3.1 Property, plant and equipment:
> Recognition and Measurement
Items of property, plant and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated
depreciation and accumulated impairment losses, if any.
Cost of an item of property, plant and equipment comprises its purchase price, including import duties and non-refundable
purchase taxes, after deducting trade discounts and rebates, any directly attributable cost of bringing the item to its working
condition for its intended use and estimated costs of dismantling and removing the item and restoring the site on which it is
located.
The cost of a seif-constructed item of property, plant and equipment comprises the cost of materials and direct labour, any other
costs directly attributable to bringing the item to working condition for its intended use, and estimated costs of dismantling and
removing the item and restoring the site on which it is located.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate
items (major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.
> Subsequent Expenditure
Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure
will flow to the Company. All other repair and maintenance costs are recognized in the statement of profit and loss as incurred
unless they meet the recognition criteria for capitalization under Property, Plant and Equipment.
> Depreciation and amortization
Depreciation on tangible assets is provided on the Straight-Line Method (SLM) over the useful life of the assets as prescribed
under Schedule II to the Companies Act, 2013. In respect of the fixed assets purchased during the year, depreciation is provided
on pro rata basis from the date on which such asset is ready to be put to use.
Depreciation method, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate. Based
on technical evaluation and consequent advice, the management believes that its estimates of useful lives as given above best
represent the period over which management expects to use these assets.
Depreciation on additions/disposals is provided on a pro-rata basis i.e. from /up to the date on which asset is ready for use/
disposed off.
> De-recognition
The carrying amount of an item of property, plant and equipment is derecognized on disposal or when no future economic
benefits are expected from its use or disposal. The consequential gain or loss is measured as the difference between the net
disposal proceeds and the carrying amount of the item and is recognized in the Statement of Profit and Loss.
3.2 Capital Work-in-progress:
Capital work-in-progress represents directly attributable costs of construction to be capitalized. All other expenses including interest
incurred during construction period are capitalized as a part of the construction cost to the extent to which these expenditures
are attributable to the construction as per Ind AS-23 "Borrowing Costs". Interest income earned on temporary investment of funds
brought in for the project during construction period are set off from the interest expense accounted for as expenditure during the
construction period. Advances given towards acquisition of property, plant and equipment outstanding at each balance sheet date are
disclosed as other non-current assets.
3.3 Intangible Assets:
> Recognition and Measurement
Intangible assets including those acquired by the company are initially measured at cost. Such intangible assets are subsequently
measured at cost less accumulated amortization and any accumulated impairment losses (if any).
> Subsequent Expenditure
Subsequent expenditure Is capitalized only when it increases the future economic Benefits embodied in the specific asset to
which it relates. All other expenditure is Recognized in profit or loss as incurred.
> Amortization
Amortization is calculated to write off the cost of intangible assets less their estimated residual values over their estimated useful
lives using the straight line method, and is included in depreciation and amortization in Statement of Profit and loss.
Amortization method, useful lives and residual values are reviewed at the end of each financial year and adjusted if appropriate.
> De-Recognition
The carrying amount of an intangible asset is derecognized on disposal or when no future economic benefits are expected from
its use or disposal. The gain or loss arising from the de-recognition of an intangible asset is measured as the difference Between
the net disposal proceeds and the carrying amount of the intangible asset and is recognized in the Statement of Profit and Loss
when the asset is derecognized.
An item of intangible asset initially recognized is derecognized upon disposal or when no future economic benefits are expected
from its use or disposal. Any gain or loss arising on de-recognition of the asset [calculated as the difference between the net
disposal proceeds and the carrying amount of the asset] is included in the statement of profit and loss when the asset is
derecognized. Intangible fixed assets are amortized on straight line basis over their estimated useful economic life.
3.4 Leases
> The Company's lease asset classes primarily consist of leases for Land. The Company, at the inception of a contract, assesses whether
the contract is a lease or not lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified
asset for a time in exchange for a consideration. This policy has been applied to contracts existing and entered into on or after April 1,
2019.
> The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The ROU asset is measured at cost,
which includes the amount of the initial lease liability adjusted for lease payments made at or before the commencement date, initial
direct costs, and an estimate of costs to restore the underlying asset.
> The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the
lease term. The lease liability is increased by interest cost and reduced by lease payments made.
> The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the Company's incremental borrowing rate.
> The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12
months or less and leases of low value assets (assets of less than USD 5,000 in value). The Company recognizes the lease payments
associated with these leases as an expense over the lease term.
3.5 Foreign Currency Transactions
The Company's financial statements are presented in INR, which is also the Company's functional & reporting currency.
A. Initial Recognition:
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount, the exchange
rate between the reporting currency and the foreign currency at the date of transaction.
B. Conversion:
Foreign currency monetary items are reported using the closing rate. Non-monetary items, which are measured in terms of
historical costs denominated in foreign currency, are reported using the exchange rate at the date of the transaction. Non¬
monetary items, which are measured at fair value or other similar valuation denominated in a foreign currency, are translated
using the exchange rate at the date when such value was determined.
C. Exchange Differences:
Exchange differences arising on the settlement of monetary items or on reporting Company's monetary items at rates different
from those at which they were initially recorded during the year, or reported in previous financial statements including receivables
and payables which are likely to be settled in foreseeable future, are recognized as income or as expenses in the year in which
they arise. All other exchange differences are recognized as income or as expenses in the period in which they arise.
Transactions covered under forward contracts are accounted for at the contracted rate. All export proceeds have been accounted
for at the rate of exchange at the time of raising invoices. Foreign exchange fluctuations as a result of the export sales have been
adjusted in the statement of profit and loss account and export proceeds not realized at the balance sheet date are restated at
the rate prevailing as at the balance sheet date.
3.6 Revenue Recognition
Revenue is recognized to the extent it is probable that the economic benefits will flow to the company and the revenue can be reliably
measured.
> Sale of Goods
Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or
receivable, net of returns, trade discounts and volume rebates. This inter alia involves discounting of the consideration due to the
present value if payment extends beyond normal credit terms. Revenue is recognized when the significant risks and rewards of
ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return
of goods can be estimated reliably, there is no continuing effective control over, or managerial involvement with, the goods, and
the amount of revenue can be measured reliably.
The timing of transfers of risks and rewards varies depending on the individual terms of sale.
> Export benefits are recognized as Income when the right to receive credit as per the terms of the scheme is established and there
is no significant uncertainty regarding the claim.
> Contract Balances
a. Trade Receivables:
Receivable represents the Company's right to an amount of consideration that is unconditional.
b. 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. Contract
liabilities are recognized as revenue when the Company performs under the contract.
c. Other Operating and Non-Operating Income
(i) For all debt instruments measured either at amortized cost or at fair value through other comprehensive income
[OCI], interest income is recorded using the effective interest rate [EIR]. EIR is the rate that exactly discounts the
estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period,
where appropriate, to the gross carrying amount of the financial asset or to the amortized cost of a financial liability.
When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the
contractual terms of the financial instrument [for example, prepayment, extension, call and similar options] but does
not consider the expected credit losses.
(ii) Interest income is recognized on time proportion basis taking into account the amount outstanding and rate applicable.
(iii) Dividend income from investments is recognized when the Company's right to receive payment is established which
is generally when shareholders approve the dividend.
3.7 Financial Instruments
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 instruments also include derivative contracts such as foreign currency foreign exchange forward contracts,
interest rate swaps and currency options.
> Recognition and Initial Measurement
Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets and
financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instrument.
A financial asset or financial liability is initially measured at fair value plus, for an item not at fair value through profit and loss
(FVTPL), transaction costs that are directly attributable to its acquisition or issue.
> Classification and Subsequent Measurement - Financial Assets
On initial recognition, a financial asset is classified as measured at
- Amortized Cost
- FVOCI - Debt Investment
- FVOCI - Equity Investment
- fvtpl
Financial assets are not reclassified subsequent to their initial recognition, except if and in the period to the company change its
business model for managing financial assets.
Financial Assets are measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL.
- the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
- the contractual terms of the financial asset give rise on specified dates to cashflows that are solely payments of principal
and interest on the principal amount outstanding.
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:
- the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling
financial assets; 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. At present, the Company does not have investments in any debt securities
classified as FVOCI.
On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present
subsequent changes in the investment's fair value in OCI (designated as FVOCI - equity investment). This election is made on an
investment-by-investment basis.
All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes
all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise
meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces
an accounting mismatch that would otherwise arise.
> De-recognition of financial assets
The Company de-recognizes a financial asset when the contractual rights to the cash flows from the financial asset expires, or
it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of
ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks
and rewards of ownership and does not retain control of the financial asset.
If the Company enters into transactions where by it transfers assets recognized on its balance sheet, but retains either all or
substantially all of the risks and rewards of the transferred assets, the transferred assets are not de-recognized.
> Impairment of financial instruments
In accordance with Ind-AS 109, the Company applies Expected Credit Loss (ECL) Model for measurement and recognition of
impairment loss on the following financial assets and credit risk exposure:
a) Financial Assets measured at amortized cost and
b) Financial Assets measured at FVOCI - debt investments
At each reporting date, the company assesses whether financial assets carried at amortized cost are credit-impaired. A financial
asset is "credit-impaired" when one or more events that have a detrimental impact on the estimated future cash flows of the
financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:
- Significant financial difficulty of the borrower or issuer;
- a breach of contract such as a default or being past due for 90 days or more;
- the restructuring of a loan or advance by the Company on terms that the Company would not consider otherwise;
- it is probable that the borrower will enter bankruptcy or other financial reorganization; or
- the disappearance of an active market for a security because of financial Difficulties.
The Company measures loss allowances at an amount equal to lifetime expected credit losses, except for bank balances for which
credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since
initial recognition, which are measured as 12 month expected credit losses.
Loss allowances for trade receivables are always measured at an amount equal to lifetime expected credit losses. Lifetime
expected credit losses are the expected credit losses that result from all possible default events over the expected life of a
financial instrument. Twelve months expected credit losses are the portion of expected credit losses that result from default
events that are possible withinl2 months after the reporting date (or a shorter period if the expected life of the instrument is
less than 12 months).
In all cases, the maximum period considered when estimating expected credit losses Is the maximum contractual period over
which the Company Is exposed to credit risk. When determining whether the credit risk of a financial asset has increased
significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and
supportable information that Is relevant and available without undue cost or effort. This Includes both quantitative and qualitative
information and analysis, based on the Company's historical experience and informed credit assessment and including forward
looking information.
Measurement of Expected Credit Losses:-
Expected credit losses are a probability weighted estimate of credit losses. Credit losses are measured as the present value of
all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash
flows that the Company expects to receive).
Presentation of Allowance for Expected Credit Losses:-
Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.
> Impairment of Non-Financial Assets
The Company's non-financial assets, other than 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.
For impairment testing, assets that do not generate independent cash inflows are grouped together into cash-generating units
(CGUs). Each CGU represents the smallest group of assets that generates cash inflows that are largely independent of the cash
inflows of other assets or CGUs.
The recoverable amount of a CGU (or an individual asset) Is the higher of its value in use and its fair value less costs to sell. Value
in use Is based on the estimated future cash flows, 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 CGU (or the asset).
An impairment loss Is recognized if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. Impairment
losses are recognized in the statement of profit and loss. Impairment loss recognized in respect of a CGU Is allocated first to
reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets
of the CGU (or group of CGUs) on a pro rata basis.
In respect of other assets for which impairment loss has been recognized in prior periods, the Company reviews at each reporting
date whether there Is any indication 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. Such a reversal Is made 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.
> Reclassification of financial assets
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 in frequent. 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. The Company does not restate any previously recognized gains, losses [including impairment gains or losses]
or interest.
> Financial Liabilities - Classification and Subsequent Measurement, Gain and Losses
Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability Is classified as at FVTPL if it Is classified
as held-for-trading, or it Is a derivative or it Is designated as such on initial recognition. Financial liabilities at FVTPL are measured
at fair value and net gains and losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are
subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gain and
losses are recognized in profit and loss.
> Loans and Borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR
method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR
amortization process. Amortized cost Is calculated by taking into account any discount or premium on acquisition and fees or
costs that are an integral part of the EIR. The EIR amortization Is included as finance costs In the statement of profit and Ioss.
> De-recognition of financial liabilities
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire.
The Company also derecognizes a financial liability when its terms are modified and the cash flows under the modified terms
are substantially different. In this case, a new financial liability based on the modified terms is recognized at fair value. The
difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms
is recognized in profit or Ioss.
> Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when, and only when, the
Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to
realize the asset and settle the liability simultaneously.
> Operating Cycle
All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other
criteria set out in the Schedule III of the Companies Act, 2013. Operating cycle is the time from start of the project to the
realization in cash or cash equivalents.
3.8 Inventories
Inventories are measured at the lower of cost and net realizable value after providing Ioss for obsolesce, if any, The cost of inventories
is determined using the first in first out (FIFO) method and includes expenditure incurred in acquiring inventories, production or
conversion and other costs incurred in bringing them to their respective present location and condition. In the case of manufactured
inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. The
comparison of cost and Net Realizable Value is made on an item by item basis.
Net realizable value is estimated selling price in the ordinary course of business, less estimated cost of completion and the estimated
costs necessary to make the sale. The net realizable value of work in progress is determined with reference to selling prices of finished
products.
3.9 Income Tax
Income tax comprises of current and deferred tax. It is recognized in the statement of profit or Ioss except to the extent that it relates
to an item recognized directly in equity or in other comprehensive income.
> Current Tax
Current tax comprises of the expected tax payable or receivable on the taxable income or Ioss for the year and any adjustment to
the tax payable or receivable in respect of previous years. The amount of current tax reflects the best estimate of the tax amount
expected to be paid or received after considering the uncertainty, if any, related to income taxes. It is measured using tax rates
(and tax laws) enacted or substantively enacted by the reporting date.
Current tax assets and current tax liabilities are offset only if there is a legally enforceable right to set off the recognized amounts,
and it is intended to realize the asset and settle the liability on a net basis or simultaneously.
> Deferred Tax
Deferred tax is recognized in respect of timing differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the corresponding amounts used for taxation purposes. Deferred tax is also recognized in respect of
carried forward tax losses and tax credits.
Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which they
can be used. The existence of unused tax losses is strong evidence that future taxable profit may not be available. Therefore, in
case of a history of recent losses, the Company recognizes a deferred tax asset only to the extent that it has sufficient taxable
timing differences or there is convincing other evidence that sufficient taxable profit will be available against which such
deferred tax asset can be realized. Deferred tax assets un-recognized or recognized, are reviewed at each reporting date and are
recognized/reduced to the extent that it is probable/no longer probable respectively that the related tax benefit will be realized.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is
settled, based on the laws that have been enacted or substantively enacted by the reporting date. The measurement of deferred
tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to
recover or settle the carrying amount of its assets and liabilities.
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.
Any tax credit available is recognized as deferred tax to the extent that it is probable that future taxable profit will be available
against which the unused tax credit can be utilized. The said asset is created by way of credit to the statement of Profit and loss
and shown under the head of deferred tax.
3.10 Employee Benefits
> Short Term Employee Benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is
provided. A liability is recognized for the amount expected to be paid e.g. Under short-term cash bonus, if the Company has a
present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the amount
of obligation can be estimated reliably. Leave Entitlement Benefits are paid on yearly basis to respective employees.
> Retirement Benefits
Retirement benefits in the form of provident fund and superannuation fund are defined contribution plans. The Company
has no obligation, other than the contributions payable to provident fund and superannuation fund. The Company recognizes
contribution payable to these funds as an expense, when an employee renders the related service.
In respect of gratuity liability, the Company operates defined benefit plan with LIC wherein contributions are made to a separately
administered fund. The costs of providing benefits under this plan are determined on the basis of actuarial valuation at each
reporting date being carried out using the projected unit credit method.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net
interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the
net defined benefit liability), are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained
earnings through OCI in the period in which they occur. Re-measurements are not reclassified to Statement of Profit and Loss in
subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognizes the
following changes in the net defined benefit obligation as an expense in the Statement of Profit and Loss:
• Service costs comprising current service costs; and
• Net interest expense or income
|