2. Significant accounting policies
2.1 Basis of preparation
The Standalone fmancial statements ("financial statements") have been prepared to comply m all
material aspects with the Indian Accounting Standard (Ind AS) notified under section 133 of the
Companies Act, 2013, read together with Rule 3 of the Companies (Indian Accounting
Standards) Rules, 2015 and as amended by the Ministry of Corporate Affairs (’MCA ) from tune
to tune.
The financial statements have been prepared under historical cost convention on accrual and
going concern basis, except for the certain fmancial instruments which have been measured at
fair value as required by relevant Ind ASs.
Accounting policies have been consistently applied except where a newly issued accounting
standard is initially adopted or a revision to an existing accounting standard requires a change in
the accoimtmg policy hitherto m use.
All the amounts included in the financial statements are reported m Crores of Indian Rupees, and
are rounded to the nearest Crores except per share data and unless stated otherwise.
The Fmancial statements have been prepared m accordance with Indian Accounting Standards to
the extent possible and requirements of all Ind AS have not been complied with m totality.
2.2 Use of Estimates & Basis of Measurement
IND AS enjoins management to make estimates and assumptions related to financial statements
that affect reported amount of assets, liabilities, revenue, expenses and contingent liabilities
pertaining to the year. Actual result may differ from such estmiates. Any revision m accoimtmg
estimates is recognized prospectively in the period of change and material revision, including its
impact on financial statements, is reported in the notes to accounts in the year of incorporation of
revision.
The financial statements have been prepared under the historical cost convention on the accrual
basis, except for certain financial instruments and provisions which are measured at fair value at
the end of each reporting period, as explamed in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for
goods and services.
2.3 Recognition of Income and Expenses
Revenue is measured at the fair value of the consideration received or receivable, taking mto
account the contractually defined terms of payment net of returns and allowances, trade
discounts, volume rebates and taxes or duties collected on behalf of thegovemment
Revenue towards satisfaction of performance obligation is measured at the amount of transaction
price (re net of variable consideration) allocated to the performance obhgation. The transaction
price of goods sold and services rendered is net of variable consideration on account of various
discounts/schemes, damages incurred offered by die company as a part of contract
Company recognizes revenue from sale of goods when significant risks and rewards of
ownership in the goods are transferred to the buyer as per the terms of the contract, which
coincides with the delivery ofgoods.
Interest Income from debt instruments is recognized using the effective interest rate (EIR). EIR is
the rate that exactly discounts the estmiated future cash flows over the expected hfe of financial
instrument, to the gross carrying amount of the financial assets or to the amortized cost of the
financialliability.
Dividend mcome is recognized when the Company’s right to receive payment is estabhshed on
or before the Balance Sheet date (Provided that it is probable that the economic benefit will flow
to the Company).
Export sales are accounted on the basis of date of bill of ladmg.
Interest mcome on investment m fixed deposit is recognized on time proportion basis at the
contractual rate.
Otlier incomes have been recognized on accrual basis m financial statements except for cash flow
information.
2.4 Property, Plant and Equipment
An item of Property . Plant and Equipment (PPE) is recognized as an asset, if and only' if. it is
probable that the future economic benefits associated with the item will flow to the Company and
its cost can be measured reliably. PPE are initially recognized at cost. The mitial cost of PPE
comprises its purchase price (including non-refundable duties and taxes but excludmg any trade
discounts and rebates), and any directly attributable cost of bringing the asset to its working
condition and location for its mtended use.
Subsequent to initial recognition. PPE are stated at cost less accumulated depreciation and any
impairment losses. When significant parts of property, plant and equipment are required to be
replaced in regular intervals, the Company recognizes such parts as separate component of assets.
When an item of PPE is replaced, then its cany mg amount is de-recognized from the balance
sheet and cost of the new item of PPE is recognized. Further, in case the replaced part was not
being depreciated separately, the cost of the replacement is used as an indication to determine the
cost of the replaced part at the tune it was acquired.
The expenditures that are incurred after the item of PPE has been put to use, such as repairs and
maintenance, are normally charged to the statement of profit and loss m the period in which such
costs are mcurred
PPE / intangible assets are depreciated amortised over then estmiated useful lives, after taking
mto account estimated residual value Management reviews the estimated useful lives and
residual values of the assets annually m order to determine the amount of depreciation to be
recorded during any reporting period. The useful lives and residual values are based on the
Company’s historical experience with similar assets and take mto account anticipated
technological changes The depreciation /amortisation for future periods are revised if there are
significant changes from previous estimates
Any gam or loss on disposal /impairment of an item of property, plant and equipment is
recognised in Statement of profit and loss.
Depreciation is provided on straight lme method, at the rates determined based on the economic
useful lives of assets estmiated by the management: or at the rates prescribed under Schedule II
of the Companies Act, 2013, whichever is higher. Accordingly, the Company has used the
followmgrates:-
Assets of Rs. 5.000 or less are fully depreciated in the year of purchase
2.5 Investment Property
Property that is held for long-term rental yields or for capital appreciation or both, and that is not
occupied by the Company, is classified as Investment Property. Investment Property is measured
initially at its cost, including transaction costs and where applicable borrowing costs. Subsequent
expenditure is capitalized to the asset's carrying amount only when it is probable that future
economic benefits associated with the expenditure will flow' to the Company and the cost of the
item can be measured reliably. All other repairs and mamtenance costs are expensed when
incurred When part of an investment property is replaced, the carrymg amount of the replaced
part is derecognized. Investment Properties (except freehold land) are depreciated usmg the
straight-line method over their estimated useful lives.
2.6 Intangible Assets
Intangible Assets with finite useful lives acquired by the Company are measured at cost less
accumulated amortization and accumulated impairment losses. Amortization is charged on a
straight-line basis over the estimated useful lives The estimated useful life and amortization
method are reviewed at the end of each annual reporting period, with the effect of any changes in
the estimate being accounted for on a prospective basis. On transition to hid AS. the Company
has elected to continue with the carrying value of all of intangible assets recognized as at April
01, 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of
intangiblea ssets.
Gains or losses arising from derecognition of an intangible asset are measured as the difference
between the net disposal proceeds and the c any mg amount of the asset and are recognized
m the statement of profit and loss when the asset is derecognized.
2.7 Goodwill
No self-generated goodwill is recognized. Goodwill arises during the course of acquisition of an
entity in terms of accounting treatment provided in IND AS-103 dealmg with Business
Combination’. Goodwill represents the excess of consideration money over the fair value of net
assets of the entity under acquisition. Such goodwill is construed to have indefinite life and as
such is not subject to annual amortization but annual test of impairment under END AS - 36. Any
shortfall in consideration money vis-a-vis fair value of net assets on account of bargain purchase
is recognized m OCI at acquisition point and subsequently' transferred to capital reserve-
2.8 Impairment of Non- Financial Assets
Intangible assets that have an indefinite useful life are not subject to amortization and are tested
annually for impairment or more frequently if events or changes m circumstances indicate that
they might be impaired. Other assets are tested for impairment whenever events or changes in
circumstances indicate that the earning amount may' not be recoverable. An impairment loss is
recognized for the amount by which the asset's carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value less costs of disposal and value m
use. For the purposes of assessmg impairment, assets are grouped at the lowest levels for which
there are separately' identifiable cash inflows which are largely independent of the cash inflows
from other assets or groups of assets (cash-generating units). Non-fmancial assets that suffered
impairment are reviewed for possible reversal of the impairment at the end of each reporting
period.
An asset is considered as unpaired when at the date of Balance Sheet, there are indications of
unpainnent and the carry'ing amount of the asset, or where applicable, the cash generating unit to
which the asset belongs, exceeds its recoverable amount (i.e. the higher of the net asset selling
price and value in use) .The carry'ing amount is reduced to the recoverable amount and the
reduction is recognized as an impairment loss in the statement of profit and loss. The impairment
loss recognized in the prior accounting period is reversed if there has been a change in the
estimate of recoverable amount. Post impairment, depreciation is provided on the revised
carrying value of the unpaired asset oyrer its remaining useful life.
2.9 Government -Subsidy /Grant
Government Grant is recognized only when there is a reasonable assurance that the entity' will
comply with the conditions attachmg to them and the grants will be received.
a) Subsidy' related to assets is recognized as deferred mcome which is recognized m the
statement of profit & loss on systematic basis over the useful life of the assets Purchase of
assets and receipts of related grants are separately disclosed in statement of cashflow.
b) Grants related to income are treated as other income m statement of profit & loss subject
to due disclosure about the nature ofgrant
2.10 Financial Instrument
a) Financial Assets
Initial Recognition and Measurement
All financial assets are recognized initially at fair value plus, in the case of financial assets
not recorded at fair value through profit or loss, transaction costs that are attributable to the
acquisition of the financial asset
Financial assets are classified, at initial recognition, as financial assets measured at fan-
value or as financial assets measured at amortized cost.
Subsequent Measurement
For purpose of subsequent measurement financial assets are classified m two broad
categones:-
l Fmancial Assets at fair value
it Financial assets at amortized cost
Where assets are measured at fair value, gams and losses are either recognized entirely in
the statement of profit and loss, or recognized in other comprehensive mcome. A financial
asset that meets the following two conditions is measured at amortized cost.
l. Business Model Test: The objective of the company's business model is to hold the
financial asset to collect the contractual cashflows.
u. Cash flow characteristics test: The contractual terms of the financial asset give rise
on specified dates to cash flows that are solely payment of principal and mterest on
the principal amountoutstanding
A financial asset that meets the following two conditions is measured at fair value through
OCI:-
l Business Model Test: The financial asset is held within a busmess model w'liose
objective is achieved by both collecting contractual cash flows and selling financial
assets.
il Cash flow characteristics test: The contractual terms of die financial asset give rise
on specified dates to cash flow's that are solely payment of prmcipal and mterest on
the prmcipal amount outstanding.
All odier financial assets are measured at fair value through profit and loss.
All equity investments are measured at fair value in the balance sheet, with value changes
recognized in the statement of profit and loss, except for those equity investments for
which the entity has elected irrevocable option to present value changes m OCI.
Investment in Associates, Joint Venture and Subsidiaries
The company has accounted for its investment in subsidiaries, associates and joint venture at
cost.
Impairment
The Company assesses on a forward lookmg basis the expected credit losses associated with
its assets earned at amortized cost and debt lnstniment earned at FVTOCI. The impairment
methodology applied depends on whether there has been a significant increase in credit risk
smee initial recognition. If credit risk has not mcreased significantly, twelve month ECL is
used to provide for impairment loss, otherwise lifetime ECL is used.
However, only in case of trade receivables, the Company applies the simplified approach
which requires expected lifetime losses to be recognized from initial recognition of the
receivables
b) Financial Liabilities
All financial liabilities are initially recognized at fair value and. in the case of loans and
borrowings and payables, net of directly attributable transaction costs.
Fmancial liabilities are classified as measured at amortized cost or fair value through profit
and loss (FVTPL). A financial liability is classified as FVTPL if it is classified as held for
tradmg. or it is a derivative or is designated as such on initial recognition. Fmancial Liabilities
at FVTPL are measured at fair value and net gain or losses, including any interest expense,
are recognized m statement of profit and loss. Other financial liabilities are subsequently
measured at amortized cost using the effectiv e interest method. Interest expense and foreign
exchange gams and losses are recognised m statement of profit and loss. Any gam or loss on
de-recogmtion is also recognized in statement of profit andloss.
2.11 Fair Value Measurement
The Company measures certain fmancial instruments at fair value at each Balance Sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability m an
orderly transaction between market participants at the measurement date. The fair value
measurement is based on the presumption that the transacuon to sell the asset or transfer the
liability takes placeeither:
i. In the principal market for the asset or liability, or
11 In the absence of a principal market, m 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 usmg the assumptions that market participants would
use when pnemg 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 usmg the asset m its highest and best use or by selling it
The Company uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable
inputs and minimizing the use of unobservable inputs
All assets and liabilities for which fair value is measured or disclosed in the financial statements
are categorised within the fair value hierarchy, described as follows, based on the lowest level
input that is significant to the fair value measurement as a whole:
Level 1: Quoted (unadjusted) prices for identical assets or Labilities in active markets
Level 2: Significant inputs to the fair value measurement are directly or indirectly observable
Level 3: Significant inputs to the fair value measurement are unobservable
For assets and Labilities that are recognised in the financial statements on a recurring basis, the
Company determines whether transfers have occurred between levels m the hierarchy by re¬
assessing categorization (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 &
liabilities on the basis of the nature, characteristics and the risks of the asset or liability and the
level of the fair value hierarchy as explained above.
2.12 Lease assets
The determination of whether an arrangement is a lease ls based on whether fulfillment of the
arrangement is dependent on the use of a specific asset and the arrangement conveys a right to
use the asset, even if that right is not explicitly specified m anaiTangement.
Leases where the lessor transfers substantially all the risks and rewards of ownership of the
leased asset are classified as finance lease and other leases are classified as operatmglease.
Operating lease receipts / payments are recognized as an mcome / expense on a straight-line basis
over the lease term.
Contmgent rents are recognized as mcome / expense m the period m which they are earned.''
incurred.
2.13 Inventory
a) Basis of valuation
Inventories are valued at lower of cost and net realizable value after providing cost of
obsolescence, if any. However, materials and other items held for use m the production of
inventories are not written down below cost if the fimshed products m which they will be
incorporated are expected to be sold at or above cost. The comparison of cost and net
realizable value is made on an item-by'-item basis.
b) Method of valuation
Raw materials and consumables has been determined by using FIFO cost method and
comprises all cost of purchase, freight costs, customs duty (wherever paid) taxes (other than
those subsequently recoverable from Tax Authorities) and all other cost incurred m bringing
the inventory to their present location and condition. The cost is determined usmg the FIFO
metod.
Work in progress include direct and mdirect materials, direct and indirect labour and other
manufacturing overheads incurred in bringing them to their respective present location and
condition.
Finished goods mcludes direct and mdirect materials, direct and indirect labour and other
manufacturing overheads incurred in bnngmg them to their respective present location and
condition. Cost is determined on moving cost basis.
2.14 Employee benefits
The Company’s employee benefits mainly mclude wages, salaries, bonuses, contribution to
plans, defined benefit plans, compensated absences, deferred compensation and share-based
payments The employee benefits are recognized in the year in which the associated services are
rendered by the Company employees.
Defined contribution plans
The contributions to defined contribution plans are recognized m profit or loss as and when the
services are rendered by employees. The Company has no further obligations under these plans
beyond its periodic contributions.
Provident Fund and Employees’ State Insurance Schemes
All employees of the Company are entitled to receive benefits under the Provident Fund, which
is a defined contribution plan. Both the employee and the employer make monthly contributions
to the plan at a predetermined rate (presently 12%) of the employees' basic salary The
contributions are made to the fund administered and managed by the Government of India, hi
addition, some employees of the Company are covered under the employees' state insurance
schemes, which are also defined contribution schemes recognized and administered by the
Government of India
Defined benefit plans
In accordance with the local laws and regulations, all the employees m India are entitled for the
Gratuity plan. The said plan requires a lump-sum payment to eligible employees (meetmg the
required vesting service condition) at retirement or termination of employment, based on a pre¬
defined formula.
The Company provides for the liability towards the said plans on the basis of actuarial valuation
earned out quarterly as at the reporting date, by an independent qualified actuary using the
projected-umt-credit method.
The obhgation towards the said benefits is recognized in the balance sheet, at the present value
of the defined benefit obligations less the fair value of plan assets (bemg the funded portion).
The present value of the said obligation is determined by discounting the estmiated future cash
outflows, usmg interest rates of govemmentbonds.
The interest income / (expense) are calculated by applying the above mentioned discount rate to
the plan assets and defined benefit obligations liability. The net interest income / (expense) on
the net defined benefit liability is recognized m the statement of profit and loss. However, the
related re-measurements of the net defined benefit liability are recognized directly in the other
comprehensive mcome m the period m which they arise. The said re-measurements comprise of
actuarial gams and losses (arising from experience adjustments and changes m actuarial
assumptions), the return on plan assets (excluding mterest). Re-measurements are not re¬
classified to the statement of profit and loss in any of the subsequent periods.
Other long-term employee benefits
The employees of die Company are entitled to compensated absences as well as odier long-term
benefits. Compensated absences benefit comprises of encashment and availment of leave
balances diat were earned by the employees over die period of past employment.
The Company provides for the liability towards the said benefit on the basis of actuarial
valuation carried out quarterly as at the reportmg date, by an mdependent qualified actuary usmg
the projected-unit-credit method. The related re-measurements are recognized in the statement
of profit and loss in the period m which they arise
2.15 Tax Expenses
Income Tax expense comprises of current tax and deferred tax charge or credit. Provision for
current tax is made with reference to taxable mcome computed for the financial year for which
the financial statements are prepared by applying the tax rates asapplicable.
Current Tax
The current tax is calculated on the basis of the tax rates, laws and regulations, which have been
enacted or substantively enacted as at the reportmg date in die respective countries where the
Company operates and generate taxable mcome. The payment made m excess / (shortfall) of the
respective Company's mcome tax obhgation for the period are recognized m the Balance Sheet
as current mcome tax assets /liabilities.
Deferred Tax
Deferred tax is provided usmg the Balance Sheet approach on temporary differences at the
reportmg date between the tax bases of assets and liabilities and their earning amounts for
financial reportmg purpose at reportmg date. Deferred mcome tax assets and liabilities are
measured usmg tax rates and tax laws that have been enacted or substantively enacted by the
Balance Sheet date and are expected to apply to taxable mcome in the years in which those
temporary differences are expected to be recovered or settled.
The carrying amount of deferred tax assets is reviewed at each reportmg date and reduced to the
extent that it is no longer probable that sufficient taxable profit will be available to allow all or
part of the deferred tax asset to be utilized.
Unrecognized deferred tax assets are re-assessed at each reportmg date and are recognized to the
extent that it has become probable that future taxable profits will allow the deferred tax asset to
berecovered.
Current and deferred tax is recognized m statement of profit or loss, except to the extent that it
relates to items recognized in other comprehensive mcome or directly m equity'. In this case, the
tax is also recognized m other comprehensive income or directly in equity, respectively.
Minimum Alternate Tax
Minimum Alternate Tax credit is recognized as an asset only when and to the extent there is
convincing evidence that the Company will pay normal mcome 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 mcome tax during the specified period.
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