2. SUMMARY OF MATERIAL ACCOUNTING
POLICIES:

2.1 Statement of compliance:

The financial statements have been prepared in
accordance with Indian Accounting Standards
(Ind AS) notified under the Companies (Indian
Accounting Standards) Rules, 2015 read with Section
133 of the Companies Act, 2013. The standalone
financial statements have been prepared on Accrual
and Going Concern basis and these policies are
applied consistently.

2.2 Basis of preparation and presentation:

The financial statements have been prepared on a
historical cost basis except for the revaluations of
certain properties and financial instruments that are
measured at revalued amounts or fair values at the end
of each reporting period, as explained in the accounting
policies below.

Historical cost is generally based on the fair value of the
consideration given in exchange for goods and services.

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 the
asset or liability as if market participants would take
those characteristics into account when pricing the
asset or liability at the measurement date.

In addition, for financial reporting purposes, fair value
measurements are categorized into Level 1, 2, or 3
based on the degree to which the inputs to the fair value
measurements are observable and the significance of
the inputs to the fair value measurement in its entirety,
which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities that
the entity can access at the measurement date;

• Level 2 inputs are other than quoted prices
included within Level 1, that are observable for the
asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the
asset or liability.

All assets and liabilities have been classified as current
or non-current as per the company's normal operating
cycle, paragraph 66 and 69 of Ind AS 1 and other
criteria as set out in the Division II of Schedule III to the
Companies Act, 2013.

An asset is treated as current when it is:

• Expected to be realized or intended to be sold or
consumed in normal operating cycle*

• Held primarily for the purpose of trading,

• Expected to be realized 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

• It 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 terms of the liability
that could, at the option of the counterparty, result
in its settlement by the issue of equity instruments
do not affect its classification.

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 realization in cash and cash
equivalents. The Company has identified twelve months as its
operating cycle.

2.3 Non-current assets held for sale:

Non-current assets are classified as held for sale if their
carrying amount will be recovered principally through
a sale transaction rather than through continuing use.
This condition is regarded as met only when the asset
is available for immediate sale in its present condition
subject only to terms that are usual and customary for
sales of such asset and its sale is highly probable.

Non-current assets classified as held for sale are
measured at the lower of their carrying amount and fair
value less costs to sell.

2.4 Revenue recognition:

Revenue towards satisfaction of a performance
obligation is measured at the amount of transaction
price (net of variable consideration) allocated to that
performance obligation. The transaction price of
goods sold and services rendered is net of variable
consideration on account of various discounts and
schemes offered by the Company as part of the contract.

Consequent to the introduction of Goods and Service
Tax (GST) with effect from July 1,2017, Central Excise,
Value Added Tax (VAT) etc. have been subsumed into
GST In accordance with Ind-AS 115 on Revenue and
Schedule III of the Companies Act, 2013, unlike Excise
Duties, levies like GST, VAT etc. are not part of Revenue.

2.4.1 Sale of goods:

Revenue from the sale of goods is recognised when
the goods are delivered and titles have passed, at
which time all the following conditions are satisfied:

• the Company is recognising revenue as and
when it satisfies the performance obligation
by transferring promised goods to a customer
and customer obtains control of the same;

• the Company retains neither continuing
managerial involvement to the degree usually
associated with ownership nor effective
control over the goods sold;

• the amount of revenue can be
measured reliably;

• it is probable that the economic benefits
associated with the transaction will flow
to the Company;

• the costs incurred or to be incurred in respect
of the transaction can be measured reliably.

The Company derives its revenue from sale of
engines, power generating sets, farm equipment
& Spares. It also earns revenue from servicing
power generating sets. The Company also trades
in the spares of engines and other products like
construction equipment and electric vehicles.

In case of exports the revenue is recognized
based on the Bills of Lading received from the
shipping companies who assume control of goods
on behalf of the customers.

The products which are sold to OEMs and direct
end customers, the prices are pre-determined as
per negotiations and long term supply contracts.
The products through dealer network are sold at
dealer prices as determined and circulated by the
Company periodically.

The Company also offers cash discounts and
volume discounts and the same are netted off
against the gross revenue. The volume discounts
are accrued on a regular basis based on total
sales of each dealer / customer.

The Company disaggregates revenue on the basis
of its segments viz. engines, electric mobility and
others as well as geographical operations viz.
domestic and overseas. The Company believes
that this disaggregation best depicts how the
nature, amount, timing and uncertainty of revenues
and cash flows are affected by industry, market
and other economic factors.

Our customers have the contractual right to return
goods only when authorized by the company.
An estimate is made of goods that will be returned
and liability is recognized for this amount using a
best estimate based on management's judgment.

2.4.2 Rendering of services:

Revenue in respect of services is recognised
in the accounting year in which the services
are performed in accordance with the terms
of the contract with customers and there are no
unfulfilled obligations. The nature of services that
company offers to the customer includes After
Market railway service for Escorting of gensets
in power car, Maintenance & overhauling of
engine at Railway site/ dealer place, Overhauling
of engines at company's own premises and
Comprehensive maintenance contract (CMC) /
Annual maintenance contract (AMC).

2.4.3 Dividend and interest income:

Dividend income from investments is recognised
when the Company's right to receive payment has
been established.

Interest income from a financial assets is
recognised when it is probable that the economic
benefit will flow to the Company and the amount of
income can be measured reliably. Interest income
is accrued on a time basis, by reference to the
principal outstanding and at the effective interest
rate applicable.

2.5 Foreign currencies:

Items included in the financial statements are measured
using the currency of the primary economic environment
in which the Company operates (‘the functional
currency'). These financial statements are presented in
Indian rupee (INR), which is the Company's functional
and presentation currency. Transactions in currencies
other than the Company's functional currency (foreign
currencies) are recognised at the rate of exchange
prevailing at the dates of transactions. At the end of
each reporting period monetary items denominated
in foreign currencies are retranslated at the rates
prevailing at that date.

Exchange differences on monetary items are
recognised in the Statement of profit and loss in the year
in which they arise except for exchange differences
arising on marking forward contracts to market rates
are recognised in the Statement of profit and loss in
the year in which they arise and the premium paid /
received is accounted as expenses / income over the
period of contract.

2.6 Borrowing cost:

Borrowing costs that are attributable to the acquisition,
construction or production of qualifying assets are
capitalised as part of the cost of such assets till such
time the asset is ready for its intended use or sale.
A qualifying asset is an asset that necessarily requires
a substantial period of time to get ready for its intended
use or sale. All other borrowing costs are recognised as
an expense in the year in which they are incurred.

2.7 Employee benefits:

2.7.1 Defined Contribution Plans:

The eligible employees of the Company are
entitled to receive benefits under provident
fund schemes defined contribution plans, in
which both employees and the Company make
monthly contributions at a specified percentage
of the employees' salary. Payment to defined
contribution plans are recognized as an expense
when employees have rendered services entitling
them to the contributions. The contributions are
paid to the respective Regional Provident Fund
Commissioner and the Central Provident Fund
under the State Pension scheme. There are no other
obligations other than the contribution payable

to the Regional Provident Fund Commissioner
and the Central Provident Fund under the State
Pension scheme.

Contribution to Superannuation Fund and
National Pension Scheme, a defined contribution
scheme, is made at pre-determined rates to the
Superannuation Fund managed by Life Insurance
Corporation and various asset management
companies under National Pension Scheme and
is charged to the Statement of profit and loss.
There are no other obligations other than the
contribution payable to the Superannuation Fund
& National Pension Scheme.

2.7.2 Defined Benefit Plans:

For defined benefit retirement plans (i.e.
gratuity and ex-gratia) the cost of providing benefits
is determined using the projected unit credit
method, with independent actuarial valuations
being carried out at the end of each annual
reporting period. Re-measurement, comprising
actuarial gains and losses, the effect of the changes
to the asset ceiling and the return on plan assets
(excluding interest), is reflected immediately in the
statement of financial position with a charge or
credit recognised in other comprehensive income
in the period in which they occur. Defined benefit
costs are categorised as follows:

• service cost (including current service cost,
past service cost, as well as gains and losses
on curtailments and settlements) - recognized
in profit and loss when the plan amendment
or curtailment occurs or when the Company
recognizes related restructuring costs or
termination benefits if earlier, gain or losses
on settlement of defined benefit plan are
recognized when the settlement occurs.

• net interest expense or income - net interest is
calculated by applying a discount rate to the
net defined benefit liability or assets.and;

• re-measurement.

2.7.3 Compensated Absences:

Compensated absences which accrue to
employees and which are expected to be availed

within twelve months immediately following the
year end are reported as expenses during the year
in which the employee performs the service that
the benefit covers and the liabilities are reported
at the undiscounted amount of the benefit, and
where the availment or encashment is otherwise
not expected to wholly occur within the next twelve
months, the liability on account of the benefit
is actuarially determined using the projected
unit credit method.

There is mandatory clause to avail certain no.
of privilege leaves during the financial year, failing
which, unavailed minimum privilege leaves will
lapse and can not be carried forward.

2.8 Share-based payment arrangements:

The stock options granted to employees pursuant to
the Company's Stock Options Schemes, are measured
at the fair value of the options at the grant date.
The fair value of the options is treated as discount and
accounted as employee compensation cost over the
vesting period on a straight line basis. The amount
recognised as expense in each year is arrived at
based on the number of grants expected to vest. If a
grant lapses after the vesting period, the cumulative
discount recognised as expense in respect of such
grant is transferred to the General reserve within equity.
The share based payment equivalent to the fair value as
on the date of grant of employee stock options granted
to key managerial personnel is disclosed as a related
party transaction in the year of grant.

2.9 Goods and Service Tax (GST) paid on incurring
expenses or on acquisition of assets:

Expenses and Assets are recognised net of the
amount of GST, except

a. When the tax incurred on purchase of expenses
or assets is not recoverable from the taxation
authority, in which case, the tax paid is recognised
as part of the cost of acquisition of the asset or as
part of the expense item, as applicable.

b. The net amount of tax receivable / payable is
included as part of other assets or other liabilities,
as the case may be.

2.10 Taxation:

2.10.1 Current tax:

The tax currently payable is based on taxable
profit for the year. Taxable profit differs from
“profit before tax” as reported in the Statement
of profit and loss because of items of income
or expense that are taxable or deductible in
other years and items that are never taxable
or deductible. The Company's current tax is
calculated using tax rates that have been
enacted by the end of the reporting period.

A provision is recognized for those matters
for which the tax determination is uncertain
but is considered probable that there
will be a future outflow of funds to a tax
authority. the provisions are measured at
the best estimate of the amount expected
to be payable. the assessment is based
on the judgment of tax professionals within
the company supported by previous
experience in respect of such activities and
in certain cases based on independent tax
specialist advice.

2.10.2 Deferred tax:

Deferred tax is recognised on temporary
differences between the carrying amounts
of assets and liabilities in the financial
statements and the corresponding tax
bases used in the computation of taxable
profit. Deferred tax liabilities are generally
recognised for all taxable temporary
differences. Deferred tax assets are generally
recognised for all deductible temporary
differences to the extent that it is probable
that taxable profits will be available against
which those deductible temporary differences
can be utilised.

The carrying amount of deferred tax assets is
reviewed at the end of each reporting period
and reduced to the extent that it is no longer
probable that sufficient taxable profits will
be available to allow all or part of the assets
to be recovered.

Deferred tax liabilities and assets are
measured at the tax rates that are expected

to apply in the year in which the liability is
settled or the asset realised, based on tax
rates (and tax laws) that have been enacted
or substantively enacted by the end of the
reporting year.

2.10.3 Current and deferred tax for the year:

Current and deferred tax are recognised
in the Statement of profit and loss, except
when they relate to items that are recognised
in other comprehensive income, in which
case, the current and deferred tax are also
recognised in other comprehensive income.

2.11 Earnings per share:

Basic earnings per share is calculated by dividing the
net profit or loss for the period attributable to equity
shareholders by the weighted average number of equity
shares outstanding during the period. The weighted
average number of equity shares outstanding during
the period and for all periods presented is adjusted for
events (such as bonus shares, share-based payment
arrangements), if any, other than the conversion of
potential equity shares that have changed the number
of equity shares outstanding without a corresponding
change in resources. For calculating diluted earnings per
share, the net profit or loss for the period attributable to
equity shareholders and the weighted average number
of shares outstanding during the period are adjusted for
the effects of all dilutive potential equity shares.

2.12 Dividends:

Final dividends on shares are recorded as a liability on
the date of approval by the shareholders and interim
dividends are recorded as a liability on the date of
approval by the Company's Board of Directors.

2.13 Property, plant and equipment:

As per para 7 of Ind AS 16 ‘Property, Plant and
Equipment' The cost of an item of Property, Plant and
Equipment shall be recognized as an asset if and only if,
It is Probable that future economic benefits associated
with the item will flow to the entity and the cost can be
measured reliably. Cost includes inward freight, taxes
(other than taxes recoverable from tax authorities) and
expenses incidental to acquisition and installation,
up to the point the asset is ready for its intended use.
Own manufactured assets are capitalised at factory

cost. Certain project related direct expenses incurred
at site for the period upto the date of commencement of
commercial production are capitalised.

Depreciation on fixed assets is provided under the
straight line method over the useful life of the assets.
Extra shift depreciation is provided based on the
number of shifts for which the plant has worked.
Leasehold land is amortised over the primary period of
the lease. Leasehold building improvements are written
off over the period of lease or their estimated useful life,
whichever is lower, on a straight line basis. The residual
value of the assets is estimated at 5% of cost. The useful
lives of the assets of the Company are as follows:

As per Para 67 the carrying amount of an item of
Property, Plant and Equipment shall be derecognized
on disposal or when no future economic benefits are
expected from its use or disposal. Hence, When an
asset is scrapped or otherwise disposed off, the cost
and related depreciation are removed from the books
and the resultant profit or loss (including capital profit),
if any, is reflected in the Statement of profit and loss.

The estimated useful life and residual value is reviewed
at the end of each reporting period, with the effect of
any changes in estimate being accounted for on a
prospective basis.

Advances paid towards the acquisition of property,
plant and equipment outstanding at each Balance
Sheet date is classified as capital advances under
other non-current assets. The cost of assets not ready
to use before such date are disclosed under ‘Capital
work-in-progress'. Subsequent expenditures relating to
property, plant and equipment is capitalized only when
it is probable that future economic benefits associated
with these will flow to the Company and the cost of the
item can be measured reliably. The cost and related
accumulated depreciation are eliminated from the
financial statements upon sale or retirement of the asset.

2.14 Business Combinations:

Business combinations, if any, are accounted by using
the acquisition method as per Ind AS 103 ‘Business
Combination'. The cost of an acquisition is measured
as the aggregate of the consideration transferred
measured at fair value on acquisition date and the
amount of any non-controlling interests in the acquiree.
Acquisition related costs are expensed as incurred.
Goodwill is initially measured at cost, being the excess
of the net acquisition cost and any previous interest held,
over the net identifiable assets acquired and liabilities
assumed. If the fair value of the net assets acquired is
in excess of the net cost of acquisition, then the gain
is recognised in OCI and accumulated in equity as
capital reserve. However, if there is no clear evidence
of bargain purchase, the Company recognises the gain
directly in equity as capital reserve, without routing the
same through OCI.

2.15 Investment Property:

Investment properties are properties held to earn rentals
and/or for capital appreciation. Investment properties
are measured initially at cost including transaction costs.
Subsequent to initial recognition investment properties
are measured in accordance with Ind AS 16 “Property
Plant and Equipment”, requirements for cost model..

An investment property is de-recognised upon disposal
or when the investment property is permanently
withdrawn from use and no future economic benefits
are expected from the disposal. Any gain or loss
arising on derecognition of the property (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 in the year in which the
property is de-recognised.

Investment property owned by the Company is
depreciated under the straight line method over its
estimated useful life of 30 years.

2.16 Leases:

At inception of a contract, the Company assesses
whether a contract is or contains a lease. 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.

Ind As 116 requires a lessee to recognise assets
and liabilities for all leases for a term of more than
12 months unless the underlying assets is of low
value. Therefore, At the date of commencement of a
lease, the Company recognises a right-of-use asset
(“ROU assets”) and a corresponding lease liability
for all leases, except for short term leases and low
value leases. Certain lease arrangements include the
options to extend or terminate the lease before the
end of the lease term. Lease payments to be made
under such reasonably certain extension options are
included in the measurement of ROU assets and lease
liabilities. ROU assets are amortised on a straight-line
basis over the asset's useful life or the lease period
whichever is shorter.

Lease liability is measured by discounting the lease
payments using the interest rate of the incremental
borrowing. Lease liabilities are re-measured with a
corresponding adjustment to the related right-of-use
asset if the Company changes its assessment of whether
it will exercise an extension or a termination option.

Impairment of ROU assets is in accordance with the
policy for impairment of non- financial assets.

The Company has opted for exemption provided
under Ind AS 116 “Leases” for short-term leases and
leases of low-value assets, hence the lease payments
associated with those leases are treated as an expense
on a straight-line basis over the lease term.

2.17 Intangible assets:

2.17.1 I ntangible assets internally generated or

acquired separately:

Own developed intangible assets are
capitalised at actual cost. Cost includes all
expenses incurred for development of the
intangible asset, up to the point the asset is
ready for its intended use. Research costs
are charged to the Statement of profit and
loss in the year in which they are incurred.
Product development costs incurred on new
engine platform, engines, transmission and
new products are recognised as intangible
assets, when feasibility has been established,
the Company has committed technical,
financial and other resources to complete the

development and it is probable that asset will
generate future economic benefits. The costs
capitalized include the cost of materials,
direct labour and directly attributable
overhead expenditure incurred up to the date
the asset is available for use.

Intangible assets with finite useful lives that
are acquired separately or own developed
intangible assets are carried at cost less
accumulated amortisation and accumulated
impairment losses. Amortisation is
recognised on a straight-line basis over their
estimated useful lives. The estimated useful
life and residual value is reviewed at the end
of each reporting period, with the effect of
any changes in estimate being accounted for
on a prospective basis.

2.17.2 Derecognition of intangible asset:

An intangible asset is derecognised on
disposal, or when no future economic
benefits are expected from use or disposal.
Gains or losses arising from derecognition
of an intangible asset, measured as the
difference between the net disposal proceeds
and the carrying amount of the asset, are
recognised in the Statement of profit and loss
in the period when the asset is derecognised.

2.17.3 Useful life of intangible assets:

Estimated useful lives of the intangible assets
are as follows:

i) Technical know-how is amortised over a
period of 5 years.

ii) Product development is amortised over
a period of 3 to 5 years.

iii) Computer software is amortised over a
period of 4 years.

2.18 I impairment of tangible and intangible assets
other than goodwill:

Property, Plant and equipment and intangible assets
with finite life are evaluated for recoverability whenever
there is any indication that their carrying amounts may
not be recoverable. If any such indication exists, the

recoverable amount (i.e. higher of the fair value less
cost to sell and the value-in-use) is determined on
an individual asset basis unless the asset does not
generate cash flows that are largely independent of
those from other assets. In such cases, the recoverable
amount is determined for the cash generating unit
(CGU) to which the asset belongs.

If the recoverable amount of an asset (or CGU) is
estimated to be less than its carrying amount, the
carrying amount of the asset (or CGU) is reduced to its
recoverable amount. An impairment loss is recognised
in the Statement of profit and loss.

2.19 Inventories:

Inventories are valued, after providing for
obsolescence, as under:

a. Raw materials, stores, spares, packing materials,
loose tools and traded goods at weighted average
cost or net realisable value, whichever is lower.

b. Work-in-progress at lower of weighted average
cost including conversion cost or net realisable
value, whichever is lower.

c. Finished goods at lower of weighted average cost
including conversion cost or net realisable value,
whichever is lower.