2. Material accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these Standalone financial statements.
a. Current and non-current classification
All assets and liabilities are classified into current and non-current.
Assets
An asset is classified as current when it satisfies any of the following criteria:
• It is expected to be realised in, or is intended for sale or consumption in, the Company’s normal operating cycle;
• It is held primarily for the purpose of being traded;
• It is expected to be realised within 12 months after the reporting date; or
• It is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.
Current assets include the current portion of non-current financial assets. All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies any of the following criteria:
• It is expected to be settled in the Company’s normal operating cycle;
• It is held primarily for the purpose of being traded;
• It is due to be settled within 12 months after the reporting date; or
• The Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. Terms of a
liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
Current liabilities include the current portion of financial liabilities some part of which may be non-current. All other liabilities are classified as non¬
current. Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Operating cycle
Based on the nature of products/ activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash
equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non¬
current.
b. Measurement of fair values
A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and
liabilities.
The Company has an established control framework with respect to the measurement of fair values. This includes the corporate finance team that has
overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the board of directors.
The corporate finance team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes
or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion
that these valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which the valuations should be classified.
Significant valuation issues are reported to the Company’s audit committee.
Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices).
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair
value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same
level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
c. Property, Plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost, which includes capitalised 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.
When parts of an item of property, plant and equipment having significant cost have different useful lives, then they are accounted for as separate items
(major components) of property, plant and equipment.
Gains or losses on disposal of an item of property, plant and equipment is recognised in the statement of profit or loss.
All spare parts which are expected to be used for more than one accounting period are capitalised as property, plant and equipment.
Capital work-in-progress is stated at cost, net of impairment loss, if any. The cost of self-constructed assets includes the cost of materials, direct labour, and
any other costs directly attributable to bringing the assets to a working condition and location for their intended use, the initial estimate of dismantling
and removing the items and restoring the site on which they are located.
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 is
derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in the statement of profit and loss as incurred.
Depreciation is provided on cost of items of property, plant and equipment less their estimated residual values over their estimated useful lives.
(i) The Company follows straight-line method of depreciation in respect of buildings, plant and machinery, all assets of Engineering Division and
written down value method in respect of other assets.
(ii) The depreciation charged on all property, plant and equipment is on the basis of useful life specified in Part “C” of Schedule II to the Companies
Act, 2013 which represents useful lives of the assets.
(iii) On assets sold, discarded, etc., during the year, depreciation is provided up to the date of sale/discard.
(iv) Depreciation has been calculated on a pro-rata basis in respect of acquisition/installation during the year.
(v) Leasehold improvements are amortised over the balance of the primary lease period or the useful lives of assets, whichever is shorter.
(vi) Freehold land is not depreciated.
Depreciation methods, useful lives and residual values are reviewed at each financial year, and changes, if any, are accounted for prospectively. 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 of).
d. Intangible assets
Recognition and measurement
Intangible assets comprise computer software. Intangible assets are carried at cost less accumulated amortisation and impairment losses, if any. The cost
of an intangible asset comprises its purchase price, including any import duties and other taxes (other than those subsequently recoverable from the tax
authorities), and any directly attributable expenditure on making the asset ready for its intended use and net of any trade discounts and rebates.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from
derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset are recognised in
the statement of profit and loss when the asset is derecognised.
Amortisation
The management’s estimates of the useful lives of the Software are 3-5 years.
Amortisation method, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.
e. Inventories
(i) Stores, spares and components are valued at cost or under.
(ii) Raw materials, process stocks, finished goods and stock in trade are valued at lower of cost and net realisable value.
(iii) Land (for development) on conversion into inventory from fixed assets is valued at the lower of its historical cost and net realisable value, and includes
appropriate share of land development expenses and finance cost of borrowed funds relatable thereto.
Cost of inventories, other than land (for development), is ascertained on the weighted average basis in textiles division and moving weighted average basis
in engineering division. Further, in respect of the manufactured inventories, i.e., process stocks and finished goods, appropriate share of manufacturing
expenses are included on absorption costing basis. Work in process relating to software contracts includes salary and other directly identifiable expenses
incurred on fixed price contracts, till the completion of specified deliverables, and are valued at cost or net realisable value, whichever is lower.
f. Financial instruments
Recognition and initial measurement
(i) Financial assets
Trade receivables issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised
when the Company becomes a party to the contractual provision of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of
financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted
from the fair value of financial asset or financial liabilities, as appropriate, on initial recognition.
Classification and subsequent measurement
On initial recognition, a financial asset is classified as measured at
- amortised cost;
- FVTPL
Financial assets are not reclassified subsequent to their initial recognition, except if and in the period the Company changes its business model for
managing financial assets.
A financial asset is measured at amortised 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 cash flows that are solely payments of principal and interest on the
principal amount outstanding.
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). The election is made on an investment-by-investment basis.
All financial assets not classified as measured at amortised cost or FVOCI 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 amortised cost
or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Impairment
The Company recognizes loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or
loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all financial
assets with contractual cash flows other than trade receivable, ECLs are measured at an amount equal to the 12-month ECL, unless there has been
a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of ECLs (or reversal) that
is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised as an impairment gain or loss in the
Statement of Profit and Loss.
(ii) Financial liabilities
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 amortised cost using the
effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit and loss. Any gain or loss on derecognition
is also recognised in profit or loss.
(iii) 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 realise the assets and settle the liabilities
simultaneously.
(iv) Investment in Subsidiaries
Investments in subsidiaries are carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying
amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in subsidiaries, the
difference between net disposal proceeds and the carrying amounts are recognized in the Statement of Profit and Loss.
Derecognition
(i) Financial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, 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 whereby it transfers assets recognised 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 derecognised.
(ii) Financial liabilities
The Company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
The Company also derecognises 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 recognised at fair value. The difference between the carrying amount
of the financial liability extinguished and the new financial liability with modified terms is recognised in statement of profit or loss.
g. 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 recognised if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. Impairment losses are recognised in
the statement of profit and loss. Impairment loss recognised 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.
h. Non-current assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities are classified as held for sale if it is highly probable that they recovered primarily
through sale rather than through continuing use.
Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value less costs to sell. Any resultant loss on a disposal
group is allocated first to goodwill, and then to remaining assets and liabilities on pro rata basis, except that no loss is allocated to inventories, financial
assets, deferred tax assets and employee benefit assets, which continue to be measured in accordance with the Company’s other accounting policies. Losses
on initial classification as held for sale and subsequent gains and losses on re-measurement are recognised in profit or loss.
Once classified as held-for-sale, intangible assets and property, plant and equipment are no longer amortised or depreciated.
Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the
financial statement.
i. 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. Employee benefit
liabilities such as salaries, wages, casual leave allowance and bonus, etc. that are expected to be settled wholly within twelve months after the end of the
year in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting year and are measured
at an undiscounted amount expected to be paid when the liabilities are settled.
Defined contribution plans
Provident Fund: A defined contribution plan is a post-employment benefit plan under which an entity pays specified contributions to a separate entity
and has no obligation to pay any further amounts.
The Company makes specified monthly contributions towards employee provident fund and employee state insurance to Government administered fund
which is a defined contribution plan. The Company’s contribution is recognised as an expense in the statement of profit or loss during the period in which
the employee renders the related service and also includes contribution to national pension scheme and overseas social security contribution.
Superannuation fund of the Company is managed by the Life Insurance Corporation of India (“LIC”).
Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s obligation in respect of defined benefit
plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods,
discounting that amount and deducting the fair value of any plan assets.
The Company has following defined benefit plans:
Gratuity: The Company’s gratuity scheme is a defined benefit plan. The present value of the obligation under such defined benefit plan is determined based
on actuarial valuation carried out by an independent actuary, using the Projected Unit Credit Method, which recognises each period of service as giving
rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured as the
present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plans is
based on the market yields on Government securities as at the balance sheet date for the estimated term of the obligation.
Remeasurements of the defined benefit liability, which comprise actuarial gains and losses are recognized in OCI.
Other long-term employee benefits
Benefits under the Company’s compensated absences are other long term employee benefits. The Company’s net obligation in respect of long-term
employee benefits other than post-employment benefits is the amount of future benefit that employees have earned in return for their service in the
current and prior periods; that benefit is discounted to determine its present value, and the fair value of any related assets is deducted. The obligation is
measured on the basis of an annual independent actuarial valuation using the projected unit credit method. Remeasurements gains or losses are recognised
in statement of profit or loss in the period in which they arise.
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