Fixed Assets

(3) Gut No. 99, Village Pharola, Tal. Paithan, Dist. Aurangabad - 431105 : Immovable Fixed Assets

(iii) IndusInd Bank Ltd Rupee Term loan of H 750 Million (balance as on 31st March 2025 H 300.00 million) is secured on exclusive first charge by way of Hypothecation on Immovable Fixed Assets of the following plants of Company situated at :

(1) Survey No 154/1, 154/3 And 155/2, Karsanpura, Mandal, Ahmedabad, Gujarat, 382130.

(2) Plot No. 601-A&B Sector-III, Industrial Area, Pithampur, Dist. Dhar - 454775.

(3) Survey No. 128-1B & 129-1B, Ezhichur Village, Sriperambudur taluk, Kancheepuram Dist. (Chennai) 603 204

(d) Saraswat Co. Operative Bank

(i) Saraswat Co. operative Bank Ltd. Term loan of H 750 million (balance as on March 31, 2025. H 291.67 million is secured on exclusive charge by way of mortgage of immovable properties situated at:-

(1) Plot no E-88 ,MIDC,Ranjangaon, Tal.Shirur, Dist Pune Maharashtra.

(2) Plot No M-165-167, MIDC, Waluj Aurangabad 431136 Maharashtra.

2) 8.60% Non-convertible debentures of J 100,000 each (Balance as on March 31,2025 H2,187.50 Million) are Secured by:

Exclusive charge by way of Hypothecation on the specific identified movable properties of the Company situated at:

(1) Varroc Engineering Limited, VEL III, Plot No. B-24 & 25, MIDC, Chakan, Pune - 410501, Maharashtra

(2) Varroc Engineering Limited, VEL VII (Valves), Plot No. L-4, MIDC, Waluj, Aurangabad - 431136, Maharashtra

(3) Varroc Engineering Limited, VEL VII (Forging), Plot No. L-4, MIDC, Waluj, Aurangabad -431136, Maharashtra

(4) Varroc Engineering Limited, Lighting Plant, Plot No. B-14, MIDC, Chakan, Pune - 410501, Maharashtra

(5) Varroc Engineering Limited, Lighting Plant, Plot No. 1(P), Gut No. 51 to 59, Village Bhambholi, Tal. Khed, Dist. Pune- 410501, Maharashtra

3) Borrowings pertaining to following charges have been repaid, however Company is in process of filing charge satisfaction documents as at March 31, 2025

a. Tata Capital: Immovable fixed assets located at Plot No.20 Sector 9, Integrated Industrial Area, Pant Nagar, Dist. Udhamsingh Nagar, Uttrakhand

b. ICICI Bank

(1) Immovable fixed assets located at Plot No. C-3 in the Chakan Industrial Area, Phase-II and within village limits of Bhamboli Taluka, sub-district Khed, district Pune

(2) Movable Fixed assets located at:

(i) Plot No. 271 and 272 Part, Narasapara, Industrial Area, Yandrakayipura, Kolar, Karnataka, 563133

(ii) 136 B, Harohalli Industrial Area, Phase - 2, Kanakapura Tal. Dist. Ramanagara, Bengaluru Karnataka, 562112

(iii) Survey No. 128-1B & 129-1B, Ezhichur Village, Sriperambudur taluk, Kancheepuram Dist. 603 204 (Chennai)

(iv) Plot No. 601-A&B Sector-III, Industrial Area, Pithampur, Dist. Dhar - 454775

4) Debt covenants :

Bank loans contain certain debt covenants relating to limitation on indebtedness, debt-equity ratio, net borrowings to EBITDA ratio and debt service coverage ratio. Company is in compliance with these debt covenants as at March 31, 2025.

The asset cover in respect of the Non-Convertible Debentures of the Company as on March 31,2025 is 1.57 times of the total due amount which is greater than the requirement of 1.1 times of the said Secured Non-Convertible Debentures.

Cash credit facilities have been sanctioned from Standard Chartered Bank, HDFC Bank Limited, ICICI Bank Limited, IDBI Bank Limited, Axis Bank Limited, Kotak Mahindra Bank Limited, The Hongkong and Shanghai Banking Corporation Ltd. and IDFC First Bank Ltd. and are secured by first paripassu charge by way of hypothecation of stocks of raw materials, work in progress, finished goods, consumable, stores and spares, packing materials and receivables of the Company both present and future.

The Company has borrowings from banks or financial institutions on the basis of security of current assets, and quarterly returns or statements of current assets filed by the Company during the current and previous year with banks or financial institutions are in agreement with the books of accounts except as mentioned in Note 22(a) & 22(b).

Note 1 Includes ''Provision on Inventory'' added back to the net inventory balance and ''Material in transit'' not considered as part of total stock.

Note 2 Difference primarily includes intercompany debtors, provision for customer rate increase/decrease and debtors of ageing more than 90 days, and export customer balance revaluation. Further, factoring balance has been disclosed separately in the statement which is netted off in the financial statements.

Note 3 Difference is on account of export cut off sales reversal as per Ind AS 115. Also includes some external customer which were identified as intercompany at the time of reporting to banks.

Note 4 Re-classification entry pertaining to netting off of receivables against payables.

Note 5 Mainly includes inter company creditors and provision for expenses and import vendor revaluation.

Note 6 Includes Post closure entries posted at the time of finalisation of quarterly financial statement.

Notes to the Standalone Financial Statements

for the year ended March 31, 2025

3. Trade Payables ₍H _{in MiNion)}

Sr. No.	Quarter ended	Amount as per books of accounts	Amount as per quarterly returns	Amount of difference	Reconciliation items Components not considered Post closure for the purpose adjustments of reporting (Note 2) (Note 4)		Net difference
1	June 30, 2023	3,719.99	2,964.49	755.50	755.50	-	-
2	Sept 30, 2023	3,876.94	3,330.94	546.00	546.00	-	-
3	Dec 31, 2023	3,653.07	3,077.86	575.21	575.21	-	-
4	March 31, 2024	3,821.87	3,554.73	267.14	306.80	(39.66)	-

Note 1 Includes ''Provision on Inventory'' added back to the net inventory balance.

Note 2 Includes post closure entries posted at the time of finalisation of quarterly financial statement.

Note 3 Majorly includes exchange rates revaluations & provision for customer rate increase/decrease.

Note 4 Majorly includes provision for expenses including GST payable, provision for vendor rate increase/ decrease, pending GRIR accounts, and forex restatement.

(H in Million)

Particulars	As at March 31, 2025	As at March 31, 2024 (restated)
Provision for employee benefits
Compensated absences	144.21	120.02
Provision for coupon scheme ( refer note 28 )	0.49	10.05
Total non-current provisions	144.70	130.07

Vearrocz

Note 23 Non-current provisions

i. Deferred tax assets and deferred tax liabilities have been offset as at March 31,2025 they relate to the same governing taxation laws and Company has legally enforceable right to set-off. As at March 31, 2024 deferred tax asset of H 1913.74 million pertaining to Varroc Engineering Limited and deferred tax liabilities of H 251.55 million pertaining to Varroc Polymers Limited (Wholly owned subsidiary, now merged with Varroc Engineering Limited with appointed date of April 01, 2024 ) have not been set-off against each other, as the Company did not have legally enforceable right to set-off as at March 31, 2024.

ii. During the year ended March 31, 2024, the Company derecognised (written-off) loans given to VarrocCorp Holding BV (''VCHBV''), Netherlands including interest on such loans aggregating to H 13,533.33 million (including H 1,736.89 million by Varroc Polymers Limited (''VPL''), wholly owned subsidiary, now merged with the Company as explained in Note 55(b)) after making requisite submissions to AD Bank. The Company claimed this write-off on loans as an allowable business loss, considering that these loans extended to VCHBV were in the nature of trade investments to derive benefits for the Company''s businesses rather than for earning dividend/capital appreciation. The Company obtained legal opinions from two independent senior counsels who have supported their view on claiming this write-off of loans as an allowable business loss. Accordingly, VPL considered this loss as tax deductible for computation of current tax provision to the extent of H 437.14 million and the Company recognised deferred tax asset of H 2,968.93 million on such loss during the year ended March 31, 2024. These loans pertained to funding of Varroc Lighting Systems (''VLS'') entities (erstwhile subsidiaries of VCHBV) which were fully provided for during the

period ended September 30, 2022 when the VLS business was sold to Compagnie Plastic Omnium SE, France. Further, the Company shifted to new tax regime under section 115BAA of Income Tax Act, 1961 from financial year ended March 31, 2024. As a result, MAT credit of H 265.34 million was written off and deferred tax liability to the extent of H 254.54 million was reversed on account of lower tax rate under new regime, which were included in the total tax expense for the year ended March 31, 2024.

‘Deferred government grant

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions.

Government grants relating to purchase of property, plant and equipment are included in current and non-current liabilities as deferred income and are credited to profit or loss on straight-line basis over the expected lives of the related assets and presented within other operating revenue.

Trade receivables are non-interest bearing and are generally on payment terms of 30 to 120 days.

A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.

Contract liabilities include advances received from customers for delivery of goods, engineering design and development of tools.

D Performance obligation

Revenue from contracts with customers include revenue from finished goods, tooling, engineering services and Job work. Finished goods / tooling / engineering services

For the sale of finished goods the performance obligation is generally satisfied upon its delivery or as per the terms of the customer contract and payment is generally due within 30 to 120 days from delivery.

For sale of toolings, the performance obligation is considered satisfied on billing after approval of the part(s) by the customer. The Company generally receives advance for toolings contracts ranging from 30 % to 50% of the contracted price. The revenue is recognised at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

Product development/engineering services are considered as related to sale of parts rather than a separate performance obligation. As a result, revenue from engineering services is recognised over the period of production from the date of start of production. Costs incurred in respect of providing engineering services are recognised as intangible assets and amortised over the period of production from the date of start of production. Payments received from customers in respect of product development/engineering services are presented as contract liabilities.

For supply of engineering services to group companies, performance obligation is generally satisfied on the basis of time/work completed as per the contract with the group companies and payment is generally due within 30-60 days.

Development of toolings for the customers has been identified by the Company to be a separate performance obligation. Further, the Company has determined that the performance obligation in respect of development of toolings is satisfied at a point in time. The revenue is recognised at an amount that reflects the consideration to which the Company expects to be entitled in exchange for supply of tooling

The Company provides normal warranty provisions on some of its products sold, in line with the industry practice. The Company considers that the contractual promise made to the customer in the form of warranties for the parts supplied does not meet the definition of separate performance obligation as it does not give rise to additional service.

Job work revenue is recognised when the work is completed and billed to customer.

In the previous year, the Company received eligibility certificates (ECs) in respect of three plants in Aurangabad/ Pune under the Maharashtra Electronic Policy 2016 effective from April 1, 2022 and valid for 10 years. Under these ECs, the Company is eligible to claim incentive in the form of taxes payable under SGST on finished goods eligible for incentives from the respective plants. The Company has considered these as grants related to income under Ind AS 20 by recognizing the same as income in profit and loss based on SGST collected for the period/year. The amount of income recognised in the previous year in respect of the aforesaid ECs is H 989.71 million pertaining to the period April 1, 2022 to March 31, 2024.

B Defined benefit plan (Gratuity)

The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/ termination is the employees last drawn basic salary plus dearness allowance per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity plan is a funded plan and the Company makes contributions to recognised funds in India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.

The amounts recognised in the balance sheet and the movements in the net defined benefit obligation over the year are as follows:

Notes to the Standalone Financial Statements

for the year ended March 31, 2025

Change in present value of benefit obligations

(H in Million)

(b)

Particulars	As at March 31, 2025	As at March 31, 2024 (restated)
Liability at the beginning of the year	785.84	673.91
Service cost	98.85	84.31
Interest expense	54.66	47.74
Transfer of obligation	1.08	(0.02)
Remeasurements - Actuarial (gains)/ losses (refer note (e) below)	(1.81)	19.82
Benefits paid	(54.40)	(39.92)
Liability at the end of the year	884.22	785.84
Change in fair value of plan assets (H in Million)
Particulars	As at March 31, 2025	As at March 31, 2024 (restated)
Fair value of plan assets at the beginning of the year	708.13	613.12
Interest income	51.89	46.70
Remeasurements- Return on plan assets excluding amounts recognised in interest income (refer note (e) below)	3.08	0.17
Contributions	79.57	93.21
Morality Charges and Taxes	(4.63)	(5.15)
Benefits paid	(54.40)	(39.92)
Fair value of plan assets at the end of the year	783.64	708.13
The net liability disclosed above relates to funded plan is as follows : (H in Million)
Particulars	As at March 31, 2025	As at March 31, 2024 (restated)
Present value of funded obligations	884.22	785.84
Fair value of plan assets	783.64	708.13
(Surplus)/Deficit of funded plan	100.58	77.71

(a)

(c)

(d)

Vearrocz

Expenses to be recognized in the Statement of Profit and Loss under employee benefit expenses

(H in Million)

Particulars	For the year ended March 31, 2025	For the year ended March 31, 2024 (restated)
Service cost	98.85	84.31
Net interest (income)/expense	2.77	1.04
Transfer In/(Out)	1.08	(0.03)
Net gratuity cost	102.70	85.32

Sensitivity for significant actuarial assumptions is computed by varying one actuarial assumption used for the valuation of the defined benefit obligation by 1%, keeping all other actuarial assumptions constant. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method

(present value of defined benefit obligation calculated with the Projected Unit Credit method at the end of reporting period) has been applied while calculating the defined benefit liability recognised in the balance sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

Expected contributions for the next year

The Company intends to contribute H100.60 million towards its gratuity fund during the year ending March 31, 2026. During the year ended March 31, 2025, the Company has contributed H79.18 million to its gratuity fund.

Risk Exposure and Asset Liability Matching

Provision of a defined benefit scheme poses certain risks, some of which are detailed here under as companies take on uncertain long-term obligations to make future benefit payments.

1) Liability Risks

Asset-Liability mismatch risk-

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralize valuation swings caused by interest rate movements. Hence, companies are encouraged to adopt asset-liability management.

Discount rate risk-

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

Future salary escalation and inflation risk -

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management''s discretion may lead to uncertainties in estimating this increasing risk.

2) Asset risks

All plan assets are maintained in a trust fund managed by a public sector insurer viz. LIC of India. LIC has a sovereign guarantee and has been providing consistent and competitive returns over the years.

The Company has opted for a traditional fund wherein all assets are invested primarily in risk averse markets. The Company has no control over the management of funds but this option provides a high level of safety for the total corpus. A single account is maintained for both the investment and claim settlement and hence 100% liquidity is ensured. Also, interest rate and inflation risk are taken care of.

(ii) Valuation technique used to determine fair value

The following methods and assumptions were used to estimate the fair value of the financial instruments included in the above tables:

- The Company enters into derivative financial instruments with financial institutions with investment grade credit ratings. Foreign exchange forward contracts, interest rate swaps are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing model, using present value calculations. The models incorporate various inputs including the credit quality counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spread between the respective currencies, interest rate curves etc. The changes in counterparty credit risk had no material effect on financial instruments recognised at fair value through profit and loss.

Commentary

The carrying amounts of trade receivables, loans, other financial assets, cash and bank balances, trade payables/ acceptances and other financial liabilities are considered to be the same as their fair values due to their shortterm nature. The fair values of non-current financial assets and non-current financial liabilities also approximate their carrying values.

The borrowings which are at floating rate of interest, fair values as at March 31,2025 approximate their carrying values.

For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

Investment in equity instruments fair valued at Level 3 pertains to investment in equity shares of various special purpose vehicle (SPV) entities under solar power generation agreements with AMP Energy . These investments have been made in current and previous financial years and are expected to generate benefits in the form of savings in energy costs over the contracted period.

As at March 31, 2025, project for AMP Energy C&I Twenty Pvt Ltd and AMP Energy C&I Twenty one Pvt Ltd are operational. The underlying project of other SPVs is under construction. Management has assessed that based on the present value of estimated future cash flows from the said project, the carrying value approximates its fair value.

Note 44 - Financial risk management

The Company''s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables, and lease liabilities and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company''s operations and to provide guarantees to support its operations.The Company''s principal financial assets include Investment, loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also enters into derivative transactions.

The Company is exposed to market risk, credit risk and liquidity risk. The Company''s senior management oversees the management of these risks. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company''s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below:

A Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk such as equity price risk and commodity price risk. Financial instruments affected by market risk include loans and borrowings, receivables, payables, deposits, investments and derivative financial instruments.

(a) Foreign currency risk

The Company operates internationally and the business is transacted in several currencies. Consequently, the Company is exposed to foreign exchange risk through its sale and purchase of goods and services, mainly in the North America and Europe .The exchange rate between the rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Company''s operations are affected positively/adversely as the rupee appreciates /depreciates against these currencies. The Company evaluates exchange rate exposure arising from these transactions and enters into foreign exchange forward contracts,to mitigate the risk of changes in exchange rates on foreign currency exposures. The Company follows established risk management policies, to hedge forecasted cash flows denominated in foreign currency. The Company has designated certain derivative instruments as cash flow hedges to mitigate the foreign exchange exposure.

Sensitivity Analysis

For the year ended March 31, 2025 and March 31, 2024, every 5% percentage point appreciation/ depreciation in the exchange rate between the Indian rupee and U.S. Dollar, would have affected the Company''s incremental operating margins by approximately H4.31 million and H 16.05 million respectively. And for Euro, every 5% percentage point appreciation/depreciation in the exchange rate would have affected the Company''s incremental operating margin by approximately H 50.77 million, previous year H 60.36 million. The sensitivity for net exposure in JPY and in other currencies does not have material impact to Statement of Profit and Loss.

Sensitivity analysis is computed based on the changes in the receivables and payables in foreign currency upon conversion into functional currency, due to exchange rate fluctuations between the previous reporting period and the current reporting period.

(b) Interest rate risk

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

(c) Other price risk

The Company does not have material investments in equity securities other than investments in its subsidiaries. Hence, equity price risk is considered to be low. Further, the Company''s operating activities require the ongoing purchase of various commodities for manufacture of automotive parts. However, the movement is commodity prices are substantially adjusted through price differences as per customer contracts and hence commodity price risk for the Company is also considered to be low.

B Credit risk management

Credit risk arises when a customer or counterparty does not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its investing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. The Company only deals with parties which have good credit rating/worthiness given by external rating agencies or based on the Company''s internal assessment.

Trade receivables

Customer credit risk is managed by the Company''s established policy, procedures and control relating to customer credit risk management. Further, Company''s customers includes marquee OEMs and Tier I companies, having long standing relationship with the Company. Outstanding customer receivables are regularly monitored and reconciled. At March 31, 2025, receivable from Company''s top 5 customers accounted for approximately 43.48 % (March 31, 2024: 57.92%) of all the receivables outstanding. An impairment analysis is performed at each reporting date on an individual basis based on historical data. The maximum exposure to credit risk at the reporting date is the carrying value of trade receivables disclosed in Note 13. The Company does not hold collateral as security.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Company''s corporate treasury department in accordance with the Company''s policy. Investments of surplus funds are made only with approved counterparties. Credit limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty''s potential failure to make payments.

The Company''s maximum exposure to credit risk for the components of the balance sheet at March 31, 2025 and March 31,2024 is the carrying amounts as disclosed in note 14 and 15 except for financial guarantees. The Company''s maximum exposure relating to financial guarantees is disclosed in note 51 (B).

C Liquidity risk

Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at a reasonable price. The Company''s corporate treasury department is responsible for liquidity and funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management. Management monitors the Company''s net liquidity position through rolling forecasts on the basis of expected cash flows. As at March 31, 2025, cash and cash equivalents are held with major banks.

Maturities of financial liabilities

The table below summarises the maturity profile of the Company''s financial liabilities based on contractual payments.

Note 45 - Capital management

(a) Risk management

The Company''s capital comprises equity share capital, securities premium, retained earnings and other equity attributable to shareholders.

The Company''s objectives when managing capital are to :

- Safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and for other stakeholders, and

- Maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares .

Loan covenants

The Company''s capital management aims to ensure that it meets financial covenants attached to the interestbearing loans and borrowings that define capital structure requirements. Refer note 21 for details.

(b) Dividends not recognised at the end of the reporting period

Directors have recommended the payment of a final dividend of H 152.79 million at H 1 per equity share (March 31, 2024 H Nil ). This proposed dividend is subject to the approval of shareholders in the ensuing annual general meeting.

Note 51 - Contingent liabilities (A) Contingent liabilities not provided for : (H in Million)
Particulars	As at March 31, 2025	As at March 31, 2024 (restated)
a) Claim against the group not acknowledged as debt (Refer (i))
Disputed excise, service tax and goods and service tax matters	1,561.56	1,334.90
Income tax matters	383.75	227.48
b) Employee related disputes	34.58	34.12
c) Export Promotion Capital Goods (EPCG) (Export obligation against the above H 859.15 million, previous year H 862.83 Million)	143.19	144.28
d) Provident fund liability	See note (ii)	See note (ii)

(i) The Company is contesting Excise, Service Tax and Goods and Service Tax & Income tax related demand/notices and the management, including its tax advisors, believe that it''s position will likely be upheld in the appellate process. No expense has been accrued in the financial statements for the tax demands/notices raised. The management believes that the ultimate outcome of the proceedings will not have a material adverse effect on the Company''s financial position and results of the operations. The Company has deposited H 49.47 million (previous year H 48.45 million) with the tax authorities against the above matters to comply with the order of the tax authorities.

(ii) There are numerous interpretative issues relating to the Supreme Court (SC) judgement on Provident Fund dated February 28, 2019. As a matter of caution, the company has made a provision on a prospective basis from the date of the SC order. The company will update its provision, on receiving further clarity on the subject.

B) Contingent liabilities disclosed above include the following litigations:

(i) On November 5, 2024, the Company received a GST Order from Additional Commissioner of CGST & Central Excise for appropriation of GST dues amounting to H 629 million along with equivalent penalty and applicable interest relating to inappropriate classification of certain goods supplied during the period from July 1, 2017 to September 30, 2023. The Company has paid the principal demand, however, considering merits of the case, management believes that it has grounds to successfully defend and litigate the GST Order with respect to applicable interest and penalty for the aforementioned period. The Company has initiated appellate proceedings against this GST Order, pending conclusion of which no adjustments have been made in respect of this matter in the financial statements for the year ended March 31, 2025.

(ii) On January 03, 2025, Varroc Polymers Limited (''VPL'') (wholly owned subsidiary, now merged with the Company as explained in Note 55(b)) received a GST Order from Commercial Tax Officer (Divisional GST office, Karnataka) consisting of demand for GST dues amounting to H 0.03 million along with interest of H 302.67 million and penalty of H 564.19 million relating to inappropriate classification of certain goods supplied during the period from July 1, 2017 to September 30, 2023. VPL has paid the principal demand, however, considering merits of the case, management believes that it has grounds to successfully defend and litigate the GST Order with respect to the interest and penalty for the aforementioned period. The Company has initiated appellate proceedings against this GST Order, pending conclusion of which no adjustments have been made in respect of this matter in the financial statements for the year ended March 31, 2025.

The loans taken by the subsidiaries against the above guarantees/standby letter of credit have been utilised by them for setting up of manufacturing facilities, working capital requirements and/or repayment of external loans.

(D) Code on Social Security, 2020

The Code on Social Security, 2020 (''Code'') relating to employee benefits during employment and post-employment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified and the final rules/interpretation have not yet been issued. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective.

Note 52- Loss on equity investments and loans given to VLS

Varroc Engineering Limited (''the Company'') and VarrocCorp Holding BV, Netherlands (''VCHBV'', wholly owned subsidiary of VEL) (together referred to as ''Sellers'') entered into a Securities Purchase Agreement dated April 29, 2022 as amended dated July 01,2022, October 05, 2022 and May 12, 2023 (collectively referred to as ''SPA'') with Compagnie Plastic Omnium SE, France (referred to as ''Buyer''), to divest the Sellers 4-Wheeler lighting business in the Americas and Europe (''VLS Business''). In the previous year, both the Buyer and the Sellers have entered into Settlement Agreement on July 14, 2023 whereby both the parties agreed to settle the disagreements on closing adjustments and the final equity value agreed under the Settlement Agreement was Eur 54.5 million. Accordingly VCHBV has received the remaining consideration amount of Eur 13 million on July 17, 2023 pursuant to this final settlement with Buyer. Exceptional item of H45 million for the year ended March 31, 2024 pertains to expenses directly related to sale of investment in VLS business.

Formulae for calculation of ratios are as follows:

(i) Current ratio = [Current Assets / Current Liabilities]

(ii) Debt-Equity Ratio = [Total Debt / Total Equity]

(iii) Debt service coverage ratio = [(Earning before Interest Tax & Depreciation & amortization and exceptional items)/ (Interest Expense Principal repayments of long term loan made during the period, including pre-payments)]

(iv) Return on Equity ratio = [(Net Profits after taxes - Preference Dividend)/(Average Shareholder''s Equity)]

(v) Inventory Turnover ratio= [(cost of goods sold)/(Average Inventory)]

(vi) Trade Receivable Turnover Ratio = [(Revenue from Operation)/(Average Trade receivable)]

(vii) Trade Payable Turnover Ratio = [(Purchases)/(Average Trade payable)]

(viii) Net Capital Turnover Ratio = [(Net Annual Sales)/( Average Working Capital)]

(ix) Net Profit ratio = [ (Net Profit after taxes)/ (Revenue from Operation)]

(x) Return on Capital Employed = [(Earning Before Interest and taxes (EBIT))/(Capital employed)]

(xi) Return on Investment = [(Income generated from invested funds in bank FDs and mutual funds)/ (Average invested funds in bank FDs and mutual funds)]

(xii) Capital Employed = Tangible Net worth Total Debt Deferred Tax Liability

(xiii) Working capital = (Current assets - Current liabilities )

Commentary

A) Decrease in the ratio due to reduced balance of borrowing at the end of the current year as compared to previous year

B) Increase in the ratio due to lower repayment of long term borrowings during the current year

C) Decrease in the ratio due to lower net profit during the current year

D) Decrease in the ratio due to lower net profit during the current year as well as increase in shareholder''s equity due to accumulated profits

E) Decrease in the ratio due to decrease in average investment in fixed deposit and liquid/ overnight Mutual funds during the current year

F) Increase in the ratio due to increase in average working capital during the current year

The Company has complied with the relevant provisions of the Foreign Exchange Management Act, 1999 (42 of 1999) and the Companies Act for the above transactions and the transactions are not violative of the Prevention of MoneyLaundering Act, 2002 (15 of 2003)

The Company has not advanced or loaned or invested funds, apart from those disclosed above, 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

The Company has complied with the relevant provisions of the Foreign Exchange Management Act, 1999 (42 of 1999) and the Companies Act for the above transactions and the transactions are not violative of the Prevention of MoneyLaundering Act, 2002 (15 of 2003)

The Company has not advanced or loaned or invested funds, apart from those disclosed above, 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,

Note 55 (a) - Audit Trail

The Company uses SAP ECC R6 as the accounting software. SAP ensures an audit trail, providing standard functionality and logging in all changed data in the system. This functionality and audit trail feature in SAP has been operational throughout the year for all relevant transactions recorded through the application in the Company. Further, there were no instances of the audit trail feature being tampered with in respect of the accounting software during the year.

---

Mar 31, 2024

(ii) Leasing arrangements

Certain investment properties located at M139-140 MIDC Waluj Aurangabad are sub-leased to tenants under longterm cancellable operating leases with rentals payable monthly. There is escalation of 5% in lease rentals during the lease terms.

(iii) Fair value

Fair value of the investment property as on March 31,2024 is H 139.47 million (March 31,2023 H 138.70 million). Estimation of fair value

These valuations are based on valuations performed by Mr N G Karkhane Consulting Civil Engineers and Structural Designers, an accredited independent valuer. Valuer is a specialist in valuing these types of investment properties and is a registered valuer as defined under rule 2 of Companies (Registered Valuers and Valuation) Rules, 2017. Fair value of investment property is based on the replacement cost method. The best evidence of fair value is current prices in an active market for similar properties.

Note 6 - Right of use assets

TheCompany has lease contractfor plant and machinerywith lease term of 2 -10 years, premises/building used for its operations with lease terms of 2-10 years, and for lease hold land with lease term of 95-99 years The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. The Company is restricted from assigning and subleasing the leased assets. The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (mainly Laptops) (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option)

The Company had total cash outflows for leases of H 353.51 million for the year ended March 31,2024 (previous year : H 203 million). The company does not have non-cash additions to right-of-use assets and lease liabilities for the year ended March 31,2024

(iii) Extension and termination options

As at March 31,2024, the Company has no potential future rental payments relating to periods following the exercise date of extension and termination options that are not included in the lease term

Credit risk

There are no trade receivables which have significant increase in credit risk as at March 31,2024 and March 31,2023 other than disclosed above

Credit period

Trade receivables are non-interest bearing and are generally on payment terms of 30 to 120 days.

No trade or other receivable are due from directors or other officers of the Company either severally or jointly with any other person. Nor any trade or other receivable are due from firms or private companies respectively in which any director is a partner, a director or a member, except as disclosed in note 47

(b) Rights, preferences and restrictions attached to equity shares

The Company has equity shares having a par value of Re. 1 per share (previous year Re.1 per share). In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend.

Nature and purpose of reserves General reserve

General reserve is the retained earning of the Company which is kept aside out of the Company''s profits to meet future (known or unknown) obligations

Capital reserve

Capital reserve is not available for distribution as dividend.

Securities premium

Securities premium is used to record the premium on issue of shares. It is utilised in accordance with the provisions of the Companies Act, 2013.

Nature of Security

1) Rupee Term Loans from Banks are secured by:

(a) Kotak Mahindra Bank Limited, Rupee Term Loan 2 outstanding Balance of H 175 million secured by exclusive first charge by way of hypothecation on movable fixed assets of the following plants :

(1) Varroc Engineering Limited, Plant VIII, Plot No. M-191/3, MIDC Industrial Area, Waluj, Aurangabad -431136, Maharashtra

(2) Varroc Engineering Limited, Exhaust Plant, Plot No. B-14, MIDC Industrial Area, Chakan, Tal. Khed, Dist. Pune - 410501, Maharashtra

(b) HSBC BANK

(i) Working Capital Term Loan (WCTL) of H 400 Million and INR 435 Million having outstanding balance of H 200.00 Million and H 398.75 Million respectively, by way of Guaranteed Emergency Credit Line (GECL) under ECLGS scheme of National Credit Guarantee Trustee Company Ltd. (NCGTC) are secured by way of second pari-passu charge on current assets of the Company along with other banks. Further secured by second charge on movable fixed assets of the Company situated at:

(1) Varroc Engineering Limited, Plant IV - Plot No. M-140-141, MIDC Industrial Area, Waluj, Aurangabad 431 136, Maharashtra

(2) Varroc Engineering Limited, Corporate Office, Plot No. L-4, MIDC Industrial Area, Waluj, Aurangabad 431 136, Maharashtra

(3) Varroc Engineering Limited, Pant Nagar - Plot No.20 Sector 9, Integrated Industrial Area, Pant Nagar, Dist. Udhamsingh Nagar, Uttarakhand

(4) Varroc Engineering Limited, Plant V - Plot No. L-6/2, MIDC Industrial Area, Waluj Aurangabad - 431136

(5) Varroc Engineering Limited, Plant V - R&D, Plot No. L-6/2, MIDC Industrial Area, Waluj Aurangabad - 431136

(ii) Term Loan of H 1,000 Million availed in November 2023 has security creation in process.

(c) (i) ICICI BANK Rupee Term loan of H 1,000 Million having outstanding balance of H600.00 million is secured by

way of mortgage of immovable properties situated at:

(1) Gut No. 390, Takve Bk, Tal. Maval, Dist. Pune, Maharashtra

(2) Plot No. B-14, MIDC, Chakan, Tal. Khed, Dist. Pune, Maharashtra

(3) Plot Nos. K-101-102, M-140-141 and M-191/3, MIDC Industrial Area, Waluj, Aurangabad, Maharashtra

(4) B-3010, 3^rd Floor, Marvel Edge, Village Vadagaonsheri Taluka Haveli Dist. Pune, Maharashtra

(5) A-7010 & 7020, B-7010, 7020, 7030 & 7040 at 7^th Floor, Marvel Edge, Village Vadagaonsheri Taluka Haveli Dist. Pune, Maharashtra

(ii) ICICI BANK Rupee Term Loan of of H 1250 Million having outstanding balance of H 1,111.11 million is secured on exclusive charge basis by way of mortgage of immovable properties of subsidiary company Varroc Polymers Ltd. situated at:

(1) B-3020 & 3040, Marvel Edge, Viman Nagar, Pune, Maharashtra

(2) Plot No. 35-A, Udyog Vihar, Greater Noida, Uttar Pradesh

(3) 58^th Mile Stone, Opp. Mittal Orchards, Village Binola, Dist. Gurgaon, Haryana State

(4) Plot No. 136-B, Harohalli Industrial Area, Kanakapura Taluk, Ramanagara Distt. Karnataka

(5) Plot No. 271 & 272(P), Nara Sapura Industrial Area, Nara Sapura, Dist. Kolar - 563133 Karnataka State

(d) IndusInd Bank Ltd Rupee Term loan of H 1,000 Million (partially availed of H 500.00 million) is secured on exclusive first charge by way of Hypothecation on Movable Fixed Assets of the following plants of Company situated at :

(1) Plot No. E-4, MIDC, Waluj, Aurangabad - 431136 (M.S.)

(2) Plot No. B-24 & 25, MIDC, Chakan, Pune - 410501 (M.S.)

(3) Gat No. 12/1 and Gat No. 12/2 situated at Village Shivaji Nagar , Tal. Sakri, Dist. Dhule (M.S

(4) Plot No. 103/4, Maswad, GIDC, Expansion Estate, Halol-II, Dist. Panchmahal, Gujarat - 389 350

(5) Gut No. 390, Takve Bk, Tal. Maval, Dist. Pune

2) Rupee Term Loans from Financial Institution are secured by:

(a) Rupee Term loan of H 1,000 Million availed from Bajaj Finance Limited having outstanding balance of H536.39 million as on March 31, 2024 is secured by way of mortgage on specific immovable properties on exclusive charge basis located at Plot Nos. E-4, L-6/2 and L-4, MIDC, Waluj, Aurangabad - 431136, Maharashtra State

(b) Rupee Term loan of H 650 Million having outstanding balance as on March 31, 2024 H84.09 million availed from Bajaj Finance Limited is secured by way of mortgage on specific immovable properties on exclusive charge basis located at Plot No. B-24/25, MIDC, Chakan, Pune - 410501, Maharashtra State and extension of charge on specific immovable properties located at E-4, L-6/2 and L-4, MIDC, Waluj, Aurangabad - 431136, Maharashtra State.

(c) Rupee Term loan of H 600 Million availed from Tata Capital and Financial Services Limited having outstanding balance as on March 31,2024 H 400.00 million is secured by way of mortgage on immovable properties on exclusive charge basis located at Plot No. 20, Sector 9, SIDCUL Industrial area, Pant Nagar, Rudrapur, Uttarakhand 263153

3) 8.60% Non-convertible debentures of J100,000 each are Secured by:

Exclusive charge by way of Hypothecation on the specific identified movable properties of the Company situated at

(1) Varroc Engineering Limited, VEL III, Plot No. B-24 & 25, MIDC, Chakan, Pune - 410501, Maharashtra

(2) Varroc Engineering Limited, VEL VII (Valves), Plot No. L-4, MIDC, Waluj, Aurangabad - 431136, Maharashtra

(3) Varroc Engineering Limited, VEL VII (Forging), Plot No. L-4, MIDC, Waluj, Aurangabad - 431136, Maharashtra

(4) Varroc Engineering Limited, Lighting Plant, Plot No. B-14, MIDC, Chakan, Pune - 410501, Maharashtra

(5) Varroc Engineering Limited, Lighting Plant, Plot No. 1(P), Gut No. 51 to 59, Village Bhambholi, Tal. Khed, Dist. Pune- 410501, Maharashtra

4) 8.25 % Non convertible debentures of J1,000,000 each were Secured by:

Exclusive charge by way of Hypothecation on the specific identified movable properties of the Company situated at:

(1) Varroc Engineering Limited, VEL III, Plot No. B-24 & 25, MIDC, Chakan, Pune - 410501, Maharashtra

(2) Varroc Engineering Limited, VEL III (R&D), Plot No. B-24 & 25, MIDC, Chakan, Pune - 410501, Maharashtra

(3) Varroc Engineering Limited, VEL VII (Valves), Plot No. L-4, MIDC, Waluj, Aurangabad - 431136, Maharashtra

(4) Varroc Engineering Limited, VEL VII (Forging), Plot No. L-4, MIDC, Waluj, Aurangabad - 431136, Maharashtra

(5) Varroc Engineering Limited, VEL Chennai, Survey No. 128-1B & 129/1B, Ezhichur Village, Taluka Sriperumbudur, Dist. Kancheepuram, Chennai - 603204, Tamil Nadu

(6) Varroc Engineering Limited, VEL Windmill Satara, 2.10 MW Wind Mills installed at village Vankusawade & Kusawade, Dist. Satara, Maharashtra

(7) Varroc Engineering Limited, VEL Windmill Supa, 4 MW Wind Mills installed at Village Shahajapur, Pimpalgaon & Jamner (Supa), Dist. Ahmednagar, Maharashtra

(8) Varroc Engineering Limited, VEL Windmill Jaisalmer, 2.25 MW Wind Mills installed at Village Badabaugh, Baramsar, Dist. Jaisalmer, Rajasthan

(9) Varroc Engineering Limited, VEL Chakan Lighting Plant, Plot No. B-14, MIDC, Chakan, Pune - 410501, Maharashtra

(10) Varroc Engineering Limited, VEL I, Plot No. E-4, MIDC, Waluj, Aurangabad - 431136, Maharashtra

(11) Varroc Engineering Limited, VEL II, Plot No. K-101-102, MIDC, Waluj, Aurangabad - 431136, Maharashtra

(12) Varroc Engineering Limited, VEL Halol, Plot No. 103/4, Maswad, GIDC Expansion Estate, Halol-II, Dist. Panchmahal - 389 350, Gujarat

5) Debt covenants :

Bank loans contain certain debt covenants relating to limitation on indebtedness, debt-equity ratio, net borrowings to EBITDA ratio and debt service coverage ratio. Some of the debt covenants in respect of non-current borrowings of H 175.00 million were not complied as at March 31,2024, which are due for repayment with in the next 12 months and are already classified as current.

The asset cover in respect of the Non-Convertible Debentures of the Company as on March 31,2024 is 1.38 times of the total due amount which is greater than the requirement of 1.1 times of the said Secured Non-Convertible Debentures.

Cash credit facilities have been sanctioned from Standard Chartered Bank, HDFC Bank Limited, ICICI Bank Limited, IDBI Bank Limited, Axis Bank Limited, Kotak Mahindra Bank Limited, The Hongkong and Shanghai Banking Corporation Ltd. and IDFC First Bank Ltd. and are secured by first paripassu charge by way of hypothecation of stocks of raw materials, work in progress, finished goods, consumable, stores and spares, packing materials and receivables of the Company both present and future. However, there is no outstanding cash credit balance as at March 31,2024 and March 31,2023

The Company has borrowings from banks or financial institutions on the basis of security of current assets, and quarterly returns or statements of current assets filed by the Company during the current and previous year with banks or financial institutions are in agreement with the books of accounts except as mentioned in Note 22(a) & 22(b).

* In the previous year The Company had obtained unsecured Buyer’s credit of Euro 3,033,187.65 on 13.07.2021 from IDFC First Bank Ltd. for a period of 1 year against capex import LC payment. The Buyer’s credit was due and was paid on 03.07.2023 and carried the interest rate of Euribor 33 BPS, i.e. 0.33% pa.

Note 1 Includes ‘Provision on Inventory'' added back to the net inventory balance and ‘Material in transit'' not considered as part of total stock.

Note 2 Difference primarily includes intercompany debtors, provision for customer rate increase/decrease and debtors of ageing more than 90 days, and export customer balance revaluation. Further, factoring balance has been disclosed separately in the statement which is netted off in the financial statements.

Note 3 Difference is on account of export cut off sales reversal as per Ind AS 115. Also includes some external customer which were identified as intercompany at the time of reporting to banks.

Note 4 Re-classification entry pertaining to netting off of receivables against payables.

Note 5 Mainly includes inter company creditors and provision for expenses and import vendor revaluation.

Note 6 Includes Post closure entries posted at the time of finalisation of quarterly financial statement.

Note 1 I ncludes ‘Provision on Inventory'' added back to the net inventory balance and ‘Material in transit'' not considered as part of total stock.

Note 2 Includes Post closure entries posted at the time of finalisation of quarterly financial statement.

Note 3 Primarily includes intercompany debtors, provision for customer rate increase/decrease and debtors of ageing more than 90 days. Further, factoring balance has been disclosed separately in the statement which is netted off in the financial statements.

Note 4 The net difference is on account of incorrect adjustments.

Note 5 Mainly includes inter company creditors and provision for expenses.

Note 6 Trade payable shown in stock statement is net of vendor advances outstanding as of that date.

Note 7 The balance difference is on account of incorrect adjustments which majorly pertains to:

i) The creditor balance outstanding for more than 90 days has not been considered for the plants in lighting division for the purpose of reporting in stock statement.

ii) For reporting in quarterly statement to banks, incorrect capital creditors amounts were considered for exclusion from total creditors balance.

i. Deferred tax assets and deferred tax liabilities have been offset as they relate to the same governing taxation laws.

ii. During the year, the Company has derecognised (written-off) loans given to VarrocCorp Holding BV (''VCHBV''), Netherlands including interest on such loans aggregating to H 11,796.44 million after making requisite submissions to AD Bank. The Company has claimed this write-off on loans as an allowable business loss, considering that these loans extended to VCHBV were in the nature of trade investments to derive benefits for the Company''s businesses rather than for earning dividend/capital appreciation. The Company has obtained legal opinions from two independent senior counsels who have supported their view on claiming this write-off of loans as an allowable business loss. Accordingly,

the Company has considered this loss as tax deductible for computation of tax provision and recognised deferred tax asset of H 2,448.03 million (after adjusting other taxable income pertaining to current financial year). These loans pertained to funding of Varroc Lighting Systems (''VLS'') entities (erstwhile subsidiaries of VCHBV) which were fully provided for during the period ended September 30, 2022 when the VLS business was sold to Compagnie Plastic Omnium SE, France.

Further, the Company has decided to shift to new tax regime under section 115BAA of Income Tax Act, 1961 from current financial year ended March 31,2024. As a result, MAT credit of H 265.34 million (opening MAT credit: H110.39 million and additional MAT credit as per return of income filed for AY 2023-24 of H154.95 million) has been written off and deferred tax liability to the extent of H 254.54 million has been reversed on account of lower tax rate under new regime, which has been included in the Income tax expense for the year ended March 31,2024.

** Provision for warranties - The Company provides warranties on applicable products, for their satisfactory performance during the warranty period as per the contracts with buyers. Provision for warranty claims arising out of such obligation is made based on such warranty period. The impact of discounting of these provisions is not material.

*** Provision for coupon scheme - Provision is made for supplies to other than OEMs on estimated cost of coupons redemption. These coupons are expected to be redeemed with in 2-3 years. Management estimates the provision based on historical claims information and any recent trends. The impact on discounting of the provision is not material.

"Deferred government grant

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions.

Government grants relating to purchase of property, plant and equipment are included in current and non-current liabilities as deferred income and are credited to profit or loss on straight-line basis over the expected lives of the related assets and presented within other operating revenue.

Trade receivables are non-interest bearing and are generally on payment terms of 30 to 120 days.

A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.

Contract liabilities include advances received from customers for delivery of goods, engineering design and development of tools

D Performance obligation

Revenue from contracts with customers include revenue from finished goods, tooling, engineering services and Job work.

Finished goods / tooling / engineering services

For the sale of finished goods the performance obligation is generally satisfied upon its delivery or as per the terms of the customer contract and payment is generally due within 30 to 120 days from delivery.

For sale of toolings, the performance obligation is considered satisfied on billing after approval of the part(s) by the customer. The Company generally receives advance for toolings contracts ranging from 30 % to 50% of the contracted price. The revenue is recognised at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

Product development/engineering services are considered as related to sale of parts rather than a separate performance obligation. As a result, revenue from engineering services is recognised over the period of production from the date of start of production. Costs incurred in respect of providing engineering services are recognised as intangible assets and amortised over the period of production from the date of start of production. Payments received from customers in respect of product development/engineering services are presented as contract liabilities.

For supply of engineering services to group companies, performance obligation is generally satisfied on the basis of time/work completed as per the contract with the group companies and payment is generally due within 30-60 days.

The Company provides normal warranty provisions on some of its products sold, in line with the industry practice. The Company considers that the contractual promise made to the customer in the form of warranties for the parts supplied does not meet the definition of separate performance obligation as it does not give rise to additional service.

Job work revenue is recognised when the work is completed and billed to customer.

In the current year, the Company received eligibility certificates (ECs) in respect of three plants in Aurangabad/ Pune under the Maharashtra Electronic Policy 2016 effective from April 1, 2022 and valid for 10 years. Under these ECs, the Company is eligible to claim incentive in the form of taxes payable under SGST on finished goods eligible for incentives from the respective plants. The Company has considered these as grants related to income under Ind AS 20 by recognizing the same as income in profit and loss based on SGST collected for the period/year. The amount of income recognised in the current year in respect of the aforesaid ECs is H 989.71 million pertaining to the period April 1,2022 to March 31,2024.

Further, during the year, management has also changed the presentation of income from government grants in the statement of profit and loss and has re-classified it from other income to other operating income included within ‘Revenue from Operations''. Accordingly, income of H 1,249.54 million has been presented under other operating income. Further other income of comparative periods for year ended March 31, 2023 have also been reclassified by H223.06 million, Further cashflows have also been reclassified from investing activity to operating activity in the cashflow statement.

The revenue expenditure as above comprise of employee benefit costs relating to personnel engaged in R&D activities, consumption of raw materials, stores and spares, power and fuel and other expenses and depreciation directly related to R&D. These expenses have been booked under the respective heads in the statement of profit and loss. Capital expenditure comprises of expenditure on Plant & machinery, factory equipments and software pertaining to R&D.

B Defined benefit plan (Gratuity)

The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/ termination is the employees last drawn basic salary plus dearness allowance per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity plan is a funded plan and the Company makes contributions to recognised funds in India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.

The amounts recognised in the balance sheet and the movements in the net defined benefit obligation over the year are as follows:

Sensitivity for significant actuarial assumptions is computed by varying one actuarial assumption used for the valuation of the defined benefit obligation by 1%, keeping all other actuarial assumptions constant. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of defined benefit obligation calculated with the Projected Unit Credit method at the end of reporting period) has been applied while calculating the defined benefit liability recognised in the balance sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

Expected contributions for the next year

The Company intends to contribute H 40 million towards its gratuity fund during the year ending March 31,2025. During the year ended March 31,2024, the Company has contributed H 67.77 million to its gratuity fund.

RISK EXPOSURE AND ASSET LIABILITY MATCHING

Provision of a defined benefit scheme poses certain risks, some of which are detailed here under as companies take on uncertain long-term obligations to make future benefit payments.

1) Liability Risks Asset-Liability mismatch risk-

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralize valuation swings caused by interest rate movements. Hence, companies are encouraged to adopt asset-liability management.

Discount rate risk-

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities

Future salary escalation and inflation risk -

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management''s discretion may lead to uncertainties in estimating this increasing risk.

2) Asset risk

All plan assets are maintained in a trust fund managed by a public sector insurer viz. LIC of India. LIC has a sovereign guarantee and has been providing consistent and competitive returns over the years.

The Company has opted for a traditional fund wherein all assets are invested primarily in risk averse markets. The Company has no control over the management of funds but this option provides a high level of safety for the total corpus. A single account is maintained for both the investment and claim settlement and hence 100% liquidity is ensured. Also, interest rate and inflation risk are taken care of.

---

Mar 31, 2023

Note 5A - Right of use assets

The Company has lease contract for premises/building used for its operations with lease terms of 2-10 years, and for lease hold land with lease term of 95-99 years The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. The Company is restricted from assigning and subleasing the leased assets. The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (mainly Laptops) (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option).

Credit period

Trade receivables are non-interest bearing and are generally on payment terms of 30 to 120 days.

No trade or other receivable are due from directors or other officers of the Company either severally or jointly with any other person. Nor any trade or other receivable are due from firms or private companies respectively in which any director is a partner, a director or a member, except as disclosed in note 47

During the previous year, the Company along with VCHBV entered into a Securities Purchase Agreement (‘SPA'') dated April 28, 2022 as amended dated July 01, 2022, October 05, 2022 and May 12, 2023 with Compagnie Plastic Omnium SE, France to divest the Sellers 4-Wheeler lighting business in the Americas and Europe ("VLS Business"). The deal also includes transfer of India R&D centre for four-wheeler lighting busines which has assets of 36.37 Million as on March 31,2022.

On October 6, 2022 out of H 36.37 millions asset sold to VL Lighting Solution Pvt.Ltd. step down subsidiary Compagnie Plastic Omnium SE, France of H 6.51 million and balance assets of H 29.86 millions which were not transferred as a part of sale transaction have been reclassified to Property Plant & Equipments.

(b) Rights, preferences and restrictions attached to equity shares

Equity shares: The Company has equity shares having a par value of Re. 1 per share (previous year Re.1 per share). In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend.

Nature and purpose of reserves General reserve

General reserve is the retained earning of the Company which is kept aside out of the Company''s profits to meet future (known or unknown) obligations.

Capital reserve

Capital reserve is not available for distribution as dividend.

Securities premium

Securities premium is used to record the premium on issue of shares. It is utilised in accordance with the provisions of the Companies Act, 2013.

1) Rupee Term Loans from Banks are secured by:

(a) Kotak Mahindra Bank Limited, Rupee Term Loan 2 outstanding Balance of H 350 million Secured by Exclusive First Charge By Way Of Hypothecation On Movable Fixed Assets of the Following Plants of Company:

(1) Varroc Engineering Limited, Plant VIII PLOT NO M-191/3, MIDC INDUSTRIAL AREA, WALUJ, AURANGABAD 431136, Maharashtra

(2) Varroc Engineering Limited, Exhaust Plant - PLOT NO. B-14, MIDC INDUSTRIAL AREA, CHAKAN, TAL. KHED, DIST. PUNE 410501 Maharashtra

(b) HSBC BANK Term Loan 1 outstanding balance of H 187.50 million secured by Exclusive Charge by way of Hypothecation on identified movable Fixed Assets of the Following Plants :

(1) Varroc Engineering Limited, Plant IV PLOT NO M 140,141, MIDC,WALUJ,AURANGABAD 431136, Maharashtra.

(2) Varroc Engineering Limited, Corporate Office , L 4, MIDC INDUSTRIAL AREA, WALUJ, DISTRICT AURANGABAD 431136 Maharashtra.

(3) Varroc Engineering Limited, Pantnagar, Plot No 20 SECTOR 9, INTEGRATED INDUSTRIAL AREA, PANTNAGAR, DISTRICT UDHAMSINGH NAGAR,UTTRAKHAND

(c ) HSBC BANK Term Loan 2 outstanding balance of H 375 million secured by Exclusive Charge by way of Hypothecation on identified movable Fixed Assets of the Following Plants :

(1) Varroc Engineering Limited, Plant V - Plot No. L-6/2, MIDC, WALUJ, AURANGABAD 431136 Maharashtra.

(2) Varroc Engineering Limited, PLant V - R&D, PLOT NO L-6/2, MIDC,WALUJ,AURANGABAD 431 136 Maharashtra.

(d) HSBC BANK Working Capital Term Loan (WCTL) of H 400 Million and INR 435 Million outstanding balance of H 300.00 Million and H 435.00 Million

respectively, by way of Guaranteed Emergency Credit Line (GECL) under ECLGS scheme of National Credit Guarantee Trustee Company Ltd. (NCGTC) are secured by way of second pari-passu charge on current assets of the Company along with other banks. Further secured by second charge on movable fixed assets of the Company situated at

(1) Varroc Engineering Limited, Plant IV - Plot No. M-140-141, MIDC Industrial Area, Waluj, Aurangabad 431 136, Maharashtra

(2) Varroc Engineering Limited, Corporate Office, Plot No. L-4, MIDC Industrial Area, Waluj, Aurangabad 431 136, Maharashtra

(3) Varroc Engineering Limited, Pantnagar - Plot No.20 Sector 9, Integrated Industrial Area, Pant Nagar, Dist. Udhamsingh Nagar, Uttrakhand

(4) Varroc Engineering Limited, Plant V - Plot No. L-6/2, MIDC Industrial Area, Waluj Aurangabad - 431136

(5) Varroc Engineering Limited,Plant V - R&D, Plot No. L-6/2, MIDC Industrial Area, Waluj Aurangabad - 431136

(e) (i) ICICI BANK Rupee Term loan of H 1000 Million is secured by way of mortgage of immovable properties situated at:

(1) Gut No. 390, Takve Bk, Tal. Maval, Dist. Pune, Maharashtra

(2) Plot No. B-14, MIDC, Chakan, Tal. Khed, Dist. Pune, Maharahtra

(3) Plot Nos. K-101-102, M-140-141 and M-191/3, MIDC Industrial Area, Waluj, Aurangabad, Maharashtra

(4) B-3010, 3rd Floor, Marvel Edge, Village Vadagaonsheri Taluka Haveli Dist Pune, Maharashtra

(5) A-7010 & 7020, B-7010, 7020, 7030 & 7040 at 7th Floor, Marvel Edge, Village Vadagaonsheri Taluka Haveli Dist Pune, Maharashtra

(ii) ICICI BANK Rupee Term Loan of of H 1250 Milion availed on March 31 2023 , security creation is in process.

(f) IDBI BANK Rupee Term loan of H 750 Million (partially availed of H 292.60 million) is secured by way of hypothecation of specific movable properties of the Borrower including its movable plant and machinery, machinery spares, tools and accessories and movables, both present and future

2) Rupee Term Loans from Financial Institution are secured by:

(a) Rupee Term loan of H 1000 Million availed from Bajaj Finance Limited outstanding balance as on March 31, 2023 H720.66 million is secured by way of mortgage on specific immovable properties on exclusive charge basis located at Plot Nos. E-4, L-6/2 and L-4, MIDC, Waluj, Aurangabad - 431136, Maharashtra State.

(b) Rupee Term loan of H 650 Million outstanding balance as on March 31, 2023 H259.52 million availed from Bajaj Finance Limited is secured by way of mortgage on specific immovable properties on exclusive charge basis located at Plot No. B-24/25, MIDC, Chakan, Pune - 410501, Maharashtra State and extension of charge on specific immovable properties located at E-4, L-6/2 and L-4, MIDC, Waluj, Aurangabad - 431136, Maharashtra State.

(c) Rupee Term loan of H 600 Million availed from Tata Capital and Financial Services Limited outstanding balance as on March 31, 2023 H 600.00 million is secured by way of mortgage on immovable properties on exclusive charge basis located at Plot No. 20, Sector 9, SIDCUL Industrial area, Pantnagar, Rudrapur, Uttarakhand 263153

3) Non Convertible Debentures are Secured by:

Non Convertible Debentures Secured by Exclusive charge by way of Hypothecation on the specific identified movable properties of the Company situated at:

(1) Varroc Engineering Limited -VEL-III - Plot No. B-24 & 25, MIDC, Chakan, Pune - 410501, Maharashtra

(2) Varroc Engineering Limited -VEL-III (R&D) - Plot No. B-24 & 25, MIDC, Chakan, Pune - 410501, Maharashtra

(3) Varroc Engineering Limited -VEL VII (Valves) -Plot No. L-4, MIDC, Waluj, Aurangabad - 431136, Maharashtra.

(4) Varroc Engineering Limited - VEL VII (Forging) -Plot No. L-4, MIDC, Waluj, Aurangabad - 431136, Maharashtra.

(5) Varroc Engineering Limited - VEL Chennai - Survey No. 128-1B & 129/1B, Ezhichur Village, Taluka Sriperumbudur, Dist. Kancheepuram, Chennai -603204, Tamilnadu.

(6) Varroc Engineering Limited- VEL Windmill Satara -Wind Mills 2.10 MW Wind Mills installed at village Vankusawade & Kusawade, District: Satara, Maharashtra

(7) Varroc Engineering Limited - VEL Windmill Supa- 4 MW Wind Mills installed at Village Shahajapur, Pimpalgaon & Jamner (Supa), District Ahmednagar, Maharashtra.

(8) Varroc Engineering Limited- VEL Windmill Jaisalmer- 2.25 MW Wind Mills installed at Village Badabaugh, Site: Baramsar, Dist Jaisalmer, in Rajasthan State.

(9) Varroc Engineering Limited- Lighting Plant Plot No. B-14, MIDC, Chakan, Pune - 410501, Maharashtra

(10) Varroc Engineering Limited- VEL-I - Plot No. E-4, MIDC, Waluj, Aurangabad - 431136, Maharashtra

(11) Varroc Engineering Limited -VEL-II - Plot No. K-101-102, MIDC, Waluj, Aurangabad - 431136, Maharashtra

(12) Varroc Engineering Limited - VEL - Halol - Plot No. 103/4, Maswad, GIDC Expansion Estate, Halol-II, Dist. Panchmahal, Gujarat - 389 350

4) Covenant non-compliance

Bank loans contain certain debt covenants relating to limitation on indebtedness, debt-equity ratio, net borrowings to EBITDA ratio and debt service coverage ratio. Some of the debt covenants in respect of non-current borrowings of H 3,033.14 million were not complied as at March 31, 2023. The Company has received waiver letter subsequent

to year-end from one lender agreeing not to demand repayment as a consequence of such breaches. For rest of the facilities, non-current loans of H 2,381.23 million have been reclassified as current. The asset cover in respect of the Non-Convertible Debentures of the Company as on March 31 , 2023 is 1.21 times of the total due amount which is greater than the requirement of 1.1 times of the said Secured Non-Convertible Debentures.

The management does not expect any material impact on the financial statements/cash flows due to the above.

Cash credit facilities availed from Standard Chartered Bank, HDFC Bank Limited, CITI Bank N.A, ICICI Bank Limited, IDBI Bank Limited, Axis Bank Limited, Kotak Mahindra Bank Limited and IDFC First Bank Ltd. are secured by first paripassu charge by way of hypothecation of stocks of raw materials, work in progress, finished goods, consumable, stores and spares, packing materials and receivables of the Company both present and future.

* The Company has obtained unsecured Buyer''s credit of Euro 3,033,187.65 on 13.07.2021 from IDFC First Bank Ltd. for a period of 1 year which is further rolled over for another 1 year against capex import LC payment. The Buyer''s credit is due for payment on 03.07.2023 and carries the interest rate of 1.75% pa.

The Company has borrowings from banks or financial institutions on the basis of security of current assets, and quarterly returns or statements of current assets filed by the Company during the current and previous year with banks or financial institutions are in agreement with the books of accounts except as mentioned in Note 22(a) & 22(b).

Note 2 Includes Post closure entries posted at the time of finalisation of quarterly financial statement.

Note 3 Primarily includes intercompany debtors, provision for customer rate increase/decrease and debtors of ageing more than 90 days. Further, factoring balance has been disclosed separately in the statement which is netted off in the financial statements

Note 4 The net difference is on account of incorrect adjustments.

Note 5 Mainly includes inter company creditors and provision for expenses.

Note 6 Trade payable shown in stock statement is net of vendor advances outstanding as of that date.

Note 7 The balance difference is on account of incorrect adjustments which majorly pertains to:

i) The creditor balance outstanding for more than 90 days has not been considered for the plants in lighting division for the purpose of reporting in stock statement.

ii) For reporting in quarterly statement to banks, incorrect capital creditors amounts were considered for exclusion from total creditors balance.

Note 2 Includes Post closure entries posted at the time of finalisation of quarterly financial statement.

Note 3 Primarily includes intercompany debtors, provision for customer rate increase/decrease and debtors of ageing more than 90 days. Further, factoring balance has been disclosed separately in the statement which is netted off in the financial statements

Note 4 The net difference is on account of incorrect adjustments.

Note 5 Mainly includes inter company creditors and provision for expenses.

Note 6 Trade payable shown in stock statement is net of vendor advances outstanding as of that date.

Note 7 The balance difference is on account of incorrect adjustments which majorly pertains to:

i) The creditor balance outstanding for more than 90 days has not been considered for the plants in lighting division for the purpose of reporting in stock statement.

ii) For reporting in quarterly statement to banks, incorrect capital creditors amounts were considered for exclusion from total creditors balance.

D Performance obligation

Revenue from contracts with customers include revenue from finished goods, tooling, engineering services and Job work.

Finished goods / tooling / engineering services

For the sale of finished goods the performance obligation is generally satisfied upon its delivery or as per the terms of the customer contract and payment is generally due within 30 to 120 days from delivery.

For sale of toolings, the performance obligation is considered satisfied on billing after approval of the part(s) by the customer. The Company generally receives advance for toolings contracts ranging from 30 % to 50% of the contracted price. The revenue is recognised at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

Product development/engineering services are considered as related to sale of parts rather than a separate performance obligation. As a result, revenue from engineering services is recognised over the period of production from the date of start of production. Costs incurred in respect of providing engineering services are recognised as intangible assets and amortised over the period of production from the date of start of production. Payments received from customers in respect of product development/engineering services are presented as contract liabilities.

For supply of engineering services to group companies, performance obligation is generally satisfied on the basis of time/work completed as per the contract with the group companies and payment is generally due within 30-60 days.

The Company provides normal warranty provisions on some of its products sold, in line with the industry practice. The Company considers that the contractual promise made to the customer in the form of warranties for the parts supplied does not meet the definition of separate performance obligation as it does not give rise to additional service

Job work revenue is recognised when the work is completed and billed to customer.

B Defined benefit plan (Gratuity)

The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/ termination is the employees last drawn basic salary plus dearness allowance per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity plan is a funded plan and the Company makes contributions to recognised funds in India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.

Sensitivity for significant actuarial assumptions is computed by varying one actuarial assumption used for the valuation of the defined benefit obligation by 1%, keeping all other actuarial assumptions constant. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of defined benefit obligation calculated with the projected unit credit method at the end of reporting period) has been applied while calculating the defined benefit liability recognised in the balance sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

RISK EXPOSURE AND ASSET LIABILITY MATCHING

Provision of a defined benefit scheme poses certain risks, some of which are detailed here under as companies take on uncertain long-term obligations to make future benefit payments.

1) Liability Risks Asset-Liability mismatch risk-

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralize valuation swings caused by interest rate movements. Hence, companies are encouraged to adopt asset-liability management.

Discount rate risk-

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

Future salary escalation and inflation risk -

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management''s discretion may lead to uncertainties in estimating this increasing risk.

2) Asset risks

All plan assets are maintained in a trust fund managed by a public sector insurer viz. LIC of India. LIC has a sovereign guarantee and has been providing consistent and competitive returns over the years.

The Company has opted for a traditional fund wherein all assets are invested primarily in risk averse markets. The Company has no control over the management of funds but this option provides a high level of safety for the total corpus. A single account is maintained for both the investment and claim settlement and hence 100% liquidity is ensured. Also, interest rate and inflation risk are taken care of

(ii) Valuation technique used to determine fair value

The following methods and assumptions were used to estimate the fair value of the financial instruments included in the above tables:

- The Company enters into derivative financial instruments with financial institutions with investment grade credit ratings. Foreign exchange forward contracts, interest rate swaps are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing model, using present value calculations. The models incorporate various inputs including the credit quality counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spread between the respective currencies, interest rate curves etc. The changes in counterparty credit risk had no material effect on financial instruments recognised at fair value through profit and loss.

Commentary

The carrying amounts of trade receivables, loans, other financial assets, cash and bank balances, trade payables/ acceptances and other financial liabilities are considered to be the same as their fair values due to their short-term nature. The fair values of non-current financial assets and non-current financial liabilities also approximate their carrying values. The borrowings which are at floating rate of interest, fair values as at March 31,2023 approximate their carrying values.

For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

Other Assets for which Fair Value is disclosed

The fair value of investment property is based on valuation performed by independent valuer as per significant observable inputs (Level 2).

Fair value of the investment property as on March 31,2023 H138.70 million.(March 31,2022 H 138.70 million) - Refer Note 4

Note 44 : Financial risk management

The Company''s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company''s operations and to provide guarantees to support its operations. The Company''s principal financial assets include loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also enters into derivative transactions.

The Company is exposed to market risk, credit risk and liquidity risk. The Company''s senior management oversees the management of these risks. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company''s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below:

Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk such as equity

price risk and commodity price risk. Financial instruments affected by market risk include loans and borrowings, receivables, payables, deposits, investments and derivative financial instruments.

a) Foreign currency risk

The Company operates internationally and the business is transacted in several currencies. Consequently, the Company is exposed to foreign exchange risk through its sale and purchase of goods and services, mainly in the North America and Europe . The exchange rate between the rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Company''s operations are affected positively/adversely as the rupee appreciates /depreciates against these currencies. The Company evaluates exchange rate exposure arising from these transactions and enters into foreign exchange forward contracts, interest and principal swaps and options to mitigate the risk of changes in exchange rates on foreign currency exposures. The Company follows established risk management policies, to hedge forecasted cash flows denominated in foreign currency. The Company has designated certain derivative instruments as cash flow hedges to mitigate the foreign exchange exposure.

iii) Sensitivity

For the year ended March 31, 2023 and March 31, 2022, every 5% percentage point appreciation/depreciation in the exchange rate between the Indian rupee and U.S. Dollar, would have affected the Company''s incremental operating margins by approximately H 12.82 million and H 3.56 million respectively. And for Euro, every 5% percentage point appreciation/depreciation in the exchange rate would have affected the Company''s incremental operating margin by approximately H 691.11 million, previous year H 13.81 million The sensitivity for net exposure in JPY and in other currencies does not have material impact to Statement of Profit and Loss. Sensitivity analysis is computed based on the changes in the receivables and payables in foreign currency upon conversion into functional currency, due to exchange rate fluctuations between the previous reporting period and the current reporting period.

b) Interest rate risk

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

C) Other price risk

The Company does not have material investments in equity securities other than investments in its subsidiaries. Hence, equity price risk is considered to be low. Further, the Company''s operating activities require the ongoing purchase of various commodities for manufacture of automotive parts. However, the movement is commodity prices are substantially adjusted through price differences as per customer contracts and hence commodity price risk for the Company is also considered to be low.

Credit risk management

Credit risk arises when a customer or counterparty does not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its investing activities, including deposits with banks and financial institutions,

foreign exchange transactions and other financial instruments. The Company only deals with parties which have good credit rating/worthiness given by external rating agencies or based on the Company''s internal assessment.

Trade receivables

Customer credit risk is managed by the Company''s established policy, procedures and control relating to customer credit risk management. Further, Company''s customers includes marquee OEMs and Tier I companies, having long standing relationship with the Company. Outstanding customer receivables are regularly monitored and reconciled. At March 31, 2023, receivable from Company''s top 5 customers accounted for approximately 42.61 % (March 31, 2022: 43.99%) of all the receivables outstanding. An impairment analysis is performed at each reporting date on an individual basis based on historical data. The maximum exposure to credit risk at the reporting date is the carrying value of trade receivables disclosed in Note 12. The Company does not hold collateral as security.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Company''s corporate treasury department in accordance with the Company''s policy. Investments of surplus funds are made only with approved counterparties. Credit limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty''s potential failure to make payments.

The Company''s maximum exposure to credit risk for the components of the balance sheet at March 31, 2023 and March 31, 2022 is the carrying amounts as disclosed in note 13 except for financial guarantees. The Company''s maximum exposure relating to financial guarantees is disclosed in note 51 (B).

d) Liquidity risk

Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at a reasonable price. The Company''s corporate treasury department is responsible for liquidity and funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management. Management monitors the Company''s net liquidity position through rolling forecasts on the basis of expected cash flows. As at March 31,2023, cash and cash equivalents are held with major banks.

The amounts disclosed in the above table are the contractual undiscounted cash flows

For financial guarantee contracts, refer note 51 (B).

Note 45 - Capital management

(a) Risk management

T he Company''s capital comprises equity share capital, securities premium, retained earnings and other equity attributable to shareholders.

The Company''s objectives when managing capital are to:

- Safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and for other stakeholders, and

- Maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.

No changes were made in the objectives, policies or processes for managing capital of the Company during the year.

Loan covenants

The Company''s capital management aims to ensure that it meets financial covenants attached to the interestbearing loans and borrowings that define capital structure requirements. Some of the financial covenants were not complied as at March 31,2023. Refer note 21 for details.

(b) Dividends not recognised at the end of the reporting period

The Board of Directors have not recommended any dividend during the current year.

(i) The Company is contesting excise, service tax and goods and service tax demand/notices and the management, including its tax advisors, believe that it''s position will likely be upheld in the appellate process. No expense has been accrued in the financial statements for the tax demands/notices raised. The management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the Company''s financial position and results of the operations. The Company has deposited H 38.08 million (previous year H 38.08 million) with the tax authorities against the above matters to comply with the order of the tax authorities.

(ii) There are numerous interpretative issues relating to the Supreme Court (SC) judgement on PF dated February 28, 2019. As a matter of caution, the company has made a provision on a prospective basis from the date of the SC order. The company will update its provision, on receiving further clarity on the subject.

(C) - Code on Social Security, 2020

The Code on Social Security, 2020 (‘Code'') relating to employee benefits during employment and post-employment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified and the final rules/interpretation have not yet been issued. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective.

Note 52- Loss on equity investments and loans given to VLS

The Company and VarrocCorp Holding BV, Netherlands ("VCHBV", wholly owned subsidiary of the Company) (together referred to as "Sellers") entered into a Securities Purchase Agreement dated April 29, 2022 as amended dated October 05, 2022 and May 12, 2023 (collectively referred to as "SPA") with Compagnie Plastic Omnium SE, France (referred to as "Buyer"), to divest the Sellers 4-Wheeler lighting business in the Americas and Europe ("VLS Business"). The equity value agreed under the SPA was Eur 69.5 million (subject to closing adjustments as provided under the SPA) and accordingly the loss on equity investments and loans given to VLS business of Rs 13,321.90 million was recognised during the year ended March 31,2023 as exceptional item. Summary of loss on equity and loans given to VLS business is as follows :

As per the terms of the SPA, a specific ‘Adjustment Escrow'' has been provided for the Final Closing Statement and the Final Closing Adjustment Statement to be prepared as of Closure Date i.e. Oct 6, 2022. The Buyer had a period of 90 working days from the closing date to come up with the same duly supported by requisite information/documentation.

The Buyer submitted the final adjustments in the month of February 2023 but failed to provide the necessary supporting details to enable the Sellers to understand these adjustments. Hence, Sellers sent a Dispute Notice in accordance with the SPA disputing the proposed adjustments. Pursuant to the amendment to SPA dated May 12, 2023, both parties have mutually agreed to attempt the resolution of their disagreements in accordance with the provisions of the SPA. Considering the disagreement between the parties and the negotiations with the Buyer are under progress, the effect of the proposed adjustments cannot be ascertained for recognition in the standalone financial statements as of March 31, 2023, and accordingly the loss recognised for the year ended March 31,2023 is based on the initial agreed equity value of Eur 69.5 million as explained above.

Formulae for calculation of ratios are as follows:

(i) Current ratio = [ Current Assets / Current Liabilities ]

(ii) Debt-Equity Ratio = [ Total Debt / Total Equity ]

(iii) Debt service coverage ratio = [ (Earning before Interest Tax & Depreciation & amortization and exceptional items)/ (Interest Expense Principal repayments of long term loan made during the period) ]

(iv) Return on Equity ratio = [(Net Profits after taxes - Preference Dividend/(Average Shareholder''s Equity)]

(v) Inventory Turnover ratio= [(cost of goods sold)/(Average Inventory)]

(vi) Trade Receivable Turnover Ratio = [(Revenue from Operation)/(Average Trade receivable)]

(vii) Trade Payable Turnover Ratio = [ (Purchases)/(Average Trade payable)]

(viii) Net Capital Turnover Ratio = [( Net Annual Sales )/( Average Working Capital)]

(ix) Net Profit ratio = [ (Net Profit after taxes)/ (Revenue from Operation)]

(x) Return on Capital Employed = [( Earning Before Interest and taxes (EBIT))/( Capital employed)]

(xi) Return on Investment = [(Income generated from invested funds in bank FDs and mutual funds)/ (Average invested funds in bank FDs and mutual funds)]

(xii) Capital Employed = Tangible Net worth Total Debt Deferred Tax Liability

(xiii) Working capital = (Current assets - Current liabilities)

Commentary

A) Decrease in Current ratio is due to impairment of loan receivable & gurantee commission receivable from Related Party.

B) Increase in Debt equity ratio is due to increase in borrowings raised during the year and and decrease in equity due to losses.

C) Decrease in the ratio is due to losses in the current year as compared to profit in the previous year.

D) Decrease in the ratio is mainly due to impairment provision of loan, interest & guarantee to related party and impairment of investment in subsidiaries.

E) Decrease in the return on capital employed primarily due to impairment provision on investment/loan to subsidiary during the year.

F) Increase in ratio mainly due increase in revenue as compared to previous year.

G) Decrease in Net capital turnover ratio is mainly on account of increase in current borrowings and Inter corporate deposits

Note 55 : Other Statutory Information

(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.

(ii) The Company does not have any transactions with companies struck off.

(iii) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period,

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

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

---

Mar 31, 2018

Note 2A: Significant accounting judgments, estimates and assumptions

The preparation of the Company’s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities and the accompanying disclosures.

These judgments, estimates and assumptions are based on historical experience and other factors, including expectations of future events that may have a financial impact on the company and that are believed to be reasonable under the circumstances.

This note provides an overview of the areas that involve a higher degree of judgments or complexities and of items which are more likely to be materially adjusted due to estimates and assumptions to be different than those originally assessed. Detailed information about each of these judgments, estimates and assumptions is mentioned below. These Judgments, estimates and assumptions are continually evaluated.

Significant estimates and judgments

1 Impairment of financial assets

The impairment provisions for financial assets are based on assumptions about risk of default and expected loss rates. The company uses judgment in making these assumptions and selecting the inputs to the impairment calculation, based on the company’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.

2 Fair valuation of financial instruments

When the fair values of financial assets and financial liabilities cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow model (DCF). The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments’ include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

3 Defined benefit plans

The liability or asset recognized in the balance sheet in respect of gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.

An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation.

The mortality rate is based on Indian Assured Lives Mortality (2006-08) Ultimate. Those mortality tables tend to change only at interval in response to demographic changes.

Future salary increases and gratuity increases are based on expected future inflation rates.

Further details about gratuity obligation are given in Note 42.

4 Deferred tax

At each reporting date, the Company assesses whether the realization of future tax benefits is sufficiently probable to recognize deferred tax assets. This assessment requires the use of significant estimates with respect to assessment of future taxable income. The recorded amount of total deferred tax assets could change if estimates of projected future taxable income or if changes in current tax regulations are enacted.

5 Customer Claims

The company has made accruals in respect of unsettled prices for some of its raw materials purchase contracts and finished goods sales contracts. These accruals are made considering the past settlement formula / communications with the vendors and customers respectively. The management has assessed and believes that the timing of cash outflow pertaining to these accruals are uncertain and hence considered the same as payable / receivable on demand and classified under current liabilities / assets respectively.

Note 2B: Standards issued but not yet effective 1 Ind AS 115 - Revenue from Contracts with Customers

The Ministry of Corporate Affairs (MCA) has notified Ind AS 115, ‘Revenue from Contracts with Customers’, on 28 March 2018, which is effective for accounting periods beginning on or after 1 April 2018. The new revenue standard is based on a transfer of control model, which fundamentally changes the basis of revenue recognition, presentation and disclosures. The core principle is described in a five-step model framework.

The Company is in the process of evaluating the impact on the financial statements in terms of the amount and timing of revenue recognition under the new standard.

2 Ind AS 21-The Effects of Changes in Foreign Exchange Rates

Appendix B to Ind AS 21, Foreign currency transactions and advance consideration: On March 28, 2018, MCA has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. This amendment will come into force from April 1, 2018. The company has evaluated the effect of this on the standalone financial statements and the impact is not material.

3 Ind AS 40- Investment property

Amendment to Ind AS 40 regarding transfers of investment property: On March 28, 2018 MCA has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 which clarifies that to transfer to, or from, investment properties there must be change in use. A change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A change in intention, in isolation, is not enough to support a transfer. The amendment has also re-characterized the list of evidence of change in use as a non-exhaustive list of examples and scope of theses examples have been expanded to include assets under construction and development and not only transfers of completed properties. The company has decided to apply the amendment prospectively to change in use that occur after the date of initial application (i.e. April 1, 2018). Management has assessed the effect of the amendment on classification of existing property at April 1, 2018 and concluded that no reclassifications required.

4 Amendments to Ind AS 12 Income taxes regarding recognition of deferred tax assets on unrealized losses

The amendments clarify the accounting for deferred taxes where an asset is measured at fair value and that fair value is below the asset’s tax base. They also clarify certain other aspects of accounting for deferred tax assets set out below:

- A temporary difference exists whenever the carrying amount of an asset is less than its tax base at the end of the reporting period.

- The estimate of future taxable profit may include the recovery of some of an entity’s assets for more than its carrying amount if it is probable that the entity will achieve this. For example, when a fixed-rate debt instrument is measured at fair value, however, the entity expects to hold and collect the contractual cash flows and it is probable that the asset will be recovered for more than its carrying amount.

- Where the tax law restricts the source of taxable profits against which particular types of deferred tax assets can be recovered, the recoverability of the deferred tax assets can only be assessed in combination with other deferred tax assets of the same type.

- Tax deductions resulting from the reversal of deferred tax assets are excluded from the estimated future taxable profit that is used to evaluate the recoverability of those assets. This is to avoid double counting the deductible temporary differences in such assessment.

The Company has evaluated the effect of this amendment on the standalone financial statements and the impact is not material.

(ii) Property, plant and equipment pledged as security

Refer to note 52 for information on property, plant and equipment pledged as security by the company

(iii) Contractual obligations

Refer to note 48 for disclosure of contractual commitments for the acquisition of property, plant and equipment.

(iv) Office Building includes premises on ownership basis in a Co-Operative Society '' 6.3 million, including cost of shares therein of ''125/- per share.

(ii) Leasing arrangements

Certain investment properties are leased to tenants under long-term cancellable operating leases with rentals payable monthly. There is escalation of 10% in lease rentals during the lease terms.

(iii) Fair value

Fair value of the investment property as on March 31, 2017 was Rs, 364.79 million. There is no significant change in the fair value of investment property after March 31, 2017.

Estimation of fair value

The company obtains valuations for its investment properties internally. The best evidence of fair value is current prices in an active market for similar properties

Initial Public Offer expenses receivable comprise share issue expenses incurred in connection with the proposed Initial Public offer (IPO) by way of offer for sale by existing shareholders of the Company. These receivables include fees paid to stock exchanges, SEBI, lawyers, auditors etc., in connection with the IPO of the Company. As per the offer agreement between the Company and the selling shareholders, upon successful completion of the Offer, these expenses will be reimbursed by the selling shareholders in proportion to their respective Offered Shares sold pursuant to the Offer. Accordingly, the Company has classified these expenses as receivable from selling shareholders under Other Financial Assets. Initial Public Offer expenses includes receivable from related parties refer note 47.

General reserve

General reserve is the retained earning of the company which is kept aside out of the companyRs,s profits to meet future (known or unknown) obligations.

Debenture redemption reserve

The company is required to create a debenture redemption reserve out of the profits which is available for payment of dividend for the purpose of redemption of debentures.

Capital reserve

Capital reserve is not available for distribution as dividend.

Securities premium reserve

Securities premium reserve is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.

Cash flow hedging reserve

The company uses hedging instruments to hedge its exposure to movements in foreign exchange rates and interest rates, which are designated as cash flow hedges. To the extent these hedges are effective, the change in fair value of the hedging instrument is recognized in the cash flow hedge reserve. Amounts recognized in cash flow hedge reserve are reclassified to profit or loss when the hedged item affects profit or loss.

1) Rupee term loans , foreign currency loan (ECB) and Letter of Credit from Bank are secured by:

a) ECB Loan from ICICI Bank secured by First pari-passu charge by way of Joint Mortgage of immovable properties of the Company located at E-4, L-6/2, and L-4 MIDC ,Waluj, Aurangabad-431136.

b) Letter of credit (Buyers Credit) secured by First pari-passu charge on current asset of the company

2) a) Foreign currency loan (FCNR loan USD 7.27 million) from Citi Bank N.A. is secured by first pari-passu charge on movable fixed assets of Crankshaft unit both present and future located at M-191/3, MIDC, Waluj, Aurangabad - 431136.

b) Foreign currency loan (FCNR loan USD 2.25 million) from Citi Bank N.A. is secured by first pari-passu charge on movable fixed assets of solar unit both present and future located at Sakri, Dhule.

3) Rupee Term Loans from Financial Institution, From Banks and Non Convertible debentures are secured by:

a) Rupee Term loan of Rs, 500 million availed from Bajaj Finance Limited is secured by first pari-passu charge on movable fixed assets both present and future of crankshaft unit located at M-191/3 MIDC, Waluj, Aurangabad - 431136.

b) Rupee Term Loan from Kotak Mahindra Bank Limited is secured by way of first pari passu charge on movable fixed assets both present and future of unit V located at L-6/2, MIDC, Waluj, Aurangabad -431136.

c) 8.10% Non convertible debentures of Rs, 800 million is secured by way of first pari passu charge on movable fixed assets both present and future of unit III located at B-24 & 25, MIDC, Chakan, Pune - 410501 and unit VII (Valves and Forging) located at L-4, MIDC, Waluj, Aurangabad - 431136.

4) The carrying amounts of financial and non financial assets pledged as security for current and non-current borrowings are disclosed in Note 52.

Total current borrowings

Working capital facilities availed from Corporation Bank, Standard Chartered Bank, HDFC Bank Limited, CITI Bank N.A, ICICI Bank Limited, IDBI Bank Limited and Kotak Mahindra Bank Limited are secured by first pari-passu charge by way of hypothecation of stocks of raw materials, work in progress, finished goods, consumable, stores and spares, packing materials and receivables of the Company both present and future.

The carrying amounts of financial and non financial assets pledged as security for current and non-current borrowings are disclosed in Note 52

* For the purposes of this clause, the term ''Specified Bank Notes’ shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407(E), dated the November 8, 2016.

The Shareholders at their meeting held on January 25, 2018, accorded their approval for conversion of the Company from a “Private Limited Company” to “Public 40(b) I Limited Company”. Necessary documents have been filed with the Ministry of Corporate Affairs and the same has been approved by the Register of Companies (ROC) Mumbai on February 05, 2018.

A Defined contribution plans:

The Company has certain defined contribution plans. Contributions are made to provident fund in India for employees at the rate of 12% of basic salary as per regulations. The contributions are made to registered provident fund administered by the government. The obligation of the company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognized during the year towards defined contribution plan is as under

B Gratuity

The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary plus Dearness Allowance per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity plan is a funded plan and the Company makes contributions to recognized funds in India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.

Sensitivity for significant actuarial assumptions is computed by varying one actuarial assumption used for the valuation of the defined benefit obligation by 1%, keeping all other actuarial assumptions constant. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of defined benefit obligation calculated with the projected unit credit method at the end of reporting period) has been applied while calculating the defined benefit liability recognized in the balance sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

As the funds are managed wholly by the insurance company, the break-up of the plan assets is unavailable.

Actual return on assets for the year ended March 31, 2018 and year ended March 31, 2017 was Rs,10.34 million and '' 9.43 million respectively.

The Company expects to contribute '' 30.00 million to the gratuity trusts during the fiscal 2018. As at March 31, 2018 it has contributed '' 28.74 million

1) Liability Risks Asset-Liability Mismatch Risk-

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the company is successfully able to neutralize valuation swings caused by interest rate movements. Hence companies are encouraged to adopt asset-liability management.

Discount Rate Risk-

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

Future Salary Escalation and Inflation Risk -

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often resulting higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management’s discretion may lead to uncertainties in estimating this increasing risk.

2) Asset Risks

All plan assets are maintained in a trust fund managed by a public sector insurer viz; LIC of India. LIC has a sovereign guarantee and has been providing consistent and competitive returns over the years.

The company has opted for a traditional fund wherein all assets are invested primarily in risk averse markets. The company has no control over the management of funds but this option provides a high level of safety for the total corpus. A single account is maintained for both the investment and claim settlement and hence 100% liquidity is ensured. Also interest rate and inflation risk are taken care of.

(ii) Valuation technique used to determine fair value

The following methods and assumptions were used to estimate the fair value of the level 2 financial instruments included in the above tables:

- the fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves.

- the fair value of forward foreign exchange contracts and principal swap is determined using forward exchange rates at the balance sheet date.

- the fair value of foreign currency option contracts is determined using the Black Scholes valuation model.

Commentary

The carrying amounts of trade receivables, loans, trade payables, cash and bank balances, security deposits, other financial assets, borrowings, other financial liabilities, acceptances are considered to be the same as their fair values, due to their short-term nature. The fair value of non-current financial assets and non-current liabilities also approximates its carrying value.

For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

Note 44: Financial risk management

Liquidity risk

Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at a reasonable price. The Company’s corporate treasury department is responsible for liquidity and funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management. Management monitors the Company’s net liquidity position through rolling forecasts on the basis of expected cash flows. As of March 31, 2018, cash and cash equivalents are held with major banks.

The amount disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

Note 44: Financial risk management Financial risk management

The Company’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company’s primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk. The Company uses derivative financial instruments - foreign currency forward contracts, swaps and option contracts to mitigate foreign exchange related risk exposures. The Company’s exposure to credit risk, excluding receivables from related parties, is influenced mainly by the individual characteristic of each customer and the concentration of risk from the top few customers. The demographics of the customer including the default risk of the industry and country in which the customer operates also has an influence on credit risk assessment.

Market Risk

a) Foreign currency risk

The Company operates internationally and the business is transacted in several currencies. Consequently the Company is exposed to foreign exchange risk through its sale and purchase of goods and services, mainly in the North America and Europe and borrowings in various foreign currencies. The exchange rate between the rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Company’s operations are affected positively/adversely as the rupee appreciates /depreciates against these currencies. The Company evaluates exchange rate exposure arising from these transactions and enters into foreign exchange forward contracts, interest and principle swaps and options to mitigate the risk of changes in exchange rates on foreign currency exposures. The Company follows established risk management policies, to hedge forecasted cash flows denominated in foreign currency. The Company has designated certain derivative instruments as cash flow hedges to mitigate the foreign exchange exposure of forecasted highly probable cash flows.

(iii) Sensitivity

For the year ended March 31, 2018 and March 31, 2017, every percentage point appreciation/depreciation in the exchange rate between the Indian rupee and U.S. Dollar, would have affected the Company’s incremental operating margins by approximately '' 12.01 million and '' 14.14 million, respectively. The sensitivity for net exposure in EURO, JPY and in other currencies does not have material impact to Statement of Profit and Loss.

Sensitivity analysis is computed based on the changes in the receivables and payables in foreign currency upon conversion into functional currency, due to exchange rate fluctuations between the previous reporting period and the current reporting period.

b) Interest rate risk

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

c) Credit Risk Management

Credit risk arises when a customer or counterparty does not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing/ investing activities, including deposits with banks. The Company has 9 to 10 major clients (previous year 8 to 10 clients) which represents 82.77% receivables as on March 31, 2018 (March 31, 2017 : 80% )and company is receiving payments from these parties within due dates. Hence, the company has no significant credit risk related to these parties.

Trade receivables

Customer credit risk is managed by the Company’s established policy, procedures and control relating to customer credit risk management. Further, Company’s customers includes marquee OEMs and Tier I companies, having long standing relationship with the Company. Outstanding customer receivables are regularly monitored and reconciled. At March 31, 2018, receivable from Company’s top 5 customers accounted for approximately 74.26% (March 31, 2017: 74%) of all the receivables outstanding. An impairment analysis is performed at each reporting date on an individual basis based on historical data. The maximum exposure to credit risk at the reporting date is the carrying value of trade receivables disclosed in Note 12. The Company does not hold collateral as security. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.

Note 45: Capital Management (a) Risk management

The Company’s capital comprises equity share capital, preference share capital, security premium, retained earnings and other equity attributable to shareholders.

“The Company objectives when managing capital are to:

- Safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and for other stakeholders, and

- Maintain an optimal capital structure to reduce the cost of capital.”

In order to maintain or adjust the capital structure, the company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares .

The company monitors capital gearing ratio, which is net debt divided by total capital. Net debt comprises of long term and short term borrowings less cash and bank balances, equity includes equity share capital, preference share capital and reserves that are managed as capital. The gearing at the end of the reporting period was as follows.

No changes were made in the objectives, policies or processes for managing capital of the company during the year

(i) Loan covenants

The Company’s capital management aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. There has been no breach in the financial covenants of any interest-bearing loans and borrowing during the current period and previous year.

Note 47: Related Party Disclosure. a. Related parties and their relationships

1 Subsidiaries Varroc Polymers Private Limited

Durovalves India Private Limited

Varroc Lighting Systems (India) Private Limited

Team Concepts Private Limited (w.e.f. November 30, 2017)

Varroc European Holding B.V. Netherlands Aries Mentor Holding B.V. Netherlands Varroc Corp Holding B.V. Netherlands Varroc Japan Co. Ltd Japan (w.e.f. March 27, 2017)

Industria Meccanica E Stampaggio S.p.A., Italy Esex Forging SRL, Italy (Liquidated on March 31, 2017)

TRI.O.M., S.p.A., Italy

Electromures SA, Romania

TRI.O.M. Vietnam Co. Ltd., Vietnam

Varroc Lighting Systems SRO, Czech Republic

Varroc Lighting Systems S.de.R.L. De. C.V., Mexico

Varroc Lighting Systems GMBH, Germany

Varroc Lighting Systems Inc. USA

Varroc Lighting Systems sp. Z o.o., Poland (w.e.f. December 20,2017 )

Varroc Lighting Systems SA, Morocco (w.e.f.September 19,2017)

Varroc Do Brasil Comercio, Importapao E Exportapao De Maquinas, Equipamento E Pepas Ltda. (w.e.f. December 20, 2017)

TRI.O.M. Mexico SA De. C. V.Mexico

2 Jointly Controlled Entities Varroc TYC Corporation British Virgin Islands

Varroc TYC Auto Lamps Co. Ltd., China (Subsidiary of Varroc TYC Corporation, BVI) Varroc TYC Auto Lamps Co. Ltd. CQ, China (Subsidiary of Varroc TYC Auto Lamps Co Ltd China )

Nuova CTS S.r.L., Italy

Varroc Elastomers Private Limited (until March 15, 2017)

3 Key Management Personnel Mr. Tarang Jain - Managing Director

Whole time Directors

Mr. Arjun Jain (until February 06, 2018)

Mr. Ashwani Maheshwari

Non-executive Directors Mr. Naresh Chandra

Independent Directors

Mr. Gautam Khandelwal (w.e.f. July 20, 2017)

Mr. Marc Szulewicz (w.e.f. July 20, 2017)

Mrs. Vijaya Sampath (w.e.f. July 20, 2017)

Mr. Vinish Kathuria (w.e.f. February 06, 2018)

4 Relatives of Key Management Mrs. Suman Jain Personnel with whom Mrs. Rochana Jain

transactions are taken place Mr. Arjun Jain (w.e.f. February 07, 2018)

Mr. Dhruv Jain

5 Enterprises Owned or controlled by/or Endurance Technologies Limited over which Parties described in para 3 Tarang Jain (HUF)

& 4 or their relatives exercise significant TJ Holdings Trust

influence where transactions have Naresh Chandra Holdings Trust

taken place [Other than those included Suman Jain Holdings Trust

above] Varroc Trading Private Limited (Until October 20,2016)

* All the amounts are inclusive of taxes, if any

** Amount below rounding off norm adopted by the Company.

# As gratuity and compensated absences are computed for all the employees in aggregate, the amount relating to the key managerial personnel, cannot be individually identified

##Refer note 14 for provision made for doubtful debts.

There is no provision for doubtful debts related to outstanding balances and no expense has been recognized during the current period in respect of bad or doubtful debts due from related parties.

During the year ended March 31, 2017 the company has issued 852,359 Series B CCPS and 1,168,377 Series C CCPS as bonus shares to key managerial personnel and their relative. Subsequently during the current year Series B CCPS have been converted into equity shares based on the terms of the agreement, refer note 17.

Note: Represent sale proceeds of sale of property with a book value of Rs, 82.69 million.

For above guarantees following charge is created in favour of

1) Stand by letter of credit from Citi Bank is secured by first pari-passu charge on movable fixed assets of Crankshaft unit both present and future located at M-191/3, MIDC, Waluj, Aurangabad - 431136.

2) Stand by letter of credit from IDBI Bank is secured by first pari-passu charge by way of hypothecation of stocks of raw materials, work in progress, finished goods, consumable, stores and spares, packing materials and receivables of the Company both present and future.

3) Stand by letter of credit from Axis Bank is secured by subservient charge on the entire current assets and movable fixed assets of the Company