2A MATERIAL ACCOUNTING POLICIES
2.01 Statement of Compliance:
These financial statements of the Company are prepared in accordance with Indian Accounting Standards (“Ind AS”) notified
under section 133 of Companies Act, 2013 (the Act) read alongwith Companies (Indian Accounting Standards) Rules, 2015 as
amended and other relevant provisions of the Act.
2.02 Basis of Preparation and Presentation:
The Financial Statements have been prepared on the historical cost basis except for certain financial instruments measured at
fair value at the end of each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
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, regardless of whether that price is directly observable or estimated using another
valuation technique. In estimating the fair value of an asset or a liability, the Company takes in to account the characteristics
of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at
the measurement date.
In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2, or 3 based on the
degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value
measurements in its entirety, which are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at
the measurement date;
Level 2 inputs are inputs, other than quoted prices included within level 1, that are observable for the asset or liability, either
directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
The financial statements are presented in Indian currency (INR) which is the Company’s functional and presentation currency.
All values are rounded off to the nearest crores.
The financial statements were approved for issue by the Board of Directors on 16th May, 2025.
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 (Division II) to the Companies Act, 2013. Based on the nature of products and the time between
the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its
operating cycle as twelve months for the purpose of current-non current classification of assets and liabilities.
The Company earns revenue primarily from sale of its main products transformers, electric motors, magnet technology
machines and drives & automation system. The Company also earns revenue by undertaking turnkey projects (switchyards).
2.03 Revenue Recognition:
Revenue is recognised on satisfaction of performance obligation upon transfer of control of the promised goods or services to
a customer at an amount , being the transaction price that reflects the consideration which the Company expect storeceive in
exchange for those goods or services. The performance obligation in case of sale of goods is satisfied at a point in time which
is generally at the time of despatch / delivery as may be specified in the contract. The Company has determined that freight is a
separate performance obligation and there venue under these contracts representing the obligation to perform the freight service is
recognised upon delivery.
The performance obligation in case of sale of services is satisfied when the service is performed and there are no unfulfilled
obligations.
Revenue is measured based on the transaction price, which is net of variable consideration adjusted for discounts, rebates,
refunds, credits, price concessions, etc., if any, as specified in the contract with the customer. The estimated amount of
variable consideration is adjusted in the transaction price only to the extent that it is highly probable that a significant reversal
in the amount of cumulative revenue recognised will not occur and is reassessed at the end of each reporting period. Revenue
also excludes taxes collected from customers.
The amount of consideration does not contain a significant financing component as payment terms are less than one year.
Generally contracts with customers include warranty periods following sale of products. These obligations are not deemed to
be separate performance obligations and therefore estimated and included in the total costs of the products. Where required,
amounts are recognised accordingly in line with Ind AS 37: Provisions, Contingent Liabilities and Contingent Assets.
Revenue from projects is recognised over time using the input method to measure progress of delivery. As work is performed
on the assets being constructed they are controlled by the customer and have no alternative use to the Company, and it also
has a right to payment for performance to date. When the outcome of individual contracts can be estimated reliably, contract
revenue and contract costs are recognised as revenue and expenses respectively by reference to the stage of completion at
the reporting date. Costs are recognised as incurred and revenue is recognised on the basis of the proportion of total costs
at the reporting date to the estimated total costs of the contract. No margin is recognised until the outcome of the contract
can be estimated with reasonable certainty. Provision is made for all known or expected losses on individual contracts once
such losses are foreseen.
Revenues in excess of invoicing are classified as contract assets (which we refer as Gross amounts due from customers of projects)
while invoicing in excess of revenues are classified as contract liabilities (which we refer to as Project amount due to customers).
Contracts are subject to modification to account for changes in contract specification and requirements. The Company reviews
modification to contract in conjunction with the original contract, basis which the transaction price of an existing obligation could
undergo a change. In the event transaction price is revised for existing obligation, a cumulative adjustment is accounted for.
The Company disaggregates revenue from contracts with customers by nature of products and services.
2.04 Other Income:
a) Dividend income from investments is recognised when the shareholder’s right to receive payment has been established.
b) I nterest income is recognised on the time proportion basis, by reference to the principal outstanding and the effective
interest rate applicable.
c) Insurance and other claims are accounted as and when unconditionally admitted by the appropriate authorities.
2.05 Property, Plant and Equipment:
Property, plant and equipment is stated at acquisition cost net of accumulated depreciation and accumulated impairment
losses, if any. Subsequent costs are included in the asset’s carrying amount or recognised as 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. All other repairs and maintenance are charged to the Statement of Profit and Loss during the period in
which they are incurred.
Gains or Losses arising on retirement or disposal of property, plant and equipment are recognised in the Statement of Profit
and Loss.
Capital work-in-progress / intangible assets under development are carried at cost, comprising direct cost, related incidental
expenses and attributable borrowing cost.
The management’s estimate of useful lives are in accordance with Schedule II to the Companies Act, 2013. Depreciation is
provided on pro-rata basis on the straight line method over the useful life of assets. The useful life, residual value and the
depreciation method are reviewed at each financial year end and adjusted prospectively.
Leasehold land is stated at historical cost less amounts amortised proportionate to expired lease period.
Spares in the nature of capital spares / insurance spares are added to the cost of the assets. The total cost of such spares is
depreciated over a period not exceeding the useful life of the asset to which they relate.
2.06 Intangible Assets:
I ntangible assets are stated at acquisition cost, net of accumulated amortisation and accumulated impairment losses, if any.
Intangible assets are amortised on a straight line basis over their estimated useful lives. The amortisation period and amortisation
method are reviewed at least at each financial year end. If the expected useful life of the asset is significantly different from
previous estimates, the amortisation period is changed accordingly.
Expenditure on application software is amortised over a period of three years.
2.07 Impairment of assets:
Property, plant and equipment and intangible assets with finite life are evaluated for recoverability whenever there is any
indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e.
higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does
not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is
determined for the cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the
asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised in the Statement of Profit and Loss.
When an impairment loss subsequently reverses, the carrying amount of the asset or a cash-generating unit is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) earlier.
2.08 Financial instruments:
1. Initial recognition and measurement
Financial assets and/or financial liabilities are recognised when the Company becomes party to a contract embodying
the related financial instruments. All financial assets, financial liabilities are initially measured at fair value. Transaction
costs that are attributable to the acquisition or issue of financial assets and financial liabilities (other than financial
assets and financial liabilities at fair value through profit or loss) are added to or deducted from as the case may be, the
fair value of such assets or liabilities, on initial recognition. Transaction costs directly attributable to the acquisition of
financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
2. Financial assets:
Classification and subsequent measurement of financial assets:
a) Classification of financial assets:
(i) The Company classifies its financial assets in the following measurement categories:
— t hose to be measured subsequently at fair value (either through other comprehensive income, or
through profit or loss), and
— those measured at amortised cost.
(ii) The classification is done depending upon the Company’s business model for managing the financial
assets and the contractual terms of the cash flows.
(iii) For investments in debt instruments, this will depend on the business model in which the investment is held.
(iv) The Company reclassifies debt investments when and only when its business model for managing those
assets changes.
b) Subsequent Measurement
(i) Debt instruments:
Subsequent measurement of debt instruments depends on the Company’s business model for managing
the asset and the cash flow characteristics of the asset. There are three measurement categories into
which the Company classifies its debt instruments:
(1) Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held
within a business whose objective is to hold these assets in order to collect contractual cash flows
and 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.
(2) Financial assets at fair value through other comprehensive income (FVTOCI)
Financial assets are subsequently measured at fair value through other comprehensive income if
these financial assets are held within a business whose objective is achieved by both collecting
contractual cash flows that give rise on specified dates to solely payments of principal and interest
on the principal amount outstanding and by selling financial assets.
(3) Financial assets at fair value through profit or loss (FVTPL)
Financial assets are subsequently measured at fair value through profit or loss unless it is measured
at amortised cost or fair value through other comprehensive income on initial recognition. The
transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value
through profit or loss are immediately recognised in profit or loss.
(ii) Equity instruments:
The Company subsequently measures all equity investments at fair value. There are two measurement
categories into which the Company classifies its equity instruments:
Investments in equity instruments at FVTPL:
I nvestments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on
initial recognition to present subsequent changes in fair value in other comprehensive income for equity
instruments which are not held for trading.
Investments in equity instruments at FVTOCI:
On initial recognition, the Company can make an irrevocable election (on an instrument-by-instrument
basis) to present the subsequent changes in fair value in other comprehensive income. This election is not
permitted if the equity investment is held for trading. These elected investments are initially measured at fair
value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising
from changes in fair value recognised in other comprehensive income and accumulated in the reserve for
‘equity instruments through other comprehensive income’. The cumulative gain or loss is not reclassified
to Statement of Profit and Loss on disposal of the investments.
c) Impairment of financial assets:
The Company applies the expected credit loss model for recognising impairment loss on financial assets measured
at amortised cost, lease receivables, trade receivables, other contractual rights to receive cash or other financial
asset. For trade receivables, the Company measures the loss allowance at an amount equal to lifetime expected
credit losses. Further, for the purpose of measuring lifetime expected credit loss allowance for trade receivables,
the Company has used a practical expedient as permitted under Ind AS 109. This expected credit loss allowance
is computed based on a provision matrix which takes into account historical credit loss experience and adjusted
for forward-looking information.
d) Derecognition of financial assets:
A financial asset is primarily derecognised when:
1. the right to receive cash flows from the asset has expired, or
2. the Company has transferred its rights to receive cash flows from the asset; and
(a) the Company has transferred substantially all the risks and rewards of the asset, or
(b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset,
but has transferred control of the asset.
On derecognition of a financial asset in its entirety (other than investments in equity instruments at FVTOCI), the
differences between the carrying amounts measured at the date of derecognition and the consideration received
is recognised in the Statement of Profit and Loss.
3. Financial liabilities and equity instruments
Classification as debt or equity
Financial liabilities and equity instruments issued by the Company are classified according to the substance of the
contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all
of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.
Repurchase of the Company’s own equity instrument is recognised and deducted directly in equity. No gain or loss is
recognised in the Statement of Profit and Loss on the purchase, sale, issue or cancellation of the Company’s own equity
instruments.
Financial Liabilities
Classification and subsequent measurement
The Company’s financial liabilities include trade and other payables, loans and borrowings and derivative financial
instruments. Subsequent measurement of financial liabilities depends on their classification as fair value through Profit
and loss or at amortized cost. All changes in fair value of financial liabilities classified as FVTPL are recognized in the
Statement of Profit and Loss. Amortised cost category is applicable to loans and borrowings, trade and other payables.
After initial recognition the financial liabilities are measured at amortised cost using the Effective Interest Rate method.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. Gains
and losses are recognized in the Statement of profit and loss when the liabilities are derecognized.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and presented on net basis in the Balance Sheet when there is a
currently enforceable legal right to offset the recognised amounts and there is an intention either to settle on a net basis
or to realise the assets and settle the liabilities simultaneously.
Derivative financial instruments
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently
remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in the
Statement of profit and Loss immediately.
2.09 Inventories:
I nventories are stated at the lower of cost and net realisable value.
Cost of inventories comprise all costs of purchase (net of input credits), costs of conversion and other costs incurred in bringing
the inventories to their present location and condition.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and
the estimated costs necessary to make the sale.
Cost of raw materials and components, packing materials, stores, spare parts other than specific spares for machinery and
traded finished goods are determined on the basis of weighted average method.
Cost of Materials in transit and materials in bonded warehouse are determined at cost-to-date.
Cost of Work-in-progress and manufactured finished goods comprises of all costs of purchase, costs of conversion and other
costs incurred in bringing the inventories to their present location and condition.
Custom duty is included in the materials lying in bonded warehouse.
2.10 Foreign currencies:
Items included in the financial statements of the Company are recorded using the currency of the primary economic environment
(INR) in which the Company operates (the ‘functional currency’).
Foreign currency transactions are translated into the functional currency using exchange rates at the date of the transaction.
Foreign exchange gains and losses from settlement of these transactions, and from translation of monetary assets and liabilities
at the reporting date are recognised in the Statement of Profit and Loss.
2.11 Employee Benefits:
Retirement benefit costs and termination benefits:
Defined Contribution Plans
Payment to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service
entitling them to the contributions.
Contributions to Provident and Family Pension Fund and Superannuation scheme, which are defined contribution plans, are
made as required by the statute and expensed in the Statement of profit and loss.
Defined Benefit Plans
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method,
with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement comprising actuarial
gains and losses and the effect of the changes to the return of plan assets (excluding net interest), is reflected immediately
in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur.
Remeasurement recognised in the other comprehensive income is reflected immediately in retained earnings and is not
reclassified to Statement of Profit and Loss. Past service cost is recognised in Statement of Profit and Loss in the period of a
plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the defined benefit
liability or asset. Defined benefit costs are categorised as follows:
• service cost (including current service cost, past service cost, as well as gains and losses on curtailments and
settlements);
• net interest expense or income; and
• remeasurement
The Company presents the first two components of defined benefit costs in the Statement of Profit and Loss in the line item
“Employee benefits expense”. Curtailment gains and losses are accounted for as past service cost.
The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus in the Company’s
defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits
available in the form of refunds from the plans or reductions in future contributions to the plans.
A liability for the termination benefit is recognized at the earlier of when the entity can no longer withdraw the offer of the
termination benefit and when the entity recognizes any related restructuring costs.
Short-term and other long-term employee benefits:
Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits
expected to be paid in exchange of related service.
Liabilities recognized in respect of other long-term employee benefits are measured at present value of the estimated future cash
outflows expected to be made by the Company in respect of services provided by employee upto the reporting date.
2.12 Borrowing Costs:
(a) Borrowing costs that are attributable to the acquisition, construction, or production of a qualifying asset are capitalised as a part
of the cost of such asset till such time the asset is ready for its intended use or sale. A qualifying asset is an asset that necessarily
requires a substantial period of time (generally over twelve months) to get ready for its intended use or sale.
(b) All other borrowing costs are recognised as expense in the period in which they are incurred.
2.13 Taxation:
I ncome Tax expense represents the sum of the tax currently payable and deferred tax.
Current Tax
Current tax is measured at the amount of tax expected to be payable on the taxable income for the year.
Deferred Tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Company’s
financial statements and the corresponding tax bases used in computation of taxable profit.
Deferred tax liabilities are generally recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all taxable temporary differences to the extent that it is probable that taxable
profits will be available against which those deductible temporary differences can be utilised. 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 all or part of the asset to be recovered.
Deferred tax assets relating to unabsorbed depreciation/business losses/losses under the head “capital gains” are recognised and
carried forward to the extent of available taxable temporary differences or where there is convincing other evidence that sufficient
future taxable income will be available against which such deferred tax assets can be realised.
Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted
by the end of the reporting period and are expected to apply when the related deferred tax asset is realised or the deferred
tax liability is settled.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in
which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and
liabilities.
Current Tax Assets and Current Tax Liabilities are offset when there is a legally enforceable right to set-off the recognised
amounts and there is an intention to settle the asset and liability on a net basis. Deferred Tax Assets and Deferred Tax Liability
are offset when they relate to the same governing taxation laws.
Current and Deferred tax is recognised in the Statement of Profit and Loss, except when it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly
in equity, respectively.
2.14 Leases:
The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is
initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or
before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of
the lease term.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted using the Company’s incremental borrowing rate. It is re-measured when there is a change in future lease
payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to
be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase,
extension or termination option. When the lease liability is re-measured in this way, a corresponding adjustment is made to the
carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has
been reduced to zero.
The Company has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term
of 12 months or less and leases of low-value assets. The Company recognises the lease payments associated with these
leases as an expense over the lease term.
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