2. SUMMARY OF MATERIAL ACCOUNTING
POLICIES

(a) Basis of preparation and presentation

The financial statements have been prepared on a
historical cost convention and on an accrual basis,
except for certain items that are measured at fair
value at the end of each reporting period as required
by relevant Ind AS:

• Financial assets and financial liabilities

measured at fair value (refer accounting policy
on financial Instruments);

• Defined benefit and other long-term

employee benefits.

The Financial Statements of the Company have been
prepared to comply with the Indian Accounting
standards ('Ind AS'), including the rules notified under
the relevant provisions of the Companies Act, 2013,
(as amended from time to time) and Presentation and
disclosure requirements of Division II of Schedule III
to the Companies Act, 2013, (Ind AS Compliant
Schedule III) as amended from time to time.

The accounting policies adopted for preperation
and presentation of financial statement have been
consistent with previous year.

The financial statements are presented in and all
values are rounded to the nearest crores, except
when otherwise indicated."

(b) Critical accounting judgments and key
sources of estimation uncertainty

The preparation of these financial statements in
conformity with the recognition and measurement
principles of Ind AS requires the management of the
Company to make estimates and judgments that
affect the reported balances of assets and liabilities,
disclosures relating to contingent assets and
liabilities, and the reported amounts of income and
expense for the periods presented.

Estimates and the underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the periods in which the
estimates are revised and in future periods affected.

Information about significant areas of estimation
uncertainty and critical judgments in applying
accounting policies that have the most significant
effect on the amounts recognized in the financial
statements are disclosed in Note 3.

(c) Revenue recognition

Revenue towards satisfaction of a performance
obligation is measured at the amount of transaction
price (net of variable consideration) allocated to that
performance obligation. The transaction price of
goods sold and services rendered is net of variable
consideration on account of various discounts and
schemes offered by the Group as part of the contract.

i. Revenue from sale of goods :

Revenue from the sale of goods is recognized
at the point in time when control is transferred
to the customer which generally coincides with
transfer of goods to the transporters. The normal
credit term is 7 to 30 days.. Indicators that control
has been transferred include the establishment
of the Company's present right to receive
payment for the goods sold, transfer of legal title
to the customer, transfer of physical possession
to the customer, transfer of significant risks,
and rewards of ownership in the goods to the
customer, and the acceptance of the goods
by the customer.

The Company provides preventive maintenance
services on its certain products at the time of sale.

iii. Revenue from sale of services :

Revenue from services rendered over a period
of time, such as annual maintenance contracts,
are recognized on a straight line basis over the
period of the performance obligation.

iv. Dividend and Interest income :

Dividend income is accounted for when declared
and the right to receive the same is established.
Interest income is recognized using the effective
interest method.

v. Rental income :

Rental income from operating leases is
accounted for on a straight-line basis over
the lease term.

(d) Government grant

Government grants are recognized 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
recognized as income on a systematic basis over the
period that the related costs, which it is intended to
compensate are expensed. When the grant relates to
an asset, it is recognized as income in equal amounts
over the expected useful life of the related asset.

(e) Employee benefits

Short term benefits :

Salaries, wages, short-term compensated absences,
and other short-term benefits, accruing to employees
are recognized at undiscounted amounts in the period
in which the employee renders the related service.

Retirement benefits :

Defined contribution plan :

Payments to defined contribution retirement
benefit plans are recognized as an expense when
employees have rendered the service entitling them
to the contribution.

Defined benefit plan :

Payments to defined contribution retirement benefit
plans are recognised as an expense when employees
have rendered the service entitling them to the
contribution. Defined benefit plan: The company

makes monthly contributions toward the employees'
provident fund which is administered by a trust.
In the event of an interest shortfall (between the
interest declared by the Government and the interest
paid by the fund) the deficiency is made good by the
company, based on an actuarial valuation. The present
value of the defined benefit obligation of employees'
provident fund is determined using the projected
unit credit method, with actuarial valuations being
carried out at each year end. The Company's liability
towards gratuity is determined based on the present
value of the defined benefit obligation and fair
value of plan assets and the net liability or asset is
recognized in the balance sheet. The net liability or
asset represents the deficit or surplus in the plan
(the surplus is limited to the present value of the
economic benefits available in the form of refunds
from the plan or reductions in future contributions).
The present value of the defined benefit obligation is
determined using the projected unit credit method,
with actuarial valuations being carried out at each
year end. Defined benefit costs are composed of:

i. service cost - recognized in profit or loss;

ii. net interest on the net liability or asset -
recognized in profit or loss;

iii. re-measurement of the net liability or asset -
recognized in other comprehensive income

Share based payments :

Employees (including senior executives) of the
Company receive remuneration in the form of
share based payment transactions, whereby
employees render services as consideration for
equityinstruments. In accordance with the Securities
and Exchange Board of India (Share Based Employee
Benefits) Regulations, 2014 and the Ind-AS 102 Share
based payments, the fair value of options granted
under the scheme, cumulative expense recognized
for equity-settled transactions at each reporting date
until the vesting date reflects the extent to which
the vesting period has expired and the Group's best
estimate of the number of equity instruments that
will ultimately vest. The expense or credit recognized
in the Statement of Profit and Loss for a period
represents the movement in cumulative expense
recognized as at the beginning and end of that period
and is recognized in employee benefits expense.

Where the terms of an equity-settled transaction
award are modified, the minimum expense
recognized is the expense as if the terms had not
been modified, if the original terms of the award are
met. An additional expense is recognized for any
modification that increases the total intrinsic value of
the share-based payment transaction, or is otherwise
beneficial to the employee as measured at the date
of modification. The Employee stock option scheme
is administered through Blue Star ESOP Trust.

Code on Social Security, 2020

The Code on Social Security, 2020 ('the Code')
received presidential assent on September 28, 2020.
However, the date on which the Code will come into
effect has not yet been notified. The Company will
record any related financial impact of the Code in the
books of account, in the period(s) in which the Code
becomes effective.

(f) Leases

As a lessee

At the inception of a contract, the Company assesses
whether a contract is or contains a lease. A contract is,
or contains, a lease if a contract conveys the right to
control the use of an identified asset for a period of time
in exchange for consideration.

At the date of commencement of a lease, the Company
recognizes a right-of-use asset ("ROU assets") and
a corresponding lease liability for all leases, except
for short-term leases and low-value leases. Certain
lease arrangements include the option to extend or
terminate the lease before the end of the lease term.
Lease payments to be made under such reasonably
certain extension options are included in the
measurement of ROU assets and lease liabilities.

(i) Right-of-use asset :

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. Right-
of-use assets are depreciated on a straight-line
basis from commencement date to earlier of, the
end of useful life of the ROU assets or the end
of the lease term. The right-of-use assets are also
subject to impairment. Refer to the accounting
policies in section ""l"" Impairment of non¬
financial assets.

Right-of-use assets are depreciated on a straight¬
line basis over the shorter of the lease term and
the estimated useful lives of the assets, as follows:

• Office building 60 years

Average lease term 1 to 10 years

(ii) Lease liability :

Lease liability is measured by discounting the
lease payments using the interest rate using the
incremental borrowing rates. Lease liabilities are
re-measured with a corresponding adjustment
to the related right of use asset if the Company
changes its assessment of whether it will exercise
an extension or a termination option.

The company remeasures the lease liability
(and makes a corresponding adjustment to the
related right-of-use asset) whenever:

• The lease term has changed or there is a
significant event or change in circumstances
resulting in a change in the assessment
of exercise of a purchase option, in which
case the lease liability is remeasured by
discounting the revised lease payments
using a revised discount rate.

• A lease contract is modified and the lease
modification is not accounted for as a
separate lease, in which case the lease
liability is remeasured based on the lease
term of the modified lease by discounting
the revised lease payments using a revised
discount rate at the effective date of
the modification.

The Company has opted for the exemption
provided under Ind AS 116 for short-term leases
and leases of low-value assets, hence the lease

Tax assets and tax liabilities are offset when

there is a legally enforceable right to set off the

recognized amounts.

i. Current income tax

Current income tax assets and liabilities are
measured at the amount expected to be
recovered from or paid to the taxation authorities
in accordance with Income Tax Act,1961. The tax
rates and tax laws used to compute the tax are
those that are enacted at the reporting date.
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 OCI or directly in equity.

ii. Deferred tax

Deferred Tax is provided using the balance sheet
approach on temporary differences between
the tax bases of assets and liabilities and
their carrying amounts for financial reporting
purposes at the reporting date. Deferred income
tax assets are recognized to the extent that it
is probable that taxable profit will be available
against which the deductible temporary
differences and the carry forward of unused tax
credits and unused tax losses can be utilised.

Deferred tax assets are recognised to the extent
that it is probable that taxable profit will be
available against which the deductible temporary
differences, and the carry forward of unused tax
credits and unused tax losses can be utilised.

The carrying amount of deferred tax assets is
reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of
the deferred tax asset to be utilised. Unrecognised
deferred tax assets are re-assessed at each reporting
date and are recognised to the extent that it has
become probable that future taxable profits will
allow the deferred tax asset to be recovered.

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.

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.

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.

(i) Exceptional items

Exceptional items refer to items of income or expense
within the income statement from ordinary activities
which are non-recurring and are of such size, nature, or
incidence that their separate disclosure is considered
necessary to explain the performance of the Company
and to assist users of financial statements in making
projections of future financial performance.

(j) Property, plant and equipment

Property, plant, and equipment are stated at cost,
net of accumulated depreciation, and accumulated
impairment losses.

Costs comprise of costs incurred to bring the assets to
their location and working condition up to the date
the assets are put to their intended use.

When significant components ofplant and equipment
are replaced separately, the Company depreciates
them based on the useful lives of the components.
Leasehold land is depreciated on a straight line
basis over the period of the lease. All other assets
are depreciated to their residual values on a straight
line value basis over their estimated useful lives. The
estimated useful lives of the assets are as follows:

economic lives and assessed for impairment whenever
there is an indication that the intangible asset may
be impaired. Intangible assets are derecognised on
disposal, or when no further economic benefits are
expected from use or disposal. Any gain or loss arising
from derecognition is included in profit or loss.

Useful lives of plant and machinery are higher than
those indicated in Schedule II to the Companies Act,
2013 based on management estimates and technical
assessment made by a technical expert.

Freehold land is not depreciated.

An item of property, plant and equipment and any
significant part initially recognised is derecognised
upon disposal or when no future economic benefits
are expected from its use or disposal.Any gain or loss
arising from the derecognition / disposal of an asset
is included in profit or loss.

The residual values, useful lives, and methods of
depreciation of property, plant, and equipment are
reviewed at each financial year end and adjusted
prospectively, as appropriate.

Capital work-in-progress and capital advance

Cost of assets not ready for intended use, as on the
balance sheet date, is shown as capital work in progress.
The cost comprises purchase price, borrowing cost if
capitalisation criteria are met and directly attributable
cost of bringing the asset to its working condition for
the intended use. Any trade discount and rebates are
deducted in arriving at the purchase price. Advances
paid for the acquisition construction of PPE which are
outstanding at the Balance Sheet date are classified
under the 'Capital Avances¹.

(k) Intangible assets

Intangible assets acquired are measured on initial
recognition at cost. After initial recognition, intangible
assets are carried at cost less any accumulated
amortisation and accumulated impairment losses.
Intangible assets with finite lives are amortised on
a straight - line basis over their estimated useful

The residual values, useful lives, and methods of
depreciation of Intangible assets are reviewed at
each financial year end and adjusted prospectively,
as appropriate.

Research and development costs

Research costs are expensed as incurred. Development
expenditure on projects is recognised as an intangible
asset when the Company can demonstrate:

• The technical feasibility of completing the
intangible asset so that the asset will be available
for use or sale.

• Its intention and ability to complete and to use
or sell the asset.

• How the asset will generate future
economic benefits.

• The availability of adequate resources to
complete the asset.

• The ability to measure reliably the expenditure
incurred during development.

Development expenditure that does not meet the
above criteria is expensed as incurred.

During the period of development, the asset is tested
for impairment annually.

(l) Impairment

i. Financial assets :

The Company applies expected credit losses
(ECL) model for measurement and recognition
of loss allowance on trade receivables.

In case of trade receivables, the Company follows
a simplified approach wherein an amount equal
to lifetime ECL is measured and recognised as
loss allowance.

ii. Non-financial assets :

The Company assesses, at each reporting date,
whether there is an indication that an asset
may be impaired. If any indication exists, or
when annual impairment testing for an asset
is required, the Company estimates the asset's
recoverable amount. An asset's recoverable
amount is the higher of an asset's or cash¬
generating unit's (CGU) fair value less costs
of disposal and its value in use. Recoverable
amount is determined for an individual asset,
unless the asset does not generate cash inflows
that are largely independent of those from other
assets or Companys of assets. When the carrying
amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is
written down to its recoverable amount.

In assessing value in use, the estimated future
cash flows are discounted to their present value
using a pre-tax discount rate that reflects current
market assessments of the time value of money
and the risks specific to the asset. In determining
fair value less costs of disposal, recent market
transactions are taken into account. If no such
transactions can be identified, an appropriate
valuation model is used.

Impairment losses including impairment on
inventories 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 and loss.

For contract assets, the Company has applied
the simplified approach for recognition of
impairment allowance as provided in Ind AS 109
which requires the expected lifetime losses from
initial recognition of contract assets.

(m) Financial instruments

Recognition and initial measurement

A financial instrument is any contract that gives rise to
a financial asset of one entity and a financial liability
or equity instrument of another entity. Financial
assets and financial liabilities are recognized by the
Company when it becomes a party to the contractual
provisions of the financial instrument.

Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of
a financial instrument are adjusted to fair value,
except where the financial instrument is measured
at Fair Value through profit or loss, in which case
the transaction costs are immediately recognized in
profit or loss.

Financial assets

Cash and cash equivalents

The Company considers all highly liquid financial
instruments, which are readily convertible into known
amounts of cash that are subject to an insignificant
risk of change in value and having original maturities
of three months or less from the date of purchase,
to be cash equivalents. Cash and cash equivalents
consist of balances with banks that are unrestricted
for withdrawal and usage.

For the statement of cash flows, cash and cash
equivalents consist of cash and short-term deposits,
as defined above, net of outstanding bank overdrafts
as they are considered an integral part of the
Company's cash management.

Financial assets at amortised cost

Financial assets are subsequently measured at
amortized cost if these financial assets are held
within a business whose objective is to hold these
assets to collect contractual cash flows and the
contractual terms give rise on specified dates to
cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Wherever the customer has raised issue on contractual
/ performance obligation on goods and services
delivered or received and is under discussion with the
customer are treated as the disputed amount.

Trade Receivables

Trade receivables are financial assets within the scope
of measurement requirements of Ind AS 109. All
financial assets are initially at fair value plus or minus
the transaction cost. Financial assets in the form of
trade receivables, shall be initially measured at their
transaction price unless those contain a significant
financing component determined in accordance
with Ind AS 115.

Financial assets at fair value through other
comprehensive income

Financial assets are measured at fair value through
other comprehensive income if these financial assets
are held within a business model whose objective is
achieved both by collecting contractual cash flows on
specified dates that are solely payments of principal
and interest on the principal amount outstanding
and selling financial assets.

Financial assets at fair value through profit or
loss

Financial assets are measured at fair value through
profit or loss unless they are measured at amortised
cost or fair value through other comprehensive
income on initial recognition. The transaction costs
directly attributable to the acquisition of financial
assets and liabilities at fair value through profit or loss
are immediately recognised in profit or loss.

Investment in subsidiaries and joint ventures

The Company accounts for its investments in
subsidiaries and joint ventures at cost less impairment
in the financial statements.

Financial liabilities and equity instruments

Financial liabilities at fair value through profit
or loss

Financial liabilities at fair value through profit or
loss include financial liabilities held for trading
and financial liabilities designated upon initial
recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading
if they are incurred to repurchase in the near term.
Whenever the vendor has raised issue on contractual
/ performance obligation on goods and services
delivered or received and is under discussion with the
vendor are treated as the disputed amount.

Financial liabilities are designated upon initial
recognition at fair value through profit or loss only if
the criteria in Ind AS 109 are satisfied.

Other financial liabilities

Other financial liabilities (including borrowings,
financial guarantee contracts and trade, and
other payables) are after initial recognition,
measured at amortized cost using the effective
interest (EIR) method

Offsetting of financial assets and financial
liabilities

Financial assets and financial liabilities are offset and
the net amount is reported in the Balance Sheet if
there is a currently enforceable legal right to offset
the recognised amounts and there is an intention to
settle on a net basis or to realise the asset and settle
the liability simultaneously.

Equity instruments

An equity instrument is a contract that evidences
residual interest in the assets of the Company after
deducting all of its liabilities. Equity instruments
issued by the Company are recognised at the
proceeds received net off direct issue costs

Derivative financial instruments

The Company enters into derivative contracts to
hedge foreign currency/price risk on unexecuted
firm commitments or highly probable forecast
transactions. Such derivative financial instruments
are initially recognized at fair value on the date on

which a derivative contract is entered into and are
subsequently re-measured at fair value at the end
of each reporting period. Derivatives are carried as
financial assets when the fair value is positive and as
financial liabilities when the fair value is negative.

Any gains or losses arising from changes in the fair
value of derivatives are taken directly to profit or loss
immediately unless the derivative is designated and
effective as a hedging instrument, in which event the
timing of the recognition in profit or loss depends on
the nature of the hedged item.

Derecognition of financial instruments

The Company derecognizes a financial asset when
the contractual rights to the cash flow from the
financial asset expire or it transfers the financial asset
and the transfer qualifies for de-recognition under
Ind AS 109. A financial liability (or a part of a financial
liability) is derecognized from the Company's Balance
Sheet when the obligation specified in the contract is
discharged or cancelled or expires.

Fair value measurement

When the fair values of financial assets or financial
liabilities recorded or disclosed in the financial
statements cannot be measured based on quoted
prices in active markets, their fair value is measured
using valuation techniques including the Discounted
Cash Flow (DCF) model. The inputs to these models
are taken from observable markets where possible,
but where this is not feasible, a degree of judgment
is required in establishing fair values. Judgments
include consideration of inputs such as liquidity risk,
credit risk, and volatility.

In addition, for financial reporting purposes, fair
value measurements are categorized into Level 1,
2, or 3 based on the degree to which the inputs
to the fair value measurements are observable
and the significance of the inputs to the fair
value measurements in their entirety, which are
described as follows:

Level 1 inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities that
the entity can access at the measurement date;

Level 2 inputs are inputs, other than quoted prices
included within Level 1, that are observable for the
asset or liability, either directly or indirectly; and

Level 3 inputs are unobservable inputs for the
asset or liability.

For assets and liabilities that are recognised in
the financial statements on a recurring basis, the
Company determines whether transfers have
occurred between levels in the hierarchy by re¬
assessing categorisation (based on the lowest level
input that is significant to the fair value measurement
as a whole) at the end of each reporting period.

(n) Inventories

Inventories including Work - in - Progress (other
than construction contracts) are valued at cost or
net realizable value, whichever is lower, the cost
is worked out on a weighted average basis. Cost
includes all charges for bringing the goods to their
present location and condition. Net realizable value
represents the estimated selling price for inventories
less all estimated costs of completion and costs
necessary to make the sale.