2 Material accounting policies
2.1 Basis of preparation
The financial statements have been prepared in accordance with Indian Accounting Standards as defined in Rule 2(1)(a) of the Companies (Indian
Accounting Standards) Rules, 2015 and relevant amendment rules issued thereafter, prescribed under Section 133 of the Companies Act, 2013 (“Ind
AS”). The presentation of the Financial Statements is based on Ind AS Schedule III of the Companies Act,2013.
2.2 Basis of measurement
The financial statements are prepared on Historical Cost basis except for certain financial assets and liabilities that are measured at fair value (Refer
accounting policy regarding Financial Instruments). The accounting policies not specifically referred to otherwise, are consistent and in consonance
with generally accepted accounting principles. All income and expenditure are being accounted for on accrual basis.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.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 measurement date.
2.3 Functional and Presentation currency
These financial statements are presented in Indian Rupees (INR), which is the Company’s functional currency. All financial information presented in INR
has been rounded to the nearest lakhs (upto two decimals), except as stated otherwise.
2.4 Use of Estimates
In preparing Company’s financial statements in conformity with accounting principles generally accepted in India, management is required to make
estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent liabilities at the date of the financial
statements and reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Any revision to
accounting estimates is recognized in the period in which the same is determined.
2.5 Current and non-current classification
The Company presents assets and liabilities in the balance sheet based on current/non-current classification.
An asset is current when it is:
• Expected to be realized or intended to sold or consumed in normal operating cycle;
• Held primarily for the purpose of trading;
• Expected to be realized 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 current when it is:
• Expected to be settled in normal operating cycle;
• Due to be settled within twelve months after the reporting period; or
• There is no unconditional right to defer settlement of the liability for at least twelve months after the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
2.6 Property Plant & Equipment
i) Initial recognition and measurement
An item of property, plant and equipments recognized as an asset if and only if it is probable that future economic benefits associated with the item
will flow to the company and the cost of the item can be measured reliably.
Items of Property, Plant and Equipment are measured at cost less accumulated depreciation/amortization and accumulated impairment losses.
Cost includes expenditure that is directly attributable to bringing the asset, inclusive of non-refundable taxes & duties, to the location and condition
necessary for it to be capable of operating in the manner intended by management.When parts of an item of property, plant and equipment have
different useful life, they are recognized separately. Items of spare parts, stand-by equipment and servicing equipment which meet the definition of
Property, Plant and Equipment are capitalized.Property, Plant and Equipments which are not ready for intended use as on the date of Balance
Sheet are disclosed as ‘Capital Work-In-Progress’.
ii) Subsequent costs
Subsequent expenditure is recognized as an increase in the carrying amount of the asset when it is probable that future economic benefits
deriving from the cost incurred will flow to the enterprise and the cost of the item can be measured reliably.The cost of replacing part of an item of
property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within
the part will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the
day-to-day servicing of Property, Plant and Equipment are recognized in profit or loss as incurred.
iii) De-recognition
Property, Plant and Equipment are derecognized when no future economic benefits are expected from their use or upon their disposal. Gains and
losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount
of property, plant and equipment, and are recognized in the statement of profit and loss.
iv) Depreciation/amortization
Depreciation is recognized in profit or loss on straight line method over the estimated useful life of each item of Property, Plant and Equipment &
Investment Property.
Depreciation on additions to/deductions from property, plant and equipment and Investment Property during the year is charged on pro-rata basis
from/up to the date on which the asset is available for use/disposed.
2.7 Capital work-in-progress
The cost of self-constructed assets includes the cost of materials & direct labour, borrowing costs, any other costs directly attributable to bring the assets
to the location and condition necessary for it to be capable of operating in the manner intended by management.
Expenses directly attributable to construction of property, plant and equipment incurred till these are ready for their intended use are identified and
allocated on a systematic basis towards the cost of related assets.
2.8 Intangible assets
i) Initial recognition and measurement
An intangible asset is recognized if and only if it is probable that the expected future economic benefits that are attributable to the asset will flow
to the company and the cost of the asset can be measured reliably.
Intangible assets that are acquired by the Company, which have finite useful lives, are recognized at cost. Subsequent measurement is done at
cost less accumulated amortization and accumulated impairment losses. Cost includes any directly attributable incidental expenses necessary to
make the assets ready for its intended use.
Expenditure on development activities is capitalized only if the expenditure can be measured reliably, the product or process is technically and
commercially feasible, future economic benefits are probable and the Company intends to and has sufficient resources to complete development
and to use or sell the asset.
Expenditure incurred which are eligible for capitalizations under intangible assets are carried as intangible assets under development till they are
ready for their intended use.
ii) Subsequent costs
Subsequent expenditure is recognized as an increase in the carrying amount of the asset when it is probable that future economic benefits
deriving from the cost incurred will flow to the enterprise and the cost of the item can be measured reliably.
iii) De-recognition
An intangible asset is derecognized when no future economic benefits are expected from their use or upon their disposal. Gains and losses on
disposal of an item of intangible assets are determined by comparing the proceeds from disposal with the carrying amount of intangible assets and
are recognized in the statement of profit and loss.
iv) Amortization
Intangible assets having definite life are amortized on straight line method in their useful life of 5 year.
2.9 Investment Property
Investment properties are measured at cost less accumulated depreciation and impairment losses, if any. Depreciation on building is provided using the
straight line method over the estimated useful lives as specified in Schedule II to the Companies Act, 2013.
2.10 Inventories
Inventories of Raw material, Work-in-progress, Finished goods and Consumable Spares are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:- Raw materials: cost includes cost of purchase
and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on FIFO basis.- Finished goods and work
in progress: cost includes cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity.All
other inventories of stores, consumables, project material at site are valued at cost. The stock of waste is valued at net realisable value.
2.11 Cash and Cash Equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and cash on hand and short-term deposits with an original maturity of three
months or less, which are subject to insignificant risk of change in value.
2.12 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
i) Financial assets:Financial assets are recognised when the Company becomes a party to the contractual provisions of the instrument.
a) Initial recognition and measurement
All financial assets are recognized initially at fair value plus or minus, in the case of financial assets not recorded at fair value through profit
or loss, transaction cost that are attributable to the acquisition of Financial Assets.
b) Subsequent measurement
Financial assets are subsequently classified and measured at:
• Financial assets at amortised cost
• Financial assets at fair value through profit and loss (FVTPL)
• Financial assets at fair value through other comprehensive income (FVOCI).
c) Equity Instruments:
All investments in equity instruments in entities other than subsidiaries and joint ventures are measured at fair value. Equity instruments if
held for trading are classified as at FVTPL. For all other equity instruments, the Company decides to classify the same either at FVTOCI or
FVTPL. The Company makes such election on an instrument by instrument basis. The classification is made on initial recognition and is
irrevocable.
If the company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instruments, excluding dividends,
are recognized in the OCI. There is no recycling of the amounts from OCI to P&L, even on sale of investment as the company transfers
cumulative gain or loss within the equity.
Equity instruments if classified as FVTPL category are measured at fair value with all changes recognized in the profit and loss.
d) De-recognition
A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial assets) is primarily derecognized
(i.e. removed from the Company’s balance sheet) when:
• The contractual rights to receive cash flows from the asset have expired, or
• The Company has transferred its contractual rights to receive cash flows from the asset.
e) Impairment of Financial Asset
Expected credit losses are recognized for all financial assets subsequent to initial recognition in Statement of Profit and loss.
For recognition of impairment loss on financial assets other than Trade receivables, the company determines whether there has been a
significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide
impairment loss. However, If credit risk is increased significantly, lifetime ECL is used.
If, in a subsequent period, credit quality of the instrument improves to such extent that there is no longer a significant increase in credit risk
since initial recognition, then the entity reverts to recognising impairment loss allowance based on 12- Month ECL.
For trade receivables Company applies ‘simplified approach’ which requires expected lifetime losses to be recognised from initial recognition
of the receivables. The Company uses historical default rates to determine impairment loss on the portfolio of trade receivables. At every
reporting date these historical default rates are reviewed and changes in the forward looking estimates are analysed.
ii) Financial liabilities
a) Initial recognition and measurement
All financial liabilities are recognized at fair value and in case of loans, net of directly attributable cost. Fees of recurring nature are directly
recognised in the Statement of Profit and Loss as finance cost.
b) Subsequent measurement
Financial liabilities are carried at amortized cost using the effective interest method. Amortized cost is calculated by taking into account any
discount or premium on acquisition and any material transaction that are any integral part of the EIR. Trade and other payables maturing
within one year from the balance sheet date are carried at transaction value and the carrying amounts approximate fair value due to the short
maturity of these instruments.Financial liabilities carried at fair value through profit or loss are measured at fair value with all changes in fair
value recognised in the Statement of Profit and Loss.
c) De-recognition
A financial liability is derecognized 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 de-recognition of the original liability and the recognition of a new liability. The
difference in the respective carrying amounts is recognized in the statement of profit or loss.
2.13 Fair value measurement
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date. 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 measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the company. The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in
its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The company uses valuation
techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant
observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial
statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value
measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or Indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognized in the financial statements on a recurring basis, the company determines whether transfers have occurred
between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a
whole) at the end of each reporting period. The Company determines the policies and procedures for both recurring fair value measurement, such as
derivative instruments and unquoted financial assets measured at fair value, and for non-recurring measurement, such as assets held for distribution in
discontinued operations.
2.14 Impairment of Financial Assets
All financial assets except for those at FVTPL are subject to review for impairment at least at each reporting date to identify whether there is any
objective evidence that a financial asset or a company of financial assets is impaired. Different criteria to determine impairment are applied for each
category of financial assets.In accordance with Ind-AS 109, the company applies expected credit loss (ECL) model for measurement and recognition of
impairment loss for financial assets carried at amortised cost.ECL is the weighted average of difference between all contractual cash flows that are due
to the company in accordance with the contract and all the cash flows that the company expects to receive, discounted at the original effective interest
rate, with the respective risks of default occurring as the weights. When estimating the cash flows, the company is required to consider -
- All contractual terms of the financial assets (including prepayment and extension) over the expected life of the assets.
- Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
2.15 Impairment of Non-Financial Assets
The Company, in accordance with the Indian Accounting Standard (Ind AS) 36 “Impairment of Assets” , has adopted the practice of assessing at each
Balance Sheet date whether there is any indication that an asset may be impaired. If any such indication exists, then the company provides for the loss
for impairment of Assets after estimating the recoverable amount of the assets.
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