Note No : 1 Background
a. Overview of the Reporting Entity
The entity is a Company domiciled in India. The address of the Registered Office of Company is Office no.- 506, 5thFloor, Elements Mall Ajmer Road, Jaipur, 302021. The Registration Number of the Company is L25209RJ2017PLC059111. The Company was incorporated on the 19th Sept., 2017.
The principal activity of the Company include Manufacturing of Pipes etc..
b. Basis of Preparation
The Financial Statements of the entity have been prepared and presented in accordance with the Generally Accepted Accounting Principles (GAAP). GAAP comprises the Accounting Standards notified u/s S.133 read with S.469 of the Companies Act, 2013. The accounting policies have been framed, keeping in view the fundamental accounting assumptions of Going Concern, Consistency and Accrual, as also basic considerations of Prudence, Substance over form, and Materiality. These have been applied consistently, except where a newly issued accounting standard is initially adopted or a revision in the existing accounting standards require a revision in the accounting policy so far in use. The need for such a revision is evaluated on an ongoing basis.
The Financial Statements have been prepared on a going concern basis, inasmuch as the management neither intends to liquidate the entity nor to cease operations. Accordingly, assets, liabilities, income and expenses are recorded on a Going Concern basis.
Based on the nature of products and services, and the time between the acquisition of assets and realisation in cash or cash equivalents, the entity has ascertained its operating cycle as 12 months for the purposes of current and non-current classification of assets and liabilities
Based on the total income of the reporting entity, the amounts presented in the Financial Statements are uniformly rounded off to the nearest Lakhs, except for earnings per share and ratios.
The entity reports its transactions in Indian Rupees.
c. Basis of Measurement
The Financial Statements have been prepared on historical cost convention, on accrual basis of accounting, except for Cash Flow Statement and certain Assets or Liabilities that have been measured either on fair value, or on net realisable value or on recoverable amount basis, as per examples shown below:
a) Certain items of Property, Plant and Equipment to which, after initial recognition, fair value model of accounting has been adopted
b) Where applicable, Defined Benefit Plan Asset is recognised as a net total of value plan assets, adjusted for any unrecognised service costs or actuarial gains, and present value of defined plan obligations.
c) Where applicable, in the capacity of lessees, Finance Leases are recognised as an asset at an amount equal to its fair value, excepting where if the fair value were to exceed the present value of minimum lease payments, it is recognised at fair value, computed by applying either the rate implied in the lease, or incremental borrowing rate.
d. Use of Estimates
The preparation of financial statements requires the management to make certain estimates and assumptions that affect the amounts reported in the financial statements and notes thereto. The management believes that these estimates and assumptions are reasonable and prudent. However, actual results could differ from these estimates. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in future periods if these are affected. Application of accounting policies that require critical accounting estimates and assumptions that may have a significant effect on the amounts recognized in the financial statements include, wherever applicable, the following :
i) Net Realisable Value of items of Inventories
ii) Useful life and Residual Value of Property, Plant and Equipment
iii) Useful life of Intangible Assets
iv) Recoverable amount of Cash Generating Units
v) Provisions for trade receivables
vi) Defined benefit obligations
vii) Tax expenses and payable
viii) Provisions and contingencies
Note No : 2 Significant Accounting Policies
a. Property Plant and Equipment
An item of property, plant and equipment that qualifies to be recognized as an asset, on initial recognition, is measured at cost. Cost includes purchase price, taxes and duties and other costs directly attributable to bringing the asset to the working condition for its intended use. Where applicable, borrowing cost incurred up to the date the asset is ready for use and the initial estimate of the present value of decommissioning, restoration and similar liabilities are included. However, cost excludes duties and taxes wherever credit of such duties and taxes is availed of. The item is thereafter carried at its cost less accumulated depreciation and accumulated impairment losses, if any.
Items such as spare parts, stand-by equipment and servicing equipment that meet the definition of property, plant and equipment are capitalized at cost and depreciated over their estimated useful life.
The cost of self-constructed assets, if any, includes cost of materials, direct labour and other costs attributable to make it ready for use, as also costs of dismantling and removing the items and restoring the site on which they are located.
Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
Gains and losses on disposal of assets are determined by comparing the sale proceeds with the carrying amount. These are included, on a net basis, in the Statement of Profit or Loss, under the head Profit/Loss on sale of assets in statement of income.
Assets retired from active use, if any, are carried at lower of carrying amount and net realisable value.
Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably. The carrying amount of replaced part is de-recognised. If subsequent costs are in the nature of repairs and maintenance expenses, they are charged to Profit and Loss.
b. Depreciation
Depreciation of PPE (other than freehold land) is provided on written down value method based on the useful lives estimated by the entity. The useful lives so determined are generally in alignment with regulatory prescriptions.
On tangible fixed assets added / disposed of during the year, depreciation is charged on pro-rata basis from the date of addition / till the date of disposal.
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the entity will obtain ownership by the end of lease term. Depreciation on contract-specific assets are charged, co-terminus over the contract period.
The managements estimation of useful lives of the PPE were as follows:
Buildings - 30 Years Plant and Machinery - 15 Years Furniture and Fittings - 10 Years Office Equipments - 5 Years Vehicles - 8 Years
The residual values of assets are measured at not more than 5% of the original cost thereof. The depreciation method, residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period.
c. Capital Work in Progress
Properties under construction are stated at cost less accumulated impairment losses if any, until construction or development is completed, at which time they are reclassified to be accounted for as an item of Property Plant and Equipment. Cost capitalised include cost of land and other directly related development expenditure, including borrowing costs incurred in developing the asset.
Cost of assets under development and not ready for intended use, as on the reporting date, is shown as capital work in progress. Advances given towards acquisition of an item of PPE outstanding at each reporting date are disclosed under the head Advance for Capital Assets.
d. Investments
Investments, that are by their nature are readily realizable and which the management intends not to hold these for more than twelve months (from date of purchase), are classified as current investments. All other investments, both equity and non-equity investments, even if these are freely marketable, are classified as non-current.
Current investments are carried at lower of their cost and fair value as determined by each category of investment. Long term investments are carried at cost. If however, there were to be a decline, which is other than temporary, a provision is made to reflect the decline in value.
Gain or loss arising on sale of investments, computed as the difference between the carrying amount and proceeds from sales net of any expenses is recognised in Profit and Loss.
Where a long-term investment is reclassified as a current investment, the transfer is made at lower of cost and carrying amount at the date of such transfer. Where an investment is reclassified from current investment to long-term investment, the transfer is made at the lower of its cost and the fair value of such investment at the date of such transfer.
e. Inventories
Inventories comprise of and are classified as raw-materials, work in progress, finished goods, stock-in-trade, stores and spares and loose tools that are used in day-to-day maintenance.
Inventories are measured at the lower of cost and net realisable value. Cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition, including taxes and duties except to the extent that these are otherwise subsequently recoverable. Trade discounts, rebates, duty drawbacks and other similar items are deducted in determining the costs of purchase.
For inventory items, that are not ordinarily interchangeable and goods or services produced and segregated for specific projects, the cost is assigned by specific identification of their individual costs. In respect of other items, cost is ascertained by adopting Weighted Average method, (or FIFO as adopted). Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale..
Raw-materials and other supplies held for use in production are not written down below cost, if finished products in which they will be incorporated are expected to be sold at or above cost. However, when there has been a decline in the price of materials and it is estimated that the cost of the finished products will exceed net realisable value, the materials are written down to net realisable value. In such circumstances, the replacement cost of the materials may be the best available measure of their net realisable value (NRV). NRV is assessed at each reporting date.
f. Trade and Other Receivables
Trade and other receivables are generally measured at invoice value. An allowance for any shortfall in recovery is established if the collection of a receivable becomes doubtful. The amount of the allowance is the difference between the assets carrying amount and the estimated future cash flows. The loss allowance as also any subsequent recoveries made is recognized in the Profit and Loss. Bad debts are
written off when identified.
Aggregate amount of Trade Receivables aging analysis report as required by the Revised Schedule III applicable from the financial year ended 31.03.2022 are separately disclosed in the format prescribed.
Trade receivables are also further classified as follows :
(i) Secured
(ii) Unsecured
(iii) Considered Good
(iv) Considered Doubtful
(v) Disputed
(vi) Undisputed
g. Cash and Cash Equivalents
Cash and cash equivalents include all cash balances and short-term highly liquid investments that are readily convertible into known amounts of cash and which are subjectto an insignificant risk of changes in value. Foreign Currency cash if any, and cash equivalents are measured at fair value.
h. Cash Flow Statements
The entity prepares and presents Cash Flow from Operating Activities by adopting indirect method.
i. Revenues and Other Income
Revenue from sale of goods is recognized when the significant risks and rewards of ownership are transferred to the buyer, the entity retains no effective control of the goods transferred to a degree usually associated with ownership; and no significant uncertainty existed regarding the amount of consideration that will be derived from the sale of goods. Revenue from operations is net of sales return. GST and other applicable duties are allowed to be recovered as part of the price are presented separately.
In respect of transactions involving rendering of services, performance is measured either under the completed service contract method or under the proportionate completion method, whichever relates the revenue to the work accomplished. Such performance is regarded as being achieved when no significant uncertainty exists regarding the amount of the consideration that will be derived from rendering the service.
The amount representing unserviced portion of billed contracts, is held as deferred income.
Export benefits, if any, are accounted for as other income on accrual basis, based on reasonable certainty that amounts are collectible.
Interest income is recognized on accrual basis, adopting a time proportion method, taking into account the amount outstanding and the rate applicable.
Dividends from investments in shares if any are recognised as other income only when a right to receive payment is established.
j. Borrowing Costs
Borrowing costs are interest and other costs incurred by an enterprise in connection with the borrowing of funds. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.
Borrowing costs are capitalised as part of the cost of a qualifying asset when it is probable that they will result in future economic benefits to the enterprise and the costs can be measured reliably. Other borrowing costs are recognised as an expense in the period in which they are incurred. In the case of specific borrowings, the amount eligible for capitalization is determined at actual amount, subject to adjustment of income if any from temporary investments. In the case of general borrowings the amount eligible for capitalization is determined by applying a capitalization rate, being the weighted average rate of such borrowings. In either case, capitalization period is restricted to asset development period.
Capitalisation commences only when (a) expenditure for the acquisition, construction or production of a qualifying asset is being incurred;
(b) borrowing costs are being incurred; and (c) activities that are necessary to prepare the asset for its intended use or sale are in progress.
Capitalisation is suspended during periods of delay when the active development of asset is interrupted, unless such a delay is an essential
part of the process of getting the asset ready for its intended use or sale. Capitalisation ceases when asset is found to be ready for use or sale.
k. Employee Benefits
Employee benefits are accrued in the period in which the associated services are rendered by employees of the entity, as detailed below:
(a) Defined Contribution Plan (Provident fund)
In accordance with Indian law, all employees receive benefits from a provident fund, which is a defined contribution plan. Both the employees and employer make monthly contributions to the plan, each equal to a specified percentage of employees basic salary. The entity has no further obligations under the plan beyond its monthly contributions. The entity does not have any legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. Obligation for contributions to the plan is recognized as an employee benefit expense in Profit and Loss when incurred.
(b) Defined Benefit Plans (Gratuity)
Liability towards Gratuity and Leave Encashment are accounted on cash basis and charged to profit and loss as and when paid by the entity.
(c) Short term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the entity 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.
(d) Compensated leave of absence
The employees of the Entity are entitled to compensated absence. The employees can carry forward a portion of the unutilized accrued absence and utilize it in future periods or receive cash compensation at retirement or termination of employment for the unutilized accrued compensated absence. The entity recognizes an obligation for compensated absences in the period in which the employee renders the services. The entity provides for the expected cost of compensated absence as the additional amount that the entity expects to pay as a result of the unused entitlement that has accumulated based on actuarial valuations at the balance sheet date, carried out by an independent actuary in the statement of profit or loss.
Entity does not have any share-based compensation plans
l. Provisions and Contingencies
Provisions are recognized if, as a result of a past event, the entity has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. The amount recognised as a provision is determined as the best estimate of the expenditure required to settle the present obligation at the balance sheet date. This amount is not discounted to its present value except in case of decommissioning liabilities etc., that are recognised as cost of Property, Plant and Equipment. The provision is measured before tax. If however the possibility of outflow of economic benefits is remote, the amount is reckoned as contingent liability and is only disclosed. A contingent asset is neither recognised nor disclosed.
A provision for onerous contracts is recognized when the expected benefits to be derived by the entity from a contract are lower than the unavoidable cost of meeting its obligations under the contract. Before a provision is established, the entity recognizes any impairment loss on the assets associated with that contract.
m. Taxes on Income
Tax expense comprises current and deferred tax, and this is recognized in profit and loss. Current tax is the estimated amount of tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax is recognized by providing for differences between the carrying amount of assets liabilities, income or expenses, for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to timing differences when they are likely to reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are not offset unless there is a legally enforceable right to offset current tax liabilities and assets, except in special circumstances.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the timing difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
n. Earnings per Share
In determining earnings per share, the Company considers the net profit after tax and includes the post-tax effect of any extra-ordinary item. The number of equity shares used in computing basic earnings per share is the weighted average number of equity shares outstanding during the year. The number of equity shares used in computing diluted earnings per share comprises weighted average number of equity shares considered for deriving basic earnings per share and also weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.
The entity does not have any dilutive potential equity shares, and therefore Basic Earnings per share equals Diluted Earnings per share
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