3 SIGNIFICANT ACCOUNTING POLICIES
3.1 Basiso?accounting and preparation of financial statements
The financial statements of the Company have been prepared In accordance with the Generally Accepted Accounting
Principles in India (Indian GAAP) to comply with the Accounting Standards as notified and the relevant provisions of the
Companies Act, 201?.. The financial statements have been prepared or. accrual basis underthe historical cost convention
The accounting policies adopted In the preparation of the financial statements are consistent with those followed in the
previous year
The Financial Statements are presented In Indian Rupees, which the functional currency of the company. All Amounts
have been rounded off to nearest lakhs, unless otherwise indicated.
The Financial Statements have been presented as per Schedule of the Companies Act. 2013. Trie Cash Flow Statement of
the Company has been prepared as per Accounting Standard - 3 "Statement of Cash Flow" as preserved by the Institute
of Chartered Accountants of India using the Indirect Method.
The Company has followed Accounting Standards issued by The Institute* of Chartered Accountants of India for preparation
of the financial statements. The Ministry of Corporate Affairs (MCA), in 2015, had notified the Companies (Indian
Accounting Standards (IND AS)) Rules 201S, which stipulated the adoption and applicability of IND AS in a phased manner
The company fs listed on SME Emerge Platform of the National Stock Exchange (India) Ltd. and hence It is exempted from
compulsory adaption of Ind AS for preparation of its Financial Statements.
During the previous year, the scheme of arrangement for the demerger of Tools Business Undertaking from the Company,
to Emkay Tools Limited ("the resulting company") under Sections 230 to 232 of the Companies Act, 2013 and all other
applicable provisions of the Companies Act, 2013 ("the Scheme") was approved by Honourable National Company Law
Tribune!, Mumbai Sench. (Refer Note No. 45 for Detailed note on Scheme of Arrangement) In pursuance of the said
scheme, the Company has cerognised the carrying value of assets and liabilities pertaining to the demerged undertaking
from the carrying value of assets and liabilities as appearing In the books on the appointed date. The company
derecognises the carrying amount of investments, loans and advances, receivables, payables and other dues outstanding
relating to the demerged undertaking and are cancelled. There are no further obllgation/outstandlng on that behalf. The
excess/deficit, if any. of the net assets transferred are adjusted with the retained earning of the Company.
3.2 Use of estimates
The preparation of the financial statements In conformity with Indian GAAP requires the Management to make
estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities)
and the reported income and expenses during the year. The Management believes that the estimates used in preparation
of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the
differences between the actual results and the estimates are recognised in the periods in which the results are known /
materialise.
Estimates and u nderiying assumptions are reviewed at each Balance Sheet date. Revisions to accounting estimates, if any,
are recognised propescively Change in Estimates are reflected In Financial Statements in the period in which changes are
made and, if material, their effects are disclosed in notes tothe Financial Statements.
3.3 Revenue recognition
The Company recognises revenues on the sale of products, net of discounts, sales incentives, customer bonuses and
rebates granted, when products are delivered or when delivered to a carrier for export sales, which Is when control
including risks and rewards and title of ownership pass to the customer. Revenues are recognised when collectability of
the resulting receivable is reasonably assured.
Income & expenses are recognised and accounted or accrual basis. Where the ability to assess the ultimate collection
with reasonable certainty is lacking at the time of raising any daim.revenue recognition is postponed to the extent of
uncertainty Involved.
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3.4 Property, Plant and Equlmen! and Intangible Assets
Property, Plant and Equipment
'Property p;ant and equipment are stated at cost of acquisition less accumulated depreciation and impairment, if any
Cost includes purchase price, non refundaole taxes and levies and other directly attributable costs of bringing the assets to
its location and working condition for its intended use
The cost of an item is recognised as 3n asset if, and only if, it is probable th3t the economic benefit associated with that
item will flow to the company in future periods and the cost can be measured reliably. Expenditure incurred for the asset
has been put Into operations, such as repairs and maintenance expenses, are charged to the statement of profit and loss
during the period in which they are incured.
An item of asset is de recognised upon disposal or when no future economic benefits are expected to arise form the
continued use of assets. Any gam or loss on disposal or retirement of the asset, is determined as the difference between
sale proceeds and the carrying amount of the asset and Is recognised In thestatemenl of profit and loss.
Intangible Assets
Intarigibie assets that are acquired separately are measured on Inlial recognition at cost. Following Intial recognition,
intangible assets are carried at cost less any accumulated amortisation and accumulated Impairment loss, ifany.
Depreci jt ion and Amortisation
Depreciation has been provided on the value of Property, Plant and Equiment at the written down value method acquired
as per the rates and manner as prescribed in Schedule 11 to the Companies Act, 2013. In respect of additions/extensions
forming Integral part of existing assets & adjustments to Fixed Assets on account of exchange difference. If any,
depreciation has been provided over residual life of the respective fixed assets
The useful lives is reviewed at least at each year end. Changes in expected useful lives are treated as change in accounting
estimates.
Depreciation is not recorded on capital work-in-progress until construction and installation are complete and the asset is
ready lor its intended use
Leasehold Land. Ifany, has been amortised over the period of lease.
Intangible Assets are amortized as per written down value method over the estimated useful economic life Management
has determined its estimates of useful economic life The useful economic life of the Intangible assets is reviewed at each
finaoct'aI yarand adjusted prospectively.
Impairment of assets
An impairment loss is recognized wherever the carrying amount of fixed assets exceeds the recoverable amount i.e. the
higher of the assets' net selling price and value in use
3 5 Earnings per share
Basic Earning per Share
Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinan/
items, if any) by the Weighted average number of equity shares outstanding during the year. The company has not issued
any dilutable Shares to any persons. The EPS has been calculated as oer Accounting Standard 20 “Earning Per share" issued
by The institute of Chartered Accountants of India.
Diluted Earning per Share
For the purposes of calculating Diluted Earning per share, the net profit or loss attributable to the Equity Shareholders and
weighted average of the number of shares outstanding during the year are adjusted for the effects of all dilutive potential
equity shares Dilutive potential equity shares are deemed converted as of the beginmg of the period, unless they have
been issued at a later date. In computing dilutive earing per share, only potential equity shares that are dilutive and that
either reduces the earing per share or increases loss per share are included
3.6 Taxeson income
Current tax is the amount of tax payable on the taxable Income for the year as determined in accordance with the
provisions of the Income Tax Act, 1961. Income tax expense is recognised In the statement of Profit and Loss. Cureent tax
comprises the expected tax payable or receivable on the taxable income or loss for the current yearand any adjustment to
the tax payable or receivable in respect of previous years. The amount of current tax is the best estimate of the tax amount
to be paid or received by the company which is measured at the rates of taxes enacted on the reporting date.
Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting
Income that originate in one period and are capable of reversal In one or more subsequent periods. Deferred tax is
measureo using the tax rates and the tax laws enacted or sucstantially enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax assers in respect of unabsorbed depreciation and carry
forward of losses are recognised only if there s virtual certainty that there will be sufficient future taxable Income available
to realise such assets. Deferred tax assets are recognised for timing differences of other items only to the extent that
reasonable certainty exists that sufficient future taxable income will be available against which these can be realised
Deferred tax assets and liabilities arc offset If such Items relate to taxes on income levied by the same governing tax laws
and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each Balance Sheet
datetortheirrealisability.
3.7 Investment
Current Investments are carried at lower of cost and quoted/fair value, computed category wise Long Term investments
are carried at cost. Provision for diminution In the value of Long Term Investments In made only if; such a decline is other
than temporary.
3.8 Inventory
The Inventories, i.e. Raw Materials, Stores and spates. Finished Goods etc. have been value at ower of cost or net
realisable value. Cost of Inventories comprises of all costs of purchase, cost of conversion and other cost Incurred In
bringing them to their respective present location and condition The cost of raw Material and Stores & Spares is
determined at Weighted Average Cost basis By products am valued at Net Realisable value. The cost of work in progress
and finished stock is determined on the obsorption costing method The value of Finished Goods indudes Excise Duty
wherever applicable.
3.9 Cash and Cash Equivalents
Cash and cash equivalents comprises cash on hand, demand deposits and highly liquid investments with an origins
maturity of up to three months that are readily convertible Into cash and which arc subject to an Insignificant risk of
changes in value.
3.10 Borrowings
Borrowing are initially recognised at fair value, net of transaction cost incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds and redemption amount is recognised in Statement of Profit and
Loss. General and specific borrowing costs that are directly attributable to the acquisition, construction or production of
an asset, that necessarily takes substantial period of time to get ready for its intended use, are capitalized during the
period of the time that is required to complete and prepare the asset for its intended use.
Borrowing costs consist of interest and other coststhatthe company incurs in connection with the borrowing of funds.
3.11 Employee Benefits
a) Short Term Employee Benefits:
Short Term Employee Benefits are recognized as an expense in the year in which the related service is rendered at the
undi$counted amount in the statement of Profit and I oss. These benefits include salaries, performance incentives, bonus
which are expected to occur in twelve months at end of the period in which the employee renders the related service
b) Post Employeme.nt/ Retirement Benefits:
The Company makes contribution towards Provident Fund and ESICto a defined contribution retirement benefit plan for
qualifying employees. The provident plan is operated is operated partly by Regional Provident Fund Commissioners and
partly by an independent Trust. ESIC by Government agencies. Linder the said schemes the company Is required to
contribute a specefic percentage of pay roll costs In respect of eligible employees to the retirement benefit scheme; to the
fund benefits.
The Contributions payable to these plans by the Company are at the rates specefied in the rules of the Schemes The
company has no obligation, other than the contrbution payable to the respective funds. The company rcconises the
contibutiori payable tot he respective fundsas expenditure, when an employee renders the related service
c) Gratuity
The Company has an obligation towards gratuity, post employment / retirement defined benefit plan covering eligible
employees. The benefit 15 In form of lump sum payments to eligible employees on resignation / retirement or death while
in employment or termination of employment tor an amount equivalent to 15 days of basic salary and dearness allowance
payable for each completed yearof service.
3.12 Segment Reporting
The segment reporting of the Company as prepared in the Notes to Accounts of the Company has been prepared in
accordance with the Accounting Standard 17 "Segment Reporting" issued by the Institute of Chartered Accountants of
India For the purpose of Reporting the Company has Two (2) segments as mentioned below which are considered as
primary segments based on Business undertaken by the Company.
Segment A. Manufacturing ofTaps A CuttingTools
Segment B Production of Power through Windmill
Income and direct expense aloocabie to the segment are classified based on items that are individually identifiable to that
segment. The reminder isconsiderd as un-aflocable expense and charged against the total income.
3.13 Foreign Currency Transactions
The Financial Statements of the company are presented in Indian Rupees, the function currency of the company.
Transactions in Foreign currency are recorded at the exchange rate prevailing on the date of the transaction. Exchange
differences ate recognised In the statement of Profit and Loss forming part of the financial statements of the company.
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