Material Accounting Policies

I. Financial instruments

1. Financial Assets:

a) Initial Recognition and Measurement: All financial assets are recognised initially at fair value
when the parties become party to the contractual provisions of the financial asset. In case of
financial assets which are not recorded at fair value through profit or loss, transaction costs that are
directly attributable to the acquisition or issue of the financial assets, are adjusted to the fair value on
initial recognition.

b) Subsequent Measurement: The Company classifies its financial assets into various
measurement categories. The classification depends on the contractual terms of the financial
assets’ cash flows and the Company’s business model for managing financial assets.

Financial Assets Measured At Amortised Cost:

A financial asset is measured at Amortised Cost if it is held within a business model whose objective
is to hold the asset in order to collect contractual cash flows and the contractual terms of the
Financial Asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.

Financial Assets Measured At Fair Value Through Other Comprehensive Income (FVOCI):

A financial asset is measured at FVOCI if it is held within a business model whose objective is
achieved by both collecting contractual cash flows and selling financial assets and contractual
terms of financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.

Financial Assets Measured At Fair Value Through Profit Or Loss (FVTPL):

A financial asset which is not classified in any of the above categories are measured at FVTPL.
c) Other Equity Investments: All other equity investments are measured at fair value, with value
changes recognised in Statement of Profit and Loss, except for those equity investments for which
the Company has elected to present the changes in fair value through other comprehensive income
(FVOCI).

2. Financial Liabilities:

a) Initial recognition and measurement: All financial liabilities are recognized initially at fair value
and, in the case of borrowings and payables, net of directly attributable transaction costs. The
company’s financial liabilities include trade and other payables.

b) Subsequent Measurement: Financial liabilities other than derivative financial instruments are
subsequently carried at amortized cost using the effective interest method.

3. Derecognition of Financial Assets And Liabilities:

a) Financial Asset:

The Company derecognizes a financial asset when the contractual cash flows from the asset expire or it
transfers its rights to receive contractual cash flows from the financial asset in a transaction in which
substantially all the risks and rewards of ownership are transferred. Any interest in transferred financial
assets that is created or retained by the Company is recognized as a separate asset or liability.

b) Financial Liability:

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or
expires. Where 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 de-recognition of the original liability and the recognition of a new liability. The
difference between the carrying value of the original financial liability and the consideration paid is
recognised in the Statement of profit and loss.

4. Offsetting

Financial assets and financial liabilities are generally reported gross in the balance sheet. Financial
assets and liabilities are offset and the net amount is presented in the balance sheet when the Company
has a legal right to offset the amounts and intends to settle on a net basis or to realise the asset and settle
the liability simultaneously in all the following circumstances:

a. The normal course of business

b. The event of default

c. The event of insolvency or bankruptcy of the Company and/or its counterparties.

5. Impairment of Financial Assets:

In accordance with IND AS 109, the Company uses ‘Expected Credit Loss’ model (ECL), for evaluating
impairment of financial assets other than those measured at Fair value through profit or loss.

Overview of the Expected Credit Loss (ECL) mode:

Expected Credit Loss, at each reporting date, is measured through a loss allowance for a financial asset:

a. At an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument
has increased significantly since initial recognition.

b. At an amount equal to 12-month expected credit losses, if the credit risk on a financial instrument
has not increased significantly since initial recognition.

Lifetime expected credit losses means expected credit losses that result from all possible default events
over the expected life of a financial asset.

12-month expected credit losses means the portion of Lifetime ECL that represent the ECLs that result
from default events on financial assets that are possible within the 12 months after the reporting date.

The Company performs an assessment, at the end of each reporting period, of whether a financial assets
credit risk has increased significantly since initial recognition. When making the assessment, the change
in the risk of a default occurring over the expected life of the financial instrument is used instead of the
change in the amount of expected credit losses.

Based on the above process, the Company categorises its loans into three stages as described below:
Stage 1 : All exposures where there has not been a significant increase in credit risk since initial
recognition or that has low credit risk at the reporting date and that are not credit impaired upon origination
are classified under this stage. The Company classifies all standard advances and advances upto 30
days default under this category. Stage 1 loans also include facilities where the credit risk has improved
and the loan has been reclassified from Stage 2 or Stage 3.

Stage 2: All exposures where there has been a significant increase in credit risk since initial recognition
but are not credit impaired are classified under this stage. 30 Days Past Due is considered as significant
increase in credit risk.

Stage 3: All exposures assessed as credit impaired when one or more events that have a detrimental
impact on the estimated future cash flows of that asset have occurred are classified in this stage. For
exposures that have become credit impaired, a lifetime ECL is recognised and interest revenue is
calculated by applying the effective interest rate to the amortised cost (net of provision) rather than the
gross carrying amount. 90 Days Past Due is considered as default for classifying a financial instrument as
credit impaired. If an event (for e.g. any natural calamity) warrants a provision higher than as mandated
under ECL methodology, the Company may classify the financial asset in Stage 3 accordingly.

In line with Reserve Bank of India Master Circular on Prudential norms on Income Recognition, Asset
Classification and Provisioning pertaining to Advances and Clarifications dated April 01,2023 borrower
accounts shall be flagged as overdue as part of the day-end processes for the due date, irrespective of the
time of running such processes. Similarly, classification of borrower accounts as Non-Performing Asset /
Stage 3 shall be done as part of day-end process for the relevant date i.e. more than 90 days overdue and
NPA/Stage 3 classification date shall be the calendar date for which the day end process is run. In other
words, the date of Non-Performing Asset / Stage 3 shall reflect the asset classification status of an
account at the day-end of that calendar date.

The Company has carried out the requirement in line with Reserve Bank of India Clarification and
accordingly the change in accounting policy is effective financial year 2023-24

II. Revenue from operations

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company
and the revenue can be reliably measured and there exists reasonable certainty of its recovery.

Interest Income: The interest income is calculated by applying the EIR to the gross carrying amount of
non-credit impaired financial assets (i.e. at the amortised cost of the financial asset before adjusting for
any expected credit loss allowance).

For Credit Impaired financial assets the interest income is calculated by applying the EIR to the amortised
cost of the credit-impaired financial assets (i.e. the gross carrying amount less the allowance for expected
credit losses (ECLs)) and not recognized in Statement of Profit and loss account rather it is credited in a
separate ledger "Unrealized Interest On NPAAccounts” under the "Other Financial Liabilities” head.

III. Employee Benefits

Short Term Employee Benefit:

All employee benefits payable wholly within twelve months of rendering the service are classified as
short-term employee benefits. These benefits include short term compensated absences such as paid

annual leave. The undiscounted amount of short-term employee benefits expected to be paid in
exchange for the services rendered by employees is recognised as an expense during the period.
Benefits such as salaries and wages, etc. and the expected cost of the bonus/ex-gratia are recognised in
the period in which the employee renders the related service.

Post-employment employee benefits

No provision has been made in accounts against liability in respect of future payment of Gratuity, Leave
Encashment, ESI and Provident Fund to employee as in the opinion of the management neither the
Gratuity, ESI nor Provident Fund apply to the company nor any employee qualifies for entitlement of such
benefits.

IV. Other income and expenses

All other income and expense are recognised in the period they occur.

V. Taxes
Current Tax

Current tax assets and liabilities for the current and prior years 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, by the reporting date in the countries where
the Company operates and generates taxable income. Current income tax relating to items is recognised
outside the statement of profit and loss (either in other comprehensive income or 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.

Deferred Tax

Deferred tax assets and liabilities are recognised for temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts. Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantively enacted by the reporting date and are expected to
apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are only recognised for temporary differences, if it is probable that future taxable
amounts will arise to utilise those temporary differences and losses. 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 realised.

Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax
assets and liabilities 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 are realised simultaneously.

VI. Cash and Cash Equivalents

Cash and cash equivalents comprise of cash in hand, Balance with banks and Cheques in hand, which
are subject to an insignificant risk of changes in value.

For the purpose of the statement of cash flows, cash and cash equivalents consist of cash in hand,
Balance with banks and Cheques in hand as they are considered an integral part of the Company’s cash
management.

VII. Property, Plant and Equipment

Property, plant and equipment (PPE) are carried at historical cost of acquisition less accumulated
depreciation. The total cost of assets comprises its purchase price, freight, duties, taxes and any other
incidental expenses directly attributable to bringing the asset to the location and condition necessary for it
to be capable of operating in the manner intended by the management.

Subsequent expenditure related to an item of tangible asset are added to its gross value only if it
increases the future benefits of the existing asset, if it is probable that future economic benefit will flow to
the Company from that expenditure and cost can be measured reliably. Other repairs and maintenance
costs are expensed off as and when incurred.

Depreciation on Property, Plant and Equipment is calculated using written down value method (WDV) to
write down the cost of property and equipment to their residual values over their estimated useful lives
which is in line with the estimated useful life as specified in Schedule II of the Companies Act, 2013.