Note No. 2: MATERIAL ACCOUNTING POLICIES.

(a) Accounting Convention

The financial statements are prepared under the
historical cost convention except for certain financial
assets and liabilities that are measured at fair value and
on the basis of going concern. The financial statements
have been prepared on a going concern basis on the
strength of profitability, liquidity and continued support
of the promoters, financial institutions and banks and
with a reasonable expectation that the Company have
adequate resources to continue in operational existence
for the foreseeable future. Thus, they continue to adopt
the going concern basis of accounting in preparing the
financial statements. All expenses and incomes to the
extent considered payable and receivable respectively,
unless stated otherwise, have been accounted for on
mercantile basis.

(b) Use of estimates and judgements

The preparation of financial statements in conformity
with Ind AS requires management to make judgements,
estimates and assumptions that affect the application
of accounting policies and the reported amounts of
assets, liabilities, income and expenses at the date of
these financial statements and the reported amounts of
revenues and expenses for the years presented. Actual
results may differ from these estimates.

Estimates and underlying assumptions are reviewed
at each balance sheet date. Revisions to accounting
estimates are recognised in the period in which the
estimate is revised and future periods affected.

Key sources of estimation uncertainty at the date of
financial statements, which may cause a material
adjustment to the carrying amounts of assets and liabilities
within the next financial year, is in respect of useful lives
of property, plant and equipment, intangible assets, fair
value of financial assets/liabilities and impairment of
investments.

The estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are
discussed below:

i) Useful lives of property, plant and equipment
and intangible assets :

The Company reviews the useful lives of property,
plant and equipment and intangible assets at the
end of each reporting period. This re-assessment may
result in change in depreciation and amortisation
expense in future periods.

ii) Leases:

The Company considers all the extension-options
under the commercial contract for determining
the lease-term which forms the basis for the
measurement of right of-use asset and the
corresponding lease-liability.

iii) Income Tax:

Deferred tax assets are recognised for the unused
tax losses credits for which there is probability
of utilisation against the future taxable profit.
Significant management judgement is required to
determine the amount of deferred tax assets that
can be recognised, based upon the likely timing and
the level of future taxable profits, future tax planning
strategies and recent business performances and
developments.

iv) Provision for rebates and discounts

Provisions for rebates, discounts and other deductions
are estimated and provided for in the year of sales and
recorded as reduction of revenue. Provisions for such
rebates and discounts are accrued and estimated
based on past experience, market conditions and
current contract prices with customers.

v) Allowance for impairment of trade receivables

The Company estimates the probability of collection
of accounts receivable by analysing historical
payment patterns, customer concentrations,
customer credit-worthiness and current economic
trends. If the financial condition of a customer
deteriorates, additional allowances may be required.
Moreover, trade receivables are written off on a
case-to-case basis if deemed not to be collectible
on the assessment of the underlying facts and
circumstances.

vi) Impairment of Investments

The Company reviews the carrying value of long
term investments in equity/preference shares of
associate, subsidiaries and joint venture companies
carried at cost/amortized cost at the end of each
reporting period. If the recoverable amount is less
than its carrying amount, the impairment loss is
accounted for.

(c) Property, Plant & Equipment

Property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment
loss, if any. Cost of acquisition or construction is inclusive
of freight, duties, taxes, other directly attributable
incidental expenses and interest on loans attributable to
the acquisition or construction of assets up to the date of
assets available for use as intended by management.
Tangible Assets are stated at fair values. Machinery Spares
have been capitalised as and when issued. Direct costs
are capitalised until the property, plant and equipment
are available for use, as intended by the management.
These costs also include financing cost which has been
capitalized on qualifying assets as per Ind-AS 23. When an
asset is scrapped or otherwise disposed off, the cost and
related depreciation are taken out from books of accounts
and resultant profit (including capital profit) or loss, if any,
is reflected in Statement of Profit & Loss.

The Company has identified spares having value (landed
cost) of H10000/- & above and having life of more than
one year in line with the Ind-AS 16. These spares are
transferred to capital work in progress account and are
capitalized as and when issued. The full value of these
spares is being depreciated over their useful life using the
straight-line method.

An item of PPE is de-recognised upon disposal or when
no future economic benefits are expected to arise from
the continued use of the assets. Any gain or loss arising
on the disposal or retirement of an item of PPE, is
determined as the difference between the sales proceeds
and the carrying amount of the asset, and is recognised in
Statement of Profit and Loss.

Capital work-in-progress includes cost of property, plant
and equipment under installation/under development as
at the reporting date.

(d) Depreciation

The Company has charged depreciation on fixed assets
on straight-line basis (SLM) on a pro-rata basis from
the date of additions / available for use as intended
by management, as per their useful life based on past
operational experience as certified by the technical
staff of the plant. Fixed Assets individually costing up to
H5,000/- are depreciated 100% in the year of purchase.
The intangible assets are being amortised over a period
of 5 years. On assets sold, discarded etc. during the year,
depreciation is provided up to the date of sale/discard.
The estimated useful lives, residual values and depreciation
method are reviewed at the end of each reporting period,
with the effect of any changes in estimate accounted for
on a prospective basis.

Depreciation on all tangible assets is provided on the basis
of estimated useful life and residual value determined
by the management based on a technical evaluation
considering nature of asset, past experience, estimated
usage of the asset, vendor's advice etc. Estimated residual
value of tangible assets has been taken at 5%.

(e) Intangible Assets:

Intangible Assets acquired are measured on initial
recognition at cost. Following initial recognition,
intangible assets are carried at cost less any accumulated
amortisation and accumulated impairment losses, if
any. These assets are being amortized over a period of
five years. Costs associated with maintaining software
programme are recognized as an expense as incurred.
Intangible assets are amortised over the useful economic
life and assessed for impairment whenever there is an
indication that the intangible asset may be impaired. The
amortisation period and the amortisation method for an

intangible asset are reviewed at least at the end of each
reporting period.

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 profit or loss when the asset is
derecognised.

(f) Current versus non-current classification

The Company presents assets and liabilities in the balance
sheet based on current / non-current classification.

An asset is classified 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 classified as 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 noncurrent.

Deferred tax assets and liabilities are classified as non¬
current assets and liabilities.

(g) Valuation of Inventories

The items of finished goods are valued at lower of
cost or estimated net realisable value. Cost of finished
goods includes material cost and appropriate portion of
production and administrative overheads and excludes
interest and marketing expenses. The value of finished
goods stock is exclusive of GST. Cost of raw material,
building material and stores & spares is determined (net of
input tax credit) at monthly weighted average cost basis.
Material in transit is taken at cost price. Stock in process is
valued at cost of raw material added. Scrap, if any, at the
year end does not form part of closing inventory.

(h) Investment in associates enterprises

The company prepares separate financial statements
to account for investments in associate enterprises. The
investments in associates have been accounted for at cost
less accumulated impairment, if any.

(i) Financial instruments
Recognition and initial measurement

All financial assets and financial Liabilities are initially
recognised 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.

Transaction costs that are directly attributable to the
acquisition or issue of financial assets and financial
liabilities (other than financial assets and financial
liabilities at fair value through profit and loss) are added
to or deducted from the fair value of the financial assets
or financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition
of financial assets or financial liabilities at fair value
through profit and loss are recognised immediately in
profit and loss.

Classification and subsequent measurement

i) Financial assets

Financial assets at amortised cost : A financial
asset is subsequently measured at amortised cost
if it is held in order to collect contractual cash flows
and the contractual terms of the financial asset give
rise on specified dates to cash flows that are solely
payments of principal and interest on the principal
amount outstanding. The amortised cost is reduced
by impairment losses, if any. Interest income,
foreign exchange gains and losses and impairment

are recognised in profit or loss. Any gain or loss on
derecognition is recognised in profit or loss.

Financial assets carried at fair value through other
comprehensive income (FVTOCI) : The Company
has made an irrevocable election for its investments
which are classified as equity instruments (Other
than Investment in Subsidiaries, Joint Venture and
Associates) to present the subsequent changes in fair
value in other comprehensive income.

Financial assets at FVTPL : A financial asset which
is not classified in any of the above categories
are subsequently measured at fair value through
profit or loss.

ii) Financial liabilities

Financial liabilities are classified as measured at
amortised cost or FVTPL. A financial 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 or loss. Interest expense and foreign exchange
gains and losses are recognised in profit or loss. Any
gain or loss on derecognition is also recognised in
profit or loss.

(j) Revenue Recognition

Revenue is recognised at the transaction price as per
agreements with the customers after taking into account
the amount of price discount, volume rebate, outgoing
taxes (GST) on sales on satisfaction of performance
obligation by transfer of effective control of the promised
goods to the customer which is generally on dispatch/
delivery of goods, as applicable. The revenue is recognised
on point in time basis.

Interest income from a financial asset is recognised when
it is probable that the economic benefits will flow to the
Company and the amount of income can be measured
reliably. Interest income is accrued on a time basis.

I nsurance, railway and other claims, where quantum of
accruals cannot be ascertained with reasonable certainty,
are accounted on acceptance basis.

Income from service activities is accounted for on rendering
the service in accordance with the contractual terms and
when there is no uncertainty in receiving the same.

(k) Government Grants

Government grants are assistance by government in the
form of transfers of resources to an entity in return for past
or future compliance with certain conditions relating to
the operating activities of the entity. They exclude those
forms of government assistance which cannot reasonably
have a value placed upon them and transactions with
government which cannot be distinguished from the
normal trading transactions of the entity.

Government grants are recognized where there is
reasonable assurance that the company will comply
with the conditions attached to it and that the grants
will be received. Grants are presented as part of income
in the statement of profit and loss; alternatively they are
deducted in reporting the related expense.

(l) Foreign Exchange Transactions

i) Functional and presentation currency

The Financial Statements are presented in Indian
Rupee which is the functional and presentation
currency of the Company.

ii) Transactions and balances

Transactions denominated in foreign currencies are
normally recorded at the exchange rate prevailing
at the time of the transaction. Monetary items
denominated in foreign currencies at the year end
and not covered by forward exchange contracts are
translated at year end rates and those covered by
forward exchange contracts are translated at the
rate ruling at the date of transaction as increased
or decreased by the proportionate difference
between the forward rate and exchange rate on the
date of transaction, such difference having been
recognised over the life of the contract. Any income

or expense on account of exchange difference either
on settlement or on translation is recognised in the
Statement of Profit & Loss.

(m) Employee Benefits

i) Defined Contribution Plan :

Employee defined contribution plans include
Provident Fund and Employee State Insurance.
The Company's Contribution paid/payable during
the year towards Provident Fund Scheme and
Employees's State Insurance (where applicable) are
recognised as expense in the Statement of Profit &
Loss. The Company has no further obligations under
the plan beyond its monthly contributions.

ii) Short-term employee benefits:

A liability is recognised for benefits accruing to
employees in respect of wages and salaries in
the period the related service is rendered at the
undiscounted amount of the benefits expected to be
paid in exchange for that service.

iii) Defined Benefit Plan :

The Company's liabilities towards leave encashment
and gratuity are determined by an independent
actuary, using the Projected Unit Credit Method.
Obligation is measured at the present value of
estimated future cash flows using a discounted
rate that is determined by reference to the market
yields at the Balance Sheet date on Government
Bonds. Actuarial gains and losses are recognised
immediately in the Statement of Profit & Loss as
income or expense and other comprehensive income
as per Ind-AS 19. Present value of Defined Benefit
Obligation is calculated by projecting salaries, exits
due to death, resignation and other decrements,
if any, and benefit payments made during each
month till the time of retirement of each active
member using assumed rates of salary escalation,
mortality & employee turnover rates. The expected
benefit payments are then discounted back from
the expected future date of payment to the date of
valuation using the assumed discount rate.

iv) Gratuity :

Gratuity liability has been covered by master
policies of Life Insurance Corporation of India under
irrevocable trust.

(n) Borrowing Costs

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 Statement of Profit & Loss in the period in which they
are incurred.

(o) Earnings Per Share

The Basic Earnings/ (Loss) per Share is computed on
the basis of weighted average number of Equity Shares
outstanding during the financial year. The Diluted
Earnings/(Loss) per Share is computed on the basis of
weighted average number of Equity Shares outstanding
during the year and the Potential Equity Shares.

(p) Taxes on Income

Tax on income for the current period is determined on
the basis of taxable income and tax credits computed in
accordance with the provisions of the Income Tax Act, 1961.

Deferred income tax is recognised using the balance sheet
approach. Deferred tax has been recognised in accordance
with IND-AS 12 on the basis of tax consequences of
difference between the carrying amounts of assets and
liabilities and their tax base.

Deferred tax assets are recognised to the extent that there
is a reasonable certainty that sufficient future taxable
income will be available against which such deferred tax
assets can be realized.

The carrying amount of deferred tax assets is reviewed
at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable

profits will be available to allow all or part of the asset to
be recovered.

Deferred tax 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.