3. Summary of significant accounting policies

(a) Property, plant and equipment

Recognition and measurement

Property, plant and equipment (PPE) are measured at cost, which includes capitalized borrowing costs, less
accumulated depreciation and/ or accumulated impairment losses, if any.

Cost of an item of property, plant and equipment comprises its purchase price, including import duties and non¬
refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable costs of bringing
the item to its working condition for its intended use and estimated costs of dismantling and removing the item and
restoring the site on which it is located.

The cost of a self-constructed item of property, plant and equipment comprises the cost of materials and direct
labor, any other costs directly attributable to bringing the item to working condition for its intended use, and
estimated costs of dismantling and removing the item and restoring the site on which it is located.

If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted
for as separate items (major components) of property, plant and equipm ent.

Capital work-in-progress comprises the cost of PPE that are not ready for their intended use at the reporting date.

Advances paid towards acquisition of PPE outstanding at each Balance sheet date, are shown as capital advances
under other non-current assets.

Any gain or loss on disposal of item of PPE is recognised in the Statement of Profit and Loss.

Subsequent expenditure

Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the
expenditure will flow to the Company.

Depreciation

Depreciation is calculated on cost of items of PPE less their estimated residual values over their estimated useful
lives using the straight-line method, and is recognised in the Statement of Profit and Loss. Assets acquired under
finance leases are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain
that the Company will obtain ownership by the end of the lease term.

Depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted if
appropriate.

Depreciation on additions (disposals) is provided on a pro-rata basis i.e. from (upto) the date on which asset is
ready for use (disposed of).

Derecognition

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

(b) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the
moving weighted average method, and includes expenditure incurred in acquiring the inventories, production or

conversion costs and other costs incurred in bringing them to their present location and condition. In the case of
manufactured inventories and work-in-progress, cost includes an appropriate share of fixed production overheads
based on normal operating capacity.

Net realisable value is the estimated selling price in the ordin ary course of business, less the estimated costs of
completion and the estimated costs necessary to make the sale.

The net realisable value of work-in-progress is determined with reference to the selling prices of related finished
products.

Raw materials, components and other supplies held for use in the production of finished products are not written
down below cost except in cases where material prices have declined and it is estimated that the cost of the finished
products will exceed their net realisable value. The comparison of cost and net realisable value is made on an item-
by-item basis.

(c) Employee benefits

Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related
service is provided. A liability is recognised for the amount expected to be paid e.g., salaries and wages, short term
compensated absences and bonus etc., 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 amount of obligation can be estimated reliably.

Post-employment benefits
Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions and
will have no legal or constructive obligation to pay further amounts. The Company makes specified contributions
towards these schemes such as Superannuation Fund, Provident Fund, Employee State Insurance and other funds
as determined under relevant schemes and/ or statue. Obligations for contributions to defined contribution plans
are recognised as an employee benefit expense in the Statement of Profit and Loss in the periods during which the
related services are rendered by employees.

Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. Gratuity is a defined
benefit plan. The liability or asset recognised in the balance sheet in respect of gratuity plan is the present value of
the defined benefits obligation at the end of the reporting period less the fair value of plan assets. The defined
benefit obligation is calculated annually by an actuary using the projected unit credit method.

Remeasurement of the net defined benefit liability i.e. Gratuity, 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 in retained earnings. The Company determines the net interest expense (income) on the net defined
benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at
the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes
in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net
interest expense and other expenses related to defined benefit plans are recognised in the Statement of Profit and
Loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefits that relates to
past service (‘past service cost' or ‘past service gain') or the gain or loss on curtailment is recognised immediately
in the Statement of Profit and Loss. The Company recognises gains and losses on the settlement of a defined
benefit plan when the settlement occurs.

Other long-term employee benefits

Compensated absences

The Company's net obligations in respect of long-term employee benefits other than post-employment benefits is
the amount of future benefits that employees have earned in return for their service in the current and prior periods;
that benefit is discounted to determine its present value, and the fair value of any related assets is deducted.
Obligations such as those related to compensated absences are measured on the basis of an annual independent

actuarial valuation using the projected unit cost credit method. Remeasurement gains or losses are recognised in
the Statement of Profit and Loss in the period in which they arise.

Termination benefits

Termination benefits are recognised as an expense when, as a result of past event, the Company has a present
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to
settle the obligation.