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AuditQualification1

iso4217:INRxbrli:pureiso4217:INRxbrli:shares

541578

VARROC

INE665L01035

VARROC ENGINEERING LIMITED

Main Board

Equity

2024-04-01

2025-03-31

2025-05-29

2025-05-22

INR

Millions

Quarterly

Fourth quarter

Multi segment

2025-05-29

12:30:00

2025-05-29

14:30:00

true

Cash Flow Indirect

Statement on impact of audit qualification

2025-01-01

2025-03-31

Audited

Consolidated

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Notes to Audited Consolidated Financial Results: 1. The above results were reviewed by the Audit Committee and approved by the Board of Directors at its meeting held on May 29, 2025 and were subjected to audit by the Statutory Auditors. 2. The figures for the quarters ended March 31, 2025 and March 31, 2024 are the derived figures between the audited figures in respect of full financial year and the unaudited published year-to-date figures upto the third quarter of the respective financial year which were subjected to limited review. 3. Pursuant to provisions of Section 230-232 of the Companies Act, 2013, the Board of Directors of the Company on May 17, 2024 had approved the scheme of amalgamation of Varroc Polymers Limited ('VPL') (a wholly owned subsidiary of the Holding Company) with Varroc Engineering Limited ('VEL') (the Holding Company) with appointed date of April 01, 2024 ('the Scheme'). National Company Law Tribunal ('NCLT') approved the above scheme vide its order dated January 10, 2025 and the merger became effective on February 1, 2025 on filing of the NCLT order with the Registrar of Companies. The merger has been accounted as business combination of entities under common control as per Appendix C to Ind AS 103 - Business Combinations. The aforesaid scheme has no impact on the Consolidated Financial Results of the Group since the scheme of merger was between the Holding Company and its wholly owned subsidiary. 4. Exceptional items for the periods presented in the consolidated results include following: 4a On December 11, 2024, the Group received an order from the International Chamber of Commerce, Singapore ('ICC') in respect of the ongoing arbitration between VarrocCorp Holding B.V. ('VCHBV') jointly with Varroc Engineering Limited and Beste Motor Co. Ltd. ('TYC BVI Entity') jointly with TYC Brother Industrial Co. Ltd ('TYC Group') and Varroc TYC Corporation ('VTYC' or 'China JV'), wherein VCHBV has been directed to transfer its 50% shareholding in VTYC to TYC BVI Entity for a consideration of RMB 310.50 million. Accordingly, the Group has assessed that its investment in VTYC (a joint venture accounted for under the equity method) satisfies the criteria prescribed under Ind AS 105 'Non-Current Assets Held for Sale and Discontinued Operations' for classification as 'Assets held for sale' and has written down this investment to Rs. 3,395.15 million which is its fair value less costs to sell. The resulting estimated impairment loss of Rs. 10.34 million, Rs. 796.48 million and Rs. 806.82 million for the quarters ended March 31, 2025 and December 31, 2024, and the year ended March 31, 2025 respectively has been disclosed as an Exceptional item in the financial results. Subsequent to the year end, the Group has received above consideration on May 07, 2025 and transferred its investments in China JV. Further, the Group’s share of net profits of VTYC of Rs. 27.85 million (approx. 1.65% of Profit/(loss) before tax) which is included in the Group’s consolidated profits is based on management certified accounts and was not subjected to audit. Due to the arbitration as explained above, the Group was unable to get the financial and other information of VTYC audited from auditors. The auditors in their audit report have included a qualification in respect of this matter. 4b On April 21, 2025, the Group received final order from ICC in respect of the above arbitration wherein the Group has been directed to pay to TYC Group legal costs pertaining to the arbitration incurred by TYC Group amounting to Rs. 439.91 million. The group has recognised a provision for this cost as at March 31, 2025 and the same has been disclosed as an Exceptional item in the financial results for the quarter and year ended March 31, 2025. The Company is analyzing the Final Award, and is assessing the legal options available in this regard. 4c Exceptional item also include estimated expenses directly attributable to merger of VPL with the Company amounting to Rs. 83.32 million, Rs. 112.70 million and Rs. 196.02 million for the quarters ended March 31, 2025 and December 31, 2024, and the year ended March 31, 2025 respectively. 4d During the current year, KTM AG group, one of the customer of the Group, filed for insolvency and the Court admitted restructuring with self-administration in Austria. Considering these developments, the Group recognised a provision for expected credit loss of trade receivables of KTM AG Group amounting to Rs. 30.62 million in the quarter and year ended March 31, 2025. 5 a) On November 5, 2024, the Group received a GST Order from Additional Commissioner of CGST & Central Excise for appropriation of GST dues amounting to Rs. 629 million along with equivalent penalty and applicable interest relating to inappropriate classification of certain goods supplied during the period from July 1, 2017 to September 30, 2023. The Group has paid the principal demand, however, considering merits of the case, management believes that it has grounds to successfully defend and litigate the GST Order with respect to applicable interest and penalty for the aforementioned period. The Group has initiated appellate proceedings against this GST Order, pending conclusion of which no adjustments have been made in respect of this matter in the financial results for the quarter and year ended March 31, 2025. b) On January 03, 2025, the Group received a GST Order from Commercial Tax Officer (Divisonal GST office, Karnataka) consisting of demand for GST dues amounting to Rs. 0.03 million along with interest of Rs. 302.67 million and penalty of Rs. 564.19 million relating to inappropriate classification of certain goods supplied during the period from July 1, 2017 to September 30, 2023. The Group has paid the principal demand, however, considering merits of the case, management believes that it has grounds to successfully defend and litigate the GST Order with respect to the interest and penalty for the aforementioned period. The Group has initiated appellate proceedings against this GST Order, pending conclusion of which no adjustments have been made in respect of this matter in the financial results for the quarter and year ended March 31, 2025. 6 During the previous year ended March 31, 2024, the Group received eligibility certificates (ECs) in respect of three plants in Aurangabad/Pune under the Maharashtra Electronic Policy 2016 effective from April 1, 2022 and valid for 10 years. Under these ECs, the Company is eligible to claim incentive in the form of refund of SGST paid on eligible sales from the respective plants. The Group has considered these as grants related to income under Ind AS 20 by recognizing the same as income in profit and loss based on SGST paid for the year. The amount of income recognised in the quarter and year ended March 31, 2024 in respect of the aforesaid ECs was Rs. 989.71 million pertaining to the period April 1, 2022 to March 31, 2024. 7 During the year ended March 31, 2024, Varroc Engineering Limited ('VEL') and Varroc Polymers Limited ('VPL') had derecognised (written-off) loans given to VarrocCorp Holding B.V. (‘VCHBV’), Netherlands including interest on such loans aggregating to Rs. 13,533.33 million after making requisite submissions to AD Bank. The Group had claimed this write-off of loans as an allowable business loss, considering that these loans extended to VCHBV were in the nature of trade investments to derive benefits for the Group's businesses rather than for earning dividend/capital appreciation. The Group obtained legal opinions from two independent senior counsels who supported their view on claiming this write-off of loans as an allowable business loss. Accordingly, the group considered this loss as tax deductible for computation of current tax provision to the extent of Rs. 437.14 million and for recognition of deferred tax asset of Rs. 2,968.93 million in VPL & VEL respectively, towards the loss during the year ended March 31, 2024. These loans pertained to funding of Varroc Lighting Systems (‘VLS’) entities (erstwhile subsidiaries of VCHBV) which were fully provided for during the period ended September 30, 2022, in respective standalone financial statements of VEL and VPL when the VLS business was sold to Compagnie Plastic Omnium SE, France. Further, VEL shifted to new tax regime under section 115BAA of Income Tax Act, 1961 from financial year ended March 31, 2024. As a result, MAT credit of Rs. 265.34 million was written off and deferred tax liability to the extent of Rs. 254.54 million was reversed on account of lower tax rate under new regime, which were included in the total tax expense for the year ended March 31, 2024. 8 During the year ended March 31, 2024, the Company had issued 25,000 number of listed Non-Convertible Debentures (‘NCD’) of face value of Rs. 1,00,000 each aggregating to Rs. 2,500 million on a private placement basis. The NCDs are repayable in 16 equal quarterly instalments beginning from December 07, 2024. Further, NCD holders have a put option after 30 months and 42 months respectively from date of allotment, requiring the Company to redeem all the NCDs. The Company shall at all times until the Final Settlement Date maintain a minimum Security Cover of at least 1.1x. The proceeds from the issue have been utilised for repayment of existing listed NCDs, other outstanding debt and for general corporate purposes. These NCDs are secured by exclusive charge by way of hypothecation on the specific identified movable properties of the Company. The asset cover in respect of the Non-Convertible Debentures as at March 31, 2025 is 1.57 times of the total due amount which is higher than the requirement of 1.10 times as specified in the Debenture Trust Deed. 9 The 'Automotive' segment consists of the business of automobile products consisting of auto parts for twowheelers, three-wheelers and four-wheelers and related design, development and engineering activities and other services. 'Others' comprise of forging components for off road vehicles and components for mining and oil drilling industry which is below the thresholds for reporting as separate operating segment. Investment in joint ventures and corresponding share of profit/loss from joint ventures is considered under unallocated assets and profit/loss respectively. 10 Varroc Engineering Limited ('VEL') and VarrocCorp Holding BV, Netherlands ('VCHBV', wholly owned subsidiary of VEL) (together referred to as 'Sellers') entered into a Securities Purchase Agreement dated April 29, 2022 as amended dated July 01, 2022, October 05, 2022 and May 12, 2023 (collectively referred to as 'SPA') with Compagnie Plastic Omnium SE, France (referred to as 'Buyer'), to divest the Sellers 4-Wheeler lighting business in the Americas and Europe ('VLS Business'). The equity value agreed under the SPA was Euro 69.5 million (subject to closing adjustments as provided under the SPA). Subsequently, both the Buyer and the Sellers entered into Settlement Agreement on July 14, 2023 whereby both the parties agreed to settle the disagreements on closing adjustments and the final equity value agreed under the Settlement Agreement was Euro 54.5 million. Accordingly, VCHBV received the remaining consideration amount of Euro 13 million on July 17, 2023 pursuant to this final settlement with Buyer. Loss from discontinued operations for the year ended March 31, 2024 of Rs. 209.20 million pertains to adjustments pursuant to revised equity value as per above settlement agreement and expenses directly related to sale of investment in VLS business. 11 The Board of Directors at its meeting held today has considered and recommended a final dividend of Re. 1 per equity share (nominal value of Re. 1 per share) for the year ended March 31, 2025. The final dividend is subject to approval of shareholders at the ensuing Annual General Meeting of the Company.

2024-04-01

2025-03-31

Audited

Consolidated

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Foreign exchange (gain)/loss (net)

-73890000

Consumption of Stores, Spares and Tools

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Water and Electricity Charges

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Contract Labour Cost

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Remeasurement of defined benefit obligation (net of tax)

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Remeasurement of defined benefit obligation (net of tax)

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Exchange differences in translating the financial statements of foreign operations

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Exchange differences in translating the financial statements of foreign operations

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Audited

Qualified opinion

S R B C & CO LLP

true

2026-02-28

81717660000

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4.01

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Following qualification has been given by the Auditors in the audit report on Consolidated financial statements of the Company: As disclosed in note 50 to the consolidated financial statements, the financial results and other financial information for the year ended March 31, 2025 in respect of Varroc TYC Corporation BVI (China JV), a joint venture accounted for under the equity method, considered for the purpose of preparation of the consolidated financial statements, is unaudited. Hence, we are unable to determine the impact of Groups share of profit/loss from China JV and of the impairment loss recognised for China JV on the consolidated profit/loss before tax, profit/loss after tax, total comprehensive income and earnings per share for the year ended March 31, 2025 and Groups share of net assets of China JV on the investment in China JV as at March 31, 2025, had the financial results/ other financial information of China JV been audited.

Qualified opinion

Repetitive

N/A

The Groups share of net profits of VTYC of Rs. 27.85 million (approx. 1.65% of Profit/(loss) before tax) which is included in the Groups consolidated profits is based on management certified accounts and was not subjected to audit. Due to the ongoing arbitration as explained below, the Group was unable to get the financial and other information of VTYC audited from auditors. On December 11, 2024, the Group received an order from the International Chamber of Commerce, Singapore ('ICC') in respect of the ongoing arbitration between VarrocCorp Holding B.V. ('VCHBV') jointly with Varroc Engineering Limited and Beste Motor Co. Ltd. ('TYC BVI Entity') jointly with TYC Brother Industrial Co. Ltd ('TYC Group') and Varroc TYC Corporation ('VTYC' or 'China JV'), wherein VCHBV has been directed to transfer its 50% shareholding in VTYC to TYC BVI Entity for a consideration of RMB 310.50 million. Subsequent to the year end, the Group has received above consideration on May 07, 2025 and transferred its investments in China JV.

As explained to us by the management, due to the ongoing arbitration with the JV partner for resolution of certain matters regarding the operation of the JV which were concluded on December 11, 2024, due to which the Group was unable to obtain audited financials and other information from China JV, in the absence of which we are unable to determine the possible impact of Group's share of profit/loss from China JV and of the impairment loss recognised for China JV on the consolidated profit/loss before tax, profit/loss after tax, total comprehensive income and earnings per share for the year ended March 31, 2025 and Groups share of net assets of China JV on the investment in China JV as at March 31, 2025.

Mr. Tarang Jain

Mr. K. Mahendra Kumar

Mr. Gautam Khandelwal

Mr. Paul Alvares

Pune

2025-05-29