2 SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of preparation of financial statements

The Standalone Financial Statements of the
Company have been prepared in accordance with
Indian Accounting Standards (Ind AS) prescribed
under section 133 of the Companies Act 2013, read
with Companies (Indian Accounting Standard)
Rules, 2015 as amended time to time.

The accounting policies have been consistently
applied by the Company in preparation of
the Standalone Financial Information and are
consistent with those adopted in the preparation
of the Ind AS financial statements.

2.2 Basis of preparation and presentation

The Financial Information have been prepared on a
historical cost basis considering the applicable Act
except the following material items that have been
measured at fair value as required by relevant
Ind AS. Nevertheless, historical cost is generally
based at the fair value of the consideration given
in exchange for goods and services.

The Financial Information are presented in
Indian Rupee (?) and all values are rounded to
the Rupee in millions, unless otherwise stated.
Whenever the Company changes the presentation
or classification of items in its financial information
materially, the Company reclassifies comparative
amounts, unless impracticable.

2.3 Use of Estimate and judgment

In the application of accounting policy which
are described in notes below, the management

is required to make judgment, estimates and
assumptions about the carrying amount of assets
and liabilities, income and expenses, contingent
liabilities and the accompanying disclosures that
are not readily apparent from other sources.
The estimates and associated assumptions are
based on historical experience and other factors
that are considered to be relevant and are
prudent and reasonable. Actual results may differ
from those estimates.

The estimates and underlying assumptions are
reviewed on ongoing basis. Revisions to accounting
estimates are recognized in the period in which
the estimates are revised if the revision affects
only that period, or in the period of revision and
future periods if the revision affects both current
and future period.

The few critical estimations and judgments made
in applying accounting policies are:

a Property, Plant and Equipment:

Useful life of Property Plant and Equipment and
Intangible Assets are as specified in Schedule II to
the Act, and on certain intangible assets based on
technical advice which considered the nature of
the asset, the usage of the asset and anticipated
technological changes.

b Impairment of Non-financial Assets:

For calculating the recoverable amount of non¬
financial assets, the Company is required to
estimate the value-in-use of the asset or the
Cash Generating Unit and the fair value less
costs to disposal. For calculating value in use
the Company is required to estimate the cash
flows to be generated from using the asset.
The fair value of an assets is estimated using a
valuation technique where observable prices are
not available. Further, the discount rate used for
value in use calculations includes an estimate of
risk assessment specific to the asset.

c Impairment of Financial Assets:

The Company impairs financial assets other than
those measured at fair value through profit or
loss or designated at fair value through other
comprehensive income on expected credit losses.
The estimation of expected credit loss includes
the estimation of probability of default (PD), loss
given default (LGD) and the exposure at default
(EAD). Estimation of probability of default apart
from involving trend analysis of past delinquency

rates include an estimation on forward-looking
information relating to not only the counterparty
but also relating to the industry and the economy
as a whole. The probability of default is estimated
for the entire life of the contract by estimating
the cash flows that are likely to be received in
default scenario. The lifetime PD is reduced to 12
month PD based on an assessment of past history
of default cases in 12 months. Further, the loss
given default is calculated based on an estimate
of the value of the security recoverable as on
the reporting date. The exposure at default is the
amount outstanding at the balance sheet date.

d Defined Benefit Plans:

The cost of the defined benefit plan and other
post-employment benefits and the present value
of such obligations are determined using actuarial
valuations.

An actuarial valuation involves making various
assumptions that may differ from actual
developments in the future. These include the
determination of the discount rate, future salary
increases, mortality rates and attrition rate. Due to
the complexities involved in the valuation and its
long-term nature, a defined benefit obligation is
highly sensitive to changes in these assumptions.
All assumptions are reviewed at each reporting
date.

e Fair Value Measurement of Financial Instruments:

When the fair values of financial assets and
financial liabilities recorded in the balance sheet
cannot be measured based on quoted prices in
active markets, their fair value is measured using
valuation techniques including the Discounted
Cash Flow (DCF) model. The inputs to these
models are taken from observable markets where
possible, but where this is not feasible, a degree of
judgement is required in establishing fair values.
Judgments include considerations of inputs such
as liquidity risk, credit risk and volatility. Changes in
assumptions about these factors could affect the
reported fair value of financial instruments.

f Allowances for expected credit loss

The Company makes provision for expected
credit losses through appropriate estimations
of irrecoverable amount. The identification of
expected credit loss requires use of judgment
and estimates. The Company evaluates trade
receivables ageing and makes a provision for
those debts as per the provisioning policy.

Where the expectation is different from the original
estimate, such difference will impact the carrying
value of the trade and other receivables and
doubtful debts expenses in the period in which
such estimate has been changed.

g Valuation of deferred tax

The Company reviews the carrying amount of
deferred tax assets at the end of each reporting
period.

h Lease

Lease accounting after evaluating the right
to use the underlying assets, substance of
the transactions including legally enforceable
arrangements and other significant terms and
conditions of the arrangement to conclude whether
the arrangements meet the criteria under Ind AS
116.

2.4 Property, Plant and Equipment

Property, plant and equipment are stated at cost
less accumulated depreciation and accumulated
impairment losses except freehold land which is
not depreciated. Cost includes purchase price
(after deducting trade discount / rebate), non¬
refundable duties and taxes, cost of replacing
the component parts, borrowing costs and other
directly attributable cost to bringing the asset to
the location and condition necessary for it to be
capable of operating in the manner intended by
management, and the initial estimates of the cost
of dismantling / removing the item and restoring
the site on which it is located.

Spare parts procured along with the Plant and
Equipment or subsequently individually which meets
the recognition criteria of PPE are capitalized and
added to the carrying amount of such items.
The carrying amount of those spare parts that
are replaced are derecognized when no future
economic benefits are expected from their use or
upon disposal. If the cost of the replaced part is
not available, the estimated cost of similar new
parts is used as an indication of what the cost of
the existing part was when the item was acquired.

An item of PPE is derecognized on disposal or when
no future economic benefits are expected from
use. Any gain or loss arising on the derecognition
of an item of property, plant and equipment is
determined as the difference between the net
disposal proceeds and the carrying amount of

the asset and is recognized in Statement of Profit
and Loss.

The depreciable amount of an asset is determined
after deducting its residual value. Where the
residual value of an asset increases to an amount
equal to or greater than the asset’s carrying
amount, no depreciation charge is recognized
till the asset’s residual value decreases below the
asset’s carrying amount. Depreciation of an asset
begins when it is available for use, i.e., when it is
in the location and condition necessary for it to
be capable of operating in the intended manner.
Depreciation of an asset ceases at the earlier of
the date that the asset is classified as held for sale
in accordance with IND AS 105 and the date that
the asset is derecognized.

Impairment of tangible assets

At the end of each reporting period, the Company
reviews the carrying amounts of i ts PPE to determine
whether there is any indication that these assets
have suffered an impairment loss. If any such
indication exists, the recoverable amount of the
asset is estimated in order to determine the extent
of the impairment loss (if any). Where it is not
possible to estimate the recoverable amount of
an individual asset, the Company estimates the
recoverable amount of the cash-generating unit
(‘CGU’) to which the asset belongs. When the
carrying amount of an asset or CGU exceeds
its recoverable amount, the asset is considered
impaired and is written down to its recoverable
amount.

The resulting impairment loss is recognized in the
Statement of Profit and Loss.

Recoverable amount is the higher of fair value
less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are
discounted to their present value using a pre¬
tax discount rate that reflects current market
assessments of the time value of money and the
risks specific to the asset. In determining fair value
less cost to sell, recent market transactions are
taken into account. If no such transactions can be
identified, an appropriate valuation model is used.

Where an impairment loss subsequently
reverses, the carrying amount of the asset or
CGU is increased to the revised estimate of its
recoverable amount, but so that the increased
carrying amount does not exceed the carrying
amount that would have been determined had no

impairment loss been recognized for the asset or
CGU in prior years. A reversal of an impairment
loss is recognized in the Statement of Profit and
Loss.

2.5 Intangible assets

Intangible assets are stated at cost of acquisition
or construction less accumulated amortization and
impairment, if any. Intangible assets purchased
are measured at cost as at the date of acquisition,
as applicable, less accumulated amortization and
accumulated impairment, if any. The estimated
useful life of an identifiable intangible asset is
based on a number of factors including the effects
of obsolescence, demand, competition, and other
economic factors (such as the stability of the
industry, and known technological advances), and
the level of maintenance expenditures required to
obtain the expected future cash flows from the
asset.

2.6 Foreign Currency Transactions

The financial information of Company are
presented in which is also the functional
currency. In preparing the financial information,
transactions in currencies other than the entity’s
functional currency are recognized at the rates
of exchange prevailing at the dates of the
transactions. The date of transaction in case of
advance receipts is determined considering the
advance receipts and subsequent exports as a
single transaction. At the end of each reporting
period, monetary items denominated in foreign
currencies are translated at the rates prevailing
at that date. Non-monetary items denominated in
foreign currency are reported at the exchange
rate ruling on the date of transaction.

Exchange differences on monetary items are
recognized in the Statement of Profit and Loss in
the period in which they arise.

2.7 Inventories

Traded goods are valued at lower of cost and
net realizable value. Cost of inventories comprises
all costs of purchase price and other incidental
costs incurred in bringing the inventories to their
present location and condition. Cost is determined
on weighted average basis Net realizable value is
the estimated selling price in the ordinary course
of business, less estimated costs of completion
and to make the sale Goods and materials in
transit include materials, duties and taxes (other
than those subsequently recoverable from
tax authorities) labour cost and other related
overheads incurred in bringing the inventories to
their present location and condition.

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

The amount of any write-down of inventories
to net realizable value and all abnormal losses
of inventories are recognized as expense in the
Statement of Profit and Loss in the period in which
such write-down or loss occurs. The amount of
any reversal of the write-down of inventories
arising from increase in the NRV is recognized
as a reduction from the amount of inventories
recognized as an expense in the period in which
reversal occurs.

2.8 Fair value measurement

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, regardless of whether
that price is directly observable or estimated using
another valuation technique. In estimating the fair
value of an asset or a liability, the Company takes
into account the characteristics of asset and
liability if market participants would take those
into consideration. Fair value for measurement
and / or disclosure purposes in these Financial
Statements is determined on such basis except
for transactions in the scope of Ind AS 2, 17 and
36. Normally at initial recognition, the transaction
price is the best evidence of fair value.

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 those are
appropriate in the circumstances and for which
sufficient data are available to measure fair value,
maximizing the use of relevant observable inputs
and minimizing the use of unobservable inputs.

All financial assets and financial liabilities for which
fair value is measured or disclosed in the Financial
Statements are categorized 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.

Financial assets and financial liabilities that are
recognized at fair value on a recurring basis,
the Company determines whether transfers have
occurred between levels in the hierarchy by
re-assessing categorization at the end of each
reporting period.

2.9 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. The Company recognizes a financial asset
or financial liability in its balance sheet only when
the entity becomes party to the contractual
provisions of the instrument.

a Financial Assets

A financial asset inter-alia includes any asset that
is cash, equity instrument of another entity or
contractual obligation to receive cash or another
financial asset or to exchange financial asset
or financial liability under condition that are
potentially favorable to the Company.

Financial assets of the Company comprise trade
receivable, cash and cash equivalents, Bank
balances, loans to employee / related parties /
others, security deposit, claims recoverable etc.

Initial recognition and measurement

All financial assets except trade receivable are
recognized initially at fair value. The financial
assets not recorded at fair value through profit
or loss, are recognized initially at fair value plus
transaction costs that are attributable to the
acquisition of the financial asset. Transaction costs
of financial assets carried at fair value through
profit or loss are charged in the Statement of

Profit and Loss. Where transaction price is not the
measure of fair value and fair value is determined
using a valuation method that uses data from
observable market, the difference between
transaction price and fair value is recognized in
the Statement of Profit and Loss and in other
cases spread over life of the financial instrument
using effective interest.

The Company measures the trade receivables at
their transaction price, if the trade receivables do
not contain a significant financing component.

Subsequent measurement

For purposes of subsequent measurement financial
assets are classified in three categories:

- Financial assets measured at amortized cost

- Financial assets at fair value through OCI

- Financial assets at fair value through profit or
loss

Financial assets measured at amortized cost
Financial assets are measured at amortized cost
if the financials asset is held within a business
model whose objective is to hold financial assets
in order to collect contractual cash flows and the
contractual terms of the financial asset give rise
on specified dates to cash flows that are solely
payments of principal and interest on the principal
amount outstanding. These financials assets are
amortized using the effective interest rate (‘EIR’)
method, less impairment. Amortized 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 amortization
is included in finance income in the Statement of
Profit and Loss. The losses arising from impairment
are recognized in the Statement of Profit and Loss.

Financial assets at fair value through OCI
(‘FVTOCI’)

Financial assets are measured at fair value
through other comprehensive income if the
financial asset is held within a business model
whose objective is achieved by both collecting
contractual cash flows and selling financial assets
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. At initial
recognition, an irrevocable election is made (on
an instrument-by-instrument basis) to designate

investments in equity instruments other than held
for trading purpose at FVTOCl.Fair value changes
are recognized in the other comprehensive income
(‘OCI’). However, the Company recognizes interest
income, impairment losses and reversals and
foreign exchange gain or loss in the Statement of
Profit and Loss. On derecognition of the financial
asset other than equity instruments designated
as FVTOCI, cumulative gain or loss previously
recognized in OCI is reclassified to the Statement
of Profit and Loss.

Financial assets at fair value through profit or loss
(‘FVTPL’)

Any financial asset that does not meet the criteria
for classification as at amortized cost or as financial
assets at fair value through other comprehensive
income is classified as financial assets at fair value
through profit or loss. Further, financial assets
at fair value through profit or loss also include
financial assets held for trading and financial
assets designated upon initial recognition at fair
value through profit or loss. Financial assets are
classified as held for trading if they are acquired
for the purpose of selling or repurchasing in the
near term. Financial assets at fair value through
profit or loss are fair valued at each reporting date
with all the changes recognized in the Statement
of Profit and Loss.

Derecognition

The Company derecognizes a financial asset only
when the contractual rights to the cash flows from
the asset expire, or when it transfers the financial
asset and substantially all the risks and rewards
of ownership of the asset to another entity.
If the Company neither transfers nor retains
substantially all the risks and rewards of ownership
and continues to control the financial asset, the
Company recognizes its retained interest in the
asset and an associated liability for amounts it
may have to pay.

Impairment of financial assets

The Company assesses impairment based on

expected credit loss (‘ECL’) model on the following:

- Financial assets that are measured at
amortized cost; and

- Financial assets measured at FVTOCI.

ECL is measured through a loss allowance on a
following basis:-

- The 12 month expected credit losses (expected

credit losses that result from those default
events on the financial instruments that are
possible within 12 months after the reporting
date)

- Full life time expected credit losses (expected
credit losses that result from all possible default
events over the life of financial instruments)

The Company follows ‘simplified approach’ for
recognition of impairment on trade receivables
or contract assets resulting from normal business
transactions. The application of simplified approach
does not require the Company to track changes
in credit risk. However, it recognizes impairment
loss allowance based on lifetime ECLs at each
reporting date, from the date of initial recognition.

For recognition of impairment l oss on other financial
assets, the Company determines whether there
has been a significant increase in the credit risk
since initial recognition. If credit risk has increased
significantly, lifetime ECL is provided. For assessing
increase in credit risk and impairment loss, the
Company assesses the credit risk characteristics
on instrument-by-instrument basis.

ECL is the difference between all contractual cash
flows that are due to the Company in accordance
with the contract and all the cash flows that the
entity expects to receive (i.e. all cash shortfalls)
discounted at the original EIR.

Impairment loss allowance (or reversal) recognized
during the period is recognized as expense/income
in the Statement of Profit and Loss.

b Financial Liabilities

The Company’s financial liabilities include loans
and borrowings including bank overdraft, trade
payables, accrued expenses and other payables
etc.

Initial recognition and measurement
All financial liabilities at initial recognition are
classified as financial liabilities at amortized cost
or financial liabilities at fair value through profit
or loss, as appropriate. All financial liabilities
classified at amortized cost are recognized
initially at fair value net of directly attributable
transaction costs. Any difference between the
proceeds (net of transaction costs) and the fair
value at initial recognition is recognized in the
Statement of Profit and Loss or in the CWIP, if
another standard permits inclusion of such cost in

the carrying amount of an asset over the period
of the borrowings using the Effective interest rate
(‘EIR’) method.

Subsequent measurement

The subsequent measurement of financial liabilities
depends upon the classification as described
below:-

Financial Liabilities classified as Amortized Cost
Financial Liabilities that are not held for
trading and are not designated as at FVTPL
are measured at amortized cost at the end of
subsequent accounting periods. Amortized 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. Interest expense
that is not capitalized as part of costs of assets
is included as Finance costs in the Statement of
Profit and Loss.

Financial Liabilities classified as Fair value through
profit and loss (FVTPL)

Financial liabilities classified as FVTPL includes
financial liabilities held for trading and financial
liabilities designated upon initial recognition as
FVTPL.

Financial liabilities are classified as held for
trading if they are incurred for the purpose of
repurchasing in the near term. Financial liabilities
designated upon initial recognition at FVTPL only
if the criteria in Ind AS 109 is satisfied.

Derecognition

A financial liability is derecognized when the
obligation under the liability is discharged /
cancelled / expired. 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 de recognition of the original liability and the
recognition of a new liability. The difference in the
respective carrying amounts is recognized in the
Statement of Profit and Loss.

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 recognized amounts and there is an
intention to settle on a net basis, to realize the
assets and settle the liabilities simultaneously.

Share capital and share premium
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue
of new shares are shown in equity as a deduction
net of tax from the proceeds. Par value of the
equity share is recorded as share capital and
the amount received in excess of the par value is
classified as share premium.

Dividend Distribution to equity shareholders

The Company recognizes 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 other equity along
with any tax thereon.

2.10 Government Grants

Government grants are recognized when there
is reasonable assurance that the Company will
comply with the conditions attached to them and
that the grants will be received.

Grants in the form of non-monetary assets are
recognized at fair value and presented as deferred
income which is recognized in the Statement of
Profit and Loss over the expected useful life in
a pattern of consumption of the benefit of the
underlying asset.

Government grants (grants related to income) are
recognized as income over the periods necessary
to match them with the costs for which they
are intended to compensate on a systematic
basis. Government grants that are receivable
as compensation for expenses or losses already
incurred or for the purpose of providing immediate
financial support with no future related costs are
recognized in the Statement of Profit and Loss
in the period in which they become receivable.
Grants related to income are presented under
other income in the Statement of Profit and Loss
except for grants received in the form of rebate
or exemption which are deducted in reporting the
related expense.

The benefit of a government loan at a below-
market rate of interest is treated as a government
grant and measured as the difference between
proceeds received and the fair value of the
loan based on prevailing market interest rates.
The grant set up as deferred income is recognized

in the Statement of Profit and Loss on a systematic
basis.

2.11 Investments

Current investments are carried at lower of cost
and fair value. Non-current investments are
stated at cost. Provision for diminution in the value
of long term investment is made only if such a
decline is other than temporary.

2.12 Leases

Where the Company is a lessee-

At inception of a contract, the Company assesses
whether a contract is or contains a l ease. A contract
is, or contains, a lease if a contract conveys the
right to control the use of an identified asset for
a period of time in exchange for consideration.
To assess whether a contract conveys the right to
control the use of an identified asset, the Company
assesses whs whether:

- the contract conveys the right to use an
identified asset;

- the Company has the right to obtain
substantially all the economic benefits from
use of the asset throughout the period of use;
and

- the Company has the right to direct the use
of the identified asset.

At the date of commencement of a lease, the
Company recognizes a right-of-use asset (“ROU
assets”) and a corresponding lease liability for all
leases, except for leases with a term of twelve
months or less (short-term leases) and low value
leases. For short-term and low value leases, the
Company recognizes the lease payments as an
operating expense on a straight-line basis over
the term of the lease.

Lease liability is measured by discounting the lease
payments using the interest rate implicit in the
lease or, if not readily determinable, using the
incremental borrowing rates.

Lease payments are allocated between principal
and finance cost. The finance cost is charged
to Statement of Profit and Loss over the lease
period so as to produce a constant periodic rate
of interest on the remaining balance of the liability
for each period. The ROU assets are initially
recognized at cost, which comprises the initial
amount of the lease liability adjusted for any lease
payments made at or prior to the commencement

date of the lease plus any initial direct costs
less any lease incentives and restoration costs.
They are subsequently measured at cost less
accumulated depreciation and impairment losses,
if any. ROU assets are depreciated on a straight¬
line basis over the asset’s useful life or the lease
whichever is shorter. Impairment of ROU assets
is in accordance with the Company’s accounting
policy for impairment of tangible and intangible
assets.

Where the Company is a lessor-

Lease income from operating leases where the
Company is a lessor is recognized in the Statement
of Profit and Loss on a straight- line basis over the
lease term.

2.13 Cash and cash equivalents

Cash and cash equivalents comprise cash at banks
and on hand, cheques 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.