VI. Significant accounting policies

A. Revenue recognition

Revenue from contract with customers is recognized upon transfer of control of promised goods/ products
to customers at an amount that reflects the consideration to which the Company expect to be entitled
for those goods/ products. To recognize revenues, the Company applies the following five-step approach:

• Identify the contract with a customer,

• Identify the performance obligations in the contract,

• Determine the transaction price,

• Allocate the transaction price to the performance obligations in the contract, and

• Recognize revenues when a performance obligation is satisfied.

1. Sale of goods

Revenue from the sale of goods is recognized when the significant risks and rewards of ownership
of the goods have passed to the buyer and no significant uncertainty exists regarding the amount
of the consideration that will be derived from the sale of goods. Revenue from the sale of goods
is measured at the fair value of the consideration received or receivable, net of returns and
allowances, related discounts & incentives and volume rebates. It excludes value added tax/ sales
tax/goods and service tax.

2. Sale of goods - non-cash incentive schemes (deferred revenue)

The company operates a non-cash incentive scheme program where dealers / agents are entitled
to non-cash incentives on achievement of sales targets. Revenue related to the non-cash schemes
is deferred and recognized when the targets are achieved. The amount of revenue is based on
the realization of the sales targets to the period of scheme defined.

3. Interest income

For all financial instruments measured either at amortized cost or at fair value through other
comprehensive income, interest income is recorded using the effective interest rate (EIR), which
is the rate that exactly discounts the estimated future cash payments or receipts over the expected
life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount
of the financial asset or to the amortized cost of a financial liability. Interest income is included
in other income in the statement of profit and loss.

4. Dividends

Dividend income is accounted for when the right to receive the same is established, which is
generally when shareholders approve the dividend.

B. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized
as part of the cost of the asset. Qualifying assets are assets that necessarily take a substantial period
of time to get ready for their intended use or sale. All other borrowing costs are expensed in the
period in which they occur. Borrowing costs consist of interest and other costs that a company incurs
in connection with the borrowing of funds.

Investment income earned on the temporary investment of specific borrowings pending their expenditure
on qualifying asset is deducted from the borrowing costs eligible for capitalization.

C. Taxes

1. Current income tax

Current income tax assets and liabilities are measured at the amount expected to be recovered
from or paid to the taxation authorities, based on the rates and tax laws enacted or substantively
enacted, at the reporting date in the country where the entity operates and generates taxable
income.

Current tax items are recognized in correlation to the underlying transaction either in OCI or
directly in equity.

Management periodically evaluates positions taken in the tax returns with respect to situations
in which applicable tax regulations are subject to interpretation and establishes provisions where
appropriate.

2. Deferred tax

Deferred tax is provided using the balance sheet approach on temporary differences at the reporting
date between the tax bases of assets and liabilities and their corresponding carrying amounts
for the financial reporting purposes.

Deferred tax assets are the amounts of income taxes recoverable in future periods in respect
of:

i. deductible temporary differences;

ii. the carry forward of unused tax losses; and

iii. the carry forward of unused tax credits.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient taxable profit will be available to allow all or part
of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each
reporting date and are recognized to the extent that it has become probable that future taxable profits
will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the

year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have

been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognized outside profit or loss is (either in other comprehensive income
or in equity). Deferred tax items are recognized in correlation to the underlying transaction either in
OCI or directly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set
off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable
entity and the same taxation authority.

Minimum Alternative Tax (MAT) credit is recognized as an asset only when and to the extent there
is convincing evidence that the company will pay normal income tax during the specified period. In
the year in which the MAT credit becomes eligible to be recognized an asset in accordance with
recommendations contained in Guidance Note issued by ICAI, the said asset is created by way of
a credit to the Statement of Profit and Loss and shown as MAT Credit Entitlement. The company
reviews the same at each Balance Sheet date and writes down the carrying amount of MAT Credit
Entitlement to an extent there is no longer convincing evidence to the effect that the company will
pay normal Income Tax during the specified period.

D. Leases

Company as a lessee

Short-term leases and leases of low-value assets

The Company applies the short-term lease recognition exemption to its short-term leases of machinery
and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement
date and do not contain a purchase option). It also applies the lease of low-value assets recognition
exemption to leases of office equipment that are considered to be low value.

Lease payments on short-term leases and leases of low-value assets are recognized as expense on
a straight-line basis over the lease term.

E. Employee Benefits

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., and the expected cost of bonus, ex-gratia are recognized during the period
in which the employee renders related service.

Payments to defined contribution retirement benefit plans are recognized as an expense when employees
have rendered the service entitling them to the contribution.

No benefits have been provided by the Company under the defined benefits plan. Thus no re measurement
comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included
in net interest on the net defined benefit liability and the return on plan assets (excluding amounts
included in net interest on the net defined benefit liability), are recognized in the balance sheet with
a corresponding debit or credit to retained earnings through OCI in the period in which they occur

No net defined benefit obligation as an expense has been recognized in the statement of profit and
loss:

1. Long-term employee benefits

Post-employment and other employee benefits are recognized as an expense in the statement of profit
and loss fo the period in which the employee has rendered services. A liability is recognized for benefits
accruing to employees in respect of wages and salaries, annual leave and sick leave in the period
the related service is rendered at the undiscounted amount of the benefits expected to be paid in
exchange for that service.

2. Defined contribution plans

The company pays provident fund contributions to publicly administered provident funds as per local
regulations. The company has no further payment obligations once the contributions have been paid.
Company is not complying with the provisions of Gratuity Plan as required as per INDAS 19.

F. Property, plant and equipment

All items of property, plant and equipment are stated at acquisition cost of the items. Acquisition cost
includes expenditure that is directly attributable to getting the asset ready for intended use. Subsequent
costs are included in the asset’s 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 company
and the cost of the item can be measured reliably. The carrying amount of any component accounted
for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged
to profit or loss during the reporting period in which they are incurred.

Capital work in progress is stated at cost and net of accumulated impairment losses, if any. All the
direct expenditure related to implementation including incidental expenditure incurred during the period
of implementation of a project, till it is commissioned, is accounted as Capital work in progress (CWIP)
and after commissioning the same is transferred / allocated to the respective item of property, plant
and equipment.

Pre-operating costs, being indirect in nature, are expensed to the statement of profit and loss as and
when incurred.

The present value of the expected cost for the decommissioning of an asset after its use is included
in the cost of the respective asset if the recognition criteria for a provision are met.

Property, plant and equipment are eliminated from financial statement, either on disposal or when retired
from active use. Losses arising in the case of retirement of property, plant and equipment are recognized
in the statement of profit and loss in the year of occurrence.

Depreciation methods, estimated useful lives and residual value

Depreciation is calculated to allocate the cost of assets, net of their residual values, over their estimated
useful lives. Components having value significant to the total cost of the asset and life different from
that of the main asset are depreciated over its useful life. However, land is not depreciated. The useful
lives so determined are as follows:

Depreciation on fixed assets has been provided in the accounts based on useful life of the assets
prescribed in Schedule II to the companies Act, 2013 based on Written Down Method.

Depreciation on additions is calculated on pro rata basis with reference to the date of addition.

Depreciation on assets sold/ discarded, during the period, has been provided up to the preceding month
of sale / discarded.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed
at each financial year end and adjusted prospectively, if appropriate.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These
are included in profit or loss within other gains / (losses).

G. Intangibles

Intangible assets are recognized when it is probable that the future economic benefits that are attributable
to the assets will flow to the company and the cost of the asset can be measured reliably.

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible
assets acquired in a business combination is their fair value at the date of acquisition. Following initial
recognition, intangible assets are carried at cost less any accumulated amortization and accumulated
impairment losses. Internally generated intangibles, excluding capitalized development costs, are not
capitalized and the related expenditure is reflected in profit or loss in the period in which the expenditure
is incurred.

H. Inventories

Inventories are valued at the lower of cost and net realizable value.

1. 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 first in, first out basis.

2. 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, but excluding
borrowing costs. Cost is determined on lower of cost or net realizable value. Cost is determined
on first in, first out basis

3. Stores and spares: cost includes cost of purchase and other costs incurred in bringing the
inventories to their present location and condition. Cost is determined on weighted average basis.

An item of spare parts that does not meet the definition of ‘property, plant and equipment’ has
to be recognized as a part of inventories. Cost is determined on first in, first out basis

4. Fuel: cost includes cost of purchase and other cost incurred in bringing the inventories to their
present location and condition. Cost is determined on first in, first out basis.

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

I. Financial Instruments

• Financial assets

i. Initial recognition and measurement

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

Financial assets are classified, at initial recognition, as financial assets measured at fair value
or as financial assets measured at amortized cost.

ii. Subsequent measurement

For purposes of subsequent measurement, financial assets are classified in four categories:

a. Debt instruments at amortized cost

b. Debt instruments at fair value through other comprehensive income (FVTOCI)

c. Financial assets at fair value through profit or loss (FVTPL)

d. Equity instruments measured at fair value through other comprehensive income (FVTOCI)

iii. Debt instruments at amortized cost

A ‘debt instrument’ is measured at the amortized cost if both the following conditions are met:

a. The asset is held within a business model whose objective is to hold assets for collecting
contractual cash flows, and

b. Contractual terms of the asset give rise on specified dates to cash flows that are solely
payments of principal and interest (SPPI) on the principal amount outstanding.

After initial measurement, such financial assets are subsequently measured at amortized cost
using the effective interest rate (EIR) method. Amortized 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 amortization is included in finance income in the profit or loss. The losses arising from
impairment are recognized in the profit or loss. This category generally applies to trade and
other receivables.

iv. Debt instrument at FVTOCI

A ‘debt instrument’ is classified as at the FVTOCI if both of the following criteria are met:

a. The objective of the business model is achieved both by collecting contractual cash flows
and selling the financial assets, and

b. The asset’s contractual cash flows represent SPPI.

Debt instruments included within the FVTOCI category are measured initially as well as at each
reporting date at fair value. Fair value movements are recognized in the other comprehensive
income (OCI).

v. Financial instrument at FVTPL

FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet
the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.

In addition, the company may elect to designate a debt instrument, which otherwise meets
amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing
so reduces or eliminates a measurement or recognition inconsistency (referred to as ‘accounting
mismatch’). The company has not designated any debt instrument as at FVTPL.

Debt instruments included within the FVTPL category are measured at fair value with all changes
recognized in the P&L.

vi. Equity investments

All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments
which are held for trading and contingent consideration recognized by an acquirer in a business
combination to which Ind AS103 applies are classified as at FVTPL. For all other equity instruments,
the company may make an irrevocable election to present in other comprehensive income
subsequent changes in the fair value. 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 instrument, excluding dividends, are recognized in the OCI. There is no recycling of the
amounts from OCI to P&L, even on sale of investment. However, the company may transfer the
cumulative gain or loss within equity.

Equity instruments included within the FVTPL category are measured at fair value with all changes
recognized in the P&L.

vii. Derecognition

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:

a. The rights to receive cash flows from the asset have expired, or

b. The company has transferred its rights to receive cash flows from the asset or has assumed
an obligation to pay the received cash flows in full without material delay to a third party
under a ‘pass-through’ arrangement; and either

a) the company has transferred substantially all the risks and rewards of the asset,
or

b) the company has neither transferred nor retained substantially all the risks and rewards
of the asset, but has transferred control of the asset.

When the company has transferred its rights to receive cash flows from an asset or has entered
into a pass-through arrangement, it evaluates if and to what extent it has retained the risks
and rewards of ownership. When it has neither transferred nor retained substantially all of the
risks and rewards of the asset, nor transferred control of the asset, the company continues to
recognize the transferred asset to the extent of the company’s continuing involvement. In that
case, the company also recognizes an associated liability. The transferred asset and the associated
liability are measured on a basis that reflects the rights and obligations that the company has
retained.

viii. Impairment of financial assets

The company assesses impairment based on expected credit loss (ECL) model to the following:

a. Financial assets measured at amortized cost;

b. Financial assets measured at fair value through other comprehensive income (FVTOCI);
Expected credit losses are measured through a loss allowance at an amount equal to:

a. The 12-months expected credit losses (expected credit losses that result from those default
events on the financial instrument that are possible within 12 months after the reporting
date); or

b. Full time expected credit losses (expected credit losses that result from all possible default
events over the life of the financial instrument).

The company follows ‘simplified approach’ for recognition of impairment loss allowance on:

a. Trade receivables or contract revenue receivables; and

Under the simplified approach, the company does not track changes in credit risk. Rather, it
recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from
its initial recognition.

The company uses a provision matrix to determine impairment loss allowance on the portfolio
of trade receivables. The provision matrix is based on its historically observed default rates over
the expected life of the trade receivable and is adjusted for forward looking estimates. At every
reporting date, the historical observed default rates are updated and changes in the forward-looking
estimates are analyzed.

For recognition of impairment loss on other financial assets and risk exposure, the company
determines that 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 for
impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in
a subsequent period, credit quality of the instrument improves such that there is no longer a
significant increase in credit risk since initial recognition, then the entity reverts to recognizing
impairment loss allowance based on 12-month ECL.

Lifetime ECL are the expected credit losses resulting from all possible default events over the
expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which
results from default events that are possible within 12 months after the reporting date.

ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/
expense in the statement of profit and loss (P&L). This amount is reflected under the head ‘other
expenses’ in the P&L.

ix. Financial assets measured as at amortized cost, contractual revenue receivables and lease
receivables

ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets
in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets
write-off criteria, the company does not reduce impairment allowance from the gross carrying
amount.

For assessing increase in credit risk and impairment loss, the company combines financial
instruments on the basis of shared credit risk characteristics with the objective of facilitating
an analysis that is designed to enable significant increases in credit risk to be identified on
a timely basis.

The company does not have any purchased or originated credit-impaired (POCI) financial assets,

i.e., financial assets which are credit impaired on purchase/ origination.

• Financial liabilities

i. Initial recognition and measurement

All financial liabilities are recognized initially at fair value and, in the case of loans and
borrowings and payables, net of directly attributable transaction costs.

The company’s financial liabilities include trade and other payables, loans and borrowings
including bank overdrafts.

ii. Subsequent measurement

The measurement of financial liabilities depends on their classification, as described below:

a. Financial liabilities at fair value through profit or loss

b. Loans and borrowings

c. Financial guarantee contracts

iii. Financial liabilities at FVTPL

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 repurchasing in the near term.

Gains or losses on liabilities held for trading are recognized in the profit or loss.

Financial liabilities designated upon initial recognition at fair value through profit or loss
are designated as such at the initial date of recognition, and only if the criteria in Ind
AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable
to changes in own credit risk is recognized in OCI. These gains/ loss are not subsequently
transferred to P&L. However, the company may transfer the cumulative gain or loss within
equity. All other changes in fair value of such liability are recognized in the statement
of profit and loss. The company has not designated any financial liability as at fair value
through profit and loss.

iv. Loans and borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured
at amortized cost using the EIR method. Gains and losses are recognized in profit or
loss when the liabilities are derecognized as well as through the EIR amortization process.
Amortized 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 amortization is included
as finance costs in the statement of profit and loss.

v. 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 and loss.

• Off-setting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the
standalone balance sheet if there is a currently enforceable legal right to offset the recognized
amounts and there is an intention to settle on a net basis, to realize the assets and
settle the liabilities simultaneously.

J. Cash and cash equivalents

Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short¬
term deposits with an original maturity of three months or less, which are subject to an
insignificant risk of changes in value. For the purpose of the statement of cash flows, cash and
cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding
bank overdrafts as they are considered an integral part of the company’s cash management.

K. Segment accounting

The Chief Operational Decision Maker monitors the operating results of its business Segments
separately for the purpose of making decisions about resource allocation and performance
assessment. Segment performance is evaluated based on profit or loss and is measured
consistently with profit or loss in the financial statements.

The Operating segments have been identified on the basis of the nature of products/services.

The accounting policies adopted for segment reporting are in line with the accounting policies of
the company. Segment revenue, segment expenses, segment assets and segment liabilities have
been identified to segments on the basis of their relationship to the operating activities of the
segment. Inter Segment revenue is accounted on the basis of transactions which are primarily
determined based on market/fair value factors. Revenue, expenses, assets and liabilities which
relate to the company as a whole and are not allocated to segments on a reasonable basis
have been included under "unallocated revenue / expenses / assets / liabilities".

The Company is primarily engaged in the business of manufacturing, distribution and marketing of
textile product. These, in the context of Ind AS 108 on Operating Segments Reporting are
considered to constitute single business segment.