1. Use of estimates
Estimates and assumptions used in the preparation of the financial statements and disclosures are based
upon Management's evaluation of the relevant facts and circumstances as of the date of the financial
statements, which may differ from the actual results at a subsequent date. Accounting estimates and
judgments are used in various line items in the financial statements, including:
• Business model assessment
• Fair value of financial instruments
• Impairment of financial and non-financial assets
• Provisions for tax expense
• Fair value of employee stock options
• Post employment benefits
2. Revenue recognition
Income
Revenue is recognised to the extent that it is probable that the economic benefit will flow to the Company
and the revenue can be reliably measured and there exists reasonable certainty of its recovery.
A. Interest income
Interest income from debt instruments is recognised using the effective interest rate (EIR) method
on financial assets subsequently measured under amortised cost. The EIR is the rate that exactly
discounts estimated future cash receipts through the expected life of the financial asset to the
gross carrying amount of a financial asset. When calculating the effective interest rate, the Company
estimates the expected cash flows by considering all the contractual terms of the financial instrument
but does not consider the expected credit losses.
The EIR (and therefore, the amortised cost of the asset) is calculated by considering any discount or
premium on acquisition, fees and costs that are an integral part of the EIR. The Company recognises
interest income using a rate of return that represents the best estimate of a constant rate of return
over the expected life of the instrument.
Interest on financial assets subsequently measured at fair value through profit or loss (FVTPL) is
recognised at the contractual rate of interest and it is recognised in the Statement of Profit and Loss.
B. Dividends
Dividends are recognised in the Statement of Profit and Loss only when the right to receive the income
is established.
C. Windpower income
Income from windpower generation is recognised on acceptance of units generated by customer and
after giving allowance for wheeling and transmission losses over time, if any. Simultaneously, relevant
entitlements for generating green energy are recognised to the extent the ultimate collection is
reasonably certain.
D. Rent and other income
Rental income is accounted on a straight-line basis over the lease term of operating leases.
Other income, including income tax refunds and miscellaneous income, is recognised when the right to
receive the amount is established, and in accordance with the agreed terms of contracts, if applicable.
3. Property, plant and equipment and depreciation
A. Property, plant and equipment (PPE)
As per Ind AS 101, the Company had elected to continue with carrying value of all PPE as the deemed
cost of PPE i.e. historical cost. PPE are stated at acquisition or construction cost less accumulated
depreciation and impairment losses, if any. Land is carried at cost of acquisition. PPE not ready for the
intended use on the date of Balance Sheet are disclosed as 'Capital work-in-progress'.
If significant parts of an item of PPE have different useful lives, then they are accounted for as
separate items (major components) of PPE. All other repair and maintenance costs are recognised in
the Statement of Profit and Loss as incurred.
B. Depreciation
Depreciation on PPE is provided on straight-line method using the rates arrived at based on the
useful lives as specified in the Schedule II of the Companies Act, 2013. Leasehold improvements are
depreciated over the period of lease term.
C. Impairment of non-financial assets
An assessment is done at each Balance Sheet date as to whether there are any indications that an
asset may be impaired. If any such indication exists, an estimate of the recoverable amount of the
asset/Cash Generating Unit (CGU) is made. Where the carrying value of the asset/CGU exceeds the
recoverable amount, the carrying value is written down to the recoverable amount.
4. Investments and financial assets
A. Investment in subsidiaries and joint venture
Interest in subsidiaries and joint venture are recognised at cost and not adjusted to fair value at the
end of each reporting period as permitted by Ind AS 27. Cost represents amount paid for acquisition
of the said investments. Loans and other similar arrangements with subsidiaries which are probable
to be settled for a fixed number of equity shares of the borrower for a fixed price are classified as
equity investments.
The Company assesses at the end of each reporting period, if there are any indications that the said
investments may be impaired. If so, the Company estimates the recoverable value/amount of the
investment and provides for impairment, if any i.e. the deficit in the recoverable value over cost.
B. Other investments and financial assets
i. Recognition and initial measurement
Financial assets are initially recognised on the trade date, i.e., the date that the Company becomes
a party to the contractual provisions of the instrument. All financial assets are recognised initially
at fair value. Further, 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, are added to the
fair value. However, trade receivables that do not contain a significant financing component are
measured at transaction price.
ii. Subsequent measurement
Subsequent measurement of financial assets depend on the Company's business model for
managing the financial assets and the cash flow characteristics of the financial assets.
The Company classifies its financial assets in the following measurement categories:
• those to be measured subsequently at amortised cost, and
• those to be measured subsequently at fair value either through other comprehensive
income (FVTOCI), or through profit or loss (FVTPL)
The classification is done depending upon the Company's business model for managing the
financial assets and the contractual terms of the cash flows.
For assets classified as 'measured at fair value', gain/(loss) will either be recorded in profit or loss
or other comprehensive income, as elected. For assets classified as 'measured at amortised cost',
this will depend on the business model and contractual terms of the cash flows.
iii. Business model assessment
The Company determines its business model at the level that best reflects how it manages groups
of financial assets to achieve its business objective.
The Company's business model is not assessed on an instrument-by-instrument basis, but at a
higher level of aggregated portfolios and is based on observable factors such as:
• How the performance of the business model and the financial assets held within that business
model are evaluated and reported to the entity's key management personnel.
• The risks that affect the performance of the business model (and the financial assets held
within that business model) and, in particular, the way those risks are managed.
• The expected frequency, value and timing of sales are also important aspects of the
Company's assessment.
If cash flows after initial recognition are realised in a way that is different from the Company's
original expectations, the Company does not change the classification of the remaining financial
assets held in that business model, but incorporates such information when assessing newly
originated or newly purchased financial assets going forward.
iv. The SPPI test (Solely payments of principal and interest)
As a second step of its classification process, the Company assesses the contractual terms of
financial instruments to identify whether they meet the SPPI test.
'Principal' for the purpose of this test is defined as the fair value of the financial asset at
initial recognition and may change over the life of the financial asset. 'Interest' is defined as
consideration for the time value of money and for the credit risk associated with the principal
amount outstanding during a particular period of time and for other basic lending risks and costs,
as well as profit margin.
v. Subsequently measured at amortised cost
Financial assets that are held for collection of contractual cash flows where those cash
flows represent solely payments of principal and interest are measured at amortised cost
e.g. debentures, bonds, certificate of deposits etc. A gain/(loss) on a financial asset that is
subsequently measured at amortised cost is recognised in the Statement of Profit and Loss when
the asset is derecognised or impaired. Interest income from these financial assets is included in
investment income using the effective interest rate method.
vi. Subsequently measured at FVTPL
Financial assets that do not meet the criteria for amortised cost, are measured at FVTPL e.g.
investments in mutual funds. A gain/(loss) on a financial asset that is subsequently measured at
FVTPL is recognised in profit or loss and presented net in the Statement of Profit and Loss with
other gain/(loss) in the period in which it arises.
vii. Impairment of financial assets
The Company assesses on a forward-looking basis the expected credit losses associated with its
assets carried at amortised cost. The impairment methodology applied depends on whether there
has been a significant increase in credit risk and if so, assess the need to provide for the same in
the Statement of Profit and Loss.
Since the Company makes investments in highly rated fixed income securities, which are
categorised as 'subsequently measured at amortised cost', the risk parameters such as tenor,
the probability of default corresponding to the credit rating by rating agency (viz. CRISIL, ICRA),
for each of these instruments is considered in estimating the probable credit loss over lifetime of
such securities.
ECL impairment loss allowance (or reversal) is recognised during the period only if material and is
recognised as income/expense in the Statement of Profit and Loss. This amount is reflected under
the head 'other expenses' in the Statement of Profit and Loss.
viii. Reclassification of financial assets and liabilities
The Company does not reclassify its financial assets subsequent to their initial recognition,
apart from the exceptional circumstances in which the Company acquires, disposes of,
or terminates a business line.
ix. Derecognition of financial assets
A financial asset is derecognised only when:
• The rights to receive cash flows from the asset have expired or
• The Company has transferred its right 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 assets.
Any gain or loss on derecognition will be recognised in the Statement of Profit and Loss.
5. Financial liabilities
Financial liabilities are classified as measured at amortised cost or FVTPL. Financial liabilities at FVTPL are
measured at fair value and net gain and loss, including any interest expense, are recognised in Statement
of Profit and Loss. Other financial liabilities are subsequently measured at amortised cost using the
effective interest rate method. Interest expense and foreign exchange gain and loss are recognised in the
Statement of Profit and Loss.
A. Recognition and initial measurement
All financial liabilities are recognised initially at fair value and, in the case of payables, net of directly
attributable transaction costs.
B. Subsequent measurement
After initial recognition, all financial liabilities are subsequently measured at amortised cost using the
effective interest rate method.
C. Derecognition
The Company derecognises financial liability when the obligation under the liability is discharged,
cancelled or expired. Any gain or loss on derecognition is also recognised in the Statement of Profit
and Loss.
6. Employee benefits
A. Short-term employee benefits and defined contribution plan
Liabilities for salaries, including non-monetary benefits and accumulating leave balance in respect of
employees' services up to the end of the reporting period, are recognised as liabilities (and expensed),
and are measured at the amounts expected to be paid when the liabilities are settled.
The Company also recognises a liability and records an expense for bonuses (including
performance-linked bonuses) where contractually obliged or where there is a past practice that has
created a constructive obligation.
The Company has made contribution to superannuation fund, provident fund and pension scheme as
per the scheme of the Company or to Government authority. Contributions to these schemes are made
by the Company on periodic basis and charged to the Statement of Profit and Loss. The Company has
no further obligation beyond these contributions.
B. Defined benefits plans (Gratuity obligation)
The liability or asset recognised in the Balance Sheet in respect of defined benefit gratuity plans is the
present value of the defined benefit obligation at the end of the reporting period less the fair value of
plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit
credit method. The calculation includes assumptions with regard to discount rate, salary escalation
rate, attrition rate and mortality rate. Management determines these assumptions in consultation with
the plan's actuaries and past trend.
Remeasurements as a result of experience adjustments and changes in actuarial assumptions are
recognised in other comprehensive income.
Payment for present liability of future payment of gratuity is being made to approved gratuity fund
viz, Life Insurance Corporation of India (LIC) and Bajaj Life Insurance Ltd. (Bajaj Life). However, any
deficits in plan assets managed by LIC and Bajaj Life as compared to actuarial liability determined by
an appointed actuary are recognised as a liability.
C. Compensated absences
Compensated absences entitlements are recognised as a liability, in the calendar year of rendering
of service, as per the rules of the Company. As accumulated leave can be availed and/or encashed at
any time during the tenure of employment the liability is recognised on the basis of an independent
actuarial valuation. The compensated absences liability is calculated annually by actuaries using the
projected unit credit method.
D. Employee stock option scheme
The Company has entered into an equity settled share-based payment arrangement with its
employees as compensation for the provision of their services. The Company carries out fair value
cost assessment of employee stock options on the grant date using Black & Scholes model.
The cost towards employees of the Company is recognised as employee benefits expenses, over the
period in which the service conditions are fulfilled and that pertaining to employees of subsidiaries are
recovered from subsidiaries. The cumulative expense/recharge recognised at each reporting date until
the vesting date reflects the extent to which the vesting period has not expired and the Company's
best estimate of the number of equity instruments that will ultimately vest. No expense is recognised
for grants that do not ultimately vest because of non-fulfillment of service conditions.
E. 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 Stock Option Scheme. The Company treats EBT as its extension and shares held by EBT are
treated as treasury shares.
Own equity instruments that are re-acquired (treasury shares) are recognised at cost and deducted
from other equity. No gain/(loss) is recognised in the Statement of Profit and 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 or sold, is recognised in capital reserve.
Share options exercised during the reporting period are settled with treasury shares.
7. Taxation
A. Current tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from
or paid to the taxation authorities, in accordance with the Income Tax Act, 1961 and the Income
Computation and Disclosure Standards prescribed therein. The tax rates and tax laws used to compute
the amount are those that are enacted or substantively enacted, at the reporting date.
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.
Current income tax relating to items recognised outside profit or loss is recognised outside profit
or loss (either in other comprehensive income or in equity). Current tax items are recognised in
correlation to the underlying transaction either in other comprehensive income or directly in equity.
B. Deferred tax
Deferred tax is provided on temporary differences at the reporting date between the tax bases of
assets and liabilities, and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year
when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted at the reporting date. The carrying amount of deferred tax assets is
reviewed at each reporting date by the Company 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.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set
off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable
entity and the same taxation authority.
|