NOTE ‘1’ : SIGNIFICANT ACCOUNTING POLICES
1.1. Basis of preparation and presentation
(i) The financial statements have been prepared in accordance with Indian Accounting Standards ('Ind AS') as notified by
Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act, 2013 (the 'Act') read with of the Companies
(Indian Accounting Standards) Rules as amended from time to time, and other relevant provisions of the Act.
(ii) The Financial statements have been prepared on the historical cost basis except certain financial assets & liabilities
which are measured at fair value, defined benefit and other long-term employee benefits and assets held for sale -
measured at fair value less cost of sell:
(iiI) All the assets and liabilites have been classified as current or non-current as per the company's normal operating cycle
of twelve months and other criteria set out in Schedule III of the Companies Act, 2013.
(iv) The statement of cash flows has been prepared under indirect method, whereby profit or loss is adjusted for the effects
of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and
items of income or expense associated with investing or financing cash flows. The cash flows from operating, investing
and financing activities of the Company are segregated. The Company considers all highly liquid investments that are
readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value to be cash
equivalents.
(v) All amounts disclosed in the financial statements and notes have been rounded off to the nearest lakhs as per the requirement
of Schedule III, unless otherwise stated.
1.2. Use of Estimates & Judgements
The preparation of financial statements in conformity with Ind AS requires management to make judgments, estimates and
assumptions, that affect the application of accounting policies and the reported amounts of assets, liabilities, income, expenses etc. at
the date of these financial statements and the reported amounts of revenues and expenses for the years presented. Actual results
may differ from these estimates.
Estimates and underlying assumptions are reviewed at each balance sheet date. Revisions to accounting estimates are recognised
in the period in which the estimate is revised and future periods affected.
1.3. Property, Plant and Equipment
(i) Property, plant and equipment are stated at cost, net of recoverable taxes, trade discount and rebates less accumulated
depreciation and impairment loss, if any. Such cost includes purchase price, borrowing costs, and any cost directly
attributable to bringing the asset to its working condition for its intended use, net charges on foreign exchange contracts and
adjustments arising from exchange rate variations attributable to the assets.
(ii) Capital work-in-progress includes expenditure during construction period incurred on projects under implementation treated
as pre-operative expenses pending allocation to the assets. These expenses are apportioned to the respective fixed assets
on their completion/ commencement of commercial production.
(iii) Depreciation on property, plant and equipment is provided based on useful life of the assets prescribed in Schedule II to the
Companies Act, 2013 on straight line method.
(iv) When an asset is scrapped or otherwise disposed off, the cost and related depreciation are removed from the books of
account and resultant profit or loss, if any, is reflcted in statement of Profit and Loss.
(v) The Residual Value, useful lives and methods of depreciation of property, plant and equipment are reviewed at the end of each
financial year and ajusted prospectively, if appropriate.
Intangible Assets
Intangible assets are stated at cost less accumulated amortization and impairment. Intangible assets are amortized over their
respective individual estimated useful lives on a straight-line basis, from the date that they are available for use. The estimated useful
life of an identifiable intangible asset is based on a number of factors including the effects of obsolescence, demand, competition and
other economic factors and the level of maintenance expenditures required to obtain the expected future cash flows from the asset.
Amortization methods and useful lives are reviewed periodically including at each financial year end.
1.4. Impairment of Non-financial Assets
The Company assesses at each reporting date whether there is any objective evidence that a non-financial asset or a group of non¬
financial assets are impaired. If any such indications exists, the Company estimates the amount of impairment loss which may be
caused to the company. For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash
inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets is considered as a
cash generating unit. If any such indication exists, an estimate of the recoverable amount of the individual asset/cash generating unit
is made.
An impairment loss is calculated as the difference between an asset’s carrying amount and recoverable amount. Losses are
recognised in profit or loss and reflected in an allowance account. When the Company considers that there are no realistic prospects
of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently decreases and the
decrease can be related objectively to an event occurring after the impairment was recognised, then the previously recognised
impairment loss is reversed through profit or loss.
1.5. Investment property
Property that is held for long-term rental yields or for capital appreciation or both, and that is not used by the Company, is classified as
investment property. Investment property is measured at its cost, including related transaction costs and, wherever applicable,
borrowing costs less depreciation and impairment, if any.
1.6. Cash & cash equivalents
Cash and Cash equivalents include cash and Cheque in hand, bank balances and demand deposits with banks that are readily
convertible to known amounts of cash & which are subject to an insignificant risk of changes in value where original maturity is three
months or less.
1.7. Inventory
Inventories of Finished Goods and Stock-in-trade are stated ‘at the lower of cost or net realisable value’. Raw Materials, Work-in¬
Progress and Goods-in-transit are stated ‘at cost’. Cost comprise all cost of purchase, cost of conversion and other costs incurred in
bringing the inventories to their present location and condition. Cost formulae used are ‘First-in-First-out’. Due allowance is estimated
and made for defective and obsolete items, wherever necessary.
Having regard to the nature & value of items of Stores & consumables, the same are treated as consumed in the year of their purchase.
1.8. Financial Instruments
(i) Financial Assets
Initial Recognition and Measurement
Financial assets are recognised when the company becomes party to the contractual provisions of the instruments. Financial
assets, other than trade receivables, are initially recognised at fair value plus transaction costs for all financial assets not
carried at fair value through statement of profit or loss. Financial assets carried at fair value through statement of profit or loss
are initially recognised at fair value and transaction costs are expensed in the statement of Profit and Loss.
Subsequent measurement
Financial assets, other than equity instruments, are subsequently measured at amortised cost or fair value through other
comprehensive income (OCI) or fair value through profit or loss on the basis of:
- the entity's business model for managing the financial assets; and
- the contractual cash flow characteristics of the financial asset.
Financial assets carried at amortised cost (AC)
A financial asset is measured at amortised cost if it is held within a business model whose objective is to hold the asset in order
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.
Financial assets at fair value through other comprehensive income (FVTOCI)
A financial asset is measured at FVTOCI if it 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.
Financial assets at fair value through profit or loss (FVTPL)
Investment in financial asset other than equity instrument, not measured at either amortised cost or FVTOCI is measured at
FVTPL. Such financial assets are measured at fair value with all changes in fair value, including interest income and dividend
income if any, recognised in the Statement of Profit and Loss.
Equity Instruments:
All investment in equity instrument classified under finanacial assets are subsequently measured at fair value. Equity
instruments which are held for trading are measured at FVTPL.
For all other equity instruments, on initial recognition, irrevocably elect to measure the same either at FVOCI or FVTPL. The
Compnay makes such election on an instument-by-instrument basis.
Impairment of financial assets
In accordance with Ind AS 109, the company uses 'Expected Credit Loss' (ECL) model, for evaluating impairment of financial
asets 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 month 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); or
- Full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the
financial instruments).
(ii) Financial Liabilities
Initial recognition and measurement
Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Financial liabilities are initially recognised at fair value net of transaction costs for all financial liabilities not carried at fair value
through profit or loss.
The Company’s financial liabilities includes trade and other payables, loans and borrowings including bank overdrafts and
derivative instruments.
Subsequent measurement
Financial liabilities measured at amortised cost are subsequently measured using Effective Interest Rate (EIR) method. Financial
liabilities carried at fair value through profit or loss (FVTPL) are measured at fair value with all changes in fair value recognised in the
Statement of Profit and Loss.
Loans & Borrowings
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using EIR method. Gains
and losses are recognized in profit & loss when the liabilities are derecognized as well as through EIR amortization process.
Financial Guarantee Contracts
Financial guarantee contracts issued by the Company are those contracts that requires a payment to be made or to reimburse the
holder for a loss it incurs because the specified debtors fails to make payment when due in accordance with the term of a debt
instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are
directly attributable to the issuance of the guarantee.
Subsequently the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind
AS 109 and the amount recognized less cumulative adjustments.
(iii) Derivative financial instruments and Hedge Accounting
The Company can use various derivative financial instruments such as interest rate swaps, currency swaps, forwards & options and
commodity contracts to mitigate the risk of changes in interest rates, exchange rates and commodity prices. Such derivative financial
instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are also subsequently
measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair
value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and Loss, except for
the effective portion of cash flow hedges which is recognised in Other Comprehensive Income and later to Statement of Profit and
Loss when the hedged item affects profit or loss or treated as basis adjustment if a hedged forecast transaction subsequently results
in the recognition of a non-financial assets or non-financial liability
For the purpose of hedge accounting, hedges are classified as:
Cashflow hedge
The Company designates derivative contracts or non derivative financial assets / liabilities as hedging instruments to mitigate the risk
of movement in interest rates and foreign exchange rates for foreign exchange exposure on highly probable future cash flows
attributable to a recognised asset or liability or forecast cash transactions. When a derivative is designated as a cash flow hedging
instrument, the effective portion of changes in the fair value of the derivative is recognized in the cash flow hedging reserve being part
of other comprehensive income. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in the
Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, then hedge accounting is
discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the
hedging instrument recognized in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging
reserve until the underlying transaction occurs. The cumulative gain or loss previously recognized in the cash flow hedging reserve is
transferred to the Statement of Profit and Loss upon the occurrence of the underlying transaction. If the forecasted transaction is no
longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified in the Statement of Profit and
Loss.
Fair value hedge
The Company designates derivative contracts or non derivative financial assets / liabilities as hedging instruments to mitigate the risk
of change in fair value of hedged item due to movement in interest rates, foreign exchange rates and commodity prices.
Changes in the fair value of hedging instruments and hedged items that are designated and qualify as fair value hedges are recorded
in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, the adjustment to the
carrying amount of a hedged item for which the effective interest method is used is amortised to Statement of Profit and Loss over the
period of maturity
(iv) Derecognition of financial instruments
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it
transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109. A financial liability (or a part of a financial
liability) is derecognized from the Company's Balance Sheet when the obligation specified in the contract is discharged or cancelled
or expires.
1.9. Leases
The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether
a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use
of an identified asset; (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the
lease; and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use asset (“ROU”) and a corresponding lease liability
for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low
value leases. For these short-term and low value leases, the Company recognizes the lease payments as an operating expense on a
straight-line basis over the term of the lease.
Lease liability is measured by discounting the lease payments using the interest rate implicit in the lease or, if not readily
determinable, using the incremental borrowing rate. Lease payments are allocated between principal and finance cost. The finance
cost is charged to statement of profit and loss over the lease period so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period.
The ROU assets are initially recognised at cost, which comprises the initial amount of the lease liability adjusted for any lease
payment made at or prior to the commencement date of the lease plus any initial direct cost less any lease incentives and restoration
cost. They are subsequently measured at cost less accumulated depreciation and inpaired losses, if any. ROU assets are
depreciated on a straight line basis over the asset's useful life or the lease whichever is shorter. Impairment of ROU assets is in
accordance with the Company's accounting policy for impairment of tangible and intangible assets.
Company as a lessor
Lease income from operating leases where the Company is a lessor is recognised in the Statement of Profit and Loss on a straight¬
line basis over the lease term unless the receipts are structured to increase in line with expected general inflation to compensate for
the expected inflationary cost increases.
1.10. Fair Value Measurement:
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset
or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability
- The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by
using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best
use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation
technique:
Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable,
either directly or indirectly.
Level 3: Techniques which use inputs that have a significant effect on the recorded fair value that are not based on
observable market data.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether
transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is
significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature,
characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
1.11. Borrowing Cost
Borrowing costs include interest expenses as per effective interest rate and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the interest cost. Borrowing costs that are directly attributable to the
acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that
necessarily takes substantial period of time to get ready for its intended use.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is
deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are charged to the Statement of Profit and Loss for the period for which they are incurred.
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