(2) Material accounting policies
(A) Statement of compliance
(i) Basis of preparation of financial statements:
Compliance with Ind AS
The standalone financial statements are prepared in
accordance with Indian Accounting Standards (“Ind
AS”), under the historical cost convention on the accrual
basis except for certain financial instruments which are
measured at fair values. The Ind AS are prescribed under
Section 133 of the Act read with the Companies (Indian
Accounting Standards) Rules, 2015, as amended and
other relevant provisions of the Act.
Effective from April 1, 2018, the Company had adopted
all the Ind AS and the adoption has been carried out in
accordance with Ind AS 101, First time Adoption of Indian
Accounting Standards, with April 1, 2017 as the transition
date. The transition was carried out from Indian Accounting
Principles generally accepted in India as prescribed under
Section 133 of the Act, which was the previous GAAP
Presentation of financial statements
The Balance Sheet as at March 31, 2025 and the Statement
of Profit and Loss for the year ending March 31, 2025 are
prepared and presented in the format prescribed in the
Schedule III to the Companies Act, 2013 (“the Act”). The
Statement of Cash Flows for the year ended March 31, 2025
has been prepared and presented as per the requirements
of Ind AS 7 “Statement of Cash Flows”. The disclosure
requirements with respect to items in the Balance Sheet
and Statement of Profit and Loss, as prescribed in the
Schedule III to the Act, are presented by way of notes
forming part of the financial statements.
Accounting policies have been consistently applied except
where a newly-issued accounting standard is initially
adopted or a revision to an existing accounting standard
requires a change in the accounting policy hitherto in use.
With effect from 1st April, 2019, Ind AS 116 - “Leases” (Ind
AS 116) supersedes Ind AS 17 - “Leases”. The Company has
adopted Ind AS 116 using the prospective approach. The
application of Ind AS 116 has resulted into recognition of
'Right-of-Use’ asset with a corresponding Lease Liability
in the Balance Sheet.
The Company’s Financial Statements are presented in
Indian Rupees, which is also its functional currency and
all values are rounded to the nearest millions ('0,00,000),
except when otherwise indicated.
(ii) Investments in subsidiaries, Associates and
Joint Ventures:
The investment in subsidiaries and associates are carried
in these financial statements at historical cost, except
when the investment, or a portion thereof, is classified
as held for sale, in which case, it is accounted for as Non¬
Current assets held for sale and discontinued operations.
Where the carrying amount of investment is greater than
its estimated recoverable amount, it is written down
immediately to its recoverable amount and the difference
is transferred to the Statement of Profit and Loss.
On disposal of investment, the difference between the net
disposal proceeds and the carrying amount is charged or
credited to the Statement of Profit or Loss.
(iii) Property, plant and equipment:
Freehold land is carried at historical cost
All other items of Property, plant and equipment are stated
at cost of acquisition net of any trade discounts and
rebates, any import duties and other taxes (other than
those subsequently recoverable from the tax authorities),
any directly attributable expenditure on making the
asset ready for its intended use, including relevant
borrowing costs for qualifying assets and any expected
costs of decommissioning. Expenditure incurred after
the property, plant and equipment have been put into
operation, such as repairs and maintenance, are charged
to the Statement of Profit and Loss in the year in which
the costs are incurred. Major shutdown and overhaul
expenditure is capitalized as the activities undertaken
improves the economic benefits expected to arise from
the asset. It includes professional fees and, for qualifying
assets, borrowing costs capitalized in accordance with
the Company’s accounting policy based on Ind AS 23 -
Borrowing costs. Such properties are classified to the
appropriate categories of PPE when completed and ready
for intended use. Assets in the course of construction are
capitalized in the assets under construction account. At
the point when an asset is operating at management’s
intended use, the cost of construction is transferred to
the appropriate category of property, plant and equipment
and depreciation commences. Costs associated with
the commissioning of an asset and any obligatory
decommissioning costs are capitalized where the asset
is available for use but incapable of operating at normal
levels until a year of commissioning has been completed.
Revenue generated from production during the trial period
is capitalized. Property, plant and equipment except
freehold land held for use in the production, supply or
administrative purposes, are stated in the balance sheet
at cost less accumulated depreciation and accumulated
impairment losses, if any.
The Company has elected to continue with the carrying
value for all of its property, plant and equipment as
recognized in the financial statements on transition to Ind
AS, measured as per the previous GAAP and use that as its
deemed cost as at the date of transition.
Subsequent expenditure and componentization
Parts of an item of PPE having different useful lives
and significant value and subsequent expenditure on
Property, Plant and Equipment arising on account of
capital improvement or other factors are accounted for as
separate components 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.
Decommissioning costs
Decommissioning cost includes cost of restoration.
Provision for decommissioning costs is recognized when
the Company has a legal or constructive obligation to
plug and abandon a well, dismantle and remove a facility
or an item of Property, Plant and Equipment and to
restore the site on which it is located. The full eventual
estimated provision towards costs relating to dismantling,
abandoning and restoring sites and other facilities
are recognized in respective assets when the site is
complete/facilities or Property, Plant and Equipment are
installed. The amount recognized is the present value
of the estimated future expenditure determined using
existing technology at current prices and escalated
using appropriate inflation rate till the expected date of
decommissioning and discounted up to the reporting date
using the appropriate risk-free discount rate.
Depreciation and Useful life
Depreciable amount for assets is the cost of an asset,
or other amount substituted for cost, less its estimated
residual value. Depreciation is recognized so as to write off
the cost of assets (other than freehold land and properties
under construction) less their residual values over their
useful lives, using straight-line method as per the useful
life prescribed in Schedule II to the Companies Act, 2013
except in respect of following categories of assets, in
whose case the life of the assets has been assessed as
under based on technical advice, taking into account
the nature of the asset, the estimated usage of the
asset, the operating conditions of the asset, past history
of replacement, anticipated technological changes,
manufacturers warranties and maintenance support, etc.
The assets’ residual values and useful lives are reviewed,
and adjusted if appropriate, at the end of each reporting
period and if the expectations differ from the previous
estimates, the change is accounted for as a change in
accounting estimate on a retrospective or prospective
basis, whichever is nearly possible for the Company.
The property, plant and equipment acquired under finance
leases is depreciated over the asset’s useful life or over
the shorter of the asset’s useful life and the lease term
if there is no reasonable certainty that the Company will
obtain ownership at the end of the lease term.
De-recognition of Asset
An item of PPE is de-recognized 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 recognized in Statement of Profit and Loss.
(iv) Intangible assets:
Intangible assets are stated at acquisition cost, net of
accumulated amortization and accumulated impairment
losses, if any. Intangible assets are recognized only on
reasonable certainty and after completion of all activities
related to the asset.
Gains or losses arising from the retirement or disposal
of an intangible asset are determined as the difference
between the disposal proceeds and the carrying amount
of the asset and are recognized as income or expense in
the Statement of Profit and loss.
(v) Impairment of assets:
An asset is treated as impaired when the carrying cost
of asset exceeds its recoverable value. At each year end,
assets are broadly evaluated for impairment. Provision
for impairment of asset is made only if the recoverable
amount of the asset goes below the carrying amount of
the asset.
For the purpose of impairment testing, the recoverable
amount (i.e. the higher of the fair value less cost to sell
and the value-in-use) is determined on an individual asset
basis unless the asset does not generate cash flows that
are largely independent of those from other assets. In
such cases, the recoverable amount is determined for the
Cash Generating Unit (CGU) to which the asset belongs.
If such assets are considered to be impaired, the
impairment to be recognized in the Statement of Profit
and Loss is measured by the amount by which the carrying
value of the assets exceeds the estimated recoverable
amount of the asset. An impairment loss is reversed in the
Statement of Profit and Loss if there has been a change
in the estimates used to determine the recoverable
amount. The carrying amount of the asset is increased to
its revised recoverable amount, provided that this amount
does not exceed the carrying amount that would have
been determined (net of any accumulated depreciation)
had no impairment loss been recognized for the asset in
prior years.
(vi) Leases:
The company has applied Ind AS 116 for leases.
As a lessee, the Company recognizes a right-of-use
asset and a lease liability at the lease commencement
date. The right-of-use asset is initially measured at
cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or
before the commencement date, plus any initial direct
costs incurred and an estimate of costs to dismantle and
remove the underlying asset or to restore the underlying
asset or the site on which it is located, less any lease
incentives received.
The right-of-use asset is subsequently depreciated
using the straight-line method from the commencement
date to the earlier of the end of the useful life of the right-
of-use asset or the end of the lease term. The estimated
useful lives of right-of-use assets are determined on
the same basis as those of property and equipment. In
addition, the right-of-use asset is periodically reduced
by impairment losses, if any, and adjusted for certain re¬
measurements of the lease liability.
The lease liability is initially measured at the present
value of 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, Company’s incremental borrowing rate.
Generally, the Company uses its incremental borrowing
rate as the discount rate.
Lease payments included in the measurement of the lease
liability comprise the following:
• Fixed payments, including in-substance fixed
payments;
• Variable lease payments that depend on an index or
a rate, initially measured using the index or rate as at
the commencement date;
• Amounts expected to be payable under a residual
value guarantee; and
• The exercise price under a purchase option that
the Company is reasonably certain to exercise,
lease payments in an optional renewal period if
the Company is reasonably certain to exercise an
extension option, and penalties for early termination
of a lease unless the Company is reasonably certain
not to terminate early.
The lease liability is measured at amortized cost using the
effective interest method. It is remeasured when there is
a change in future lease payments arising from a change
in an index or rate, if there is a change in the Company’s
estimate of the amount expected to be payable under
a residual value guarantee, or if Company changes
its assessment of whether it will exercise a purchase,
extension or termination option.
When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount
of the right-of-use asset, or is recorded in profit or loss if
the carrying amount of the right-of-use asset has been
reduced to zero.
The Company presents right-of-use assets that do not
meet the definition of investment property in 'property,
plant and equipment’ and lease liabilities in 'loans and
borrowings’ in the statement of financial position.
Short-term leases and leases of low-value assets
The Company has elected not to recognize right-of-use
assets and lease liabilities for short term leases of real
estate properties that have a lease term of 12 months. The
Company recognizes the lease payments associated with
these leases as an expense on a straight-line basis over
the lease term.
Sale and Lease back:
Since the control of the Assets sold are not effectively
transferred to the buyer, in accordance with Para B66
of Ind AS 115 read with Paras 99 and 103 of Ind AS 116,
those assets are considered as part of Property, Plant
and Equipment.
Liabilities resulting from such transactions are considered
Financial Liabilities in the Financial Statements.
(vii) Financial instruments:
Initial Recognition and Measurement
Financial assets and/or financial liabilities are recognized
when the Company becomes party to a contract embodying
the related financial instruments. All financial assets,
financial liabilities and financial guarantee contracts
are initially measured at transaction values and where
such values are different from the fair value, at fair value.
Transaction costs that are attributable to the acquisition
or issue of financial assets and financial liabilities (other
than financial assets and financial liabilities at fair value
through profit or loss) are added to or deducted from as
the case may be, the fair value of such financial assets
or liabilities, on initial recognition. Transaction costs
directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are
recognized immediately in Profit or Loss.
Offset
A financial asset and a financial liability are offset and
presented on net basis in the balance sheet when there is a
current legally enforceable right to set-off the recognized
amounts and it is intended to either settle on net basis or
to realize the asset and settle the liability simultaneously.
A. Financial Assets:
a. Subsequent measurement:
For subsequent measurement, the Company classifies
financial asset in following broad categories:
• Financial asset carried at amortized cost.
• Financial asset carried at fair value through other
comprehensive income (FVTOCI).
• Financial asset carried at fair value through profit or
loss (FVTPL).
i. Financial asset carried at amortized cost (net of any
write down for impairment, if any):
Financial assets are measured at amortized cost when
asset is held within a business model, whose objective
is to hold assets for collecting contractual cash flows
and contractual terms of the asset give rise on specified
dates to cash flows that are solely payments of principal
and interest. Such financial assets are subsequently
measured at amortized costs using Effective Interest Rate
(EIR) method less impairment, if any. The losses arising
from impairment are recognized in the statement of profit
or loss. Cash and bank balances, trade receivables, loans
and other financial asset of the company are covered
under this category.
Under the EIR method, the future cash receipts are
exactly discounted to the initial recognition value using
EIR. The cumulative amortization using the EIR method of
the difference between the initial recognition amount and
maturity amount is added to the initial recognition value
(net of principal repayments, if any) of the financial asset
over the relevant period of the financial asset to arrive at
amortized cost at each reporting date. The corresponding
effect of the amortization under EIR method is recognized
as interest income over the relevant period of the financial
asset. The same is included under “other income” in the
statement of profit or loss. The amortized cost of the
financial asset is also adjusted for loss allowance, if any.
ii. Financial asset carried at FVTOCI:
Financial asset under this category are measured initially
as well as at each reporting date at fair value, when asset
is held with a business model whose objective is to hold
asset for both collecting contractual cash flows and selling
financial assets. Fair value movements are recognized in
the other comprehensive income.
iii. Financial asset carried at FVTPL:
Financial asset under this category are measured initially
as well as at each reporting date at fair value. Changes in
fair value are recognized in the statement of profit or loss.
b. Derecognition:
A financial asset is primarily derecognized when rights
to receive cash flows from the asset have expired or the
Company has transferred its contractual rights to receive
cash flows of the financial asset and has substantially
transferred all the risk and reward of the ownership of the
financial asset.
c. Impairment of financial asset:
In accordance with Ind AS 109, the Company uses
'Expected Credit Loss’ (ECL) model, for evaluating
impairment of financial assets other than those measured
at fair value through profit and loss (FVTPL).
ECL is the difference between all contractual cash flows
that are due to the Company in accordance with the
contract and all the cash flows that the entity expects to
receive (i.e., all cash shortfalls), discounted at the original
effective interest rate.
Lifetime ECL are the expected credit losses resulting
from all possible default events over the expected life of
a financial asset. 12-month ECL is a portion of the lifetime
ECL which results from default events that are possible
within 12 months from the reporting date.
For trade receivables, the Company applies 'simplified
approach’ which requires expected lifetime losses to be
recognized 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 analyzed.
For other assets, the Company uses 12-month ECL to
provide for impairment loss where there is no significant
increase in credit risk. If there is significant increase in
credit risk full lifetime ECL is used.
ECL impairment loss allowance (or reversal) recognized
during the period is recognized as income/expense in
the Statement of Profit and Loss under the head 'Other
expenses’.
B. Financial Liabilities:
a. Subsequent measurement:
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.
Interest-bearing loans and borrowings are subsequently
measured at amortized cost using the Effective Interest
Rate (EIR) method. Gains and losses are recognized in
profit or loss when the liabilities are derecognized as well
as through 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.
b. Derecognition of financial liabilities:
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
derecognition 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.
c. Derivative financial instrument:
Company uses derivative financial instruments such as
interest rate swaps, currency swaps, forward contracts
to mitigate the risk of changes in interest rate and
foreign currency exchange rate. At the inception of a
hedge relationship, the Company formally designates
and documents the hedge relationship to which the
Company wishes to apply hedge accounting and the risk
management objective and strategy for undertaking the
hedge. Such derivative financial instruments are initially
recognised at fair value on the date on which a derivative
contract is entered into and are also subsequently
measured at fair value.
Derivatives are carried as financial assets when the
fair value is positive and as financial liabilities when the
fair value is negative. Any gains or losses arising from
changes in the fair value of derivatives are taken directly
to Statement of Profit and Loss, except for the effective
portion of cash flow hedge which is recognised in Other
Comprehensive Income and later to Statement of Profit
and Loss when the hedged item affects profit or loss
or is treated as basis adjustment if a hedged forecast
transaction subsequently results in the recognition of a
Non-Financial Assets or Non-Financial liability. Hedges
that meet the criteria for hedge accounting are accounted
for as follows:
A. Cash Flow Hedge:
The Company designates derivative contracts or non¬
derivative Financial Assets/ Liabilities as hedging
instruments to mitigate the risk of movement in
interest rates and foreign exchange rates for foreign
exchange exposure on highly probable future cash flows
attributable to a recognised asset or liability or forecast
cash transactions.
When a derivative is designated as a cash flow hedging
instrument, the effective portion of changes in the fair
value of the derivative is recognised in the cash flow
hedging reserve being part of Other Comprehensive
Income. Any ineffective portion of changes in the fair
value of the derivative is recognised immediately in the
Statement of Profit and Loss. If the hedging relationship
no longer meets the criteria for hedge accounting, then
hedge accounting is discontinued prospectively. If the
hedging instrument expires or is sold, terminated or
exercised, the cumulative gain or loss on the hedging
instrument recognised in cash flow hedging reserve till
the period the hedge was effective remains in cash flow
hedging reserve until the underlying transaction occurs.
The cumulative gain or loss previously recognised in the
cash flow hedging reserve is transferred to the Statement
of Profit and Loss upon the occurrence of the underlying
transaction. If the forecasted transaction is no longer
expected to occur, then the amount accumulated in cash
flow hedging reserve is reclassified in the Statement of
Profit and Loss.
B. Fair Value Hedge:
The Company designates derivative contracts or
non-derivative Financial Assets/Liabilities as hedging
instruments to mitigate the risk of change in fair value of
hedged item due to movement in interest rates, foreign
exchange rates and commodity prices. Changes in the
fair value of hedging instruments and hedged items
that are designated and qualify as fair value hedges
are recorded in the Statement of Profit and Loss. If the
hedging relationship no longer meets the criteria for
hedge accounting, the adjustment to the carrying amount
of a hedged item for which the effective interest method is
used is amortized to Statement of Profit and Loss over the
period of maturity.
(viii) Trade receivables:
Trade receivables are recognized initially at fair value
and subsequently measured at amortized cost using the
effective interest method, less provision for impairment.
(ix) Inventories:
Inventories comprise of Raw and packing materials, Work-
in-progress, Finished goods, and Stores and spares.
Inventories are valued at the lower of cost and the net
realizable value. Cost is determined on weighted average
basis. Cost includes all charges in bringing the goods to
their present location and condition. The cost of Work-
in-progress and Finished goods comprises of materials,
direct labour, other direct costs and related production
overheads.
Net realizable 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.
(x) Employee benefits:
(a) Short-term employee benefits:
Employee benefits such as salaries, wages, short term
compensated absences, expected cost of bonus, ex-
gratia and performance-linked rewards falling due
wholly within twelve months of rendering the service
are classified as short-term employee benefits and are
expensed in the period in which the employee renders the
related service.
(b) Post-employment benefits:
i. Defined contribution plans:
The contribution paid/payable under defined contribution
plan is recognized during the period in which the employee
renders the related service.
ii. Defined benefit plans:
The liability or asset recognized in the balance sheet in
respect of defined benefit gratuity plans is the present
value of the defined obligation at the end of the reporting
period less the fair value of plan assets. The defined
obligation is calculated annually based on actuarial
valuation using the Projected Unit Credit Method.
The obligation is measured at the present value of
the estimated future cash flows using a discount rate
based on the market yield on government securities of
a maturity period equivalent to the weighted average
maturity profile of the defined benefit obligations at the
Balance Sheet date.
Re-measurement, comprising actuarial gains and losses,
the return on plan assets (excluding amounts included in
net interest on the net defined benefit liability or asset)
and any change in the effect of asset ceiling (if applicable)
is recognized in Other Comprehensive Income and is
reflected in Retained earnings and the same is not eligible
to be reclassified to Profit or Loss.
Defined benefit costs comprising current service cost,
past service cost and gains or losses on settlements
are recognized in the Statement of Profit and Loss as
employee benefits expense. Interest cost implicit in
defined benefit employee cost is recognised in the
Statement of Profit and Loss under finance cost. Gains
or losses on settlement of any defined benefit plan are
recognized when the settlement occurs. Past service
cost is recognized as expense at the earlier of the plan
amendment or curtailment and when the company
recognizes related restructuring costs or termination
benefits.
In case of funded plans, the fair value of the plan assets
is reduced from the gross obligation under the defined
benefit plans to recognize the obligation on a net basis.
Leave Salary is considered as short-term benefits and
the same is accrued and paid within the working cycle of
the business.
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