1 CORPORATE INFORMATION
The Standalone financial statements comprise financial statements of AWL Agri Business Limited (formerly known as Adani Wilmar Limited) (“the Company “ or “AWL”) (CIN L15146GJ1999PLC035320) for the year ended 31st March 2025. The Company is a Joint venture between two global corporate groups, Adani group - the leaders in Energy & Private Infrastructure Conglomerate in India and Wilmar Group- Singapore, Asia's leading Agri business group. Its shares are listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) w.e.f. February 08, 2022. The Company is domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. The registered office of the Company is located at “Fortune House”, Nr Navrangpura Railway crossing, Ahmedabad - 380009.
The Company is in the Fast-moving consumer goods (FMCG) business comprising primarily of Edible Oil and Food & FMCG Segment. The Company also engaged in Industry Essential commodities such as Castor Derivatives, Oleo Derivatives, De-Oils Cake etc. The Company has manufacturing facilities across the country and sells primarily in India.
The Company sells its entire range of packed products in edible oil and food FMCG segment under the following brands: Fortune, King's, Raag, Alpha, Bullet, Fryola, Jubilee, Aadhar, Kohinoor, Charminar and Trophy.
On March 17, 2025, Legal name of the Company has changed from Adani Wilmar Limited to AWL Agri Business Limited. (Also refer note 16 (d))
The standalone financial statements were approved for issue in accordance with a resolution passed by the Board of Directors of the Company on 28th April, 2025.
The standalone financial statements once approved by the Board of Directors needs to be adopted by the shareholders at the Annual General Meeting of the Company.
The Board of Directors can withdraw and re-issue the financial statements so adopted only in specific cases such as non-compliance with the applicable accounting standards, with the approval of Tribunal, after following the appropriate procedure as per the Companies Act, 2013.
Statement of compliance
The Standalone financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, (as amended from time to time) and presentation requirements of Division II of Schedule III of the Companies Act, 2013 (as amended) and other accounting principles generally accepted in India.
2 Material accounting policies
2.1 Basis of preparation
The Standalone financial statements have been prepared on the historical cost basis except for derivative financial instruments, net defined benefit (asset)/ liability, equity settled ESOP at grant date fair value and certain financial assets and liabilities that are measured at fair values at the end of each reporting period, as explained in the accounting policies below. The company has prepared the financial statements on the basis that it will continue to operate as going concern.
All amounts disclosed in the Standalone financial statements and notes have been rounded off to the nearest H Crore as per the requirement of division II of Schedule III, unless otherwise indicated.
Current versus non-current classification
The Company segregates assets and liabilities into current and non-current categories for presentation in the balance sheet after considering its normal operating cycle and other criteria set-out in Ind AS-1, "Presentation of Financial Statements". For this purpose, current assets and liabilities includes current portion of non-current assets and liabilities respectively. Deferred tax assets and liabilities are always classified as non-current.
The operating cycle is time involved between the acquisition of assets for the processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle for determining current/non-current classification of assets and liabilities in the balance sheet.
2.2 Significant accounting judgements, estimates and assumptions
The preparation of the Company's Standalone financial statements requires management to make judgements / estimates and assumptions that affect the reported amounts of revenue, expenses, assets, liabilities and the accompanying disclosure, and the disclosure of contingent liabilities. The estimates and associated assumptions are based on experience and other factors that management consider to be relevant. Actual results may significantly differ from these estimates. The estimates and underlying assumptions are reviewed or an ongoing basis by the management of the Company. Revision to the accounting estimates are recognised in the period in which that estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount
of assets or liabilities affected in future. The management believes that the estimates used in preparation of the financial statements are prudent and reasonable.
Key estimates and assumptions:
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the Standalone financial statements were prepared. Existing circumstances and assumptions about future developments may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
i) Fair value measurement of financial instruments
In estimating the fair value of financial assets and financial liabilities, the Company uses market observable data to the extent available. Where such Level 1 inputs are not available, the Company establishes appropriate valuation techniques and inputs to the model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. For further details refer note 44 (A) & (B) and 47(b).
ii) Defined benefit plans (gratuity benefits) and other long term employee benefits
The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. Information about the various estimates and assumptions made in determining the present value of defined benefit obligations are disclosed in note 38. Further, obligation for accumulated balances for compensated absences are determined using actuarial valuation using various assumptions.
iii) Taxes
Significant management judgment is also required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies, including estimates of temporary differences reversing on account of available benefits from the Income Tax Act, 1961 disclosed in note 33. The amount of the deferred income tax assets considered realizable could reduce if the estimates of the future taxable income are reduced.
iv) Impairment of Non Financial Assets and Investments in Subsidiaries
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the budget for the next five years which involve estimate and assumption relating to demand of products, price realisation, exchange variation, inflation etc. and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset's performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.
These estimates are most relevant to Intangible Assets with indefinite useful life and investment in subsidiaries recognised by the Company at cost. The carrying amount of the Company's investments in subsidiaries and joint ventures are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the recoverable amount of such investments / CGUs have been determined based on value in use estimation. The key assumption used to determine recoverable amount for the Intangible Asset i.e., Brands as well as investment of subsidiary wherein impairment indication exist, including a sensitivity analysis is disclosed and further explained in Note 47.
v) Provision for expected credit losses of trade receivables and contract assets
The Company uses a provision matrix to calculate ECLs for trade receivables and contract assets. The provision rates are based on days past due for Company's various customer segments that have similar loss patterns i.e., by customer type and coverage by letters of credit and other forms of credit insurance.
The provision matrix is initially based on the Company's historical observed default rates. The Company will calibrate the matrix to adjust the historical credit loss experience with forwardlooking information. For instance, if forecast economic conditions (i.e., gross domestic product) are expected to deteriorate over the next year which can lead to an increased number of defaults in the manufacturing sector, the historical default rates are adjusted. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Company's historical credit loss experience and forecast of economic conditions may also not be representative of customer's actual default in the future. The information about the ECLs on the Company's trade receivables and contract assets is disclosed in Note 43 (C).
vi) Impairment of Financial Assets
Impairment testing for financial assets (other than trade receivables) is done at least once annually and upon occurrence of an indication of impairment. The recoverable amount of the individual financial assets is determined based on value-in-use calculations which required use of assumption. These assumptions are about risk of default and expected credit loss. The Company makes judgement in making these assumptions and selecting inputs to the impairment calculation, based on the Company's past history, existing condition and forward-looking estimates at the end of each reporting year of counter party's credit worthiness. Refer note 43 (C) for further details.
vii) Useful life of Property, Plant and Equipment and Intangibles
Useful life of Property, Plant & Equipment, and Intangible assets is based on the life prescribed in Schedule II to the Companies Act, 2013 or based on technical estimates, taking into account the Company's historical experience with similar assets, nature of the asset, estimated usage, expected residual values and operating conditions of the asset. Management reviews its estimate of the useful lives of depreciable/ amortizable assets at each reporting date, based on the expected utility of the assets. The depreciation / amortisation for future periods is revised if there are significant changes from previous estimates. Refer note 3 for further details.
viii) Determination of lease term & discount rate
- Determination of lease term
Ind AS 116 Leases requires lessee to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The Company makes assessment on the expected lease term on lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of lease and the importance of the underlying to the Company's operations taking into account the location of the underlying asset and the availability of the suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances.
- Estimating the Incremental Borrowing Rate
The Company cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate that the Company have to pay to borrow over a similar terms, and with a similar security, the funds necessary to obtain an asset of similar value to the right-to-use asset in a similar economic environment. The IBR therefore
reflects what the Company 'would have to pay', which require estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The Company estimates the IBR using observable inputs when available and is required to make certain entity / lease transaction specific estimates. For further details on lease liabilities movement refer note 39. The weighted average incremental borrowing rate applied to lease liabilities is 9% (previous year 9%).
ix) Estimation of Claims, Provisions and Contingencies
The Company has ongoing litigation with various regulatory authorities. Where an outflow of funds is believed to be probable and a reliable estimate of the outcome of the disputes can be made based on management's assessment of specific circumstances of each dispute and relevant external advice, management provides for its best estimate of the liability. Such accruals are by nature complex and involves estimation uncertainty. Information about such litigation is provided in Note 34 (A) to the Financial Statements.
x) Valuation of Inventories
Inventories are valued at lower of cost or net realisable value. The Company estimates the net realisable value of inventories taking into account the most reliable evidence with regards to selling price less cost to make sales available as at reporting date. The future realisation of these inventories may be affected by future demand or other market driven changes that may vary the expected selling price. Certain inventories may utilize significant unobservable inputs related to adjustments to determine its selling price. Such significant unobservable inputs are pertaining to transportation costs, processing costs and other local market or location related adjustments.
The valuation of finished goods of inventories of certain items of Edible oils and Food & FMCG segment involves estimation in respect of determination of overhead absorption rates specifically regards to finished goods yield from raw material, quantum of purchase quantity and manufactured quantity of finished goods forming part of closing inventories. The production process also involves ageing of the raw material to achieve the designed quality and thus calculation of holding period and determination of average holding cost
incurred in nature of storage, insurance and freight cost involves management estimation.
xi) Derecognition and valuation of Commodity Derivative Contracts
The Company has committed purchase and sale contracts and commodity future contracts for edible and non-edible oils designation of such contracts as derivative contracts based on management's judgement and assessment done periodically as per the Company's policy and as per the latest trends of managing portfolio of commodity contracts including settlement of firm commitment contracts on net settlement basis or through delivery. Such commodity derivative contracts are recognised and measured at fair value where the management has made a judgement to designate contracts as financial instruments. In situation when the firm commitment contract no longer meets Ind AS 109 criteria for fair value designation, the Company does not use this designation. As at March 31, 2025, no committed purchase and sales contracts were designated as "Derivatives".
Estimation of mark to market value of commodity derivative contracts are based on commodity future exchange quotations, broker or dealers quotations or market transactions in either listed or over-the-counter ("OTC") markets with appropriate adjustments for difference in local markets where the Company's inventories located.
xii) Share Based Payments
The Company measures share-based payments and transactions at fair value and recognises over the vesting period using Black Scholes valuation model. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. This requires a reassessment of the estimates used at the end of each reporting period. The Company is applying forfeiture rate based on historical trend. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in note 52.
2.3 Material accounting policies
a Property, plant and equipment
i. Recognition and measurement
On transition to Ind AS, the Company had elected to continue with the carrying value of all of its property, plant & equipments recognised as at 1st April, 2015 measured as per previous GAAP and use that carrying value, on the date of transition, as the deemed cost of Property, Plant & Equipment.
Property, plant and equipment except items stated below are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Such cost of an item of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable cost of bringing the item to its working condition for its intended use. Such cost includes borrowing costs incurred up to the date the asset is ready for its intended use, is capitalized along with respective qualifying asset. Freehold land has an unlimited useful life and recognised and measured at cost less accumulated impairment losses if any.
Capital work in progress is stated at cost, net of impairment loss, if any.
The cost of a self-constructed item of property, plant and equipment comprises the cost of materials and direct labour, any other costs directly attributable to bringing the item to working condition for its intended use, and estimated costs of dismantling and removing the item. When significant parts of plant and machinery are required to be replaced at regular intervals, the Company depreciates them separately based on their specific useful life. All other repair and maintenance costs are recognised in statement of profit and loss.
Subsequent costs related to an item of Property, Plant and Equipment are included in its carrying amount or recognised as a separate asset, as appropriate, only when it is probable that the future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. Subsequent costs are depreciated over the residual life of the respective assets. All other expenses on existing Property, Plant and Equipments, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the Statement of Profit and Loss for the period during which such expenses are incurred.
If significant parts of an item of property, plant and equipment have different useful lives, then they are
accounted for as separate items (major components) of property, plant and equipment.
ii. Depreciation
Depreciation is recognised so as to expense the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the Straight line method. The useful life of property, plant and equipment is considered based on life prescribed in Schedule II to the Companies Act, 2013 except for certain asset class of electric fittings and plant & machineries. For these assets, life is estimated based on technical assessment, taking into account the nature of asset, the estimated usage of the asset, the operating condition of the asset, anticipated technical changes and maintenance support. In case of major components identified, depreciation is provided based on the useful life of each such component based on technical assessment, if materially different from that of the main asset.
The estimated useful lives of the assets are as follows:
Class of Assets
|
Estimated Lives (in Years)
|
Factory Buildings
|
25-30
|
Offices and Residential Buildings
|
30-60
|
Temporary structures & Roads
|
3-10
|
Plant & Equipments (incl. Electrical Fittings and Lab Equipments)*
|
8-25
|
Office Equipments
|
3-8
|
Furniture & Fixtures
|
8-10
|
Vehicles
|
8-10
|
Computer Hardware (incl. Data Server)
|
3-7
|
Solar Panel
|
25
|
Leasehold
|
Shorter of lease period or
|
Improvement
|
estimated useful lives - 18 years
|
Molds and Insurance Spares
|
3
|
* Plant & Equipment includes certain categories of Plant & Equipments and Electrical fittings whose life estimated at 20 years and 15 years respectively basis technical assessments. Also, include Lab Equipments whose useful life is estimated at 8 years.
Further, Assets individually costing H 5000 or less are depreciated fully in the year of acquisition.
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.
iii. Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in statement of profit and loss.
b Intangible Assets
a) Computer Software
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
b) Brands
Brands acquired separately are measured on initial recognition at the fair value of consideration paid on acquisition. Following initial recognition, brands are carried at cost less impairment losses, if any.
c) Useful lives of Intangible Assets and amortisation
The useful lives of Intangible Assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
Intangible assets, Brands, with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cashgenerating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. This assessment includes whether the brand name will continue to trade and the expected lifetime of the brand.
Estimated useful lives of Intangible Assets is as follows:
Class of Intangible Assets
|
Estimated Useful Lives
|
Computer Software
|
5 years
|
Brands
|
Indefinite
|
d) Derecognition
An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognised.
c Capital Work in Progress
Capital work in progress (CWIP including related inventories) comprises expenditure related to and incurred during construction and development of capital project to get assets ready for their intended use and not completed as at reporting date. CWIP is stated at cost, net of accumulated impairment loss, if any. Cost of CWIP comprises direct cost, borrowing cost and other directly attributable costs.
d Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
- Financial assets
Initial recognition and measurement
On initial recognition, a financial asset (except for trade receivable) and a financial liabilities is recognised at fair value. In case of financial assets/ liabilities which are recognised at fair value through profit and loss, its transaction cost are recognized immediately in profit and loss. In other cases, the transaction cost that are directly attributable to the acquisition or issue value of financial assets and
financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Trade receivables that do not contain a significant financing component are measured at the transaction price determined under Ind AS 115. Refer accounting policy in section 2.3 (i) Revenue from contracts with customers.
Financial Assets are classified, at initial recognisition and subsequently measured at amortised cost, fair value through other comprehensive income (OCI) and fair value through profit or loss. The classification of financial assets at initial recognition depends upon the financial assets contractual cash flow characteristics and the Company's business model for managing them.
Business model Assessment
The Company makes an assessment of the objectives of the business model in which a financial assets is held because it reflects the way business is managed and information is provided to the management of the company. The assessment of business model comprises the stated policies and objectives of the financial assets, management's strategy for holding the financial assets, the risks that affects the performance etc. Further, management also evaluates whether the contractual cashflow are solely payment of principal and interest considering the contractual terms of the instrument. Financial Assets with cashflows that are not SPPI are classified and measured at fair value through profit/loss, irrespective of business model.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified based on assessment of business model in which they are held. This assessment is done for portfolio of financial assets. The relevant categories are as below:
i) Financial assets at amortized cost
Financial asset measured at the amortised 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.
This category is the most relevant to the Company. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method and are subject to impairment as per the accounting policy applicable to impairment of financial assets. Amortised 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 amortisation is included in finance income -Interest Income' in the statement of profit and loss. The loss arising from impairment are recognised in the profit or loss. The Company's financial assets at amortised cost includes trade receivables, loans to related parties and others and other financial assets.
ii) Financial assets at fair value through Other comprehensive income (FVTOCI)
A financial asset is classified at FVTOCI if it meet the criteria for initial recognition and are remeasured subsequently at fair value at the end of each reporting date through other comprehensive income (OCI). These are no assets designed to measured at FVTOCI.
iii) Financial assets at fair value through profit and loss (FVTPL)
Financial Assets are held for trading and have been either designated by the management upon initial recognisition or are mandatorily required to be measured at fair value under Ind AS 109 i.e. do not meet the criteria for a classification as measured at amortised cost or FVTOCI are measured at Fair Value through Profit and Loss (FVTPL). Management only designates an instrument at FVTPL upon initial recognisition. Such designation is determined on an instrument by instrument basis. For the Company, this category includes investments in mutual funds, and other unquoted investments,
derivative financial instruments. Financial assets at FVTPL are measured at fair value at the end of each reporting date, with net changes in fair value recognised in the statement of profit and loss. The net gain or loss recognized in statement of profit and loss includes any dividend or interest earned on the underlying financial assets.
Derecognition of financial assets
A financial asset is primarily derecognised (i.e. removed from the Company's standalone financial statements) 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 (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 recognise the transferred asset to the extent of the Company's continuing involvement. In that case, the Company also recognises 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.
On derecognition of a financial asset in its entirely, the difference between the assets carrying amount and the sum of consideration received or receivable and the cumulative gain or loss that had been recognized in other comprehensive income, if any, and accumulated in equity, if any, is recognized in the statement of profit and loss if such gain or loss would have otherwise been recognized in statement of profit and loss on disposal of that financial assets.
Impairment of Financial assets
The Company applies the expected credit loss (ECL) model for recognition of impairment loss on financial assets and credit risk exposure:
a) Financial assets that are debt instruments, and are measured at amortised cost e.g., loans, deposits and bank balances;
b) Trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115.
ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
For trade receivables and contract assets, the Company applies a simplified approach in calculating ECLs. Therefore, the Company does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. The Company established a provision matrix that is based on its historical credit loss experience, adjusted for forward looking factors specific to the debtors and the economic environment.
In case of other financial assets other than trade receivables, 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, 12- month ECL is used to provide for impairment loss allowance. However, if credit risk has increased significantly, an amount equal to lifetime ECL is measured and recognised as loss allowance.
The Company considers a other financial asset other than Trade Receivables, in default when contractual payments are 180-365 days past due. However, in certain cases, the Company may also consider a financial asset to be in default when internal or external information indicates that the Company
is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Company. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
Subsequently, if the credit quality of the financial asset improves such that there is no longer a significant increase in credit risk since initial recognition, the Company reverts to recognising impairment loss allowance based on 12-months ECL.
ECL impairment allowance recognised (or reversed) during the year is recognised as income/expense in the Statement of Profit and Loss under the head 'Other expenses' / 'Other Income'.
- Financial liabilities and equity instruments Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
Financial liabilities
Initial recognition and measurement
The Company's financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments.
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.
Subsequent measurement
Financial liabilities are measured at
- Fair value through profit or loss ('FVTPL') or at amortised cost (loans and borrowings) using the effective interest method.
a) 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 FVTPL.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Financial liabilities at FVTPL, are measured at fair value at the end of each reporting date. Resultant Gains or losses on fair valuation of financial liabilities are recognized in the statement of profit and loss. The net gain or loss recognized in profit or loss includes any interest paid on the financial liability.
The Company has not designated any financial liability except liability under derivative instrument as at fair value through profit or loss.
b) Financial liabilities at amortized cost (Borrowing and Other Financial Liabilities)
Financial liability that are not held for trading and are not designated as at FVTPL are measured at amortized cost subsequently.
This is the category most relevant to the Company. After initial recognition, carrying amounts of financial liabilities that are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised 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 amortisation is included as finance costs in the statement of profit and loss.
- Trade Credit for Banks
The Company enters into arrangements whereby the suppliers of raw material receive upfront payment on negotiation of documents from offshore branch of Indian bank or foreign bank (negotiating bank) against Usance Letter of Credit (LC) issued by the Company's bank. The negotiating bank are subsequently repaid (along with discounting
charges) by the Company on LC maturity date. These arrangements normally settled within 120 days, which is within working capital cycle of the Company. The discounting charge on these arrangement are borne by the Company and recognised over the tenure of facility as finance cost in the Statement of Profit and Loss. Based on economic substance of the arrangement, the obligation is presented as 'Trade Credits from Banks' on the face of Balance Sheet.
Further, payment made by banks and other financial institutions to the operating vendors are treated as a non-cash item and settlement of due to operating cash outflow reflecting the substance of the payment.
i.e. negotiating bank / foreign bank are not acting as agent of the Company while making payment.
- Derecognition of financial liabilities
A financial liability is derecognised when, and only when, the obligations under the liability is discharged, cancelled or expired. 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 amount is recognised in statement of profit and loss.
- 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 realize the assets and settle the liabilities simultaneously.
e Derivative Instruments
1) Forex Derivatives
Initial recognition and subsequent measurement
The Company uses derivative financial instruments, such as forward, future and currency options contracts to hedge its foreign currency risks. Forex derivative instruments entered by the Company has not been designated as 'Hedge' and consequently are categorised as Financial Assets or Financial Liabilities at Fair Value Through Profit or Loss. Such derivative financial instruments are initially recognised at fair value through profit or loss (FVTPL) on the date on which a derivative contract is entered into and are subsequently re-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 derivative financial instrument are recognised in the statement of profit and loss.
2) Commodity Contracts:
Initial recognition and subsequent measurement
The Company enters into derivative instruments such as commodity future contracts to manage its exposure to risk associated with commodity prices fluctuations, which are accounted for as derivative at fair value through profit and loss.
Commodity Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Commodity contracts, i.e., contracts for purchase and sale of non-financial assets, that are entered into and continue to be held for the purpose of the receipt or delivery of a non-financial item in accordance with the Company's own expected purchase, sale or usage requirements are held at cost. ('own use contracts'). The Company does not recognize contracts entered into for own use in the financial statements, until physical deliveries take place or contracts become onerous. The purchase or sale contracts, which do meet own use exception, are treated as a derivative under Ind AS 109.
At the time of entering into contract, the Company's management assesses whether the committed purchase and sales contracts should be designated as derivatives measured at fair value through profit and loss, or for own use, based on factors such as operational needs, and priorities, expected price fluctuation in commodity prices and recent trends of settlement on net basis. For contracts initially designated as own use, the management makes a continuous reassessment whether own use designation is appropriate, or they should be designated as derivative based on the factors stated above and if a change is needed, the said change in made prospectively. For contracts initially designated as own use, no reassessment is made.
Refer Note 2.2 (xi) for key judgement and estimation related to Designation and valuation of Commodity Derivatives Contracts.
f Fair value measurement
The Company measures financial instruments, such as,
investments in mutual funds, equity investment other than
investment in subsidiaries / joint ventures, equity settled
ESOPs, derivatives at fair value at each balance sheet date.
The Company's management determines the policies and procedures for both recurring fair value measurement, such as derivative instruments and unquoted financial assets measured at fair value, and for non-recurring measurement, such as assets held for distribution in discontinued operations, equity settled ESOPs. The Management Committee comprises of the head of the Businesses, the head of the risk management department, chief finance officer, chief operating officer and chief executive officer.
External valuers are involved for valuation of significant assets, such as properties, investments and unquoted financial assets, and significant liabilities and other obligations, such as Equity Settled ESOPs. Involvement of external valuers is decided upon annually by the Management Committee after discussion with and approval by the Company's Audit Committee. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The Management Committee decides, after discussions with the Company's external valuers, which valuation techniques and inputs to use for each case.
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 - Quated (unadjusted) market prices in active market for identical assets or liabilities;
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement directly or indirectly observable;
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
External valuers as well as internal experts are involved for valuation of financial and non-financial instruments measured/disclosed at fair value such as unquoted Equity Investments, Derivative Instruments, Equity settled ESOPs, Intangibles with indefinite useful life, Investment in Subsidiaries and Asset held for sale.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
• Disclosures for valuation methods, significant estimates and assumptions (notes 43)
• Quantitative disclosures of fair value measurement hierarchy (note 43)
• Impairment Assessment of Intangible Assets with Indefinite life and Impairment of Investments in Subsidiary (note 47)
• Share Based Payments - Equity Settled ESOPs (note 52)
• Financial instruments (including those carried at amortised cost) (notes 43)
g Inventories
Inventories comprises of Raw material, finished goods (including semi finished goods), stores, chemicals, packing materials and by products.
Inventory are carried at the lower of the cost and net realizable value after providing for obsolescence and other losses where considered necessary. Inventory of By products are carried at net realizable value.
Costs incurred in bringing each products to its present location and condition as follows.
Cost of raw material, packing material, spares and consumables comprises all cost of purchase and other cost incurred in bringing inventories to their present location and condition.
Cost of finished goods and semi-finished goods comprises of cost of raw material, labour and a proportion of manufacturing overheads. When goods are stored for a substantial period of time, costs includes other expenditure incurred in bringing such inventories to their present location and condition (excluding interest).
By products and scraps are valued at net realisable value.
Cost of all inventories is determined using the moving weighted average cost method. 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.
h Foreign currency transactions
These Standalone financial statements are presented in Indian Rupees (INR), which is the Company's functional currency.
Transactions and balances
Transactions in currencies other than the entities functional currency are initially recorded by the Company at its functional currency spot rates at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.
Exchange differences arising on settlement or translation of monetary items are recognised in the statement of profit and loss .
In determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which the Company initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Company determines the transaction date for each payment or receipt of advance consideration.
i Revenue Recognition
Revenue from Contract with Customers
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services. The Company has generally concluded that it is the principal in its revenue arrangements, because it typically control the goods before transferring them to customers.
The accounting policies for the specific revenue streams of
the company is summarized below:
i. Sale of Product
Revenue from sale of products is recognised at the point in time when the Company transfers the control of goods to the customer as per the terms of contract at an amount that reflect the consideration to which the company expects to be entitled in exchange of goods. The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price, the Company considers the effects of variable consideration, consideration payable to the customer (if any). In case of domestic sales, the control gets transferred to the customer on dispatch of the goods from the factory/depot and in case of exports, revenue is recognised on passage of control as per the terms of contract / inco terms.
The Company does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, it does not adjust any of the transaction prices for the time value of money.
ii. Variable Consideration
Discounts and Volume Rebates under Promotional Schemes
Variable consideration in the form of discounts given at time of sale of goods or volume rebates under various promotional schemes are recognised at the time of sale made to the customers and are offset against the amounts payable by them. To estimate the variable consideration for the expected future rebates, the Company applies the expected value method or most likely method. The selected method that best predicts the amount of variable consideration is primarily driven by the number of volume thresholds contained in the contract. The most likely amount is used for those contracts with a single volume threshold, while the expected value method is used for those with more than one volume threshold. The Company then applies the requirements on constraining estimates of variable consideration and recognises a liability for the expected future rebates. The Company updates its estimates of provision for rebate and damage return (and the corresponding change in the transaction price) at the end of each reporting period.
iii. Contract Balances
Trade Receivables and Contract assets
A receivable represents the Company's right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets in section 2.3(d) Financial Instruments- Initial recognition and subsequent measurement.
Advance from customer, Contract liability
Advance from customer is the obligation to transfer goods or services to a customer for which the Company has received consideration from the customer. Advance from customer is recognised as revenue when the Company performs under the contract. (i.e., transfer of control of the related goods or services to the customers).
Refund liabilities
A refund liability is recognised for the obligation to refund some of all of the consideration received or receivable from the customers. The Company's refund liabilities arise from the customers volume rebates. The Company updates its estimates of refund liabilities at the end of each reporting period.
Other Operating and Non-operating Incomes
i) Export incentives under various schemes notified by the government such as Duty Drawback and Remission of Duties and Taxes on Exported Products (RoTDEP) Scheme are recognised on accrual basis when no significant uncertainties as to the amount of consideration that would be derived and that the Company will comply with the conditions associated with the grant and ultimate collection exist.
ii) Interest Income is recognised on Effective Interest Rate (EIR) basis taking into account the amount outstanding and the applicable interest rate.
iii) Dividend income is recognised at the time when the right to receive is established by the reporting date.
iv) Other Incomes have been recognised on accrual basis in the financial statements except when there is uncertainty of collection.
j Borrowing costs
Borrowing costs are interest and other costs incurred 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 directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in statement of profit and loss in the period in which they are incurred.
k Employee benefits
Employee benefits include gratuity, compensated absences, contribution to provident fund, employees' state insurance and superannuation fund.
Short term employee benefits :
Short-term employee benefit obligations are recognised at an undiscounted amount in the Statement of Profit and Loss for the year in which the related services are received.
Post employment benefits :
i) Defined benefit plans :
The Company operates a defined benefit gratuity plan, which requires contributions to be made to a separately administered fund. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method.
Re-measurements, 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 recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to profit and loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognizes the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
- Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non routine settlements; and
- Net interest expense or income
Provision for Gratuity and its classifications between current and non-current liabilities are based on independent actuarial valuation.
ii) Defined contribution plan :
Retirement benefit in the form of Provident Fund and Family Pension Fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund and family pension fund as an expense, when an employee renders the related service. The Company makes contributions towards provident fund and pension fund to the regulatory authorities in a defined contribution retirement benefit plan for qualifying employees, where the Company has no further obligations beyond the monthly contributions. Both the employees and the Company make monthly contributions to the Provident Fund Plan equal to a specified percentage of the covered employee's salary.
iii) Compensated Absences :
Accumulated leave, which is expected to be utilized within the next 12 months, is treated as shortterm employee benefit. The Company recognizes expected cost of short-term employee benefit as an expense, when an employee renders the related service.
The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the reporting date. Remeasurement gains/losses are immediately taken to the statement of profit and loss and are not deferred. Provision for Compensated Absences and its classifications between current and non-current liabilities are based on independent actuarial valuation.
l Share-based payments - Equity-settled transactions-ESOPs :
Employees (including senior executives) of the Company receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions).
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model.
The cost is recognised, together with a corresponding increase in share-based payment (“SBP") reserves in equity, over the vesting period in which the performance and/or service conditions are fulfilled in employee benefits expense. The cumulative expense recognised for
equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company's best estimate of the number of equity instruments that will ultimately vest. The statement of profit and loss expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest.
Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Company's best estimate of the number of equity instruments that will ultimately vest.
m Treasury Shares
The Company has created an Employee Benefit Trust (EBT) for providing share-based payment to its employees. The Company uses EBT as a vehicle for distributing shares to employees under the employee remuneration schemes. The EBT buys shares of the Company from the market, for giving shares to employees on exercise of equity settled ESOP. Share options exercised during the reporting period are satisfied with treasury shares. The Company treats EBT as its extension and shares held by EBT are treated as treasury shares.
Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company's own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in Capital reserve.
n Taxes
Tax on Income comprises current and deferred tax. It is recognised in statement of profit and loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
i. 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. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in India.
The amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty if any, related to income taxes.
Current income tax relating to items recognised outside the statement of profit and loss is recognised outside the statement of profit and loss (either in other comprehensive income (OCI) or in equity). Current tax items are recognised 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 and establishes provisions where applicable.
Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Company reflects the effect of uncertainty for each uncertain tax treatment by using either most likely method or expected value method, depending on which method predicts better resolution of the treatment.
Current tax assets and current tax liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realize the asset and settle the liability on a net basis or simultaneously.
ii. Deferred tax
Deferred tax is provided using the liability method for the future tax consequences of deductible temporary differences between the tax bases of assets and liabilities and their carrying amounts at the reporting date, using the tax rates and laws that are enacted or substantively enacted as on reporting date. Deferred tax liabilities are generally recognized for all taxable temporary differences except when the deferred tax liability arises at the time of transactions that affects neither the accounting profit or loss nor taxable profit or loss, and does not give rise to equal taxable and deductible temporary differences. Deferred Tax assets are recognised for all deductible temporary differences.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised. 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 utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
In assessing the recoverability of deferred tax assets, the Company relies on the same forecast assumptions used elsewhere in the financial statements and in other management report.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
The Company offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority.
o Earnings per share
Basic earnings per share is computed by dividing the profit / (loss) after tax by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for treasury shares. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity share holders and weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
p Provisions, Contingent Liabilities and Contingent Assets - Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. The expense relating to a provision is
presented in the statement of profit and loss net of any reimbursement.
- Contingent Liabilities
Contingent liability is:
(a) a possible obligation arising from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity or
(b) a present obligation that arises from past events but is not recognized because;
- it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or
- the amount of the obligation cannot be measured with sufficient reliability.
The Company does not recognize a contingent liability but discloses its existence and other required disclosures in notes to the financial statements, unless the possibility of any outflow in settlement is remote.
- Contingent Assets
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. The Company does not recognize the contingent asset in its standalone financial statements since this may result in the recognition of income that may never be realised.
Provisions, contingent liabilities and contingent assets are reviewed at each reporting date.
q Impairment of non-financial assets
At each balance sheet date, the Company reviews whether there is an indication that an asset may be impaired. Intangible Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicates that they might be impaired.
If any indication exists or when annual impairment testing for an asset is required, the Company estimates the recoverable amount of its assets other than inventory and deferred tax. An impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is determined as higher of the asset's fair value less costs of disposal and value in use. For the purpose of assessing impairment, assets
are grouped at the levels for which there are separately identifiable cash flows (cash generating unit). Assessment is done at each Balance Sheet date as to whether there is any indication that an impairment loss recognised for an asset in the prior accounting period may no longer exist or may have decreased. An impairment loss is reversed to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had previously been recognised.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company's CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, the Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified. In any case, this growth rate does not exceed the long-term average growth rate for the products, industries, or country or countries in which the Company operates, or for the market in which the asset is used.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the Statement of Profit and Loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Leases
The Company assess at contract inception whether a contract is or contains a lease. That is if a contract conveys the right to control the use of an identified asset for a 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 identified asset; (ii) the Company has substantially all of the economic benefits
from the use of the asset through the period of lease and (iii) the Company has right to direct the use of the asset.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for shortterm leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
i. Right of Use Assets:
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 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, plant 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.
Estimated useful life of right of use asset is as follows :
Class of Right of Use Assets
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Estimated Lives (in Years)
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Lease hold land
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20-60
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Warehouses
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2-10
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Offices and Guest House
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3-10
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Right of way
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10-20
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Plant & Machinery
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2-5
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ii. Lease Liabilities:
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, the Company's incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.
The lease liability is subsequently 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. Lease payments have been classified as financing activities.
iii. Short term Lease :
The Company has elected not to recognize right-of-use assets and lease liabilities for short term leases that have a lease term of less than or equal to 12 months with no purchase option. The Company recognizes the lease payments associated with these leases as an expense in statement of profit and loss over the lease term. The related cash flows are classified as operating activities.
s Investment in subsidiaries and joint ventures
Equity investments in subsidiaries and joint ventures are stated at cost less impairment, if any as per Ind AS 27.
The Company reviews its carrying value of investments recognised at cost on annual basis or more frequent where there is indication of impairment. Where the carrying amount of an investment or CGU to which the investment relates is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount and the difference is recognised in the Statement of Profit and Loss.
t Cash and Cash Equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and short-term deposits with an original maturity of three months or less, which are readily convertible to a known amount of cash and subject to an insignificant risk of changes in value.
Cash and cash equivalents for the purpose of Statement of Cash Flow comprise cash and cheques in hand, bank balances, demand deposits with banks where the original maturity is three months or less as defined above, net of outstanding bank overdrafts as they are considered as integral part of the Company's cash management.
u Government Grant
Grants from the government are recognised when there is reasonable assurance that the Company will comply with the conditions attached to them and the grant will be received. When the grant relates to expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. Where the grant relates to assets, it is recognised as deferred income and released to income in equal amounts over the expected useful life of the related asset. Government grants, which are receivables towards capital investments under State Investment Promotion Scheme or towards other incentive scheme issued by the State Government, are recognised in the Statement of Profit and loss when they become receivable.
v Exceptional item
Exceptional items are generally non-recurring items of income and expense within profit or loss from ordinary activities, which are of such size, nature or incidence that their disclosure is relevant to explain the performance of the Company for the year.
w Assets held for sale and disposal groups
Non-current assets or disposal group are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sale of such asset or disposal group and its sale is highly probable. Management must be committed to the sale and the sale expected within one year form the date of classification. As at each balance sheet date, the Company reviews the appropriateness of such classification.
Assets held for sale and disposal groups are measured at the lower of their carrying amount and fair value less cost to sell. Property, plant and equipment and intangible assets once classified as held for sale/distribution to owners are not depreciated or amortized.
Assets and liabilities classified as held for sale are presented separately from other items in the balance sheet.
x Events after the reporting period
If the Company receives information after the reporting period, but prior to the date of approved for issue, about conditions that existed at the end of the reporting period, it will assess whether the information affects the amounts that it recognises in its separate financial statements. The Company will adjust the amounts recognised in its financial statements to reflect any adjusting events after the reporting period and update the disclosures that relate to those conditions in light of the new information. For non-adjusting events after the reporting period, the Company will not change the amounts recognised in its separate financial statements but will disclose the nature of the non-adjusting
event and an estimate of its financial effect, or a statement that such an estimate cannot be made, if applicable.
2.4 New and Amended Standards:
The Company applied for the first-time certain standards and amendments, which are effective for annual periods beginning on or after 1 April 2024. The Company has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
(i) Ind AS 117 Insurance Contracts
The Ministry of Corporate Affairs (MCA) notified the Ind AS 117, Insurance Contracts, vide notification dated 12 August 2024, under the Companies (Indian Accounting Standards) Amendment Rules, 2024, which is effective from annual reporting periods beginning on or after 1 April 2024.
Ind AS 117 Insurance Contracts is a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. Ind AS 117 replaces Ind AS 104 Insurance Contracts. Ind AS 117 applies to all types of insurance contracts, regardless of the type of entities that issue them as well as to certain guarantees and financial instruments with discretionary participation features; a few scope exceptions will apply. Ind AS 117 is based on a general model, supplemented by:
• A specific adaptation for contracts with direct participation features (the variable fee approach)
• A simplified approach (the premium allocation approach) mainly for short-duration contracts
The application of Ind AS 117 does not have material impact on the Company's separate financial statements as the Company has not entered any contracts in the nature of insurance contracts covered under Ind AS 117.
(ii) Amendments to Ind AS 116 Leases - Lease Liability in a Sale and Leaseback
The MCA notified the Companies (Indian Accounting Standards) Second Amendment Rules, 2024, which amend Ind AS 116, Leases, with respect to Lease Liability in a Sale and Leaseback. The amendment specifies the requirements that a seller-lessee uses in measuring the lease liability arising in a sale and leaseback transaction, to ensure the seller-lessee does not recognise any amount of the gain or loss that relates to the right of use it retains. The amendment is effective for annual reporting periods beginning on or after 1 April 2024 and must be applied retrospectively to sale and leaseback transactions entered into after the date of initial application of Ind AS 116. The amendments do not have a material impact on the Company's financial statements.
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