3 SUMMARY OF MATERIAL ACCOUNTING POLICIES

A) INVENTORIES

Inventories are valued at lower of cost and net realizable value.
The cost of raw materials, components, stock-in-trade,
consumable stores and spare parts are determined using first-in
first-out / specific identification method and includes freight, taxes
and duties, net of duty credits wherever applicable and any other
expenditure incurred in bringing them to their present location and
condition. In the case of finished goods and work-in-progress,
cost includes an appropriate share of manufacturing overheads
based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary
course of business, less the estimated cost of completion and
selling expenses. The net realisable value of work-in-progress is
determined with reference to the selling prices of related finished
products. Raw materials, stores and spares, packing and others
held for use in the production of finished goods are not written
down below except in cases where material prices have declined
and it is estimated that the cost of the finished goods will exceed
their net realizable value.

The comparison of cost and net realisable value is made on an
item by item basis.

B) CASH AND CASH EQUIVALENTS (FOR PURPOSES OF
CASH FLOW STATEMENT)

Cash comprises cash on hand and demand deposits with banks.
Cash equivalents are short-term balances (with an original
maturity of three months or less from the date of acquisition),
highly liquid investments that are readily convertible into known
amounts of cash and which are subject to insignificant risk of
changes in value.

C) CASH FLOW STATEMENT

Cash flows are reported using the indirect method, whereby profit
/ (loss) is adjusted for the effects of transactions of non-cash
nature and any deferrals or accruals of past or future cash receipts
or payments. The cash flows from operating, investing and
financing activities of the Company are segregated based on the
available information. In cash flow statement, cash and cash
equivalents include cash in hand, balances with banks in current
accounts and other short-term highly liquid investments with
original maturities of three months or less.

D) PROPERTY, PLANT AND EQUIPMENT
Recognition and measurement

The cost of an item of property, plant and equipment shall be
recognised as an asset if, and only if 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.

Freehold land is stated at historical cost less any accumulated
impairment losses. Items of property, plant and equipment are
measured at cost, which includes capitalised borrowing costs,
less accumulated depreciation and accumulated impairment
losses, if any. Cost of an item of property, plant and equipment
comprises:

a. Purchase price, including import duties and non-refundable
taxes on purchase (goods and service tax), after deducting trade
discounts and rebates.

b. Any directly attributable cost of bringing the item to its working
condition for its intended use, estimated costs of dismantling and
removing the item and restoring the site on which it is located.

c. The cost of a self-constructed item of property, plant and
equipment comprises the cost of materials and direct labour, any
other costs directly attributable to bringing the item to working
condition for its intended use and estimated costs of dismantling
and removing the item and restoring the site on which it is located.

Any gain / loss on disposal of an item of property, plant and
equipment is recognised in the statement of profit and loss.

Subsequent expenditure

Subsequent expenditure is capitalised only if 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.

Component accounting

If significant parts of an item of property, plant and equipment have
different useful lives, then they are accounted for as separate
items (major components) of property, plant and equipment.

Depreciation

Depreciation is calculated on the cost of items of property, plant
and equipment less their estimated residual values using the
straight-line method over the estimated useful lives and is
generally recognised in the Statement of profit and loss. Freehold
land is not depreciated.

Depreciation on property, plant and equipment is charged over the
estimated useful life of the asset or part of the asset (after
considering double/triple shifts) as evaluated on technical
assessment on straight-line method, in accordance with Part A of
Schedule II to the Companies Act, 2013.

The estimated useful life of the property, plant and equipment
followed by the Company for the current and the comparative
period are as follows:

Depreciation method, useful lives and residual values are
reviewed at each financial year-end and adjusted if necessary, for
each reporting period. Based on technical evaluation, the
management believes that its estimate of useful life as given
above best represent the period over which management expects
to use the asset.

On property, plant and equipment added / disposed off during the
year, depreciation is charged on pro-rata basis for the period
from/upto which the asset is ready for use/disposed off.

Capital work-in-progress

Property, plant and equipment in the course of construction for
production, supply or administrative purposes are carried at cost,
less any recognised impairment loss. Cost includes professional
fees and for qualifying assets, borrowing costs capitalised in
accordance with the Company's accounting policy. They are
classified to the appropriate categories of property, plant and

equipment when completed and ready for intended use.
Depreciation of these assets, on the same basis as other property
assets, commences when the assets are ready for their intended
use.

INTANGIBLE ASSETS

Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated amortisation and
accumulated impairment losses. Amortisation is calculated on a
straight-line basis over their estimated useful lives and it is
included in the statement of profit and loss. The estimated useful
life and amortisation method are reviewed at the end of each
reporting period, with the effect of any changes in estimate being
accounted for on a prospective basis. Intangible assets with
indefinite useful lives that are acquired separately are carried at
cost less accumulated impairment losses.

The estimated useful life of intangible assets consisting computer
software is 3 years.

An intangible asset is derecognised on disposal, or when no future
economic benefits are expected from use or disposal. Gains or
losses arising from derecognition of an intangible asset,
measured as the difference between the net disposal proceeds
and the carrying amount of the asset, are recognised in the
statement of profit and loss when the asset is derecognised.

E) REVENUE FROM CONTRACTS WITH CUSTOMERS

The Company generates revenue primarily from sale of Yarn,
Knitted Fabric and Readymade Garments. The Company also
earns revenue from rendering of services.

Revenue is measured based on the consideration specified in a
contract with a customer. The Company recognises revenue
when it transfers control over a good or service to a customer.

1.1 Sale of products

Revenue is recognised when a promise in a customer
contract (performance obligation) has been satisfied by
transferring control over the promised goods to the customer.
Control over the promised goods refers to the ability to direct
the use of, and obtain substantially all of the remaining
benefits from, those goods. Control is usually transferred
upon shipment, delivery to, upon receipt of goods by the
customer, in accordance with the individual delivery and
acceptance terms agreed with the customers.

The amount of revenue to be recognized (transaction price)
is based on the consideration expected to be received in
exchange for goods, excluding amounts collected on behalf
of third parties such as sales tax or other taxes directly linked
to sales. If a contract contains more than one performance
obligation, the transaction price is allocated to each
performance obligation based on their relative stand-alone

selling prices. Revenue from product sales are recorded net
of allowances for estimated rebates, cash discounts and
estimates of product returns, all of which are established at
the time of sale.

1.2 Revenue from services

Revenue from sale of services is recognised when related
services are rendered as perthe terms agreed with customers.

1.3 Export incentives

Export incentives are accounted in the year of exports based on
eligibility and expected amount on realisation.

1.4 Sales returns

Our customers have the contractual right to return goods only
when authorised by the Company.

F) OTHER INCOME

Dividend income from investments is recognized when the right to
receive the payment is established and when no significant
uncertainty as to measurability or collectability exists.

Rental income under operating leases is recognized in the
statement of profit and loss on a straight-line basis over the term of
the lease except where another systematic basis is more
representative of the pattern in which benefit from the use of the
underlying asset is diminished.

Interest income is recognised using effective interest rate method.
Interest income on overdue receivables is recognized only when
there is a certainty of receipt. The 'effective interest rate' is the rate
that exactly discounts estimated future cash payments or receipts
through the expected life of financial instrument to: the gross
carrying amount of the financial asset; or the amortised cost of the
financial liability.

G) FOREIGN CURRENCY TRANSACTIONS AND
TRANSLATIONS

Transactions in foreign currencies are translated into the
functional currency at the exchange rates at the dates of the
transactions or an average rate if the average rate approximates
the actual rate at the date of the transaction. Foreign exchange
gains and losses from settlement of these transactions are
recognised in the statement of profit and loss.

Monetary assets and liabilities denominated in foreign currencies
are translated into the functional currency at the exchange rate at
the reporting date. 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. Non-monetary assets and liabilities that are
measured at historical cost in a foreign currency are translated at
the exchange rate at the date of the transaction. Exchange
differences arising on translation are recognised in the statement
of profit and loss.

H) FINANCIAL INSTRUMENTS

(i) Recognition and initial measurement

Trade receivables and debt securities are initially recognised
when they are originated.

All other financial assets and financial liabilities are initially
recognized when the Company becomes a party to the
contractual provisions of the instrument. A financial asset (unless
it is a trade receivable without a significant financing component)
or financial liability is initially measured at fair value plus or minus,
for an item not at FVTPL, transaction costs that are directly
attributable to its acquisition or issue. A trade receivable without a
significant financing component is initially measured at the
transaction price.

The 'trade payable' is in respect of the amount due on account of
goods purchased in the normal course of business. They are
recognised at their transaction and services availed value if the
transaction do not contain significant financing component.

(ii) Classification and subsequent measurement
Financial assets

On initial recognition, a financial asset is classified as measured at

- amortised cost;

- Fair value through other comprehensive income
(FVTOCI)-debt investment

- Fair value through other comprehensive income (FVTOCI)
-equity investment; or

- Fair value through profit and loss (FVTPL)

For the purpose of subsequent measurement, financial
instruments of the Company are classified in the following
categories: non-derivative financial assets comprising amortised
cost, debt instruments at fair value through other comprehensive
income (FVTOCI), equity instruments at FVTOCI or fair value
through profit and loss account (FVTPL), non derivative financial
liabilities at amortised cost or FVTPL and derivative financial
instruments (under the category of financial assets or financial
liabilities) at FVTPL.

The classification of financial instruments depends on the
objective of the business model for which it is held. Management
determines the classification of its financial instruments at initial
recognition.

(ii) Classification and subsequent measurement
a) Non-derivative financial assets
Financial assets at amortised cost

A financial asset is measured at amortised cost if it meets both of
the following conditions and is not designated as at FVTPL:

(a) it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and

(b) its contractual terms give rise on specified dates to cash flows
that are solely payments of principal and interest (SPPI) on
the principal amount outstanding.

Debt investment at FVTOCI

A debt Investment will be measured at FVTOCI if it meets both of
the following conditions and is not designated as at FVTPL:

(a) it is held within a business model whose objective is achieved
by both collecting contractual cash flows and selling financial
assets; and

(b) its contractual terms give rise on specified dates to cash flows
that are SPPI on the principal amount outstanding.

Equity instruments at FVTOCI

On initial recognition of an equity investment that is not held for
trading, the Company may irrevocably elect to present
subsequent changes in the investment’s fair value in Other
Comprehensive Income ('OCI'). This election is made on an
investment-by-investment basis. If the Company decides to
classify an equity instrument as FVTOCI, then all fair value
changes on the instrument, excluding dividend are recognised in
OCI which is not subsequently recycled to statement of profit and
loss.

Financial assets at FVTPL

All financial assets not classified as measured at amortised cost or
FVTOCI as described above are measured at FVTPL.

On initial recognition, the Company may irrevocably designate a
financial asset that otherwise meets the requirements to be
measured at amortised cost or at FVTOCI as at FVTPL if doing so
eliminates or significantly reduces an accounting mismatch that
would otherwise arise.

Financial assets: Business model assessment

The Company makes an assessment of the objective of the
business model in which a financial asset is held at a portfolio level
because this best reflects the way the business is managed and
information is provided to management. The information
considered includes:

- the stated policies and objectives for the portfolio and the
operation of those policies in practice. These include whether
management’s strategy focuses on earning contractual
interest income, maintaining a particular interest rate profile,
matching the duration of the financial assets to the duration of
any related liabilities or expected cash outflows or realising
cash flows through the sale of the assets;

- how the performance of the portfolio is evaluated and reported
to the Company’s management;

- the risks that affect the performance of the business model
(and the financial assets held within that business model) and
how those risks are managed;

- how managers of the business are compensated - e.g.
whether compensation is based on the fair value of the assets
managed or the contractual cash flows collected; and

- the frequency, volume and timing of sales of financial assets
in prior periods, the reasons for such sales and expectations
about future sales activity.

Transfers of financial assets to third parties in transactions that do
not qualify for derecognition are not considered sales for this
purpose, consistent with the Company’s continuing recognition of
the assets.

Financial assets that are held for trading are managed and whose
performance is evaluated on a fair value basis are measured at
FVTPL.

Financial assets: Assessment whether contractual cash
flows are solely payments of principal and interest

For the purposes of this assessment, ‘principal’ is defined as the
fair value of the financial asset on initial recognition. ‘Interest’ is
defined as consideration for the time value of money and for the
credit risk associated with the principal amount outstanding during
a particular period of time and for other basic lending risks and
costs (e.g. liquidity risk and administrative costs), as well as a
profit margin.

In assessing whether the contractual cash flows are solely
payments of principal and interest, the Company considers the
contractual terms of the instrument. This includes assessing
whether the financial asset contains a contractual term that could
change the timing or amount of contractual cash flows such that it
would not meet this condition. In making this assessment, the
Company considers:

- contingent events that would change the amount or timing of
cashflows;

- terms that may adjust the contractual coupon rate, including
variable interest rate features;

- prepayment and extension features; and

- terms that limit the Company’s claim to cash flows from
specified assets (e.g. non- recourse features).

A prepayment feature is consistent with the solely payments of
principal and interest criterion if the prepayment amount
substantially represents unpaid amounts of principal and interest
on the principal amount outstanding, which may include
reasonable additional compensation for early termination of the
contract. Additionally, for a financial asset acquired at a significant
discount or premium to its contractual par amount, a feature that
permits or requires prepayment at an amount that substantially
represents the contractual par amount plus accrued (but unpaid)
contractual interest (which may also include reasonable
additional compensation for early termination) is treated as
consistent with this criterion if the fair value of the prepayment

feature is insignificant at initial recognition.

Financial assets - Subsequent measurement and gains and
losses

Financial assets are not reclassified subsequent to their initial
recognition unless the Company changes its business model for
managing financial assets, in which case all affected financial
assets are reclassified on the first day of the first reporting period
following the change in the business model.

Financial assets at FVTPL

These assets are subsequently measured at fair value. Net gains
and losses, including any interest or dividend income, are
recognised in standalone statement of profit and loss.

Financial assets at amortised cost

These assets are subsequently measured at amortised cost using
the effective interest method. The amortised cost is reduced by
impairment losses. Interest income, foreign exchange gains and
losses and impairment are recognised in standalone statement of
profit and loss. Any gain or loss on derecognition is recognised in
standalone statement of profit and loss.

Debt investments at FVTOCI

These assets are subsequently measured at fair value. Interest
income calculated using the effective interest method, foreign
exchange gains and losses and impairment are recognised in
standalone statement of profit and loss. Other net gains and
losses are recognised in OCI. On derecognition, gains and losses
accumulated in OCI are reclassified to standalone statement of
profit and loss.

Equity investments at FVTOCI

These assets are subsequently measured at fair value.
Impairment losses (and reversal of impairment losses) on equity
investments measured at FVTOCI are not reported separately
from other changes in fair value. Dividends are recognised as
income in profit and loss unless the dividend clearly represents a
recovery of part of the cost of the investment. Other net gains and
losses are recognised in OCI and are not reclassified to
standalone statement of profit and loss.

Financial liabilities - Classification, subsequent
measurement and gains and losses

Financial liabilities are classified as measured at amortised cost or
FVTPL. Afinancial liability is classified as at FVTPL if it is classified
as held for trading, 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 and loss. Other financial
liabilities are subsequently measured at amortised cost using the
effective interest method. Interest expense and foreign exchange
gains and losses are recognised in standalone statement of profit
and loss. Any gain or loss on derecognition is also recognised in
standalone statement of profit and loss.

(iii) Derecognition
Financial assets

The Company derecognises a financial asset when the
contractual rights to the cash flows from the financial asset expire,
or it transfers the rights to receive the contractual cash flows in a
transaction in which either substantially all of the risks and
rewards of ownership of the financial asset are transferred or the
Company neither transfers nor retains substantially all of the risks
and rewards of ownership and does not retain control of the
financial asset.

If the Company enters into transactions whereby it transfers
assets recognised on its balance sheet, but retains either all or
substantially all of the risks and rewards of the transferred assets.
In these cases the transferred assets are not derecognised.

Financial liabilities

The Company derecognises a financial liability when its
contractual obligations are discharged or cancelled, or expire.

The Company also derecognises a financial liability when its
terms are modified and the cash flows of the modified liability are
substantially different. In this case, a new financial liability based
on the modified terms is recognised at fair value.

On derecognition of a financial liability, the difference between the
carrying extinguished and the consideration paid (including any
non-cash assets transferred or liabilities assumed) is recognised
in standalone statement of profit and loss.

(iv) Offsetting

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 to set off the
amounts and it intends either to settle them on a net basis or to
realise the asset and settle the liability simultaneously.

(v) Derivative financial instruments

The Company holds derivative financial instruments such as
foreign exchange forward contracts to mitigate the risk of changes
in foreign exchange rates on foreign currency assets or liabilities
and forecasted cash flows denominated in foreign currencies. The
counterparty for these contracts is generally a bank.

Derivatives are recognized and measured at fair value.
Attributable transaction costs are recognized in statement of profit
and loss. Subsequent to initial recognition, derivatives are
measured at fair value and changes therein are generally
recognised in profit and loss. Derivatives are carried as financial
assets when the fair value is positive and as financial liabilities
when the fair value is negative.

I) GOVERNMENT GRANTS, SUBSIDIES AND EXPORT
INCENTIVES

Government grants and subsidies related to assets, including

non-monetary grants, are initially recognised as deferred income
at fair value if there is reasonable assurance that they will be
received and the Company will comply with the conditions
associated with the grant; they are then recognised in statement
of profit and loss as other operating revenue / other income on a
systematic basis.

Government grants received in relation to assets are presented as
a reduction to the carrying amount of the related asset and the
same is recognised in statement of profit and loss over the life of a
depreciable asset as a reduced depreciation expense.
Repayment of a grant related to an asset is recognised by
increasing the carrying amount of the asset and the cumulative
additional depreciation that would have been recognised in the
statement of profit and loss in the absence of the grant is
recognised immediately in the statement of profit and loss.

Government grants relating to income are deferred and
recognised in the statement of profit and loss over the period
necessary to match them with the costs that they intended to
compensate and presented in other operating revenue.

Grants that compensate the Company for expenses incurred are
recognised in profit and loss as other income on a systematic
basis in the periods in which the expenses are recognised, unless
the conditions for receiving the grant are met after the related
expenses have been recognised. In this case, the grant is
recognised when it becomes receivable.

Export benefits are accounted for in the year of exports based on
eligibility and when there is no uncertainty in receiving the same.

J) INVESTMENTS
Investment in subsidiaries

Investments in subsidiaries are carried at cost less accumulated
impairment losses, if any. Where an indication of impairment
exists, the carrying amount of investment is assessed and written
down immediately to its recoverable amount.

K) EMPLOYEE BENEFITS

(a) Short term employee benefits

Short-term employee benefits are measured on an undiscounted
basis and expensed as the related service is provided. A liability is
recognised for the amount expected to be paid under short-term
cash bonus, if the Company has a present legal or constructive
obligation to pay this amount as a result of past service provided
by the employee and the obligation can be estimated reliably.

(b) Defined contribution plan

Provident Fund and Employee State Insurance

A defined contribution plan is a post-employment benefit plan
where the Company’s legal or constructive obligation is limited to
the amount that it contributes to a separate legal entity. The
Company makes specified contributions towards Government

administered provident fund and employee state insurance
schemes. Obligations for contributions to defined contribution
plan are expensed as an employee benefits expense in the
statement of profit and loss in period in which the related service is
provided by the employee. Prepaid contributions are recognised
as an asset to the extent that a cash refund or a reduction in future
payments is available.

(c) Defined benefit plan

A defined benefit plan is a post-employment benefit plan other
than a defined contribution plan. Post employment benefit
comprises of Gratuity which is accounted for as follows:

Gratuity Fund

The Company’s net obligation in respect of defined benefit plans is
calculated separately for each plan by estimating the amount of
future benefit that employees have earned in the current and prior
periods, discounting that amount and deducting the fair value of
any plan assets.

The calculation of defined benefit obligations is performed
annually by a qualified actuary using the projected unit credit
method. When the calculation results in a potential asset for the
Company, the recognised asset is limited to the present value of
economic benefits available in the form of any future refunds from
the plan or reductions in future contributions to the plan (‘the asset
ceiling’). To calculate the present value of economic benefits,
consideration is given to any applicable minimum funding
requirements.

Remeasurements of the net defined benefit liability, which
comprise actuarial gains and losses, the return on plan assets
(excluding interest) and the effect of the asset ceiling (if any,
excluding interest), are recognised immediately in OCI. The
Company determines the net interest expense (income) on the
net defined benefit liability (asset) for the period by applying the
discount rate determined by reference to market yields at the end
of the reporting period on government bonds. This rate is applied
on the net defined benefit liability (asset), both as determined at
the start of the annual reporting period, taking into account any
changes in the net defined benefit liability (asset) during the period
as a result of contributions and benefit payments. Net interest
expense and other expenses related to defined benefit plans are
recognised in the statement of profit and loss.

When the benefits of a plan are changed or when a plan is
curtailed, the resulting change in benefit that relates to past
service (‘past service cost’ or ‘past service gain’) or the gain or loss
on curtailment is recognised immediately in standalone statement
of profit and loss. The Company recognises gains and losses on
the settlement of a defined benefit plan when the settlement
occurs.

L) LEASES

At inception of a contract, the Company assesses whether a

contract is, or contains, a lease. Acontract is, or contains, a lease if
the contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration. To assess
whether a contract conveys the right to control the use of an
identified asset, the Company uses the definition of a lease in Ind
AS 116.

i) As a lessee

At commencement or on modification of a contract that contains a
lease component, the Company allocates the consideration in the
contract to each lease component on the basis of its relative
stand-alone prices. However, for the leases of property the
Company has elected not to separate non-lease components and
accountforthe lease and non-lease components as a single lease
component.

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, unless the lease transfers ownership of the
underlying asset to the Company by the end of the lease term or
the cost of the right-of-use asset reflects that the Company will
exercise a purchase option. In that case the right-of-use asset will
be depreciated overthe useful life of the underlying asset, which is
determined on the same basis as those of property, plant and
equipment. In addition, the right-of-use asset is periodically
reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.

The lease liability is initially measured at the present value of the
lease payments that are not paid at the commencement date,
discounted using interest rate implicit in the lease or, if that rate
cannot be readily determined, the Company’s incremental
borrowing rate. Generally, the Company uses its incremental
borrowing rate as the discount rate. The Company determines its
incremental borrowing rate by obtaining interest rates from
various external financing sources and makes certain
adjustments to reflects the terms of the lease and type of the asset
leased.

Lease payments included in the measurement of the lease liability
comprise the following:

- fixed payments, including in-substance fixed payments

- variable lease payments that depend on an index or rate,
initially measured using the index or rate as at the
commencement date;

- amounts expected to be payable under a residual value
guarantee; and

- the exercise price under a purchase option that the Company is
reasonably certain to exercise, lease payments in an optional
renewal period if the Company is reasonably certain to exercise
an extension option and penalties for early termination of a
lease unless the Company is reasonably certain not to
terminate early.

The lease liability is measured at amortised cost using the
effective interest method. It is remeasured 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, if the
Company changes its assessment of whether it will exercise a
purchase, extension or termination option or if there is a revision
in-substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding
adjustment is made to the carrying amount of the right-of-use
asset or is recorded in profit and loss if the carrying amount of the
right-of-use asset has been reduced to zero. The Company
presents right-of-use assets that do not meet the definition of
investment property in “property, plant and equipment” and lease
liabilities separately in balance sheet within “Financial liabilities”.

Shortterm leases and low value assets

The Company has elected not to recognise right-of-use assets
and lease liabilities for leases of low-value assets and short-term
leases, including IT equipment. The Company recognises the
lease payments associated with these leases are recognized as
an expense in standalone statement of profit and loss on a
straight-line basis over the lease term.

ii) As a lessor

At inception or on modification of a contract that contains a lease
component, the Company allocates the consideration in the
contract to each lease component on the basis of their relative
stand-alone prices.

When the Company acts as a lessor, it determines at lease
inception whether each lease is a finance lease or an operating
lease.

To classify each lease, the Company makes an overall
assessment of whether the lease transfers substantially all of the
risks and rewards incidental to ownership of the underlying asset.
If this is the case, then the lease is a finance lease; if not, then it is
an operating lease. As a part of this assessment, the company
considers certain indicators such as whether the lease is for the
major part of the economic life of the asset.

The Company recognises lease payments received under
operating leases as income on a straight-line basis over the lease
term as part of other income. In case of a finance lease, finance
income is recognised over the lease term based on a pattern
reflecting a constant periodic rate of return on the lessor’s net

investment in the lease.

If an arrangement contains lease and non-lease components,
then the Company applies Ind AS 115 Revenue from contracts
with customers to allocate the consideration in the contract.

M) BORROWING COSTS

Borrowing cost are interest and other costs (including exchange
differences relating to foreign currency borrowings to the extent
that they are considered as adjustment to interest costs) incurred
in connection with the borrowings of funds. Borrowing costs
directly attributable to the acquisition, construction or production
of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use or
sale, are added to the cost of those assets, until such time as the
assets are substantially ready for their intended use or sale.

Interest income earned on the temporary investment of specific
borrowings pending their expenditure on qualifying assets is
deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in the statement of profit
and loss in the year in which they are incurred.

N) SEGMENT REPORTING

The Company is engaged in manufacture and sale of Yarn,
Knitted Fabric and Readymade Garments and thus the Company
has only one reportable segment (i.e.) Textile business.

O) EARNINGS PER SHARE

Basic earnings per share are 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
year. The weighted average number of equity shares outstanding
during the period is adjusted for events including a bonus issue,
bonus element in a rights issue to existing shareholders, share
split and reverse share split (consolidation of shares). Diluted
earnings per share is computed by dividing the profit (considered
in determination of basic earnings per share) after considering the
effect of interest and other financing costs or income (net of
attributable taxes) associated with dilutive potential equity shares
by the weighted average number of equity shares considered for
deriving basic earnings per share adjusted for the weighted
average number of equity shares that would have been issued
upon conversion of all dilutive potential equity shares.

P) INCOME TAXES

Income tax expense comprises current and deferred tax. It is
recognised in standalone statement of profit and loss except to the
extent that it relates to a business combination or to an item
recognised directly in equity or in other comprehensive income.

The Company has determined that interest and penalties related
to income taxes, including uncertain tax treatments, do not meet
the definition of income taxes and therefore accounted for them
under Ind AS 37 Provisions, Contingent Liabilities and Contingent
Assets.

i) Current tax

Current tax comprises the expected tax payable or receivable on
the taxable income or loss for the year and any adjustment to the
tax payable or receivable in respect of previous years. The
amount of current tax payable or receivable is the best estimate of
the tax amount expected to be paid or received that reflects the
uncertainty related to income taxes, if any. It is measured using tax
rates (and tax laws) enacted or substantively enacted by the
reporting date.

Current tax liabilities and current tax assets are offset only if there
is a legally enforceable right to set off the recognised amounts and
it is intended to realise the asset and settle the liability on a net
basis or simultaneously.

ii) 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 liabilities are generally
recognised for all taxable temporary differences. Deferred tax
assets are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable profits will
be available against which those deductible temporary
differences can be utilised. Such deferred tax assets and
liabilities are not recognised if the temporary difference arises
from the initial recognition (other than in a business combination)
of assets and liabilities in a transaction that affects neither the
taxable profit nor the accounting profit. In addition, deferred tax
liabilities are not recognised if the temporary difference arises
from the initial recognition of goodwill.

Deferred tax liabilities are recognised for taxable temporary
differences associated with investments in subsidiaries, except
where the Company is able to control the reversal of the
temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future. Deferred tax
assets arising from deductible temporary differences associated
with such investments and interest are only recognised to the
extent that it is probable that there will be sufficient taxable profits
against which to utilise the benefits of the temporary differences
and they are expected to reverse in the foreseeable future.

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. Such reductions are
reversed when the probability of future taxable profit improves.

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 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.

Deferred tax assets and liabilities are offset if there is a legally
enforceable right to offset current tax liabilities and assets and
they relate to income taxes levied by same tax authority on same
taxable entity, or on different tax entities, but they intend to settle
current tax liabilities and assets on a net basis or its tax assets and
liabilities will be realised simultaneously.

iii) Recognition

Current and deferred tax are recognised in the statement of profit
and loss, except when they relate to items that are recognised in
other comprehensive income or directly in equity, in which case,
the current and deferred tax are also recognised in other
comprehensive income or directly in equity respectively. Where
current tax or deferred tax arises from the initial accounting for a
business combination, the tax effect is included in the accounting
for the business combination.

Q) IMPAIRMENT

Impairment of Financial instruments and contract assets

The Company recognises loss allowance for expected credit loss
on financial assets measured at amortised cost.

At each reporting date, the Company assesses whether financial
assets carried at amortised cost are credit impaired. A financial
asset is ‘credit impaired’ when one or more events that have a
detrimental impact on the estimated future cash flows of the
financial asset have occurred.

Evidence that a financial asset is credit - impaired includes the
following observable data:

- significant financial difficulty;

- a breach of contract such as a default or being past due;

- the restructuring of a loan or advance by the Company on
terms thatthe Company would not consider otherwise;

- it is probable that the borrower will enter bankruptcy or other
financial reorganisation; or

- the disappearance of an active market for a security
because of financial difficulties.

Loss allowances for trade receivables are measured at an amount
equal to lifetime expected credit losses. Lifetime expected credit
losses are credit losses that result from all possible default events
over expected life of financial instrument. The maximum period
considered when estimating expected credit losses is the
maximum contractual period over which the Company is exposed
to credit risk.

When determining whether the credit risk of a financial asset has
increased significantly since initial recognition and when
estimating expected credit losses, the Company considers

reasonable and supportable information that is relevant and
available without undue cost or effort. This includes both
quantitative and qualitative information and analysis, based on
the Company’s historical experience and informed credit
assessment and including forward looking information. The
Company assumes that credit risk on a financial asset has
increased significantly if it is past due.

The Company considers a financial asset to be in default when:

- the recipient is unlikely to pay its credit obligations to the
Company in full, without recourse by the Company to
actions such as realising security (if any is held); or

- the financial asset is past due.

Measurement of expected credit losses

Expected credit losses are a probability - weighted estimate of
credit losses. Credit losses are measured as the present value of
all cash shortfalls (i.e. the difference between the cash flows due
to the Company in accordance with the contract and the cash
flows that the Company expects to receive).

Presentation of allowance for expected credit losses in the
balance sheet

Loss allowances for financial assets measured at amortised cost
are deducted from the gross carrying amount of the assets.

Write-off

The gross carrying amount of a financial asset is written off (either
partially or in full) to the extent that there is no realistic prospect of
recovery. This is generally the case when the Company
determines that the debtor does not have assets or sources of
income that could generate sufficient cash flows to repay the
amounts subject to the write off. However, financial assets that are
written off could still be subject to enforcement activities in order to
comply with the Company’s procedures for recovery of amounts
due.

Impairment of Non-Financial Assets

The Company’s non-financial assets, other than inventories and
deferred tax assets, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any
such indication exists, then the asset’s recoverable amount is
estimated. Goodwill is tested annually for 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 group of assets that
generates cash inflows that are largely independent of the cash
inflows of other assets or CGUs.

The recoverable amount of a CGU (or an individual asset) is the
higher of its value in use and its fair value less costs to sell. Value in
use is based on the estimated future cash flows, discounted to
their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the
risks specific to the CG U (or the asset).

An impairment loss is recognised if the carrying amount of an
asset or CGU exceeds its estimated recoverable amount.
Impairment losses are recognised in the statement of profit and
loss. Impairment loss recognised in respect of a CGU is allocated
first to reduce the carrying amount of any goodwill allocated to the
CGU, and then to reduce the carrying amounts of the other assets
of the CGU (or group of CGUs) on a pro rata basis.

An impairment loss in respect of assets for which impairment loss
has been recognised in prior periods, the Company reviews at
each reporting date whether there is any indication that loss has
decreased or no longer exists. An impairment loss is reversed if
there has been a change in estimates used to determine
recoverable amount. Such a reversal is made only to an extent
that asset’s carrying amount does not exceed carrying amount
that would have been determined, net of depreciation/
amortisation, if no impairment loss was recognised.