A. Material accounting policies:
a. System of accounting
The financial statements of the Company are prepared in accordance
with Indian Accounting Standards (Ind AS), under the historical cost
convention on the accrual basis as per the provisions of Companies
Act, 2013 (''Act"), except in case of significant uncertainties.
b. Key accounting estimates
The preparation of the financial statements, in conformity with the
recognition and measurement principles of Ind AS, requires the
management to make estimates and assumptions in the application
of accounting policies that affect the reported amounts of assets,
liabilities, income, expenses and disclosure of contingent liabilities
as at the date of financial statements and the results of operation
during the reported period. Although these estimates are based upon
management's best knowledge of current events and actions, actual
results could differ from these estimates which are recognised in the
period in which they are determined.
The Company based its assumptions and estimates on parameters
available when the financial statements were prepared. Existing
circumstances and assumptions about future developments, however,
may change due to market changes or circumstances arising that
are beyond the control of the Company. Such changes are reflected
in the financial statements in the period in which changes are made
and, if material, their effects are disclosed in the notes to the financial
statements.
Estimates and judgements are regularly revisited. Estimates are
based on historical experience and other factors, including futuristic
reasonable information that may have a financial impact on the
Company.
c. Property, plant and equipment, capital work in progress and intangible
assets
(i) Property, plant and equipment are stated at historical cost of
acquisition (except for certain class of assets which are measured
at fair value on transition date to Ind AS i.e 1st April, 2017 as
deemed cost) including attributable interest and finance costs,
if any, till the date of acquisition/installation of the assets less
accumulated depreciation and accumulated impairment losses, if
any.
(ii) Subsequent expenditure relating to property, plant and equipment
is capitalised only when it is probable that future economic
benefits associated with the item will flow to the Company and
the cost of the item can be measured reliably. All other repairs and
maintenance costs are charged to the statement of profit and loss
as incurred.
(iii) The cost and related accumulated depreciation are eliminated
from the financial statements, either on disposal or when retired
from active use and the resultant gain or loss are recognised in the
statement of profit and loss.
(iv) The Company depreciates property, plant and equipment on
written down value method except for buildings, plant & equipment
and dies & moulds where depreciation is provided on straight line
method over the estimated useful life prescribed in Schedule II of
the Companies Act, 2013 from the date the assets are ready for
intended use after considering the residual value.
(v) Capital work-in-progress, representing expenditure incurred in
respect of assets under development and not ready for their
intended use, are carried at cost. Cost includes related acquisition
expenses, construction cost, related borrowing cost and other
direct expenditure.
(vi) Intangible assets mainly represent implementation cost for
software and other application software acquired/developed for in¬
house use and technical know-how of the Company. These assets
are stated at cost. Cost includes related acquisition expenses,
related borrowing costs, if any, and other direct expenditure.
Intangible assets are amortised over a useful period of life of the
respective assets.
(vii) Items of stores and spares that meet the definition of property,
plant and equipment are capitalised at cost and depreciated over
their useful life. Otherwise, such items are classified as inventories.
(viii) Losses arising from the retirement of and gains or losses arising
from disposal of property, plant and equipment which are carried
at cost are recognised in the Statement of Profit and Loss.
(ix) Property, plant and equipment and intangible assets are tested for
impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset's fair value less costs of disposal and
value in use. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are separately
identifiable cash inflows which are largely independent of the cash
inflows from other assets or groups of assets (cash-generating
units).
d. Investments and financial assets
(i) Investments in subsidiary companies
Investments in subsidiary companies are recognised at cost and
not adjusted to fair value at the end of each reporting period. Cost
represents amount paid for acquisition of the said investments.
The Company assesses at the end of each reporting period, if there
is any indication that the said investments may be impaired. If so,
the Company estimates the recoverable value of the investments
and provides for impairment, if any, i.e. the deficit in the recoverable
value over cost.
(ii) Other investments and financial assets
Financial assets are recognised when the Company becomes a
party to the contractual provisions of the instrument.
On initial recognition, a financial asset is recognised at fair value, in
case of financial assets which are recognised at fair value through
profit and loss (FVTPL), its transaction costs are recognised in the
statement of profit or loss. In other cases, the transaction costs
are attributed to the acquisition value of financial asset. However,
trade receivables that do not contain a significant financing
component are measured at transaction price.
Financial assets are subsequently classified measured at -
- amortised cost
- fair value through profit and loss (FVTPL)
- fair value through other comprehensive income (FVOCI).
Financial assets are not reclassified subsequent to their
recognition except if and in the period the Company changes its
business model for managing financial assets.
Financial asset is derecognised only when the Company has
transferred the rights to receive cash flows from the financial asset.
Where the entity has transferred the asset, the Company evaluates
whether it has transferred substantially all risks and rewards of
ownership of the financial asset. In such cases, financial asset is
derecognised.
In accordance with Ind AS 109, the Company applies the expected
credit loss ("ECL') model for measurement and recognition of
impairment loss on financial assets and credit risk exposures.
The Company follows 'simplified approach' for recognition of
impairment loss allowance on trade receivables. Simplified
approach does not require the Company to track changes in
credit risk. Rather, it recognises impairment loss allowance
based on lifetime ECL at each reporting date, right from its initial
recognition. For recognition of impairment loss on other financial
assets and risk exposure, the Company determines that whether
there has been a significant increase in the credit risk since initial
recognition.
e. Inventories
(i) Raw materials and stores and spares are valued at weighted
average cost including all charges in bringing the materials to the
present location.
(ii) Finished and work-in-progress are valued at the cost plus direct
expenses and appropriate value of overheads or net realisable
value, whichever is lower.
(iii) Obsolete, slow moving and defective inventories are written
off/valued at net realisable value during the year as per policy
consistently followed by the Company.
f. Cash and bank balances
Cash and equivalents:
Cash and cash equivalents in the balance sheet comprises of balance
with banks and cash on hand and short-term deposits with an original
maturity of three month or less, which are subject to insignificant risks
of changes in value.
Other bank balances:
Other bank balances include deposits with maturity less than twelve
months but greater than three months and balances and deposits with
banks that are restricted for withdrawal and usage.
g. Trade receivables
A receivable is classified as a trade receivable if it is in respect of the
amount due on account of goods sold or services rendered in the
normal course of business. Trade receivables are recognised initially at
their transaction price and subsequently measured net of any expected
credit losses.
h. Financial liabilities
(i) Financial liabilities are recognised when the Company becomes
a party to the contractual provisions of the instrument. Financial
liabilities are initially measured at the amortised cost unless at
initial recognition, they are classified as fair value through profit
and loss.
(ii) Financial liabilities are subsequently measured at amortised cost
using the Effective Interest Rate (EIR) method. Financial liabilities
carried at fair value through profit and loss are measured at fair
value with all changes in fair value recognised in the statement of
profit and loss.
(iii) Financial liabilities are derecognised when the obligation specified
in the contract is discharged, cancelled or expires.
i. Trade payables
A payable is classified as a trade payable if it is in respect of the amount
due on account of goods purchased or services received in the normal
course of business. These amounts represent liabilities for goods and
services provided to the Company prior to the end of the financial year
which are unpaid. These amounts are unsecured and are usually settled
as per the payment terms. Trade and other payables are presented as
current liabilities unless payment is not due within 12 months after the
reporting period.
j. Revenue recognition
(i) Revenue shall be recognised to depict the transfer of promised
goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange
for those goods and services.
(ii) Revenue is measured based on transaction price, which is the
fair value of the consideration received or receivable, stated net
of discounts, return and goods & service tax. Transaction price is
recognised based on the price specified in the contract, net of the
estimated sales incentives/discounts.
(iii) Accumulated experience is used to estimate and provide for the
discounts/rights of return, using the expected value method.
(iv) The Company recognises as an asset, the incremental costs of
obtaining a contract with a customer, if the Company expects to
recover those costs. The said asset is amortised on a systematic
basis consistent with the transfer of goods or services to the
customers.
(v) Export incentives are accounted for on export of goods if the
entitlements can be estimated with reasonable accuracy and
conditions precedent to claim are reasonably expected to be
fulfilled.
(vi) Revenue in respect of other income is recognised on accrual
basis. However, where the ultimate collection of the same lacks
reasonable certainty, revenue recognition is postponed to the
extent of uncertainty.
k. Foreign currency transactions
(i) Items included in the financial statements are measured using the
currency of primary economic environment in which the company
operates ("the functional currency"). The financial statements are
presented in Indian Rupee (INR), which is the company's functional
and presentation currency.
(ii) Foreign currency transactions are initially recorded in the reporting
currency at foreign exchange rate on the date of the transaction.
(iii) Monetary items of current assets and current liabilities
denominated in foreign currencies are reported using the closing
rate at the reporting date. Non-monetary items which are carried
in terms of historical cost denominated in a foreign currency are
reported using the exchange rate at the date of the transaction.
(iv) The gain or loss on decrease/increase in reporting currency due
to fluctuations in foreign exchange rates are recognised in the
statement of profit or loss.
l. Employee benefit expenses
(i) Contributions to defined contribution schemes such as provident
fund, employees' state insurance, labour welfare fund etc. are
charged as an expense based on the amount of contribution
required to be made as and when services are rendered by the
employees. These benefits are classified as defined contribution
schemes as the Company has no further obligations beyond the
monthly contributions.
(ii) The Company provides for gratuity which is a defined benefit
plan, the liabilities of which are determined based on valuations,
as at the reporting date, made by an independent actuary using
the projected unit credit method. Re-measurement comprising of
actuarial gains and losses, in respect of gratuity are recognised in
the other comprehensive income in the period in which they occur.
The classification of the Company's obligation into current and
non-current is as per the actuarial valuation report.
(iii) The employees are entitled to accumulate leave subject to certain
limits, for future encashment and availment, as per the policy of the
Company. The liability towards such unutilised leave as at the end
of each balance sheet date is determined based on independent
actuarial valuation and recognised in the statement of profit and
loss.
(iv) Employee Share based Payments: The Company operates
equity settled share-based plan for the employees (Referred
to as employee stock option plan (ESOP)). ESOP granted to the
employees are measured at fair value of the stock options at
the grant date. Such fair value of the equity settled share-based
payments is recognised as expense on a straight-line basis over
the vesting period, based on the Company's estimate of equity
shares that will eventually vest, with a corresponding increase
in equity (employee stock option reserve). At the end of each
reporting period, the Company revises its estimate of number of
equity shares expected to vest.
Fair value of the ESOP granted to the employees of subsidiary
companies are considered on cash settlement basis by the parent
company on a straight-line basis over the vesting period which,
will be adjusted by any recharge in the subsequent years by the
subsidiary companies.
m. Leases
The Company, as a lessee, recognises a right-of-use asset and a lease
liability for its leasing arrangements, if the contract conveys the right to
control the use of an identified asset.
The contract conveys the right to control the use of an identified
asset, if it involves the use of an identified asset and the Company has
substantially all of the economic benefits from use of the asset and has
right to direct the use of the identified asset. The cost of the right-of-use
asset 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 plus any initial direct costs incurred. The right-
of-use assets 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 assets 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.
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