Pearl Global Industries Ltd:Annual Report 2023-24 Analysis

Pearl Global Industries Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Pearl Global Industries Ltd. was founded in 1987.

Headquarters Location and Global Presence:

The company is headquartered in Gurugram, Haryana, India. They have a global presence with manufacturing facilities and offices in multiple countries.

Company Vision and Mission:

Their mission is to be a global leader in garment manufacturing, driven by innovation, sustainability, and customer satisfaction.

Key Milestones in their Growth Journey:

• Significant expansion in manufacturing capacity over the years.
• Strategic partnerships with international brands.
• Focus on sustainable practices and certifications.
• Diversification into new product categories within apparel.

Stock Exchange Listing Details and Market Capitalization:

Pearl Global Industries Ltd. is listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Check real-time market data for the most current market capitalization.

Recent Financial Performance Highlights:

To obtain the latest financial performance highlights, consult the company’s annual reports, investor presentations, and press releases available on their website or financial news portals.

Management Team and Leadership Structure:

Consult the company’s website for information on the current management team and leadership structure.

Their Products #

Complete Product Portfolio with Categories:

Pearl Global Industries Ltd. specializes in apparel manufacturing. Their portfolio includes:

• Woven Apparel: Shirts, trousers, dresses, skirts.
• Knit Apparel: T-shirts, polo shirts, sweatshirts, activewear.
• Outerwear: Jackets, coats.

Flagship or Signature Product Lines:

While specific “flagship” lines may vary depending on customer contracts, they are known for high-quality woven shirts and performance knitwear.

Manufacturing Facilities and Production Capacity:

The company operates multiple manufacturing facilities across India and other countries. Refer to investor presentations for specific details regarding their aggregate production capacity.

Quality Certifications and Standards:

Pearl Global Industries Ltd. holds various quality certifications, including:

• ISO 9001: Quality Management System
• SA8000: Social Accountability
• WRAP: Worldwide Responsible Accredited Production

Unique Selling Propositions or Technological Advantages:

• Vertically Integrated Operations: Allowing greater control over the supply chain, from fabric sourcing to garment finishing.
• Focus on sustainable manufacturing practices.
• Strong relationships with leading global brands.

Primary Customers #

Target Industries and Sectors:

Their primary customers are major international apparel brands and retailers across fashion, casual wear, and activewear.

Geographic Markets (domestic vs. international):

The company primarily serves international markets, with a significant portion of their revenue coming from exports.

Distribution Network and Sales Channels:

Pearl Global Industries Ltd. directly supplies apparel to their clients, and doesn’t rely on a retail distribution network.

Major Competitors #

Direct Competitors in India and Globally:

Major competitors include other large-scale apparel manufacturers in India, Bangladesh, Vietnam, and China. These include but are not limited to:

• Shahi Exports (India)
• Gokaldas Exports (India)
• Epic Group
• Crystal International Group Limited

Competitive Advantages and Disadvantages:

• Advantages: Vertically integrated operations, sustainability initiatives, long-standing relationships with major brands, and a focus on innovation give them a competitive edge.
• Disadvantages: Susceptibility to fluctuating raw material prices, labor costs, and currency exchange rates.

Industry Challenges and Opportunities:

• Challenges: Increasing competition, demand for faster lead times, pressure to adopt sustainable practices, and geopolitical risks.
• Opportunities: Growing demand for apparel, increasing focus on sustainable fashion, and the potential to expand into new markets.

Future Outlook #

Expansion Plans or Growth Strategy:

Growth is likely driven by expanding production capacity, entering new product categories, and strengthening relationships with key clients.

Sustainability Initiatives or ESG Commitments:

Pearl Global Industries Ltd. is increasingly focused on sustainability, implementing initiatives to reduce its environmental footprint, promote ethical labor practices, and enhance transparency across its supply chain.

Industry Trends Affecting Their Business:

Key industry trends affecting their business include the rise of fast fashion, the increasing demand for sustainable and ethical apparel, and the growing importance of e-commerce.

Long-term Vision and Strategic Goals:

Their long-term vision is to be a global leader in sustainable apparel manufacturing, recognized for its commitment to quality, innovation, and customer satisfaction.

Financial Analysis Report: Pearl Global Industries Limited (PGIL) - FY 2023-24 #

Comprehensive Performance Overview: 3-Year Trend Analysis (Consolidated) #

Detailed Analysis #

Financial Analysis Report: Pearl Global Industries Limited (FY 2023-24) #

This report analyzes the financial performance and position of Pearl Global Industries Limited (PGIL) based on its Annual Report for the Financial Year 2023-24.

Balance Sheet Analysis #

Comparative Analysis of Assets, Liabilities, and Equity (Consolidated) #

The provided Annual Report offers detailed Consolidated Balance Sheets for FY 2023-24 and FY 2022-23 (p.255). A full 3-year comparative analysis for all balance sheet line items is limited by the comparatives presented. However, key P&L metrics are available for a 5-year period (Financial Highlights, p.31).

Key Consolidated Balance Sheet Items (₹ in Crores)

Source: Consolidated Balance Sheet, p.255

Analysis:

• Total Assets grew by 11.44%, driven by increases in both Non-Current Assets (14.45%) and Current Assets (9.83%).
• Total Equity increased by 9.69%, primarily due to a rise in Other Equity (retained earnings and other reserves). The decline in Non-Controlling Interest is noted.
• Total Liabilities saw a significant increase of 12.70%, with Non-Current Liabilities growing by a substantial 25.07%, indicating potential long-term investments or restructuring of debt. Current Liabilities also grew by 9.23%.

Profit & Loss Analysis #

Significant Changes in Major Line Items (>10% YoY - Consolidated) #

Consolidated Profit & Loss Statement (₹ in Crores)

Business Segments #

Segment Performance Analysis #

Strategic and Management Analysis #

Long-term Strategic Goals and Progress #

The company aims to be a global leader in end-to-end apparel supply chain solutions, driven by sustainability, technological advancement, innovation, and talent. Key objectives include innovating global fashion creation, achieving 12-14% CAGR revenue growth over 3-4 years, attaining double-digit EBITDA margins, and reaching a USD 1 billion+ revenue target. The strategy emphasizes an asset-light model, customer base expansion, increased wallet share with existing clients, geographical expansion (India: Madhya Pradesh, Bihar; overseas: Guatemala JV), automation, capacity optimization, and leveraging partnership facilities.

Progress towards these goals is evidenced by revenue more than doubling since FY 2020-21, with EBITDA margins improving from 4% to approximately 9%. Consolidated revenue for FY 2023-24 reached ₹3,436.15 Crores (9% YoY growth), and EBITDA stood at ₹307.8 Crores (22% YoY growth), with the EBITDA margin expanding by 100 bps to 9%. Working capital days have been significantly reduced from over 60 to 30 days. Overseas revenue grew 21% YoY in FY24. Capacity expansion has been executed in Indonesia (new facility) and Guatemala (operations commenced, JV factory expansion completed), with further expansion planned in India.

Competitive Advantages and Market Positioning #

Pearl Global Industries Limited (PGIL) leverages several competitive advantages:

• Multinational Presence: Operations across 10 countries, including 5 manufacturing nations (India, Bangladesh, Vietnam, Indonesia, Guatemala), with 24 manufacturing units (including partnership facilities) and an annual capacity of 83.9 million units. This allows presence in 3 out of 4 major apparel supply chains and mitigates geographical risk.
• Diversified Product Portfolio: Manufacturing knits, wovens, denim, outerwear, activewear, and athleisure for varied market segments.
• Integrated Supply Chain Solutions: Offers end-to-end services from design and development (75 designers in 5 countries, utilizing 3D CAD, Optitex, CLO, Browzwear) to manufacturing, sourcing, and distribution.
• Strong Customer Relationships: Long-term preferred vendor status with major global retailers like Kohl’s, PVH, Inditex, GAP, Old Navy, and Macy’s, focusing on co-creation and customized solutions.
• Operational Excellence & Digitization: Emphasis on timely deliveries, scalable infrastructure, and process management, enhanced by digitization initiatives such as unique QR codes on garments for 100% traceability, inventory, and quality control.
• Sustainability Focus: Commitment to sustainable practices, including the “Aqualess Mission” (reducing water in denim production by 85%), solar power generation, water conservation, GRS and GOTS certifications, and environmental impact scoring for garments.
• Asset-Light Model: Strategic use of partnership factories (approximately 16% of sourcing) to optimize capital and enable swift expansion.
• Financial Strength: Improved credit rating ([ICRA] A- Stable) facilitates access to low-cost debt.

PGIL positions itself as a prominent global apparel multinational, adapting to the dynamic retail landscape by focusing on quality, innovation, and sustainability. Its diversified manufacturing footprint allows for specialized production catering to specific market needs (e.g., technical outerwear in Vietnam, near-shoring for the US market from Guatemala).

Innovation Initiatives and R&D Effectiveness #

Innovation at PGIL is focused on design, process, digital integration, and sustainability.

• Design Innovation: A robust global design team (75 designers) utilizes modern techniques such as 3D CAD rendering, 3D Optitex, CLO, and Browzwear for co-creation with clients and to develop intricate patterns and textures, particularly for woven fabrics.
• Digital Innovation: Comprehensive digitization strategy implemented across factories, including unique QR codes on each garment for enhanced traceability, inventory management, and quality control. This directly addresses market demands, especially from US retailers concerned with issues like forced labor. Automation of group financial consolidation, MIS review, and factory MIS is enhancing efficiency.
• Sustainable Innovation: The “Aqualess Mission” has achieved an 85% reduction in water usage for denim washes. Other initiatives include solar power generation, water conservation and recycling (ETP/STP/WTP), use of eco-friendly fabrics, and environmental impact measurement software for garment finishing processes.
• Process Innovation: Ongoing automation of facilities and processes is a strategic priority to enhance operational efficiency and product quality.

The effectiveness of these initiatives is demonstrated by improved operational metrics (e.g., working capital reduction), enhanced product traceability meeting client requirements, and alignment with the growing market demand for sustainable apparel.

ESG Analysis of Pearl Global Industries Limited (FY 2023-24) #

Environmental Metrics and Targets #

• Energy Consumption & Initiatives:
  • Total energy consumption for FY 2023-24: 28,616.13 GJ (standalone).
  • Initiatives:
    • Installation of steam boilers (replacing electrical).
    • Energy-efficient electrical items.
    • Focused lighting.
    • Optimized workstation layouts.
    • 200 KW solar energy plant in Chennai (investment: ₹1.07 Crores).
    • PNG-run boilers for reduced emissions.
• Water Management:
  • Total water withdrawal (standalone FY24): 1,32,960 kiloliters (Groundwater: 40,030 Kl; Third-party: 4,030 Kl; Municipal: 88,900 Kl).
  • Aqualess Mission: 85% reduction in water consumption for denim washes in Bangladesh operations.
  • ETP/STP/WTP systems for water recycling and reuse.
  • Central Water Monitoring Unit (CWMU).
  • UV filtration plants operational.
• Waste Management & Emissions:
  • Waste segregated and disposed of via authorized vendors (Hazardous Waste Management Rules, 2016).
  • Environmental Impact Measurement software monitors garment finishing processes.
  • Environmental Impact Score assigned during design.
  • Recycled materials utilized (e.g., Recycled Poly Stone).
• Certifications & Standards:
  • Global Recycled Standard (GRS).
  • Organic Content Standard (OCS).
  • Global Organic Textile Standards (GOTS).
  • Standard 100 by OEKO-TEX.
  • US Cotton Trust Protocol (USCTP).
  • European Linen.
  • ISO 14001:2015.
  • ISO 45001:2018.
• Targets:
  • Aligns with India’s net-zero emissions by 2070 target.
  • Commitment to reducing energy consumption, emissions, and waste.
  • 85% water reduction in denim (Bangladesh).

Social Responsibility Programs #

• Community Development & CSR Spend:
  • FY24 CSR Obligation: ₹15.82 Lakhs.
  • FY24 CSR Spent: ₹398.16 Lakhs.
  • Education: “Badhtey Kadam” project (Gurugram) engaged over 700 girls. Scholarships provided to factory workers’ students.
  • Women Development: “Ek Nayi Pehchaan” (Gurugram) trained ~70 women.
  • Environmental Sustainability (CSR): Green belt transformation in Gurugram.
  • Healthcare & Sanitation: Camps and distribution in Bangladesh. COVID-19 vaccination drives in Indonesia.
• Employee Well-being & Development:
  • Training:
    • P.A.C.E. Program (with GAP Inc.): Trained 559 female workers in FY24 (India).
    • Supervisory Skills Training (SST) (with Better Work & GAP Inc.): Trained 147 supervisors in FY24 (India).
    • Leadership Conclaves (A.I.M program).
    • Skills training workshops.
  • Health & Safety:
    • Health & Safety Committee.
    • Suggestion boxes.
    • Anonymous helplines.
    • HER Project programs (HER Health, HER Essentials): Trained over 3,500 workers.
  • Human Rights & Inclusion:
    • POSH Committee.
    • Gender awareness training.
    • Equal opportunity policy.
• Workforce Statistics (FY24):
  • Direct Workforce: 25,708.
  • Standalone Permanent Employees: 9,116.
  • Women on Board: 20% (3 out of 15).
  • Women in KMP (not board): 33%.
  • Training coverage: BOD/KMP 100%; Other Employees 75%; Workers 90%.

Governance Structure and Effectiveness #

• Board Composition (as of March 31, 2024):
  • 15 Directors: 3 Executive, 3 Promoter Non-Executive, 9 Independent Directors (including 3 women).
  • Chairman: Promoter Non-Executive Director.
  • Appointments: Dr. Rajiv Kumar, Mr. Sanjay Kapoor, Mr. Ashwini Agarwal as IDs (Feb 2024).
  • Cessations: Mr. Anil Nayar, Mr. Chittranjan Dua, Mr. Rajendra Kumar Aneja as IDs (Mar 2024).
• Board Committees (Chairpersons as of May 20, 2024):
  • Audit Committee: Mr. Abhishek Goyal (ID); 4 members (all IDs).
  • Nomination and Remuneration Committee (NRC): Mr. Abhishek Goyal (ID); 4 members (3 IDs, 1 NED).
  • Stakeholders Relationship Committee: Mr. Ashwini Agarwal (ID); 3 members (2 IDs, 1 NED).
  • Risk Management Committee: Mr. Pallab Banerjee (MD); 3 members (1 ED, 2 IDs).
  • Corporate Social Responsibility Committee: Mrs. Madhulika Bhupatkar (ID); 3 members (1 ID, 1 NED, 1 ED).
  • Finance Committee: Mr. Pulkit Seth (NED); 4 members (2 NEDs, 1 ID, 1 ED).
• Key Policies & Mechanisms:
  • Code of Conduct (Directors & Senior Management).
  • Whistle-Blower Policy (Vigil Mechanism).
  • Anti-corruption/Anti-bribery Policy.
  • Related Party Transaction Policy.
  • Dividend Distribution Policy (minimum 20% of consolidated PAT).
  • Board Evaluation: Annual process. Separate meeting of IDs.
  • Familiarization Program for IDs.
• Effectiveness & Controls:
  • Internal Auditors: Ernst & Young LLP (India & Bangladesh).
  • Statutory Auditors: M/s. S R Dinodia & Co. LLP. Big 4 firm for overseas companies.
  • CEO/CFO Certification.
  • Compliance with Secretarial Standards.
  • Secretarial Audit Report indicates general compliance.
  • Automated group financial consolidation, MIS, budgeting, sales forecasting.

Sustainability Investments and ROI #

• Direct Investments:
  • Solar power generation plant (Chennai): ₹1.07 Crores.
  • Technology for 85% water reduction in denim production (Bangladesh operations).
  • Investment in ETP/STP/WTP, UV filtration, PNG Boilers, Magic Box.
  • CSR expenditure: ₹398.16 Lakhs in FY24.

Pearl Global Industries Limited: Financial Analysis (FY 2023-24) #

Company Overview and Business Model #

Pearl Global Industries Limited (PGIL), established in 1987, is a global apparel multinational specializing in design, manufacturing, and supply chain solutions for the fashion industry. The company caters to a diverse clientele, including major international brands and retailers such as Kohl’s, PVH, Inditex, and GAP. PGIL operates with a diversified product portfolio encompassing knits, wovens, denim, outerwear, activewear, and athleisure.

Its manufacturing footprint spans 10 countries (India, Indonesia, Bangladesh, Vietnam, Guatemala, US, Spain, Hong Kong, UK, UAE) with 24 manufacturing units (including partnership facilities), boasting an annual capacity of 83.9 million units. A key strategic element is its asset-light model, leveraging both 100% owned factories and partnership facilities (currently ~16% of sourcing). The company emphasizes customized solutions, a robust design team (75 designers globally), operational rigor, and sustainable practices.

Financial Performance Review (FY 2023-24 - Consolidated) #

Revenue Growth #

Consolidated revenue from operations reached ₹3,436.15 Crores, a 9% year-on-year (YoY) increase from ₹3,158.41 Crores in FY 2022-23. This growth was significantly driven by a 21% YoY increase in overseas revenue, particularly from Bangladesh and Vietnam facilities.

Profitability #

• EBITDA (excluding ESOP expenses) crossed the ₹300 Crores mark, amounting to ₹307.8 Crores, a 22% YoY growth from ₹258.2 Crores.
• EBITDA margin improved by 100 basis points YoY, from 8% to 9%, attributed to operational leverage, optimized product/customer mix, and enhanced efficiency in overseas operations.
• Profit After Tax (PAT) stood at ₹169.12 Crores, up from ₹152.99 Crores in the previous year. PAT margin was 4.9%.

Working Capital Management #

Working capital days were significantly reduced to 30 days, a substantial improvement attributed to digitization efforts reducing turnaround time. This has unlocked capital and reduced debt servicing costs.

Geographical Revenue Contribution #

Bangladesh (46%), India (20%), Vietnam (14%), Indonesia (10%), Others (10%). (Shipped Pieces %)

Client Concentration #

69% of revenue contribution came from key clients, indicating strong relationships but also a degree of concentration risk.

Credit Rating #

ICRA upgraded the long-term credit rating to A- (Stable) from BBB+ (Stable), reflecting consistent performance despite market slowdowns and benefits from a multinational presence.

Dividend #

An interim dividend was declared. The company policy targets a minimum dividend of 20% of consolidated PAT.

Strategic Initiatives and Growth Drivers #

Customer Focus #

• Acquiring new marquee customers and increasing wallet share with existing ones.
• Co-creating products based on end-customer needs, leveraging a robust design team and technologies like 3D CAD rendering.

Operational Excellence & Digitization #

• Modernization of all factories with a comprehensive digitization strategy.
• Introduction of unique QR codes on garments for 100% traceability, inventory, and quality control, meeting evolving market demands (e.g., US retailer requirements against forced labor).
• Focus on improving operational efficiency across geographies.

Asset-Light Model & Partnerships #

Continued emphasis on the asset-light model, utilizing partnership factories, especially in mature markets like Vietnam and Bangladesh.

Sustainability #

• Significant investments in sustainable practices:
  • Aqualess Mission: 85% reduction in water consumption for denim washes in Bangladesh.
  • Use of eco-friendly fabrics, environmental impact assessments for garments.
  • Solar power generation (implemented in Chennai, planned for other facilities), ETP/STP/WTP for water recycling.

Geographical Diversification & Near-Shoring #

• Presence in three out of four major global apparel supply chains.
• Expansion in Guatemala to serve as a near-shore option for US customers, addressing inventory management and logistics challenges.

Capital Expenditure and Expansion Plans #

Indicative Capex (FY2023-24 to FY2027-28) #

₹450 Crores to ₹550 Crores.

Funding Mix #

Internal accruals, debt, and expansion capital.

India Expansion #

• Advanced stages for capacity expansion in Madhya Pradesh and Bihar through subsidiaries.
• Exploring opportunities in other states, leveraging state government incentives.

Overseas Expansion #

• Guatemala: Joint venture executed, factory expansion completed.
• Evaluating acquisition of factories in other countries.
• Indonesia: New facility built on owned land, expanding capacity by 35%.

Objective #

Enhance production capacity, geographical reach, automate facilities/processes, and optimize capacities.

Market Outlook and Competitive Positioning #

Global Economic Environment #

• US Market: Experienced a 15% reduction in apparel imports in 2023 due to inventory overhang, but signs of recovery with fresh inventory placement.
• Europe: Cautious buying (13% less inventory overall) due to geopolitical tensions; UK & Germany saw 17% import reduction.
• Japan: Modest 4% decrease in imports post-pandemic.

Industry Trends #

• Increasing demand for environment-friendly and sustainable fashion. PGIL is responding with GRS, GOTS certifications, and water/energy reduction initiatives.
• Growing focus on woven fabrics and modern technology (3D design, CAD, automation). PGIL utilizes 3D CAD and advanced design software.
• Evolving economic conditions (GDP, trade policies, currency fluctuations). PGIL aims to leverage its multinational presence to mitigate regional disruptions.

Competitive Advantage #

• Diversified product offering and multinational presence across key supply chains.
• Robust design capabilities and end-to-end supply chain solutions (Concept to Store).
• Strong relationships with marquee global retailers.
• Shift towards an asset-light model for swift expansion and improved return ratios.
• Commitment to sustainability and traceability enhancing appeal to conscious brands and consumers.

Risk Assessment and Mitigation #

Customer Risk #

Mitigated through credit assessments for new customers and pre/post-shipment coverage. Strong relationships with key clients are maintained, though concentration risk exists.

Product Risk #

Addressed by aligning quality systems with customer expectations, ongoing communication, and customer-certified associates for product certification.

Raw Material Risk #

Managed via proactive demand forecasting, early booking, strategic supplier partnerships, and aligning production with confirmed sales orders. Costs are generally passed through.

Currency Risk #

Minimal exposure due to natural hedges in overseas operations and domestic sourcing for 99% of fabric in India. A calibrated hedging policy is followed for export currency.

Social and Ethical Compliance #

Rigorous internal control and compliance framework, adherence to customer onboarding standards, and zero-tolerance policy.

Cashflow Risk #

Asset-light model optimizes capital, operations funded through internal resources, and focus on timely collections.

Geopolitical Risk #

Monitored, with diversification across manufacturing locations acting as a natural hedge.

Operational Risk (Supply Chain, Energy, Safety - from BRSR) #

• Supply Chain: Adherence to OCS, GOTS for traceability and organic content.
• Energy/Water: Investments in conservation, solar, ETP/STP, steam boilers.

Financial Analysis: Pearl Global Industries Limited (FY 2023-24) #

Auditor’s Opinion and Qualifications #

S.R. Dinodia & Co. LLP issued an unmodified opinion on the Standalone and Consolidated Financial Statements for the year ended March 31, 2024, signifying a true and fair view in accordance with Indian Accounting Standards (Ind AS) and the Companies Act, 2013.

Key Audit Matters (KAMs):

• Adequacy and completeness of disclosures of Related Party Transactions.
• Recognition, measurement, presentation, and disclosures of revenues as per Ind AS 115 ‘Revenue from Contracts with Customers’.

The consolidated financial statements’ report includes an “Other Matters” paragraph, relying on other auditors’ reports for six subsidiaries (total assets ₹140,840.53 lakh, total revenues ₹369,686.40 lakh for FY24).

The Companies (Auditor’s Report) Order, 2020 (CARO) report noted:

• The audit trail (edit log) facility at the database level was not enabled for the accounting software.
• The accounting software used for payroll records did not have an audit trail feature.

A similar observation was made in the consolidated CARO report.

Key Accounting Policies #

The financial statements are prepared under the historical cost convention, except for certain financial instruments measured at fair value, in accordance with Ind AS. Key accounting policies include:

• Revenue Recognition (Ind AS 115): Revenue recognized when control of goods or services is transferred.
• Leases (Ind AS 116): Right-of-use (ROU) assets and lease liabilities are recognized. Short-term leases and leases of low-value assets are expensed on a straight-line basis.
• Financial Instruments (Ind AS 109): Financial assets are classified at amortized cost, FVTOCI, or FVTPL. Financial liabilities are generally measured at amortized cost. Hedge accounting is applied for certain derivative contracts (cash flow hedges).
• Inventories: Valued at the lower of cost (weighted average/FIFO for traded goods) and net realizable value.
• Property, Plant & Equipment (PPE): Stated at cost less accumulated depreciation and impairment. Depreciation is primarily on a straight-line basis.
• Employee Benefits (Ind AS 19): Defined contribution plans are expensed as incurred. Defined benefit plans are accounted for using the projected unit credit method. ESOP costs are recognized based on fair value at grant date.
• Business Combinations and Goodwill (Ind AS 103): Accounted for using the acquisition method. Goodwill is tested for impairment annually.

No new standards or amendments materially impacted the financial statements for the year ended March 31, 2024.

Internal Control Effectiveness #

The auditors’ report on Internal Financial Controls (IFC) under Section 143(3)(i) states that the Holding Company and its Indian subsidiaries have an adequate IFC system over financial reporting.

However, the CARO report points to deficiencies in the audit trail functionality for certain accounting software.

Regulatory Compliance Status #

• Companies Act, 2013: General compliance confirmed. The CARO observation on audit trail functionality is a compliance point under Rule 11(g).
• SEBI Regulations: Compliance confirmed with SEBI (LODR) Regulations, 2015.
• Listing Requirements: Listing fees for FY 2024-25 have been paid.
• FEMA: Compliance reported for Foreign Direct Investment, Overseas Direct Investment, and External Commercial Borrowings.
• Environmental, Social, and Governance (ESG): Compliance and initiatives related to National Guidelines on Responsible Business Conduct (NGRBC) outlined in the BRSR.
• Tax Laws: Ongoing tax assessments and pending litigations exist.

Overall, broad compliance is reported, with the audit trail deficiency noted for improvement.

Legal Proceedings and Their Potential Impact #

As per Note 46 on Contingent Liabilities:

• Tax Demands: Income Tax demands are pending for Assessment Years 2011-12, 2017-18, 2018-19, and 2020-21.
• Labor Cases: Various legal cases involving labor are pending.
• Letters of Credit & Guarantees:
  • Standalone: Irrevocable LCs outstanding: ₹2,867.47 lakh (FY24), ₹2,720.75 lakh (FY23). Corporate guarantees to foreign subsidiaries: ₹10,421.25 lakh (FY24), ₹23,843.80 lakh (FY23).
  • Consolidated: Irrevocable LCs outstanding: ₹17,144.32 lakh (FY24), ₹15,295.05 lakh (FY23).

No significant and material orders were passed by regulators or courts impacting the going concern status or future operations.