3 Significant accounting Policies

3.1 Statement of Compliance

These financial statements have been prepared in
accordance with the Indian Accounting Standards (‘Ind
AS’) as notified by Ministry of Corporate Affairs pursuant
to section 133 of Companies Act, 2013. The Company
has uniformaly applied the accounting policies for the
periods presented in these financial statements.

3.2 Basis of preparation

The financial statements have been prepared on accrual
and going concern basis. Certain financial instruments
that are measured at fair values at the end of each
reporting period, as explained in the accounting policies
below. Historical cost is generally based on the fair value
of the consideration given in exchange for goods and
services. All assets and liabilities have been classified
as current or non-current as per the Company’s normal
operating cycle and other criteria set out in the Schedule
III to the Companies Act, 2013. The financial statements
are presented in Indian Rupees which is also the
Company’s functional currency. All the amounts are

rounded to the nearest Thousands and two decimal
thereof, unless otherwise indicated.

Fair Value measurement

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 under current market conditions. The Company
categorizes assets and liabilities measured at fair value
into one of three levels depending on the ability to
observe inputs employed in their measurement which
are described as follows:

a) Level 1 inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities.

b) Level 2 inputs are inputs that are observable, either
directly or indirectly, other than quoted prices
included within level 1 for the asset or liability.

c) Level 3 inputs are unobservable inputs for the
asset or liability reflecting significant modifications
to observable related market data or Company’s
assumptions about pricing by market participants.

3.3 Revenue Recognition

According to Ind AS 115, revenue is measured at the
amount of consideration the Company expects to receive
in exchange for the goods or services when control of
the products or services and the benefits obtainable
from them are transferred to the customer. Revenue is
recognised using the following five step model specified
in Ind AS 115:

Step 1: Identify contracts with customers.

Step 2: Identify performance obligations contained in the
contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance
obligation.

Step 5: Recognise revenue when a performance
obligation is satisfied.

Sales are recognized when risks and rewards (transfer
of custody of goods) are passed to customers and
include all statutory levies except Goods and services
Tax (GST) and is net of discounts.

Service Income resulting from achievement of milestone
events stipulated in agreements is recognized when
the milestone is achieved. Milestones are based on the
occurrence of a substantive element specified in the

contract or as a measure of substantive progress made
towards completion under the contract.

Dividend income is recognized when the right to receive
the dividend is established.

Interest income is accrued on a time basis, by reference
to the principal outstanding and at the effective interest
rate applicable (which is the rate that exactly discounts
estimated future cash receipts through the expected life
of the financial asset to that asset’s net carrying amount
on initial recognition).

For non financial assets, interest income is recognized
on a time proportion basis.

Revenue from sale of scrap is recognized when risks
and rewards (transfer of custody of goods) are passed
to customers.

Revenue in respect of Liquidated Damages from
contractors/ suppliers is recognized when determined
as not payable.

3.4 Leases

Leases are classified as finance leases 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.

Leasehold lands where the ownership of the land will not
be transferred to Company at the end of lease period
are classified as operating leases. Upfront operating
lease payments are recognized as prepayments and
amortized on a straight-line basis over the term of the
lease. Leasehold lands are considered as finance lease
where ownership will be transferred to the Company as
at the end of lease period. Such leasehold lands are
presented under property, plant and equipment and not
depreciated.

3.5 Foreign currencies

The functional currency of the Company is Indian
Rupees which represents the currency of the primary
economic environment in which it operates. Transactions
in currencies other than the Company’s functional
currency (foreign currencies) are recognized at the rates
of exchange prevailing at the dates of the transactions.
At the end of each reporting period, monetary items
denominated in foreign currencies are retranslated
using closing exchange rate prevailing on the last day of
the reporting period.

3.6 Borrowing Costs

Borrowing costs specifically identified to the acquisition
or construction of qualifying assets is capitalized as part
of such assets. A qualifying asset is one that necessarily
takes substantial period of time to get ready for intended
use. All other borrowing costs are charged in the
statement of profit and loss.

3.7 Employee Benefits

Employee benefits include provident fund, gratuity fund,
compensated absences and resettlement allowances.

Defined benefit plans

- Description of the Plan

• The Company has a defined benefit gratuity
plan (funded). Gratuity is payable to all eligible
employees of the Company on superannuation,
death and resignation, in terms of the provisions
of the Payment of Gratuity Act or as per the
Company’s Scheme whichever is more beneficial.

Defined retirement benefit plan of gratuity is
recognized based on the present value of
defined benefit obligation and is computed using
the projected unit credit method, with actuarial
valuations being carried out at the end of each
annual reporting period. These are accounted as
current employee cost or included in cost of assets
as permitted.

• Gratutiy provision is made on acturial basis for the
employees who are in continues service for five
years with the company and the acturial gain/(loss)
is recognized by the company in the Statement of
Profit and Loss of the year.

• Employee benefit under defined contribution
plans comprising of provident fund is recognized
based on the amount of obligation of the Company
to contribute to the plan. The same is paid to a
Provident Fund Trust authorities and to Life
Insurance Corporation of India respectively, which
are expensed during the year.

• Net interest on the net defined liability is calculated
by applying the discount rate at the beginning of
the period to the net defined benefit liability or
asset and is recognized in the statement of profit
and loss except those included in cost of assets as
permitted. Re-measurement, comprising actuarial

gains and losses, the effect of the changes to
the asset ceiling (if applicable) and the return on
plan assets (excluding net interest as defined
above),are recognized in other comprehensive
income except those included in cost of assets
as permitted in the period in which they occur and
are not subsequently reclassified to profit or loss.
The Company contributes all ascertained liabilities
with respect to Gratuity to the Life Insurance
Corporation of India.

Short-term employee benefits

• The undiscounted amount of short-term employee
benefits expected to be paid in exchange for the
services rendered by employees are recognized
during the year when the employees render the
service. These benefits include performance
incentive and compensated absences which are
expected to occur within twelve months after the
end of the period in which the employee renders
the related service.

• The cost of short-term compensated absences is
accounted as under :

(a) in case of accumulated compensated
absences, when employees render the
services that increase their entitlement of
future compensated absences; and

(b) in case of non-accumulating compensated
absences, when the absences occur.

Long-term employee benefits

• Compensated absences which are not expected
to occur within twelve months after the end of the
period in which the employee renders the related
service are recognized as a liability at the present
value of the defined benefit obligation as at the
balance sheet date less the fair value of the plan
assets out of which the obligations are expected to
be settled.

3.8 Taxation

Income tax expense represents the sum of the tax
currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for
the year. Taxable profit differs from ‘profit before tax’ as
reported in the statement of profit and loss because of
items of income or expense that are taxable or deductible
in other years and items that are never taxable or

deductible. The Company’s current tax is calculated
using tax rates that have been enacted or substantively
enacted by the end of the reporting period.

Deferred tax

Deferred tax is recognized on temporary differences
between the carrying amounts of assets and liabilities
in the Financial Statements and the corresponding tax
bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognized for all
taxable temporary differences. Deferred tax assets
are generally recognized for all deductible temporary
differences to the extent that it is probable that taxable
profits will be available against which those deductible
temporary differences can be utilized.

Deferred taxes are recognized in respect of temporary
differences which originate during the tax holiday period
but reverse after the tax holiday period. For this purpose,
reversal of temporary difference is determined using first
in first out method.

The carrying amount of deferred tax assets is reviewed
at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to
be recovered.

Deferred tax liabilities and assets are measured at the
tax rates that are expected to apply in the period in
which the liability is settled or the asset realized, based
on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.

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 end of the
reporting period, to recover or settle the carrying amount
of its assets and liabilities.

Deferred tax assets include Minimum Alternative Tax
(MAT) paid in accordance with the tax laws in India,
which is likely to give future economic benefits in the
form of availability of set off against future income tax
liability. Accordingly, MAT is recognized as deferred
tax asset in the balance sheet when the asset can be
measured reliably and it is probable that the future
economic benefit associated with asset will be realized.

Current and deferred tax for the year

Current and deferred tax are recognized instatement of
profit or loss, except when they relate to items that are
recognized in other comprehensive income or directly

in equity, in which case, the current and deferred tax
are also recognized in other comprehensive income or
directly in equity respectively.

3.9 Property, Plant and Equipment (PPE)

Land and buildings held for use in the production
or supply of goods or services, or for administrative
purposes, are stated in the balance sheet at cost less
accumulated depreciation and accumulated impairment
losses if any. Freehold land is not depreciated.

PPE in the course of construction for production,
supply or administrative purposes are carried at cost,
less any recognized impairment loss. The cost of an
asset comprises its purchase price or its construction
cost (net of applicable tax credits)and any cost directly
attributable to bring the asset into the location and
condition necessary for it to be capable of operating in
the manner intended by the management. It includes
professional fees and borrowing costs for qualifying
assets capitalized in accordance with the Company’s
accounting policy. Such properties are classified to the
appropriate categories of PPE when completed and
ready for intended use. Parts of an item of PPE having
different useful lives and material value as assessed by
management and subsequent capital expenditure on
Property, Plant and Equipment are accounted for as
separate components.

PPE are stated at cost less accumulated depreciation
and accumulated impairment losses if any.

Depreciation of PPE commences when the assets are
ready for their intended use.

Depreciation is provided on the cost of PPE(other than
freehold land and properties under construction) less
their residual values over their useful lives, using Straight
Line Method, over the useful life of component of various
Assets as specified in Schedule II to the Companies Act,
2013.

Depreciation on additions/deletions to PPE during the
year is provided for on a pro-rata basis with reference
to the date of additions/deletions except low value items
not exceeding Rs. 5,000/-.

Assets held under finance leases are depreciated over
their expected useful lives on the same basis as owned
assets.

An item of property, plant and equipment is derecognized
upon disposal, replacement 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 profit
or loss.

3.10 Intangible assets

Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated
amortization and accumulated impairment losses.
Amortization is recognized on a straight-line basis over
their estimated useful lives. The estimated useful life
and amortization method are reviewed at the end of
each reporting period, with the effect of any changes
in estimate being accounted for on a prospective basis.
Intangible assets with indefinite useful lives that are
acquired separately are carried at cost less accumulated
impairment losses if any.

De-recognition of intangible assets

An intangible asset is derecognized on disposal, or when
no future economic benefits are expected from use or
disposal. Gains or losses arising from de-recognition of
an intangible asset, measured as the difference between
the net disposal proceeds and the carrying amount of
the asset, and are recognized in profit or loss when the
asset is derecognized.

Useful lives of intangible assets

Estimated useful lives of the intangible assets are as
follows :-

a) Estimated useful lives of computer softwere is 3 or
10 years

b) Estimated useful lives of licence and franchise is 2
or 10 years

3.11 Cash flow statement

Cash flows are reported using the indirect method,
whereby profit after tax is adjusted for the effects of
transactions of a non-cash nature, any deferrals or
accruals of past or future operating cash receipts or
payments and item of income or expenses associated
with investing or financing cash flows. The cash flows
are segregated into operating, investing and financing
activities.

3.12 Inventories

Inventories are valued at lower of cost and net realizable
value. Cost of inventories comprises of purchase cost

and other costs incurred in bringing inventories to their
present location and condition. The cost has been
determined as under:

a) Raw material has been determined as weighted
average cost basis.

b) Finished product has been determined as raw
material and conversion cost.

c) Stock-in-Process has been determined as raw
material and Proportionate conversion cost.

d) Stores and Spares has been determined as
weighted average cost basis.

The net realisable value is the estimated selling price in
the ordinary course of business less the estimated costs
of completion and estimated costs necessary to make
the sale.

Assessment of net realisable value is made at each
subsequent reporting date. When the circumstances that
previously caused inventories to be written down below
cost no longer exist or when there is clear evidence of
an increase in net realisable value because of changed
economic circumstances, the amount so written-down is
adjusted in terms of policy as stated above. Appropriate
adjustments are made to the carrying value of damaged,
slow moving and obsolete inventories based on
management’s current best estimate.