2. Summary of material accounting policies
Accounting policy information is expected to be material
if users of an entity's financial statements would need it
to understand other material information in the financial
statements.
The Company applied the guidance available under
paragraph 117B of Ind AS 1, Presentation of Financial
Statements in evaluating the material nature of the
accounting policies.
The following are the material accounting policies for the
Company:
A) Foreign Currency transactions
Transactions in foreign currencies are initially recorded
by the Company at their respective functional currency
spot rates at the date, the transaction first qualifies for
recognition. However, for practical reasons, the Company
uses an average rate, if the average approximates the
actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies are translated at the functional currency
spot rates of exchange at the reporting date. Exchange
differences arising on settlement or translation of monetary
items are recognised in the statement of profit and loss.
Non-monetary items that are measured based on historical
cost in a foreign currency are translated at the exchange
rate at the date of the initial transaction.
Non-monetary items that are measured at fair value in a
foreign currency are translated using the exchange rates at
the date when the fair value was measured.
The gain or loss arising on translation of non-monetary
items measured at fair value is treated in line with the
recognition of the gain or loss on the change in fair value
of the item (i.e., translation differences on items whose fair
value gain or loss is recognised in other comprehensive
income ("OCI") or profit or loss are also recognised in OCI
or profit or loss, respectively).
B) Property Plant & Equipment
Recognition and measurement
Property, Plant and Equipment are stated at cost of
acquisition or construction less accumulated depreciation
and impairment loss, if any. The cost includes expenditures
that are directly attributable to the acquisition of the
asset i.e., freight, duties and taxes applicable and other
expenses related to acquisition and installation. The cost
of self-constructed assets includes the cost of materials
and other costs directly attributable to bringing the asset
to a working condition for its intended use. Borrowing
costs that are directly attributable to the construction or
production of a qualifying asset are capitalized as part of
the cost of that asset.
Directly attributable costs include:
• Cost of Employee Benefits arising directly from
Construction or acquisition of PPE.
• Cost of Site Preparation.
• Initial Delivery & Handling costs.
• Professional Fees and
• Costs of testing whether the asset is functioning
properly, after deducting the net proceeds from selling
any item produced while bringing the asset to that
location and condition (such as samples produced
when testing equipment).
When parts of an item of property, plant and equipment
have different useful lives, they are accounted for as
separate items (major components) of property, plant and
equipment.
Gains and losses upon disposal of an item of property,
plant and equipment are determined by comparing the
proceeds from disposal with the carrying amount of
property, plant and equipment and are recognized net
within the statement of profit and loss.
The cost of replacing part of an item of property, plant
and equipment is recognized in the carrying amount of
the item if it is probable that the future economic benefits
embodied within the part will flow to the Company and
its cost can be measured reliably. The carrying amount of
the replaced part will be de-recognized. The cost of repairs
and maintenance are recognized in the statement of profit
and loss as incurred.
Items of property, plant and equipment acquired through
exchange of non-monetary assets are measured at fair
value, unless the exchange transaction lacks commercial
substance or the fair value of either the asset received or
asset given up is not reliably measurable, in which case the
asset exchanged is recorded at the carrying amount of the
asset given up.
Depreciation
Depreciation is recognized in the statement of profit and
loss on a straight-line basis over the estimated useful lives
of property, plant and equipment based on the Companies
Act, 2013 ("Schedule II"), which prescribes the useful lives
for various classes of tangible assets. For assets acquired
or disposed of during the year, depreciation is provided on
pro rata basis. Land is not depreciated.
Depreciation methods, useful lives and residual values are
reviewed at each reporting date and adjusted prospectively,
if appropriate.
Advances paid towards the acquisition of property, plant
and equipment outstanding at each reporting date is
disclosed as capital advances under other non-current
assets. The cost of property, plant and equipment not ready
to use before such date are disclosed under capital work-
in-progress. Assets not ready for use are not depreciated.
The Company assesses at each balance sheet date whether
there is objective evidence that an asset or a group of
assets is impaired. An asset's carrying amount is written
down immediately to its recoverable amount if the asset's
carrying amount is greater than its estimated recoverable
amount. Recoverable amount is higher of the value in use
or fair value less cost to sell.
Intangible assets
Acquiring computer software is capitalized on the basis of
the costs incurred to acquire and bring to use the specific
software. The Intangible assets that are acquired by the
Company and that have finite useful lives are measured
at cost less accumulated amortization and accumulated
impairment losses.
Amortisation
Amortisation is recognized in the statement of profit and
loss on a straight-line basis over the estimated useful lives
of intangible assets or on any other basis that reflects the
pattern in which the asset's future economic benefit is
expected to be consumed by the entity. Intangible assets
that are not available for use are amortized from the date
they are available for use. The estimated useful lives are
as follows:
The amortisation period and the amortisation method for
intangible assets with a finite useful life are reviewed at
each reporting date.
C) 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.
a) Financial assets
Initial recognition and measurement
All financial assets are recognized initially at fair value plus,
in the case of financial assets not recorded at fair value
through profit or loss, transaction costs that are attributable
to the acquisition of the financial asset. Purchases or sales
of financial assets that require delivery of assets within a
time frame established by regulation or convention in the
marketplace (regular way trades) are recognized on the
trade date, i.e., the date that the Company commits to
purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets
are classified in four categories:
• Debt instruments at amortised cost.
• Debt instruments at fair value through other
comprehensive income (FVTOCI).
• Debt instruments, derivatives and equity instruments
at fair value through profit or loss (FVTPL).
• Equity instruments measured at fair value through
other comprehensive income (FVTOCI).
Debt instruments at amortised cost
A 'debt instrument' is measured at the amortised cost,
if both of the following conditions are met: (i) The asset
is held within a business model whose objective is to
hold assets for collecting contractual cash flows; and (ii)
Contractual terms of the asset give rise on specified dates
to cash flows that are solely payments of principal and
interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are
subsequently measured at amortised cost using the
effective interest rate (EIR) method. Amortised 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 amortisation is included in finance
income in the statement of profit and loss. The losses
arising from impairment are recognised in the statement
of profit and loss. This category generally applies to trade
and other receivables.
Debt instrument at FVTOCI
A 'debt instrument' is classified as FVTOCI, if both of the
following criteria are met: (i) The objective of the business
model is achieved both by collecting contractual cash
flows and selling the financial assets; and (ii) The asset's
contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category
are measured initially as well as at each reporting date
at fair value. Fair value movements are recognized in
OCI. However, the Company recognizes interest income,
impairment losses and foreign exchange gain or loss in
the statement of profit and loss. On de-recognition of
the asset, cumulative gain or loss previously recognised in
OCI is reclassified from the equity to statement of profit
and loss. Interest earned whilst holding FVTOCI debt
instrument is reported as interest income using the EIR
method.
Debt instrument at FVTPL
FVTPL is a residual category for debt instruments. Any
debt instrument, which does not meet the criteria for
categorization as at amortized cost or as FVTOCI, is
classified as FVTPL. Debt instruments included within the
FVTPL category are measured at fair value with all changes
recognized in the statement of profit and loss.
Equity Instruments
All equity investments in the scope of Ind AS 109 are
measured at fair value. Equity instruments which are held
for trading are classified as FVTPL. If the Company decides
to classify an equity instrument as FVTOCI, then all fair
value changes on the instrument, excluding dividends,
are recognized in the OCI and there is no subsequent
reclassification of these fair value gains and losses to the
statement of profit and loss. Equity instruments included
within the FVTPL category are measured at fair value with
all changes 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
balance sheet) when:
a) The rights to receive cash flows from the asset have
expired, or
b) 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 neither transferred nor retained substantially all
the risks and rewards of the asset, but has transferred
control of the asset.
When the Company has transferred its rights to receive
cash flows from an asset or has entered 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 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 assets and the
associated liability are measured on a basis that reflects
the rights and obligations that the Company has retained.
Impairment of Financial Assets
The Company assesses at each balance sheet date whether
a financial asset or a group of financial assets is impaired.
In accordance with Ind AS 109, the Company uses
"Expected Credit Loss" (ECL) model, for evaluating
impairment of Financial Assets other than those measured
at Fair Value Through Profit and Loss (FVTPL).
Expected credit losses are measured through a loss
allowance at an amount equal to:
• The 12 months expected credit losses (expected credit
losses that result from those default events on the
financial instrument that are possible within 12 months
after the reporting date);
• Full lifetime expected credit losses (expected credit
losses that result from all possible default events over
the life of the financial instrument)
The Company uses 12-month ECL to provide for
impairment loss where there is no significant increase in
credit risk. If there is a significant increase in credit risk full
lifetime ECL is used.
b) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value i.e., loans and borrowings,
payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate. All
financial liabilities are recognized 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, loans and borrowings including bank overdrafts,
financial guarantee contracts.
Subsequent measurement
The measurement of financial liabilities depend on their
classification.
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 fair value
through profit or loss. Financial liabilities are classified as
being held for trading if they are incurred for the purpose
of repurchasing in the near term. This category also
includes derivative financial instruments entered by the
Company that are not designated as hedging instruments
in hedge relationships as defined by Ind AS 109. Separated
embedded derivatives are also classified as held for
trading, unless they are designated as effective hedging
instruments. 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 as such
at the initial date of recognition, and only if the criteria
in Ind AS 109 are satisfied. For liabilities designated as
FVTPL, fair value gains/losses attributable to changes in
own credit risk are recognized in OCI. These gains/ losses
are not subsequently transferred to the statement of profit
and loss.
However, the Company may transfer the cumulative gain
or loss within equity. All other changes in the fair value
of such liability are recognised in the statement of profit
and loss.
Loans and borrowings
After initial recognition, interest-bearing borrowings are
subsequently measured at amortised cost using the EIR
method. Gains and losses are recognised in the statement
of profit and loss when the liabilities are derecognised 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 amortisation is included as
finance costs in the statement of profit and loss.
De-recognition
Financial liability is derecognised when the obligation
under the liability is discharged or cancelled or expired.
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 de¬
recognition 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 assets and liabilities
The Company determines classification of financial assets
and liabilities on initial recognition. After initial recognition,
no re-classification is made for financial assets which are
equity instruments and financial liabilities. For financial
assets, which are debt instruments, a re-classification is
made only if there is a change in the business model for
managing those assets. 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 re¬
classification prospectively from the re-classification 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 recognised gains,
losses (including impairment gains or losses) or interest.
Offsetting of financial instruments
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,
to realise the assets and settle the liabilities simultaneously.
D) Investment in Subsidiaries, Associates and Joint Ventures
The Company has accounted for its investments in equity
shares of Subsidiaries, at cost.
E) Cash & Cash Equivalents
Cash and bank balances comprise of cash balance in hand,
in current accounts with banks, demand deposits, short¬
term deposits, Margin Money deposits and unclaimed
dividend accounts. For this purpose, "short-term" means
investments having maturity of three months or less
from the date of investment. Bank overdrafts that are
repayable on demand and form an integral part of our cash
management are included as a component of cash and
cash equivalents for the purpose of the statement of cash
flows. The Margin money deposits, balance in dividend
accounts which are not due and unclaimed dividend
balances shall be disclosed as restricted cash balances.
F) Inventories
Inventories are valued at the lower of cost and net
realisable value.
Inventories consist of raw materials, stores and spares,
work-in-progress and finished goods and they are
measured at the lower of cost and net realizable value.
The cost of all categories of inventories is based on the
weighted average method.
Cost includes expenditures incurred in acquiring the
inventories, production or conversion costs and other
costs incurred in bringing them to their existing location
and condition.
In the case of finished goods and work-in-progress, cost
includes an appropriate share of overheads based on
normal operating capacity. Stores and spares, that do not
qualify to be recognized as property, plant and equipment,
consists of packing materials, engineering spares (such as
machinery spare parts) and consumables which are used
in operating machines or consumed as indirect materials
in the manufacturing process.
The net realizable value is the estimated selling price in
the ordinary course of business, less the estimated costs
of completion and selling expenses.
G) Impairment of non-financial assets
The carrying amounts of 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 goodwill and intangible assets that have indefinite
lives or that are not yet available for use, an impairment
test is performed each year at March 31.
The recoverable amount of an asset or cash-generating
unit (as defined below) is the greater of its value in use and
its fair value less costs to sell. 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 or the cash-generating
unit. For the purpose of impairment testing, assets are
grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely
independent of the cash inflow of other assets or groups
of assets (the "cash-generating unit").
The Company bases its impairment calculation on detailed
budgets and forecast calculations, which are prepared
separately for each of the Company's CGUs to which the
individual assets are allocated. These budgets and forecast
calculations generally cover a period of five years. For
longer periods, a long-term growth rate is calculated and
applied to project future cash flows after the fifth year.
To estimate cash flow projections beyond periods covered
by the most recent budgets/forecasts, the Company
extrapolates cash flow projections in the budget using
a steady or declining growth rate for subsequent years,
unless an increasing rate can be justified. In any case,
this growth rate does not exceed the long-term average
growth rate for the products, industries, or country in
which the entity operates, or for the market in which the
asset is used.
An impairment loss is recognized in the statement of
profit and loss if the estimated recoverable amount of an
asset or its cash-generating unit is lower than its carrying
amount. Impairment losses recognized in respect of cash¬
generating units are allocated first to reduce the carrying
amount of any goodwill allocated to the units and then to
reduce the carrying amount of the other assets in the unit
on a pro-rata basis.
Reversal of Impairment of Assets
An impairment loss in respect of goodwill is not reversed.
In respect of other assets, impairment losses recognized
in prior periods are assessed at each reporting date for
any indications 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. An impairment loss is reversed 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.
H) Employee Benefits
Short term employee benefits
Short-term employee benefits are expensed as the related
service is provided. A liability is recognized for the amount
expected to be paid 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 obligation
can be estimated reliably.
Defined contribution plans
The Company's contributions to defined contribution
plans are charged to the statement of profit and loss as
and when the services are received from the employees.
Defined benefit plans
The liability in respect of defined benefit plans and other
post-employment benefits is calculated using the projected
unit credit method consistent with the advice of qualified
actuaries. The present value of the defined benefit
obligation is determined by discounting the estimated
future cash outflows using interest rates of high-quality
corporate bonds that are denominated in the currency
in which the benefits will be paid, and that have terms
to maturity approximating to the terms of the related
defined benefit obligation. In countries where there is no
deep market in such bonds, the market interest rates on
government bonds are used. The current service cost of
the defined benefit plan, recognised in the statement of
profit and loss in employee benefit expense, reflects the
increase in the defined benefit obligation resulting from
employee service in the current year, benefit changes,
curtailments and settlements. Past service costs are
recognised immediately in the statement of profit and loss.
The net interest cost is calculated by applying the discount
rate to the net balance of the defined benefit obligation
and the fair value of plan assets. This cost is included in
employee benefit expense in the statement of profit and
loss. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions for
defined benefit obligation and plan assets are recognized
in OCI in the period in which they arise. When the benefits
under a plan are changed or when a plan is curtailed, the
resulting change in benefit that relates to past service or
the gain or loss on curtailment is recognised immediately in
the statement of profit and loss. The Company recognises
gains or losses on the settlement of a defined benefit plan
obligation when the settlement occurs.
Termination benefits
Termination benefits are recognised as an expense in
the statement of profit and loss when the Company is
demonstrably committed, without realistic possibility of
withdrawal, to a formal detailed plan to either terminate
employment before the normal retirement date, or to
provide termination benefits as a result of an offer made
to encourage voluntary redundancy. Termination benefits
for voluntary redundancies are recognised as an expense
in the statement of profit and loss if the Company has
made an offer encouraging voluntary redundancy, it is
probable that the offer will be accepted, and the number
of acceptances can be estimated reliably.
Other long-term employee benefits
The Company's net obligation in respect of other long-term
employee benefits is the amount of future benefit that
employees have earned in return for their service in the
current and previous periods. That benefit is discounted
to determine its present value. Re-measurements are
recognised in the statement of profit and loss in the period
in which they arise.
Compensated absences
The Company's current policies permit certain categories
of its employees to accumulate and carry forward a
portion of their unutilised compensated absences and
utilise them in future periods or receive cash in lieu
thereof in accordance with the terms of such policies. The
Company measures the expected cost of accumulating
compensated absences as the additional amount that the
Company incurs as a result of the unused entitlement that
has accumulated at the reporting date. Such measurement
is based on actuarial valuation as at the reporting date
carried out by a qualified actuary.
Share-based payments
Employees of the group receive remuneration in the form
of Share-based payments, whereby employees render
services as consideration for equity instruments.
Treasury Shares
Own equity instruments that are required (treasury shares)
are recognized at cost and deducted from equity. No gain
or loss is recognized in the statement of profit and loss on
the purchase, sale, issue or cancellation of the Company's
own equity instruments. Any difference between the
carrying amount and the consideration, if reissued, is
recognized in the securities premium.
Equity-settled transactions
The cost of equity-settled transactions is determined by
the fair value at the date when the grant is made using
Black Scholes valuation model.
That cost is recognized, together with a corresponding
increase in share- based payment (SBP) reserves in equity,
over the period in which the performance and/or service
conditions are fulfilled in employee benefits expense.
The 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 Company's best estimate of the number of equity
instruments that will ultimately vest. The Statement of
profit and loss expense or credit 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.
Service and non-market performance conditions are not
taken into account when determining the grant date fair
value of awards, but the likelihood of the conditions being
met is assessed as part of the Company's best estimate
of the number of equity instruments that will ultimately
vest. Market performance conditions are reflected within
the grant date fair value.
The dilutive effect of outstanding options is reflected as
additional share dilution in the computation of diluted
earnings per share.
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