Accounting policy:
(i) Classification:
The Company classifies its financial assets in the following measurement categories:
• those to be measured subsequently at fair value, and
• those measured at amorised cost.
The classification depends on the entity's business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will be recorded in profit or loss. For investments in debt instruments, this will depend on the business model in which the investment is held. The Company reclassifies debt investments when and only when its business model for managing those assets changes.
(ii) Measurement
At initial recognition, the Company measures a financial asset (excluding trade receivables which do not contain a significant financing component) at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
(a) Debt instruments
Subsequent measurement of debt instruments depends on the Company's business model for managing the asset and the cash flow characteristics of the asset. There are two measurement categories into which the Company classifies its debt instruments:
Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other income.
Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or fair value through other comprehensive income (FVOCI) are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented net in the statement of profit and loss within other income in the period in which it arises. Interest income from these financial assets is included in other income.
(b) Equity instruments
The Company subsequently measures all equity investments at fair value. Where the Company's management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss. Dividends from such investments are recognised in profit or loss as other income when the Company's right to receive payments is established. Changes in the fair value of equity instruments at fair value through profit or loss are recognised in other income in the statement of profit and loss. Impairment losses (and reversal of impairment losses) on equity investments measured at fair value are not reported separately from other changes in fair value.
(c) Trade receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business and reflects Company's unconditional right to receive consideration (that is, payment is due only on the passage of time). Trade receivables are recognised initially at the transaction price as they do not contain significant financing components.
(iii) Investment in subsidiaries
The Company has accounted for its investments in Subsidiaries at cost.
(iv) Impairment of financial assets
The Company assesses on a forward-looking basis, the expected credit losses associated with its financial assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 27(A) details how the company determines whether there has been a significant increase in credit risk.
For trade receivables, the Company applies the simplified approach permitted by Ind AS 109, Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
Allowance for uncollected accounts receivable and advances - Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrevocable amounts. Individual trade receivables are written off when management deems them not to be collectible. Impairment is made on the expected credit losses, which are the present value of the cash shortfall over the expected life of the financial assets - note 27(A) .
Refer note 38(c) for the other accounting policies relevant to financial assets
Nature and purpose of reserves:
Securities premium reserve:
Securities premium reserve is used to record the premium on issue of securities. This reserve will be utilised in accordance with the provisions of the Companies Act, 2013.
General Reserve:
General Reserve represents amounts transferred from retained earnings in earlier years under the provisions of the erstwhile Companies Act, 1956.
Special Economic Zone Re-investment reserve:
Under the SEZ scheme, the unit which begins production of goods/services on or after April 1, 2005 and on or before June 30, 2020 is eligible for deduction of 100% of profits or gains derived from export of goods/services for the first five years, 50% of such profits or gains for a further period of 5 years and 50% of such profits or gains for an additional period of five years subject to creation of special economic zone re-investment reserve out of profits of eligible SEZ unit and utilisation of such reserve in terms of the provisions of the Income Tax Act, 1961.
(a) Compensated absences obligations:
The compensated absences covers the Company's liability for earned leave. The liabilities for earned leave that cannot be availed/settled within 12 months are therefore measured at the present value of expected future availment/payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefit is discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligations. Remeasurements as a result of the experience adjustments and changes in actuarial assumptions are recognised in the other comprehensive income.
(b) Post-employment obligations- Gratuity: (Defined benefit)
The company provides gratuity for employees as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity benefit. The amount of gratuity payable on retirement/termination is the employees' last drawn basic salary per month computed proportionately for 15 days' salary multiplied for the number of years of service. The gratuity plan is a funded plan and the company makes contributions, through an approved trust, to recognised funds administered by Life Insurance Corporation of India (Insurer).
The company has established a trust to administer its obligation for payment of gratuity to employees. The trust in turn contributes to a scheme administered by the Life Insurance Corporation of India (Insurer). Every year, the insurer carries out a funding valuation based on the latest employee data provided by the Company. Any deficit in the assets arising as a result of such valuation is funded by the Company. The trust has not changed the process used to manage the risks from previous years.
(v) Risk exposure
Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:
Interest rate risk: The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability.
Liquidity risk: This is the risk that the Company is not able to meet the short term gratuity pay-out. This may arise due to non-availability of enough cash/cash equivalents to meet the liabilities or holdings in liquid assets not being sold in time.
Salary escalation risk: The present value of the defined benefit plans calculated with the assumption of salary increase rate of plan participants in future. Deviation in the rate of increase of salary in future for plan participants from the rate of increase in salary used to determine the present value obligation will have a bearing on the plan's liability.
Demographic risk: The Company has used certain mortality and attrition assumptions in valuation of the liability. The company is exposed to the risk of actual experience turning out to be worse compared to the assumption.
Regulatory risk: Gratuity benefits are paid in accordance with the requirements of the Payment of Gratuity Act, 1972 (as amended from time to time). There is a risk of change in regulations requiring higher gratuity payouts (eg. increase in the maximum limit on gratuity.)
Asset liability mismatching or market risk: The duration of the liability is longer compared to duration of assets, exposing the Company to market risk for volatilities/fall in interest rate.
Changes in fund yields: A decrease in fund yields will increase plan liabilities, although this will be partially off-set by an increase in the value of the plan's fund holdings.
(c) Defined contribution plans
Employer's contribution to provident fund: Contributions are made to a provident fund in India for employees at the rate of 12% of the employee's qualifying salary as per regulations. The contributions are made to registered provident fund administered by the government. This obligation of the company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognised during the year towards this defined contribution plan is C28 (March 31, 2023- C26).
Employer's contribution to state insurance scheme: Contributions are made to state insurance scheme for employees at the rate of 3.25%. The contributions are made to employee state Insurance corporation (ESI), a corporation administered by the government. This obligation of the company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognised during the period towards defined contribution plan is C3 (March 31, 2023- C3)
Accounting policy:
For operations carried out in Special Economic Zones which are entitled to tax holiday under the Income tax Act, 1961, no deferred tax is recognised in respect of temporary differences which reverse during the tax holiday period, to the extent of Company's gross taxable income that is allowed as the deduction during the tax holiday period. Deferred tax in respect of temporary differences which reverse after the tax holiday period is recognised in the year in which temporary difference originate. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised, or the deferred income tax liability is settled.
Significant judgement and estimate:
There is significant degree of judgement involved in determining the tax rates to be applied for measuring deferred tax liability considering that different tax rates apply depending upon irrevocable election of availing tax holiday benefits by the Company in the future. The Company has certain units that are entitled to certain tax holiday benefit in relation to profits earned and other units that are not entitled to any tax holiday benefit [Also refer note 24(b)]. Further, the tax holiday benefit can be availed only with enacted tax rates which are higher than the alternate tax rates enacted which once opted, the company would need to forego the tax holiday benefits irrevocably. The company has made certain assumptions in respect of timing of exercise of alternate tax rates regime taking into account future market opportunities for its products and any changes to those assumptions are not expected to have significant impact on the measurement of deferred tax liability as at the year end.
Refer note 38(e) for other accounting policies relevant to deferred taxes.
i) Utilisation of borrowings availed from banks
The borrowings obtained by the Company from banks have been applied for the purposes for which such loans are taken.
ii) Quarterly statements filed with banks
The quarterly statements of current assets filed by the Company in respect of its working capital facilities with banks are in agreement with the books of accounts.
iii) Wilful defaulter
The Company has not been declared as wilful defaulter by any bank or financial institutions or government or any government authority.
Secured borrowings and assets pledged as security
Working capital loans are secured by pari-passu first charge on Inventories, receivables and other current assets of the Company.
Overdraft facilities from banks are secured by pledge of specific term deposits with banks.
Note 16: Revenue from operations
Accounting policy:
Revenue is measured at the transaction price determined under IND AS 115- Revenue from contracts with customers. Amounts disclosed as revenue are net of returns, trade allowances, rebates, goods & service tax (GST) collections and amounts collected on behalf of third parties.
(i) Revenue from Sale of Goods:
Revenue from sale of goods is recognised when the customer obtains control of the Company's product, which occurs at a point in time based on international commercial terms as agreed with the customers with payment terms typically in the range of 60 to 180 days after invoicing.
Revenue from these sales is recognised based on the price specified in the contract, net of the estimated discounts. Accumulated experience is used to estimate and provide for the discounts, using the expected value method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur.
The Company does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the company does not adjust any of the transaction prices for the time value of money.
For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation based on the relative standalone selling price.
(ii) Revenue from sale of services:
Revenue from Sale of services is recognised as per the terms of the contracts with customers when the related services are performed, or the agreed milestones are achieved.
(iii) Export incentives
Export incentives comprise of Duty draw back.
Duty drawback is recognised as income when the right to receive credit as per the terms of the scheme is established in respect of the exports entitled for this benefit made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
Refer note 38(k) for other accounting policies relevant to revenue.
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