2.1 Summary of Significant Accounting Policies
a) Basis of preparation of Financial Statements:
The financial statements have been prepared and presented under the Historical Cost Convention, on the accrual basis of the accounting except for certain financial assets and financial liabilities including derivative instruments, if any, which are measured at fair value/amortized cost/net present value at the end of each reporting period; as explained in the accounting policies below.
Fair Value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the market participants at the measurement date. These accounting policies have been applied consistently over all the period presented in these financial statements.
All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in Schedule III of the Companies Act, 2013.
For the purpose of the Current / Non-Current classification of assets and liabilities, the Company has ascertained its operating cycle as twelve months. This is based on the nature of services and the time between the acquisition of the assets or liabilities for processing and their realization in Cash and Cash Equivalents.
The Company's financial statements are prepared and presented in Indian Rupee, which is also the functional currency of the Company. All amounts have been rounded off to the nearest lakhs unless otherwise indicated.
b) Use of Estimates
The preparation of the financial statements is in conformity with the Ind AS which requires management to make certain judgments, estimates and assumptions that affect the application of the accounting policies and the reported amounts of the assets, liabilities, income and expenses (including contingent liabilities) and the accompanying disclosures. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on a periodic basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
The key assumptions concerning the future and other key resources of estimation uncertainty at the reporting date, have a significant risk of causing a material adjustment to the carrying amount of the assets and liabilities within the next financial year are described as follows:
i. Income Tax: The Company's tax jurisdiction is in India. Significant judgments are involved in estimating budgeted profits for the purpose of paying advance tax, determining the income tax provisions, including the amount expected to be paid / recovered. (Refer Note No.33)
ii. Useful life of the Property, Plants and Equipment:
Property, Plant and Equipment represent a significant proportion of the asset base of the Company. The charge with respect to periodic depreciation is derived after determining an estimate of an asset's expected useful life and the expected residual value at the end of its life.
The useful lives and residual values of Company's assets are determined by the management at the time the asset is acquired and reviewed periodically, including at each financial year end.
Useful lives of each of these assets is based on the life prescribed in Schedule II to the Companies Act, 2013 or based on the technical estimates, taking into account the nature of the assets, estimated usage, expected residual values and operating conditions of the assets.
The estimated useful life of Property, Plant and Equipment is based on a number of factors including the effects of obsolescence, demand, competition and other economic factors (such as the stability of industry and known technological advances) and the level of maintenance expenditures required to obtain the expected future cash flows from the asset.
iii. Defined Benefits Obligations:
The costs of providing Gratuity and other post-employment benefits are charged to the Statement of Profit and Loss in accordance with Ind AS-19, "Employee Benefits" over the period during which benefit is derived from the employees' services. It is determined by using the Actuarial Valuation and assessed on the basis of assumptions selected by the management.
An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These assumptions include salary escalation rates, discount rates, expected rate of return on assets and mortality rates. The same is disclosed in Note No. 36, "Employee Benefits". Due to complexities involved in the valuation and its long-term in nature, a defined benefit obligation is highly sensitive to change in these assumptions. All assumptions are reviewed at each balance sheet date.
iv. Fair Value Measurements of Financial Instruments:
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques, including the discounted cash flow model, which involves various judgments and assumptions.
v. Allowance for impairment of trade receivables:
Judgments are required in assessing the recoverability of overdue trade receivables and determining whether a provision is against those receivables is required. Factors considered include the credit rating of the counterparty, the amount and timing of anticipated future payments and any possible actions that can be taken to mitigate the risk of non-payment. Moreover, trade receivables are written off on a case-to-case basis if deemed not to be collectable on the assessment of the underlying facts and circumstances.
vi. Provisions:
The timing of recognition and quantification of the liability requires estimates which can be subject to change. The carrying amounts of provisions and liabilities are reviewed regularly and revised to take the amount of changing the facts and circumstances.
vii. Impairment of Financial and Non-Financial Assets:
The impairment provision of financial assets are based on the assumptions about the risk of default and expected cash loss rates. The Company uses judgment in making these assumptions and selecting the inputs to the impairment calculation, based on the Company's past history, existing market conditions as well as forward-looking estimates at the end of the reporting period.
In case of Non - Financial Assets, the Company estimates asset's recoverable amount, this is higher of an asset's or Cash Generating Units (CGU)'s fair value less the cost of disposal and the value in use.
In assessing the value in use, the estimated future cash flows are discounted using the pre - tax discount rate that reflects current market assessments of the time value of money and the risk specific to the assets. In determining the fair value less cost of disposal, recent market transactions are taken into accounts, if no such transactions can be identified, an appropriate valuation model is used.
viii. Recognition of Deferred Tax Assets and Liabilities:
Deferred tax assets and liabilities are recognized for deductible/taxable temporary differences and unused tax losses and tax credits for which there is probability of utilization against the future taxable profit. The Company uses judgments to determine the amount of deferred tax that can be recognized, based upon the likely timing and the level of future taxable profits and business developments.
ix. Inventory Management:
Inventory consists of a large variety of items of raw materials, stores and spares finished goods with variation in sizes and weights. Measurement of items of inventory is complex and involves significant judgements and estimates. The Company performs physical counts of the inventory on a periodic basis and arrives at the proper quantity of inventory which involves estimates of quantity for certain types of items with heavy weight or in such forms where complete count is not practicable.
c) Property, Plants and Equipment:
Measurement at Recognition:
An item of Property, Plant and Equipment that qualifies as an asset is measured on the initial recognition at cost, net of recoverable taxes, if any. Following the initial recognition, items of property, plants and equipment are carries at its cost less accumulated depreciation / amortization and accumulated impairment losses, if any.
The Company identifies and determines cost of each part of an item of Property, Plant and Equipment separately if the part has a cost which is significant to the total costs of that item of Property, Plant and Equipment and has a useful life that is materially different from that of remaining items.
The cost of an item of property, plants and equipment comprises of its purchase price including import duties and other non - refundable purchase taxes or levies, directly attributable to the cost of bringing the asset to its present location and working condition for its intended use and the initial estimate of decommissioning, restoration and similar liabilities, if any. Any trade discount and rebates are deducted in arriving at the purchase price of such Property, Plant and Equipment.
Such cost also includes the cost of replacing a part of the plant and equipment and the borrowing cost of the long - term construction projects, if the recognition criteria are met. Expenses directly attributable to new manufacturing facility during its construction period are capitalized if the recognition criteria are met. Expenditure related to plans, designs and drawings of buildings or plant and machinery is capitalized under relevant heads of property, plant and equipment if the recognition criteria are met.
When the significant parts of Property, Plant and Equipment are required to be replaced at periodical intervals, the Company recognizes such part as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as replacement, if the recognition criteria are satisfied, all other repair and maintenance costs are recognized in the Statement of Profit and
Loss as and when incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.
All the costs, including administrative, financing and general overhead expenses, as are specifically attributable to construction of a project or to the acquisition of a Property, Plants and Equipment or bringing it to its present location and working condition, is included as a part of the cost of construction of the project or as a part of the cost of Property, Plant and Equipment, till the commencement of commercial production. Any adjustments arising from exchange rate variations attributable to the Property, Plant and Equipment are capitalized as aforementioned.
Borrowing cost relating to the acquisition / construction of Property, Plant and Equipment which takes the substantial period of time to get ready for its intended use are also included in the cost of Property, Plant and Equipment / cost of constructions to the extent they relate to the period till such Property, Plant and Equipment are ready to be put to use.
Any subsequent expenditure related to an item of Property, Plant and Equipment is added to its book value only and only if it increases the future economic benefits from the existing asset beyond its previously assessed standard of performance.
Any items such as spare parts, standby equipment and servicing equipment that meet the definitions of the Property, Plant and Equipment are capitalized at cost and depreciated over the useful life of the respective Property, Plant and Equipment. Cost is in the nature of repair and maintenance are recognized in the Standalone Statement of Profit and Loss as and when incurred.
The Company has elected to consider the carrying amount of all its property, plants and equipment appearing the financial statements prepared in accordance with the Accounting Standards notified under Section 133 of the Companies Act, 2013, read together with Rule 7 of the Companies (Accounts) Rule, 2014, as amended and used the same as deemed cost in the Opening Ind AS Balance Sheet prepared as on April 01, 2019.
Capital Work-in-Progress and Capital Advances:
The cost of Property, Plant and Equipment not ready for intended use, as on the balance sheet date, is shown as a "Capital Work-in-Progress". The Capital Work-inProgress is stated at cost. Any expenditure in relation to survey and investigation of the properties is carried as Capital Work-in-Progress. Such expenditure is either capitalized as cost of the projects on completion of construction project or the same is expensed in the period in which it is decided to abandon such project. Any advances given towards acquisition of Property, Plants and Equipment outstanding at each balance sheet date is disclosed as "Other Current Assets".
Depreciation
Depreciation on each part of Property, Plants and Equipment is provided to the extent of the depreciable amount of the assets on the basis of "Straight Line
Method (SLM)" on the useful life of the tangible property, plants and equipment and is charged to the Statement of Profit and Loss, as per the requirement of Schedule - II to the Companies Act, 2013. The useful life of the Property, Plants and Equipment is estimated as prescribed in Schedule II of the Companies Act 2013 or estimated by the management as per technical evaluation based on the nature of the Property, Plants and Equipment, the usage of the Property, Plants and Equipment, expected physical wear and tear of such Property, Plants and Equipment, the operating conditions, anticipated technological changes, manufacturer warranties and maintenance support of the Property, Plants and Equipment etc.
When the parts of an item of the Property, Plants and Equipment have different useful life, they are accounted for as a separate item (major components) and are depreciated over their useful life or over the remaining useful life of the principal Property, Plants and Equipment, whichever is less.
Useful lives of each class of Property, Plants and Equipment as prescribed under Part C of Schedule II to the Companies Act, 2013; except as based on technical evaluation are as under:-
Freehold land is not depreciated. Leasehold land and their improvement costs are amortized over the period of the lease. The useful lives, residual value of each part of an item of Property, Plants and Equipment and the method of depreciation are reviewed at the end of each reporting period, if any, of these expectations differ from the previous estimates, such change is accounted for as a change in accounting estimate and adjusted prospectively, if appropriate.
Derecognition
The carrying amount of an item of Property, Plants and Equipment and Intangible Assets is recognized on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the derecognition of the Property, Plants and Equipment is measured as the difference between the net disposal proceeds and the carrying amount of the assets and is recognized in the Statement of Profit and Loss, as and when the assets are derecognized.
d) Intangible Assets:
Measurement at Recognition:
Intangible assets acquired separately is measured on the initial recognition at Cost. Intangible assets arising on the acquisition of business are measured at fair value as at the date of acquisition. Internally generated intangible assets including research cost are not capitalized and the related expenditure is recognized in the Statement of Profit and Loss in the period in which the expenditure is incurred. Following the initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment loss, if any.
The Company has elected to consider the carrying amount of all its intangible assets appearing in the financial statements prepared in accordance with the Accounting Standards notified under Section 133 of the Companies Act, 2013, read together with Rule 7 of the Companies (Accounts) Rule, 2014, as amended and used the same as deemed cost in the Opening Ind AS Balance Sheet prepared as on April 1, 2019.
Amortization:
Intangible assets with finite lives are amortized on a "Straight Line Basis" over the estimated useful economic life of such Intangible assets. The amortization expenses on Intangible assets with the finite lives are recognized in the Statement of Profit and Loss.
The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at the end of each financial year. If any of these expectations differ from the previous estimates, such changes are accounted for as a change in an accounting estimate.
Intangible assets including Computer software are amortized on a straight-line basis over a period of Five years.
Derecognition:
The carrying amount of an Intangible asset is recognized on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the derecognition of an Intangible asset is measured as the difference between the net disposal proceeds and the carrying amount of the intangible asset and is recognized in the Statement of Profit and Loss, as and when such asset is derecognized.
e) Impairment:
Assets that have an indefinite useful life, for example, goodwill, are not subject to amortization and are tested for impairment annually and whenever there is an indication that the asset may be impaired.
Assets that are subject to depreciation and amortization and assets representing investments in subsidiary and associate companies are reviewed for impairment, whenever events or changes in circumstances indicate that carrying amount may not be recoverable. Such circumstances include, though are not limited to, significant or sustained decline in revenues or earnings and material adverse changes in the economic environment.
The Company assesses at each reporting date whether there is an indication that assets may be impaired. If any indication exists based on internal or external factors, or when annual impairment testing for assets is required, the Company estimates the asset's recoverable amount. Where the carrying amount of the assets or its cash-generating unit (CGU) exceeds its recoverable amount, the assets are considered impaired and are written down to their recoverable amount. The recoverable amount is the greater of the fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax rate that reflects current market rates and the risk specific to the assets. For those assets that do not generate largely independent cash inflows, the recoverable amount is determined for the CGU to which the assets belong. Fair value less cost to sell is the best estimate of the amount obtainable from the sale of an asset in arm's length transactions between knowledgeable, willing parties, less cost of disposal. After the impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.
Reversal of impairment losses recognized in prior years is recorded when there is an indication that the impairment losses recognized for the assets no longer exist or have decreased. However, the increase in the carrying amount of assets due to the reversal of an impairment loss is recognized to the extent it does exceed the carrying amount that would have been determined (net of depreciation) had no Impairment Loss been recognized for the assets in the prior years.
Impairment losses, if any, are recognized in the Statement of Profit and Loss and included in depreciation and amortization expenses. Impairment losses are reversed in the Statement of Profit and Loss only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had previously been recognized.
f) Lease:
A lease is classified at the inception date as finance lease or an operating lease. A lease that transfers substantially all the risk and rewards incidental to the ownership of the Company is classified as a finance lease. All other leases are classified as operating lease.
The Company as a Lessee:
i) Operating Lease:
Rental payable under the operating lease is charged to the Statement of Profit and Loss on a straight-line basis over the term of the relevant lease except where another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
ii) Finance Lease:
Finance lease are capitalized at the commencement of the lease, at the lower of the fair value of the property or the present value of the minimum lease payments. The corresponding liability to the lessor is included in the Balance Sheet as a finance lease obligation. Lease payments are apportioned between finance expenses and the reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are charged directly against the income over the period of the lease unless they are directly attributable to qualifying assets, in which case they are capitalized. Contingent rentals are recognized as an expense in the period in which they are incurred.
A leased asset is depreciated over the useful lives of the assets, however, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the assets are depreciated over the shorter of the estimated useful lives of the assets and the lease terms.
The Company as a Lessor:
Lease payments under operating leases are recognized as an income on a straightline basis in the statement of profit and loss over the lease term except where the lease payments are structured to increase in line with expected general inflation. The respective leased assets are included in the Balance Sheet based on their nature.
Assets given under finance lease are recognised at an amount equal to the net investment in the lease. Lease rentals are apportioned between principal and interest on the Internal Rate of Return (IRR) method. The principal amount received reduces the net investment in the lease and interest is recognized as revenue. Initial direct cost such as legal costs, brokerage costs etc. are recognized immediately in the Statement of Profit and Loss/ Profit and Loss Account
g) Investments
Investments are classified into Current or Non - Current Investments. Investments that are readily realizable and intended to be held for not more than a year from the date of acquisition are classified as Current Investments. All other Investments are classified as Non - Current Investments. However, that part of Non - Current Investments which are expected to be realized within twelve months from the Balance Sheet date is also presented under "Current Investments" under "Current portion of Non - Current Investments" in consonance with classification of Current / Non-Current classification of Schedule - III of the Act.
All the equity investment which covered under the scope of Ind AS 109, "Financial Instruments" is measured at the fair value. Investment in Mutual Fund is measured at fair value through profit and loss (FVTPL). Trading Instruments are trading at fair value through profit and loss (FVTPL).
The cost of investments comprises the purchase price and directly attributable acquisition charges such as brokerage, fess and duties.
h) Investments Properties:
The property that is held for capital appreciation or for earning rentals or both or, which are not intended to be occupied substantially for use by, or in the operations of the Company is classified as Investment Properties. Items of investment properties are measured at cost less accumulated depreciation / amortization and accumulated impairment losses. Cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for its intended use. Investment properties are depreciated on straight line method on pro-rata basis at the rates specified therein. Subsequent expenditure including cost of major overhaul and inspection is recognized as an increase in the carrying amount of the asset when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably.
i) Inventories:
Inventories of the raw material, work-in-progress, finished goods, packing material, stores and spares, components, consumables and stock in trade are carried at lower of cost and net realizable value. However, raw material and other items held for use in production of inventories are not written down below cost if the finished goods in which they will be incorporated are expected to be sold at or above cost. The comparison of cost and net realizable value is made on an item by item basis.
In determining the cost of raw materials, work-in-progress, finished goods, packing materials, stores and spares, components and stock in trade "First in First out (FIFO)" method is used. Cost of inventories included the cost incurred in bringing each product to its present location and conditions are accounted as follows:
i) Raw Material: Cost included the purchase price net of all direct and indirect taxes, duties (other than those which are recoverable from tax authorities) and other direct or indirect costs incurred to bring the inventories into their present location and conditions.
ii) Finished Goods and Work-in-Progress: Cost included the cost of direct materials and packing material, labour cost and an appropriate proportion of fixed and variable overhead based on the normal operating capacity of the Company, but excluding the borrowing costs but include the other costs incurred in bringing the inventories to their present location and condition. Fixed production overheads are allocated based on the normal capacity of production facilities. Cost is determined on a "First in First out basis (FIFO)".
iii) Stock in Trade: Stock of raw material consists of raw material intended for trading. The cost of raw materials intended for trading included the purchase price and other direct or indirect costs incurred in bringing the inventories to their present location and conditions. Cost is determined on a "First in First out basis (FIFO)".
iv) Stores / spares: Cost included the purchase price net of all direct and indirect taxes, duties (other than those which are recoverable from tax authorities) and other direct or indirect costs incurred to bring the inventories into their present location and conditions.
The stock of waste or scrap is valued at net realizable value.
"Net Realizable Value" is the estimated selling price of inventories in the ordinary course of business, less estimated costs of completion and estimated cost necessary to make the sales of the products.
j) Borrowing Costs:
Borrowing costs include the interest, commitments charges on bank borrowings, amortization of ancillary costs incurred in connection with the arrangement of borrowings.
Borrowing costs that are directly attributable to the acquisition or construction of the qualifying property, plants and equipment are capitalized as a part of the cost of that property, plants and equipment until such time that the assets are substantially ready for their intended use. Qualifying assets are assets which take a substantial period of time to get ready for the intended use or sale.
When the Company borrows the funds specially for the purpose of obtaining the qualifying assets, the borrowing costs incurred are capitalized with qualifying assets. When the Company borrows funds generally and uses them for obtaining a qualifying asset, the capitalization of borrowing costs is computed on the weighted average cost of general costs that are outstanding during the reporting period and used for the acquisition of the qualifying assets.
Capitalization of the borrowing costs ceases when substantially all the activities necessary to prepare the qualifying assets for intended use are complete.
Other Borrowing Costs are recognized as expenses in the period in which they are incurred. Any interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
Any exchange differences arising from foreign currency borrowings to the extent that they are regarded as adjustments to interest costs are recognized as Borrowing Costs and are capitalized as a part of the cost of such property, plants and equipment if they are directly attributable to their acquisition or charged to the Standalone Statement or Profit and Loss.
k) Employee Benefits:
Short-Term Employee Benefits:
All the employee benefits payable wholly within twelve months of rendering the services are classified as short-term employee benefits and they are recognized in the period in which the employee renders the related services. The Company recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for services rendered as a liability (accrued expense) after deducting any amount already paid.
The benefit in the form of Leave Encashment is a non-accumulating short-term compensated absence. It is accounted in the year when absences occur and charged to the Statement of Profit & Loss of the year.
Post-Employment Benefits:
a. Defined Contribution Plans:
Defined contribution plans are employee state insurance schemes and Government administrated provident fund schemes for all the applicable employees. The Company makes a specified monthly contribution towards the Employee Provident Fund scheme as per the norms prescribed by the Central Government. The Company's contribution to defined contribution plans is recognized in the Statement of Profit and Loss in the reporting to which they relate.
Recognition and Measurement of Defined Contribution Plans:
The Company recognizes contribution payable to a defined contribution plan as an expense in the Statement of Profit and Loss when the employees render services to the Company during the reporting period. If the contributions payable for services received from employees before the reporting date exceed the contributions already paid, the deficit payable is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the reporting date, the excess is recognized as an asset to the extent that the prepayment will lead to, for example, a reduction in future payments or a cash refund.
b. Defined Benefits Plans:
i) Gratuity Scheme:
The Company operates a defined benefit gratuity plan for employees. The Company pays the gratuity to the employee whoever has completed five years of service with the Company at the time of resignation or superannuation. The Gratuity is paid at 15 Days salary for every completed year of service as per the Payment of Gratuity Act, 1972.
The liability in respect of gratuity and other post-employment benefits is calculated using the "Project Unit Credit Method" and spread over the period during which the benefit is expected to be derived from employee services.
Re-measurement of defined benefits plans in respect of post-employment are charged to Other Comprehensive Income.
Recognition and Measurement of Defined Benefit Plans:
The cost of providing defined benefits is determined using the Projected Unit Cash Credit method with actuarial valuations being carried out at each Balance Sheet date. The defined benefit obligations recognized in the Balance Sheet represent the present value of the defined benefit obligations as reduced by the fair value of plan assets, if applicable. Any defined benefit asset (negative defined benefit obligations resulting from this calculation) is recognized representing the present value of available refunds and reductions in future contributions to the plan.
All expenses represented by current service cost, past service cost, if any, and net interest on the defined benefit liability / (asset) are recognized in the Statement of Profit and Loss. Remeasurements of the net defined benefit liability / (asset) comprising actuarial gains and losses and the return on the plan assets (excluding amounts included in net interest on the net defined benefit liability/asset), are recognized in Other Comprehensive Income. Such Remeasurements are not reclassified to the Statement of Profit and Loss in the subsequent periods.
Past service cost is recognized immediately to the extent that the benefits are already vested, else is amortized on a straight-line basis over the average period until the amended benefits become vested. Actuarial gains or losses in respect of the defined benefit plans are recognized in the Statement of Profit and Loss in the year in which they arise.
The Company preset the above liability as Current and Non-Current in the Balance Sheet as per the Actuarial Valuation by the Independent actuary; however, the entire liability towards gratuity is considered as current as the Company will contribute this amount to the Gratuity Fund within the next twelve months.
l) Revenue Recognition:
Revenue is recognized when it is probable that economic benefit associated with the transaction flows to the Company in the ordinary course of its activities and the amount of revenue can be measured reliably, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payments, net of its returns, trade discounts and volume rebates allowed.
Revenue includes only the gross inflows of economic benefits, including the excise duty, received and receivable by the Company, on its account. The amount collected on behalf of third parties such as sales tax, value-added tax and goods and service tax (GST) are excluded from the Revenue.
Revenue from contracts with the customers is recognized upon the transfer of control of promised products or services to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those products and services. Revenue is measured based on the transaction price, which is the consideration, adjusted discounts and other incentives, if any, as per the contract with customers. Revenue also excludes taxes or amounts collected from customers in its capacity as agents.
Sale of Products:
Revenue from sales of goods is recognized, when all the significant risks and rewards of the ownership of the goods are passed to the buyer, recovery of the consideration is probable, associated cost can be estimated reliably, there is no continuing effective control or managerial involvement with the goods and amount of revenue can be measured reliably, which is generally considered on dispatch of goods to the customers except in case of the consignment sales.
Sales (Gross) includes Excise Duty but excludes VAT and Goods and Service Tax (GST) and is net of discounts and incentives to the customers. Excise Duty to the extent included in the gross turnover is deducted to arrive at the net turnover.
Sale of Services:
Revenue from Sale of Services is recognized as per the Completed Service Contract Method of Revenue recognition except in the few cases when the Revenue from Sale of Services is recognized on an accrual basis as per the Contractual agreement basis. Stage of completion is measured by the service performed till the balance sheet date as a percentage of the total service contracted.
Revenue from Contracts:
Revenue from contracts with customers is recognized on the transfer of control of promised goods or services to a customer at an amount that reflects the consideration to which the Company is expected to be entitled in exchange for those goods or services.
Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable consideration) allocated to that performance obligation. The transaction price of goods sold and services rendered is net of variable consideration on account of various discounts and schemes offered by the Company as part of the contract. This variable consideration is estimated based on the expected value of outflow. Revenue (net of variable consideration) is recognized only to the extent that it is highly probable that the amount will not be subject to significant reversal when uncertainty relating to its recognition is resolved.
Export Incentives:
Export incentive revenues are recognized when the right to receive the credit is established and there is no significant uncertainty regarding the ultimate collection.
Interest:
Revenue from Interest income is recognized using the effective interest method. Effective Interest Rate (EIR) is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instruments or a shorter period, where appropriate, to the gross carrying amount of the financial assets or the amortized cost of financial liability.
Royalty:
Royalty income is recognized on an accrual basis in accordance with the substance of the relevant agreement.
Dividend:
Revenue is recognized when the Company's right to receive the payment is established at the end of the reporting date, which is generally when the shareholders approve the dividend at the Annual General Meeting / Extraordinary General Meeting.
Surplus / (Loss) on disposal of Property, Plants and Equipment / Investments:
Surplus or loss on disposal of property, plants and equipment or investment is recorded on transfers of title from the Company and is determined as the difference between the sales price and carrying value of the property, plants and equipment or investments and other incidental expenses.
Rental Income:
Rental income arising from operating lease on investment properties is accounted for on a straight-line basis over the lease term except in the case where the incremental lease reflects inflationary effect and rental income is accounted in such cases by actual rent for the period.
Insurance Claim:
Claim receivable on account of insurance is accounted for to the extent the Company is reasonably certain of their ultimate collections.
Other Income:
Revenue from other income is recognized when the payment of that related income is received or credited.
m) Foreign Currency Transactions:
a) Initial Recognition:
Transactions in the Foreign Currencies entered into by the Company are accounted in the functional currency (i.e. Indian Rupee '), by applying the exchange rates prevailing on the date of the transaction. Any exchange difference arising on foreign exchange transactions settled during the reporting period is recognized in the Statement of Profit and Loss.
b) Conversion of Foreign Currency Items at Reporting Date:
Foreign Currency Monetary Items of the Company are restated at the end of the reporting date by using the closing exchange rate as prescribed by the Reserve Bank of India, RBI Reference Rate.
Non - Monetary Items are recorded at the exchange rate prevailing on the date of the transactions.
Non - Monetary Items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is measured. Exchange differences arising out of these translations are recognized in the Statement of Profit and Loss except exchange gain or loss arising on Non-Monetary Items measured at the fair value of the item which are recognized in Statement of Profit and Loss or Other Comprehensive Income depending upon their fair value gain or loss recognized in Statement of Profit or Loss and Other Comprehensive Income, respectively.
Exchange differences arising on monetary items that, in substance, form part of the Company's net investment in a foreign operation (having a functional currency other than Indian Rupees) are accumulated in the Foreign Currency Translation Reserve.
All the other exchange differences arising on settlement or translation of monetary items and the mark-to-market losses/gain are dealt with in the Statement of Profit and Loss as Income or Expenses in the period in which they arise except to the extent that they are regarded as an adjustment to the Finance Costs on foreign currency borrowings that are directly attributable to the acquisition or constructions of the qualifying assets, are capitalized to the qualifying assets.
n) Government Grants and Subsidies:
Any subsidy from the Government authorities or any other authorities which the company is entitled to receive in respect of manufacturing or other facilities is dealt as follows:
i) Grants in the nature of subsidies which are non - refundable are recognized as income where there is reasonable assurance that the Company will comply with all the necessary conditions attached to them. Income from grants is recognized on a systematic basis over periods in which the related costs that are intended to be compensated by such grants are recognized.
ii) A government grant which becomes receivable by an entity as compensation for expenses or losses incurred in a previous period is recognised in the profit or loss of the period in which it becomes receivable.
iii) Government grants related to assets, including non-monetary grants at fair value, are presented in the balance sheet by deducting the grant in arriving at the carrying amount of the asset. The grant is recognised in profit or loss over the life of a depreciable asset as a reduced depreciation expense.
o) 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:
The Company recognizes a financial asset in its Balance Sheet when it becomes party to the contractual provisions of the instrument. All financial assets are recognized initially at fair value, plus in the case of financial assets not recorded at fair value through profit or loss (FVTPL), transaction costs that are attributable to the acquisition of the financial asset.
Where the fair value of a financial asset at initial recognition is different from its transaction price, the difference between the fair value and the transaction price is recognized as a gain or loss in the Statement of Profit and Loss at initial recognition if the fair value is determined through a quoted market price in an active market for an identical asset (i.e. level 1 input) or through a valuation technique that uses data from observable markets (i.e. level 2 input).
In case the fair value is not determined using a level 1 or level 2 input as mentioned above, the difference between the fair value and transaction price is deferred appropriately and recognized as a gain or loss in the Statement of Profit and Loss only to the extent that such gain or loss arises due to a change in the factor that market participants take into account when pricing the financial asset.
However, trade receivables that do not contain a significant financing component are measured at transaction price.
Subsequent Measurement:
For subsequent measurement, the Company classifies a financial asset in accordance with the below criteria:
i) The Company's business model for managing the financial assets and
ii) The contractual cash flow characteristics of the financial asset.
Based on the above criteria, the Company classifies its financial assets into the following categories:
i) Financial assets measured at amortized cost
ii) Financial assets measured at fair value through other comprehensive income (FVTOCI)
iii) Financial assets measured at fair value through profit or loss (FVTPL)
Financial Assets measured at Amortized Cost:
A financial asset is measured at the amortized cost if both the following conditions are met:
a) The Company's business model objective for managing the financial assets is to hold financial assets in order to collect contractual cash flows, and
b) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
This category applies to cash and bank balances, trade receivables, loans and other financial assets of the Company Refer to Note No. 35 for further details. Such financial assets are subsequently measured at amortized cost using the effective interest method.
Under the effective interest method, the future cash receipts are exactly discounted to the initial recognition value using the effective interest rate. The cumulative amortization using the effective interest method of the difference between the initial recognition amount and the maturity amount is added to the initial recognition value (net of principal repayments, if any) of the financial asset over the relevant period of the financial asset to arrive at the amortized cost at each reporting date. The corresponding effect of the amortization under effective interest method is recognized as interest income over the relevant period of the financial asset. The same is included under other income in the Statement of Profit and Loss.
The amortized cost of a financial asset is also adjusted for loss allowance, if any.
Financial Assets measured at FVTOCI:
A financial asset is measured at FVTOCI if both of the following conditions are met:
a) The Company's business model objective for managing the financial asset is achieved both by collecting contractual cash flows and selling the financial assets, and
b) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
This category applies to certain investments in debt instruments Refer to Note No.35 for further details). Such financial assets are subsequently measured at fair value at each reporting date. Fair value changes are recognized in the Other Comprehensive Income (OCI). However, the Company recognizes interest income and impairment losses and their reversals in the Statement of Profit and Loss.
On Derecognition of such financial assets, cumulative gain or loss previously recognized in OCI is reclassified from equity to Statement of Profit and Loss.
On Derecognition of such financial assets, cumulative gain or loss previously recognized in OCI is not reclassified from the equity to Statement of Profit and Loss. However, the Company may transfer such cumulative gain or loss into retained earnings within equity.
Financial Assets measured at FVTPL:
A financial asset is measured at FVTPL unless it is measured at amortized cost or at FVTOCI as explained above. This is a residual category applied to all other investments of the Company excluding investments in subsidiary and associate companies. Such financial assets are subsequently measured at fair value at each reporting date. Fair value changes are recognized in the Statement of Profit and Loss.
Derecognition:
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized (i.e. removed from the Company's Balance Sheet) when any of the following occurs:
i) The contractual rights to cash flows from the financial asset expire;
ii) The Company transfers its contractual rights to receive cash flows of the financial asset and has substantially transferred all the risks and rewards of ownership of the financial asset;
iii) The Company retains the contractual rights to receive cash flows but assumes a contractual obligation to pay the cash flows without material delay to one or more recipients under a 'pass-through' arrangement (thereby substantially transferring all the risks and rewards of ownership of the financial asset)
iv) The Company neither transfers nor retains substantially all risk and rewards of ownership and does not retain control over the financial asset.
In cases where the Company has neither transferred nor retained substantially all of the risks and rewards of the financial asset, but retains control of the financial asset, the Company continues to recognize such financial asset to the extent of its continuing involvement in the financial asset. In that case, the Company also recognizes an associated liability. The financial asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
On Derecognition of a financial asset, (except as mentioned in ii above for financial assets measured at FVTOCI), the difference between the carrying amount and the consideration received is recognized in the Statement of Profit and Loss.
Impairment of Financial Assets:
The Company applies the expected credit losses (ECL) model for measurement and recognition of loss allowance on the following:
i) Trade receivables and lease receivables
ii) Financial assets measured at amortized cost (other than trade receivables and lease receivables)
iii) Financial assets measured at fair value through other comprehensive income (FVTOCI)
In case of trade receivables and lease receivables, the Company follows a simplified approach wherein an amount equal to lifetime ECL is measured and recognized as loss allowance.
In case of other assets (listed as ii and iii above), the Company determines if there has been a significant increase in credit risk of the financial asset since initial recognition.
If the credit risk of such assets has not increased significantly, an amount equal to 12-month ECL is measured and recognized as a loss allowance. However, if credit risk has increased significantly, an amount equal to lifetime ECL is measured and recognized as loss allowance.
Subsequently, if the credit quality of the financial asset improves such that there is no longer a significant increase in credit risk since initial recognition, the Company reverts to recognizing impairment loss allowance based on 12 months- ECL.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original effective interest rate.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial asset. 12 months ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months from the reporting date.
ECL is measured in a manner that reflects unbiased and probability-weighted amounts determined by a range of outcomes, taking into account the time value of money and other reasonable information available as a result of past events, current conditions and forecasts of future economic conditions.
As a practical expedient, the Company uses a provision matrix to measure lifetime ECL on its portfolio of trade receivables. The provision matrix is prepared based on historically observed default rates over the expected life of trade receivables and is adjusted for forward-looking estimates. At each reporting date, the historically observed default rates and changes in the forward-looking estimates are updated.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the Statement of Profit and Loss under the head "Other Expenses".
Financial Liabilities:
Initial Recognition and Measurement:
The Company recognizes a financial liability in its Balance Sheet when it becomes party to the contractual provisions of the instrument. All financial liabilities are recognized initially at fair value minus, in the case of financial liabilities not recorded at fair value through profit or loss (FVTPL), transaction costs that are attributable to the acquisition of the financial liability.
Where the fair value of a financial liability at initial recognition is different from its transaction price, the difference between the fair value and the transaction price is recognized as a gain or loss in the Statement of Profit and Loss at initial recognition if the fair value is determined through a quoted market price in an active market for an identical asset (i.e. level 1 input) or through a valuation technique that uses data from observable markets (i.e. level 2 input).
In case the fair value is not determined using a level 1 or level 2 input as mentioned above, the difference between the fair value and transaction price is deferred appropriately and recognized as a gain or loss in the Statement of Profit and Loss only to the extent that such gain or loss arises due to a change in the factor that market participants take into account when pricing the financial liability.
Subsequent Measurement:
All financial liabilities of the Company are subsequently measured at amortized cost using the effective interest method. (Refer to Note No. 35 for further details).
Under the effective interest method, the future cash payments are exactly discounted to the initial recognition value using the effective interest rate. The cumulative amortization using the effective interest method of the difference between the initial recognition amount and the maturity amount is added to the initial recognition value (net of principal repayments, if any) of the financial liability over the relevant period of the financial liability to arrive at the amortized cost at each reporting date. The corresponding effect of the amortization under the effective interest method is recognized as interest expense over the relevant period of the financial liability. The same is included under finance cost in the Statement of Profit and Loss.
Derecognition:
A financial liability is derecognized 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 between the carrying amount of the financial liability derecognized and the consideration paid is recognized in the Statement of Profit and Loss.
p) Fair Value:
The Company measures financial instruments at fair value in accordance with the accounting policies mentioned above. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
* In the principal market for the assets or liability, or
* In the absence of a principal market, in the most advantageous market for the assets or liabilities.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy that is categorized into three levels, described as follows, the inputs to valuation techniques used to measure value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly;
Level 3 - Inputs that are unobservable for the asset or liability
For assets and liabilities that are recognized in the financial statements at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization at the end of each reporting period and discloses the same.
q) Taxes on Income:
Tax expense comprises Current and Deferred Income tax. Tax expenses are recognized in the Statement of Profit and Loss, except to the extent that it relate to the items recognized in the other comprehensive income or in equity. In that case, tax is also recognized in other comprehensive income or equity.
Current Income tax is the amount of income tax payable in respect of taxable profit for the period. Taxable profit differs from "Profit Before Tax" as reported under Statement of Profit and Loss because of items of expenses or income that are taxable or deductible in other years and items that are never taxable or deductible under the Income Tax Act.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the Income Tax Authorities, based on tax rates and laws that are enacted at the balance sheet date. Current tax also includes any adjustments amount to tax payable in respect of the previous year.
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit under the Income Tax Act, 1961.
Deferred tax liabilities are generally recognized for all taxable temporary differences. However, in case of a temporary difference that arises from the initial recognition of assets or liabilities in a transaction (other than business combination) that affects neither the taxable profit nor the accounting profit, deferred tax liabilities are not recognized. Also, for temporary differences if any that may arise from the initial recognition of goodwill, deferred tax liabilities are not recognized.
Deferred tax assets are generally recognized for all deductible temporary differences to the extent it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. In case of temporary differences that arise from the initial recognition of assets or liabilities in a transaction (other than business combination) that affect neither the taxable profit nor the accounting profit, deferred tax assets are not recognized.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the benefits of part or all of such deferred tax assets to be utilized.
Deferred tax assets and liabilities are measured at the tax rates that have been enacted or substantively enacted by the Balance Sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Presentation:
Current and deferred tax are recognized as income or an expense in the Statement of Profit and Loss, except when they relate to items that are recognized in Other Comprehensive Income, in which case, the current and deferred tax income / expense are recognized in Other Comprehensive Income.
The Company offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. In case of deferred tax assets and deferred tax liabilities, the same are offset if the Company has a legally enforceable right to set off corresponding current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority on the Company.
Deferred tax assets include Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability, Accordingly, MAT is recognized as deferred tax assets in the balance sheet when the asset can be measured reliably and it is probable that the future economic benefit associated with the asset will be realized. However, for the years under reporting the company has not recognized deferred tax assets on MAT due to uncertainty arising out of tax planning options available to the company as per prevailing tax laws. (Refer Note 18)
If MAT Credit is recognized, the Company reviews the same at each reporting period and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that the Company will pay Normal Income Tax during the specified period.
r) Segment Reporting:
Segments are identified having regard to the dominant source and nature of risks and returns and the internal organization and management structure. The Company has considered as Business Segments as Primary Segments. The Company does not have any Geographical Segments.
Identification of Segments:
The Company's operating businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a Strategic business unit that offers different products and serves different markets. Majorly, the Company's Business Segments are "Elevator Division", and "Steel Polishing Division".
Segments Accounting Policies:
The Company prepares its Segment Information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.
Inter - Segment Transfer:
The Company does not recognize Inter-segment transfers at any agreed value of the transactions.
Allocation of Common Costs:
Common allocable costs are allocated to each segment reporting according to the relative contribution of each segment to the total of common costs.
Unallocated Items:
Unallocated Items include the General Corporate Income and Expense items which are not allocated to any of the Business Segments.
Operating Segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM). The CODM is responsible for assessing the performance and allocating the resources of the operating segment of the Company. Refer to Note No. 38 for Segment information.
s) Research and Development:
Research and Development expenditures of a revenue nature are expensed out under the respective heads of the account in the year in which it is incurred. Expenditure of development which does not meet the criteria for recognition as an intangible asset is recognized as an expense when it is incurred.
Item of Property, Plants and Equipment and acquired Intangible Assets utilized for research and developments are capitalized and depreciated in accordance with the policies stated for Tangible Property, Plants and Equipment and Intangible Assets.
t) Earnings per Share:
The Company reports the basic and diluted Earnings per Share (EPS) in accordance with Indian Accounting Standard - 33, "Earnings per Share". Basic EPS is computed by dividing the Net Profit or Loss attributable to the Equity Shareholders for the period by the weighted average number of Equity Shares outstanding during the period.
Diluted EPS is computed by dividing the Net Profit or Loss attributable to the Equity Shareholders for the period by the weighted average number of Equity Shares outstanding during the period as adjusted for the effects of all potential Equity Shares, except where the results are anti-dilutive.
The weighted average number of Equity Shares outstanding during the period is adjusted for events such as a Bonus Issue, Bonus elements in right issue, share splits, and reverse share splits (consolidation of shares) that have changed the number of Equity Shares outstanding, without a corresponding change in resources.
Partly paid-up Equity Shares, if any, are treated as a fraction of Equity Shares to the extent that they are entitled to participate in dividends to fully paid equity shares during the Reporting Period.
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