B. MATERIAL ACCOUNTING POLICIES

1. Statement of compliance

The financial statements have been prepared in accordance with Indian Accounting Standards
(Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) read with the
Companies (Indian Accounting Standards) Rules, 2015, and other relevant provisions of the Act.
In addition, the guidance notes/announcements issued by the Institute of Chartered Accountants of
India (ICAI) are also applied except where compliance with other statutory promulgations
requires a different treatment.

2. Basis of preparation

The financial statements have been prepared on the historical cost convention on an accrual
basis except for the following assets and liabilities which have been measured at fair value
amount:

i) Defined benefit plans

Historical cost is generally based on the fair value of the consideration given in exchange for
goods or 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, regardless of
whether that price is directly observable or estimated using another valuation technique.

3. Operating Cycle for current and non-current classification

The Company presents assets and liabilities in the Balance Sheet based on current/ non-current
classification.

An asset is classified as current when it is:

a) expected to be realized or intended to be sold or consumed in the normal operating
cycle,

b) held primarily for the purpose of trading,

c) expected to be realized within twelve months after the reporting period, or

d) cash or cash equivalents 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 classified as current when:

a) it is expected to be settled in the normal operating cycle,

b) it is held primarily for the purpose of trading,

c) it is due to be settled within twelve months after the reporting period, or

d) 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.

The operating cycle of the Company, that is, the time between the acquisition of assets for
processing and their realization in cash or cash equivalent is 12 months.

Deferred tax assets and liabilities are classified as non-current.

4. The company’s financial statements are presented in Indian Rupees, which is also its functional
currency.

5. Critical estimate and Judgements

The preparation of financial statements in conformity with Ind AS requires management to make
judgments, estimates, and assumptions that affect the application of the accounting policies
and the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenues and
expenses during the year. Actual results could differ from those estimates. The estimates and
underlying assumptions are reviewed on an ongoing basis.

The areas involving critical estimates or judgments are:

• Employee benefits (estimation of defined benefit obligation)

Post-employment benefits represent obligations that will be settled in the future and require

assumptions to project benefit obligations. Post- employment benefit accounting is intended
to reflect the recognition of future benefit costs over the employee’s approximate service
period, based on the terms of the plans and the investment and funding decisions made. The
accounting requires the Company to make assumptions regarding variables such as discount
rate and salary growth rate. Changes in these key assumptions can have a significant impact on
the defined benefit obligations.

• Estimation of expected useful lives of property, plant, and equipment Management reviews its
estimate of the useful lives of property, plant, and equipment at each reporting date, based

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on the expected utility of the assets. Uncertainties in these estimates relate to technical
and economic obsolescence that may change the utility of property, plant, and equipment.

• Contingencies

Legal proceedings covering a range of matters are pending against the Company. Due to the
uncertainty inherent in such matters, it is often difficult to predict the final outcome. The cases
and claims against the Company often raise difficult and complex factual and legal issues that
are subject to many uncertainties and complexities, including but not limited to the facts and
circumstances of each particular case/claim, the jurisdiction and the differences in applicable
law. In the normal course of business, the Company consults with legal counsel and other
experts on matters related to litigations. The Company accrues a liability when it is
determined that an adverse outcome is probable and the amount of the loss can be reasonably
estimated. In the event an adverse outcome is possible or an estimate is not determinable, the
matter is disclosed.

• Valuation of deferred tax assets

Deferred income tax expense is calculated based on the differences between the carrying
value of assets and liabilities for financial reporting purposes and their respective tax bases
that are considered temporary in nature.

The valuation of deferred tax assets is dependent on management’s assessment of the future
recoverability of the deferred benefit. Expected recoverability may result from expected
taxable income in the future, planned transactions, or planned optimizing measures. Economic
conditions may change and lead to a different conclusion regarding recoverability.

• Fair value measurements

When the fair values of financial assets and financial liabilities recorded in the Balance Sheet
cannot be measured based on quoted prices in active markets, their fair values are measured

using valuation techniques, including the market multiples model (Market Approach) and
Capitalisation method (Income Approach) which involve various judgments and assumptions.

• Impairment of Property, plant and equipment, Right-of-use assets, intangible assets (other
than goodwill), and Capital work-in-progress

The Company estimates the value in use of the cash-generating unit (CGU) based on future
cash flows after considering current economic conditions and trends, estimated future
operating results and growth rates and anticipated future economic and regulatory conditions.
The estimated cash flows are developed using internal forecasts. The cash flows are discounted
using a suitable discount rate in order to calculate the present value.

For the purpose of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash inflows which are largely independent of the cash
inflows from other assets or groups of assets.

Revisions to accounting estimates are recognized prospectively in the period in which the
estimate is revised if the revision affects only that period; they are recognized in the period of
the revision and future periods if the revision affects both current and future periods.

6. Property, plant, and equipment (PPE)

Property, plant, and equipment are stated at cost, net of recoverable taxes, trade discounts, and
rebates less accumulated depreciation and impairment losses, if any. Such cost includes
purchase price, borrowing cost, and any cost directly attributable to bringing the assets to their
working condition for its intended use, net charges on foreign exchange contracts, and
adjustments arising from exchange rate variations attributable to the assets.

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 entity and the cost can be measured reliably.

Assets are classified into the appropriate categories of property, plant, and equipment when
completed and ready for intended use.

Expenses incurred relating to the project, including borrowing cost and net income earned
during the project development stage prior to its intended use, are considered as pre¬
operative expenses and disclosed under Capital Work-in-Progress.

Spare parts are capitalized when they meet the definition of PPE, i.e., when the Company intends
to use these during more than a period of 12 months.

7. Investment property

Property that is held for long-term rental yields or for capital appreciation or both, and that is
not occupied by the Company, is classified as investment property. Property, plant, and
equipment are stated at cost, net of recoverable taxes, trade discounts, and rebates less
accumulated depreciation and impairment losses, if any. For this purpose, cost includes
deemed cost which represents the carrying value of property, plant, and equipment
recognized on 1st April 2016 measured as per the previous GAAP. Such cost includes purchase
price, borrowing cost, and any cost directly attributable to bringing the assets to its working
condition for its intended use, net charges on foreign exchange contracts, and adjustments
arising from exchange rate variations attributable to the assets.

An item of property, plant, and equipment or any significant part initially recognized of such
item of property plant and equipment is derecognized upon disposal or when no future
economic benefits are expected from its use or disposal.

Any gain or loss arising on the DE recognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the asset) is included in the
income statement when the asset is unrecognized.

8. Depreciation

Depreciable amount for assets is the cost of an asset, or other amount substituted for cost,
less its estimated residual value. Depreciation has been provided on such cost of assets less
their residual values on straight line method on the basis of estimated useful life of assets as
prescribed in Schedule II of the Act.

Freehold land is not depreciated/amortized.

Assets held under financial leases are depreciated over their expected useful lives on the same
basis as owned assets or, wherever shorter, the term of the relevant lease.

Depreciation is calculated on a pro-rata basis except that, assets costing up to Rs. 5,000 each
are fully depreciated in the year of purchase.

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

9. Intangible Assets

Intangible Assets are stated at the cost of acquisition net of recoverable taxes, trade

discount, and rebates less accumulated amortization/depletion and impairment loss, if any.
Such cost includes purchase price, borrowing costs, and any cost directly attributable to
bringing the asset to its working condition for the intended use, net charges on foreign
exchange contracts, and adjustments arising from exchange rate variations attributable to
the intangible assets.

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 entity and the cost can be measured reliably.

Following initial recognition, intangible assets are carried at cost less any accumulated
amortization and accumulated impairment losses, if any.

Gains or losses arising from the derecognition of an intangible asset are measured as the
difference between the net disposal proceeds and the carrying amount of the asset and are
recognized in the Statement of Profit and Loss when the asset is derecognized.

Intangible assets being computer software are amortised on a straight line method over the
period of five years.

10. Impairment of tangible and intangible assets other than goodwill

The Company assesses, at each reporting date, whether there is an indication that an
asset may be impaired. If any indication exists, or when annual impairment testing for an
asset is required, the Company estimates the asset’s recoverable amount. An asset’s
recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less
costs of disposal and its value in use.

Impairment loss is recognized when the carrying amount of an asset exceeds recoverable
amount.

For assets excluding goodwill, an assessment is made at each reporting date to determine
whether there is an indication that previously recognized impairment losses no longer exist or
have decreased.

If such indication exists, the Company estimates the asset’s or CGU’s recoverable amount. A
previously recognised impairment loss is reversed. The reversal is limited so that the carrying
amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount
that would have been determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years.

11. Leases

Company as a Lessee

The Company assesses whether a contract contains a lease, at the inception of a contract. A
contract is, or contains, a lease if the contract conveys the right to control the use of an
identified asset for a defined period of time in exchange for consideration. To assess whether a
contract conveys the right to control the use of an identified asset, the Company assesses
whether: (i) the contract involves the use of an identified asset (ii) the Company has
substantially all of the economic benefits from use of the asset through the period of the lease
and (iii) the Company has the right to direct the use of the asset.

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, and the Company’s incremental borrowing
rate. For leases with reasonably similar characteristics, the Company, on a lease-by-lease
basis, may adopt either the incremental borrowing rate specific to the lease or the incremental
borrowing rate for the portfolio as a whole.

Lease payments included in the measurement of the lease liability comprise the fixed payments,
including in-substance fixed payments and lease payments in an optional renewal period if the
Company is reasonably certain to exercise an extension option;

The lease liability is measured at amortized cost using the effective interest method.

The Company has elected not to recognize right-of-use assets and lease liabilities for short¬
term leases that have a lease term of 12 months or less and leases of low-value assets. The
Company recognizes the lease payments associated with these leases as an expense on a
straight-line basis over the lease term. The Company applied a single discount rate to a
portfolio of leases of similar assets in a similar economic environment with a similar end date.
Company as a Lessor

Leases in which the Company does not transfer substantially all the risks and rewards of
ownership of an asset are classified as operating leases. Where the Company is a lessor under
an operating lease, the asset is capitalized within property, plant, and equipment and
depreciated over its useful economic life. Payments received under operating leases are
recognized in the Statement of Profit and Loss on a straight-line basis over the term of the
lease.

12. Inventories

Inventories are valued at cost or net realizable value, whichever is lower. The basis for
determining the cost for various categories of inventory are as follows:

(a) Raw materials, Chemicals, Components, stores & spares, and Stock in Trade - Cost
includes the cost of purchase (Net of recoverable taxes) and other costs incurred in bringing
the inventories to their present location and condition. Cost is determined on a FIFO basis.

(b) Stock in process and finished goods- Direct cost plus an appropriate share of overheads.

(c) Saleable Scrap/Waste/By-products - At estimated realizable value.

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.

13. Foreign Currencies

a) Functional and presentation currency

Items included in the financial statements are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The financial
statements are presented in Indian Rupee (INR/Rupees), which is the Company’s functional and
presentation currency.

b) Transaction and balances

Transactions in foreign currencies are recorded on initial recognition at the exchange rate

prevailing on the date of the transaction.

Any gains or losses arising due to differences in exchange rates at the time of translation or
settlement are accounted for in the Statement of Profit & Loss either under the head foreign
exchange fluctuation or interest cost, as the case may be, except those relating to long-term
foreign currency monetary items.

14. Investment in Subsidiaries and Associates

Investments in subsidiaries, associates, and other related parties are carried at cost less
accumulated impairment, if any.

15. 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. 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 which can be
accessed by the Company for the asset or liability.

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.

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.

16. Financial Assets
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. Purchases or sales of financial assets that require delivery of
assets within a time frame established by regulation or convention in the marketplace
(regular way trades) are recognized on the trade date, i.e., the date that the Company
commits to purchase or sell the asset.

Subsequent measurement

Subsequent measurement is determined with reference to the classification of the respective
financial assets. Based on the business model for managing the financial assets and the
contractual cash flow characteristics of the financial asset, the Company classifies financial
assets as subsequently measured at amortized cost, fair value through other comprehensive
income or fair value through profit and loss.

Debt instruments at amortized cost

Debt instruments such as trade and other receivables, security deposits, and loans given are
measured at the amortized cost if both the following conditions are met:

The 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 (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.

Equity investments

All equity investments in the scope of Ind-AS 109 are measured at fair value. Equity instruments
that are held for trading are classified as at FVTPL. For all other equity instruments, the company
decides to classify the same either as at FVTOCI or FVTPL. The company makes such an election
on an instrument- by-instrument basis. The classification is made on initial recognition and is
irrevocable.

Equity instruments included w'thin the FVTPL category are measured at fair value with all
changes recognized in the Profit or loss.

De-recognition

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is primarily derecognized (i.e. removed from the Company's Balance Sheet)
when

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

• 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:

• The Company has transferred substantially all the risks and rewards of the asset, or

• The Company has neither transferred nor retained substantially all the risks and rewards of the
asset, but has transferred control of the asset.

On de-recognition, any gains or losses on all debt instruments (other than debt instruments
measured at FVOCI) and equity instruments (measured at FVTPL) are recognised in the
Statement of Profit and Loss. Gains and losses in respect of debt instruments measured at FVOCI
and that are accumulated in OCI are reclassified to profit or loss on de-recognition. Gains or
losses on equity instruments measured at FVOCI that are recognised and accumulated in OCI are
not reclassified to profit or loss on de-recognition.

17. Impairment of financial assets

The Company applies expected credit loss (ECL) model for measurement and recognition of
impairment loss on the following financial assets and credit risk exposure:

a) Financial assets that are debt instruments, and are measured at amortised cost e.g., loans,
debt securities, deposits, trade receivables and bank balance.

b) Financial assets measured at fair value through other comprehensive income.

In case of other assets (listed as a) above), the company determines if there has been a
significant increase in credit risk of the financial asset since initial recognition. If the credit risk of
such assets has not increased significantly, an amount equal to 12-month ECL is measured and
recognized as loss allowance. However, if credit risk has increased significantly, an amount
equal to lifetime ECL is measured and recognized as loss allowance.

18. Financial Liabilities
Initial recognition and measurement

All financial liabilities are recognised 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, and derivative financial instruments.

Subsequent measurement

The measurement of financial liabilities depends on their classification, as described below:
Financial Liabilities at Fair Value through Profit or Loss (FVTPL)

Financial liabilities at fair value through profit or loss include financial liabilities designated
upon initial recognition as at fair value through profit or loss.

Financial liabilities designated upon initial recognition at fair value through profit or loss are
designated 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/ losses are not subsequently transferred to profit
or loss. 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 or loss.
Financial Liabilities at amortised cost

Financial liabilities classified and measured at amortized cost such as loans and borrowings
are initially recognized at fair value, net of transaction cost incurred. After initial
recognition, financial liabilities 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 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.

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.

19. Derivative financial instruments

The Company uses derivative financial instruments to manage the commodity price risk and
exposure on account of fluctuation in interest rate and foreign exchange rates. Such derivative
financial instruments are initially recognized at fair value on the date on which a derivative
contract is entered into and are subsequently measured at fair value with changes being
recognized in Statement of Profit and Loss. 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 through
profit and loss.

20. Borrowings

Borrowings are initially recognized at fair value, net of transaction costs incurred.
Borrowings are subsequently measured at amortized cost. Any differences between the
proceeds (net of transaction costs) and the redemption amount is recognized in Profit or
loss over the period of the borrowing using the effective interest method. Fees paid on
the establishment of loan facilities are recognized as transaction costs of the loan to the
extent that it is probable that some or all of the facilities will be drawn down. In this case, the
fee is deferred until the drawdown occurs.

The borrowings are removed from the Balance sheet when the obligation specified in the
contract is discharged, cancelled or expired. The difference between the carrying amount of
the financial liability that has been extinguished or transferred to another party and the
consideration paid including any noncash asset transferred or liabilities assumed, is
recognised in profit or loss as other gains/(losses).

Borrowings are classified as current liabilities unless the group has an unconditional right

to defer settlement of the liability of at least 12 months after the reporting period. Where
there is a breach of a material prov'sion of a long-term loan arrangement on or before the
end of the reporting period with the effect that the liability becomes payable on demand
on the reporting date, the entity does not classify the liability as current, if the lender
agreed, after the reporting period and before the approval of the financial statement for
issue, not to demand payment as a consequence of the breach.

21. Borrowing costs

Borrowing costs consist of interest and other costs that an entity incurs in connection with
the borrowing of funds.

Borrowing cost also includes exchange differences to the extent regarded as an adjustment
to the borrowing costs.

Borrowing costs, allocated to and utilised for qualifying assets, pertaining to the period from
commencement of activ'ties relating to construction/development of the qualifying asset
upto the date of capitalization of such asset is added to the cost of the assets.

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

All other borrowing costs are expensed in the period in which they occur.

22. Offsetting 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
recognised amounts and there is an intention to settle on a net basis, to realise the assets
and settle the liabilities simultaneously. The legally enforceable right must not be
contingent on future events and must be enforceable in the normal course of business and in
the event of default, insolvency or bankruptcy of the company, or the counterparty.

23. Claims

Claims against the Company not acknowledged as debts are disclosed after a careful
evaluation of the facts and legal aspects of the matter involved.