2. Significant Accounting Policies:
A. Basis of Preparation
a. Compliance with Ind AS
The financial statement comply in all material aspects with Indian Accounting Standards
(Ind AS) notified under section 133 of the Companies Act, 2013 ("the Act") [Companies
(Indian Accounting Standards ) Rules , 2015] and other relevant provision of the Act.
The financial statement up to year ended 31 March 2024 were prepared in accordance
with the accounting standard notified under the Companies (Accounting Standards)
Rules, 2006 (as amended) and other relevant provisions of the Act.
These financial statements are the first financial statements of the Company under Ind
AS, refer of Notes to Accounts for an explanation of how the transition from previous
GAPP to Ind AS has affected the company's financial position, financial performance and
cash flow.
b. Historical cost convention
The financial statements have been prepared on a historical cost basis.
B. Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable.
a) Revenue from sale of goods is recognised when the following conditions are satisfied.
i. the Company has transferred the significant risks and rewards of ownership of the goods to
the buyer which generally coincides when the goods are dispatched in accordance with the
terms of sale;
ii. the Company retains neither continuing managerial involvement to the degree usually
associated with ownership nor effective control over the goods sold;
iii. the amount of revenue can be measured reliably;
iv. it is probable that the economic benefits associated with the transaction will flow to the
Company;
v. The costs incurred or to be incurred in respect of the transaction can be measured reliably.
C. Other Income
1. Dividend income from investments is recognised when the shareholder's right to receive
payment has been established.
2. Interest income is recognised on the time proportion basis, by reference to the principal
outstanding and the effective interest rate applicable.
3. Insurance and other claims are accounted as and when unconditionally admitted by the
appropriate authorities.
D. Income tax
Income tax
Current income tax assets and liabilities 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, at the reporting
date in the countries where the Company operates and generates taxable income.
Current income tax relating to items recognised outside profit or loss is recognised in 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.
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 is provided using the liability method on temporary differences between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes at
the reporting date. Deferred tax liabilities are recognised for all taxable temporary
differences.
Deferred tax assets including Minimum Alternate Tax (MAT) are generally recognised for all
deductible temporary differences, the carry forward of unused tax credits and any unused tax
losses. 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 utilized.
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 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 and the deferred taxes relate to the
same taxable entity and the same taxation authority.
E. Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents
includes cash on hand, deposits held at call with financial institutions, 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.
F. Inventories
Raw materials and stores, work-in-progress, traded and finished goods are stated at the lower
of cost and net realizable value.
Cost of raw materials and traded goods comprise of cost of purchase.
Cost of work-in-progress and manufactured finished goods comprises direct materials, direct
labor and an appropriate proportion of variable and fixed overhead expenditure, the later
being allocated on the basis of normal operating capacity.
Cost of inventories also includes all other cost incurred in bringing the inventories to their
present location and condition. Costs are assigned to individual items of inventory on
weighted average basis. Costs of purchased inventory are determined after deducting rebates
and discounts.
Net realizable value is the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the sale.
G. Financial Instruments:
(i) Financial assets:
Initial recognition and measurement
Financial assets are classified, at initial recognition, as financial assets measured at fair value
or as financial assets measured at amortised cost. All financial assets not recorded at fair
value though profit or losses are recognized initially at fair value plus transaction costs that
are attributable to the acquisition of the financial asset.
Subsequent measurement
For Purposes of subsequent measurement, financial assets are classified in two broad
categories:
• Financial assets at fair value
• Financial assets at amortised cost
Where assets are measured at fair value, gains and losses are either recognized in the
statement of profit and loss (i.e. fair value through profit or loss), or recognized in other
comprehensive income (i.e. fair value though other comprehensive income).
A financial asset that meets the following two conditions is measured at amortised cost (net
of any write down for impairment) unless the asset is designated at fair value through profit
or loss under the fair value option.
• Business model test: The objective of the company's business model is to hold the financial
asset to collect the contractual cash flows (rather than to sell the instrument prior to its
contractual maturity to realise its fair value changes).
• Cash flow characteristics test: 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.
A financial asset that meets the following two conditions is measured at fair value through
other comprehensive income unless the asset is designated at fair value through profit or
loss under the fair value option.
• Business model test: The financial asset is held within a business model whose objective is
achieved by both collecting contractual cash flow and selling financial assets.
• Cash flow characteristics test: 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.
Even if an instrument meets the two requirements to be measured at amortised cost or fair
value through other comprehensive income, a financial asset is measured at fair value
through profit or loss as doing so eliminates or significantly reduces a measurement or
recognition inconsistency (sometimes referred to as an 'accounting mismatch') that would
otherwise arise from measuring assets or liabilities or recognizing the gains and losses on
them on different bases.
All other financial asset is measured at fair value through profit or loss.
All equity investments are measured at fair value in the balance sheet, with value changes
recognized in the statement of profit and loss, except for those equity investments for which
the entity has elected to present value changes in 'other comprehensive income'
If an equity investment is not held for trading, an irrevocable election is made at initial
recognition to measure it at fair value through other comprehensive income with only
dividend income recognized in the statement of profit and loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is primarily derecognized (i.e. removed from the company's statement of
financial position) when:
• The rights to receive cash flows from the asset have expired, or
• The Company has transferred its rights to receive cash flows from the asset or has assumed
an obligation to pay the received cash flows in full without material delay to a third party
under a 'pass-through' arrangement and either;
(a) The company has transferred substantially all the risks and rewards of the asset, or
(b) The company has either transferred substantially all the risks and rewards of the asset,
but has transferred control of the asset.
When the company has transferred its rights to received cash flow from an asset or has
entered into a pass-through arrangement, it evaluates if and to what extent it has retained
the risks and rewards of ownership. When it has neither transferred nor retained
substantially all of the risks and rewards of the asset, nor transferred control of the asset, the
company continues to recognize the transferred asset to the extent of the company's
continuing involvement. In that case, the company also recognises an associated liability. The
transferred asset and the associated liability are measured on a basis that reflects the rights
and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is
measured at the lower of the original carrying amount of the asset and the maximum
amount of consideration that the Company could be required to repay.
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, and other contractual rights to receive cash or other financial asset, and
financial guarantees not designated as at FVTPL.
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 period. 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 period, 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 recognized in profit or loss and is
included in the 'Other income' line item.
(ii) Financial liabilities and equity instruments:
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.
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.
Financial Liabilities
Initial recognition and measurement
All financial liabilities are recognised initially at fair value and, in the case of loans and
borrowings and payables, net of directly attributable transaction costs.
The Company's financial liabilities include trade and other payables and loans and
borrowings including bank overdrafts.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
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 for the purpose of
repurchasing in the near term. Gains or losses on liabilities held for trading are recognised in
the statement of profit and loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are
designated at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied.
Loans and borrowings
After initial recognition, interest bearing loans and borrowings are subsequently measured at
amortised cost using the EIR method. Gains and losses are recognised in profit or loss when
the liabilities are derecognized as well as through the EIR amortization process.
Amortised cost is calculated by taking into account any discount or premium on acquisition
and fees or cost that are an integral part of the EIR. The EIR amortization is included as
finance costs in the statement of profit and loss.
The 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/services. The banks and financial institutions are subsequently
repaid by the Company at a later date. These are normally settled up to 3 months. These
arrangements for raw materials are recognized as Deferred Payment Liabilities under
Borrowings.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or
cancelled or expires. When 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 the Derecognition of the original
liability and the recognition of a new liability. The difference in the respective carrying
amounts is recognised in the statement of profit and loss.
Reclassification of Financial Instruments
The Company determines classification of financial assets and liabilities on initial recognition.
After initial recognition, no reclassification is made for financial assets which are equity
instruments and financial liabilities. For financial assets which are debt instruments, a
reclassification is made only if there is a change in the business model for managing those
assets. Changes to the business model are expected to be infrequent.
The Company's senior management determines change in the business model as a result of
external or internal changes which are significant to the Company's operations. Such changes
are evident to external parties. A change in the business model occurs when the Company
either begins or ceases to perform an activity that is significant to its operations. If the
Company reclassifies financial assets, it applies the reclassification prospectively from the
reclassification date which is the first day of the immediately next reporting period following
the change in business model.
H. Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet
where there is a legally enforceable right to offset the recognized amounts and there is an
intention to settle on a net basis or realize the asset and settle the liability simultaneously.
The legally enforceable right must not be contingent on future events and must be
enforceable in the normal course of business and in the event of default, insolvency or
bankruptcy of the Company or the counterparty.
I. Trade and other payables
These amounts represent liabilities for goods and services provided to the company prior to
the end of financial year which are unpaid. The amounts are unsecured are presented as
current liabilities unless payment is not due within 12 months after the reporting period.
They are recognized initially at their fair value and subsequently measured at amortized cost
using the effective interest method.
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