Material Accounting Policies:2.1 Statement of compliance:
The standalone 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 and other relevant provisions of
the Act. 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 standalone 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 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.
2.3.1 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.
2.3.2 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).
2.3.3 Dividend and interest income:
Dividend income from investments is recognised
when the Company's right to receive payment has
been established.
I nterest 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.
2.4 Foreign currencies:
Items included in the standalone financial statements
are measured using the currency of the primary
economic environment in which the Company operates
(‘the functional currency'). These standalone 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.
2.5 Employee benefits:
2.5.1 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.
2.5.2 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.
2.5.3 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 cannot be
carried forward.
2.6 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.
2.7 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.
2.8 Taxation:
2.8.1 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 it 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.
2.8.2 Deferred tax:
Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities
in the standalone 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.
2.8.3 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.
2.9 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.
2.10 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 are 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 expenditure 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 standalone financial statements upon sale or
retirement of the asset.
2.11 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.
2.12 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.
I nd 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.
2.13 Intangible assets:
2.13.1 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 platforms, 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.
2.13.2 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.
2.13.3 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.
2.14 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.
I f 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.
2.15 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.
Provisions are made for slow moving and obsolete
inventories based on estimates made by the Company.
|