1.3 Significant Accounting Policies:
1.3.1 Basis of Preparation and Presentation
The Financial Statements have been prepared on the historical cost basis except for following assets
and liabilities which have been measured at fair value amount:
(a) Certain Financial Assets and Liabilities (including derivative instruments if any).
The financial statements of the Company have been prepared to comply with the Indian Accounting
standards ('Ind AS'), including the rules notified under the relevant provisions of the Companies Act,
2013.
The Company's Financial Statements are presented in Indian Rupees, which is also its functional
currency
1.3.2 Fair Value Measurement
Some of the Company's accounting policies and disclosures require the measurement of fair values, for
both financial and non-financial assets and liabilities.
The Company has an established control framework with respect to the measurement of fair values.
This includes a financial reporting team that has overall responsibility for overseeing all significant fair
value measurements, including Level 3 fair values.
The financial reporting team regularly reviews significant unobservable inputs and valuation
adjustments. If third party information, such as pricing services, is used to measure fair values, then the
financial reporting team assesses the evidence obtained from the third parties to support the
conclusion that these valuations meet the requirements of Ind AS, including the level in the fair value
hierarchy in which the valuations should be classified.
Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the
valuation techniques as follows.
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
When measuring the fair value of an asset or a liability, the Company uses observable market data as
far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different
levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the
same level of the fair value hierarchy as the lowest level input that is significant to the entire
measurement.
The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting
period during which the change has occurred.
1.3.3 Current and Non-Current Classification
The Company presents assets and liabilities in the Balance Sheet based on Current /Non- Current
classification.
An asset is treated as Current when it is -
- Expected to be realised or intended to be sold or consumed in normal operating cycle;
- Held primarily for the purpose of trading;
- Expected to be realised within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least
twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle;
- It is held primarily for the purpose of trading;
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after
the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
1.3.4 Property, Plant and Equipment
(a) Tangible Assets
Property, Plant and Equipment are stated at cost, net of recoverable taxes, trade discount and rebates
less accumulated depreciation and impairment losses, if any. Such cost includes purchase price,
borrowing cost and any cost directly attributable to bringing the assets to its working condition for its
intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate
variations attributable to the assets.
Subsequent costs are included in the asset's carrying amount or recognised 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.
Property, Plant and Equipment which are significant to the total cost of that item of Property, Plant and
Equipment and having different useful life are accounted separately.
Other Indirect Expenses incurred relating to project, net of income earned during the project
development stage prior to its intended use, are considered as pre-operative expenses and disclosed
under Capital Work-in-Progress.
Depreciation
Free hold land is not depreciated. Improvement costs are amortized over the period of the lease.
Depreciation on Property, Plant and Equipment is provided using Written Down Value (WDV).
Depreciation is provided based on useful life of the assets as prescribed in Schedule II to the Companies
Act, 2013.
* The useful life has been assessed based on technical evaluation, taking into account the nature of the
asset and the estimated usage basis management's best judgement of economic benefits from those
classes of assets.
The residual values, useful lives and methods of depreciation of Property, Plant and Equipment are
reviewed at each financial year end and adjusted prospectively, if appropriate.
Derecognition
Gains or losses arising from derecognition of a Property, Plant and Equipment are measured as the
difference between the net disposal proceeds and the carrying amount of the asset and are recognised
in the Statement of Profit and Loss when the asset is derecognised.
(b) Capital Work-in-Progress and Capital Advances
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-in-Progress 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 advance given
towards acquisition of Property, Plants and Equipment outstanding at each balance sheet date is
disclosed as "Other Non-Current Assets".
(c) Intangible Assets
Intangible Assets are stated at cost of acquisition net of recoverable taxes, trade discount and rebates
less accumulated amortisation/depletion and impairment losses, 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 recognised 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.
Amortization
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 finite
useful life is reviewed at each financial year end and adjusted prospectively, if appropriate.
Derecognition
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 recognised in the
Statement of Profit and Loss when the asset is derecognized.
1.3.5 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 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.
There are no losses from impairment of assets to be recognized in the financial statements.
1.3.6 Lease
(a) The Company as a Lessee
The Company, as a lessee, recognizes a right- of-use asset and a lease liability for its leasing
arrangements, if the contract conveys the right to control the use of an identified asset.
The contract conveys the right to control the use of an identified asset, if it involves the use of an
identified asset and the Company has substantially all of the economic benefits from use of the asset
and has right to direct the use of the identified asset. The cost of the right-of- use asset shall comprise
of the amount of the initial measurement of the lease liability adjusted for any lease payments made at
or before the commencement date plus any initial direct costs incurred. 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 are depreciated
using the straight-line method from the commencement date over the shorter of lease term or useful
life of right-of-use asset.
The Company measures the lease liability 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.
(b) The Company as a Lessor
Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the
terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the
contract is classified as a finance lease. All other leases are classified as operating leases.
For operating leases, rental income is recognized on a straight-line basis over the term of the relevant
lease.
1.3.7 Inventories
Items of inventories under raw material, Work in Progress and consumables are measured at cost and
Finished good and other items are valued at cost and net realizable value w.e. less after providing for
obsolescence, if any. Cost of inventories comprises of cost of purchase, cost of conversion and other
costs including manufacturing overheads net of recoverable taxes incurred in bringing them to their
respective present location and condition.
1.3.8 Borrowing Costs
Borrowing costs include exchange differences arising from foreign currency borrowings to the extent
they are regarded as an adjustment to the interest cost. Borrowing costs that are directly attributable
to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A
qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use.
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.
All other borrowing costs are charged to the Statement of Profit and Loss for the period for which they
are incurred.
1.3.9 Employee Benefits
(A) 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.
(B) Post-Employment Benefits
(i) Defined Contribution Plans
The Company recognises contribution payable to the provident fund scheme as an expense, when an
employee renders the related service. If the contribution payable to the scheme for service received
before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme
is recognised as a liability. If the contribution already paid exceeds the contribution due for services
received before the balance sheet date, then excess is recognised as an asset to the extent that the pre¬
payment will lead to a reduction in future payment or a cash refund.
(ii) Defined Benefit Plans
(a) Gratuity Scheme: The Company pays gratuity to the employees who have completed five years of
service with the Company at the time of resignation/superannuation. The gratuity is paid @ 15 days
basic salary and dearness allowances 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 Projected Unit Credit Method and spread over the period during which the benefit is
expected to be derived from employees' services.
Remeasurement gains and losses arising from adjustments and changes in actuarial assumptions are
recognised in the period in which they occur in Other Comprehensive Income.
(iii) Other Long - Term Employee Benefits
Entitlement to annual leave is recognized when they accrue to employees.
However, the Gratuity Provisions are not applicable to the company. Hence the company has not
provided for gratuity liability in the financial Statement
1.3.10 Revenue Recognition
Revenue from contracts with customers is recognised when control of the goods or services are
transferred to the customer at an amount that reflects the consideration entitled in exchange for those
goods or services.
The Company has generally typically controls the goods or services before transferring them to the
customer.
Generally, control is transferred upon shipment of goods to the customer or when the goods is made
available to the customer, provided transfer of title to the customer occurs and the Company has not
retained any significant risks of ownership or future obligations with respect to the goods shipped.
Revenue from rendering of services is recognized on when the services are rendered and related cost
are incurred over time by measuring the progress towards complete satisfaction of performance
obligations at the reporting period.
Revenue is measured at the amount of consideration which the Company expects to be entitled to in
exchange for transferring distinct goods or services to a customer as specified in the contract, excluding
amounts collected on behalf of third parties (for example taxes and duties collected on behalf of the
government). Consideration is generally due upon satisfaction of performance obligations and a
receivable is recognised when it becomes unconditional.
Interest Income
Interest Income from a Financial Assets is recognised using effective interest rate method.
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.
Other Income
Revenue from other income is recognized when the payment of that related income is received or
credited.
1.3.11 Foreign Currency Transactions and Translation
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of
transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the
functional currency closing rates of exchange at the reporting date. Exchange differences arising on
settlement or translation of monetary items are recognised in Statement of Profit and Loss except to
the extent of exchange differences which are regarded as an adjustment to interest costs on foreign
currency borrowings that are directly attributable to the acquisition or construction of qualifying assets
which are capitalised as cost of assets.
Non-monetary items that are measured in terms of historical cost in a foreign currency are recorded
using the exchange rates at the date of the transaction. Non-monetary items measured at fair value in a
foreign currency are translated using the exchange rates at the date when the fair value was measured.
The gain or loss arising on translation of non-monetary items measured at fair value is treated in line
with the recognition of the gain or loss on the change in fair value of the item (i.e., translation
differences on items whose fair value gain or loss is recognised in Other Comprehensive Income or
Statement of Profit and Loss are also recognised in Other Comprehensive Income or Statement of Profit
and Loss, respectively).
1.3.12 Government Grants and Subsidies
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.
Refundable government grants are accounted in accordance with the recognition and measurement
principle of Ind AS 109, "Financial Instruments". It is recognized as income when there is a reasonable
assurance that the Company will comply with all necessary conditions attached to the grants. Income
from such benefit is recognized on a systematic basis over the period of the grants during which the
Company recognizes interest expense corresponding to such grants.
1.3.13 Financial Instruments - Financial Assets
(A) Initial Recognition and Measurement
All Financial Assets are initially recognised at fair value. Transaction costs that are directly attributable
to the acquisition or issue of Financial Assets, which are not at Fair Value Through Profit or Loss, are
adjusted to the fair value on initial recognition. Purchase and sale of Financial Assets are recognised
using trade date accounting.
(B) Subsequent Measurement
a) Financial Assets measured at Amortised Cost (AC)
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 flows and the contractual terms of the Financial
Asset give rise to cash flows on specified dates that represent solely payments of principal and interest
on the principal amount outstanding.
b) Financial Assets measured at Fair Value Through Other Comprehensive Income (FVTOCI)
A Financial Asset is measured at FVTOCI 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 represents solely payments of principal
and interest on the principal amount outstanding.
Further, the Company, through an irrevocable election at initial recognition, has measured certain
investments in equity instruments at FVTOCI. The Company has made such election on an instrument-
by-instrument basis. These equity instruments are neither held for trading nor are contingent
consideration recognized under a business combination. Pursuant to such irrevocable election,
subsequent changes in the fair value of such equity instruments are recognized in OCI. However, the
Company recognizes dividend income from such instruments in the Statement of Profit and Loss.
c) Financial Assets measured at Fair Value Through Profit or Loss (FVTPL)
A Financial Asset which is not classified in any of the above categories is measured at FVTPL. Financial
assets are reclassified subsequent to their recognition, if the Company changes its business model for
managing those financial assets. Changes in business model are made and applied prospectively from
the reclassification date which is the first day of immediately next reporting period following the
changes in business model in accordance with principles laid down under Ind AS 109 - Financial
Instruments.
(C) Investments
Investments are classified in to 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 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 measured at fair value through profit and loss (FVTPL).
(D) Impairment of Financial Assets
In accordance with Ind AS 109, the Company uses 'Expected Credit Loss' (ECL) model, for evaluating
impairment of Financial Assets other than those measured at Fair Value Through Profit and Loss
(FVTPL).
1.3.14 Financial Instruments - Financial Liabilities
(A) Initial Recognition and Measurement
All Financial Liabilities are recognised at fair value and in case of borrowings, net of directly attributable
cost. Fees of recurring nature are directly recognised in the Statement of Profit and Loss as finance cost.
(B) Subsequent Measurement
Financial Liabilities are carried at amortised cost using the effective interest method. For trade and
other payables maturing within one year from the balance sheet date, the carrying amounts
approximate fair value due to the short maturity of these instruments.
1.3.15 Derecognition of Financial Instruments
The Company derecognises 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. A Financial liability (or a part of a financial liability) is derecognised from the
Company's Balance Sheet when the obligation specified in the contract is discharged or cancelled or
expires.
1.3.16 Financial Instruments - Offsetting
Financial Assets and Financial Liabilities are offset and the net amount is presented in the balance sheet
when, and only when, the Company has a legally enforceable right to set off the amount and it intends,
either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
1.3.17 Taxes on Income
The tax expenses for the period comprises of current tax and deferred income tax. Tax is recognised in
Statement of Profit and Loss, except to the extent that it relates to items recognised in the Other
Comprehensive Income. In which case, the tax is also recognised in Other Comprehensive Income.
(a) Current Tax
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.
(b) Deferred Tax
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 assets are recognised to the extent it is probable that taxable profit will be available
against which the deductible temporary differences, and the carry forward of unused tax losses can be
utilised. 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 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.
Presentation
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.
1.3.18 Earnings per Share
Basic earnings per share is calculated by dividing the net profit after tax by the weighted average
number of equity shares outstanding during the year adjusted for bonus element in equity share.
Diluted earnings per share adjusts the figures used in determination of basic earnings per share to take
into account the conversion of all dilutive potential equity shares. Dilutive potential equity shares are
deemed converted as at the beginning of the period unless issued at a later date.
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