2. Material Accounting Policies
2.1 Statement of compliance and basis of
preparation
The standalone financial statements of the
Company have been prepared in accordance
with Indian Accounting Standards (Ind AS)
notified under the Companies (Indian Accounting
Standards) Rules, 2015 (as amended from time to
time) and presentation requirements of Division II
of Schedule III to the Companies Act, 2013, (Ind
AS compliant Schedule III), as applicable to the
standalone financial statements.
The standalone financial statement has been
prepared on a historical cost basis, except for the
following assets and liabilities which have been
measured at fair value:
• Derivative financial instruments
• Certain financial assets and liabilities measured
at fair value (refer accounting policies
regarding financial instruments)
The standalone financial statements are presented
in Indian Rupees (INR) and all values are rounded
to the nearest lakhs (INR 00,000), except when
otherwise indicated.
2.2 Summary of Material Accounting Policies
a) Current versus non-current classification
The Company presents assets and liabilities in
the balance sheet based on current/ non-current
classification. An asset is treated as current when
it is:
• Expected to be realised or intended to be sold
or consumed in normal operating cycle,
• Held primarily for the purpose of trading,
• Expected to be realised within twelve months
after the reporting period, or
• Cash or cash equivalent unless restricted
from being exchanged or used to settle a
liability for at least twelve months after the
reporting period.
All other assets are classified as non-current.
A liability is current when:
• It is expected to be settled in normal operating
cycle,
• It is held primarily for the purpose of trading,
• I t is due to be settled within twelve months
after the reporting period, or
• There is no unconditional right to defer the
settlement of the liability for at least twelve
months after the reporting period.
The Company classifies all other liabilities as
non-current.
Deferred tax assets and liabilities are classified as
non-current assets and liabilities.
The operating cycle is the time between the
acquisition of assets for processing and their
realisation in cash and cash equivalents. The
Company has identified twelve months as its
operating cycle.
b) Foreign currencies
The standalone financial statements are presented
in Indian rupees (INR), which is the functional
currency of the Company.
Transactions and balances
Transactions in foreign currencies are initially
recorded by the Company in INR at spot rates at the
date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in
foreign currencies are translated at INR spot rates
of exchange at the reporting date. Exchange
differences arising on settlement or translation of
monetary items are recognised in the statement of
profit and loss.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated
using the exchange rates at the dates of the initial
transactions. Non-monetary items measured
at fair value in a foreign currency are translated
using the exchange rates at the date when the fair
value is determined. The gain or loss arising on
translation of non-monetary items measured at
fair value is treated in line with the recognition of
the gain or loss on the change in fair value of the
item (i.e., translation differences on items whose
fair value gain or loss is recognised in OCI or profit
or loss are also recognised in OCI or profit or loss,
respectively).
c) Fair Value Measurement
The Company measures financial instruments, such
as, derivatives 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 in an
orderly transaction between market participants
at the measurement date.
The fair value measurement is based on the
presumption that the transaction to sell the asset
or transfer the liability takes place either:
• In the principal market for the asset or
liability, or
• I n the absence of a principal market, in the
most advantageous market for the asset
or liability.
The principal or the most advantageous market
must be accessible by the Company.
The fair value of an asset or a liability is measured
using the assumptions that market participants
would use when pricing the asset or liability,
assuming that market participants act in their
economic best interest.
A fair value measurement of a non-financial asset
takes into account a market participant's ability to
generate economic benefits by using the asset in
its highest and best use or by selling it to another
market participant that would use the asset in its
highest and best use.
The Company uses valuation techniques that
are appropriate in the circumstances and for
which sufficient data are available to measure
the fair value, maximising the use of relevant
observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities for which fair value is
measured or disclosed in the standalone 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) market prices in
active markets for identical assets or liabilities.
• Level 2 — Valuation techniques for which
the lowest level input that is significant to
the fair value measurement is directly or
indirectly observable.
• Level 3 — Valuation techniques for which the
lowest level input that is significant to the fair
value measurement is unobservable.
For assets and liabilities that are recognised in the
standalone financial statements on a recurring
basis, the Company determines whether transfers
have occurred between levels in the hierarchy
by re-assessing categorisation (based on the
lowest level input that is significant to the fair
value measurement as a whole) at the end of each
reporting period.
The Company determines the policies and
procedures for both recurring fair value
measurement, such as derivative instruments and
unquoted financial assets measured at fair value,
and for non-recurring measurement, such as assets
held for distribution in discontinued operations.
External valuers are involved for valuation of
certain unquoted financial assets. Involvement
of external valuers is decided upon annually by
the Board after discussion with and approval
by the Company's Audit Committee. Selection
criteria include market knowledge, reputation,
independence and whether professional standards
are maintained. The Management decides, after
discussions with the Company's external valuers,
which valuation techniques and inputs to use for
each case.
For the purpose of fair value disclosures, the
Company has determined classes of assets and
liabilities on the basis of the nature, characteristics
and risks of the asset or liability and the level of the
fair value hierarchy as explained above.
d) Revenue from Contract with Customer
Revenue from contracts with customer is
recognised when control of the goods or services
are transferred to the customer at an amount that
reflects the consideration to which the Company
expects to be entitled in exchange for those goods
or services. The Company has concluded that it is
the principal in its revenue arrangements because
it typically controls the goods or services before
transferring them to the customer.
Ind AS 115 establishes a five-step model to account
for revenue arising from contracts with customers
and requires that revenue be recognised at an
amount that reflects the consideration to which
an entity expects to be entitled in exchange for
transferring goods or services to a customer.
Ind AS 115 requires entities to exercise judgement,
taking into consideration all of the relevant facts
and circumstances when applying each step of
the model to contracts with their customers.
The standard also specifies the accounting for
the incremental costs of obtaining a contract
and the costs directly related to fulfilling a
contract. In addition, the standard requires
extensive disclosures.
The Goods and service Tax (GST) is not received
by the Company on its own account. It is a tax
collected on value added to the commodity by the
seller on behalf of the government. Accordingly, it
has been excluded from revenue.
The specific recognition criteria described below
must also be met before revenue is recognised.
Revenue from sale of goods
Revenue from sale of goods is recognised at
a point in time. The performance obligation is
completed when control of the asset is transferred
to the customer, generally on delivery of the
goods. The Company considers whether there are
other promises in the contract that are separate
performance obligation to which a portion of the
transaction price needs to be allocated.
Revenue from Installation and other services
The Company provides installation services that
are bundled together with the sale of products
to a customer. The installation services can
be obtained from other providers and do not
significantly customise or modify the meter or
related products manufactured.
Contracts for bundled sales of meters and related
products and installation services are comprised
of two performance obligations because the
promises to transfer equipment and provide
installation services are capable of being distinct
and separately identifiable.
The Company recognises revenue from installation
services over time, using an input method to
measure progress towards complete satisfaction of
the service, because the customer simultaneously
receives and consumes the benefits provided by
the Company. Revenue from the sale of the meters
and related products are recognised at a point in
time, generally upon delivery of the equipment.
Revenue from Erection Contracts
When the outcome of a construction contract
can be estimated reliably, contract revenue and
contract costs associated with the construction
contract shall be recognised as revenue and
expenses respectively by reference to the stage of
completion of the contract activity at the end of the
reporting period. The percentage of completion is
determined by the proportion that contract costs
incurred for work performed up to the reporting
date bear to the estimated total contract costs.
However, profit is not recognised unless there is
reasonable progress on the contract. If total cost of
a contract, based on technical and other estimates,
is estimated to exceed the total contract revenue,
the foreseeable loss is provided for. The effect of
any adjustment arising from revision to estimates
is included in the income statement of the year in
which revisions are made. Contract revenue earned
in excess of billing has been reflected under “Other
current assets” and billing in excess of contract
revenue has been reflected under “Other current
liabilities” in the balance sheet.
Price Escalation and other claims or variations
in the contract works are included in contract
revenue only when:
i. Negotiations have reached to an advanced
stage such that it is probable that customer
will accept the claim; and
ii. The amount that is probable will be accepted
by the customer and can be measured reliably.
Revenue from Service Concession Arrangement
('SCA')
The Company has entered into contracts under
AMISP model which requires supply, installation,
operation and maintenance of smart meters and
related infrastructure used to provide public service
under "Design-Build- Finance-Own-Operate-
Transfer" (DBFOOT) basis. These smart meters
including related infrastructure will be transferred
to relevant authority at the end of the terms of
the contract. These arrangements are accounted
per Ind AS 115, Appendix C- Service Concession
Arrangements (“SCA”).
In accordance with Appendix C of Ind AS
115, Service Concession Arrangements, the
Company recognises the rights granted by these
arrangements as a financial asset to the extent that
it has an unconditional contractual right to receive
cash or another financial asset from the grantor
for the services it performs. These rights arise as
the Company performs the agreed-upon scope of
work related to the supply and installation phase
of the project.
The AMISP contract involves two separate
performance obligations: (a) the supply, installation,
integration, testing, and commissioning of the AMI
system, and (b) the operation, maintenance, and
support services post-installation. The allocation
of the transaction price to these obligations is to
be based on their relative standalone selling prices
for the purpose of revenue recognition.
Recognition and Measurement
Financial assets are recognised at fair value upon
initial recognition. The asset is subsequently
measured at amortised cost using the effective
interest method. Interest income from these
financial assets is recognised in the statement of
profit and loss.
During the supply and installation phase of the
smart metering infrastructure, the Company
recognises costs as an expense when incurred.
Revenue related to supply and installation
is recognised over the period based on the
input cost method, and the contract assets are
recognised. The Company recognises financial
assets as 'Receivables under Service Concession
Arrangements' to the extent that it has an
unconditional contractual right to receive cash or
another financial asset under the Agreement. Until
the set-up of infrastructure and supply, installation
of all meters, the 'Receivables under Service
Concession Arrangements' are a contract asset.
Post the completion of set-up of infrastructure
and supply, installation of meters, these become
a financial asset.
The Company accounts for services related to the
operation and maintenance of the smart metering
infrastructure as per the terms of the AMSIP
arrangement. Revenues from these services are
recognised over time according to the terms of
the agreement, reflecting the service obligations
undertaken by the Company.
The fair value of future cash flows receivable
under the above project have been initially
recognised under contract assets as 'Receivables
under Service Concession Arrangements' and
carried at amortised cost subsequently. Until the
set-up of infrastructure and supply, installation
of meters, the 'Receivables under Service
Concession Arrangements' are a contract asset.
Post the completion of set-up of infrastructure
and supply, installation of meters, these become a
financial asset.
I nterest on the contract assets/ financial assets
arising from the Company's principal or ancillary
revenue generating activities are classified as
'Other operating revenue' in Statement of Profit
and Loss.
Contractual Obligation to restore the
infrastructure to a specified level of serviceability
The Company has a contractual obligation to
maintain the infrastructure to a specified level of
serviceability or to restore the infrastructure to
a specified condition before it is handed over to
the grantor of the SCA consequent to the right
available with the grantor under the agreement.
In the SCA under the financial asset model, such
costs are recognised in the period in which such
cost are actually incurred.
Once the contract has been commenced, the
treatment of income is recognised as Revenue
from operations under SCA in accordance with
the financial asset model using effective interest
method. Revenue are recognised in each period
as and when services are rendered. The Company
recognises revenue when it transfers control over
a product or performs service.
Contract Balances:
Contract Assets:
A contract asset is the right to consideration in
exchange for services transferred to the customer.
If the entity performs by transferring services to a
customer before the customer pays consideration
or before payment is due, a contract asset is
recognised for the earned consideration that is
conditional. Contract assets are transferred to
services concession agreement receivables when
the rights become unconditional. For AMISP
contracts, a contract asset is initially recognised
for revenue from supply and installation services
as the receipt of consideration is conditional on the
successful installation of the total agreed number
of smart meters. Upon completion of the supply
and installation of all the smart meters, or to the
extent of an unconditional contractual right to
receive cash or another financial asset under the
AMSIP Contract, the amount recognised as contract
assets is reclassified to 'Receivables under Service
Concession Arrangements' or 'Trade Receivable'.
Trade receivables/ Unbilled Revenue:
A receivable is recognised if an amount of
consideration that is unconditional (i.e., only the
passage of time is required before payment of the
consideration is due).
Contract modifications
Contract modifications are defined as changes
in the scope of the work, other than changes
envisaged in the original contract, that may result
in a change in the revenue associated with that
contract. Modifications to the initial contract require
the customer's technical and/or financial approval
before billings can be issued and the amounts
relating to the additional work can be collected.
The Company does not recognise the revenue
from such additional work until the customer's
either of the technical or financial approval has
been obtained. In cases where the additional work
has been approved but the corresponding change
in price has not been determined, the requirement
described below for variable consideration is
applied: namely, to recognise revenue for an
amount with respect to which it is highly probable
that a significant reversal will not occur.
Claims
A claim is a request for payment of compensation
from the customer (for example, for compensation,
reimbursement of prolongation costs, etc) that is
rejected and being disputed by the customer under
the contract. The revenue relating to claims which
are pending before various judicial authorities are
not recognised till the time it is established that
such amounts are clearly due and enforceable.
Interest income
For all financial instrument measured at amortised
cost, interest income is recorded using effective
interest rate (EIR), which is the rate that exactly
discounts the estimated future cash payments or
receipts through the expected life of the financial
instrument or a shorter period, where appropriate,
to the net carrying amount of the financial asset.
Interest income is included under the head “other
income” in the statement of profit and loss.
Other Operating Income
The Company presents incentives received related
to refund of indirect taxes as other operating
income in the statement of profit and loss. Interest
on the contract assets/ financial assets arising
from the Company's principal or ancillary revenue
generating activities are classified as 'Other
operating revenue' in Statement of Profit and Loss.
e) Government Grants
Government grants are recognised where there is
reasonable assurance that the grant will be received
and all attached conditions will be complied with.
When the grant relates to an expense item, it is
recognised as income on a systematic basis over
the periods that the related costs, for which it is
intended to compensate, are expensed. When the
grant relates to an asset, it is recognised as income
in equal amounts over the expected useful life of
the related asset.
f) Taxation
Current Tax
Current tax is expected tax payable on the taxable
income for the year, using the tax rate enacted at
the reporting date.
Current tax assets and liabilities are offset where
the Company has legal enforceable right to offset
and intends either to settle on net basis, or to realise
the assets and settle the liability simultaneously.
Deferred Tax Assets and Liabilities
Deferred tax is recognised for all taxable temporary
differences and is calculated based on the carrying
amounts of assets and liabilities for financial
reporting purposes and the amounts used for
taxation purposes.
Deferred tax is measured at the tax rates that are
expected to be applied when the asset is realised
or the liability is settled, based on the laws that
have been enacted or substantively enacted at the
reporting date.
Deferred tax assets are recognised only to the
extent that it is probable that future taxable profits
will be available against which the assets can be
utilised. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that
it is no longer probable that the related tax benefit
will be realised.
Deferred tax assets and liabilities are offset when
there is a legally enforceable right to offset.
Current and Deferred Tax for the Year
Current and deferred tax are recognised in the
statement of profit & loss, except when they relates
to items that are recognised in other comprehensive
income or directly in equity, in which case, the
current tax and deferred tax is recognised directly
in other comprehensive income or equity as the
case may be.
g) Property, Plant & Equipment
Property, plant and equipment and capital work
in progress are stated at cost, net of tax / duty
credit availed, less accumulated depreciation and
accumulated impairment losses, if any. Such cost
includes the cost of replacing part of the plant
and equipment and borrowing costs for long¬
term projects if the recognition criteria are met.
When significant parts of plant and equipment
are required to be replaced at intervals, the
Company depreciates them separately based
on their specific useful lives. All other repair and
maintenance costs are recognised in the statement
of profit and loss as incurred. Cost includes
expenditures that are directly attributable to the
acquisition of the asset.
The cost of self-constructed assets includes
the cost of materials and other costs directly
attributable to bringing the asset to a working
condition for its intended use. Borrowing costs
that are directly attributable to the construction
or production of a qualifying asset are capitalised
as part of the cost of that asset.
Subsequent expenditure related to an item of
property, plant and equipment is added to its book
value only if it increases the future benefits from
the existing asset beyond its previously assessed
standard of performance or extends its estimated
useful life.
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.
Gains and losses upon disposal of an item of
property, plant and equipment are determined by
comparing the proceeds from disposal with the
carrying amount of property, plant and equipment
and are recognised net within “other (income)/
expense, net” in the statement of profit and loss.
Depreciation is calculated on a straight-line basis
using the rates arrived at based on the useful lives
estimated by the management, which is equal to
the life prescribed under the Schedule II to the
Companies Act, 2013.
The management believes that these estimated
useful lives are realistic and reflect fair
approximation of the period over which the assets
are likely to be used.
An item of property, plant and equipment and any
significant part initially recognised is derecognised
upon disposal or when no future economic
benefits are expected from its use or disposal.
Any gain or loss arising on derecognition of the
asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the
asset) is included in the statement of profit and
loss when the asset is derecognised.
The residual values, useful lives and methods of
depreciation of property, plant and equipment are
reviewed at each financial period/year end and
adjusted prospectively, if appropriate.
h) Intangible Assets
Costs relating to computer software, which is
acquired, are capitalised and amortised on a
straight-line basis over their estimated useful lives
of three years.
Gains or losses arising from de-recognition of an
intangible asset are measured as the difference
between the net disposal proceeds and the
carrying amount of the asset and are recognised
in the statement of profit and loss when the asset
is derecognised.
i) Borrowing Costs
Borrowing costs directly attributable to the
acquisition, construction or production of an asset
that necessarily takes a substantial period of time to
get ready for its intended use or sale are capitalised
as part of the cost of the asset. All other borrowing
costs are expensed in the period in which they
occur. Borrowing costs consist of interest and other
costs that an entity incurs in connection with the
borrowing of funds. Borrowing cost also includes
exchange differences to the extent regarded as an
adjustment to the borrowing costs.
j) Leases
The Company assesses at contract inception
whether a contract is, or contains, a lease. That
is, if the contract conveys the right to control the
use of an identified asset for a period of time in
exchange for consideration.
Company as a lessee
The Company applies a single recognition and
measurement approach for all leases, except
for short-term leases and leases of low-value
assets. The Company recognises lease liabilities
to make lease payments and right-of-use assets
representing the right-to-use the underlying assets.
Right-of-use assets
The Company recognises right-of-use assets at the
commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use
assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted
for any remeasurement of lease liabilities. The
cost of right-of-use assets includes the amount
of lease liabilities recognised, initial direct costs
incurred, and lease payments made at or before
the commencement date less any lease incentives
received. Right-of-use assets are depreciated on
a straight-line basis over the shorter of the lease
term and the estimated useful lives of the assets.
Lease Liabilities
At the commencement date of the lease, the
Company recognises lease liabilities measured at
the present value of lease payments to be made
over the lease term. The lease payments include
fixed payments. In calculating the present value of
lease payments, the Company uses its incremental
borrowing rate at the lease commencement date
because the interest rate implicit in the lease is not
readily determinable. After the commencement
date, the amount of lease liabilities is increased to
reflect the accretion of interest and reduced for
the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change
in the lease payments or a change in the assessment
of an option to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Company applies the short-term lease
recognition exemption to its short-term leases of
those leases that have a lease term of 12 months
or less from the commencement date and do not
contain a purchase option.
k) Inventories
Inventories are valued at the lower of cost and net
realisable value. Cost is determined on weighted
average basis.
Costs incurred in bringing each product to its
present location and condition are accounted for
as follows:
• Raw materials and Components: Materials and
other items held for use in the production of
inventories are not written down below cost
if the finished products in which they will be
incorporated are expected to be sold at or
above cost. Cost includes cost of purchase and
other costs incurred in bringing the inventories
to their present location and condition.
• Finished goods and work-in-progress: cost
includes cost of direct materials and labour
and a proportion of manufacturing overheads
based on the normal operating capacity, but
excluding borrowing costs. Cost of finished
goods includes excise duty.
• Net realisable value is the estimated selling
price in the ordinary course of business,
less estimated costs of completion and the
estimated costs necessary to make the sale.
l) Impairment of Non-Financial Assets
The Impairment of Non-Financial Assets exists when
the carrying value of an asset or cash generating unit
exceeds its recoverable amount, which is the higher
of its fair value less costs of disposal and its value in
use. The fair value less costs of disposal calculation
is based on available data from binding sales
transactions, conducted at arm's-length, for similar
assets or observable market prices less incremental
costs for disposing of the asset. The value in use
calculation is based on a DCF model.
m) Provisions
Provisions are recognised when the Company
has a present obligation (legal or constructive)
as a result of a past event and it is probable that
an outflow of resources embodying economic
benefits will be required to settle the obligation and
a reliable estimate can be made of the amount of
the obligation. When the Company expects some
or all of a provision to be reimbursed, for example,
under an insurance contract, the reimbursement
is recognised as a separate asset, but only when
the reimbursement is virtually certain. The expense
relating to a provision is presented in the statement
of profit and loss net of any reimbursement.
If the effect of the time value of money is material,
provisions are discounted using a current pre¬
tax rate that reflects, when appropriate, the risks
specific to the liability. When discounting is used,
the increase in the provision due to the passage of
time is recognised as a finance cost.
Provisions are reviewed at each Balance Sheet date.
Warranty Provision
Provisions for warranty-related costs are
recognised when the product is sold or service
provided to the customer. Initial recognition is
based on historical experience. The initial estimate
of warranty-related costs is revised annually.
Liquidated damages
Provision for liquidated damages are recognised
on contracts for which delivery dates are exceeded
and computed in reasonable manner.
Other Litigation claims
Provision for litigation related obligation represents
liabilities that are expected to materialise in respect
of matters in appeal.
Onerous contracts
I f the Company has a contract that is onerous,
the present obligation under the contract is
recognised and measured as a provision. However,
before a separate provision for an onerous
contract is established, the Company recognises
any impairment loss that has occurred on assets
dedicated to that contract.
An onerous contract is a contract under which the
unavoidable costs (i.e., the costs that the Company
cannot avoid because it has the contract) of
meeting the obligations under the contract exceed
the economic benefits expected to be received
under it. The unavoidable costs under a contract
reflect the least net cost of exiting from the
contract, which is the lower of the cost of fulfilling
it and any compensation or penalties arising from
failure to fulfil it.
n) Retirement and other employee benefits
Retirement benefit in the form of provident fund is
a defined contribution scheme. The Company has
no obligation, other than the contribution payable
to the provident fund. The Company recognises
contribution payable to the provident fund scheme
as an expense, when an employee renders the
related service.
The cost of providing benefits under the defined
benefit plan is determined based on actuarial
valuation under purchase unit credit method.
Re-measurements, comprising of actuarial
gains and losses, the effect of the asset ceiling,
excluding amounts included in net interest on
the net defined benefit liability and the return on
plan assets (excluding amounts included in net
interest on the net defined benefit liability), are
recognised immediately in the balance sheet with a
corresponding debit or credit to retained earnings
through OCI in the period in which they occur. Re¬
measurements are not reclassified to statement of
profit and loss in subsequent periods.
Past service costs are recognised in statement of
profit or loss on the earlier of:
• The date of the plan amendment or
curtailment, and
• The date that the Company recognises related
restructuring costs.
Net interest is calculated by applying the discount
rate to the net defined benefit liability or asset. The
Company recognises the following changes in the
net defined benefit obligation as an expense in the
statement of profit and loss:
• Service costs comprising current service
costs, past-service costs, gains and losses on
curtailments and non-routine settlements; and
• Net interest expense or income
The Company treats accumulated leave, as a long¬
term employee benefit for measurement purposes.
Such long-term compensated absences are
provided for based on an actuarial valuation using
the projected unit credit method at the period-end.
Actuarial gains/losses are immediately taken to the
statement of profit and loss and are not deferred.
The Company presents the entire liability in respect
of leave as a current liability in the balance sheet,
since it does not have an unconditional right to
defer its settlement beyond 12 months after the
reporting date.
o) Share-Based Payments
Employees of the Company receive remuneration
in the form of share-based payments, whereby
employees render services as consideration for
equity instruments.
Equity-settled transactions
The cost of equity-settled transactions is
determined by the fair value at the date when the
grant is made using Black Scholes valuation model.
That cost is recognised, together with a
corresponding increase in share-based payment
(SBP) reserves in equity, over the period in which
the performance and/or service conditions
are fulfilled in employee benefits expense. The
cumulative expense recognised for equity-
settled transactions at each reporting date until
the vesting date reflects the extent to which the
vesting period has expired and the Company's
best estimate of the number of equity instruments
that will ultimately vest. The statement of profit
and loss expense or credit for a period represents
the movement in cumulative expense recognised
as at the beginning and end of that period and is
recognised in employee benefits expense.
When the terms of an equity-settled award are
modified, the minimum expense recognised is the
expense had the terms had not been modified, if the
original terms of the award are met. An additional
expense is recognised for any modification that
increases the total fair value of the share-based
payment transaction, or is otherwise beneficial
to the employee as measured at the date of
modification. Where an award is cancelled by the
Company or by the counterparty, any remaining
element of the fair value of the award is expensed
immediately through statement of profit and loss.
The dilutive effect of outstanding options is
reflected as additional share dilution in the
computation of diluted earnings per share.
p) Financial Instruments
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.
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition,
as subsequently measured at amortised cost, fair
value through other comprehensive income (OCI),
and fair value through profit or loss.
The classification of financial assets at initial
recognition depends on the financial asset's
contractual cash flow characteristics and the
Company's business model for managing them.
With the exception of trade receivables that do
not contain a significant financing component or
for which the Company has applied the practical
expedient, the Company initially measures a
financial asset at its fair value plus, in the case of
a financial asset not at fair value through profit or
loss, transaction costs. Trade receivables that do
not contain a significant financing component or
for which the Company has applied the practical
expedient are measured at the transaction
price determined under Ind AS 115. Refer to the
accounting policies in section (d) Revenue from
contracts with customers.
I n order for a financial asset to be classified and
measured at amortised cost or fair value through
OCI, it needs to give rise to cash flows that are
'solely payments of principal and interest (SPPI)' on
the principal amount outstanding. This assessment
is referred to as the SPPI test and is performed
at an instrument level. Financial assets with cash
flows that are not SPPI are classified and measured
at fair value through profit or loss, irrespective of
the business model.
The Company's business model for managing
financial assets refers to how it manages its
financial assets in order to generate cash flows.
The business model determines whether cash flows
will result from collecting contractual cash flows,
selling the financial assets, or both. Financial assets
classified and measured at amortised cost are held
within a business model with the objective to hold
financial assets in order to collect contractual cash
flows while financial assets classified and measured
at fair value through OCI are held within a business
model with the objective of both holding to collect
contractual cash flows and selling.
Subsequent measurement
For purposes of subsequent measurement,
financial assets are classified in four categories:
• Debt instruments at amortised cost
• Debt instruments at fair value through other
comprehensive income (FVTOCI)
• Debt instruments, derivatives and equity
instruments at fair value through profit or loss
(FVTPL)
• Equity instruments measured at fair value
through other comprehensive income
(FVTOCI)
Debt instrument at amortised cost
A 'debt instrument' is measured at the amortised
cost if both the following conditions are met:
a) The asset is held within a business model
whose objective is to hold assets for collecting
contractual cash flows, and
b) Contractual terms of the asset give rise on
specified dates to cash flows that are solely
payments of principal and interest (SPPI) on
the principal amount outstanding.
After initial measurement, such financial assets
are subsequently measured at amortised cost
using the effective interest rate (EIR) method.
Amortised cost is calculated by taking into account
any discount or premium on acquisition and fees
or costs that are an integral part of the EIR. The
EIR amortisation is included in finance income in
the statement of profit and loss. The losses arising
from impairment are recognised in the statement
of profit and loss. This category generally applies
to trade and other receivables.
Debt instrument at FVTOCI
A 'debt instrument' is classified as at the FVTOCI
if both of the following criteria are met:
a) The objective of the business model is achieved
both by collecting contractual cash flows and
selling the financial assets, and
b) The asset's contractual cash flows
represent SPPI.
Debt instruments included within the FVTOCI
category are measured initially as well as at each
reporting date at fair value. Fair value movements
are recognised in the OCI. However, the Company
recognises interest income, impairment losses &
reversals and foreign exchange gain or loss in the
statement of profit and loss. On derecognition
of the asset, cumulative gain or loss previously
recognised in OCI is reclassified from the equity
to statement of profit and loss. Interest earned
whilst holding FVTOCI debt instrument is reported
as interest income using the EIR method.
Debt instrument at FVTPL
FVTPL is a residual category for debt instruments.
Any debt instrument, which does not meet the
criteria for categorisation as at amortised cost or as
FVTOCI, is classified as at FVTPL. Debt instruments
included within the FVTPL category are measured
at fair value with all changes recognised in the
statement of profit and loss.
Equity investments:
All equity investments are measured at fair value
except for equity investment in Associates which
have been measured at cost. Equity instruments
which are held for trading are classified as at
FVTPL. For all other equity instruments, the
Company may make an irrevocable election to
present in OCI subsequent changes in the fair
value. The Company makes such election on an
instrument-by-instrument basis. The classification
is made on initial recognition and is irrevocable.
If an equity instrument is classified as FVTOCI, then
all fair value changes on the instrument, excluding
dividends, are recognised in the OCI. There is no
recycling of the amounts from OCI to statement of
profit and loss, even on sale of investment. However,
the Company may transfer the cumulative gain or
loss within equity. Equity instruments classified as
FVTPL category are measured at fair value with
all changes recognised in the statement of profit
and loss.
Impairment of Financial Assets:
In accordance with Ind AS 109, the Company
recognises an allowance for expected credit losses
(ECLs) for all debt instruments not held at fair
value through profit or loss. ECLs are based on
the difference between the contractual cash flows
due in accordance with the contract and all the
cash flows that the Company expects to receive,
discounted at an approximation of the original
effective interest rate. The expected cash flows will
include cash flows from the sale of collateral held
or other credit enhancements that are integral to
the contractual terms.
For trade receivables and contract assets,
the Company applies a simplified approach in
calculating ECLs. Therefore, the Company does
not track changes in credit risk, but instead
recognises a loss allowance based on lifetime
ECLs at each reporting date. The Company has
established a provision matrix that is based on
its historical credit loss experience, adjusted for
forward-looking factors specific to the debtors and
the economic environment.
Derecognition
A financial asset (or, where applicable, a part of a
financial asset or part of a group of similar financial
assets) is primarily derecognised (i.e. removed
from the Company's balance sheet) when:
a) the rights to receive cash flows from the asset
have expired, or
b) The Company has transferred its rights to
receive cash flows from the asset, and
(i) the Company has transferred substantially all
the risks and rewards of the asset, or
(ii) the Company has neither transferred nor
retained substantially all the risks and rewards
of the asset, but has transferred control of
the asset.
When the Company has transferred its rights to
receive cash flows from an asset or has entered
into a passthrough arrangement, it evaluates if and
to what extent it has retained the risks and rewards
of ownership. When it has neither transferred nor
retained substantially all of the risks and rewards of
the asset, nor transferred control of the asset, the
Company continues to recognise the transferred
asset to the extent of the Company's continuing
involvement. In that case, the Company also
recognises an associated liability. The transferred
asset and the associated liability are measured on
a basis that reflects the rights and obligations that
the Company has retained.
Continuing involvement that takes the form of a
guarantee over the transferred asset is measured
at the lower of the original carrying amount of the
asset and the maximum amount of consideration
that the Company could be required to repay.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial
recognition, as financial liabilities at fair value
through profit or loss, loans and borrowings,
payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at
fair value and, in the case of loans and borrowings
and payables, net of directly attributable
transaction costs.
Subsequent measurement
The measurement of financial liabilities depends
on their classification, as described below:
Loans and borrowings
After initial recognition, interest-bearing loans
and borrowings are subsequently measured at
amortised cost using the EIR method. Gains and
losses are recognised in statement of profit and
loss when the liabilities are derecognised as well
as through the EIR amortisation process.
Amortised cost is calculated by taking into account
any discount or premium on acquisition and fees
or costs that are an integral part of the EIR. The
EIR amortisation is included as finance costs in the
statement of profit and loss.
Financial Guarantee Contracts
Financial guarantee contracts issued by the
Company are those contracts that require a
payment to be made to reimburse the holder for a
loss it incurs because the specified debtor fails to
make a payment when due in accordance with the
terms of a debt instrument. Financial guarantee
contracts are recognised initially as a liability
at fair value, adjusted for transaction costs that
are directly attributable to the issuance of the
guarantee. Subsequently, the liability is measured
at the higher of the amount of loss allowance
determined as per impairment requirements
of Ind AS 109 and the amount recognised less
cumulative amortisation.
Derecognition
A financial liability is derecognised when the
obligation under the liability is discharged or
cancelled or expires. When an existing financial
liability is replaced by another from the same
lender on substantially different terms, or the terms
of an existing liability are substantially modified,
such an exchange or modification is treated as
the derecognition of the original liability and the
recognition of a new liability. The difference in the
respective carrying amounts is recognised in the
Statement of Profit and Loss
Reclassification of financial assets
The Company determines classification of financial
assets and liabilities on initial recognition. After
initial recognition, no reclassification is made for
financial assets which are equity instruments and
financial liabilities. If the Company reclassifies
financial assets, it applies the reclassification
prospectively from the reclassification date which
is the first day of the immediately next reporting
period following the change in business model.
The Company does not restate any previously
recognised gains, losses (including impairment
gains or losses) or interest.
Offsetting of financial instruments
Financial assets and financial liabilities are offset
and the net amount is reported in the balance
sheet if there is a currently enforceable legal right
to offset the recognised amounts and there is an
intention to settle on a net basis, to realise the
assets and settle the liabilities simultaneously.
q) Derivative Financial Instruments
Initial recognition and subsequent measurement
The Company uses derivative financial instruments,
such as foreign currency denominated borrowings
and foreign exchange forward contracts to manage
some of its transaction exposures. Such derivative
financial instruments are initially recognised at fair
value on the date on which a derivative contract is
entered into and are subsequently re-measured at
fair value. Derivatives are carried as financial assets
when the fair value is positive and as financial
liabilities when the fair value is negative.
Any gains or losses arising from changes in the
fair value of derivatives are taken directly to profit
or loss. The foreign exchange forward are not
designated as cash flow hedges and are entered
into for periods consistent with foreign currency
exposure of the underlying transactions.
r) 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 the statement of cash flows, cash
and cash equivalents consist of cash and short¬
term deposits, as defined above, net of outstanding
bank overdrafts as they are considered an integral
part of the Company's cash management.
s) Dividend
The Company recognises a liability to pay dividend
to equity holders of the parent when the distribution
is authorised, and the distribution is no longer at the
discretion of the Company. As per the Corporate
Laws in India, a distribution is authorised when it
is approved by the shareholders. A corresponding
amount is recognised directly in equity.
t) Earnings Per Share
Basic Earnings Per Share is computed by
dividing the net profit attributable to the equity
shareholders of the Company to the weighted
average number of shares outstanding during the
period and Diluted earnings per share is computed
by dividing the net profit attributable to the equity
shareholders of the Company after adjusting the
effect of all dilutive potential equity shares that
were outstanding during the period. The weighted
average number of shares outstanding during the
period includes the weighted average number
of equity shares that could have issued upon
conversion of all dilutive potential.
u) Segment reporting
The Company's Chief Operating Decision maker is
the Senior Management who evaluates Company's
performance and allocates resources based on
an analysis of various performance indicators by
business verticals. Effective April 01, 2020, the
Chief Operating Decision Maker (CODM) reviews
the business as two operating segments - 'Metering
Business' and 'Strategic Investment Activity'.
Segment information has been presented in the
Consolidated Financial Statements in accordance
with Ind AS 108 notified under the Companies
(Indian Accounting Standards) Rules, 2015.
Further the geographical segment is based on the
areas in which major operating divisions of the
Company operates.
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