2.2. Summary of significant accounting policies

a. Current versus non-current classification

The Company presents assets and liabilities in the
standalone financial statements based on current/ non¬
current classification. An asset is treated as current when
it is:

i. Expected to be realised or intended to be sold or
consumed in normal operating cycle,

ii. Held primarily for the purpose of trading,

iii. Expected to be realised within twelve months after
the reporting period, or

iv. 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:

i. It is expected to be settled in normal operating
cycle,

ii. It is held primarily for the purpose of trading,

iii. It is due to be settled within twelve months after
the reporting period, or

iv. There is no unconditional right to defer the
settlement of the liability for at least twelve months
after the reporting period.

All other liabilities are classified as non-current.

Deferred tax assets and liabilities are classified as non¬
current assets and liabilities.

Advance tax paid is classified as non-current assets.

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. Fair value measurement of financial instruments

The Company measures financial instruments, such as,
derivatives at fair value at each balance sheet date using
valuation techniques.

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:

a) In the principal market for the asset or liability, or

b) In 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 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.

c. Revenue from contracts with customer

The Company recognises revenue from contracts with
customers when it satisfies a performance obligation
by transferring promised good or service to a customer.
The revenue is recognised to the extent of transaction
price allocated to the performance obligation satisfied.
Performance obligation is satisfied over time when the

transfer of control of asset (good or service) to a
customer is done over time and in other cases,
performance obligation is satisfied at a point in time.
For performance obligation satisfied over time, the
revenue recognition is done by measuring the progress
towards complete satisfaction of performance
obligation. The progress is measured in terms of a
proportion of actual cost incurred to-date, to the total
estimated cost attributable to the performance
obligation.

Transaction price is the amount of consideration to
which the Company expects to be entitled in exchange
for transferring good or service to a customer excluding
amounts collected on behalf of a third party. Variable
consideration is estimated using the expected value
method or most likely amount as appropriate in a given
circumstance. Payment terms agreed with a customer
are as per business practice and there is no financing
component involved in the transaction price.

Costs to obtain a contract which are incurred regardless
of whether the contract was obtained are charged-off
in the statement of profit and loss immediately in the
period in which such costs are incurred. Incremental
costs of obtaining a contract, if any, and costs incurred
to fulfil a contract are amortised over the period of
execution of the contract in proportion to the progress
measured in terms of a proportion of actual cost
incurred to-date, to the total estimated cost attributable
to the performance obligation.

Significant judgments are used in:

1. Determining the revenue to be recognised in case
of performance obligation satisfied over a period
of time; revenue recognition is done by measuring
the progress towards complete satisfaction of
performance obligation. The progress is measured
in terms of a proportion of actual cost incurred
to-date, to the total estimated cost attributable to
the performance obligation.

2. Determining the expected losses, which are
recognised in the period in which such losses
become probable based on the expected total
contract cost as at the reporting date.

Revenue from operations

Revenue from operation is exclusive of goods and
service tax (GST). Revenue includes adjustments made
towards liquidated damages and variation wherever
applicable. Escalation and other claims, which are not
ascertainable/acknowledged by customers are not
taken into account.

Revenue from construction/project related activity is
recognised as follows:

1. Cost plus contracts: Revenue from cost plus
contracts is recognized over time and is
determined with reference to the extent
performance obligations have been satisfied. The
amount of transaction price allocated to the
performance obligations satisfied represents the
recoverable costs incurred during the period plus
the margin as agreed with the customer.

2. Fixed price contracts: Contract revenue is
recognised over time to the extent of performance
obligation satisfied and control is transferred to
the customer. Contract revenue is recognised at
allocable transaction price which represents the
cost of work performed on the contract plus
proportionate margin, using the percentage of
completion method. Percentage of completion is
the proportion of cost of work performed to-date,
to the total estimated contract costs.

Impairment loss (termed as provision for foreseeable
losses in the standalone financial statements) is
recognized in the statement of profit and loss to the
extent the carrying amount of the contract asset exceeds
the remaining amount of consideration that the
Company expects to receive towards remaining
performance obligations (after deducting the costs that
relate directly to fulfil such remaining performance
obligations). In addition, the Company recognises
impairment loss (termed as provision for expected credit
loss on contract assets in the standalone financial
statements) on account of credit risk in respect of a
contract asset using expected credit loss model on
similar basis as applicable to trade receivables.

Contract balances

Contract assets

A contract asset is the right to consideration in exchange
for goods or services transferred to the customer. If
the Company performs by transferring goods or 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 receivables when the
rights become unconditional and contract liabilities are
recognized as and when the performance obligation is
satisfied.

Trade receivables

The trade receivables are measured at transaction price
and do not contain significant financing component.
Trade receivable represents the Group's right to an
amount of consideration that is unconditional (i.e., only
the passage of time is required before payment of the
consideration is due). Refer to accounting policies of
financial assets in financial instruments - initial
recognition and subsequent measurement.

Contract liabilities

A contract liability is the obligation to transfer goods
or services to a customer for which the Company has
received consideration (or an amount of consideration
is due) from the customer. If a customer pays
consideration before the Company transfers goods or
services to the customer, a contract liability is
recognised when the payment is made or the payment
is due (whichever is earlier). Contract liabilities are
recognised as revenue when the Company performs
under the contract.

Income from management/ technical services

Income from management/ technical services is
recognised as per the terms of the agreement on the
basis of services rendered.

Sale of electrical energy/ Renewable Energy
Certificate ('REC')

a. Revenue from energy units sold is recognised on
accrual basis as per the terms of the Power
Purchase Agreement (PPA) and Letter of Intent
(LOI) [collectively hereinafter referred to as 'the
PPAs'] and tariff rates determined by Central
Electricity Regulatory Commission ('CERC').
Revenue includes unbilled revenue accrued up to
the end of the year.

Revenue from energy units sold on a merchant
basis is recognised in accordance with billings
made to the customers based on the units of
energy delivered and rates agreed with customers.

b. Revenue from sale of infirm power are recognised
as per the guidelines of CERC. Revenue prior to
date of commercial operation are reduced from
Project cost.

c. Revenue/charges from Unscheduled Interchange
for the deviation in generation with respect to
scheduled units are recognized/ charged at rate
notified by CERC from time to time, are adjusted
to revenue from sale of energy.

d. Revenue from sale of power is net of prompt
payment rebate eligible to the customers.

e. Claims for delayed payment charges and any other
claims, which the Company is entitled to under the
PPAs, are accounted for in the year of acceptance
by the customers. Similarly commission, liquidated
damages and any other charges are accounted for
in the year of acceptance.

Interest income

Interest income is recognised on a time proportion basis
taking into account the amount outstanding and the
rate applicable except the interest income received from
customers for delayed payments which are accounted

on the basis of reasonable certainty / realisation.

For all debt instruments measured either at amortised
cost or at fair value through other comprehensive
income, interest income is recorded using the effective
interest rate (EIR). EIR is the rate that exactly discounts
the estimated future cash payments or receipts over
the expected life of the financial instrument or a shorter
period, where appropriate, to the gross carrying amount
of the financial asset or to the amortised cost of a
financial liability. When calculating the effective interest
rate, the Company estimates the expected cash flows
by considering all the contractual terms of the financial
instrument but does not consider the expected credit
losses. Interest income is included in finance income in
the statement of profit and loss. Interest income is
included in other operating income in the statement of
profit and loss.

Dividends

Dividend income is recognised when the Company's
right to receive the payment is established, which is
generally when shareholders approve the dividend.

d. Taxes on income
Current income tax

Tax expense for the year comprises current and deferred
tax. The tax currently payable is based on taxable profit
for the year. Taxable profit differs from net profit as
reported in the statement of profit and loss because it
excludes items of income or expense that are taxable
or deductible in other years and it further excludes items
that are never taxable or deductible. Current income
tax assets and liabilities are measured at the amount
expected to be recovered from or paid to the taxation
authorities. The Company's liability for current tax is
calculated using the tax rates and tax laws that have
been enacted or substantively enacted by the end of
the reporting period.

Current income tax relating to items recognised outside
profit or loss is recognised outside profit or loss (either
in other comprehensive income or in equity). Current
tax items are recognised in correlation to the underlying
transaction either in OCI or directly in equity.
Management periodically evaluates positions taken in
the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation
and establishes provisions where appropriate.

Deferred tax

Deferred tax is the tax expected to be payable or
recoverable on differences between the carrying values
of assets and liabilities in the standalone financial
statements and the corresponding tax bases used in
the computation of the taxable profit and is accounted
for using the balance sheet liability model. Deferred

tax liabilities are generally recognised for all the taxable
temporary differences. In contrast, deferred tax assets
are only recognised to the extent that is probable that
future taxable profits will be available against which
the temporary differences can be utilised.

Deferred tax assets are recognized for all deductible
temporary differences, carry forward of unused tax
credits and unused tax losses, to the extent that it is
probable that taxable profit will be available against
which the deductible temporary differences, and the
carry forward of unused tax credits and unused tax
losses can be utilized.

The carrying amount of deferred tax assets is reviewed
at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient taxable profit
will be available to allow all or part of the deferred tax
asset to be utilized.

Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply in the year when
the asset is realized or the liability is settled, based on
tax rates (and tax laws) that have been enacted or
substantively enacted at the balance sheet date.

Deferred tax relating to items recognised outside profit
or loss is recognised outside profit or loss (either in
other comprehensive income or in equity). Deferred tax
items are recognised in correlation to the underlying
transaction either in OCI or directly in equity.

Deferred tax assets and deferred tax liabilities are offset
if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred
taxes relate to the same taxable entity and the same
taxation authority.

e. Non-current assets held for sale

The Group classifies non-current assets as held for sale
if their carrying amounts will be recovered principally
through a sale rather than through continuing use.
Actions required to complete the sale should indicate
that it is unlikely that significant changes to the sale
will be made or that the decision to sell will be
withdrawn. Management must be committed to the sale
expected within one year from the date of classification.

The criteria for held for sale classification is regarded
met only when the assets is available for immediate
sale in its present condition, subject only to terms that
are usual and customary for sales of such assets, its
sale is highly probable; and it will genuinely be sold,
not abandoned. The Group treats sale of the asset to
be highly probable when:

a) The appropriate level of management is committed
to a plan to sell the asset,

b) An active programme to locate a buyer and
complete the plan has been initiated,

c) The asset is being actively marketed for sale at a
price that is reasonable in relation to its current
fair value,

d) The sale is expected to qualify for recognition as a
completed sale within one year from the date of
classification, and

e) Actions required to complete the plan indicate that
it is unlikely that significant changes to the plan
will be made or that the plan will be withdrawn.

Non-current assets held for sale are measured at the
lower of their carrying amount and the fair value less
costs to sell. Assets and liabilities classified as held for
sale are presented separately in the consolidated
balance sheet.

Property, plant and equipment and other intangible
assets once classified as held for sale/ distribution to
owners are not depreciated or amortised.

f. Property, plant and equipment

Freehold land is carried at historical cost and is not
depreciated. All other items of property, plant and
equipment are stated at historical cost less accumulated
depreciation and accumulated impairment losses, if any.
Historical cost includes expenditure that is directly
attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying
amount or recognised as a separate asset, as
appropriate, only when it is probable that future
economic benefits associated with the item will flow to
the Company and the cost of the item can be measured
reliably. The carrying amount of any component
accounted for as a separate asset are derecognised
when replaced. All other repairs and maintenance are
charged to the statement of profit and loss during the
reporting period in which they are incurred.

The Company identifies and determines cost of each
component/ part of the asset separately, if the
component/ part has a cost which is significant to the
total cost of the asset having useful life that is materially
different from that of the remaining asset. These
components are depreciated over their useful lives; the
remaining asset is depreciated over the life of the
principal asset.

Depreciation is calculated on a straight-line basis over
the estimated useful lives of the assets as follows:

* The Company, based on technical assessment made
by the technical expert and management estimate,
depreciates certain items of plant and equipment over
estimated useful lives which are different from the useful
life prescribed in Schedule II to the Companies Act,
2013.

Further, the management has estimated the useful lives
of asset individually costing Rs 5,000 or less to be less
than one year, whichever is lower than those indicated
in Schedule II. 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.

The residual values, useful lives and methods of
depreciation of property, plant and equipment are
reviewed at each financial year end and adjusted
prospectively, if appropriate.

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
standalone statement of profit and loss when the asset
is derecognised.

g. Intangible assets

Intangible assets acquired separately are measured on
initial recognition at cost. Following initial recognition,
intangible assets are carried at cost less any
accumulated amortisation and accumulated impairment
losses, if any.

The useful lives of intangible assets are assessed as
either finite or indefinite.

Intangible assets with finite lives are amortised over
the useful economic life and assessed for impairment
whenever there is an indication that the intangible asset
may be impaired. The amortisation period and the
amortisation method for an intangible asset with a finite
useful life are reviewed at least at the end of each
reporting period with the effect of any change in the
estimate being accounted for on a prospective basis.
Changes in the expected useful life or the expected
pattern of consumption of future economic benefits
embodied in the asset are considered to modify the
amortisation period or method, as appropriate, and are
treated as changes in accounting estimates. The
amortisation expense on intangible assets with finite
lives is recognised in the standalone statement of profit
and loss unless such expenditure forms part of carrying
value of another asset.

Gains or losses arising from derecognition 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 standalone
statement of profit and loss when the asset is
derecognised.

A summary of the policies applied to the Company's
intangible assets is, as follows:

h. Borrowing cost

Borrowing costs consist of interest and other costs that
an entity incurs in connection with the borrowing of
funds including interest expense calculated using the
effective interest method. Borrowing cost also includes
exchange differences to the extent regarded as an
adjustment to the 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 until such time as the assets are substantially
ready for the intended use or sale. All other borrowing
costs are expensed in the period in which they occur.

i. Leases

The determination of whether an arrangement is (or
contains) a lease is based on the substance of the
arrangement at the inception of the lease. The
arrangement is, or contains, a lease if fulfilment of the
arrangement is dependent on the use of a specific asset
or assets and the arrangement conveys a right to use
the asset or assets, even if that right is not explicitly
specified in an arrangement.

A lease is classified at the inception date as a finance
lease or an operating lease.

The Company as a lessee

Assets acquired on leases where a significant portion
of risk and rewards of ownership are retained by the
lessor are classified as operating leases. Lease rental
are charged to statement of profit and loss on straight¬
line basis except where scheduled increase in rent
compensate the lessor for expected inflationary costs.

The Company enters into leasing arrangements for
various assets. The assessment of the lease is based on
several factors, including, but not limited to, transfer of
ownership of leased asset at end of lease term, lessee's
option to extend/purchase etc.

At lease commencement date, the Company recognises
a right-of-use asset and a lease liability on the balance
sheet. The right-of-use asset is measured at cost, which
is made up of the initial measurement of the lease
liability, any initial direct costs incurred by the Company,
an estimate of any costs to dismantle and remove the
asset at the end of the lease (if any), and any lease
payments made in advance of the lease commencement
date (net of any incentives received).

The Company depreciates the right-of-use assets on a
straight-line basis from the lease commencement date
to the earlier of the end of the useful life of the right-
of-use asset or the end of the lease term. The Company
also assesses the right-of-use asset for impairment
when such indicators exist. At lease commencement
date, the Company measures the lease liability at the
present value of the lease payments unpaid at that date,
discounted using the interest rate implicit in the lease
if that rate is readily available or the Company's
incremental borrowing rate. Lease payments included
in the measurement of the lease liability are made up
of fixed payments (including in substance fixed
payments) and variable payments based on an index
or rate. Subsequent to initial measurement, the liability
will be reduced for payments made and increased for
interest. It is re-measured to reflect any reassessment
or modification, or if there are changes in in-substance
fixed payments. When the lease liability is re-measured,
the corresponding adjustment is reflected in the right-
of-use asset. The Company has elected to account for
short-term leases using the practical expedients. Instead
of recognising a right-of-use asset and lease liability,
the payments in relation to these are recognised as an
expense in statement of profit and loss on a straight¬
line basis over the lease term.

The Company as a lessor

Leases are classified as finance leases when substantially
all of the risks and rewards of ownership transfer from
the Company to the lessee. Amounts due from lessees
under finance leases are recorded as receivables at the
Company's net investment in the leases. Finance lease
income is allocated to accounting periods so as to
reflect a constant periodic rate of return on the net
investment outstanding in respect of the lease.

Leases in which the Company does not transfer
substantially all the risks and rewards of ownership of
an asset are classified as operating leases. Rental income
from operating lease is recognised on a straight-line
basis over the term of the relevant lease. Initial direct
costs incurred in negotiating and arranging an
operating lease are added to the carrying amount of
the leased asset and recognised over the lease term on
the same basis as rental income.

j. Inventories

Raw materials, components, stores and spares are
valued at lower of cost and net realisable value.
However, 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 of raw materials, components and stores and
spares is determined on a weighted average basis.

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.

Costs incurred that relate to future activities on the
contract are recognised as “Contract work in progress”.

Contract work in progress comprising construction costs
and other directly attributable overheads is valued at
lower of cost and net realisable value.

k. Impairment of non-financial assets

As at the end of each accounting year, the Company
reviews the carrying amounts of its Property, plant and
equipment, intangible assets to determine whether
there is any indication that those assets have suffered
an impairment loss. If such indication exists, the said
assets are tested for impairment so as to determine
the impairment loss, if any. Goodwill and the intangible
assets with indefinite life are tested for impairment each
year.

Impairment loss is recognised when the carrying
amount of an asset exceeds its recoverable amount.
Recoverable amount is determined:

(i) in the case of an individual asset, at the higher of
the fair value less costs of disposal and the value
in use; and

(ii) in the case of a cash generating unit (a group of
assets that generates identified, independent cash
flows), at the higher of the cash generating unit's
net fair value less costs of disposal and the value
in use.

(The amount of value in use is determined as the present
value of estimated future cash flows from the continuing
use of an asset and from its disposal at the end of its
useful life. For this purpose, the discount rate (pre-tax)
is determined based on the weighted average cost of
capital of the company suitably adjusted for risks
specified to the estimated cash flows of the asset).

For this purpose, a cash generating unit is ascertained
as the smallest identifiable group of assets that
generates cash inflows that are largely independent of
the cash inflows from other assets or groups of assets.

If recoverable amount of an asset (or cash generating
unit) is estimated to be less than its carrying amount,
such deficit is recognised immediately in the statement
of profit and loss as impairment loss and the carrying
amount of the asset (or cash generating unit) is reduced
to its recoverable amount.

When an impairment loss subsequently reverses, the
carrying amount of the asset (or cash generating unit)
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 is recognised for
the asset (or cash generating unit) in prior years. A
reversal of an impairment loss is recognised
immediately in the statement of profit and loss.

l. Government Grant

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. When the
Group receives grants of non-monetary assets, the asset
and the grant are recorded at fair value amounts and
released to profit or loss over the expected useful life
in a pattern of consumption of the benefit of the
underlying asset i.e. by equal annual instalments. When
loans or similar assistance are provided by governments
or related institutions, with an interest rate below the
current applicable market rate, the effect of this
favourable interest is regarded as a government grant.
The loan or assistance is initially recognised and
measured at fair value and the government grant is
measured as the difference between the initial carrying
value of the loan and the proceeds received. The loan
is subsequently measured as per the accounting policy
applicable to financial liabilities.