3. Significant accounting policies
a) Operating Cycle
All assets and liabilities have been classified as current or nun-current as per the Company's normal operating cycle and other criteria set out
in the Schedule III to the Companies Act, 2013 and Ind AS I - Presentation of Financial Statements based on the nature of business and the
time between the acquisition of assets for development and their realisation in cash and cash equivalents.
b) 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.
i. Financial Assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss,
transaction costs that are attributable to the acquisition of the financial asset. Trade receivables are initially measured at transaction price.
Regular way purchase and sale of financial assets are accounted for at trade date.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
• Amortised cost
• Fair value through other comprehensive income (FVOC1)
• Fair value through profit or loss (FVTPL)
Financial assets are nut reclassified subsequent tu their initial recognition, except if and in the period the Company changes its business model
for managing financial assets.
Financial assets at amortised cost
A financial asset is measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect
contractual cash fluwsand the contractual terms of the financial asset give rise on specified dates tu cash flows that are solely payments of
principal and interest on the principal amount outstanding.
The effective interest rate (EIR) amortisation is included in finance incume in the profit or loss.
Financial assets at FVOCI
A financial asset is measured at FVOCI if it is held within a business model whose objective is achieved by both collecting contractual cash
flows and selling financial assets 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.
Financial assets included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value
movements are recognized in the other comprehensive income (OCI).
Financial assets at FVTPL
A financial asset which is not classified in any of the above categories are measured at FVTPL.
Financial assets included within the FVTPL category are measured at fair value with all changes recognised in the Statement of Profit &
Loss.
Derecognition
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the
financial asset and the transfer qualifies for derecognition under Ind AS 109.
ii. Financial liability
Initial recognition and measurement
Financial liabilities are initially recognised at fair value plus any transaction cost that am attributable to the acquisition of the financial liabilities
except financial liabilities at fair value through profit or loss which are initially measured at fair value.
Subsequent measurement
For purposes of subsequent measurement, financial liabilities are classified in following categories:
• Financial liabilities through profit or loss (FVTPL)
* Financial liabilities at amortised cost
Financial liabilities through FVTPL
A financial liability is classified as at FVTPL if it is classified as held-for-trading. or it is a derivative or it is designated as such on initial
recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised
in profit or loss.
Financial liabilities at amortised cost
Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and any gain or
loss on derecognition are recognised in profit or loss.
Interest bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in
profit or loss when the liabilities are derecugnised as well as through the EIR amortisation process. Fur trade and other payables maturing
within one year from the balance sheet date, the carrying amounts approximates fair value due to the short maturity of these instruments.
Derecognition
A financial liability is de-recognised 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 a de -recognition of the original liability and die recognition of a new liability, and the
difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Derivative financial instruments
The Company uses forward contracts to hedge its currency risk. Such derivative financial instruments are initially recognised at fair value on
the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets
when the fair value is positive and as financial liabilities when the fair value is negative.
Derivative financial instruments are recognised initially and subsequently at fair value through mark to market valuation. Gain or loss arising
from the changes in fair value of derivatives are credited or debited to the Exchange differences in die statement of profit and loss.
Financial guarantee contracts
Financial guarantee contracts are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the
specified party fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are
recognized as a financial liability at the time the guarantee is issued at fair value, adjusted for transaction costs that are directly attributable to
the issuance uf the guarantee. Subsequently, the liability is measured at the higher uf the amount of expected loss allowance determined as per
impairment requirements ol'lnd AS 109 and the amount recognized less cumuladve amortization.
in. Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when, and only when, the Company
currently has a legally enforceable right tu set off the amuunts and it intends either to settle them on a net basis or tu realise the asset and settle
the liability simultaneously.
c) Property, Plunt and Equipment
i. Recognition and measurement
Items of property, plant and equipment are measured at cost, which includes capitalised borrowing costs, less accumulated depreciation
and accumulated impairment losses, if any. The cost of an item of property, plant and equipment comprises its purchase price, including
import duties and non-ref jndable purchase taxes, after deducting trade discounts and rebates, any directly attributable cost of bringing
the item to its working condition for its intended use and estimated costs of dismantling and removing the item and restoring the site on
which it is located. Borrowing costs directly attributable to the acquisition or construction of those qualifying property, plant and
equipment, which necessarily take a substantial period of time to get ready for their intended use, are capitalised.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate
components of properly, plant and equipment.
The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external
factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount
is the higher of the asset's net selling price and value in use, which is determined by the present value of the estimated future cash flows.
ii. Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognised as
at 1st April, 2017, measured as per the previous GAAP, and use that carrying value as the deemed cost of such property, plant and equipment.
iii. Subsequent expenditure
Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to
the Company. Ongoing repairs and maintenance are expensed as incurred.
iv Depredation
Depreciation for the year is recognised in the Statement of Profit and Loss.
Depreciation is provided based on the life and in the manner prescribed in Schedule LI to the Companies Act. 2013, on straight line method on
property, plant and equipment in Unit II at Bhogapuram, on written down value method on other property, plant and equipment and on written
down basis on Right-to-use Assets.
These charges are commenced from the dates the assets are available for their intended use and are spread over their estimated useful econumic
lives or, in the case of right-of-use assets, over the lease period, if shorter.
The estimated useful lives of the assets of property, plant and equipment are estimated by the management which are equal to the life prescribed
under Schedule II of the Act.
Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted as appropriate.
v Reclassification to investment property
When the use of a property changes from owner-occupied to investment property, the property is reclassified as investment pruperty at its
carrying amount on the date of classification.
vi. Capital Work-in-progress
Costs of the Property, plant and equipment not ready for their intended use at the Balance Sheet date together with all related expenses are
shown as Capital Work-in-progress.
d) Investment properties
Investment properties are properties held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary
course of business, use in the production or supply of goods or services or for administrative purposes. Upon initial recognition, investment
properties are measured at cost. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation
and accumulated impairment lusses, if any.
The Company depreciates investment properties on a written down value method over the useful life of the asset.
Any gain or loss on disposal of an inv estment property is recognised in profit or loss.
The fair values of investment properties are disclosed in the notes accompanying these financial statements.
Fair values are determined by an independent property valuer who holds recognised and relevant professional qualification and has recent
experience in the location and category of the invesuneni property being valued.
el Intangible Assets
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and any accumulated
impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. An intangible asset is derecognised on
disposal, or when no future economic benefits are expected from use or disposal.
The useful life of computer software is considered to be 5 years.
i. Amortisation
Amortisation for the year is recognised in the Statement of Profit and Loss.
Intangible assets are amortised over a period of 5 years.
f) Lease
I’lic (ompuny us a Lessee
The Company accounts for each lease component within the contract as a lease separately from non-lease components of the contract and
allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the
aggregate stand-alone price of the non-lease components. The Company recognizes right-of-use asset representing its right to use the underlying
asset for the lease term at the lease commencement date.
The cost of the right-of-use asset measured at inception comprises of the amount of initial measurement uf the lease liability adjusted for any
lease payments made at or before the commencement date.
Certain lease arrangements include options to extend or terminate (he lease before the end of the lease term. The right-of-use assets and lease
liabilities include these options when it is reasonably certain that such options would be exercised.
The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted
for any remeasurement of the lease liability. The right-of-use assets is depreciated using the straight-line method from the commencement date
over the shorter of lease term or useful life of right-of-use asset.
Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment
loss, if any. is recognised in the statement of prufit and loss.
Lease liability is measured at the present value of the lease payments that are not paid at the commencement date of the lease. The lease
payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined.
If that rate cannot be readily determined, the Company uses incremental borrowing rate. The lease liability is subsequently remeasured by
increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amuunt to reflect the lease payments made and
remeasuring the carrying amount to reflect any reassessment or lease modifications. The Company recognises the amount of the remeasurement
of lease liability as an adjustment to the right-of-use asset. Where the carrying amount of the right-of-use asset is reduced to zero and there is
a further reduction in the measurement of the lease liability, the Company recugnises any remaining amount uf the remeasurement in statement
of profit and loss.
Variable lease payments not included in the measurement of the lease liabilities are expensed to the statement of profit and loss in the period
in which the events or conditions which trigger those payments occur.
'Transition
Effective April 01,2019, the Company has adopted Ind AS 116 "Leases" and applied the standard to lease arrangements existing on the date
of initial application using the modified retrospective approach with right-of-use asset recognized at an amount equal to the lease liability
adjusted for any prepayments/accruals recognized in the balance sheet immediately before the date of initial application. Accordingly,
comparatives for the year ended March 31,2019 have not been retrospectively adjusted.
g) Inventories
Inventories are valued at lower of cost and net realisable value. Cost of inventories is determined on FIFO basis.
Assessment of net realisable value is made at each subsequent reporting date. When the circumstances that previously caused inventories to be
written down below cost no longer exist or when there is clear evidence of an increase in net realisable value because of changed economic
circumstances, the amount uf the write-down is reversed.
hi Investments and other financial assets
). Classification
The company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair valuefeither through other comprehensive income, or through profit or loss)
- those measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will be recorded in profit or loss. For investments in debt instruments, this will depend on
the business model in which the investment is held. For investments in equity instruments, this will depend on whether the company has made
an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income."
il. Measurement
At initial recognition, the company measures a financial asset at its fair value and in the case of a financial asset not at fair value through prufit
and loss, at transaction costs that are direedy attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
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:
Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal
and interest are measured at amortised cost.
Fair value through oilier comprehensive income (FVOCI): Assets that are held for collection of contractual cash (lows and for selling the
financial assets, where the assets' cash flows represent solely payments of principal and interest are measured at fair value through other
comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except fur the recognition of impairment gains
or losses, interest revenue and foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is
derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other
gains/ (losses). Interest income from these financial assets is included in other income using the effective interest rate method.
Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit
and loss.
Equity instruments
The company subsequently measures all equity investments at fair value. Dividends from such investments are recognised in profit or loss as
other income when the company’s right to receive payments is established.
Changes in the fair value of financial assets at fair value through profit or loss are recognised in other gain/(losses) in the statement of profit
and loss.
i) Investment in associates
Investment in associates are carried at cost less impairment loss, ifany. The cost comprises price paid to acquire investment and directly
attributable cost.
j) Impairment
i. Impairment of financial instruments: financial assets
Expected credit losses are recognized for all financial assets subsequent to initial recognition other than financials assets in FVT PL category'.
Fur financial assets uther than trade receivables, as per Ind AS 109, the Cumpany recognises 12 month expected credit lusses fur all originated
or acquired financial assets if at the reporting dale the credit risk of the financial asset has not increased significantly since its initial recognition.
The expected credit losses are measured as lifetime expected credit losses if the credit risk on financial asset increases significantly since its
initial recognition. The Company's made receivables du not contain significant financing component and luss allowance on trade receivables is
measured at an amount equal to life time expected losses i.e. expected cash shortfall.
The impairment losses and reversals are recognised in Statement of Profit and Loss.
ii. Impairment of non-financial assets
The Company’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. For
impairment testing, assets that do not generate independent cash inflows are grouped together into cash-generating units (CGUs). Each CGU
represents the smallest Company of assets that generates cash inflows that are Largely independent of the cash inflows of other assets or CGUs.
If any such indication exists the recoverable amount of an asset or CGU is estimated to determine the extent of impairment, i f any. When it is
nut 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 is recognised in the Statement of Profit and Loss to the extent, asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is higher of an asset’s fair value less cost of disposal and value in use. 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.
The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount,
kl Amendment to Ind AS 19 - Plan Amendment, Curtailment or Settlement
The Ministry of Corporate Affairs issued amendments to hid AS 19, ‘Employee Benefits’, in connection with accounting for plan amendments,
curtailments and settlements requiring an entity to determine the current service costs and the net interest for the period after the remeasurement
using the assumptions used for the re measurement: and determine the net interest for the remaining period based on the remeasured net defined
benefit liability or asset. The adoption of amendment to Ind AS 19 did not have any material impact on the standalone financial statements of
the Company.
i. Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are
recognised as an expense during the period when the employees render the services.
ii. Defined contribution plans
The Company, presently, does not have a defined contribution plan.
iiL Defined benefit plans
Gratuity liability is defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made
at the end of each financial year.
Re-measurement of defined benefit plans in respect of post-employment are charged to the Other Comprehensive Income.
l) Provisions (other than for employee benefits)
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount
of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the
risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
m) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably
measured
The Company recognises revenue when control over the promised goods or services is transferred to the customer at an amount that reflects
the consideration to which the Company expects to be entitled in exchange for those goods or services.
The Company has genet ally concluded that it is the principal in its revenue arrangements as it typically controls the goods or services before
transferring them tu the customer.
Revenue is adjusted for variable consideration such as discounts, rebates, refunds, credits, price concessions, incentives, or other similar items
in a contract when they are highly probable to be provided. The amount of revenue excludes any amount collected on behalf of third parties.
TheCompany has adopted Ind AS 115 using cumulative effect method of initially applying this standard recognised at the date of initial
application (i.e., April 01,2018). There is no impact on the adoption of the standard in the standalone financial statements.
n) Recognition of div idend income, interest income or expense
Dividend income is recognised in profit or loss on the date on which the Company’s right to receive payment is established
Interest income or expense is recugnised using the effective interest method after taking into account the amount outstanding and the rate
applicable.
o) Income tax
Income tax expense comprises of current and deferred tax. Current tax and deferred tax is recognized in the statement of profit or loss except
to the extent that it relates tu a business combination, or items recognized direedy in equity or in OC1.
1. 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 lux
Deferred tax is recognised 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 liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settl ed or the
asset realised, 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 ”
Ind AS 21 - The Effect of Changes in Foreign Exchange Rates states that the date of the transaction, for the purpose of determining the
exchange rate, is the date of initial recognition of the non-munetnry prepayment asset or deferred income liability. If there are multiple payments
or receipts in advance, a date of transaction is established for each payment or receipt. The Company does not have evaluated any impact of
on its standalone financial statements.
p) Bor rowing costs
Borrowing costs are interest and other costs incurred in connection with the borrowing of funds. Borrowing costs directly att ribumble to
acquisition or construction of an asset which necessarily take a substantial period of time to get ready for their intended use are capitalised as
part of the cost of that asset. Other borrowing costs are recognised as an expense in the period in which they are incurred.
Where there is an unrealised exchange loss which is treated as an adjustment to interest and subsequently there is a realised or unrealised gain
in respect of the settlement or translation of the same borrowing, the gain to the extent of the loss previously recognised a s an adjustment is
recognised as an adjustment to interest.
q) Foreign currency transaction
Transactions in foreign currencies are translated into functional currency of (he Company at the exchange rates at the dales of the transactions
or an average rate if the average rate approximates the actual rate at the date of the transaction.
i) Foreign currency monetary items are translated in the functional currencyat the exchange rate of the reporting date.
ii) Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the
exchange rate when the fair value was determined.
iii) Non-monetary assets and liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate
prevalent at the dine of the transaction.
iv) Exchange differences are recognised in profit or loss in the period in which they arise, except exchange differencesarising from the
translation of the items which are recognised in OCI.
r) Earnings pur share
Basic earnings per share is calculated 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 period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the w eighted
average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
s> Segment reporting (Ind AS 10K)
Operating Segment are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker ("CODM")
of the Company. The CODM who is responsible for allocating resources and assessing performance of the operating segments, has been
identified as the Managing Directur of the Company. The Company operates only in one Business segment i.e. Trading of Iron & Steel and
related products, hence does not have segment as per Ind AS 108 "Operating Segments". The performance of the Company is mainly driven
by sales made in domestic market and hence, no separate reportable geographical segment is identified.
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