2. Significant Accounting Policies
2.1 Financial statements comprises of Balance Sheet, the
Statement of Profit and Loss (including OtherComprehensive
Income), the Statement of Changes in Equity and the
Statement of Cash Flows and notes to the financial
statements.
2.2 Basis of Preparation of Financial Statements
The principal accounting polices applied in the preparation of
these financial statements are set out below. These policies
have beenconsistentlyappliedtoalltheyears presented.
(i) CompliancewithInd-AS
These financial statements have been prepared in
accordance with the Indian Accounting Standards
(hereinafter referred to as the'Ind AS') as notified by
Ministry of Corporate Affairs pursuantto Section 133of
the Companies Act, 2013 ('Act') read with Rule 3 of the
Companies (Indian Accounting Standards) Rules, 2015
asamended and other relevant provisions of the Act.
(ii) Basis of Preparation and presentation
The financial statements have been prepared and
presented on the going concern basis and at historical
cost basis considering the applicable provisions of
Companies Act 2013, except for the following items
that have been measured at fair value as required by
relevant INDAS.
Fair Value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly
transaction between market participants at the
measurementdate.
a) Certain financial assets/liabilities measured at fair
value (refer accounting policy regarding financial
instruments)and
b) Any other item as specifically stated in the
accounting policy.
The Shareholders have the power to amend the
Financial Statementsaftertheissue.
(iii) Functional and Presentation Currency
The financial statements are presented in Indian
Rupees, which is the functional currency of the
Company and the currency of the primary economic
environment inwhich the Company operates.
(iv) Classification of Assets and Liabilities as Current
and Non-Current
All assets and liabilities are classified as current or non¬
current as per the Company's normal operating cycle,
and other criteria set out in Schedule III of the
Companies Act, 2013. Based on the nature of products
and the time lag between the acquisition of assets for
processing and their realisation in cash and cash
equivalents, 12 months period has been considered by
the Company as its normal operating cycle.
(v) Rounding off amounts
The financial statements are presented in INR and all
values are rounded to the nearest Lakhs (INR 1,00,000)
as perthe requirement of Schedule III, unlessotherwise
stated.
2.3 Keyaccountingestimates&judgements
The preparation of financial statements requires
management to make judgements, estimates and
assumptions in the application of accounting policies that
affect the reported amounts of assets, liabilities, income and
expenses. Actual results may differ from these estimates.
Continuous evaluation is done on the estimation and
judgements based on historical experience and other
factors, including expectations of future events that are
believed to be reasonable.
2.3.1 Critical accounting estimates
a. Useful lives and residual values of Property, plant and
equipment represent a material portion of the Company's
asset base. The periodic charge of depreciation is derived
after estimating useful life of an asset and expected
residual value at the end of its useful life. The useful lives
and residual values of assets are estimated by the
management at the time the asset is acquired and
reviewed periodically,includingateachfinancialyearend.
Thelives are based onvariousexternalandinternalfactors
including historical experience, relative efficiency and
operating costsandchangeintechnology.
b. Income taxes
The Company's tax jurisdiction is India. Significant
judgements are involved in determining the provision
for income taxes including amounts to be recovered or
paid for uncertain tax positions. Management
judgement is required to determine the amount of
deferred tax assets that can be recognised, based upon
thelikelytimingandthe levelof future taxable profits.
c. Defined benefitobligations
Defined benefit obligations are measured at fair value
forfinancial reporting purposes. Fair value determined
by actuary is based on actuarial assumptions.
Management judgement is required to determine such
actuarial assumptions. Such assumptions are reviewed
annually using the best information available with the
Management.
d. Contingencies
In the normal course of business, contingent liabilities
may arise from litigation and other claims against the
Company. Potential liabilities that are possible but not
probable of crystalising or are very difficult to quantify
reliably are treated as contingent liabilities. Such
liabilities are disclosed in the notes but are not
recognised.
2.4 Property,Plantand Equipment(PPE) (INDAS16)
These tangible assets are held for use in production, supply
of goods or services or for administrative purposes.
Property, Plant and Equipment are stated at cost less
accumulated depreciation and accumulated impairment
losses except for freehold land which is not depreciated.
Cost includes purchase price after deducting trade
discount/rebate, import duties, non-refundable taxes, Net
of GST input credit wherever applicable, cost of replacing
the component parts, borrowing costs and other directly
attributable cost of bringing the asset to its working
condition inthe manner intended bythemanagement.
If significant parts of an item of PPE have different useful
lives, then they are accounted for as separate items (major
components) ofPPE.
The cost of an item of PPE is recognised as an asset if, and
only if, it is probable that the economic benefits associated
with the item will flow to the Company in future periods and
the cost of the item can be measured reliably. Expenditure
incurred after the PPE have been put into operations, such
as repairs and maintenance expenses are charged to the
Statement of Profit and Loss during the period in which they
areincurred.
Items such as spare parts, standby equipment and servicing
equipment are recognised as PPE when it is held for use in
the production or supply of goods or services, or for
administrative purpose, and are expected to be used for
more than one year. Otherwise such items are classified as
inventory.
Expenditure on acquisition of PPE for Research and
Development (R&D) is included in PPE and depreciation
thereon is provided as applicable.
The Company adjusts exchange differences arising on
translation difference/settlement of long term foreign
currency monetary items outstanding and pertaining to the
acquisition of a depreciable asset to the cost of asset and
depreciates the same over the remaining life of the asset.
The depreciation on such foreign exchange difference is
recognised from first dayof its financial year.
De-recognised upon disposal
An item of PPE is derecognised on disposal or when no
future economic benefits are expected from use or disposal.
Any gain or loss arising on derecognition of an item of
property, plant and equipment is determined as the
difference between the net disposal proceeds and the
carrying amount of the asset and is recognised in Statement
of Profit and Loss when asset is derecognised.
Treatment of Expenditure during Construction Period
Expenditure, net of income earned, during construction
(including financing cost related to borrowed funds for
construction or acquisition of qualifying PPE) period is
included under capital work-in-progress, and the same is
allocated to the respective PPE on the completion of
construction. Advances given towards acquisition or
construction of PPE outstanding at each reporting date are
disclosed as Capital Advances under “Other Non-Current
Assets".
Depreciation
The depreciable amount of an asset is determined after
deducting its residual value. Where the residual value of an
asset increases to an amount equal to or greater than the
asset's carrying amount, nodepreciationchargeisrecognised
till the asset's residual value decreases below the asset's
carrying amount. Depreciation of an asset begins when it is
available for use, i.e., when it is in the location and condition
necessary for it to be capable of operating in the intended
manner. Depreciation of an asset ceases at the earlier of the
date that the asset is classified as held for sale in accordance
with INDAS105and the datethatthe asset is derecognised.
The Company depreciates its property, plant and
equipment (PPE) over the useful life in the manner
prescribed in Schedule II to the Act as per Straight Line
Method. Management believes that useful life of assets are
same as those prescribed in Schedule II to the Act, except for
plant and equipment wherein based on technical
evaluation, useful life has been estimated to be different
from that prescribed in Schedule II of the Act. Useful life
considered for calculation of depreciation for various assets
classareasfollows:-
The identified component of fixed assets are depreciated
over the useful lives and the remaining components are
depreciated over the life of the principal assets.
Depreciation on fixed assets added/disposed off during the
period is provided on pro-rata basis with reference to the
dateofaddition/disposal.
The assets residual values, useful lives and methods of
depreciation are reviewed at each financial year end and
adjusted prospectively, if appropriate.
Leasehold Land is amortised over the primary period of the
lease.
2.5 Intangibleassets(INDAS38)
Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated amortisation
and accumulated impairment losses, if any. Amortisation is
recognised on a straight-line basis over their estimated
useful lives. 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
foron a prospective basis.
Computer Software
Computer software areamortized over period of 3 years.
Internally Generated Intangible Assets - Research and
Development Expenditure:
Expenditure incurred on development is capitalised if such
expenditure leads to creation of any intangible asset,
otherwise, such expenditure is charged to the Statement of
Profit and Loss. PPE procured for research and development
activities arecapitalised.
2.6 Leases(IndAS116)
The Company has adopted Ind AS 116 - Leases effective 1st
April,2019.
As a Leasee
At inception of a contract, the Company assesses whether a
contract is, or contains, a lease. A contract 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. The Company recognises a Right-of-Use
(ROU) asset and a lease liability at the lease commencement
date. The ROU asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted
for any lease payment made at or before the
commencement date, plus any initial direct cost incurred
and an estimate of costs to dismantle and remove the
underlying assetorto restorethe underlying asset orthesite
on which it is located, less any lease incentive received.
The ROU asset is subsequently depreciated using the
straight-line method from the commencement date to the
earlier of the end of the useful life ofthe ROU asset or the end
of the lease term. The estimated useful lives of ROU assets
are determined on the same basis as those of Property, Plant
and Equipment. In addition, the ROU asset is periodically
reduced by impairment losses, if any, and adjusted for
certain remeasurements ofthe lease liability.
The lease liability isinitially measuredatthe presentvalueof
the lease payments that are not paid at the commencement
date, discounted using the 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 asthediscount rate.
Short-term leases and leases oflow-value assets
The Company has elected not to recognise right-to-use
assets and lease liabilities for short-term lease that have a
lease term of 12 months or less and leases of low-value
assets. The Company recognise the lease payments
associated with these leases as an expenses on a straight¬
line basis overtheleaseterm.
As a Lessor
The company, as a lessor, classifies a lease either as an
operating lease or a finance lease. Leases are classified as
finance lease whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the
lessee. All other leases are classified as operating leases.The
Company recognises lease payments received under
operating leases as income on a straight-line basis over the
leaseterm.
2.7 Inventories (IND AS 2)
Inventories consisting of stores and spares, raw materials,
work in progress, stock in trade, goods in transit and finished
goods are valued at lower of cost and net realisable value.
However, materials held for use in production of inventories
are not written down below cost, if the finished products are
expected to be sold ator above cost.
The cost is computed on moving weighted average basis
and is net of credits underGST.
Goods and materials in transit include materials, duties and
taxes (other than those subsequently recoverable from tax
authorities) labour cost and other related overheads
incurred in bringing the inventories to their present location
and condition.
Traded goods includes cost of purchase and other costs
incurred in bringing the inventories to their present location
and condition.
2.8 BorrowingCost(INDAS23)
Borrowing cost includes interest expense, amortisation of
discounts, ancillary costs incurred in connection with
borrowing of funds and exchange difference, arising from
foreign currency borrowings, to the extent they are
regarded as an adjustment to theinterest cost.
Borrowing costs that are attributable to the acquisition or
construction or production of a qualifying asset are
capitalised as part ofthe cost of such asset till such time the
asset is ready for its intended use. A qualifying asset is an asset
that necessarily takes a substantial period oftime toget ready
for its intended use. All other borrowing costs are recognised
as an expensein the period in which they areincurred.
Investment 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 cost are
recognised in the Statement of Profit and Loss in the period
in which they are incurred.
2.9 ImpairmentofAssets(INDAS36)
At the end of each reporting period, the Company reviews
the carrying amounts of its PPE and other intangible assets
to determine whether there is any indication that these
assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the
impairment loss. 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 (CGU) to which the asset belongs. When the carrying
amount of an asset or CGU exceeds its recoverable amount,
the asset is considered impaired and is written down to its
recoverable amount. The resulting impairment loss is
recognised in the Statement of Profit and Loss Recoverable
amount is the higher of fair value less costs to sell and value
in use. In assessing value in use, the estimated future cash
fiows are discounted to their present value using a pre-tax
discount rate that refiects current market assessments of
the time value ofmoneyand the risks specific to the asset.
Indeterminingfairvalue less costs ofdisposal, recent market
transactions are taken into account. If no such transactions
can be identified, an appropriate valuation model is used.
Where an impairment loss subsequently reverses, the
carrying amount of the asset or CGU is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying
amount that would have been determined had no
impairment loss been recognised for the asset or CGU in
prioryears. A reversal of an impairment loss is recognised in
the Statement of Profit and Loss.
2.10 Government Grants (INDAS 20)
Government grants are recognised when there is
reasonable assurance that the Company will comply with
the conditions attached to them and that the grants will be
received. When the grant relates to an expense item, it is
recognised in the Statement of Profit and Loss by way of a
deduction to the related expense on a systematic basis over
the periods that the related costs, for which it is intended to
compensate, are expensed. When the grant relates to an
asset, it is recognised as income on a systematic basis over
the expected useful life ofthe related asset.
2.11 Taxes(INDAS12)
Income tax expense represents the sum of tax currently
payable and deferred tax.Tax is recognised in the Statement
of Profit and Loss, except to the extent that it relates to items
recognised directly in equity or in other comprehensive
income.
a) CurrentTax
Current tax includes provision for Income Tax
computed under Special provision (i.e., Minimum
alternate tax) or normal provision of IncomeTax Act.Tax
on Income for the current period is determined on the
basis on estimated taxable income and tax credits
computed in accordance with the provisions of the
relevant tax laws and based on the expected outcome
ofassessments/appeals.
b) Deferred Tax
Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities
in the balance sheet and the corresponding tax bases
used in the computation of taxable profit. Deferred tax
liabilities are generally recognised for all taxable
temporarydifferences.
Deferred tax assets are generally recognised for all
deductible temporary differences, unabsorbed losses
and unabsorbed depreciation to the extent that it is
probable that future taxable profits will be available
against which those deductible temporary differences,
unabsorbed losses and unabsorbed depreciation can
be utilised.
The carrying amount of deferred tax assets is reviewed
at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient taxable
profits will be available to allowall or part ofthe asset to
be recovered.
Deferred tax assets and liabilities 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 balance sheet date. 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
reporting date, to recover or settle the carrying amount
ofitsassetsand liabilities.
Deferred tax assets and liabilities are offset when there
is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to
income taxes levied by the same taxation authority and
the Company intends to settle its current tax assets and
liabilities on a net basis.
c) MinimumAlternateTax(MAT):
MAT is recognised as an asset only when and to the
extent there is convincing evidence that the Company
will pay normal income taxduring the specified period.
In the year in which the MAT credit becomes eligible to
be recognised, it is credited to the Statement of Profit
and Loss and is considered as (MATCredit Entitlement).
The Company reviews the same at each Balance Sheet
date and writes down the carrying amount of MAT
Credit Entitlement to the extent there is no longer
convincing evidence to the effect that the Company
will pay normal IncomeTaxduringthespecified period.
Minimum Alternate Tax (MAT) Credit are in the form of
unused tax credits that are carried forward by the
Company for a specified period of time, hence, it is
presented as DeferredTaxAsset.
2.12 Employees Benefits (INDAS 19)
a) EmployeeBenefits
All employee benefits payable wholly within twelve
months of rendering services are classified as short
term employee benefits. Benefits such as salaries,
wages, short-term compensated absences,
performance incentives etc., are recognised during the
period in which the employee renders related services
and are measured at undiscounted amount expected
to be paid when the liabilities are settled.
b) Post-employmentobligations
The Company operates the following post¬
employment schemes:
(i) Defined benefit plans such asgratuityand;
(ii) Defined contribution plans such as provident fund.
(i) Defined benefit plans-Gratuityobligations
The liability or assets recognised in the balance sheet in
respect of defined benefit gratuity plans is the present
value of the defined benefit obligations at the end of
the reporting period lessthefairvalueofplanassets.
The defined benefit obligation is calculated annually by
actuaries using the projected unit credit method. The
present value of the defined benefit obligation
denominated in INR is determined by discounting the
estimated future cash outflows by reference to market
yields at the end ofthe reporting period on government
bonds that have terms approximatingto the terms ofthe
related obligation. The benefits which are denominated
in currency other than INR, the cash flows are discounted
using market yields determined by reference to high
quality corporate bonds that are denominated in the
currency in which the benefits will be paid,and that have
terms approximating to the terms of the related
obligation.
The net interest cost is calculated by applying the
discount rate to the net balance of the defined benefit
obligation and the fair value of plan assets. This cost is
included in employee benefit expense in the statement
ofprofitand loss.
Re-measurement gains and losses arising from
experience adjustments and change in actuarial
assumptions are recognised in the period in which they
occur, directly in other comprehensive income. They
are included in retained earnings in the statement of
changes in equity andin the balance sheet.
Changes in the present value of the defined benefit
obligation resulting from plan amendments or
curtailments are recognised immediately in profit or
loss as past service cost.
(ii) Definedcontribution plans
The Company pays provident fund contributions to
publicly administered funds as per local regulations.
The Company has no further payment obligations once
the contributions have been paid. The contributions
are accounted for as defined contribution plans and
the contributions are recognised as employee benefit
expensewhen they are due.
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