1.1 Basis of preparation
The financial statements have been prepared in accordance with Indian Accounting
Standards (Ind AS) notified under the Section 133 of the Companies Act, 2013 read with
the Companies (Indian Accounting Standards) Rules 2015 and other relevant provisions
of the Companies Act, 2013. The financial statements are prepared under historical cost
convention except for certain financial instruments that are measured at fair values at
the end of each reporting period, as explained in the accounting policies below, in
accordance with the Generally Accepted Accounting Principles in India and comply in all
material respects with the accounting standards specified under the section 133 of the
Act. All the assets and liabilities have been classified as current or non-current as per the
Company’s normal operating cycle. Based on the nature of the products and the time
between the acquisition of assets for processing and their realization in cash and cash
equivalents, the Company has ascertained its operating cycle as 12 months for the
purpose of current / noncurrent classification of assets and liabilities.
2.2 Use of estimates:
The preparation of the financial statements in conformity with accounting principles
generally accepted in India requires the management to make judgment’s, estimates and
assumptions that effect the reported amount of assets and liabilities as of the Balance
Sheet date, reported amount of revenues and expenses for the year and disclosure of
contingent liabilities as of the Balance Sheet date. These estimates and associated
assumptions are based on historical experience and other factors that are considered to
be relevant. Actual results may differ from these estimates. Although these estimates are
based on the management’s best knowledge of current events and actions, uncertainty
about the assumptions and estimates may result in outcomes requiring a material
adjustment to the carrying amount of assets or liabilities in future periods.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting Estimates are recognized in the period in which the estimate is revised if
the revision affects only that period, or in the period of the revision and future periods if
the revision affects both current and future periods.
2.3 Property, Plant and Equipment (PPE)
Property, Plant and Equipment are stated at cost less accumulated depreciation and
impairment in value, if any. Cost includes purchase price, (inclusive of import duties and non
— refundable purchase taxes, after deducting trade discounts and rebates) other costs
directly attributable to bring the asset to the location and condition necessary for it to be
capable of operating in the manner intended by management and an initial estimate of
the costs of dismantling, removing the item and restoring the site on which it is located, if
any. If the Company has acquired a Property, Plant and Equipment on deferred term
basis and terms are beyond normal credit terms, property plant and equipment will be
recognized on cash price equivalent, i.e. discounted amount. The cost of Assets not ready for
use as at the Balance Sheet date is disclosed under Capital Work-In-Progress. The cost of
replacement spares/ major inspection relating to property, plant and equipment is
capitalized only when it is probable that future economic benefits associated with these
will flow to the company and the cost of the item can be measured reliably. 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.
Depreciation:
Depreciation on Property, Plant and Equipment (Tangible assets) is generally computed
on a pro- rata basis on the basis of the estimated life specified in Schedule II of the
Companies Act, 2013 under Straight line method. The useful life of assets prescribed in
Schedule II to the Companies Act, 2013 are considered for the purpose of Computation of
Depreciation. However, If the management’s estimate of the useful life of a fixed asset at
the time of acquisition of the asset or of the remaining useful life on an annual review is
different from that envisaged in the aforesaid schedule, depreciation is provided at a
such rate based on the useful life / remaining useful life as technically advised.
Accordingly, depreciation is provided based on the useful life indicated below which is
different from that stated in Schedule II to the Companies Act, 2013.
Depreciation charge on additions / deletions is restricted to the period of use.
Depreciation methods, useful lives and residual values are reviewed annually.
2.4 Impairment
Assessment is done annually as to whether there is any indication that an asset (tangible
and intangible) may be impaired. 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 asset / cash generating unit is made. Assets whose carrying
value exceeds their recoverable amount are written down to the recoverable amount.
Recoverable amounts higher of an asset’s or cash generating unit’s fair value less cost to
sell and its value in use. Value in use is the present value of estimated future cash flows
expected to arise from the continuing use of an asset and from its disposal at the end of
its useful life. Assessment is also done at each Balance Sheet date as to whether there is
any indication that an impairment loss recognized for an asset in prior accounting
periods may no longer exist or may have decreased. In such cases, impairment losses are
reversed to the extent the assets carrying amount does not exceed, the carrying amount
that would have been determined if no impairment loss had previously been
recognized
2.5 Borrowing Cost
Borrowing costs that are attributable to the acquisition / construction / production of
qualifying assets (assets which require substantial period of time to get ready for its
intended use) are capitalized as part of the cost of that asset. All other borrowing costs
are charged to revenue.
Inventories are stated at lower of weighted average cost and net realizable value. Cost of
inventories comprises of purchase cost, cost of conversion and other cost including
manufacturing overheads incurred in bringing the inventory to present location and
condition. Net realizable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and the estimated costs necessary to
make the sale.
2.7 Foreign Currency Transaction
Initial Recognition
On initial recognition, all foreign currency transactions are recorded by applying to the
foreign currency amount the exchange rate between the Functional currency and the
foreign currency at the date of the transaction.
Subsequent Recognition
As at the reporting date, non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate at the date of the
transaction. All non-monetary items which are carried at fair value or other similar
valuation denominated in a foreign currency are reported using the exchange rates
that existed when the values were determined. All monetary assets and liabilities in
foreign currency are reinstated at the end of accounting period. Exchange differences on
reinstatement of all monetary items are recognized in the Statement of Profit and Loss.
Derivative Financial instruments and Hedge Accounting
The Company is exposed to foreign currency risk arising out of foreign currency revenue,
receivables, cash balances, forecasted cash flows, payables and foreign currency loans.
The Company has a detailed foreign currency risk mitigation policy in place, including
the use of derivatives like the forward currency contracts/ options contracts to hedge
forecasted cash flows denominate in foreign currency. The objective of the same is to
mitigate the impact of foreign currency exchange fluctuations caused by transacting in
foreign currency in case of future cash flows or highly probable forecast transactions.
The Company enters into various foreign currency derivative contracts with Banks in the
form of Forward currency contracts (“hedging instrument) and recognize the financial
assets / liabilities (“hedged item’) through formal documentation of the hedging
relationship in line with the Company’s foreign currency risk management policy.
The effective portion of changes in the fair value of derivatives that are designated and
qualify as cash flow hedges is recognized in other comprehensive income and
accumulated under the heading of cash flow hedging reserve. The gain or loss relating to
the ineffective portion is recognized immediately in profit or loss. Amounts previously
recognized in other comprehensive income and accumulated in equity relating to effective
portion as described above, are reclassified to profit or loss in the periods when the
hedged item affects profit or loss, in the same line as the recognized hedged item. Hedge
accounting is discontinued when the hedging instrument expires or is sold, terminated, or
exercised, or no longer qualifies for hedge accounting.
2.8 Revenue Recognition
Revenue is recognized upon transfer of control of promised products or services to
customers in an amount that reflects the probable consideration expected to be received
in exchange for those products or services. Revenue is reduced for estimated customer
returns, rebates and other similar allowances.
The Company accounts for volume discounts and pricing incentives to customers as a
reduction of revenue based on the rate-able allocation of the discounts/ incentives to
each of the underlying performance obligation that corresponds to the progress by the
customer towards earning the discount/ incentive. Also, when the level of
discount/pricing incentives varies with increases in levels of revenue transactions, the
company recognizes the liability based on its estimate of the customer’s future
purchases. If it is probable that the criteria for the discount will not be met, or if the
amount thereof cannot be estimated reliably, then discount/pricing incentives is not
recognized until the payment is probable and the amount can be estimated reliably. The
company recognizes changes in the estimated amount of obligations for
discounts/pricing incentives in the period in which the change occurs.
2.9 Employee Benefits
1. Short - Term employee benefits
All employee benefits payable wholly within twelve months of rendering the service are
classified as short-term employee benefits and recognized in the period in which the
employee renders the related service.
2. Defined Contribution Plans Provident Fund
Contribution towards provident fund for employees is made to the regulatory authorities,
where the Company has no further obligations. Such benefits are classified as Defined
Contribution Schemes as the Company does not carry any further obligations, apart from
the contributions made on a monthly basis.
3. Defined Benefit Plan
Gratuity
Ind AS 19 stipulates Company to compute its liability towards future payments of
gratuity to employees, on actuarial valuation basis which is determined based on project
unit credit method. However the company is accounting for the same as an expense as
they fall due for payment.
Compensated Absences
As per the Company’s policy, employees who are eligible to encash compensated absence
should exercise the same every year; if not the same gets lapsed and cannot be carried
forward to next year. The company does not have any compensated absences, which are
expected to be availed or encashed beyond 12 months from the end of the year end,
hence compensated absences are classified as short term employee benefits.
2.10 Taxes on Income
Tax expense for the period, comprising current tax and deferred tax, are included in the
determination of the net profit or loss for the period. Current tax is measured at the
amount expected to be paid to the tax authorities in accordance with the relevant
prevailing tax laws. Tax expenses relating to the items in profit and loss shall be treated
as current tax as part of profit and loss and those relating to items in other
comprehensive income (OCI) shall be recognized as part of OCI.
Deferred tax is recognized for all the temporary differences between the carrying amounts
of assets and liabilities in the financial statements and corresponding tax bases used in
computation of taxable profit. Deferred tax assets are recognized and carried forward
only to the extent that it is probable that taxable profit will be available against which
those deductible temporary differences can be utilized. Deferred tax assets and liabilities
are measured using the tax rates and tax laws that have been enacted or substantively
enacted by the Balance Sheet date. At each Balance Sheet date, the Company re¬
assesses unrecognized deferred tax assets, if any and the same is recognized to the
extent it has become probable that future taxable profit will allow the deferred tax asset
Current tax assets and current tax liabilities are offset when there is a legally enforceable
right to set off the recognized amounts and there is an intention to settle the asset and
the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when
there is a legally enforceable right to set off assets against liabilities representing current
tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on
income levied by the same governing taxation law.
Minimum Alternate Tax (MAT) credit is recognized as an asset only when and to the
extent there is convincing evidence that the company will pay normal income tax during
the specified period. Such asset is reviewed at each Balance Sheet date and the carrying
amount of the MAT credit asset is written down to the extent there is no longer a
convincing evidence to the effect that the Company will pay normal income tax during
the specified period. MAT shall be treated as part of deferred tax assets.
2.11 Financial instruments
Initial recognition
The company recognizes financial assets and financial liabilities when it becomes a party
to the contractual provisions of the instruments. All financial assets and liabilities are
recognized at fair value on initial recognition. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities that are
not at fair value through profit or loss, are added to the fair value on initial recognition.
Subsequent measurement
i. Financial assets carried at amortized cost
A financial asset is subsequently measured at amortized 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.
ii. Financial assets at fair value through profit or loss A financial asset which is not
classified in the above category is subsequently fair valued through profit or loss.
iii. Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest
method for trade and other payables maturing within one year from the Balance Sheet
date, the carrying amounts approximate fair value due to the short maturity of these
instruments DE recognition 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 DE recognition
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.
Impairment
All financial assets classified as at amortized cost shall be tested for impairment under
Ind AS 109 and measured using Expected Credit Loss (ECL) model.”
2.12 Fair Value
The Company measures financial instruments at fair value in accordance with the
accounting policies mentioned above. 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. All assets and liabilities for which fair value is
measured or disclosed in the financial statements are categorized within the fair value
hierarchy that categorizes into three levels, described as follows, the inputs to valuation
techniques used to measure value. The fair value hierarchy gives the highest priority to
quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the
lowest priority to unobservable inputs
Level 1 — quoted (unadjusted) market prices in active markets for identical assets
or liabilities
Level 2-inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly
Level 3 — inputs that are unobservable for the asset or liability
2.13 Government Grants
Grants from the government are recognized at their fair value where there is a reasonable
assurance that the grant will be received and the company will comply with all attached
conditions. All government grants are initially recognized by way of setting up as deferred
income. Government grants relating to income are subsequently recognized in the profit
or loss over the period necessary to match them with the costs that they are intended to
compensate. Government grants relating to the purchase of property plant and
equipment are subsequently recognized in profit or loss on a systematic basis over the
expected life of the related depreciable assets. Grants recognized in Profit and Loss as
above are presented within other income.
2.14 Research & Development Expenditure
Expenditure on research is recognized as an expense when it is incurred. Expenditure on
development which does not meet the criteria for recognition as an intangible asset is
recognized as an expense when it is incurred Items of property, plant and equipment and
acquired Intangible assets utilized for Research and Development are capitalized and
depreciated in accordance with the policies stated for property, plant and equipment
and intangible assets.
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