Statement of Material Accounting Policies

General Information

The financial statements comprise financial statements of Reliance Naval and Engineering Limited (“RNEL” or “the Company”) for the year
ended March 31, 2024. RNEL is a Company limited by shares, incorporated and domiciled in India. The registered office of the Company
is located at Pipavav Port, Post Ucchaiya, Via- Rajula, District Amreli (Gujarat), and the Company is listed on the Bombay Stock Exchange
(BSE) and the National Stock Exchange (NSE).

The Company is mainly engaged in the construction of vessels, repairs and refits of ships and rigs and heavy engineering. RNEL has
a large shipbuilding/repair infrastructure in India including the largest Dry Dock in the world. The Company is the first private sector
Company in India to obtain the licence and contract to build Naval Offshore Patrol Vessels(NOPVs) for Indian Navy. The Shipyard has
only modular shipbuilding facility in India with capacity to build fully fabricated and outfitted blocks. The fabrication facility spread over

2.1 million sq. ft. has annual capacity of 144,000 tons/year. The shipyard has pre-erection berth of 980 meter length and 40 meters width
and one Goliath crane with lifting capacity of 600 tonnes, besides outfitting berth length of 780 meters.

On September 4, 2018, IDBI Bank in its capacity of financial creditor filed a petition under the Insolvency and Bankruptcy Code 2016
(the “IBC” / “Code”) with the Hon’ble National Company Law Tribunal, Ahmedabad (the “NCLT”) against Reliance Naval and Engineering
Limited (“the Company”). The NCLT, vide its order dated January 15, 2020 (“Insolvency Commencement Date”) initiated the Corporate
Insolvency Resolution Process (“CIRP”) of the Company under the Code. The said NCLT Order also records the appointment of Mr. Rajeev
Bal Sawangikar as the Interim Resolution Professional (“IRP”) in accordance with Section 16 of the Code. Subsequently, pursuant to the
meeting held on March 13, 2020, the Committee of Creditors (the “CoC”) has replaced the existing IRP with Mr. Sudip Bhattacharya as the
Resolution Professional (“RP”) for the Company. Upon the application filed by CoC, the NCLT has approved the appointment of RP vide its
order dated May 5, 2020. The powers of the Board of Directors of the Company stand suspended with effect from January 15, 2020 i.e.
the commencement of the insolvency proceedings, and continue to remain suspended in accordance with the provisions of the approved
resolution plan. Pursuant to the approval of the Resolution Plan, the CIRP of RNEL has therefore concluded and Mr. Sudip Bhattacharya
has ceased to be the resolution professional of the Corporate Debtor, effective on and from December 23, 2022. Furthermore, as per
the terms of the approved Resolution Plan, a monitoring committee was constituted to oversee the implementation of the Resolution
Plan, and day-to-day operations and management of RNEL shall be carried out by the Monitoring Committee until the closing date as
defined under the Resolution Plan. Accordingly, as per the resolution plan and the decision of the members of the Monitoring Committee,
Mr. Sudip Bhattacharya has been appointed as the Chairman of the Monitoring Committee vide its MC 3rd meeting dated
January 31, 2023.

In line with the approved resolution plan, the Successful Resolution Applicant (“SRA”) deposited upfront payment tranches on October
27, 2023, and the same has been received in the designated bank account of the Company. By January 4, 2024, majority of the payment
to Financial Creditors, Operational Creditors, and Employees as per the approved plan along with CIRP and MC period Cost has been
made. Hence it was decided in the MC meeting held on January 4, 2024 that with effect from the said date the MC has ceased to exist,
and the board of directors of the Company is given full authority as per the Companies Act for management of affairs of the Company.
The monitoring committee has appointed M/s P.C. Patni & Company as a monitoring agency to review the cash flow and the proper
implementation of the resolution plan by the Company.

Business Revival and continuity plan

The new management of the company is revitalizing the business through a comprehensive approach that strategically targets key
market segments and establishes a clear roadmap to secure a competitive edge by focusing on 5 key levers:

1. Liquidation of WIP vessels and inventory: The company acquired 8 work-in-progress vessels presently at the yard and has received
offers for liquidation of the OSVs.

2. Focused business strategy and sustainable revenue generation: The company is focused on building and converting a robust
commercial pipeline by global and domestic reach outs for shipbuilding, repair and offshore fabrication opportunities. The company
has received their first repair order starting in August 2024 and will be operational for new build from December 2024.

3. Yard Readiness: The company is currently reinstating and operationalizing the 600 acres shipyard. As of date, the shipyard is ready
to dock vessels and provide general repair services and is in the process of fully restoring their fabrication facility.

4. Organization building: The company is also focusing on talent identification and recruitment to build a capable workforce.

5. Capacity augmentation: The company is also actively engaging in planning for additional capacity to integrate a maritime
vendor ecosystem and meet the global demand by increasing docking and berthing space. They are in the process of building a
comprehensive yard design and layout strategy.

Material Accounting Policies

This note provides a list of the Material accounting policies adopted in the preparation of these financial statements. These policies have
been consistently applied to all the years presented, unless otherwise stated.

1.1 Basis of Preparation of Financial Statements:

The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the
Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] on accrual basis and other relevant provisions
of the Act. Financial Statements have been prepared in accordance with the requirements of the information and disclosures
mandated by Schedule III, applicable Ind AS, other applicable pronouncements and regulations.

1.2 Historical Cost Convention:

The financial statements have been prepared on a historical cost basis, except for the following:

i Plant & Equipments and Freehold Land which were accounted at fair value at the date of transition to Ind AS;

ii Certain financial assets and liabilities (including derivative instruments) that are measured at fair value;

iii Defined benefit plans - plan assets measured at fair value; and

iv Assets held for sale - measured at fair value less cost to sell;

1.3 Functional and Presentation Currency:

Items included in the financial statements are measured using the currency of the primary economic environment in which the
Company operates (‘the functional currency’). The financial statements are presented in Indian Rupee (INR), which is the functional
currency for the Company.

1.4 Use of Estimates:

The preparation of Financial Statements in accordance with Ind AS requires use of estimates and assumptions for some items,
which might have an effect on their recognition and measurement in the Balance Sheet and Statement of Profit and Loss. The
actual amounts realised may differ from these estimates. Accounting estimates could change from period to period. Actual results
could differ from those estimates. Appropriate changes in estimates are made as the management becomes aware of changes in
circumstances surrounding the estimates. Differences between the actual results and estimates are recognised in the period in
which the results are known / materialised and if material, their effects are disclosed in the notes to the Financial Statements.

Estimates and assumptions are required in particular for:

i. Determination of the estimated useful life of tangible assets:

The assessment as to which components of the cost may be capitalized. Useful life of tangible assets is based on the life
prescribed in Schedule II of the Companies Act, 2013. In cases, where the useful life is different from that prescribed in Schedule
II, it is based on technical advice, taking into account the nature of the asset, estimated usage and operating conditions of
the asset, past history of replacement and maintenance support. Assumptions also need to be made, when the Company
assesses, whether an asset may be capitalised and which components of the cost of the asset may be capitalised.

ii. Recognition and measurement of defined benefit obligations:

The obligation arising from the defined benefit plan is determined on the basis of actuarial assumptions. Key actuarial
assumptions include discount rate, trends in salary escalation and vested future benefits and life expectancy. The discount
rate is determined with reference to market yields at the end of the reporting period on the government bonds. The period to
maturity of the underlying bonds correspond to the probable maturity of the post-employment benefit obligations.

iii. Recognition of deferred tax assets:

Deferred tax asset is recognised for all the deductible temporary differences to the extent that it is probable that taxable profit
will be available against which the deductible temporary difference can be utilised. The management assumes that taxable
profits will be available while recognising deferred tax assets.

iv. Recognition and measurement of other provisions:

The recognition and measurement of other provisions are based on the assessment of the probability of an outflow of
resources, and on past experience and circumstances known at the balance sheet date. The actual outflow of resources at a
future date may, therefore, vary from the figure included in other provisions.

v. Discounting of long - term financial liabilities:

All financial liabilities are required to be measured at fair value on initial recognition. In case of financial liabilities, which are
required to be subsequently measured at amortised cost, interest is accrued using the effective interest method.

vi. Determining whether an arrangement contains a lease:

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease. At the inception
or on reassessment of an arrangement that contains a lease, the Company separates payments and other consideration
required by the arrangement into those for the lease and those for the other elements on the basis of their relative fair values.
If the Company concludes for a finance lease that it is impracticable to separate the payments reliably, then an asset and a
liability are recognised at an amount equal to the fair value of the underlying asset; subsequently, the liability is reduced as
payments are made and an imputed finance cost on the liability is recognised using the Company’s incremental borrowing
rate. In case of operating lease, the Company treats all payments under the arrangement as lease payments.

vii. Fair value of financial instruments:

Derivatives are carried at fair value. Derivatives include Foreign Currency Forward Contracts and Interest Rate Swaps. Fair
value of Foreign Currency Forward Contracts is determined using the rates published by Reserve Bank of India (RBI). Fair value
of Interest Rate Swaps is determined with respect to current market rate of interest.

viii. Revenue recognition:

Determination of estimated cost to complete the contract is required for computing revenue as per Ind AS 115 on ‘Revenue
from Contracts with Customers’. The estimates are revised periodically.

5 Current Versus Non Current Classification:

i. The assets and liabilities in the Balance Sheet are based on current / non - current classification. An asset is current when
it is:

1 Expected to be realised or intended to be sold or consumed in normal operating cycle

2 Held primarily for the purpose of trading

3 Expected to be realised within twelve months after the reporting period, or

4 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.

ii A liability is current when it is:

1 Expected to be settled in normal operating cycle

2 Held primarily for the purpose of trading

3 Due to be settled within twelve months after the reporting period, or

4 There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting
period

All other liabilities are treated as non - current.

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

1.6 Other Material Accounting Policies:

I Property, Plant and Equipments:

i. The Company has measured all of its Plant and Equipments and Freehold Land at fair value at the date of transition to Ind
AS. The Company has elected these value as deemed cost at the transition date. All other property, plant and equipment
have been carried at historical cost.

ii. Property, Plant and Equipments are stated at cost net of cenvat / value added tax less accumulated depreciation and
impairment loss, if any. All costs, including finance costs incurred up to the date the asset is ready for its intended use are
capitalised as part of total cost of assets.

iii. 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.

II Depreciation:

i. Depreciation is provided, under the Straight Line Method, pro rata to the period of use, based on useful life specified in
Schedule II to the Companies Act, 2013 except the following items, where useful life estimated on technical assessment,
past trends and expected useful life differ from those provided in Schedule II of the Companies Act. 2013:

The Management believes that the useful life as given above represents the period over which management expects to
use these assets.

ii. In respect of additions/extensions forming an integral part of existing assets, depreciation has been provided over
residual life of the respective assets. Material additions which are required to be replaced/performed at regular interval
are depreciated over the useful life of their specific life.

iii. Depreciation methods, useful life and residual values are reviewed at each reporting date and adjusted if appropriate.

III Borrowing Costs:

Borrowing costs that are directly attributable to acquisition, construction or production of a qualifying asset (net of income
earned on temporary deployment of funds) are capitalised as a part of the cost of such assets. Borrowing cost consists of
interest, other cost incurred in connection with borrowings of fund and exchange differences to the extent regarded as an
adjustment to the borrowing cost. A qualifying asset is one that necessarily takes substantial period of time to get ready for
intended use. All other borrowing costs are charged to the Statement of Profit and Loss.

IV Intangible Assets:

Intangible Assets having finite life are stated at cost of acquisition less accumulated amortization and accumulated impairment,

if any. Amortization is done over their estimated useful life on straight line basis from the date that they are available for
intended use, subjected to impairment test. Software, which is not an integral part of the related hardware is classified as an
intangible asset and is amortized over the useful life of 3 - 10 years.

V Fair Value Measurement:

Fair value is the price that would be received to sell an asset or settle a liability in an ordinary transaction between market
participants at the measurement date. The fair value of an assets or liability is measured using the assumptions that market
participants would use when pricing the assets or liability, acting in their best economic interest. The fair value of plant and
equipments as at transition date to Ind AS have been taken based on valuation performed by an independent technical expert.
The Company used valuation techniques which were appropriate in circumstances and for which sufficient data were available
considering the expected loss/profit in case of financial assets or liabilities.

VI Inventories:

i. Raw Materials, Stores and Spares, Work - in - Progress and Finished Goods etc. have been valued at lower of cost or
net realisable value. Cost of Inventories comprises of all costs of purchase, cost of conversion and other costs incurred
in bringing them to their respective present location and condition. Cost of steel plates, profiles, equipments and other
raw materials and stores and spares at Weighted Average Method. Cost of Work-in-Progress and Finished Goods is
determined on Absorption Costing Method. Scrap is valued at Net Realisable Value.

ii. If payment terms for inventory are on deferred basis i.e. beyond normal credit terms, then cost is determined by discounting
the future cash flows at an interest rate determined with reference to the market rates. The difference between total cost
and deemed cost is recognised as interest expense over the period of financing under the effective interest method.

VII IND AS 116 - Leases:

The Company, as a lessee, recognises 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 is depreciated using the straight-line method
from the commencement date over the shorter of lease term or useful life of right-of-use asset.

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. For short-term and low
value leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the lease
term.

VIII Government Subsidy:

i Grants from the Government are recognised at their fair value where there is a reasonable assurance that the grant will
be received and the Company will comply with all attached conditions.

ii Government subsidy related to shipbuilding contracts are recognized when there is reasonable assurance that the
subsidy will be received, on the basis of percentage completion of the respective ships, on compliance with the relevant
conditions and such subsidies are recognized in the Statement of Profit and Loss and presented under the head revenue
from operations.

iii Government grants in the nature of compensating certain costs are recognised as other income in Statement of Profit and
Loss.

IX Foreign Currency Transactions:

i. Revenue Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing on the
date of the transaction.

ii. Monetary items denominated in foreign currencies at the year end are re measured at the exchange rate prevailing on
the balance sheet date.

iii. Non monetary foreign currency items are carried at historical cost.

iv. Any income or expense on account of exchange difference either on settlement or on restatement is recognised in the
Statement of Profit and Loss.

X Financial Instruments:

A financial instrument is any contract that gives rise to a financial asset of one company and a financial liability or equity
instrument of another Company.

Financial Assets:

i Classification:

The Company classifies financial assets as subsequently measured at amortised cost, fair value through other
comprehensive income or fair value through profit or loss on the basis of its business model for managing the financial
assets and the contractual cash flow characteristics of the financial asset.

ii Initial recognition and measurement:

All financial assets are recognised initially at fair value plus transaction costs that are attributable to the acquisition of the
financial asset, in the case of financial assets not recorded at fair value through profit or loss..

iii Financial Assets measured at amortised cost:

Financial assets are measured at amortised cost when asset is held within a business model, whose objective is to hold
assets for collecting contractual cash flows and contractual terms of the asset give rise on specified dates to cash flows
that are solely payments of principal and interest. Such financial assets are subsequently measured at amortised cost
using the Effective Interest Rate (EIR) method. The losses arising from impairment are recognised in the Statement of
Profit or Loss. This category generally applies to trade and other receivables.

iv Financial Assets measured at fair value through other comprehensive income (FVTOCI):

Financial assets under this category are measured initially as well as at each reporting date at fair value. Fair value
movements are recognized in the other comprehensive income.

v Financial Assets measured at fair value through profit or loss (FVTPL):

Financial assets under this category are measured initially as well as at each reporting date at fair value with all changes
recognised in profit or loss.

vi Investment in Subsidiaries and Associates:

Investment in equity instruments of Subsidiaries and Associates are measured at cost. Provision for Impairment loss on
such investment is made only when there is a diminution in value of the investment which is other than temporary.

vii Investment in Equity Instruments:

Equity instruments which are held for trading are classified as at FVTPL. All other equity instruments are classified as
FVTOCI. Fair value changes on the instrument, excluding dividends, are recognized in the Other Comprehensive Income.
There is no recycling of the amounts from other comprehensive income to profit or loss.

viii Investment in Debt Instruments:

A debt instrument is measured at amortised cost or at FVTPL. Any debt instrument, which does not meet the criteria for
categorization as at amortised cost or as FVTOCI, is classified as at FVTPL. Debt instruments included with in the FVTPL
category are measured at fair value with all changes recognised in the Statement of Profit and Loss.

ix Derecognition of Financial Assets:

A financial asset is primarily derecognised when the rights to receive cash flows from the asset have expired or the
Company has transferred its rights to receive cash flows from the asset.

x Impairment of Financial Assets:

In accordance with Ind AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition
of impairment loss on the financial assets which are not valued through Statement of Profit and Loss.

Financial Liabilities:

i Classification:

The Company classifies all financial liabilities as subsequently measured at amortised cost, except for financial liabilities
at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, shall be subsequently measured
at fair value.

ii Initial recognition and measurement:

All financial liabilities are recognised initially at fair value, in the case of loans, borrowings and payables, net of directly

attributable transaction costs. Financial liabilities include trade and other payables, loans and borrowings including bank
overdrafts and derivative financial instruments.

iii Subsequent measurement:

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for
trading if they are incurred for the purpose of repurchase in the near term. This category also includes derivative financial
instruments that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated
embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

iv Loans and Borrowings:

Interest-bearing loans and borrowings are subsequently measured at amortised cost using the Effective Interest Rate
(EIR) method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through
EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and
fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the Statement of Profit
and Loss.

v Derecognition of Financial Liabilities:

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When
an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the
original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in
the Statement of Profit and Loss.

vi Derivative Financial Instrument and Hedge Accounting:

The Company uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge
its foreign currency risks and interest rate risks respectively. Such derivative financial instruments are initially recognised
at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value.
Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is
negative.

XI Employee Benefits:

i Short term employee benefits:

Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount
expected to be paid 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.

ii Defined benefit plans:

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. To calculate the present value of economic benefits, consideration is given to any applicable minimum
funding requirements.

Re-measurement 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. Net
interest expense (income) on the net defined liability (assets) is computed by applying the discount rate, used to measure
the net defined liability (asset), to the net defined liability (asset) at the start of the financial year after taking into account
any changes as a result of contribution and benefit payments during the year. Net interest expense and other expenses
related to defined benefit plans are recognised in Statement of Profit and Loss.

iii Other long-term employee benefits:

The Company’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees
have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present
value. Re-measurement is recognised in Statement of Profit and Loss in the period in which they arise.

XII Provision for Current and Deferred Tax:

Income tax expense comprises current and deferred tax. It is recognised in Statement of Profit and Loss except to the extent
that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

i Current tax:

Current tax comprises of 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 the previous years. It is measured using tax rates enacted or
substantively enacted at the reporting date after taking credit for tax relief available for export operations in Special
Economic Zones (SEZs).

Current tax assets and liabilities are offset only if, the Company:

1 has a legally enforceable right to set off the recognised amounts; and

2 intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

ii Deferred Tax:

Deferred tax is recognized for the future tax consequences of deductible temporary differences between the carrying
values of assets and liabilities and their respective tax bases at the reporting date, using the tax rate and laws that are
enacted or substantively enacted as on reporting date. Deferred tax assets are recognized to the extent that it is probable
that future taxable income will be available against which the deductible temporary differences, unused tax losses and
credits can be utilised. Deferred tax relating to items recognised in other comprehensive income and directly in equity is
recognised in correlation to the underlying transaction.

Deferred tax assets and liabilities are offset only if:

1 Company has a legally enforceable right to set off current tax assets against current tax liabilities; and

2 Deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority.

XIII Impairment of Assets:

At each balance sheet date, the Company assesses whether there is any indication that any property, plant and equipment
and intangible assets with finite lives may be impaired. If any such impairment exists the recoverable amount of an asset is
estimated to determine the extent of impairment, if any. Where it is not possible to estimate the recoverable amount of an
individual asset, the Company estimates the recoverable amount of the cash - generating unit to which the asset belongs.

XIV Warranty Provision:

Provision for warranty related costs are recognised after the product is sold or services are rendered to the customer in terms
of the contract. Initial recognition is based on the historical experience. The estimates of warranty related costs are revised
periodically.