IB MATERIAL ACCOUNTING POLICIES

This note provides a list of the material accounting
policies adopted in the preparation of these
Standalone Financial Statements.

1 Statement of compliance

Standalone Financial Statements have been
prepared in accordance with the accounting
principles generally accepted in India including
Indian Accounting Standards (Ind AS) prescribed
under the section 133 of the Companies Act,
2013 read with rule 3 of the Companies (Indian
Accounting Standards) Rules, 2015 (as amended
from time to time) and presentation and
disclosures requirement of Division II of revised
Schedule III of the Companies Act 2013, (Ind
AS Compliant Schedule III), as applicable to
standalone financial statement.

Accordingly, the Company has prepared
these Standalone Financial Statements which
comprise the Standalone Balance Sheet as at 31
March 2025, the Standalone Statement of Profit
and Loss, the Standalone Statement of Cash
Flows and the Standalone Statement of Changes
in Equity for the year ended as on that date,
and accounting policies and other explanatory
information (together hereinafter referred to as
“standalone financial statements”).

These standalone financial statements are
approved for issue by the Board of Directors on
May 22, 2025.

2 Basis of preparation

The standalone financial statements of the
Company have been prepared in accordance
with Indian Accounting Standards (hereinafter
referred to as Ind AS) as notified by Ministry
of Corporate Affairs pursuant to Section 133 of
the Companies Act, 2013 (‘the Act’) read with

the Companies (Indian Accounting Standards)
Rules, as amended from time to time and other
relevant provisions of the Act.

The standalone financial statements are
prepared under the historical cost convention
except for the following:

• certain financial assets and liabilities that
are measured at fair value;

• defined benefit plans where plan assets are
measured at fair value; and

• share-based payments at fair value as on the
grant date of options given to employees.

Estimates, judgements and assumptions used
in the preparation of the standalone financial
statements and disclosures are based upon
management’s evaluation of the relevant
facts and circumstances as of the date of the
standalone financial statements, which may
differ from the actual results at a subsequent
date. The critical estimates, judgements and
assumptions are presented in Note no. 1D.

The Company presents assets and liabilities
in the balance sheet based on current / non¬
current classification. Deferred tax assets and
liabilities are classified as non-current.

The Company has prepared the standalone
financial statements on the basis that it will
continue to operate as a going concern.

An asset is treated as current when it is:

• Expected to be realised or intended to be
sold or consumed in normal operating cycle

• Expected to be realised within twelve
months after the reporting period, or

• Cash or cash equivalent unless restricted
from being exchanged or used to settle a
liability for at least twelve months after the
reporting period

All other assets are classified as non-current.

A liability is current when:

• It is expected to be settled in normal
operating cycle

• It is due to be settled within twelve months
after the reporting period, or

• There is no unconditional right to defer the
settlement of the liability for at least twelve
months after the reporting period

All other liabilities are classified as non-current.

The operating cycle is the time between the
acquisition of assets for processing and their
realisation in cash and cash equivalents. The
Company has identified twelve months as its
operating cycle.

3 Revenue from contract with customers:

Revenue from contracts with customers is
recognized 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 or services. The Company has
generally concluded that it is the principal in
its revenue arrangements, because it typically
controls the goods or services before transferring
them to the customer.

The recognition criteria for sale of products and
construction contracts is described below

i. Sale of Products

The Company recognises revenue when
control over the promised goods or services
is transferred to the customer at an amount
that reflects the consideration to which
the Company expects to be entitled in
exchange for those goods or services.

The Company has generally concluded
that it is the principal in its revenue
arrangements as it typically controls the
goods or services before transferring them
to the customer.

Revenue is adjusted for variable
consideration such as discounts, rebates,
refunds, credits, price concessions,
incentives, or other similar items in a
contract when they are highly probable
to be provided. The amount of revenue
excludes any amount collected on behalf of
third parties.

The Company recognises revenue generally
at the point in time when the products are
delivered to customer or when it is delivered
to a carrier for export sale, which is when
the control over product is transferred to
the customer. In contracts where freight is
arranged by the Company and recovered
from the customers, the same is treated
as a separate performance obligation and
revenue is recognised when such freight
services are rendered.

ii. Revenue from Projects

Performance obligations with reference to
Engineering Procurement and Construction
(EPC) contracts are satisfied over the period
of time, and accordingly, Revenue from such
contracts is recognized based on progress
of performance determined using input
method with reference to the cost incurred
on contract and their estimated total
costs. Transaction price is the amount of
consideration to which the Company expects
to be entitled in exchange for transferring
goods or services to a customer excluding
amounts collected on behalf of a third party.

Revenue, measured at transaction price,
is adjusted towards liquidated damages,
time value of money and price variations,
escalation, change in scope etc. wherever,
applicable. Variation in contract work and
other claims are included to the extent that
the amount can be measured reliably, and
it is agreed with customer.

Estimates of revenue and costs are
reviewed periodically and revised, wherever
circumstances change, resulting increases
or decreases in revenue determination, is
recognized in the statement of profit and
loss period in which estimates are revised.

The Company evaluates whether each
contract consists of a single performance
obligation or multiple performance
obligations. Where the Company enters into
multiple contracts with the same customer,
the Company evaluates whether the contract
is to be combined or not by evaluating various
factors. Due to the nature of the work required
to be performed on many of the performance
obligations, the estimation of total revenue
and cost at completion is subject to many
variables and requires significant judgement.
The Company considers its experience
with similar transactions and expectations
regarding the contract in estimating the
amount of variable consideration to which
it will be entitled and determining whether
the estimated variable consideration should
be constrained. The Company includes
estimated amounts in the transaction price
to the extent it is probable that a significant
reversal of cumulative revenue recognised will
not occur when the uncertainty associated
with the variable consideration is resolved.

Progress billings are generally issued upon
completion of certain phases of the work
as stipulated in the contract. Billing terms
of the over-time contracts vary but are
generally based on achieving specified
milestones. The difference between the
timing of revenue recognised and customer
billings result in changes to contract assets
and contract liabilities. Contractual retention
amounts billed to customers are generally
due upon expiration of the contract period.

The contracts generally result in revenue
recognised in excess of billings which
are presented as contract assets on the
statement of financial position. Amounts
billed and due from customers are
classified as receivables on the statement
of financial position. The portion of the
payments retained by the customer until
final contract settlement is not considered a
significant financing component since it is
usually intended to provide customer with
a form of security for Company’s remaining
performance as specified under the contract,
which is consistent with the industry
practice. Contract liabilities represent
amounts billed to customers in excess of
revenue recognised till date. A liability is
recognised for advance payments and it is
not considered as a significant financing
component since it is used to meet working
capital requirements at the time of project
mobilization stage. The same is presented as
contract liability in the balance sheet.

4 Contract balances

a) Contract asset

A contract asset is the right to consideration
in exchange for goods or services
transferred to the customer. If the Company
performs by transferring goods or services
to a customer before the customer pays
consideration or before payment is due, a
contract asset is recognised for the earned
consideration that is conditional.

b) Trade receivables

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).

c) Contract liabilities

A contract liability is the obligation
to transfer goods or services to a
customer for which the Company has

received consideration (or an amount of
consideration is due) from the customer. If
a customer pays consideration before the
Company transfers goods or services to the
customer, a contract liability is recognized
when the payment is made or the payment
is due (whichever is earlier). Contract
liabilities are recognised as revenue when
the Company performs under the contract.

5 Leases:

Company as a lessee:

Right-of-use assets

The Company recognises right-of-use assets
at the commencement date of the lease (i.e.,
the date the underlying asset is available
for use). Right-of-use assets are measured
at cost, less any accumulated depreciation
and impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost of
right-of-use assets includes the amount of lease
liabilities recognised, initial direct costs incurred,
and lease payments made at or before the
commencement date less any lease incentives
received. Unless the Company is reasonably
certain to obtain ownership of the leased asset at
the end of the lease term, the recognised right-
of-use assets are depreciated on a straight-line
basis over the shorter of its estimated useful life
and the lease term as follows:

Right-of-use assets are subject to impairment
test. The Company determines the lease term as
the non-cancellable term of the lease, together
with any periods covered by an option to
extend the lease if it is reasonably certain to be
exercised, or any periods covered by an option to
terminate the lease, if it is reasonably certain not
to be exercised.

Leases are capitalised at the commencement of
the lease at the inception date fair value of the
leased property or, if lower, at the present value of
the minimum lease payments. Lease payments
are apportioned between finance charges and
reduction of the lease liability so as to achieve a
constant rate of interest on the remaining balance
of the liability. Finance charges are recognised in
finance costs in the statement of profit and loss,
unless they are directly attributable to qualifying
assets, in which case they are capitalized in

accordance with the Company’s general policy
on the borrowing costs. Contingent rentals are
recognised as expenses in the periods in which
they are incurred.

Lease liabilities

At the commencement date of the lease, the
Company recognises lease liabilities measured
at the present value of lease payments to be
made over the lease term. The lease payments
include fixed payments (including in-substance
fixed payments) less any lease incentives
receivable, variable lease payments that depend
on an index or a rate, and amounts expected to
be paid under residual value guarantees. The
variable lease payments that do not depend on
an index or a rate are recognised as expense in
the period on which the event or condition that
triggers the payment occurs.

In calculating the present value of lease
payments, the Company uses the incremental
borrowing rate at the lease commencement
date if the interest rate implicit in the lease is not
readily determinable.

Short-term leases and leases of low-value assets

The Company applies the short-term lease
recognition exemption to its short-term leases
(i.e., those leases that have a lease term of 12
months or less from the commencement date
and do not contain a purchase option). It also
applies the lease of low-value assets recognition
exemption to leases that are considered of low
value (i.e., below H 5,00,000). Lease payments on
short-term leases and leases of low-value assets
are recognised as expense on a straight-line
basis over the lease term.

6 Other income:

(1) Interest income on financial asset is
recognised using the effective interest rate
method. The effective interest rate is the
rate that exactly discounts estimated future
cash receipts through the expected life of
the financial asset to the gross carrying
amount of the financial asset. When
calculating the effective interest rate, the
Company estimates the expected cash
flows by considering all the contractual
terms of the financial instruments.

(2) Others:

The Company recognises other income
(including income from income from scrap
sales, income from claims received, etc.) on
accrual basis. However, where the ultimate

collection of the same is uncertain, revenue
recognition is postponed to the extent of
uncertainty.

7 Property, plant and equipment:

The cost of property, plant and equipment
comprises its purchase price net of any trade
discounts and rebates, any import duties and
other taxes (other than those subsequently
recoverable from the tax authorities), any
directly attributable expenditure on making
the asset ready for its intended use, including
relevant borrowing costs for qualifying assets
and any expected costs of decommissioning.
Expenditure incurred after the property, plant
and equipment have been put into operation,
such as repairs and maintenance, are charged
to the Statement of Profit and Loss in the year in
which the costs are incurred. Major shut-down
and overhaul expenditure is capitalised as the
activities undertaken improves the economic
benefits expected to arise from the asset.

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.

Assets in the course of construction are
capitalised in the assets under Capital work
in progress. At the point when an asset is
operating at management’s intended use,
the cost of construction is transferred to the
appropriate category of property, plant and
equipment and depreciation commences. Costs
associated with the commissioning of an asset
and any obligatory decommissioning costs are
capitalised where the asset is available for use
but incapable of operating at normal levels,
revenue (net of cost) generated from production
during the trial period is capitalised.

Property, plant and equipment held for use in the
production, supply or administrative purposes,
are stated in the balance sheet at cost less
accumulated depreciation and accumulated
impairment losses, if any.

Depreciable amount for assets is the cost of
an asset, or other amount substituted for cost,
less its estimated residual value. Depreciation is
recognised so as to write off the cost of assets
(other than freehold land and properties under

construction) less their residual values over
their useful lives, using straight-line method
as per the useful life prescribed in Schedule II
to the Companies Act, 2013 except in respect
of following categories of assets, in whose case
the life of the assets has been assessed as under
based on technical advice, taking into account
the nature of the asset, the estimated usage
of the asset, the operating conditions of the
asset, past history of replacement, anticipated
technological changes, manufacturers
warranties and maintenance support etc.

When significant parts of plant and equipment
are required to be replaced at intervals, the
Company depreciates them separately based on
their specific useful lives.

Major overhaul costs are depreciated over the
estimated life of the economic benefit derived
from the overhaul. The carrying amount
of the remaining previous overhaul cost is
charged to the Statement of Profit and Loss if
the next overhaul is undertaken earlier than
the previously estimated life of the economic
benefit.

The Company reviews the residual value, useful
lives and depreciation method annually and, if
expectations differ from previous estimates,
the change is accounted for as a change in
accounting estimate on a prospective basis.

8 Impairment of non-financial assets:

The carrying amounts of assets are reviewed at
each balance sheet date if there is any indication
of impairment based on internal/external
factors. An asset is impaired when the carrying
amount of the asset exceeds the recoverable
amount. The recoverable amount is the higher
of an asset’s fair value less costs of disposal
and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest
levels for which there are separately identifiable
cash inflows which are largely independent of
the cash inflows from other assets or groups
of assets (cash-generating units). Impairment
loss is charged to the Statement of Profit & Loss

Account in the year in which an asset is identified
as impaired. An impairment loss recognized
in the prior accounting periods is reversed if
there has been change in the estimates used to
determine the assets recoverable amount since
the last impairment loss was 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.

Impairment losses are recognised in the
statement of profit and loss.

For assets, an assessment is made at each
reporting date to determine whether there
is an indication that previously recognised
impairment losses no longer exist or have
decreased. If such indication exists, the Company
estimates the asset’s or CGU’s recoverable
amount. A previously recognised impairment
loss is reversed only if there has been a change
in the assumptions used to determine the
asset’s recoverable amount since the last
impairment loss was recognised. The reversal is
limited so that the carrying amount of the asset
does not exceed its recoverable amount, nor
exceed the carrying amount that would have
been determined, net of depreciation, had no
impairment loss been recognised for the asset
in prior years. Such reversal is recognised in the
statement of profit or loss unless the asset is
carried at a revalued amount, in which case, the
reversal is treated as a revaluation increase.

9 Financial instruments:

Financial assets and financial liabilities are
recognised when an entity becomes a party to
the contractual provisions of the instrument.

Financial assets (except trade receivable,
measured at amortised cost) and financial
liabilities are initially measured at fair value.
Transaction costs that are directly attributable
to the acquisition or issue of financial assets and
financial liabilities (other than financial assets
and financial liabilities at fair value through
Statement of Profit and Loss (FVTPL)) are added
to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on
initial recognition. Transaction costs directly
attributable to the acquisition of financial
assets or financial liabilities at fair value through
profit and loss are recognised immediately in
Statement of Profit and Loss.

gain or loss previously recognised in OCI is
reclassified from the equity to Statement
of Profit and Loss. Interest earned whilst
holding FVTOCI debt instrument is reported
as interest income using the EIR method.

All equity investments in scope of Ind
AS 109 are measured at fair value. Equity
instruments which are held for trading and
contingent consideration recognised by
an acquirer in a business combination to
which Ind AS 103 applies are classified as
at FVTPL. For all other equity instruments,
the Company may make an irrevocable
election to present in other comprehensive
income subsequent changes in the fair
value. The Company makes such election
on an instrument-by-instrument basis. The
classification is made on initial recognition
and is irrevocable.The equity instruments
which are strategic investments and held
for long term purposes are classified as
FVTOCI.

If the Company decides to classify an equity
instrument as at FVTOCI, then all fair value
changes on the instrument, excluding
dividends, are recognised in the OCI. There
is no recycling of the amounts from OCI to
Statement of Profit and Loss, even on sale
of investment. However, the Company may
transfer the cumulative gain or loss within
equity.

Equity instruments included within the
FVTPL category are measured at fair
value with all changes recognised in the
Statement of Profit and Loss.

All other financial assets are classified as
measured at FVTPL.

In addition, on initial recognition, the
Company may irrevocably designate a
financial asset that otherwise meets the
requirements to be measured at amortised
cost or at FVTOCI as at FVTPL if doing so
eliminates or significantly reduces and
accounting mismatch that would otherwise
arise.

Financial assets at FVTPL are measured
at fair value at the end of each reporting
year, with any gains and losses arising on
remeasurement recognised in statement
of profit and loss. The net gain or loss
recognised in statement of profit and loss
incorporates any dividend or interest earned

on the financial asset and is included in
the ‘other income’ line item. Dividend on
financial assets at FVTPL is recognised
when:

The Company’s right to receive the
dividends is established,

It is probable that the economic benefits
associated with the dividends will flow to
the entity,

The dividend does not represent a recovery
of part of cost of the investment and the
amount of dividend can be measured
reliably.

c) Derecognition of financial assets

The Company derecognises a financial
asset when the contractual rights to
the cash flows from the asset expire, or
when it transfers the financial asset and
substantially all the risks and rewards of
ownership of the asset to another party.

d) Impairment

The Company applies the expected credit
loss model for recognising impairment loss
on financial assets measured at amortised
cost, debt instruments at FVTOCI, lease
receivables, trade receivables, other
contractual rights to receive cash or other
financial asset, and financial guarantees
not designated as at FVTPL.

Expected credit losses are the weighted
average of credit losses with the respective
risks of default occurring as the weights.
Credit loss is the difference between all
contractual cash flows that are due to the
Company in accordance with the contract
and all the cash flows that the Company
expects to receive (i.e. all cash shortfalls),
discounted at the original effective interest
rate (or credit-adjusted effective interest rate
for purchased or originated credit-impaired
financial assets). The Company estimates
cash flows by considering all contractual
terms of the financial instrument (for
example, prepayment, extension, call and
similar options) through the expected life
of that financial instrument.

The Company measures the loss allowance
for a financial instrument at an amount
equal to the lifetime expected credit
losses if the credit risk on that financial
instrument has increased significantly

since initial recognition. If the credit risk on
a financial instrument has not increased
significantly since initial recognition, the
Company measures the loss allowance for
that financial instrument at an amount
equal to 12-month expected credit losses.
12-month expected credit losses are portion
of the life-time expected credit losses and
represent the lifetime cash shortfalls that
will result if default occurs within the 12
months after the reporting date and thus,
are not cash shortfalls that are predicted
over the next 12 months.

If the Company measured loss allowance for
a financial instrument at lifetime expected
credit loss model in the previous year,
but determines at the end of a reporting
year that the credit risk has not increased
significantly since initial recognition due to
improvement in credit quality as compared
to the previous year, the Company again
measures the loss allowance based on
12-month expected credit losses.

When making the assessment of whether
there has been a significant increase in
credit risk since initial recognition, the
Company uses the change in the risk of a
default occurring over the expected life
of the financial instrument instead of the
change in the amount of expected credit
losses. To make that assessment, the
Company compares the risk of a default
occurring on the financial instrument as at
the reporting date with the risk of a default
occurring on the financial instrument as at
the date of initial recognition and considers
reasonable and supportable information,
that is available without undue cost or effort,
that is indicative of significant increases in
credit risk since initial recognition.

For 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, the Company always
measures the loss allowance at an amount
equal to lifetime expected credit losses.

Further, for the purpose of measuring lifetime
expected credit loss allowance for trade
receivables, the Company has used a practical
expedient as permitted under Ind AS 109. This
expected credit loss allowance is computed
based on a provision matrix which takes into
account historical credit loss experience and
adjusted for forward-looking information.

The impairment requirements for the
recognition and measurement of a loss
allowance are equally applied to debt
instruments at FVTOCI except that the
loss allowance is recognised in other
comprehensive income and is not reduced
from the carrying amount in the balance
sheet.

e) Effective interest method

The effective interest method is a method
of calculating the amortised cost of a
debt instrument and of allocating interest
income over the relevant year. The effective
interest rate is the rate that exactly discounts
estimated future cash receipts (including all
fees and points paid or received that form
an integral part of the effective interest rate,
transaction costs and other premiums or
discounts) through the expected life of the
debt instrument, or, where appropriate, a
shorter year, to the net carrying amount on
initial recognition.

Income is recognised on an effective
interest basis for debt instruments other
than those financial assets classified as at
FVTPL. Interest income is recognised in
statement of profit and loss and is included
in the ‘Other income’ line item.

B. Financial liabilities and equity instruments

a) Classification as debt or equity

Debt and equity instruments issued by a
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.

b) 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.

Repurchase of the Company’s own equity
instruments is recognised and deducted
directly in equity. No gain or loss is
recognised in Statement of Profit and Loss
on the purchase, sale, issue or cancellation
of the Company’s own equity instruments.

c) Financial liabilities

Financial liabilities are classified as either
financial liabilities ‘at FVTPL’ or ‘other
financial liabilities’.

Financial liabilities at FVTPL:

Financial liabilities are classified as at FVTPL
when the financial liability is either held for
trading or it is designated as at FVTPL.

A financial liability is classified as held for
trading if:

• It has been incurred principally for the
purpose of repurchasing it in the near
term; or

• on initial recognition it is part of
a portfolio of identified financial
instruments that the Company
manages together and has a recent
actual pattern of short-term profit¬
taking; or

• it is a derivative that is not designated
and effective as a hedging instrument.

A financial liability other than a financial
liability held for trading may be designated
as at FVTPL upon initial recognition if:

• such designation eliminates or
significantly reduces a measurement
or recognition inconsistency that
would otherwise arise;

• the financial liability forms part of a
group of financial assets or financial
liabilities or both, which is managed
and its performance is evaluated on
a fair value basis, in accordance with
the Company’s documented risk
management or investment strategy,
and information about the grouping is
provided internally on that basis; or

• it forms part of a contract containing
one or more embedded derivatives, and
Ind AS 109 permits the entire combined
contract to be designated as at FVTPL
in accordance with Ind AS 109.

Financial liabilities at FVTPL are stated
at fair value, with any gains or losses
arising on remeasurement recognised in
Statement of Profit and Loss. The net gain

or loss recognised in Statement of Profit
and Loss incorporates any interest paid on
the financial liability and is included in the
Statement of Profit and Loss. For Liabilities
designated as FVTPL, fair value gains/losses
attributable to changes in own credit risk
are recognised in OCI.

The Company derecognises financial
liabilities when, and only when, the
Company’s obligations are discharged,
cancelled or they expire. The difference
between the carrying amount of the
financial liability derecognised and
the consideration paid and payable is
recognised in the Statement of Profit and
Loss.

Derecognition of financial liabilities:

The Company derecognises financial
liabilities when, and only when, the
Company’s obligations are discharged,
cancelled or have expired. An exchange
between with a lender of debt instruments
with substantially different terms is
accounted for as an extinguishment of
the original financial liability and the
recognition of a new financial liability.
Similarly, a substantial modification of
the terms of an existing financial liability
(whether or not attributable to the financial
difficulty of the debtor) is accounted for as
an extinguishment of the original financial
liability and the recognition of a new
financial liability. The difference between
the carrying amount of the financial liability
derecognised and the consideration paid
and payable is recognised in the Statement
of Profit and Loss.

10. Fair value measurements:

The Company measures financial instruments
at fair value at each balance sheet date. Fair
value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly
transaction between market participants at the
measurement date. The fair value measurement
is based on the presumption that the transaction
to sell the asset or transfer the liability takes
place either:

• In the principal market for the asset or
liability, or

• In the absence of a principal market, in the
most advantageous market for the asset or
liability

The principal or the most advantageous market
must be accessible by the Company. The fair
value of an asset or a liability is measured using
the assumptions that market participants would
use when pricing the asset or liability, assuming
that market participants act in their economic
best interest.

A fair value measurement of a non-financial
asset takes into account a market participant’s
ability to generate economic benefits by using
the asset in its highest and best use or by selling
it to another market participant that would use
the asset in its highest and best use.

The Company uses valuation techniques that are
appropriate in the circumstances and for which
sufficient data are available to measure fair
value, maximising the use of relevant observable
inputs and minimising the use of unobservable
inputs. All assets and liabilities for which fair
value is measured or disclosed in the standalone
financial statements are categorised within the
fair value hierarchy, described as follows, based
on the lowest level input that is significant to the
fair value measurement as a whole:

• Level 1 — Quoted (unadjusted) market
prices in active markets for identical assets
or liabilities

• Level 2 — Valuation techniques for which
the lowest level input that is significant to
the fair value measurement is directly or
indirectly observable

• Level 3 — Valuation techniques for which
the lowest level input that is significant to
the fair value measurement is unobservable

For assets and liabilities that are recognised in the
standalone 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. External valuers are
involved for valuation of significant assets, such
as properties and unquoted financial assets.

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.

11. Derivative Instruments and Hedge Accounting

a. Derivative financial instruments

The Company enters into a variety of
derivative financial instruments to manage
its exposure to commodity price and
foreign exchange rate risks, including
foreign exchange forward contracts
and commodity forward contracts -
OTC derivatives. Derivatives are initially
recognized at fair value at the date the
derivative contracts are entered into and
are subsequently remeasured to their fair
value at the end of each reporting year.
The resulting gain or loss is recognized in
Statement of Profit and Loss immediately
unless the derivative is designated and
effective as a hedging instrument, in which
event the timing of the recognition in
Statement of Profit and Loss depends on
the nature of the hedge item.

b. Hedge accounting

The Company designates certain hedging
instruments, which include derivatives
in respect of foreign currency risk and
commodity price risk, as cash flow hedges.
Hedges of foreign exchange risk and
commodity price risk for highly probable
forecast transactions are accounted for as
cash flow hedges.

At the inception of the hedge relationship,
the entity documents the relationship
between the hedging instrument and
the hedged item, along with its risk
management objectives and its strategy for
undertaking various hedge transactions.
Furthermore, at the inception of the hedge
and on an ongoing basis, the Company
documents whether the hedging
instrument is highly effective in offsetting
changes in fair values or cash flows of the
hedged item attributable to hedged risk.

Cash flow hedges

The effective portion of changes in fair
value of derivatives that are designated and
qualify as cash flow hedges is recognized
in other comprehensive income and
accumulated under the heading of cash flow
hedging reserve. The gain or loss relating
to the ineffective portion is recognized

immediately in Statement of profit and loss.
Amounts previously recognized in other
comprehensive income and accumulated
in equity relating to effective portion as
described above are reclassified to profit
and loss in the years when the hedged item
affects profit and loss, in the same line as the
recognized hedged item. However, when
the hedged forecast transaction results in
the recognition of a non-financial asset or
a non-financial liability, such gains or losses
are transferred from equity (but not as a
reclassification adjustment) and included
in the initial measurement of the cost of the
non-financial asset or non-financial liability.
Hedge accounting is discontinued when
the hedging instrument expires or is sold,
terminated, or exercised, or when it no longer
qualifies for hedge accounting. Any gain
or loss recognized in other comprehensive
income and accumulated in equity at that
time remains in equity and is recognized
when the forecast transaction is ultimately
recognized in profit and loss. When a
forecast transaction is no longer expected to
occur, the gain or loss accumulated in equity
is recognized immediately in profit and loss.

12. Cash and cash equivalents:

Cash and cash equivalents in the balance
sheet and for the purpose of the statement of
cash flows, include cash on hand, other short¬
term, highly liquid investments with original
maturities of three months or less that are
readily convertible to known amounts of cash
and which are subject to an insignificant risk of
changes in value.

13. Inventories:

Inventories are valued at the lower of cost and
net realisable value. Costs incurred in bringing
each product to its present location and
condition are accounted for as follows:

Raw materials: cost includes cost of purchase and
other costs incurred in bringing the inventories
to their present location and condition. Cost is
determined on weighted average basis.

Finished goods and work in progress: cost includes
cost of direct materials, cost of purchase and other
costs incurred in bringing the inventories to their
present location and condition, labour cost and
a proportion of manufacturing overheads based
on the normal operating capacity but excluding
borrowing costs. Cost is determined on weighted
average basis .

Net realisable 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.

14. Foreign currency transactions:

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

a) On initial recognition, all foreign currency
transactions are recorded at the functional
currency spot rate at the date the
transaction first qualifies for recognition.

b) Monetary assets and liabilities in foreign
currency outstanding at the close of
reporting date are translated at the
functional currency spot rates of exchange
at the reporting date.

c) Exchange differences arising on settlement
of translation of monetary items are
recognised in the Statement of Profit and
Loss.

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. Non-monetary items
measured at fair value in a foreign currency are
translated using the exchange rates at the date
when the fair value is determined. The gain or
loss arising on translation of non-monetary
items measured at fair value is treated in line
with the recognition of the gain or loss on the
change in fair value of the item (i.e., translation
differences on items whose fair value gain or
loss is recognised in OCI or profit or loss are also
recognised in OCI or profit or loss, respectively.

15. 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 the Statement of Profit and
Loss in the year in which they are incurred.

The Company determines the amount of
borrowing costs eligible for capitalisation as
the actual borrowing costs incurred on that
borrowing during the year less any interest
income earned on temporary investment of
specific borrowings pending their expenditure
on qualifying assets, to the extent that an entity
borrows funds specifically for the purpose
of obtaining a qualifying asset. In case if the
Company borrows generally and uses the funds
for obtaining a qualifying asset, borrowing costs
eligible for capitalisation are determined by
applying a capitalisation rate to the expenditures
on that asset.

16. Income tax

The income tax expense or credit for the period
is the tax payable on the current period’s taxable
income based on the applicable income tax
rate for the jurisdiction adjusted by changes in
deferred tax assets and liabilities attributable to
temporary differences, unused tax losses and
unabsorbed depreciation.

Current and deferred tax is recognized in the
Statement of Profit and Loss except to the extent
it relates to items recognized directly in equity
or other comprehensive income, in which case it
is recognized in equity or other comprehensive
income.

A. Current income tax

The current income tax charge is calculated
on the basis of the tax laws enacted or
substantively enacted at the end of the
reporting period. The Company establishes
provisions, wherever appropriate, on the
basis of amounts expected to be paid to the
tax authorities.

Current tax assets and liabilities are offset
when there is a legally enforceable right to
set off current tax assets against current tax
liabilities.

B. Deferred tax

Deferred tax is provided using the Balance
sheet approach, on temporary differences
arising between the tax bases of assets and
liabilities and their carrying amounts in the
standalone financial statements. Deferred
tax is determined using tax rates (and laws)
that have been enacted or substantially
enacted by the end of the reporting period
and are expected to apply when the related
deferred income tax asset is realised or the
deferred income tax liability is settled.

The carrying amount of deferred tax assets
is reviewed at each reporting date and
adjusted to reflect changes in probability
that sufficient taxable profits will be
available to allow all or part of the asset to
be recovered.

Deferred tax assets are recognised for all
deductible temporary differences and
unused tax losses only if it is probable that
future taxable amounts will be available
to utilise those temporary differences and
losses.

Deferred tax assets and liabilities are offset
when there is a legally enforceable right to
offset current tax assets and liabilities and
when the deferred tax balances relate to
the same taxation authority.

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.

17. Government grants

Government grants are recognised where there
is reasonable assurance that the grant will be
received, and all attached conditions will be
complied with. When the grant relates to an
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. When the grant relates to an asset, it
is recognised as income in equal amounts over
the expected useful life of the related asset.

When the Company receives grants of non¬
monetary assets, the asset and the grant are
recorded at fair value amounts and released
to profit or loss over the expected useful life in
a pattern of consumption of the benefit of the
underlying asset i.e. by equal annual instalments.
Government grants related to assets, including
non-monetary grants at fair value are presented
in the balance sheet by setting up the grant as
deferred income.

18. Trade Credits

Company enters into deferred payment
arrangements (acceptances) whereby lenders
such as banks and other financial institutions
make payments to supplier’s banks for purchase
of raw materials and traded goods. The banks
and financial institutions are subsequently

repaid by the Company at a later date providing
working capital benefits. These arrangements
are in the nature of credit extended in normal
operating cycle and these arrangements for raw
materials and traded goods are recognised as
Trade Credits. Interest borne by the company
on such arrangements is accounted as finance
cost. Payments made by banks and financial
institutions to the operating vendors are treated
as a non-cash item and settlement of operational
acceptances by the Company is treated as cash
flows from operating activity reflecting the
substance of the payment.

19. Business Combinations under common control

Business combinations involving entities that
are controlled by the group are accounted for
using the pooling of interests method as follows:

1) The assets and liabilities of the combining
entities are reflected at their carrying
amounts.

2) No adjustments are made to reflect fair
values, or recognise any new assets or
liabilities. Adjustments are only made to
harmonise accounting policies.

3) The balance of the retained earnings
appearing in the standalone financial
statements of the transferor is aggregated
with the corresponding balance appearing
in the standalone financial statements of
the transferee or is adjusted against general
reserve.

4) The identity of the reserves are preserved
and the reserves of the transferor become
the reserves of the transferee.

5) The difference, if any, between the amounts
recorded as share capital issued plus any
additional consideration in the form of cash
or other assets and the amount of share
capital of the transferor is transferred to
capital reserve and is presented separately
from other capital reserves.

6) The financial information in the standalone
financial statements in respect of prior
periods is restated as if the business
combination had occurred from the
beginning of the preceding period in
the standalone financial statements,
irrespective of the actual date of
combination. However, where the business
combination had occured after that date,
the prior period information is restated only
from that date.

20. Investment in joint ventures

A joint venture is a type of joint arrangement
whereby the parties that have joint control of the
arrangement have rights to the net assets of the
joint venture. Joint control is the contractually
agreed sharing of control of an arrangement,
which exists only when decisions about the
relevant activities require unanimous consent of
the parties sharing control. Investment in joint
venture is measured at cost.