Ethos Ltd. ಖಾತೆಯ ಉಪಯುಕ್ತ ಮಾಹಿತಿ
g) Provisions
A provision is recognised if, as a result of a past event, the
Company has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an
outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the
expected future cash flows (representing the best estimate
of the expenditure required to settle the present obligation
at the balance sheet date) at a pre-tax rate that reflects
current market assessments of the time value of money
and the risks specific to the liability. The unwinding of the
discount is recognised as finance cost. Expected future
losses are not provided for.
h) Financial guarantee contracts
Financial guarantee contracts are recognised as a deemed
equity contribution if no premium was paid when guarantee
is received. Deemed equity contribution is initially
measured at fair value.
The fair value of financial guarantees is determined as the
present value of the difference in net cash flows between the
contractual payments under the debt instrument and the
payments that would be required without the guarantee,
or the estimated amount that would be payable to a third
party for assuming the obligations.
i) Contingent liabilities and contingent assets
A contingent liability exists when there is a possible but
not probable obligation, or a present obligation that may,
but probably will not, require an outflow of resources, or
a present obligation whose amount cannot be estimated
reliably. Contingent liabilities do not warrant provisions
but are disclosed unless the possibility of outflow of
resources is remote.
Contingent assets usually arise from unplanned or other
unexpected events that give rise to the possibility of an
inflow of economic benefits to the entity. Contingent assets
are recognized when the realisation of income is virtually
certain, then the related asset is not a contingent asset and
its recognition is appropriate.
A contingent asset is disclosed where an inflow of economic
benefits is probable.
j) Commitments
Commitments include the amount of purchase order (net
of advances) issued to parties for completion of assets.
Provisions, contingent liabilities, contingent assets and
commitments are reviewed at each reporting date.
k) Revenue from contract with customers
The Company earns revenue primarily from retail trading
of premium and luxury watches, accessories and other
luxury items and rendering of related after sale services. The
Company has concluded that it is the principal in its revenue
arrangement because it typically controls goods or services
before transferring them to the customers.
Revenue is recognized upon transfer of control of promised
products sold or services to customers in an amount that
reflects the consideration the Company expects to receive
in exchange for those products or services.
At contract inception, the Company assesses its promise
to transfer products or services to a customer to identify
separate performance obligations. The Company applies
judgement to determine whether each product or services
promised to a customer are capable of being distinct,
and are distinct in the context of the contract, if not, the
promised product or services are combined and accounted
as a single performance obligation. The Company allocates
the arrangement consideration to separately identifiable
performance obligation based on their relative stand-alone
selling price or residual method. Stand-alone selling prices
are determined based on sale prices for the components
when it is regularly sold separately, in cases where the
Company is unable to determine the stand-alone selling
price the Company uses third-party prices for similar
deliverables or the Company uses expected cost plus margin
approach in estimating the stand-alone selling price.
The method for recognizing revenues and costs depends on
the nature of the products sold and services rendered.
Sale of goods
Revenue on sale of goods are recognized when the customer
obtains control of the specified asset. The Company
considers whether there are other promises in the contract
that are separate performance obligations to which a
portion of the transaction price needs to be allocated (e.g.
customer loyalty points).
Variable Consideration
If the consideration in a contract includes the variable
amount, the Company estimates the amount of
consideration to which it will be entitled in exchange
for transferring the goods to the customer. The variable
consideration is estimated at contract inception and
constrained until it is highly probable that a significant
revenue reversal in the amount of cumulative revenue
recognised will not occur when the associated uncertainty
with the variable consideration is subsequently resolved.
Some contracts for the sale of goods provide the customers
with a right of return the goods within a specified period.
The Company uses the expected value method to estimate
the variable consideration given the large number of
contracts that have similar characteristics. The Company
then applies the requirements on constraining estimates of
variable consideration in order to determine the amount of
variable consideration that can be included in the transaction
price. A refund liability is recognized for the goods that are
expected to be returned (i.e., the amount not included in the
transaction price). A right of return asset (and corresponding
adjustment to cost of sales) is also recognised for the right
to recover the goods from a customer.
Right of return assets
A right-of-return asset is recognised for the right to recover
the goods expected to be returned by customers. The
asset is measured at the former carrying amount of the
inventory, less any expected costs to recover the goods and
any potential decreases in value. The Company updates the
measurement of the asset recorded for any revisions to its
expected level of returns, as well as any additional decreases
in the value of the returned products.
Refund liabilities
A refund liability is recognised for the obligation to refund
some or all of the consideration received (or receivable)
from the customer. The Company''s refund liabilities arise
from customers'' right of return. The Company updates
its estimates of refund liabilities (and the corresponding
change in the transaction price) at the end of each
reporting period.
Customer loyalty programmes
For customer loyalty programmes, the transaction price in
respect of initial sale is allocated between the award credits
and the other components of the sale. The amount allocated
to award credits is deferred and is recognised as revenue
when the award credits are redeemed and the Company
has fulfilled its obligations to supply the discounted products
under the terms of the programme or when it is no longer
probable that the award credits will be redeemed.
Sale of services
Revenue from services rendered is recognised in profit
or loss as they are rendered based on agreements/
arrangements with the concerned parties, and recognised
net of goods and services tax/ applicable taxes at the time
of completion of service.
Contract balances
Trade Receivable
A receivable is recognised if an amount of consideration
that is unconditional (i.e., only the passage of time
is required before payment of the consideration is
due). Refer to accounting policies of financial assets in
Section of Financial instruments - initial recognition and
subsequent measurement.
Contract liabilities
A contract liability is recognised if a payment is received
or a payment is due (whichever is earlier) from a customer
before the Company transfers the related goods or services.
Contract liabilities are recognised as revenue when the
Company performs under the contract (i.e., transfers control
of the related goods or services to the customer).
) Recognition of interest income or expense
Interest income or expense is recognised using the effective
interest method.
The âeffective interest rate'' is the rate that exactly discounts
the estimated future cash payments or receipts through the
expected life of the financial instrument to:
- The gross carrying amount of the financial asset; or
- The amortised cost of the financial liability.
In calculating interest income and expense, the effective
interest rate is applied to the gross carrying amount of
the asset (when the asset is not credit-impaired) or to the
amortised cost of the liability. However, for financial assets
that have become credit-impaired subsequent to initial
recognition, interest income is calculated by applying the
effective interest rate to the amortised cost of the financial
asset. If the asset is no longer credit-impaired, then the
calculation of interest income reverts to the gross basis.
m) Borrowing costs
Borrowing costs are interest and other costs (including
exchange differences arising from foreign currency
borrowings to the extent that they are regarded as an
adjustment to interest costs) incurred by the Company in
connection with the borrowing of funds. Borrowing costs
directly attributable to acquisition or construction of an
asset which necessarily take a substantial period of time
to get ready for their intended use are capitalized as a part
of cost of the asset. Other borrowing costs are recognised
as an expense in the period in which they are incurred.
Borrowing cost also includes exchange differences to the
extent regarded as an adjustment to the borrowing costs.
n) Taxes
Income tax expenses comprises of current and deferred tax.
It is recognised in profit or loss except to the extent that
it relates to a business combination or an item recognised
directly in equity or in other comprehensive income.
Current tax
Current tax comprises the expected tax payable or
receivable on the taxable income or loss for the year and
any adjustment to the tax payable or receivable in respect
of previous years. The amount of current tax reflects the
best estimate of the tax amount expected to be paid or
received after considering the uncertainty, if any, related to
income taxes. It is measured using tax rates (and tax laws)
enacted or substantively enacted by the reporting date.
Current tax assets and current tax liabilities are offset only if
there is a legally enforceable right to set off the recognised
amounts, and it is intended to realise the asset and settle
the liability on a net basis or simultaneously.
Current income tax relating to items recognized outside
profit or loss is recognized outside profit or loss (either in other
comprehensive income (OCI) or in equity). Current tax items
are recognized in correlation to the underlying transaction
either in OCI or directly in equity. Management periodically
evaluates positions taken in the tax returns with respect to
situations in which applicable tax regulations are subject to
interpretation and considers whether it is probable that a
taxation authority will accept an uncertain tax treatment.
The Company shall reflect the effect of uncertainty for each
uncertain tax treatment by using either most likely method
or expected value method, depending on which method
predicts better resolution of the treatment.
Deferred tax
Deferred tax is provided using the liability method on
temporary differences between the carrying amounts of the
assets and liabilities for financial reporting purposes and the
corresponding amounts used for taxation purposes.
Deferred tax liabilities are recognized for all temporary
differences, except when the deferred tax liability arises
from the initial recognition of goodwill or an asset or liability
in a transaction that is not a business combination and, at
the time of the transaction, affects neither the accounting
profit nor taxable profit or loss and does not give rise to
equal taxable and deductible temporary differences and
in respect of taxable temporary differences associated
with investments in subsidiaries, associates and interests
in joint ventures, when the timing of the reversal of the
temporary differences can be controlled and it is probable
that the temporary differences will not reverse in the
foreseeable future.
Deferred tax assets are recognised for all deductible
temporary differences, the carry forward of unused tax
credits and any unused tax losses. Deferred tax assets are
recognised to the extent that it is probable that taxable profit
will be available against which the deductible temporary
differences, and the carry forward of unused tax credits and
unused tax losses can be utilised, except when the deferred
tax asset relating to the deductible temporary difference
arises from the initial recognition of an asset or liability in
a transaction that is not a business combination and, at
the time of the transaction, affects neither the accounting
profit nor taxable profit or loss and does not give rise to
equal taxable and deductible temporary differences and
in respect of deductible temporary differences associated
with investments in subsidiaries, associates and interests
in joint ventures, deferred tax assets are recognised only to
the extent that it is probable that the temporary differences
will reverse in the foreseeable future and taxable profit
will be available against which the temporary differences
can be utilized.
The carrying amount of deferred tax assets is reviewed
at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be
utilised. Unrecognised deferred tax assets are re-assessed at
each reporting date and are recognised to the extent that
it has become probable that future taxable profits will allow
the deferred tax asset to be recovered.
In assessing the recoverability of deferred tax assets, the
Company relies on the same forecast assumptions used
elsewhere in the standalone financial statements and in
other management reports, which, among other things,
reflect the potential impact of climate-related development
on the business, such as increased cost of production as a
result of measures to reduce carbon emission.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the year when the asset
is realized or the liability is settled, based on tax rates (and
tax laws) that have been enacted or substantively enacted
at the reporting date.
Deferred tax relating to items recognised outside profit
or loss is recognised outside profit or loss (either in other
comprehensive income or in equity). Deferred tax items
are recognised in correlation to the underlying transaction
either in OCI or directly in equity.
Tax benefits acquired as part of a business combination, but
not satisfying the criteria for separate recognition at that
date, are recognised subsequently if new information about
facts and circumstances change. Acquired deferred tax
benefits recognised within the measurement period reduce
goodwill related to that acquisition if they result from
new information obtained about facts and circumstances
existing at the acquisition date. If the carrying amount
of goodwill is zero, any remaining deferred tax benefits
are recognised in OCI/ capital reserve depending on the
principle explained for bargain purchase gains. All other
acquired tax benefits realised are recognised in profit or loss.
The Company offsets deferred tax assets and deferred tax
liabilities if and only if it has a legally enforceable right to
set off current tax liabilities and assets and the deferred
tax assets and deferred tax liabilities relate to income taxes
levied by the same taxation authorities.
Sales tax/Goods and Service Tax (GST) paid on acquisition
of assets or on incurring expenses
Expenses and assets are recognised net of the amount of
sales tax / GST Paid, except:
- When the tax incurred on a purchase of assets or
services is not recoverable from the taxation authority,
in which case, the tax paid is recognized as part of
the cost of acquisition of the asset or as part of the
expense item, as applicable.
- When receivables and payables are stated with the
amount of tax included.
The net amount of tax recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables in the balance sheet.
o) Leases
The Company assesses at contract inception whether a
contract is, or contains, a lease. That is, if the contract
conveys the right to control the use of an identified asset for
a period of time in exchange for consideration.
Company as a lessee
The Company applies a single recognition and measurement
approach for all leases, except for short-term leases and
leases of low-value assets. The Company recognises lease
liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets.
Right-of-use assets
The Company recognizes right-of-use assets at the
commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use assets are
measured at cost, less any accumulated depreciation and
impairment losses, and adjusted for any remeasurement
of lease liabilities. The cost of right-of-use assets includes
the amount of lease liabilities recognized, initial direct
costs incurred, and lease payments made at or before the
commencement date less any lease incentives received.
Right-of-use assets are depreciated on a straight-line basis
over the shorter of the lease term and the estimated useful
lives of the assets, as follows:
⢠Buildings 2 to 10 years
⢠Furniture 4 to 10 years
If ownership of the leased asset transfers to the Company
at the end of the lease term or the cost reflects the exercise
of a purchase option, depreciation is calculated using the
estimated useful life of the asset.
The right-of-use assets are also subject to impairment. Refer
to the accounting policies in Section Impairment of non¬
financial assets.
Lease Liabilities
At the commencement date of the lease, the Company
recognized lease liabilities measured at the present value of
lease payments to be made over the lease term. The lease
payments include fixed payments (including in substance
fixed payments) less any lease incentives receivable,
variable lease payments that depend on an index or a rate,
and amounts expected to be paid under residual value
guarantees. The lease payments also include the exercise
price of a purchase option reasonably certain to be exercised
by the Company and payments of penalties for terminating
the lease, if the lease term reflects the Company exercising
the option to terminate. Variable lease payments that
do not depend on an index or a rate are recognized as
expenses (unless they are incurred to produce inventories)
in the period in which the event or condition that triggers
the payment occurs.
In calculating the present value of lease payments, the
Company uses its incremental borrowing rate at the
lease commencement date because the interest rate
implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is
increased to reflect the accretion of interest and reduced for
the lease payments made. In addition, the carrying amount
of lease liabilities is remeasured if there is a modification, a
change in the lease term, a change in the lease payments
(e.g., changes to future payments resulting from a change
in an index or rate used to determine such lease payments)
or a change in the assessment of an option to purchase the
underlying asset.
Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition
exemption to its short-term leases of machinery and
equipment (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). It also applies the lease of
low-value assets recognition exemption to leases of office
equipment that are considered to be low value. Lease
payments on short-term leases and leases of low-value
assets are recognised as expense on a straight-line basis
over the lease term. Lease payments on short-term leases
and leases of low-value assets are recognised as expense on
a straight-line basis over the lease term.
p) Financial instruments
A Financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
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,
all financial assets are recognised initially at fair value plus,
in the case of financial assets not recorded at fair value
through profit or loss, transaction costs that are attributable
to the acquisition of the financial asset. 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 in section of 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 âsolely 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 market place (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:
⢠Debt instruments at amortised cost
⢠Debt instruments at fair value through other
comprehensive income (FVOCI)
⢠Debt instruments, derivatives and equity instruments
at fair value through profit or loss (FVTPL)
⢠Equity instruments designated at fair value through
other comprehensive income (FVOCI)
Debt instruments at amortised cost
A âdebt instrument'' is measured at the amortised cost if
the asset is held within a business model whose objective
is to hold assets for collecting contractual cash flows, and
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.
After initial measurement, such financial assets are
subsequently measured at amortised cost using the
effective interest rate (EIR) method. The effective interest
rate is the rate that exactly discounts estimated future
cash payments or receipts through the expected life of
the financial instrument to the gross carrying amount of
the financial asset or the amortised cost of the financial
liability. Amortised 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 amortisation
is included in other income in the Statement of Profit and
Loss. The losses arising from impairment are recognised in
the Statement of Profit and Loss.
Debt instrument at FVOCI
A âdebt instrument'' is classified as at the FVOCI if the
objective of the business model is achieved both by collecting
contractual cash flows and selling the financial assets, and
the asset''s contractual cash flows represent SPPI.
Debt instruments included within the FVOCI category are
measured initially as well as at each reporting date at fair
value. Fair value movements are recognised in the other
comprehensive income (OCI). On derecognition of the
asset, cumulative gain or loss previously recognised in OCI
is reclassified to the Statement of Profit and Loss. Interest
earned whilst holding FVTOCI debt instrument is reported
as interest income using the EIR method.
Debt instrument at FVTPL
FVTPL is a residual category for debt instruments. Any
debt instrument, which does not meet the criteria for
categorization as at amortised cost or as FVOCI, is classified
as at FVTPL. In addition, at initial recognition, the Company
may irrevocably elect to designate a debt instrument,
which otherwise meets amortised cost or FVOCI criteria, as
at FVTPL. However, such adoption is allowed only if doing
so reduces or eliminates a measurement or recognition
inconsistency (referred to as âaccounting mismatch'').
Debt instruments included within the FVTPL category are
measured at fair value with all changes recognised in the
Statement of Profit and Loss.
Equity investments
All equity investments in scope of Ind AS 109 are
measured at fair value. Equity instruments which are held
for trading and contingent consideration recognised by
an acquirer in a business combination to which Ind AS
103 applies are classified as at FVTPL. For all other equity
instruments, the Company may make an irrevocable
adoption to present subsequent changes in the fair value
under other comprehensive income subsequent changes
in the fair value. The Company makes such adoption on an
instrument-by-instrument basis. The classification is made
on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument
as at FVOCI, then all fair value changes on the instrument,
excluding dividends, are recognised in the OCI. There is no
recycling of the amounts from OCI to the Profit or Loss, even
on sale of investment. However, the Company may transfer
the cumulative gain or loss to retained earnings.
Equity instruments included within the FVTPL category are
measured at fair value with all changes recognised in the
Profit or Loss.
Impairment of financial assets
The Company recognises loss allowances for expected credit
loss on financial assets measured at amortised cost. At each
reporting date, the Company assesses whether financial
assets carried at amortised cost are credit-impaired. A
financial asset is âcredit-impaired'' when one or more events
that have detrimental impact on the estimated future cash
flows of the financial assets have occurred.
Evidence that the financial asset is credit-impaired includes
the following observable data:
- significant financial difficulty of the borrower or issuer;
- the breach of contract such as a default or being past
due for 180 days or more;
- the restructuring of a loan or advance by the
Company on terms that the Company would not
consider otherwise;
- it is probable that the borrower will enter bankruptcy
or other financial re-organisation; or
- the disappearance of active market for a security
because of financial difficulties.
The impairment methodology of the company depends
on whether there has been a significant increase in credit
risk since initial recognition. If credit risk has not increased
significantly, twelve month expected credit loss is used to
provide for impairment loss, otherwise lifetime expected
credit loss is used.
However, only in case of trade receivables, the Company
applies the simplified approach which requires expected
lifetime losses to be recognised from initial recognition of
the receivables.
The presumption under Ind As 109 with reference to
significant increases in credit risk since initial recognition
(when financial assets are more than 30 days past due),
has been rebutted and is not applicable to the Company,
as the Company is able to collect a significant portion of its
receivables that exceed the due date.
Measurement of expected credit losses
Expected credit losses are a probability-weighted estimate
of credit losses. Credit losses are measured as the present
value of all cash shortfalls (i.e. difference between the cash
flow due to the Company in accordance with the contract
and the cash flow that the Company expects to receive).
Presentation of allowance for expected credit losses in
the balance sheet
Loss allowance for financial assets measured at the
amortised cost is deducted from the gross carrying
amount of the assets.
Write-off
The gross carrying amount of a financial asset is written
off (either partially or in full) to the extent that there is no
realistic prospect of recovery. This is generally the case when
the Company determines that the debtors do not have
assets or sources of income that could generate sufficient
cash flows to repay the amount subject to the write-off.
However, financial assets that are written off could still be
subject to enforcement activities in order to comply with the
Company''s procedure for recovery of amounts due.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is
primarily derecognized (i.e., removed from the Company''s
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 âpass-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 recognise the
transferred asset to the extent of the Company''s continuing
involvement. In that case, the Company also recognises 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.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or 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, financial guarantee contracts and derivative
financial instruments.
The Company holds Derivative financial instruments which
are initially recognized at fair value on the date the contract
is entered into and are subsequently remeasured at fair
value at each reporting date. All derivatives are classified as
held for trading and are accounted for at fair value through
profit or loss (FVTPL), unless they are designated and
effective as hedging instruments.
Subsequent measurement
For purposes of subsequent measurement, financial
liabilities are classified in two categories:
⢠Financial liabilities at fair value through profit
or loss (FVTPL)
⢠Financial liabilities at amortised cost (loans
and borrowings)
A financial liability is classified as at FVTPL if it is classified
as held-for-trading, or it is a derivative or it is designated as
such on initial recognition. Financial liabilities at FVTPL are
measured at fair value and net gains and losses, including
any interest expense, are recognised in Statement of
Profit and Loss. Other financial liabilities are subsequently
measured at amortised cost using the effective interest
method. Interest expense and foreign exchange gains and
losses are recognised in Statement of Profit and Loss. Any
gain or loss on derecognition is also recognised in Statement
of Profit and Loss.
Derecognition of financial liabilities
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.
Offsetting
Financial assets and financial liabilities are offset and the
net amount presented in the Balance Sheet when, and only
when, the Company currently has a legally enforceable right
to set off the amounts and it intends either to settle them
on a net basis or to realise the asset and settle the liability
simultaneously.
q) Impairment of non-financial assets
The Company''s non-financial assets, are reviewed at each
reporting date to determine if there is indication of any
impairment. If any such indication exists, then the asset''s
recoverable amount is estimated. For impairment testing,
assets that do not generate independent cash flows are
grouped together into cash generating units (CGUs). Each
CGU represents the smallest group of assets that generate
cash inflows that are largely independent of the cash
inflows of other assets or CGUs.
The recoverable amount of as CGU (or an individual asset)
is the higher of its value in use and fair value less cost to sell.
Value in use is based on the estimated future cash flows,
discounted to their present value using a pre-tax discount
rate that reflects current assessments of the time value of
money and the risks specific to the CGU (or the asset).
The Company''s corporate assets (e.g., central office building
for providing support to various CGUs) do not generate
independent cash inflows. To determine impairment of a
corporate asset, recoverable amount is determined for the
CGUs to which the corporate asset belongs.
An impairment loss is recognised whenever the carrying
amount of an asset or its cash generating unit exceeds its
recoverable amount. Impairment losses are recognised in
statement of profit or loss. An impairment loss is reversed if
there has been a change in the estimates used to determine
the recoverable amount. Such a reversal is made only to the
extent that the asset''s carrying amount does not exceed
the carrying amount that would have been determined net
of depreciation or amortisation, if no impairment loss had
been recognised.
r) Foreign currency transactions
Initial recognition
Transactions in foreign currencies are initially recorded by
the Company at functional currency spot rates at the date
the transaction first qualifies for recognition. However,
for practical reasons, the Company uses average rate if
the average approximates the actual rate at the date of
the transaction.
Measurement at the reporting date
Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at the
exchange rate at the reporting date. Exchange differences
arising on settlement or translation of monetary items are
recognised in statement of profit and loss with the exception
of the following:
Exchange differences arising on monetary items that
forms part of a reporting entity''s net investment in a
foreign operation are recognised in profit or loss in the
separate financial statements of the reporting entity
or the individual financial statements of the foreign
operation, as appropriate. In the financial statements
that include the foreign operation and the reporting entity
(e.g., consolidated financial statements when the foreign
operation is a subsidiary), such exchange differences are
recognised initially in OCI. These exchange differences are
reclassified from equity to profit or loss on disposal of the
net investment.
Exchange differences arising on monetary items that
are designated as part of the hedge of the Group''s net
investment of a foreign operation. These are recognized in
OCI until the net investment is disposed of, at which time,
the cumulative amount is reclassified to profit or loss.
Tax charges and credits attributable to exchange differences
on those monetary items are also recorded in OCI.
Non-monetary assets and liabilities that are measured
at fair value in a foreign currency are translated into the
functional currency at the exchange rate when the fair
value was determined. Non-monetary assets and liabilities
that are measured based on historical cost in a foreign
currency are translated at the exchange rate at the date of
the initial transaction. The gain or loss arising on translation
of non-monetary items measured at fair value is treated in
line with the recognition of the gain or loss on the change
in fair value of the item (i.e., translation differences on items
whose fair value gain or loss is recognised in OCI or profit or
loss are also recognised in OCI or profit or loss, respectively).
s) Operating segments
An operating segment is a component of the Company
that engages in business activities from which it may
earn revenues and incur expenses, including revenues
and expenses that relate to transactions with any of the
Company''s other components, and for which discrete
financial information is available. All operating segments''
operating results are reviewed regularly by the Company''s
Chief Executive Officer/Managing Director as Chief
Operating Decision Maker (CODM) to make decisions
about resources to be allocated to the segments and assess
their performance.
t) 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, that are readily
convertible to a known amount of cash and 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.
u) Cash flow statement
Cash flows are reported using the indirect method, whereby
profit for the period is adjusted for the effects of transactions
of a non-cash nature, any deferrals or accruals of past or
future operating cash receipts or payments and item of
income or expenses associated with investing or financing
cash flows. The cash flows from operating, investing and
financing activities of the Company are segregated.
v) Earnings per share
Basic earnings/ (loss) per share are calculated by dividing
the net profit/ (loss) for the year attributable to equity
shareholders of the Company by the weighted average
number of equity shares outstanding during the year. The
weighted average number of equity shares outstanding
during the year is adjusted for events of bonus issue and
share split. For the purpose of calculating diluted earnings/
(loss) per share, the net profit or loss for the year attributable
to equity shareholders and the weighted average number
of shares outstanding during the year are adjusted for the
effects of all dilutive potential equity shares.
w) Measurement of fair values
The Company measures financial instruments, such as,
derivatives 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:
1. In the principal market for the asset or liability, or
2. I n 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, maximising the
use of relevant observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities for which fair value is measured
or disclosed in the standalone 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 â Quoted (unadjusted) market prices in active
markets for identical assets or liabilities
Level 2 â Valuation techniques for which the lowest level
input that is significant to the fair value measurement is
directly or indirectly observable
Level 3 â 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 standalone
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.
Further information about the assumptions made in
measuring fair values used in preparing these standalone
financial statements is included in the respective notes.
2.3 Changes in accounting policies and disclosures
New and amended standards
I. Ind AS 1 (Presentation of Financial Statements):
Classification of Liabilities: Clarifies that liabilities are
classified as current/non-current based on rights existing
at the reporting date, replacing âunconditional rightâ with
âsubstantive rightâ to defer settlement.
Covenants: Enhanced disclosures are required for covenants
that must be met within 12 months, specifically how entities
manage the risk of breaching those covenants.
The Company has reviewed the new pronouncements and
based on its evaluation it has determined that it does not
have any impact in its financial statements
II. Ind AS 7 & Ind AS 107 (Cash Flows & Financial Instruments):
Supplier Finance Arrangements: Companies must provide
detailed disclosures on supplier finance arrangements
(reverse factoring), including terms, outstanding balances,
and liquidity risk, to improve transparency.
The Company has reviewed the new pronouncements and
based on its evaluation has determined that it does not
have any impact in its financial statements
III. Ind AS 12 (Income Taxes - Pillar Two): Global Minimum
Tax: Introduces a temporary exception to deferred tax
accounting related to Pillar Two model rules. It requires new
disclosures about exposure to this tax, which treats top-up
taxes as current tax expenses
The Company has reviewed the new pronouncements and
based on its evaluation has determined that it does not
have any impact in its financial statements
IV. Ind AS 21 (Effects of Changes in Foreign Exchange Rates):
Lack of Exchangeability: Provides guidance on assessing
when a currency is exchangeable and how to determine the
spot rate when it is not.
The Company has reviewed the new pronouncements and based
on its evaluation has determined that it does not have any impact
in its financial statements
2.4 Significant accounting judgements, estimates and assumptions
The preparation of the Company''s standalone financial
statements requires management to make judgements, estimates
and assumptions that affect the reported amounts of revenues,
expenses, assets and 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.
Judgments
Information about judgments made in applying accounting
policies that have the most significant effects on the amounts
recognised in the standalone financial statements is included in
the following notes:
- Note 2.2 (c) - Assessment of useful life of Property,
plant and equipment
- Note 2.2 (d) - Assessment of useful life of Intangible assets
- Note 2.2 (g) and (i) - Provisions and contingent liabilities
- Note 2.2 (n) - Income taxes
Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties
that have a significant risk of resulting in a material adjustment in
the year ended March 31, 2026 is included in the following notes:
a) Defined benefit plans
The present value of the gratuity is determined using
actuarial valuations. An actuarial valuation involves
making various assumptions that may differ from actual
developments in the future. These include the determination
of the discount rate, future salary increases and mortality
rates. Due to the complexities involved in the valuation and
its long-term nature, a defined benefit obligation is highly
sensitive to changes in these assumptions. All assumptions
are reviewed at each reporting date.
The parameter most subject to change is the discount rate.
In determining the appropriate discount rate for plans
operated in India, the management considers the interest
rates of government bonds in currencies consistent with the
currencies of the post-employment benefit obligation. The
mortality rate is based on publicly available mortality tables
for the specific countries. 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 for the respective countries.
b) Taxes
Uncertainties exist with respect to the interpretation of
complex tax regulations, changes in tax laws, and the
amount and timing of future taxable income. Given the wide
range of business relationships and the long term nature and
complexity of existing contractual agreements, differences
arising between the actual results and the assumptions
made, or future changes to such assumptions, could
necessitate future adjustments to tax income and expense
already recorded. The Company establishes provisions,
based on reasonable estimates. The amount of such
provisions is based on various factors, such as experience
of previous tax audits and differing interpretations of tax
regulations by the taxable entity and the responsible tax
authority. Such differences of interpretation may arise
on a wide variety of issues depending on the conditions
prevailing in the respective domicile of the companies.
Refer Note 2.2 (n) and 9- Recognition of deferred tax assets:
availability of future taxable profit against which tax losses
carried forward can be used;
c) Contingencies
Refer Note 35 - Recognition and measurement of provision
and contingencies, key assumptions about the likelihood
and magnitude of an outflow of resources;
d) Impairment of non-financial assets
Impairment exists when the carrying value of an asset or
cash generating unit exceeds its recoverable amount, which
is the higher of its fair value less costs of disposal and its
value in use. The fair value less costs of disposal calculation
is based on available data from binding sales transactions,
conducted at 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. These estimates are most relevant
to goodwill and other intangibles with indefinite useful lives
recognised by the Group.
Refer Note 2.2 (p)- Impairment test of non-financial assets:
key assumptions underlying recoverable amounts;
e) Determining the lease term of contracts with renewal
and termination options - Company as lessee:
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. The Company based its assumptions and
estimates on parameters available when the standalone
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.
Leases - Estimating the incremental borrowing rate: The
Company cannot readily determine the interest rate implicit
in the lease, therefore, it uses its incremental borrowing
rate (IBR) to measure lease liabilities. The IBR is the rate
of interest that the Company would have to pay to borrow
over a similar term, and with a similar security, the funds
necessary to obtain an asset of a similar value to the right-
of-use asset in a similar economic environment. The IBR
therefore reflects what the Company âwould have to pay'',
which requires estimation when no observable rates are
available or when they need to be adjusted to reflect the
terms and conditions of the lease. The Company estimates
the IBR using observable inputs (such as market interest
rates) when available and is required to make certain entity-
specific estimates.
f) Useful life of Property, plant and equipment
and intangibles:
The management estimates the useful life and residual
value of property, plant and equipment and other
intangible assets. These assumptions are reviewed at each
reporting date.
g) Provision for slow and obsolete inventory:
The Company is in business of trading of watches,
accessories & luxury items and rendering of related after¬
sales services and consists of inventory of watches at various
stores of the Company. The Company on a periodic basis
and at each reporting date assess the inventory age listing
to identify slow-moving allowance and obsolete inventories
and then estimates the amount of inventory provision.
In doing so, it estimates the net realisable value of aged
inventory based on current selling price of such/similar aged
inventory and likely sales volume based discount offered
and past sales trend. Also, the Company reviews catalogues
of various brands to verify whether all inventory items are
appearing in them.
There are no projects whose completion is over due or has exceeded its cost compared to its original plan during the financial year ending
2025-26 and 2024-25.
There are no restrictions over the title of the Company''s intangible assets, nor any intangible assets pledged as security for liabilities.
** Impairment testing of brand (Ethos)
(a) Discount rate: Discount rate represent the current market assessment of the risks specific to the CGU, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Company and is derived from its weighted average cost of capital (WACC). The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Company''s investors.
(b) Growth rate is based on the Company''s projection of business and growth of the industry
An analysis of the calculation''s sensitivity to a change in the key parameters (revenue growth, operating margin, discount rate and longterm growth rate) based on reasonably probable assumptions, did not identify any probable scenarios where the Brand''s recoverable amount would fall below its carrying amount.
b) During the year ended March 31, 2024, There was a change in the capital structure of Silvercity Brands AG (the wholly owned subsidiary) due to further allotment of 39,00,000 shares of nominal value of CHF 1 each, the shareholding of the Company has reduced to 35% from the erstwhile 100%. Owing to this, Silvercity Brands AG ceases to be the wholly owned subsidiary of the Company with effect from March 11, 2024. Henceforth, Silvercity Brands AG has been identified as an associate of the Company as on March 31, 2024. During the year ended March 31, 2025, the Company invested Rs. 951.66 to acquire 3,46,000 shares of nominal value of CHF 1 each out of 12,20,000 shares allocated by Silvercity Brands AG, resulted into further reduction of shareholding to 33.88%.
c) The Company has incorporated a wholly owned subsidiary, namely Ethos Lifestyle Private Limited (formerly knows as RF Brands
Private Limited) on February 02, 2024 in accordance with the provisions of Companies Act, 2013 read with rules made thereunder.
During the year ended March 31,2025, the Company has invested an amount of Rs 500 (March 31, 2024: 100) in its paid up share capital by subscribing to 50,00,000 (March 31, 2024: 10,00,000) equity shares of Rs. 10 each.
d) During the year ended March 31,2024, the Company has further invested an amount of Rs. 100 in the paid up share capital of its joint venture
company namely, Pasadena Retail Private Limited by subscribing to 10,00,000 equity shares of Rs. 10 each through Rights Issue having 50%
shareholding (March 31,2024: 50%) in Pasadena Retail Private Limited.
e) During the year ended March 31, 2024, the Company has acquired 6.25% of equity shares, in Switzerland based Company HAUTE-RIVE WATCHES SA, a new specialized watch making brand having registered office at Chemin des Virettes 11, Corcelles, NE for the consideration of CHF 1,25,000 (equivalent to Rs. 112.76). The Company received the letter for allotment of equity shares on April 28, 2023.
1. As on March 31, 2025, Rs.135.21 (March 31,2024: Rs.132.44) was recognised as an expense for inventories carried at net realisable value.
2. Inventories comprises of traded goods are valued at the lower of cost and net realisable value.
The cost of inventories is based on the specific identification, and includes expenditure incurred in acquiring the inventories less duties and taxes those are recoverable from government authorities, and other costs incurred in bringing them to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to make the sale. The comparison of cost and net realisable value is made on an item-by-item basis.
During the current year, the management has decided to change the method of valuation of inventory from weighted average cost method to specific identification with effect from 1 June 2024 . Accordingly, all the purchases made post 1 June 2024 has been valued on item-by-item basis. As per the assessment of the management change is not having material impact on the financial statement.
(a) Right preferences and restrictions attached to equity shares
The Company has only one class of equity shares having a par value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share. The voting rights of an equity shareholder on show of hand or through proxy shall be in proportion to his share of the paid up capital of the Company. The Company declares and pays dividends in Indian Rupees. The Dividend proposed by the Board of Directors (Except for interim dividend) is subject to approval of shareholders in the ensuring Annual General Meeting. In the event of liquidation of the Company the holders of equity shares will be entitled to receive the remaining assets of the Company after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
(e) Bonus shares, shares buyback and issue of shares without consideration being received in cash (during five years immediately preceding March 31,2025).
During the five years immediately preceding March 31, 2025 (''the period''), neither any bonus shares have been issued nor any shares have been bought back. In addition, during the period, no shares have been issued for consideration other than cash except as follows:-
(i) During the year ended March 31, 2020, 576,293 14% cumulative compulsory convertible preference shares of Rs.130 each were converted into 576,923 equity shares of Rs.10 each at a premium of Rs.120 per share. Further, 15,000 equity shares of Rs.10 each had been issued under employee stock option plans for which only exercise price had been received in cash.
(ii) During the year ended March 31, 2022, 104,750 equity shares of Rs.10 each had been issued under employee stock option plans for which only exercise price had been received in cash.
17. Other equity
(also refer to Statement of Changes in Equity)
(i) Deemed capital contribution
a) Includes Rs.14.51 towards fair value of guarantees given by the Holding Company in the earlier years.
b) Includes Rs.36.00 towards interest accrued on 12% cumulative redeemable preference shares, classified as finance cost, which is no longer payable at the time of redemption.
Nature and purpose of reserves
(ii) Share options outstanding account
The fair value of the equity settled share based payment transactions with employees is recognised in Statement of Profit and Loss with corresponding credit to share option outstanding account.
(ii) Capital reserve
Reserve created under the scheme of arrangement (Business Combination). This will be utilised in accordance with the provisions of the Companies Act, 2013.
(iii) Securities premium
Securities premium represents the excess consideration received by the Company over the face value of the shares issued to shareholders. This will be utilised in accordance with the provisions of the Companies Act, 2013.
The Company, at its QIP meeting held on November 03, 2023 approved allotment of 11,31,210 Equity Shares of Rs.10 each pursuant to Qualified institutional placement at a securities premium of Rs.1,537 per share under Private Placement, to eligible qualified institutional buyers. The total offer expenses in relation to share issued amounting to Rs.540.18 has been adjusted against securities premium. Refer Note 47.
(iv) Retained earnings
Retained earnings are the profit that the Company has earned till date, less dividends or other distributions paid to shareholders. Retained earnings includes re-measurement (loss) / gain on defined benefit plans, net of taxes that will not be reclassified to statement of Profit and Loss. Retained earnings is a free reserve available to the Company and eligible for distribution to shareholders, in case where it is having positive balance representing net earnings till date.
a) Vehicle loans from banks amounting to Nil (March 31, 2024: Rs.20.13) are secured against hypothecation of the specified vehicle purchased from proceeds of the said loan. The rate of interest on vehicle loans is Nil (March 31,2024: 7.10% to 9.25%).
b) Deposits from Shareholders carry an interest rate ranging between 10.25% to 10.75% (March 31,2024: 10.25% to 10.75%) per annum and carry a maturity period from 6 to 12 months from the respective date of deposits.
(a) The fair value in respect of the unquoted equity investments has been determined using discounted cash flow method and Market comparison technique based on market multiples derived from quoted prices of companies comparable to the investee. The significant unobservable inputs used are expected cash flows, estimated EBITDA of the investee.
(b) Fair value of non-current financial assets and non- current financial liablilites has not been disclosed as there is no significant differences between carrying value and fair value.
(c) Fair valuation of financial assets and liabilities with short term maturities is considered as approximate to respective carrying amount due to the short term maturities of these instruments.
(d) The fair value of borrowings is based upon a discounted cash flow analysis that used the aggregate cash flows from principal and finance costs over the life of the debt and current market interest rates.
(e) The fair value of derivative financial instrument has been determined using valuation techniques with market observable input. The model incorporate various input include the credit quality of counter-parties and foreign exchange forward rate.
(f) There are no transfers between Level 1, Level 2 and Level 3 during the year ended March 31, 2025 and March 31, 2024
(i) Risk management framework
The Company''s Risk management Committee has overall responsibility for the establishment and oversight of the Company''s risk management framework. The Company''s risk management policies are established to identify and analyse the risk faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to effect changes in market conditions and Company''s activities. The Company, through its training and management standards and procedures, aims to maintain discipline and constructive control environment in which all employees understand their roles and obligations.
The Company''s audit committee oversees how management monitors compliance with Company''s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to risk faced by the Company. The audit committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and adhoc reviews of risk management controls and procedures, the result of which are reported to audit committee.
The Company has exposure to the following risks arising from financial instruments:
- Credit risk (see (ii));
- Liquidity risk (see (iii));and
- Market risk (see (iv))
(ii) Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The carrying amount of financial assets represents the maximum credit risk exposure and arises principally from the Company''s receivable from customers and loans.
Trade receivables and Loans
The Company''s retail business is pre-dominantly on cash and carry basis which is largely through credit-card collections. The credit risk on such collections is minimal, since they are primarily owned by customers'' card issuing banks. The Company has adopted a policy of dealing with only credit worthy counterparties in case of institutional customers and the credit risk exposure for institutional customers is managed by the Company by credit worthiness checks. The Company also carries credit risk on lease deposits with landlords for store properties taken on leases, for which agreements are signed and property possessions timely taken for store operations. The risk relating to refunds after store shut down is managed through successful negotiations or appropriate legal actions, where necessary.
The Company''s experience of delinquencies and customer disputes have been minimal. Further, Trade and other receivables consist of a large number of customers, across geographies within India, hence, the Company is not exposed to concentration risks.
Cash and cash equivalents
The Company holds cash and cash equivalents of Rs.2,491.14 as at March 31, 2025 (March 31, 2024: Rs.5,942.15). The cash and cash equivalents are mainly held with scheduled banks
(iii) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial assets. The Company''s approach to manage liquidity is to have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed circumstances, without incurring unacceptable losses or risking damage to the Company''s reputation.
Management manages the liquidity risk by monitoring cash flow forecasts on a periodic basis and maturity profiles of financial assets and liabilities. This monitoring takes into account the accessibility of cash and cash equivalents and additional undrawn financing facilities. The Company will continue to consider various borrowings of leasing options to maximize liquidity and supplement cash requirements as necessary. Post completion of Initial Public Offer, the Company has repaid all working capital loans / limits and part of shareholder deposits and also, surrendered the sanctioned borrowing limits. During the current year, The Company has got fresh sanction of borrowing limits. Presently, no amount is drawn against the limits and entire sanction limit of Rs. 11,000 is underdrawn as on March 31,2025.
Exposure to liquidity risk
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include contractual interest payments.
(iv) Market Risk
a) Product price risk
In a potentially inflationary economy, the Company expects periodical price increases across its retail product lines. Product price increases which are not in line with the levels of customers'' discretionary spends, may affect the business/retail sales volumes. Since the Company operates in premium and luxury watch category, the demand is reasonably inelastic to changes in price. However, the Company continually monitor and compares prices of its products in other developed markets as its customers tend to compare prices across markets. In the event that prices deviate significantly unfavourably from the markets, the Company negotiates with its vendor for change of prices. The Company also manages the risk by offering judicious product discounts to retail customers to sustain volumes. The Company negotiates with its vendors for purchase price rebates such that the rebates substantially absorb the product discounts offered to the retail customers. This helps the Company protect itself from significant product margin losses.
b) Interest rate risk
The Company is exposed to interest rate risk because funds are borrowed at both fixed and floating interest rates. Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rate. The borrowings of the Company are principally denominated in rupees with a mix of fixed and floating rates of interest. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings. As on March 31,2025, all the borrowings at have fixed rate of interest. The exposure of the Company''s borrowing to interest rate changes as reported to the management at the end of the reporting period are as follows:
c) Currency risk
The Company is exposed to currency risk to the extent that there is mismatch between the currencies in which purchases are denominated and the functional currency of the Company. The currencies in the which the Company is exposed to risk are CHF, USD, AED, AUD, SGD and EUR. The Company evaluates this risk on a regular basis and appropriate risk mitigating steps are taken, including but not limited, entering into forward contracts.
The Company''s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The management monitors the return on capital. The Company monitors capital using a ratio of ''adjusted net debt'' to ''total equity''. For this purpose, adjusted net debt is defined as total borrowings including lease liabilities and trade payables net of cash and cash equivalents. Equity comprises all components of equity (as shown in the Balance Sheet). The Company always tries to minimize its adjusted net debt to equity ratio.
II. Defined benefit plan - Gratuity
The employees'' gratuity fund scheme managed by Life Insurance Corporation of India is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The Company made annual contributions to the LIC of India of an amount advised by the LIC.
The above defined benefit plan exposes the Company to following risks:
Interest rate risk:
The defined benefit obligation calculated uses a discount rate based on government bonds. If bond yields fall, the defined benefit obligation will tend to increase.
Demographic risk:
This is the risk of variability of results due to unsystematic nature of decrements that include mortality, withdrawal, disability and retirement. The effect of these decrements on the defined benefit obligation is not straight forward and depends upon the combination of salary increase, discount rate and vesting criteria. It is important not to overstate withdrawals because in the financial analysis the retirement benefit of a short career employee typically costs less per year as compared to a long service employee.
The Company actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from the employee benefit obligations. The Company has not changed the processes used to manage its risks from previous periods. The funds are managed by specialised team of Life Insurance Corporation of India.
The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same methods (present value of defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.
The Company pending litigations pertaining to proceedings pending with various direct tax, indirect tax and other authorities. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required or disclosed as contingent liabilities where applicable, in its consolidated financial statements. The Group does not expect the outcome of these proceedings to have a materially adverse effect on its consolidated financial statements.
iii) Pursuant to recent judgement by the Hon''ble Supreme Court dated February 28, 2019, it was held that basic wages, for the purpose of provident
fund, to include special allowances which are common for all employees. However, there is uncertainty with respect to the applicability of the judgement and period from which the same applies. Owing to the aforesaid uncertainty and pending clarification from the authorities in this regard, the Company has not recognised any provision. Further, management also believes that the impact of the same on the Company will not be material.
36.Leases
A. Company as a lessee
The Company has lease contracts for various retail stores and furniture to be used for its operations. The Leases generally have lease terms 2 - 10 years for building and 4 - 10 years for furniture. The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. The Company is restricted from assigning or sub leasing the leased assets.
38. Segment information
Operating segments
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company''s other components, and for which discrete financial information is available.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker of the Company. As the chief operating decision maker of the Company assess the financial performances and position of the Company as a whole and makes strategic decision, the management considers retail trading of premium and luxury watches, accessories and other luxury items and including related after sale services as a single operating segment as per Ind AS 108, hence separate segment disclosure, have not been furnished.
Information about major customers
There are no revenues from transactions with a single external customer amounting to 10% or more of an entity''s revenues during the current and previous year.
** Explanation for variance in ratios
a. Debt Equity Ratio - The debt-equity ratio is increased due to a rise in lease liabilities, despite growth in equity, indicating slightly higher financial leverage.
b. Debt Service Coverage Ratio - The ratio has improved due to major reduction in debt service obligations, indicating better debt coverage capacity.
c. Trade payables turnover Ratio - Trade payables turnover ratio have increased indicating faster payments to suppliers during the period in spite of increase in purchases
d. Return on Investment - The Company has invested funds in current year and the increased its investment base on account, whose impact in the form of returns will be seen in coming years.
The decrease in ROI from 6.75 to 3.44 provides an opportunity to reevaluate and optimize investments for better returns.
44. During the year ended March 31, 2024, There was a change in the capital structure of Silvercity Brands AG (the wholly owned subsidiary) due to further allotment of 39,00,000 shares of nominal value of CHF 1 each, the shareholding of the company has reduced to 35% from the erstwhile 100%. Owing to this, Silvercity Brands AG ceases to be the wholly owned subsidiary body corporate of the company with effect from March 12, 2024. Henceforth, Silvercity Brands AG has been identified as an associate of the Parent company as on March 31, 2024.
During the year ended March 31,2025, the Company has futher invested Rs. 951.66 to acquire 3,46,000 shared of nominal value of CHF 1 each out of 12,20,000 shares allocated by Silvercity Brands AG, resulted into further reduction of shareholding to 33.88%.
(An amount of Rs. 479.12 is payable to Silvercity Brands AG on account of partially paid-up share capital for 3,46,000 shares as of March 31,2025)"
45. Other Statutory Information
1) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
2) The Company does not have any transactions with companies struck off.
3) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
4) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
5) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries)
with the understanding that the Intermediary shall:
a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries); or
b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries;
6) The Company have not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
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,
7) The Company 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
8) The Company is not declared as wilful defaulter by any bank or financial institution
46. During the previous year ended March 31, 2023, the Company had completed its Initial Public Offering (âIPO'') of 45,81,500 equity shares of face value of Rs. 10 each at an issue price of Rs.878 per share (including securities premium of Rs.868 per share). The issue was comprised of fresh issue of 42,71,070 equity shares aggregating to Rs. 37,500.00 and offer for sale of 3,10,430 equity shares aggregating to Rs.2,725.58. The equity shares of the Company were listed on BSE Limited and National Stock Exchange of India Limited on May 30, 2022.
Consequent to allotment of fresh issue, the paid-up equity share capital of the Company stands increased from Rs.1,907.82 consisting of 1,90,78,163 equity shares of Rs.10 each to Rs.2,334.92 consisting of 2,33,49,233 Equity Shares of Rs.10 each."
48. The Company has used accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the accounting software except that, the feature of recording audit trail for direct changes to database was enabled and retained from 8 August 2024 onwards for all user ids and for certain limited tables only.
49. There are no significant events after reporting date which need to be disclosed.
There are no projects whose completion is over due or has exceeded its cost compared to its original plan during the financial year ending 2023-24 and 2022-23.
There are no restrictions over the title of the Company''s intangible assets, nor any intangible assets pledged as security for liabilities.
*** Impairment Testing of Brand (Ethos)
The Company has entered into an agreement dated January 1,2022 with its Holding company i.e. KDDL Limited to purchase its brand-name âEthosâ and âSummitâ (including trademarks, trade names, logos and all related rights) for an agreed amount of Rs. 4017.
The Company performed its annual impairment test for the year ended March 31, 2024. The recoverable amount of Intangible Asset (Brand) as at March 31, 2024 was determined based on a value in use calculation using cash flow projections from financial budgets approved by senior management covering a five-year period.
(a) Discount rate: Discount rate represent the current market assessment of the risks specific to the CGU, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Company and is derived from its weighted average cost of capital (WACC). The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Company''s investors.
(b) Growth rate is based on the Company''s projection of business and growth of the industry
An analysis of the calculation''s sensitivity to a change in the key parameters (revenue growth, operating margin, discount rate and long-term growth rate) based on reasonably probable assumptions, did not identify any probable scenarios where the Brand''s recoverable amount would fall below its carrying amount.
b) During the previous year ended March 31, 2023, the Company had acquired 100% stake in Silvercity Brands AG, the Swiss stock corporation having its registered seat in Grenchen, Switzerland from Philipp Schaller, c/o Badertscher Rechtsanwalte AG Muhlebachstrasse 32 8008 Zurich. The Share Capital of the company was CHF 100,000, divided into 100,000 registered shares with a nominal value of CHF 1 each and paid-up Share Capital was 50,000 shares for CHF 1 each. The purchase consideration for acquisition of shares was at CHF 50,000 in an all-cash deal. The Company paid CHF 50,000 on March 31, 2023. Silvercity Brands AG was wholly owned subsidiary company of Ethos Limited as on March 31, 2023.
During the year ended March 31,2024, the Company has further infused CHF 20,50,000, for issue of 20,50,000 registered shares with nominal value of CHF 1 each in Silvercity Brands AG. As on date, Company holds 21,00,000 equity shares of CHF 1 each (equivalent to Rs. 1,919.50) in Silvercity Brands AG
There was a change in the capital structure of Silvercity Brands AG (the wholly owned subsidiary) due to further allotment of 39,00,000 shares of nominal value of CHF 1 each, the shareholding of the Company has reduced to 35% from the erstwhile 100%. Owing to this, Silvercity Brands AG ceases to be the wholly owned subsidiary body corporate of the Company with effect from March 11, 2024. Henceforth, Silvercity Brands AG shall be identified as an associate of the Company.
c) The Company has incorporated a wholly owned subsidiary, namely RF Brands Private Limited on February 02, 2024 in accordance with the provisions of Companies Act, 2013 read with rules made thereunder and has invested an amount of Rs. 100 in its paid up share capital by subscribing to 10,00,000 equity shares of Rs. 10 each.
d) The Company has further invested an amount of Rs. 100 in the paid up share capital of its joint venture company namely, Pasadena Retail Private Limited by subscribing to 10,00,000 equity shares of Rs. 10 each through Rights Issue. During the year ended March 31, 2024, the Company owns 50% shareholding (March 31, 2023: 50%) in Pasadena Retail Private Limited.
e) The Company has acquired 6.25% of equity shares, in Switzerland based Company HAUTE-RIVE WATCHES SA, a new specialized watch making brand having registered office at Chemin des Virettes 11, Corcelles, NE for the consideration of CHF 1,25,000 (equivalent to Rs. 112.76). The Company received the letter for allotment of equity shares on April 28, 2023.
2. The Company mainly is in business of retail trading of premium and luxury watches, accessories & other luxury items and rendering of related after sale services and consists of inventory of watches at various stores of the Company. The Company on a periodic basis physically verifies the inventory and makes an assessment of the inventory age listing to identify the slow-moving and obsolete inventories. The exercise has been carried out throughout the year and also at the year end. Considering the fact that, the Company mainly is into the business of trading of high-end luxury watches, the holding period for the same is higher and identification of slow-moving and obsolete inventories involved judgements considering the nature of the retail industry.
(a) Right preferences and restrictions attached to equity shares
The Company has only one class of equity shares having a par value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share. The voting rights of an equity shareholder on show of hand or through proxy shall be in proportion to his share of the paid up capital of the Company. The Company declares and pays dividends in Indian Rupees. The Dividend proposed by the Board of Directors (Except for interim dividend) is subject to approval of shareholders in the ensuing Annual General Meeting. In the event of liquidation of the Company the holders of equity shares will be entitled to receive the remaining assets of the Company after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
(e) Bonus shares, shares buyback and issue of shares without consideration being received in cash (during five years immediately preceding March 31, 2024).
During the five years immediately preceding March 31, 2024 (''the period''), neither any bonus shares have been issued nor any shares have been bought back. In addition, during the period, no shares have been issued for consideration other than cash except as follows:-
(i) During the year ended March 31, 2020, 576,293 14% cumulative compulsory convertible preference shares of Rs.130 each were converted into 576,923 equity shares of Rs.10 each at a premium of Rs.120 per share. Further, 15,000 equity shares of Rs.10 each had been issued under employee stock option plans for which only exercise price had been received in cash.
(ii) During the year ended March 31,2022, 104,750 equity shares of Rs.10 each had been issued under employee stock option plan for which only exercise price had been received in cash.
Consequent to allotment of aforesaid equity shares on November 3, 2023, the paid-up equity share capital of the Company stands increased from Rs. 2,334.92 consisting of 2,33,49,233 equity shares of Rs. 10 each to Rs. 2,448.04 consisting of 2,44,80,443 Equity Shares of Rs. 10 each. Refer Note 47.
** During the previous year, the Company has issued and alloted 42,71,070 Equity Shares of Rs.10 each pursuant to Initial Public Offering at a securities premium of Rs.868 per share under Fresh Issue and offer for sale of 3,10,430 Equity Shares at an Offer Price of Rs.878 per Equity Share, to the respective applicants in various categories, in terms of the basis of allotment approved in consultation with the authorized representative of BSE Limited. The equity shares of the Company were listed on BSE Limited and National Stock Exchange of India Limited on May 30, 2022. Refer Note 46.
(also refer to Statement of Changes in Equity)
(i) Deemed capital contribution
a) Includes Rs.14.51 towards fair value of guarantees given by the holding company in the earlier years.
b) Includes Rs.36.00 towards interest accrued on 12% cumulative redeemable preference shares, classified as finance cost, which is no longer payable at the time of redemption.
Nature and purpose of reserves
(ii) Capital reserve
Reserve created under the scheme of arrangement (Business Combination). This will be utilised in accordance with the provisions of the Companies Act, 2013.
(iii) Securities premium
Securities premium represents the excess consideration received by the Company over the face value of the shares issued to shareholders. This will be utilised in accordance with the provisions of the Companies Act, 2013.
The Company, at its IPO meeting held on May 26, 2022 approved allotment of 42,71,070 Equity Shares of Rs.10 each pursuant to Initial Public Offering at a securities premium of Rs.868 per share under Fresh Issue and offer for sale of 3,10,430 Equity Shares at an Offer Price of Rs.878 per Equity Share, to the respective applicants in various categories, in terms of the basis of allotment approved in consultation with the authorized representative of BSE Limited. The equity shares of the Company were listed on BSE Limited and National Stock Exchange of India Limited on May 30, 2022. The total offer expenses in relation to share issued amounting to Rs.3,531.05 has been adjusted against securities premium. Refer Note 46.
The Company, at its QIP meeting held on November 03, 2023 approved allotment of 11,31,210 Equity Shares of Rs.10 each pursuant to Qualified institutional placement at a securities premium of Rs.1,537 per share under Private Placement, to eligible qualified institutional buyers. The total offer expenses in relation to share issued amounting to Rs.540.18 has been adjusted against securities premium. Refer Note 47.
(iv) Retained earnings
Retained earnings are the profit that the Company has earned till date, less dividends or other distributions paid to shareholders. Retained earnings includes re-measurement (loss) / gain on defined benefit plans, net of taxes that will not be reclassified to statement of Profit and Loss. Retained earnings is a free reserve available to the Company and eligible for distribution to shareholders, in case where it is having positive balance representing net earnings till date.
Notes:
a) Vehicle loans from banks amounting to Rs.20.13 (March 31, 2023: Rs.118.08 ) are secured against hypothecation of the specified vehicle purchased from proceeds of the said loan. The rate of interest on vehicle loans varies from 7.10% to 9.25% per annum (March 31, 2023: 7.10% to 9.25%). The above loans are repayable in monthly instalments within a period of next one to three years as per repayment schedule.
b) Deposits from Shareholders carry an interest rate ranging between 10.25% to 10.75% (March 31,2023: 10.25% to 10.75%) per annum and carry a maturity period from 24 to 36 months from the respective date of deposits.
Revenue from contract with the customers differ from the revenue as per contracted price due to factors such as loyalty points. The timing of revenue recognition for sale of products is when goods are transferred at a point of time. Customers are entitled to loyalty points on purchase of products which results in allocation of a portion of the transaction price to the loyalty points. Revenue is recognised when the points are redeemed. The Loyalty points can be redeemed within 15 months from the date of creation. The performance obligation in relation to sale of services is satisfied upon completion of service.
(a) Fair valuation of financial assets and liabilities with short term maturities is considered as approximate to respective carrying amount due to the short term maturities of these instruments.
(b) The fair value of borrowings is based upon a discounted cash flow analysis that used the aggregate cash flows from principal and finance costs over the life of the debt and current market interest rates. The own non-performance risk as at balance sheet date was assessed to be insignificant.
(c) The investment in subsidiary is measured at cost less impairment losses, if any. The investment in other companies, fair value in respect of the unquoted equity investments cannot be reliability estimated. The Company has currently measured them at net book value as per the latest audited financial statements available.
(d) The fair valuation of unquoted equity shares have been estimated using DCF model. The valuation requires management to make certain assumptions about the model inputs, including forecast cashflows, discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasoanably assessed and are used in management''s estimate of fairvalue for these unquoted equity investments.
(e) The fair valuation of other non current financial assets and other non current financial liabilities are approximately equivalent to carrying value.
There are no transfers between Level 1, Level 2 and Level 3 during the year ended March 31, 2024 and March 31, 2023
II. Financial risk management
(i) Risk management framework
The Company''s Risk management Committee has overall responsibility for the establishment and oversight of the Company''s risk management framework. The Company''s risk management policies are established to identify and analyse the risk faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to effect changes in market conditions and Company''s activities. The Company, through its training and management standards and procedures, aims to maintain discipline and constructive control environment in which all employees understand their roles and obligations.
The Company''s audit committee oversees how management monitors compliance with Company''s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to risk faced by the Company. The audit committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and adhoc reviews of risk management controls and procedures, the result of which are reported to audit committee.
The Company has exposure to the following risks arising from financial instruments:
- Credit risk (see (ii));
- Liquidity risk (see (iii));and
- Market risk (see (iv))
(ii) Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The carrying amount of financial assets represents the maximum credit risk exposure and arises principally from the Company''s receivable from customers and loans.
Trade receivables and Loans
The Company''s retail business is pre-dominantly on cash and carry basis which is largely through credit-card collections. The credit risk on such collections is minimal, since they are primarily owned by customers'' card issuing banks. The Company has adopted a policy of dealing with only credit worthy counterparties in case of institutional customers and the credit risk exposure for institutional customers is managed by the Company by credit worthiness checks. The Company also carries credit risk on lease deposits with landlords for store properties taken on leases, for which agreements are signed and property possessions timely taken for store operations. The risk relating to refunds after store shut down is managed through successful negotiations or appropriate legal actions, where necessary.
The Company''s experience of delinquencies and customer disputes have been minimal. Further, Trade and other receivables consist of a large number of customers, across geographies within India, hence, the Company is not exposed to concentration risks.
Cash and cash equivalents
The Company holds cash and cash equivalents of Rs.5,942.15 as at March 31, 2024 (March 31, 2023: Rs.2,701.41). The cash and cash equivalents are mainly held with scheduled banks.
(iii) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial assets. The Company''s approach to manage liquidity is to have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed circumstances, without incurring unacceptable losses or risking damage to the Company''s reputation.
Management manages the liquidity risk by monitoring cash flow forecasts on a periodic basis and maturity profiles of financial assets and liabilities. This monitoring takes into account the accessibility of cash and cash equivalents and additional undrawn financing facilities. The Company will continue to consider various borrowings of leasing options to maximize liquidity and supplement cash requirements as necessary. Post completion of Initial Public Offer, the Company has repaid all working capital loans / limits and part of shareholder deposits and also, surrendered the sanctioned borrowing limits. In the current year, The Company has got fresh sanction of borrowing limits. Presently, no amount is drawn against the limits and entire sanction limit of Rs. 1,250 is underdrawn as on March 31,2024.
Exposure to liquidity risk
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include contractual interest payments.
a) Product price risk
In a potentially inflationary economy, the Company expects periodical price increases across its retail product lines. Product price increases which are not in line with the levels of customers'' discretionary spends, may affect the business/retail sales volumes. Since the Company operates in premium and luxury watch category, the demand is reasonably inelastic to changes in price. However, the Company continually monitor and compares prices of its products in other developed markets as its customers tend to compare prices across markets. In the event that prices deviate significantly unfavourably from the markets, the Company negotiates with its vendor for change of prices. The Company also manages the risk by offering judicious product discounts to retail customers to sustain volumes. The Company negotiates with its vendors for purchase price rebates such that the rebates substantially absorb the product discounts offered to the retail customers. This helps the Company protect itself from significant product margin losses.
b) Interest rate risk
The Company is exposed to interest rate risk because funds are borrowed at both fixed and floating interest rates. Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rate. The borrowings of the Company are principally denominated in rupees with a mix of fixed and floating rates of interest. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings. As on March 31,2024, all the borrowings at have fixed rate of interest. The exposure of the Company''s borrowing to interest rate changes as reported to the management at the end of the reporting period are as follows:
The Company is exposed to currency risk to the extent that there is mismatch between the currencies in which purchases are denominated and the functional currency of the Company. The currencies in which the Company is exposed to risk are CHF, USD, AED, AUD, SGD and EUR. The Company evaluates this risk on a regular basis and appropriate risk mitigating steps are taken, including but not limited, entering into forward contracts.
Sensitivity analysis
A reasonably possible strengthening (weakening) of CHF, USD, AED, AUD, SGD and EUR against INR (H) at the end of the year, would have affected the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss by the amount shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact on forecast purchases.
Risk management
The Company''s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The management monitors the return on capital. The Company monitors capital using a ratio of ''adjusted net debt'' to ''total equity''. For this purpose, adjusted net debt is defined as total borrowings including lease liabilities and trade payables net of cash and cash equivalents. Equity comprises all components of equity (as shown in the Balance Sheet). The Company always tries to minimize its adjusted net debt to equity ratio.
II. Defined benefit plan - Gratuity
The employees'' gratuity fund scheme managed by Life Insurance Corporation of India is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The Company made annual contributions to the LIC of India of an amount advised by the LIC.
The above defined benefit plan exposes the Company to following risks:
Interest rate risk:
The defined benefit obligation calculated uses a discount rate based on government bonds. If bond yields fall, the defined benefit obligation will tend to increase.
Demographic risk:
This is the risk of variability of results due to unsystematic nature of decrements that include mortality, withdrawal, disability and retirement. The effect of these decrements on the defined benefit obligation is not straight forward and depends upon the combination of salary increase, discount rate and vesting criteria. It is important not to overstate withdrawals because in the financial analysis the retirement benefit of a short career employee typically costs less per year as compared to a long service employee.
The Company actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from the employee benefit obligations. The Company has not changed the processes used to manage its risks from previous periods. The funds are managed by specialised team of Life Insurance Corporation of India.
a) Funding
Gratuity is a funded benefit plan for qualifying employees. 100% of the plan assets are managed by LIC. The assets managed are highly liquid in nature and the Company does not expect any significant liquidity risks.
iii) In addition, the Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Company''s management does not expect that these legal actions, when ultimately concluded and determined, will have a material and adverse effect on the Company''s results of operations or financial condition. As on March 31,2024, there are two open legal proceedings involving disputed amount of Rs. 170.30 (March 31,2023: Rs. 110.22) against which the Company is carrying liability of Rs. 49.26 (March 31,2023: Rs. 49.26)
The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same methods (present value of defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when 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.
iv) Pursuant to recent judgement by the Hon''ble Supreme Court dated February 28, 2019, it was held that basic wages, for the purpose of provident fund, to include special allowances which are common for all employees. However, there is uncertainty with respect to the applicability of the judgement and period from which the same applies. Owing to the aforesaid uncertainty and pending clarification from the authorities in this regard, the Company has not recognised any provision. Further, management also believes that the impact of the same on the Company will not be material.
A. Company as a lessee
The Company has lease contracts for various retail stores and furniture to be used for its operations. The Leases generally have lease terms 2 - 10 years for building and 4 - 5 years for furniture. The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. The Company is restricted from assigning or sub leasing the leased assets.
The Company has certain leases with lease terms of 12 months or less. The Company applies the âshort-term lease'' recognition exemptions for these leases.
III. Defined contribution plans
The Company makes contribution, determined as a percentage of employee salaries, in respect of qualifying employees towards Provident fund, which is a defined contribution plan. The Company has no obligation other than to make the specified contributions. The Company has recognised Rs.208.53 during the period (March 31,2023: Rs.162.61) as expense towards contribution to these plans.
|
35. Contingent liabilities, commitments and other matters i) Claims against the Company not acknowledged as debts, under dispute |
||
|
Particulars |
As at March 31, 2024 |
As at March 31, 2023 |
|
a) Income Tax matters |
484.95 |
364.86 |
|
b) Excise Duty matters |
65.77 |
47.08 |
|
c) Value Added Tax matters |
3,330.03 |
|
|
d) Customs duty matters |
12.90 |
12.97 |
|
e) Goods and Services Tax matter |
12.15 |
12.15 |
Based on the discussion with the solicitors/legal opinion taken by the Company, the management believes that the Company has a good chance of success in above mentioned case and hence, no provision there against was considered necessary.
|
Commitments |
||
|
Particulars |
As at March 31, 2024 |
As at March 31, 2023 |
|
- Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) |
1,056.35 |
471.71 |
Operating segments
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company''s other components, and for which discrete financial information is available.
Operarting segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker of the Company. As the chief operating decision maker of the Company assess the financial performances and position of the Company as a whole and makes strategic decision, the management considers retail trading of premium and luxury watches, accessories and other luxury items and including related after sale services in India as a single operating segment as per Ind AS 108, hence separate segment disclosure, have not been furnished.
42. 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. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period when the Code becomes effective.
* Ratio Numerator and Denominator
a. Current Ratio = Current Assets / Current Liabilities
b. Debt Equity Ratio = Total Debt / Shareholder''s Equity
c. Debt Service Coverage Ratio = Earnings available for debt service (Net profit before taxes Non-cash operating expenses Finance Cost) / Debt Service (Interest & Lease Payments Principal Repayments)
d. Return on Equity Ratio = Net Profit / Average Shareholder''s Equity
e. Inventory Turnover Ratio = Cost of goods sold / Average Inventory
f. Trade Receivables turnover ratio = Net Sales (Net sales = Total sales - sales return) / Average Trade Receivable
g. Trade payables turnover ratio = Net Purchase (Gross purchases - purchase return) / Average Trade Payable
h. Net capital turnover ratio = Net Sales (Net sales = Total sales - sales return) / Working Capital (Current assets - Current liabilities)
i. Net Profit Ratio = Net Profit after tax / Net Sale (Net sales = Total sales - sales return)
j. Return on Capital Employed = Earnings before interest and taxes / Capital employed (Capital Employed = total equity total debt)
k. Return on Investment = Income on Investments / Average Investment ** Explanation for major variance in ratios
a. Debt Service Coverage Ratio - The earnings for debt service has increased during the year due to expansion in existing operations.
b. Trade Receivables turnover Ratio - The Company increases the efficiency in collection from customers during the year.
c. Return on Investment - The Company has invested funds in current year and the increased its investment base the impact which in the form of returns will be seen in coming years.
44. The Company has entered into an agreement dated January 1, 2022 with its Holding company i.e. KDDL Limited to purchase its brand-name âEthosâ and âSummitâ (including trademarks, trade names, logos and all related rights) for an agreed amount of Rs.3,900 lakhs. The aforesaid brands have been capitalized as intangible assets during the year ended March 31, 2023.
45. Other Statutory Information
1) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
2) The Company does not have any transactions with companies struck off.
3) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
4) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
5) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries)
with the understanding that the Intermediary shall:
a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries); or
b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries;
47. During the current year, the Company has issued 11,31,210 equity shares of face value of Rs. 10 each at an issue price of Rs. 1,547 per share (including securities premium of Rs. 1,537 per share) aggregating to Rs. 17,499.82 under Qualified Institutions Placement (âQIP'').
Consequent to allotment of aforesaid equity shares on November 3, 2023, the paid-up equity share capital of the Company stands increased from Rs. 2,334.92 consisting of 2,33,49,233 Equity Shares of Rs. 10 each to Rs. 2,448.04 consisting of 2,44,80,443 Equity Shares of Rs. 10 each.
6) The Company have not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
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,
7) The Company 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
8) The Company is not declared as wilful defaulter by any bank or financial institution
46. During the previous year ended March 31, 2023, the Company had completed its Initial Public Offering (âIPO'') of 45,81,500 equity shares of face value of Rs. 10 each at an issue price of Rs.878 per share (including securities premium of Rs.868 per share). The issue was comprised of fresh issue of 42,71,070 equity shares aggregating to Rs. 37,500.00 and offer for sale of 3,10,430 equity shares aggregating to Rs.2,725.58. The equity shares of the Company were listed on BSE Limited and National Stock Exchange of India Limited on May 30, 2022.
Consequent to allotment of fresh issue, the paid-up equity share capital of the Company stood increased from Rs.1,907.82 consisting of 1,90,78,163 equity shares of Rs.10 each to Rs.2,334.92 consisting of 2,33,49,233 Equity Shares of Rs.10 each.
48. The Company has used accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility except that, the feature of recording audit trail for direct changes to database made using privileged/administrative access rights is not available. The Company is in the phase of implementation of the upgraded ERP version to mitigate the requirement of maintaining audit trail at database level and change logs records.
49. There are no significant events after reporting date which need to be disclosed.
(e) Bonus shares, shares buyback and issue of shares without consideration being received in cash (during five years immediately preceding March 31,2023).
During the five years immediately preceding March 31, 2023 (''the period''), neither any bonus shares have been issued nor any shares have been bought back. In addition, during the period, no shares have been issued for consideration other than cash except as follows:-
(i) The Company had, during the year ended March 31, 2018, converted 1,100,010 12% cumulative compulsory convertible preference shares of face value of Rs.110 into 1,100,010 equity shares of Rs.10 each at a premium of Rs.100 each. Further, 21,250 equity shares of Rs.10 each had been issued under employee stock option plan for which exercise price has been received in cash.
(ii) During the year ended March 31, 2020, 576,293 14% cumulative compulsory convertible preference shares of Rs.130 each were converted into 576,923 equity shares of Rs.10 each at a premium of Rs.120 per share. Further, 15,000 equity shares of Rs.10 each had been issued under employee stock option plans for which only exercise price had been received in cash.
(iii) During the year ended March 31, 2022, 104,750 equity shares of Rs.10 each had been issued under employee stock option plans for which only exercise price had been received in cash.
(f ) Employee stock options
Terms attached to stock options granted to employees of the Company and its holding company are described in note 34(iv) regarding employee share based payments.
(also refer to Statement of Changes in Equity)
(i) Deemed capital contribution
a) Includes Rs. 14.51 towards fair value of guarantees given by the holding company in the earlier years.
b) Includes Rs. 36.00 towards interest accrued on 12% cumulative redeemable preference shares, classified as finance cost, which is no longer payable at the time of redemption.
Nature and purpose of reserves
(ii) Share options outstanding account
The fair value of the equity settled share based payment transactions with employees is recognised in Statement of Profit and Loss with corresponding credit to share option outstanding account.
(iii) Capital reserve
Reserve created under the scheme of arrangement (Business Combination). This will be utilised in accordance with the provisions of the Companies Act, 2013.
(iv) Securities premium
Securities premium represents the excess consideration received by the Company over the face value of the shares issued to shareholders. This will be utilised in accordance with the provisions of the Companies Act, 2013.
The Company, at its IPO meeting held on May 26, 2022 approved allotment of 42,71,070 Equity Shares of Rs.10 each pursuant to Initial Public Offering at a securities premium of Rs. 868 per share under Fresh Issue and offer for sale of 3,10,430 Equity Shares at an Offer Price of Rs. 878 per Equity Share, to the respective applicants in various categories, in terms of the basis of allotment approved in consultation with the authorized representative of BSE Limited. The equity shares of the Company were listed on BSE Limited and National Stock Exchange of India Limited on May 30, 2022. The total offer expenses in relation to share issued amounting to Rs. 3,531.05 has been adjusted against securities premium. Refer Note 48.
(v) Retained earnings
Retained earnings are the profit that the Company has earned till date, less any transfers to general reserve, dividends or other distributions paid to shareholders. Retained earnings includes re-measurement (loss) / gain on defined benefit plans, net of taxes that will not be reclassified to statement of Profit and Loss. Retained earnings is a free reserve available to the Company and eligible for distribution to shareholders, in case where it is having positive balance representing net earnings till date.
a) Vehicle loans from banks amounting to Rs. 118.08 (March 31, 2022: Rs.194.75) are secured against hypothecation of the specified vehicle purchased from proceeds of the said loan. The rate of interest on vehicle loans varies from 7.10% to 9.25% per annum (March 31, 2022: 7.10% to 9.25%). The above loans are repayable in monthly instalments within a period of next one to four years as per repayment schedule.
Term loan from Bank of Maharashtra amounting to Rs. NIL (March 31, 2022: Rs.389.00) carried interest rate equal to NIL (March 31, 2022: 7.50%). The loan was availed under Guarantee Emergency Credit Line Scheme launched by the Government of India in light of the present outbreak of COVID-19. The same was secured by second charge by way of hypothecation on entire current assets on pari passu basis of the Company. It was also secured by 360,000 shares of holding company held by Mr. Yashoverdan Saboo, Managing Director of the Company and second charge on entire property, plant and equipment of the Company. Further, it was compulsorily covered under Guaranteed Emergency credit line operated by National Credit Guarantee Trustee Company Limited. The loan was to be repaid in 48 equal monthly instalments of Rs.8.10 as per the repayment schedule commencing from April 30, 2022 with one year of moratorium from the drawdown. However, during the year, the Company has repaid all the outstanding loan amount.
Term loan from IDBI Bank Limited amounting to Rs. NIL (March 31,2022: Rs.320.83) carried interest rate equal to Nil (March 31,2022 : 8.80%). The loan was availed under Guarantee Emergency Credit Line Scheme launched by the Government of India in light of the present outbreak of COVID-19. The Loan was secured by second charge on all the current assets on pari passu basis of the Company both present and future and second charge on the fixed assets of the Company both present and future. It was also secured by mortgage and second charge on all the immovable fixed assets of the tool room unit (Eigen) of KDDL Limited (Holding Company) at Bangalore. Further, it was compulsorily covered under Guaranteed Emergency credit line operated by National Credit Guarantee Trustee Company Limited. The loan was to be repaid in 35 equal monthly instalments of Rs. 9.17 and 36th Instalment of Rs.9.05 as per the repayment schedule commencing from March 31,2022 with one year of moratorium from the drawdown. However, during the year, the Company has repaid all the outstanding loan amount.
Term loan from the Jammu & Kashmir Bank Limited amounting to Rs. Nil (March 31, 2022: Rs.176.00) carried interest rate equal to Nil (March 31,2022: 8.20%) was secured by Second charge on the stock and receivables on pari passu basis of the Company. These limits were also secured by second charge on assets of Ornapac unit at Chandigarh of KDDL Limited (Holding company). It was further secured by the second charge over land and building, machinery and office equipment of the Parwanoo unit of KDDL Limited. Further, it was compulsorily covered under Guaranteed Emergency credit line operated by National Credit Guarantee Trustee Company Limited. The loan was to be repaid in 36 equal monthly instalments commencing from March 31, 2022 with one year of moratorium from the first drawdown. However, during the year, the Company has repaid all the outstanding loan amount.
b) Deposits from Shareholders carry an interest rate ranging between 10.25% to 10.75% (March 31, 2022: 8% to 11.25%) per annum and carry a maturity period from 24 to 36 months from the respective date of deposits.
c) Loan repayable on demand from IDBI Bank Limited amounting to Rs. Nil (March 31,2022: Rs.633.09) were repayable on demand and were secured by first pari passu charge on all the current assets of the Company both present and future and second pari passu charge on the fixed assets of the Company both present and future. These limits were also secured by exclusive mortgage and charge on all the immovable property, plant and equipment of the tool room unit (Eigen) of KDDL Limited (Holding Company) at Bangalore. These limits were guaranteed by the Holding Company (KDDL Limited), personal guarantees of director of the Company and relative of the director. The rate of interest as on March 31, 2023 is NIL (March 31, 2022: 9.50% to 10.50%) per annum. However, during the year, the Company has repaid the oustanding amounts and closed the loan facility with Bank.
Loan repayable on demand from the Jammu & Kashmir Bank Limited amounting to Rs. Nil (March 31, 2022: Rs.454.34) were repayable on demand and were secured by first pari passu charge on the stock and receivables of the Company. These limits were also secured by exclusive first charge on assets of Ornapac unit at Chandigarh of KDDL Limited (Holding company). This was further secured by the first and exclusive charge over land and building, machinery and office equipment of the Parwanoo unit of KDDL Limited. These loans were also guaranteed by the Holding Company and personal guarantees of the director of the Company. The rate of interest as on March 31, 2023 is Nil (March 31, 2022: 8.35%) per annum. However, during the year, the Company has repaid the oustanding amounts and closed the loan facility with Bank.
Loan repayable on demand from Bank of Maharashtra amounting to Rs. Nil (March 31, 2022: Rs.588.84) were repayable on demand and were secured by first pari passu charge by way of hypothecation on entire current assets of the Company. These limits were also secured by 360,000 shares of holding company held by Mr. Y. Saboo, Managing Director of the Company and second pari passu charge on entire fixed assets of the Company. Further, these limits are also guaranteed by the Holding Company, personal guarantee of director of the Company and relative of the director. The rate of interest as on March 31, 2023 is Nil (March 31, 2022: 11.00 %) per annum. During the year, the company has repaid the oustanding amounts and closed the loan facility with Bank.
d) Inter corporate deposit amounting to Rs. Nil (March 31, 2022: Rs.500) carried an interest rate of Nil (March 31, 2022: 10% - 12%) per
annum. During the year, the Company has repaid the oustanding amount and closed the loan facility.
e) The fixed rate of interest on deposit from shareholders for maturity period of one year in the current year is 9.50% per annum
(March 31, 2022: 8% to 9.50% per annum).
(a) Fair valuation of financial assets and liabilities with short term maturities is considered as approximate to respective carrying amount due to the short term maturities of these instruments.
(b) The fair value of borrowings is based upon a discounted cash flow analysis that used the aggregate cash flows from principal and finance costs over the life of the debt and current market interest rates. The own non-performance risk as at balance sheet date was assessed to be insignificant.
(c) The investment in subsidiary is measured at cost less impairment losses, if any.
(d) The fair valuation of other non current financial assets and other non current financial liabilities are approximately equivalent to carrying value. There are no transfers between Level 1, Level 2 and Level 3 during the year ended March 31,2023 and March 31, 2022
II. Financial risk management
(i) Risk management framework
The Company''s Risk management Committee has overall responsibility for the establishment and oversight of the Company''s risk management framework. The Company''s risk management policies are established to identify and analyse the risk faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to effect changes in market conditions and Company''s activities. The Company, through its training and management standards and procedures, aims to maintain discipline and constructive control environment in which all employees understand their roles and obligations.
The Company''s audit committee oversees how management monitors compliance with Company''s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to risk faced by the Company. The audit committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the result of which are reported to audit committee.
The Company has exposure to the following risks arising from financial instruments:
- Credit risk (see (ii));
- Liquidity risk (see (iii)); and
- Market risk (see (iv))
(ii) Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The carrying amount of financial assets represents the maximum credit risk exposure and arises principally from the Company''s receivable from customers and loans.
Trade receivables and Loans
The Company''s retail business is pre-dominantly on cash and carry basis which is largely through credit-card collections. The credit risk on such collections is minimal, since they are primarily owned by customers'' card issuing banks. The Company has adopted a policy of dealing with only credit worthy counterparties in case of institutional customers and the credit risk exposure for institutional customers is managed by the Company by credit worthiness checks. The Company also carries credit risk on lease deposits with landlords for store properties taken on leases, for which agreements are signed and property possessions timely taken for store operations. The risk relating to refunds after store shut down is managed through successful negotiations or appropriate legal actions, where necessary.
The Company''s experience of delinquencies and customer disputes have been minimal. Further, Trade and other receivables consist of a large number of customers, across geographies within India, hence, the Company is not exposed to concentration risks.
Cash and cash equivalents
The Company holds cash and cash equivalents of Rs.2,701.41 as at March 31, 2023 (March 31, 2022: Rs.3,726.94). The cash and cash equivalents are mainly held with scheduled banks.
(iii) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial assets. The Company''s approach to manage liquidity is to have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed circumstances, without incurring unacceptable losses or risking damage to the Company''s reputation.
(iv) Market Risk
a) Product price risk
In a potentially inflationary economy, the Company expects periodical price increases across its retail product lines. Product price increases which are not in line with the levels of customers'' discretionary spends, may affect the business/retail sales volumes. Since the Company operates in premium and luxury watch category, the demand is reasonably inelastic to changes in price. However, the Company continually monitor and compares prices of its products in other developed markets as its customers tend to compare prices across markets. In the event that prices deviate significantly unfavourably from the markets, the Company negotiates with its vendor for change of prices. The Company also manages the risk by offering judicious product discounts to retail customers to sustain volumes. The Company negotiates with its vendors for purchase price rebates such that the rebates substantially absorb the product discounts offered to the retail customers. This helps the Company protect itself from significant product margin losses.
Management manages the liquidity risk by monitoring cash flow forecasts on a periodic basis and maturity profiles of financial assets and liabilities. This monitoring takes into account the accessibility of cash and cash equivalents and additional undrawn financing facilities. The Company will continue to consider various borrowings of leasing options to maximize liquidity and supplement cash requirements as necessary. Post completion of Initial Public Offer, the Company has repaid all working capital loans / limits and part of shareholder deposits and also, surrendered the sanctioned borrowing limits.
c) Currency risk
The Company is exposed to currency risk to the extent that there is mismatch between the currencies in which purchases are denominated and the functional currency of the Company. The currencies in the which the Company is exposed to risk are CHF, USD, AED, AUD, CAD, GBP, SGD and EUR. The Company evaluates this risk on a regular basis and appropriate risk mitigating steps are taken, including but not limited, entering into forward contracts.
Risk management
The Company''s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The management monitors the return on capital. The Company monitors capital using a ratio of ''adjusted net debt'' to ''total equity''. For this purpose, adjusted net debt is defined as total borrowings including lease liabilities and trade payables net of cash and cash equivalents. Equity comprises all components of equity (as shown in the Balance Sheet). The Company always tries to minimize its adjusted net debt to equity ratio.
II. Defined benefit plan - Gratuity
The employees'' gratuity fund scheme managed by Life Insurance Corporation of India is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The Company made annual contributions to the LIC of India of an amount advised by the LIC.
The above defined benefit plan exposes the Company to following risks:
Interest rate risk:
The defined benefit obligation calculated uses a discount rate based on government bonds. If bond yields fall, the defined benefit obligation will tend to increase.
Demographic risk:
This is the risk of variability of results due to unsystematic nature of decrements that include mortality, withdrawal, disability and retirement. The effect of these decrements on the defined benefit obligation is not straight forward and depends upon the combination of salary increase, discount rate and vesting criteria. It is important not to overstate withdrawals because in the financial analysis the retirement benefit of a short career employee typically costs less per year as compared to a long service employee.
The Company actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from the employee benefit obligations. The Company has not changed the processes used to manage its risks from previous periods. The funds are managed by specialised team of Life Insurance Corporation of India.
a) Funding
Gratuity is a funded benefit plan for qualifying employees. 100% of the plan assets are managed by LIC. The assets managed are highly liquid in nature and the Company does not expect any significant liquidity risks.
The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same methods (present value of defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when 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.
III. Defined contribution plans
The Company makes contribution, determined as a percentage of employee salaries, in respect of qualifying employees towards Provident fund, which is a defined contribution plan. The Company has no obligation other than to make the specified contributions. The Company has recognised Rs.162.61 during the period (March 31,2022: Rs.139.10) as expense towards contribution to these plans.
IV. Share based payments
a) Description of share-based payment arrangement
As at March 31, 2023, the Company does not have any share-based payment arrangements. Details of earlier share based payment arrangements are mentioned below.
b) Employee Stock Option Scheme (equity-settled)
In the Extraordinary General Meeting held on March 10, 2014, the shareholders approved the issue of options not exceeding 3,50,000 options under the Scheme titled "Ethos Employee Stock Option Plan - 2013"
The ESOP allows the issue of options to eligible employees and directors of the Company. Each option comprises one underlying equity share.
As per the Scheme, the Performance Evaluation and Guidance-cum- Nomination and Remuneration Committee (formerly known as Compensation Committee) grants the options to the employees and directors deemed eligible. The exercise price of each option shall be equal to the âMarket Priceâ as defined in the Scheme. The options granted vest as follows. Options may be exercised within 3 years of vesting.
1. 50% of the options granted to the selected employee shall vest on October 01,2017 in case there is continuation of his service till the date of vesting.
2. 50% on the first day of the financial year subsequent to the achievement of billing of Rs. 50,000 lakhs in any financial year by the Company, subject to the continuation of service till the date of vesting. However there shall remain a gap of minimum one year between the date of grant and the date of vesting under this clause. The Performance Evaluation and Guidance-cum- Nomination and Remuneration Committee (formerly known as Compensation Committee) shall declare such date as and when it is triggered.
The Company has in its Performance Evaluation and Guidance-cum- Nomination and Remuneration Committee (formerly known as Compensation Committee) meeting on August 4, 2014 granted outstanding 3,500 options to employee of the holding Company. The above options have been issued by the Performance Evaluation and Guidance-cum- Nomination and Remuneration Committee (formerly known as Compensation Committee) in accordance with the terms & conditions of the "Ethos Employee Stock Option Plan - 2013
The Company, at its 14th Annual General Meeting, approved variation/modification in the terms of âEthos Employee Stock Option Plan 2013 by allowing the option grantees to exercise their vested options as per Clause 7.1 and 7.2 of the scheme on or before August 16, 2021. The aforesaid scheme expired on August 16, 2021.
|
35. Contingent liabilities, commitments and other matters i) Claims against the Company not acknowledged as debts, under dispute |
||
|
As at |
As at |
|
|
March 31,2023 |
March 31,2022 |
|
|
a) Income Tax matters |
364.86 |
318.77 |
|
b) Excise Duty matters |
47.08 |
47.08 |
|
c) Value Added Tax matters |
3,330.03 |
3,330.03 |
|
d) Customs duty matters |
12.97 |
12.90 |
|
e) Goods and Services Tax matter |
12.15 |
|
Based on the discussion with the solicitors/legal opinion taken by the Company, the management believes that the Company has a good chance of success in above mentioned case and hence, no provision there against was considered necessary.
|
ii) Commitments |
||
|
As at |
As at |
|
|
March 31,2023 |
March 31,2022 |
|
|
- Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) |
471.71 |
2,600.00 |
iii) In addition, the Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Company''s management does not expect that these legal actions, when ultimately concluded and determined, will have a material and adverse effect on the Company''s results of operations or financial condition. As on March 31, 2023, there is one open legal proceedings involving disputed amount of Rs. 110.22 (March 31, 2022: Rs. 110.22) against which the Company is carrying liability of Rs. 49.26 (March 31, 2022: Rs. 49.26)
iv) Pursuant to recent judgement by the Hon''ble Supreme Court dated February 28, 2019, it was held that basic wages, for the purpose of provident fund, to include special allowances which are common for all employees. However, there is uncertainty with respect to the applicability of the judgement and period from which the same applies. Owing to the aforesaid uncertainty and pending clarification from the authorities in this regard, the Company has not recognised any provision. Further, management also believes that the impact of the same on the Company will not be material.
A. Company as a lessee
The Company has lease contracts for various retail stores and furniture to be used for its operations. The Leases generally have lease terms 2 - 10 years for building and 4 - 5 years for furniture. The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. The Company is restricted from assigning or sub leasing the leased assets.
The Company has certain leases with lease terms of 12 months or less. The Company applies the âshort-term lease'' recognition exemptions for these leases.
1 The Company''s principal related parties consist of KDDL Limited, its subsidiaries and key managerial personnel. The Company''s material related party transactions and outstanding balances are with related parties with whom the Company routinely enters into transactions in the ordinary course of business.
2 Key Managerial Personnel are entitled to post-employment benefits and other long term employee benefits recognised as per Ind AS 19 - ''Employee Benefits'' in the financial statements. As these employees benefits are lump sum amounts provided on the basis of actuarial valuation the same is not included above.
3 Security being provided by KDDL Limited (Holding Company) for loans taken from IDBI Bank Limited by providing exclusive mortgage and charge on all the immovable property, plant and equipments of the tool room unit (Eigen) of KDDL Limited (Holding Company) at 408, 4th Main, 11th Cross, Peenya Industrial Area, Bangalore. The loan was repaid during the year ended March 31, 2023 and the securities were released from Bank.
4 Security being provided by KDDL Limited (Holding Company) for loans taken from The Jammu & Kashmir Bank Limited by providing exclusive first charge on assets of Ornapac unit at Chandigarh of KDDL Limited (Holding Company). This is further secured by first and exclusive charge over land and building & specific machinery and office equipment of the Parwanoo unit of KDDL Limited. The loan was repaid during the year ended March 31,2023 and the securities were released from Bank.
5 Security being provided by Managing Director of the Company for loan taken from Bank of Maharashtra by pledging 3,60,000 shares of KDDL Limited held by him. The loan was repaid during the year ended March 31, 2023 and the securities were released from Bank.
6 All transactions with related parties are made on terms equivalent to those that prevail in arm''s length transactions and within the ordinary course of business.
Operating segments
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company''s other components, and for which discrete financial information is available.
Operarting segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker of the Company. As the chief operating decision maker of the Company assess the financial performances and position of the Company as a whole and makes strategic decision, the management considers retail trading of premium and luxury watches, accessories and other luxury items and including related after sale services as a single operating segment as per Ind AS 108, hence separate segment disclosure, have not been furnished.
* Ratio Numerator and Denominator
a. Current Ratio = Current Assets / Current Liabilities
b. Debt Equity Ratio = Total Debt / Shareholder''s Equity
c. Debt Service Coverage Ratio = Earnings available for debt service (Net profit before taxes Non-cash operating expenses Finance Cost) / Debt Service (Interest & Lease Payments Principal Repayments)
d. Return on Equity Ratio = Net Profit / Average Shareholder''s Equity
e. Inventory Turnover Ratio = Cost of goods sold / Average Inventory
f. Trade Receivables turnover ratio = Net Sales (Net sales = Total sales - sales return) / Average Trade Receivable
g. Trade payables turnover ratio = Net Purchase (Gross purchases - purchase return) / Average Trade Payable
i. Net capital turnover ratio = Net Sales (Net sales = Total sales - sales return) / Working Capital (Current assets - Current liabilities)
j. Net Profit Ratio = Net Profit after tax / Net Sale (Net sales = Total sales - sales return)
k. Return on Capital Employed = Earnings before interest and taxes / Capital employed (Capital Employed = total equity total debt)
l. Return on Investment = Income on Investment (includes investment in joint venture) / Investment (includes investment in joint venture) ** Explanation for variance in ratios
a. Current Ratio - Increase in Other Bank balances (IPO Monitoring account) due to proceed from IPO and increase in inventory value due to new stores and expansion in existing operations
b. Debt Equity Ratio - Increase in profitability of Business and fresh issue of equity shares through IPO and reduction in debts.
c. Trade Receivables turnover Ratio - Better management of debtors resulting in efficient trade receivables with the increase in Sales.
d. Net capital turnover Ratio - Increase in working capital due to proceed from IPO parked in monitoring bank account to be applied in order to improve the efficient utilisation of funds in future.
e. Net Profit Ratio - Company has increased its sale substantially alongwith better control of expenses.
44. The Company has entered into an agreement dated January 1,2022 with its Holding company i.e. KDDL Limited to purchase its brand-name âEthosâ and âSummitâ (including trademarks, trade names, logos and all related rights) for an agreed amount of Rs.3,900 lakhs. The aforesaid brands have been capitalized as intangible assets during the year ended March 31,2023.
45. During the previous year, The Board of Directors, at its meeting held on November 01,2021, accorded its in-principle consent to offer, issue and allot upto 458,000 equity shares of face value Rs.10 each, to the existing shareholders of the Company as on the record date i.e. October 31, 2021, at a premium of Rs.540 per share, on Rights Issue basis, aggregating to upto an amount not exceeding Rs.2,550.00 for raising funds for the Company in the ratio of 1 rights equity share of Rs. 10 each for every 40 equity shares of Rs.10 each held by the eligible equity shareholder of the Company as on the record date with the right to renounce.
Based on above, the Board of Directors, at its meeting held on December 01,2021, approved the allotment of 457,938 equity shares of Rs.10 each at a premium of Rs.540 per share for an amount totalling to Rs.2,518.66 after taking into consideration the share subscriptions and renunciations received from the existing shareholders of the Company upto November 24, 2021 (the date of close of offer), in pursuance to âEthos - Rights Issue 2021''.
46. Other Statutory Information
1) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
2) The Company does not have any transactions with companies struck off.
3) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
4) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
5) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries)
with the understanding that the Intermediary shall:
a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries); or
b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
6) The Company have not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
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.
7) The Company 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.
8) The Company is not declared as wilful defaulter by any bank or financial institution.
9) The Company does not projects as CWIP and Intangible assets under development where completion is overdue, exceeded its cost or activity is suspended.
47. During the previous year, The Board of the Directors of the Company, at its meeting held on March 28, 2022 has approved the allotment of 302,663 equity shares of Rs.10 each at a premium of Rs.816 per share aggregating to Rs.2,499.99, towards Pre-IPO placement through Preferential allotment. The paid up equity share capital of the Company, after such allotment, stands revised to Rs.1,907.82.
48. During the year ended March 31,2023, the Company has completed its Initial Public Offering (âIPO'') of 45,81,500 equity shares of face value of Rs. 10 each at an issue price of Rs. 878 per share (including securities premium of Rs. 868 per share). The issue comprised of fresh issue of 42,71,070 equity shares aggregating to Rs. 37,500.00 and offer for sale of 3,10,430 equity shares aggregating to Rs. 2,725.58. The equity shares of the Company were listed on BSE Limited and National Stock Exchange of India Limited on May 30, 2022.
Consequent to allotment of fresh issue, the paid-up equity share capital of the Company stands increased from Rs. 1,907.82 consisting of 1,90,78,163 equity shares of Rs.10 each to Rs. 2,334.92 consisting of 2,33,49,233 Equity Shares of Rs. 10 each.
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