2.2 Material accounting policies

2.2.1 Property, plant and equipment
Recognition and measurement

Items of property, plant and equipment are measured at
cost, which includes capitalised borrowing costs, less
accumulated depreciation and accumulated impairment
losses, if any. Cost of an item of property, plant and
equipment comprises its purchase price, including import
duties and non-refundable purchase taxes, after deducting
trade discounts and rebates, any directly attributable cost
of bringing the item to its working condition for its intended
use and estimated costs of dismantling and removing the
item and restoring the site on which it is located.

If significant parts of an item of property, plant and
equipment have different useful lives, then they are
accounted for as separate items (major components) of
property, plant and equipment.

Subsequent expenditure is capitalised only if it is
probable that the future economic benefits associated
with the expenditure will flow to the Company.

An item of property, plant and equipment is derecognised
upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset.
The gain or loss arising on the disposal or retirement of
an asset is determined as the difference between net
disposal proceeds and carrying amount of the asset and
recognised in statement of profit and loss.

The cost of property, plant and equipment not ready
for their intended use is recorded as capital work-in¬
progress before such date. Cost of construction that
relate directly to specific property, plant and equipment
and that are attributable to construction activity in
general and can be allocated to specific property, plant
and equipment are included in capital work-in-progress.

Depreciation methods, estimated useful lives and
residual value

Depreciation is calculated on cost of items of property,
plant and equipment less their estimated residual values
over their estimated useful lives using the straight-line
method and is generally recognised in the Statement
of Profit and Loss. Depreciation commences when the
asset is ready for their intended use and computed from
the start of the month in which the addition taken place.

Based on technical evaluation and assessment of useful
lives, the estimated useful lives of certain plant and
equipment, furniture and fittings, office equipment and
motor vehicles are lower as compared to the useful lives
as prescribed under Part C of Schedule II to the Act,
which management believes is the representative of
useful lives of these fixed assets. Estimated useful lives
of the assets are as follows:

Freehold land is not depreciated.

Assets residual values and useful lives are reviewed
at each financial year end considering the physical
condition of the assets for review and adjusted residual
life prospectively.

Intangible assets are stated at acquisition cost, net of
accumulated amortisation and accumulated impairment
losses, if any.

Amortization methods, estimated useful lives and
residual value

Intangible assets are amortised on a straight-line basis
over their estimated useful lives which is assumed to
be 3 years. The amortisation period, residual value and
the amortisation method are reviewed at least at each
financial year end. If the expected useful life of the asset
is significantly different from previous estimates, the
amortisation period is changed accordingly.

Gains or losses arising from the retirement or disposal
of an intangible asset are determined as the difference
between the net disposal proceeds and the carrying
amount of the asset and recognised as income or
expense in the Statement of Profit and Loss.

2.2.3 Impairment of assets

Assessment is done at each Balance Sheet date 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 amount is higher
of an asset's or cash generating unit's fair value less
cost of disposal 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 recognised for an asset in prior accounting periods
may no longer exist or may have decreased.

2.2.4 Cash and cash equivalents

Cash and cash equivalent in the balance sheet comprise
cash at banks and on hand and short-term deposits

with an original maturity of three months or less, which
are subject to an insignificant risk of changes in value.
For the purpose of statement of cash flows, cash and
cash equivalents consist of cash and cheque at hand /
remittance in transit and cash and deposit with bank.

2.2.5 Inventories

Inventories comprising raw materials and components,
work-in-progress and finished goods are valued at lower
of cost and net realisable value. The cost of inventories
comprises cost of purchase (net of recoverable taxes
where applicable), cost of conversion and other costs
incurred in bringing the inventories to their respective
present location and condition. Cost of purchased
inventory are determined after deducting rebates and
discounts. The cost of various categories of inventories
is arrived at as follows:

• Raw materials and components - at cost
determined on weighted average cost method
except for Air/ Gas Insulated Switchgears related
raw materials on first in first out basis.

• Work-in-progress and finished goods - based on
weighted average cost of production, including
appropriate proportion of costs of conversion.

• Packing materials, loose tools and consumables,
being immaterial in value terms, and also based on
there being purchased mostly on need basis, are
expensed to the Statement of Profit and Loss at
the point of purchase.

Contracts work-in-progress are valued at cost or net
realisable value, whichever is lower. Cost includes
direct materials, labour and appropriate proportion of
overheads including depreciation.

Net realisable value is the estimated selling price in
the ordinary course of business, less the estimated
costs of completion and estimated costs necessary
to make the sale.

Provisions/write-downs for obsolescence, damaged
and slow-moving inventory are made, wherever
necessary and inventory is stated net of such
provisions/write-downs.

The Company accounts for each lease component
within the contract as a lease separately from non¬
lease components of the contract and allocates the
consideration in the contract to each lease component
on the basis of the relative stand-alone price of the
lease component and the aggregate stand-alone price
of the non-lease components.

The Company recognises right-of-use asset
representing its right to use the underlying asset for
the lease term at the lease commencement date. The
cost of the right-of-use asset measured at inception
shall comprise of the amount of the initial measurement
of the lease liability adjusted for any lease payments
made at or before the commencement date less any
lease incentives received, plus any initial direct costs
incurred and an estimate of costs to be incurred by
the lessee in dismantling and removing the underlying
asset or restoring the underlying asset or site on which
it is located. The right-of-use assets is subsequently
measured at cost less any accumulated depreciation,
accumulated impairment losses, if any and adjusted for
any remeasurement of the lease liability. The right-of-
use assets is depreciated using the straight-line method
from the commencement date over the shorter of lease
term or useful life of right-of-use asset. The estimated
useful lives of right-of-use assets are determined on the
same basis as those of property, plant and equipment.
Right-of-use assets are tested for impairment whenever
there is any indication that their carrying amounts may
not be recoverable. Impairment loss, if any, is recognised
in the statement of profit and loss.

The Company measures the lease liability at the present
value of the lease payments that are not paid at the
commencement date of the lease. The lease payments
are discounted using the interest rate implicit in the
lease, if that rate can be readily determined. If that
rate cannot be readily determined, the Company uses
incremental borrowing rate. For leases with reasonably
similar characteristics, the Company, on a lease-by-lease
basis, may adopt either the incremental borrowing rate
specific to the lease or the incremental borrowing rate for
the portfolio as a whole. The lease payments shall include
fixed payments, variable lease payments, residual value
guarantees, exercise price of a purchase option where
the Company is reasonably certain to exercise that option

and payments of penalties for terminating the lease, if
the lease term reflects the lessee exercising an option
to terminate the lease. The lease liability is subsequently
remeasured by increasing the carrying amount to reflect
interest on the lease liability, reducing the carrying amount
to reflect the lease payments made and remeasuring
the carrying amount to reflect any reassessment or
lease modifications or to reflect revised in-substance
fixed lease payments. The company recognises the
amount of the re-measurement of lease liability due to
modification as an adjustment to the right-of-use asset
in the statement of profit and loss depending upon the
nature of modification. Where the carrying amount of
the right-of-use asset is reduced to zero and there is a
further reduction in the measurement of the lease liability,
the Company recognises any remaining amount of the re¬
measurement in statement of profit and loss.

The Company has elected not to apply the requirements
of Ind AS 116 to short-term leases of all assets that have
a lease term of 12 months or less and leases for which
the underlying asset is of low value. The lease payments
associated with these leases are recognized as an
expense on a straight-line basis over the lease term.

Lease liability and ROU asset have been separately
presented in the Balance Sheet. The principal portion
of the lease payments have been disclosed under cash
flow from financing activities.

2.2.7 Employee benefits

(i) Short-term obligations

Short-term employee benefit obligations are
measured on an undiscounted basis and are
expensed as the related service is provided. A
liability is recognised for the amount expected to
be paid e.g., wages and salaries, short-term cash
bonus, etc, if the Company has a present legal or
constructive obligation to pay this amount as a result
of past service provided by the employee, and the
amount of obligation can be estimated reliably.

(ii) Defined contribution plans

A defined contribution plan is a post-employment
benefit plan under which an entity pays fixed
contributions into a separate entity and will
have no legal or constructive obligation to pay
further amounts.

Provident Fund: The Company makes specified
monthly contributions towards Government
administered provident fund scheme in respect of
certain employees. Obligations for contributions
to defined contribution plans are recognised as
an employee benefit expense in profit or loss in
the periods during which the related services are
rendered by employees.

Superannuation Fund: Contributions are made
to a scheme administered by the Life Insurance
Corporation of India to discharge superannuating
liabilities to the employees, a defined contribution
plan, and the same is expensed to the Statement
of Profit and Loss. The Company has no liability
other than its annual contribution.

(iii) Defined benefit plans

A defined benefit plan is a post-employment
benefit plan other than a defined contribution plan.
The Company's net obligation in respect of defined
benefit plans is calculated separately for each plan
by estimating the amount of future benefit that
employees have earned in the current and prior
periods, discounting that amount and deducting
the fair value of any plan assets.

The calculation of defined benefit obligation is
performed annually by a qualified actuary using the
projected unit credit method. When the calculation
results in a potential asset for the Company, the
recognised asset is limited to the present value
of economic benefits available in the form of any
future refunds from the plan or reductions in future
contributions to the plan ('the asset ceiling'). In
order to calculate the present value of economic
benefits, consideration is given to any minimum
funding requirements.

Remeasurements of the net defined benefit
liability, which comprise actuarial gains and losses,
the return on plan assets (excluding interest) and
the effect of the asset ceiling (if any, excluding
interest), are recognised in other comprehensive
income (OCI). The Company determines the net
interest expense / (income) on the net defined
benefit liability / (asset) for the period by applying
the discount rate used to measure the defined
benefit obligation at the beginning of the annual

period to the then-net defined benefit liability /
(asset), taking into account any changes in the net
defined benefit liability / (asset) during the period
as a result of contributions and benefit payments.
Net interest expense and other expenses related
to defined benefit plans are recognised in
profit or loss.

Gratuity: The Company funds gratuity benefits for
its employees within the limits prescribed under
The Payment of Gratuity Act through contributions
to a Scheme administered by the Life Insurance
Corporation of India ('LIC').

In case of managerial employees, in addition to
the ceiling defined under the Gratuity Act, certain
additional amounts are paid depending upon the
period served. This additional gratuity liability
is also determined on the basis of its actuarial
valuation based on the projected unit credit
method as on the Balance Sheet date, changes
in actuarial assumptions are charged or credited
to other comprehensive income in the period in
which they arise. Such liability is not funded.

Provident fund: In respect of certain employees,
Provident Fund contributions are made to a
Trust administered by the Company, which is a
defined benefit plan.

(iv) Other long-term employee benefits

The Company's net obligation in respect of
long-term employee benefits other than post¬
employment benefits is the amount of future
benefit that employees have earned in return for
their service in the current and prior periods; that
benefit is discounted to determine its present
value, and the fair value of any related assets is
deducted. The obligation is measured on the basis
of an annual independent actuarial valuation using
the projected unit credit method. Remeasurements
gains or losses are recognised in profit or loss in
the period in which they arise.

Long term compensated absences: Long term
compensated absences are provided for on the
basis of its actuarial valuation as per the projected
unit credit method as on the Balance Sheet date.

(v) Share based compensation

The Company recognizes compensation expense
relating to share-based payments in net profit
using fair-value in accordance with Ind AS 102,
Share-Based Payment. The estimated fair value
of awards is charged to income on a graded
vesting basis over the requisite service period
for each separately vesting portion of the award
with a corresponding increase to share options
outstanding account (ESOP Payable) in the case of
cash-settled share based compensation.

2.2.8 Non-current assets (or disposal groups) held for sale

Non-current assets, or disposal groups comprising
assets and liabilities are classified as held for sale, if their
carrying amount will be recovered principally through a
sale transaction rather than through continuing use and
a sale is considered highly probable.

These are measured at the lower of their carrying amount
and fair value less costs to sell, except for assets such
as deferred tax assets, assets arising from employee
benefits, financial assets, which are specifically exempt
from this requirement. Losses on initial classification as
held for sale and subsequent gains and losses on re¬
measurement are recognised in profit or loss.

Once classified as held-for-sale, intangible assets and
property, plant and equipment are no longer amortised
or depreciated.

2.2.9 Foreign currency

Foreign currency transactions
Initial recognition and settlement

Foreign currency transactions are translated into the
functional currency using the exchange rates at the
dates of the transactions or an average rate if the
average rate approximates the actual rate at the date
of the transaction. Foreign exchange gains and losses
resulting from the settlement of such transactions are
generally recognised in profit or loss.

Subsequent recognition

Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at

the exchange rate at the reporting date. Non-monetary
assets and liabilities that are measured at fair value in
a foreign currency are translated into the functional
currency at the exchange rate when the fair value
was determined. Non-monetary assets and liabilities
that are measured based on historical cost in a foreign
currency are translated at the exchange rate at the date
of the transaction.

2.2.10 Financial instruments

(i) Recognition and initial measurement

A financial instrument is any contract that gives
rise to a financial asset of one entity and a
financial liability or equity instrument of another
entity. A financial asset or financial liability is
initially measured at fair value plus, for an item
not at fair value through profit and loss (FVTPL),
transaction costs that are directly attributable to
its acquisition or issue.

Trade receivables are initially recognised when
they are originated. All other financial assets and
financial liabilities are initially recognised when
the Company becomes a party to the contractual
provisions of the instrument.

(ii) Classification and subsequent measurement
Financial assets

The Company classifies its financial assets in the
following measurement categories:

• those to be measured subsequently at fair
value (either through other comprehensive
income, or through profit or loss), and

• those measured at amortised cost.

Financial assets are not reclassified subsequent to
their initial recognition, except if and in the period
the Company changes its business model for
managing financial assets.

A financial asset is measured at amortised cost if
it meets both of the following conditions and is not
designated as at FVTPL:

• the asset is held within a business model
whose objective is to hold assets 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.

On initial recognition of an equity investment
that is not held for trading, the Company may
irrevocably elect to present subsequent changes
in the investment's fair value in OCI (designated as
FVOCI - equity investment). This election is made
on an investment- by- investment basis.

All financial assets not classified as measured at
amortised cost or FVOCI as described above are
measured at FVTPL. This includes all derivative
financial assets. On initial recognition, the Company
may irrevocably designate a financial asset that
otherwise meets the requirements to be measured
at amortised cost or at FVOCI as at FVTPL if
doing so eliminates or significantly reduces an
accounting mismatch that would otherwise arise.

Financial assets: Business model assessment

The Company makes an assessment of the
objective of the business model in which a
financial asset is held at a portfolio level because
this best reflects the way the business is managed
and information is provided to management. The
information considered includes:

• the stated policies and objectives for
the portfolio and the operation of those
policies in practice. These include whether
management's strategy focuses on earning
contractual interest income, maintaining
a particular interest rate profile, matching
the duration of the financial assets to the
duration of any related liabilities or expected
cash outflows or realising cash flows through
the sale of the assets;

• how the performance of the portfolio
is evaluated and reported to the
Company's management;

• the risks that affect the performance of the
business model (and the financial assets held
within that business model) and how those
risks are managed;

• how managers of the business are
compensated - e.g. whether compensation is
based on the fair value of the assets managed
or the contractual cash flows collected; and

• the frequency, volume and timing of sales of
financial assets in prior periods, the reasons
for such sales and expectations about future
sales activity.

Transfers of financial assets to third parties in
transactions that do not qualify for derecognition
are not considered sales for this purpose,
consistent with the Company's continuing
recognition of the assets.

Financial assets that are held for trading or are
managed and whose performance is evaluated on
a fair value basis are measured at FVTPL.

Financial assets: Assessment whether

contractual cash flows are solely payments of
principal and interest

For the purposes of this assessment, 'principal'
is defined as the fair value of the financial asset
on initial recognition. 'Interest' is defined as
consideration for the time value of money and for
the credit risk associated with the principal amount
outstanding during a particular period of time
and for other basic lending risks and costs (e.g.
liquidity risk and administrative costs), as well as
a profit margin.

In assessing whether the contractual cash flows
are solely payments of principal and interest,
the Company considers the contractual terms of
the instrument. This includes assessing whether
the financial asset contains a contractual term
that could change the timing or amount of
contractual cash flows such that it would not meet
this condition. In making this assessment, the
Company considers:

• contingent events that would change the
amount or timing of cash flows;

• terms that may adjust the contractual coupon
rate, including variable interest rate features;

• prepayment and extension features; and

• terms that limit the Company's claim to
cash flows from specified assets (e.g. non¬
recourse features).

Financial assets: Subsequent measurement and
gains and losses

Financial assets at FVTPL

These assets are subsequently measured at fair
value. Net gains and losses, including any interest
or dividend income, are recognised in profit or loss.

Financial assets at amortised cost

These assets are subsequently measured at
amortised cost using the effective interest method.
The amortised cost is reduced by impairment
losses. Interest income, foreign exchange gains
and losses and impairment are recognised in
profit or loss. Any gain or loss on derecognition is
recognised in profit or loss.

Equity investments at FVOCI

These assets are subsequently measured at fair
value. Dividends are recognised as income in profit
or loss unless the dividend clearly represents a
recovery of part of the cost of the investment.
Other net gains and losses are recognised in OCI
and are not reclassified to profit or loss.

Financial liabilities: Classification, subsequent
measurement and gains and losses

Financial liabilities are classified as measured at
amortised cost or FVTPL. A financial liability is
classified as at FVTPL if it is classified as held-
for- trading, or it is a derivative or it is designated
as such on initial recognition. Financial liabilities
at FVTPL are measured at fair value and net
gains and losses, including any interest expense,
are recognised in profit or loss. Other financial
liabilities are subsequently measured at amortised

cost using the effective interest method. Interest
expense and foreign exchange gains and losses
are recognised in profit or loss. Any gain or loss on
derecognition is also recognised in profit or loss.
Fees paid on the establishment of loan facilities
are recognised as transaction costs of the loan to
the extent that it is probable that some or all of the
facility will be drawn down.

(iii) Derecognition

A financial asset is derecognised only when:

• the Company has transferred the rights to
receive cash flows from the financial asset or

• retains the contractual rights to receive the
cash flows of the financial asset, but assumes
a contractual obligation to pay the cash flows
to one or more recipients.

Where the Company has transferred an asset, the
Company evaluates whether it has transferred
substantially all risks and rewards of ownership
of the financial asset. In such cases, the financial
asset is derecognised.

Where the Company has not transferred
substantially all risks and rewards of ownership
of the financial asset, the financial asset is
not derecognised.

Where the Company has neither transferred a
financial asset nor retains substantially all risks
and rewards of ownership of the financial asset,
the financial asset is derecognised if the Company
has not retained control of the financial asset.
Where the Company retains control of the financial
asset, the asset is continued to be recognised
to the extent of continuing involvement in the
financial asset.

The Company derecognises a financial liability
when its contractual obligations are discharged
or cancelled, or expire. The Company also
derecognises a financial liability when its terms are
modified and the cash flows under the modified
terms are substantially different. In this case, a
new financial liability based on the modified terms
is recognised at fair value. The difference between

the carrying amount of the financial liability
extinguished and the new financial liability with
modified terms is recognised in profit or loss.

(iv) Offsetting

Financial assets and financial liabilities are offset
and the net amount presented in the balance sheet
when, and only when, the Company currently has
a legally enforceable right to set off the amounts
and it intends either to settle them on a net basis
or to realise the asset and settle the liability
simultaneously.

(v) Impairment of financial assets

The Company recognises loss allowances
for expected credit losses on financial assets
measured at amortised cost. At each reporting
date, the Company assesses whether financial
assets carried at amortised cost are credit-
impaired. A financial asset is 'credit- impaired'
when one or more events that have a detrimental
impact on the estimated future cash flows of the
financial asset have occurred.

Evidence that a financial asset is credit- impaired
includes the following observable data:

• significant financial difficulty of the
borrower or issuer; or

• a breach of contract such as a default or
being past due.

The Company measures loss allowances at an
amount equal to lifetime expected credit losses,
except for the following, which are measured as 12
month expected credit losses:

• bank balances for which credit risk (i.e. the
risk of default occurring over the expected life
of the financial instrument) has not increased
significantly since initial recognition.

Loss allowances for trade receivables are
always measured at an amount equal to lifetime
expected credit losses.

Lifetime expected credit losses are the expected
credit losses that result from all possible default
events over the expected life of a financial

instrument. 12-month expected credit losses are
the portion of expected credit losses that result
from default events that are possible within 12
months after the reporting date (or a shorter
period if the expected life of the instrument is less
than 12 months). In all cases, the maximum period
considered when estimating expected credit
losses is the maximum contractual period over
which the Company is exposed to credit risk.

When determining whether the credit risk of a
financial asset has increased significantly since
initial recognition and when estimating expected
credit losses, the Company considers reasonable
and supportable information that is relevant and
available without undue cost or effort. This includes
both quantitative and qualitative information
and analysis, based on the Company's historical
experience and informed credit assessment and
including forward- looking information.

Measurement of impairment - expected credit
losses

Expected credit losses are a probability-weighted
estimate of credit losses. Credit losses are measured
as the present value of all cash shortfalls (i.e. the
difference between the cash flows due to the
Company in accordance with the contract and the
cash flows that the Company expects to receive).

The Company follows 'simplified approach' for
recognition of impairment loss allowance on trade
receivable. Under the simplified approach, the
Company does not track changes in credit risk
for individual customers. Rather, it recognizes
impairment loss allowance based on lifetime ECLs
at each reporting date, right from initial recognition.

The Company uses a provision matrix to determine
impairment loss allowance on the portfolio of trade
receivables. The provision matrix is based on its
historically observed default rates and delays in
realisations over the expected life of the trade
receivable and is adjusted for forward looking
estimates. At every balance sheet date, the historical
observed default rates are updated and changes in
the forward-looking estimates are analysed.

Presentation of allowance for expected credit
losses in the balance sheet

Loss allowances for financial assets measured
at amortised cost are deducted from the gross
carrying amount of the assets.

Write-off

The gross carrying amount of a financial asset is
written off (either partially or in full) to the extent
that there is no realistic prospect of recovery.
This is generally the case when the Company
determines that the debtor does not have assets
or sources of income that could generate sufficient
cash flows to repay the amounts subject to the
write- off. However, financial assets that are
written off could still be subject to enforcement
activities in order to comply with the Company's
procedures for recovery of amounts due.

(vi) Derivative financial instruments

The Company uses derivative financial instruments,
such as forward currency contracts to hedge its
certain foreign currency risks. Derivative financial
instruments are initially recognised at fair value on
the date a derivative contract is entered into and
are subsequently re-measured at their fair value at
the end of each period. Any gains or losses arising
from changes in the fair value of derivatives are
taken directly to profit or loss.

The Company designates certain hedging
instruments, which include derivatives in respect
of foreign currency risk as cash flow hedges.

Hedges of foreign exchange risk for highly
probable forecast transactions are accounted for
as cash flow hedges. Hedges of the fair value of
recognized assets or liabilities are accounted for
as fair value hedges.

At the inception of the hedge relationship, the entity
documents the relationship between the hedging
instrument and the hedged item, along with its
risk management objectives and its strategy
for undertaking various hedge transactions.
Furthermore, at the inception of the hedge and
on an ongoing basis, the Company documents
whether the hedging instrument is highly effective

in offsetting changes in fair values or cash flows of
the hedged item attributable to the hedged risk.

Cash flow hedges that qualify for hedge
accounting

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 the Statement of Profit and Loss.
For cash flow hedging relationships that span
multiple reporting periods, the effectiveness for
the period is calculated as the difference between
the cumulative effectiveness as at reporting
date (based on the cumulative change in the fair
value of the hedging instrument and the hedged
item), and the cumulative effectiveness reported
in prior periods.

Amounts previously recognized in other
comprehensive income and accumulated in equity
relating to effective portion as described above
are reclassified to the Statement of Profit and
Loss in the periods when the hedged item affects
profit or loss, in the same line as the recognized
hedged item. However, when the hedged forecast
transaction results in the recognition of a non¬
financial asset or a non-financial liability, such
gains and losses are transferred from equity (but
not as a reclassification adjustment) and included
in the initial measurement of the cost of the non¬
financial asset or non-financial liability.

2.2.11 Borrowings

Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period
of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are
recognised as transaction costs of the loan to the extent
that it is probable that some or all of the facility will be
drawn down. In this case, the fee is deferred until the
draw down occurs. To the extent there is no evidence
that it is probable that some or all of the facility will be
drawn down, the fee is capitalised as a prepayment for
liquidity services and amortised over the period of the
facility to which it relates.

Borrowings are removed from the balance sheet when
the obligation specified in the contract is discharged,
cancelled or expired. The difference between the
carrying amount of a financial liability that has been
extinguished or transferred to another party and the
consideration paid, including any non-cash assets
transferred or liabilities assumed, is recognised in profit
or loss as other gains/(losses).

Borrowings are classified as current liabilities unless the
Company has an unconditional right to defer settlement
of the liability for at least 12 months after the reporting
period. Where there is a breach of a material provision
of a long-term loan arrangement on or before the end
of the reporting period with the effect that the liability
becomes payable on demand on the reporting date,
the entity does not classify the liability as current, if the
lender agreed, after the reporting period and before the
approval of the financial statements for issue, not to
demand payment as a consequence of the breach.

Borrowing costs

General and specific borrowing costs that are directly
attributable to the acquisition, construction or
production of a qualifying asset are capitalised during
the period of time that is required to complete and
prepare the asset for its intended use or sale. Qualifying
assets are assets that necessarily take a substantial
period of time to get ready for their intended use or sale.
Borrowing costs consist of interest and other costs that
the Company incurs in connection with the borrowing
of funds (including exchange differences relating to
foreign currency borrowings to the extent that they are
regarded as an adjustment to interest costs).

For general borrowing used for the purpose of obtaining
a qualifying asset, the amount of borrowing costs
eligible for capitalization is determined by applying a
capitalization rate to the expenditures on that asset.
The capitalization rate is the weighted average of the
borrowing costs applicable to the borrowings of the
Company that are outstanding during the period, other
than borrowings made specifically for the purpose of
obtaining a qualifying asset. The amount of borrowing
costs capitalized during a period does not exceed the
amount of borrowing cost incurred during that period.

All other borrowing costs are expensed in the period in
which they occur.

2.2.12 Income tax

Income tax comprises current and deferred tax. It
is recognised in profit or loss except to the extent
that it relates to a business combination or to an item
recognised directly in equity or in other comprehensive
income. The income tax expense or credit for the period
is the tax payable on the current period's taxable income
based on the applicable income tax rate for applicable
jurisdiction adjusted by changes in deferred tax assets
and liabilities attributable to temporary differences.

Current tax

The current income tax charge is calculated on the basis
of the tax laws enacted or substantively enacted at the
end of the reporting period in the countries where the
Company and its branches operate and generate taxable
income. Management periodically evaluates positions
taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis
of amounts expected to be paid to the tax authorities.

Current tax assets and current tax liabilities are offset
only if there is a legally enforceable right to set off
the recognised amounts, and it is intended to realise
the asset and settle the liability on a net basis or
simultaneously.

Deferred tax

Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying
amounts in the financial statements. Deferred income
tax is determined using tax rates (and laws) that have
been enacted or substantially 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. Deferred
tax assets are recognised for all deductible temporary
differences only if it is probable that future taxable
amounts will be available to utilise those temporary
differences and losses.

Deferred tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets
and liabilities and when the deferred tax balances relate
to the same taxation authority.

Current and deferred tax is recognised in Statement
of Profit or Loss, except to the extent that it relates
to items recognised in other comprehensive income
or directly in equity. In this case, the tax is also
recognised in other comprehensive income or directly
in equity, respectively.

Deferred tax assets are recognised to the extent that it
is probable that future taxable profits will be available
against which they can be used. The existence of
unused tax losses is strong evidence that future
taxable profit may not be available. Therefore, in case
of a history of recent losses, the Company recognises
a deferred tax asset only to the extent that it has
sufficient taxable temporary differences or there is
convincing other evidence that sufficient taxable profit
will be available against which such deferred tax asset
can be realised. Deferred tax assets - unrecognised or
recognised, are reviewed at each reporting date and are
recognised/ reduced to the extent that it is probable/ no
longer probable respectively that the related tax benefit
will be realised.

2.2.13 Revenue

Revenue is recognised, when or as control over distinct
goods or services is transferred to the customer; i.e.
when the customer is able to direct the use of the
transferred goods or services and obtains substantially
all of the remaining benefits, provided a contract with
enforceable rights and obligations exists and amongst
others collectability of consideration is probable, taking
into account customer's credit- worthiness. Revenue is
the transaction price expected to be entitled to.

Amounts due in respect of price escalation claims
including those linked to published indices and/or
contract modification including variation in contract
work are recognised, only if the contract allows for
such claims or variations and /or there is evidence that
the customer has accepted it and it is probable that
these will result in revenue and are capable of being
reliably measured. Variable consideration is included
in the transaction price if it is highly probable that a
significant reversal of revenue will not occur once
uncertainties are resolved.

If a contract contains more than one distinct good or
service, the transaction price is allocated to each
performance obligation. Revenue is recognized for
each performance obligation either at a point in
time or over time.

Amounts disclosed as revenue are exclusive of Goods
and Service Tax and net of returns, trade allowances,
rebates, value added taxes and amounts collected on
behalf of third parties.

Revenue from sale of goods

Revenues are recognized at a point in time when control
of the goods passes to the buyer, generally upon
delivery of the goods.

Revenue from sale of services

Sale of services (other than long term contracts)
are recognised in the period in which the services
are rendered. For fixed-price contracts, revenue is
recognised based on the actual service provided
to the end of the reporting period as a proportion
of the total services to be provided (percentage
of completion method) or on a completed service
method, as applicable.

Revenue from long term (construction type) contracts
and other customised products

Revenues are recognized over time under the
percentage-of-completion method, based on the
percentage of costs incurred to date compared to total
estimated costs. An expected loss on the contract is
recognized as an expense immediately. The differences
between the timing of our revenue recognised (based
on costs incurred) and customer billings (based on
contractual terms) results in changes to revenue in
excess of billing or billing in excess of revenue.

The percentage-of-completion method places
considerable importance on accurate estimates to
the extent of progress towards completion and may
involve estimates on the scope of deliveries and
services required for fulfilling the contractually defined

obligations. These significant estimates include total
estimated costs, total estimated revenues, contract
risks, including technical, political and regulatory
risks, and other judgments. Under the percentage-of-
completion method, changes in estimates may lead to
an increase or decrease of revenue.

In case of other customised products, the measurement
takes into account the timing of customisation of the
products during the manufacturing process and as the
right to payment for work performed is obtained.

Liquidated damages/penalties are provided for, based
on management's assessment of the estimated liability,
as per contractual terms, technical evaluation, past
experience and/or acceptance.

Other income
Interest income

Interest income is recognised using the effective
interest rate method. The effective interest rate is
the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset
to the gross carrying amount of a financial asset. When
calculating the effective interest rate, the Company
estimates the expected cash flows by considering all
the contractual terms of the financial instrument (for
example, prepayment, extension, call and similar options)
but does not consider the expected credit losses.

Export benefits

Export benefits are accounted for to the extent there is
reasonable certainty of utilisation/realisation of the same.

2.2.14 Dividend / Distribution

The Company recognises a liability to make cash
distributions to equity holders when the distribution
is authorized and the distribution is no longer at the
discretion of the Company. As per the corporate laws in
India, a distribution is authorized when it is approved by
the shareholders. A corresponding amount is recognized
directly in equity.

2.2.15 Earnings per share

Basic earnings per share is calculated by dividing the
net profit or loss for the year attributable to equity

shareholders by the weighted average number of equity
shares outstanding during the year.

For the purpose of calculating diluted earnings per
share, the net profit or loss for the period attributable to
equity shareholders and the weighted average number
of shares outstanding during the period is adjusted for
the effects of all dilutive potential equity shares.