2 Significant accounting policies
2.1 Revenue recognition
The Company has applied Ind AS 115: Revenue
from Contracts with Customers which establishes a
comprehensive framework for determining whether,
how much and when revenue is to be recognised. Ind
AS 115 replaces Ind AS 18 Revenue. The impact of the
adoption of the standard on the financial statements of
the Company is insignificant.
Revenue is recognised upon transfer of promised
products or services to customer in an amount that
reflect the consideration which the Company expects
to receive in exchange of those products or services.
• Revenue is measured at the fair value of
consideration received or receivable taking into
account the amount of discounts, volume rebates
and VAT/ GST are recognised when all significant
risks and rewards of ownership of the goods sold
are transferred.
• Revenue from the sale of goods includes excise
duty.
• Export incentives are recognised as income
when the right to receive credit as per the terms
of the scheme is established in respect of the
exports made and where there is no significant
uncertainty regarding the ultimate collection of
the relevant export proceeds
• Dividend income is accounted for when the
right to receive the income is established, which
is generally when shareholders approve the
dividend.
• Difference between the sale price and carrying
value of investment is recognised as profit or loss
on sale / redemption on investment on trade date
of transaction.
• Interest income is accrued on, time basis, by
reference to the principal outstanding and at the
effective interest rate applicable, which is the
rate that exactly discounts estimated future cash
receipts through the expected life of the financial
asset to that asset’s net carrying amount on initial
recognition.
2.2 Leases
Company as a Lessee
The Company accounts for each lease component
within the contract as a lease separately from non¬
lease components of the contract and allocates the
consideration in the contract to each lease component
on the basis of the relative standalone price of the lease
component and the aggregate standalone price of the
non-lease components. The Company recognises right-
of-use asset representing its right to use the underlying
asset for the lease term at the lease commencement
date. The cost of the right-of-use asset measured at
inception shall comprise of the amount of the initial
measurement of the lease liability adjusted for any
lease payments made at or before the commencement
date less any lease incentives received, plus any initial
direct costs incurred and an estimate of costs to be
incurred by the lessee in dismantling and removing
the underlying asset or restoring the underlying asset
or site on which it is located. The right-of-use asset is
subsequently measured at cost less any accumulated
depreciation, accumulated impairment losses, if any and
adjusted for any remeasurement of the lease liability.
The right-of-use asset is depreciated using the straight¬
line method from the commencement date over the
shorter of lease term or useful life of right-of-use asset.
The estimated useful lives of right-of-use assets are
determined on the same basis as those of property,
plant and equipment. Right-of-use assets are tested for
impairment whenever there is any indication that their
carrying amounts may not be recoverable. Impairment
loss, if any, is recognised in the statement of profit and
loss. The Company measures the lease liability at the
present value of the lease payments that are not paid
at the commencement date of the lease. The lease
payments are discounted using the interest rate implicit
in the lease, if that rate can be readily determined. If
that rate cannot be readily determined, the Company
uses incremental borrowing rate. For leases with
reasonably similar characteristics, the Company, on a
lease-by-lease basis, may adopt either the incremental
borrowing rate specific to the lease or the incremental
borrowing rate for the portfolio as a whole. The lease
payments shall include fixed payments, variable lease
payments, residual value guarantees, exercise price of
a purchase option where the Company is reasonably
certain to exercise that option and payments of
penalties for terminating the lease, if the lease term
reflects the lessee exercising an option to terminate
the lease. The lease liability is subsequently remeasured
by increasing the carrying amount to reflect interest
on the lease liability, reducing the carrying amount
to reflect the lease payments made and remeasuring
the carrying amount to reflect any reassessment or
lease modifications or to reflect revised in-substance
fixed lease payments. The Company recognises the
amount of the re-measurement of lease liability due to
modification as an adjustment to the right-of-use asset
and statement of profit and loss depending upon the
nature of modification. Where the carrying amount of
the right-of-use asset is reduced to zero and there is
a further reduction in the measurement of the lease
liability, the Company recognises any remaining amount
of the re-measurement in statement of profit and loss.
The Company has elected not to apply the requirements
of Ind AS 116 Leases to short-term leases of all assets
that have a lease term of 12 months or less and
leases for which the underlying asset is of low value.
The lease payments associated with these leases are
recognised as an expense on a straight-line basis over
the lease term. The Company has elected to use the
incremental borrowing rate as the discout, the future
lease payments. The details of ROU assets held by the
company along with deprecition are given in schedule
3.
2.3 Foreign currencies
In preparing the financial statements of the Company,
transactions in currencies other than the company’s
functional currency (foreign currencies) are recognised
at the rates of exchange prevailing at the dates of
the transactions. At the end of each reporting period,
monetary items denominated in foreign currencies are
retranslated at the rates prevailing at that date. Non¬
monetary items that are measured in terms of historical
cost in a foreign currency are not retranslated. Exchange
differences on monetary items are recognised in profit
or loss in the period in which they arise.
2.4 Borrowing costs
Specific borrowing costs that are attributable to the
acquisition, construction or production of a qualifying
asset are capitalized as part of the cost of such asset
till such time the asset is ready for its intended use and
borrowing costs are being incurred. A qualifying asset
is an asset that necessarily takes a substantial period
of time to get ready for its intended use. All other
borrowing costs are recognised as an expense in the
period in which they are incurred.
Borrowing cost includes interest expense, amortization
of discounts, ancillary costs incurred in connection with
borrowing of funds and exchange difference arising
from foreign currency borrowings to the extent they
are regarded as an adjustment to the Interest cost.
2.5 Taxation
Income tax expense consists of current and deferred
tax. Income tax expense is recognized in the income
statement except to the extent that it relates to
items recognized directly in equity, in which case it is
recognized in equity.
Current tax
Current tax is the expected tax payable on the taxable
income for the year, using tax rates enacted or
substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.
Deferred tax
Deferred tax is recognized using the balance sheet
method, providing for temporary differences between
the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used
for taxation purposes. Deferred tax is not recognized
for the following temporary differences: the initial
recognition of assets or liabilities in a transaction
that is not a business combination and that affects
neither accounting nor taxable profit; differences
relating to investments in subsidiaries and jointly
controlled entities to the extent that it is probable that
they will not reverse in the foreseeable future; and
taxable temporary differences arising upon the initial
recognition of goodwill. Deferred tax is measured at
the tax rates that are expected to be applied to the
temporary differences when they reverse, based on the
laws that have been enacted or substantively enacted
by the reporting date. Deferred tax assets and liabilities
are offset if there is a legally enforceable right to offset
current tax liabilities and assets, and they relate to
income taxes levied by the same tax authority on the
same taxable entity, or on different tax entities, but
they intend to settle current tax liabilities and assets
on a net basis or their tax assets and liabilities will be
realized simultaneously.
A deferred tax asset is recognized to the extent that it
is probable that future taxable profits will be available
against which the temporary difference can be utilized.
Deferred tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realized.
2.6 Earnings per share
The Company presents basic and diluted earnings per
share (“EPS”) data for its ordinary shares. The basic
earnings per share is computed by dividing the net
profit attributable to equity shareholders for the period
by the weighted average number of equity shares
outstanding during the year.
Diluted earnings per share is computed by dividing the
net profit attributable to equity shareholders for the
year relating to the dilutive potential equity shares,
by the weighted average number of equity shares
considered for deriving basic earnings per share and
the weighted average number of equity shares which
could have been issued on the conversion of all dilutive
potential equity shares. Potential equity shares are
deemed to be dilutive only if their conversion to equity
shares would decrease the net profit per share.
2.7 Property, plant and equipment
Freehold land and buildings (property) held for use
in the production or supply of goods or services,
or administrative purposes are stated at cost less
accumulated depreciation and accumulated impairment.
Freehold land is not depreciated.
The initial cost of PPE comprises its purchase price,
including import duties and non-refundable purchase
taxes, and any directly attributable costs of bringing an
asset to working condition and location for its intended
use, including relevant borrowing costs and any
expected costs of decommissioning, less accumulated
depreciation and accumulated impairment losses, if
any. Expenditure incurred after the PPE have been
put into operation, such as repairs and maintenance,
are charged to the Statement of Profit and Loss in the
period in which the costs are incurred.
If significant parts of an item of PPE have different
useful lives, then they are accounted for as separate
items (major components) of PPE.
Material items such as spare parts, stand-by equipment
and service equipment are classified as PPE when they
meet the definition of PPE as specified in Ind AS 16 -
Property, Plant and Equipment.
2.8 Expenditure during construction period
Expenditure during construction period (including
financing cost related to borrowed funds for
construction or acquisition of qualifying PPE) is
included under Capital Work-in-Progress, and the same
is allocated to the respective PPE on the completion of
their construction. Advances given towards acquisition
or construction of PPE outstanding at each reporting
date are disclosed as Capital Advances under “Other
non-current Assets”.
2.9 Depreciation
Depreciation is the systematic allocation of the
depreciable amount of PPE over its useful life and is
provided on a straight-line basis over the useful lives as
prescribed in Schedule II to the Act or as per technical
assessment.
Depreciable amount for PPE is the cost of PPE less its
estimated residual value. The useful life of PPE is the
period over which PPE is expected to be available for
use by the Company, or the number of production or
similar units expected to be obtained from the asset by
the Company.
The Company has componentised its PPE and has
separately assessed the life of major components. The
Company depreciates its fixed assets over the useful
lives as prescribed in Schedule II to the Act.
Depreciation on additions is provided on a pro-rata
basis from the month of installation or acquisition and
in case of Projects from the date of commencement of
commercial production. Depreciation on deductions/
disposals is provided on a pro-rata basis up to the date
of deduction/disposal.
2.10 Intangible assets and amortisation
Intangible assets are stated at cost less accumulated
amortization and impairment. Intangible assets are
amortized over their respective estimated useful lives
on a straight-line basis, from the date that they are
available for use.
Amortization
The estimated useful life of an identifiable intangible
asset is based on a number of factors including the
effects of obsolescence, demand, competition and
other economic factors (such as the stability of the
industry and known technological advances) and the
level of maintenance expenditures required to obtain
the expected future cash flows from the asset.
2.11 Inventories
Inventories are valued at lower of cost, determined
on “Weighted average” basis and net realisable value.
Costs incurred in bringing each product to its present
location and condition are accounted for as follows:
• Raw materials, fuel, stores & spare parts and
packing materials:
Valued at lower of cost and net realisable value
(NRV). However, these items are considered to
be realisable at cost, if the finished products, in
which they will be used, are expected to be sold
at or above cost. Cost is determined on FIFO
basis.
• Work-in- progress (WIP), finished goods and
stock-in-trade:
Valued at lower of cost and NRV. Cost of Finished
goods and WIP includes cost of raw materials,
cost of conversion and other costs incurred in
bringing the inventories to their present location
and condition.
2.12 Cash and cash equivalents
Cash and cash equivalents in the Balance Sheet
comprise cash at bank and in hand and short-term
deposits with banks that are readily convertible into
cash which are subject to insignificant risk of changes
in value and are held for the purpose of meeting short¬
term cash commitments.
2.13 Cash flow statement
Cash flows are reported using the indirect method,
whereby net profit before tax is adjusted for the
effects of transactions of a non-cash nature and any
deferrals or accruals of past or future cash receipts or
payments. The cash flows from operating, investing
and financing activities of the Company are segregated.
Bank overdrafts are classified as part of cash and cash
equivalent, as they form an integral part of an entity’s
cash management.
2.14 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.
Where the Company receives non-monetary grants,
the asset and the grant are accounted at fair value and
recognised in the statement of profit and loss over the
expected useful life of the asset.
2.15 Impairment of non financial assets
The carrying amounts of the Company’s non-financial
assets, inventories and deferred tax assets are reviewed
at each reporting date to determine whether there is
any indication of impairment. If any such indication
exists, then the asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating
unit (as defined below) is the greater of its value in use
and its fair value less costs to sell. 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 or the cash¬
generating unit. For the purpose of impairment testing,
assets are grouped together into the smallest group
of assets that generates cash inflows from continuing
use that are largely independent of the cash inflows of
other assets or groups of assets (the “cash-generating
unit”).
An impairment loss is recognized in the income
statement if the estimated recoverable amount of
an asset or its cash-generating unit is lower than its
carrying amount. Impairment losses recognized in prior
periods are assessed at each reporting date for any
indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has
been a change in the estimates used to determine the
recoverable amount. An impairment loss is reversed
only to the extent that the asset’s carrying amount does
not exceed the carrying amount that would have been
determined, net of depreciation or amortization, if no
impairment loss had been recognized. Goodwill that
forms part of the carrying amount of an investment in
an associate is not recognized separately, and therefore
is not tested for impairment separately. Instead, the
entire amount of the investment in an associate is
tested for impairment as a single asset when there is
objective evidence that the investment in an associate
may be impaired.
An impairment loss in respect of equity accounted
investee is measured by comparing the recoverable
amount of investment with its carrying amount. An
impairment loss is recognized in the income statement,
and reversed if there has been a favourable change
in the estimates used to determine the recoverable
amount.
2.16 Employee benefits
Short-term employee benefits
Short-term employee benefits comprise of employee
costs such as salaries, bonus etc. is recognized on the
basis of the amount paid or payable for the period
during which services are rendered by the employee.
Defined contribution plans
The Company’s contribution to provident fund and
employee state insurance schemes is charged to
the statement of profit and loss. The Company’s
contributions towards Provident Fund are deposited
with the Regional Provident Fund Commissioner under
a defined contribution plan.
Termination benefits
Termination benefits are recognized as an expense
when the Company is demonstrably committed,
without realistic possibility of withdrawal, to a formal
detailed plan to either terminate employment before
the normal retirement date, or to provide termination
benefits as a result of an offer made to encourage
voluntary redundancy. Termination benefits for
voluntary redundancies are recognized as an expense
if the Company has made an offer encouraging
voluntary redundancy, it is probable that the offer will
be accepted, and the number of acceptances can be
estimated reliably.
Defined Benefit Plans
The Company has an obligation towards gratuity,
a defined benefit retirement plan covering eligible
employees. The plan provides for a lump-sum payment
to vested employees at retirement, death while in
employment or on termination of employment of
an amount equivalent to 15 days salary payable for
each completed year of service. Vesting occurs upon
completion of five years of service. The measurement
date of retirement plans is March 31. The present
value of the defined benefit liability and the related
current service cost and past service cost are measured
using projected unit credit method The present value
of the post-employment benefit obligations depends
on a number of factors. The discounting rate used to
calculate the Present of the defined benefit obligations
is the incremental borrowing rate of the company. The
Company does not have any plan assets as on 31-03¬
2025.
Other long-term employee benefits
The Company’s net obligation in respect of other
long term employee benefits is the amount of future
benefit that employees have earned in return for
their service in the current and previous periods. That
benefit is discounted to determine its present value.
Re-measurements are recognized in the statement of
profit and loss in the period in which they arise.
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