2A MATERIAL ACCOUNTING POLICIES :
The material accounting policies applied by the Company in the preparation of its financial statements are listed
below. Such accounting policies have been applied consistently to all the periods presented in these financial
statements, unless otherwise indicated.
a. Basis of preparation :-
i. Compliance with Ind AS :-
These standalone financial statements comply in all material aspects with Indian Accounting Standards
(IND AS) notified under Section 133 of the Companies Act, 2013 (the Act) read with Companies (Indian
Accounting Standards) Rules, as amended from time to time and other relevant provisions of the Act.
ii. Historical cost convention :-
These financial statements have been prepared on the historical cost basis, except for the following :
a) Certain financial assets and liabilities which are measured at Fair Value.
(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).
iii. Current and Non Current Classification :-
All assets and liabilities have been classified as current or non-current as per the Company's operating
cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of
products and the time between the acquisition of assets for processing and their realization in cash and
cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of
current - non-current classification of assets and liabilities.
b. Use of estimates and critical accounting judgements :-
The preparation of the financial statements in conformity with Ind AS requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported amounts of
assets, liabilities, income, expenses and disclosures of contingent assets and liabilities at the date of these
financial statements and the reported amounts of revenues and expenses for the years presented. Actual
results may differ from these estimates under different assumptions and conditions. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised and future periods affected.
c. Property, plant and equipment :-
i. Tangible Assets :-
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at
historical cost less depreciation, amortization and impairment. Historical cost includes purchase price
including non refundable taxes and directly attributable expenses relating to the acquisition of the items
to bring the asset to its working condition and location for its intended use. Trial run expenses (net of
revenue) are capitalized. Borrowing costs incurred during the period of construction is capitalized as part
of cost of the qualifying assets.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as
appropriate, only 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. The carrying amount of any component
accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are
charged to the statement of profit and loss during the reporting period in which they are incurred. The gain
or loss arising on disposal of an asset is determined as the difference between the sale proceeds and the
carrying value of the asset, and is recognized in the statement of profit and loss.
Capital Work in Progress (‘CWIP’) comprises of cost of assets not ready for intended use as on the
Balance sheet date. CWIP is not depreciated until such time as the relevant asset is completed and ready
for its intended use.
In case of new projects and in case of substantial modernization / expansion at existing units of the
company, all pre-operative expenditure specifically for the project, incurred up to the date of completion,
is capitalized and added pro-rata to the cost of fixed assets.
ii. Intangible Assets
Intangible Assets are stated at cost of acquisition net of recoverable taxes, trade discount and rebates
less accumulated amortization/depletion and impairment loss, if any. Such cost includes purchase price,
borrowing costs, and any cost directly attributable to bringing the asset to its working condition for the
intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate
variations attributable to the intangible assets.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the
entity and the cost can be measured reliably.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between
the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of
Profit and Loss when the asset is derecognized.
iii. Depreciation and amortization of property, plant and equipment and intangible assets :-
a. Depreciation on Fixed Asset is provided to the extent of depreciable amount on the Straight Line
Method (SLM). Depreciation in Provided based on useful life of the assets as prescribed in Schedule
II to the Companies Act 2013 or based on technical estimate made by the Company, except in
respect of following assets, where useful life is different than those prescribed in the Schedule II are
used;
b. Depreciation on addition to the Fixed Asset or on sale/discardment is calculated pro rata from the
date of such addition or up to the date of such sale/discardment, as the case may be;
iv. Leases:-
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration.
Company as lessor : Leases in which the Company does not transfer substantially all the risks and
rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is
accounted for on a straight-line basis over the lease terms. Initial direct costs incurred in negotiating and
arranging an operating lease are added to the carrying amount of the leased asset and recognised over
the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the
period in which they are earned.
Company as lessee : The Company applies a single recognition and measurement approach for all
leases, except for short-term leases and leases of low-value assets. The Company recognises lease
liabilities to make lease payments and right-of-use assets representing the right to use the underlying
assets.
Right-of-use assets : The Company recognises right-of-use assets at the commencement date of the
lease (i.e. the date the underlying asset is available for use). Right-of-use assets are measured at cost,
less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease
liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct
costs incurred, and lease payments made at or before the commencement date less any lease incentives
received. Unless the Company is reasonably certain to obtain ownership of the leased asset at the end of
the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter
of its estimated useful life and the lease term. If ownership of the leased asset transfers to the Company at
the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated
using the estimated useful life of the asset. Right-of-use assets are subject to impairment test.
Lease liabilities : At the commencement date of the lease, the Company recognises lease liabilities
measured at the present value of lease payments to be made over the lease term. The lease payments
include fixed payments (including in-substance fixed payments) less any lease incentives receivable,
variable lease payments that depend on an index or a rate, and amounts expected to be paid under
residual value guarantees. The variable lease payments that do not depend on an index or a rate are
recognised as expense in the period on which the event or condition that triggers the payment occurs. In
calculating the present value of lease payments, the Company uses the incremental borrowing rate at the
lease commencement date if the interest rate implicit in the lease is not readily determinable.
Short-term leases and leases of low-value assets : The Company applies the short-term lease
recognition exemption to its short-term leases (i.e. those leases that have a lease term of 12 months or
less from the commencement date and do not contain a purchase option). It also applies the lease of
low-value assets recognition exemption to leases that are considered of low value. Lease payments on
short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over
the lease term.
d. Impairment of non-financial assets - property, plant and equipment and intangible assets :-
The Company assesses at each reporting date as to whether there is any indication that any property,
plant and equipment and intangible assets or group of assets, called cash generating units (CGU) may
be impaired. If any such indication exists the recoverable amount of an asset or CGU is estimated to
determine the extent of impairment, if any. When it is not possible to estimate the recoverable amount
of an individual asset, the Company estimates the recoverable amount of the CGU to which the asset
belongs.
An impairment loss, if any is recognized in the Statement of Profit and Loss to the extent, asset’s carrying
amount exceeds its recoverable amount. Value in use is based on the estimated future cash flows,
discounted to their present value using pre-tax discount rate that reflects current market assessments of
the time value of money and risk specific to the assets.
e. Investment Properties :-
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied
by the Company, is classified as Investment property. Investment property is measured initially at its
cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure
are capitalized to the asset’s carrying amount only when it is probable that future economic benefits
associated with the expenditure will flow to the Company and the cost of the item can be measured
reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment
property is replaced, the carrying amount of the replaced part is derecognized.
Subsequent to initial recognition, investment properties are stated at cost less accumulated depreciation
and accumulated impairment losses if any.
f. Government Grant :-
Grant and subsidies from the government are recognized if the following conditions are satisfied,
i. There is reasonable assurance that the Company will comply with the conditions attached to it.
ii. Such benefits are earned and reasonable certainty exists of the collection.
Industrial Promotional Subsidy : Government grants received with reference to Industrial Promotional
Subsidy under Package Scheme of Incentives, 2007 is treated as grant related to income and is recognized
as other income in the statement of Profit and Loss as and when company makes the sale.
g. Inventories
Inventories are valued at the lower of cost and net realizable value. Net realizable value is the estimated
selling price in the ordinary course of business, less estimated costs of completion and the estimated
costs necessary to make the sale.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:-
i. Raw materials :
Steel Segment : These are valued at lower of cost or net realizable value. Cost includes cost of
purchase and other costs incurred in bringing the inventories to their present location and condition.
Cost is determined on FIFO basis.
Copper Segment : These are valued at lower of cost or net realizable value. Cost includes cost of
purchase and other costs incurred in bringing the inventories to their present location and condition.
Cost is determined on weighted average basis.
EPC Segment : These are valued at lower of cost or net realizable value. Cost includes all charges
in bringing the materials to the place of usage, excluding refundable duties and taxes.
ii. Work - in - Process : Work - in - Process is valued at Raw material cost plus conversion cost
depending upon the stage of completion or estimated net realizable value whichever is lower. Work
in progress in case of construction contracts is measured in terms of a proportion of actual cost
incurred to-date, to the total estimated cost attributable to the performance obligation.
iii. Finished goods : These are valued at lower of cost or net realizable value. Cost includes cost
of direct materials and labour and a proportion of manufacturing overheads based on the normal
operating capacity. Cost is determined on weighted average basis.
iv. Stock-in-Trade : These are valued at lower of cost or net realizable value. Cost includes cost of
purchase and other costs incurred in bringing the inventories to their present location and condition.
Cost is determined on weighted average basis.
v. Stock in Transit : Goods and materials in transit are valued at actual cost incurred upto the date of
balance sheet.
vi. Stores and Spares : Stores & Spare parts are valued at lower of cost (FIFO) or net realizable value
and other minor's (Stores & Spares) are written off in the year of purchase.
vii. Scrap : These are valued at net realizable value.
viii. Obsolete inventories are identified and written down to net realizable value. Slow moving and
defective inventories are identified and provided to net realizable value.
h. Revenue Recognition :-
Revenue from contracts with customers is recognized on 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
to 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.
In certain customer contracts shipping and handling services are treated as a distinct separate performance
obligation and the Company recognizes revenue for such services over time when the performance
obligation is completed.
i. Sale of goods
Revenue from sale of products is recognized when the Company satisfies a performance obligation
in accordance with the provisions of contract with customer. This is achieved when control of the
product has been transferred to the customer, which is generally determined when title, ownership,
risk of obsolesce and loss pass to the customer and the Company has present right to payment,
all of which occurs at a point in time upon shipment or delivery of goods. The Company collects
goods and services tax (GST) on behalf of the government and, therefore, these are not economic
benefits flowing to the Company. Hence, they are excluded from revenue. Excise duty deducted from
revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of
liability arising during the year.
Certain of the Company’s sales contracts provide for provisional pricing based on the price on the
London Metal Exchange (“LME”), as specified in the contract, when shipped. Final settlement of
the price is based on the applicable price for a specified future period. The Company’s provisionally
priced sales are marked to market using the relevant forward prices for the future period specified in
the contract and is adjusted in revenue.
Revenue from operations comprises proceeds from sale of scrap net of disposal expenses.
ii. Sale of wind energy :-
Revenue from sale of wind energy is recognized when delivered and measured based on rates as
per bilateral contractual agreements with buyers and at rate arrived at based on the principles laid
down under the relevant Tariff Regulations as notified by the regulatory bodies, as applicable.
iii. Contract Revenue :-
The Company recognizes revenue from contracts with customers when it satisfies a performance
obligation by transferring promised good or service to a customer. The revenue is recognized to the
extent of transaction price allocated to the performance obligation satisfied. Performance obligation
is satisfied over time when the transfer of control of asset (good or service) to a customer is done
over time and in other cases, performance obligation is satisfied at a point in time. For performance
obligation satisfied over time, the revenue recognition is done by measuring the progress towards
complete satisfaction of performance obligation. The progress is measured in terms of a proportion
of actual cost incurred to-date, to the total estimated cost attributable to the performance obligation.
Contract Balances :-
Trade Receivable :- Trade Receivable represents the Company’s right to an amount of consideration
that is unconditional (i.e., only the passage of time is required before payment of the consideration
is due). Refer to accounting policies of financial assets in section (p) Financial instruments - initial
recognition and subsequent measurement.
Contract Assets :- Contract Assets are recognized when there is excess of revenue earned over
billings on contracts. Contract assets are classified as unbilled receivables (only act of invoicing is
pending) when there is unconditional right to receive cash, and only passage of time is required, as
per contractual terms.
Contract Liabilities :- Contract Liabilities are recognized when there is billing in excess of revenue
and advance received from customers.
iv. Interest income :-
Interest income from a financial asset is recognized when it is probable that the economic benefits
will flow to the Company and the amount of income can be measured reliably. Interest income
is accrued on a time basis, by reference to the principal outstanding and at the effective interest
rate applicable, which is the rate that exactly discounts estimated future cash receipts through the
expected life of the financial asset to that asset’s net carrying amount on initial recognition.
v. Dividend income
Dividend income is recognized in the statement of profit and loss only when the right to receive
payment is established, provided it is probable that the economic benefits associated with the
dividend will flow to the Company, and the amount of the dividend can be measured reliably.
vi. Others :-
Revenue relating to insurance claims and interest on delayed or overdue payments from trade
receivable is recognized when no significant uncertainty as to measurability or collection exists.
Export benefits are accounted for in the year of export based on eligibility and when there is no
significant uncertainty in receiving the same. Any other income is recognized on accrual basis.
vii. Revenue from Service :-
Revenue from services is recognized over time by measuring progress towards satisfaction of
performance obligation for the services rendered. The Company collects service tax /GST on behalf
of the government and, therefore, it is not an economic benefit flowing to the Company. Hence, it is
excluded from revenue.
viii. Penalty and Liquidated Damages :-
Penalty and liquidated damages are accounted for as and when these are realized and/or considered
recoverable by the company.
ix Profit on Sale of Investment :-
Profit on sale of investment is recognized upon transfer of title by the company and is determined as
the difference between the sales price and the then carrying value of the investment.
i. Borrowing Costs :-
Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized
as part of the cost of the asset. All other borrowing costs are expensed in the period in which they
occur. Borrowing costs consist of interest expenses calculated using the effective interest method and
other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes
exchange differences to the extent regarded as an adjustment to the borrowing costs.
j. Employees Benefit :-
The liability for Gratuity benefits, on the basis of amounts contributed to LIC’s Group Gratuity Policy and
the difference between the amounts paid on retirement and recovered from LIC, is charged to Profit &
Loss Account. Employer’s Contribution to Provident Fund is debited to Profit & Loss Account. Premium
paid for Workmen Compensation Insurance is charged to profit and loss account net off claims received,
if any.
k. Foreign Currency Transactions :-
i. Items included in the financial statements are measured using the currency of the primary economic
environment in which the company operates (‘the functional currency’). The financial statements are
presented in Indian rupee (INR), which is also the company’s functional and presentation currency.
ii. Transactions in foreign currency are recorded at exchange rates prevailing on the day of the
transaction. Monetary assets and liabilities denominated in foreign currency, remaining unsettled
at the period end are translated at closing rates. The difference in translation of monetary assets
and liabilities and realized gains and losses on foreign currency transactions are recognized in the
Statement of Profit and Loss. Non monetary items that are measured based on historical cost in a
foreign currency are translated at the exchange rate at the date of the transaction.
l. Tax Expenses :-
The tax expense for the period comprises current and deferred tax. Tax is recognized in Statement of
Profit and Loss, except to the extent that it relates to items recognized in the comprehensive income or in
equity. In which case, the tax is also recognized in other comprehensive income or equity.
i. Current Tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid
to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted at
the Balance sheet date.
ii. Deferred Tax :-
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.
Deferred tax assets are recognized for all deductible temporary differences only if it is probable that
future taxable amounts will be available to utilize those temporary differences and losses.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the
period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have
been enacted or substantively enacted by the end of the reporting period. The carrying amount of
Deferred tax liabilities and assets are reviewed at the end of each reporting period.
m. Earnings Per Share :-
The Company reports basic and diluted Earnings per share (EPS) in accordance with Ind AS 33 on
“Earnings per Share”. Basic EPS is computed by dividing the net profit or loss for the period (without
taking impact of OCI) attributable to equity shareholders by the weighted average number of equity shares
outstanding during the year. Diluted EPS is computed by dividing the net profit or loss for the period
attributable to equity shareholders by the weighted average number of equity shares outstanding during
the year as adjusted for the effects of all dilutive potential equity shares.
n. Cash Flow Statement :-
Cash flows are reported using the indirect method where by net profit before tax is adjusted for the
effects of transactions of a non cash nature and any deferral or accruals of past or future cash receipts or
payments. The cash flows from regular operating, investing and financing activities of the company are
segregated.
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