MATERIAL ACCOUNTING POLICIES:
This note provides a list of the material accounting policies adopted in the preparation of these financial statements. These
policies have been consistently applied for all the years presented, unless otherwise stated.
1.1 Basis of preparation and presentation of financial statements:
These financial statements are the separate financial statements of the Company (also called standalone financial
statements) prepared in accordance with Indian Accounting Standards ('Ind AS') notified under Section 133 of the
Companies Act, 2013, read together with the Companies (Indian Accounting Standards) Rules, as amended from time to
time.
These financial statements have been prepared and presented under the historical cost convention, except for certain
financial assets and financial liabilities that are measured at fair values at the end of each reporting period, as stated in the
accounting policies set out below. The accounting policies have been applied consistently over all the periods presented
in these financial statements. These financial statements are presented in Indian Rupees, which is also its functional
currency, and all values are rounded to the nearest lakhs, except when otherwise stated.
1.2 Current / Non-current classification:
For the purpose of current/non-current classification of assets and liabilities, the Company has ascertained its normal
operating cycle as twelve months. This is based on the nature of products and the time between the acquisition of assets
or inventories for manufacturing and their realization in cash and cash equivalents.
1.3 Summary of Material Accounting policies(A) Property, Plant and EquipmentTangible assets:
An item of property, plant and equipment that qualifies as an asset is measured on initial recognition at cost. Following
initial recognition, items of property, plant and equipment are carried at its cost less accumulated depreciation and
accumulated impairment losses, if any.
The cost of an item of property, plant and equipment comprises of its purchase price including import duties and other
non refundable purchase taxes or levies, directly attributable cost of bringing the asset to its working condition for
its intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. Expenses directly
attributable to new manufacturing facility during its construction period including borrowing costs are capitalized,
if the recognition criteria are met. Expenditure related to plans, designs and drawings of buildings or plant and
machinery is capitalized under relevant heads of property, plant and equipment if the recognition criteria are met.
Gains or losses arising from derecognition of assets are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss.
Capital work in progress and Capital advances:
Cost of assets not ready for intended use, as on the Balance Sheet date, is shown as capital work in progress. Advances
given towards acquisition of property, plant and equipment outstanding at each Balance Sheet date are disclosed as
Other Non-Current Assets.
Depreciation:
Depreciation on depreciable item of property, plant and equipment is provided on straight line method for the period for
which the assets have been used as under:
(a) Depreciation on assets is provided over the useful life of assets as prescribed under schedule II of the Companies
Act, 2013.
(b) Plant and machinery which have worked for more than single shift, depreciation is provided for accordingly as per
rate prescribed in schedule II of the Companies Act, 2013.
(c) Leasehold land is amortised over the period of lease.
Intangible Assets and Amortisation:
Intangible Assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses,
if any. Intangible assets are amortised on a straight line basis over their estimated useful lives. The amortisation
period and the amortisation method are reviewed at least at each financial year end. If the expected useful life of
the asset is significantly different from previous estimates, the amortisation period is changed accordingly. Gain or
losses arising from the retirement or disposal of an intangible asset are determined as the difference between the
net disposal proceeds and the carrying amount of the asset and recognized as income or expense in the Statement
of Profit and Loss. The period of amortisation is as under :
(B) Finance Costs:
Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings
and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to
the interest cost.
Borrowing costs, if any, 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 are capitalised, all other borrowing costs are charged to the
statement of profit and loss for the period in which they are incurred.
(C) Investment Properties:
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Company
for its business, is classified as investment property. Investment property is measured initially at its cost, including related
transaction costs and wherever applicable its borrowing costs. Subsequent expenditure is capitalised to the asset's
carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the
Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the
statement of profit and loss for the period in which they are incurred.
Though the company measures investment property using cost based measurement, the fair value of investment property
(Office building) is disclosed in the note 2D. Fair values are determined based on an annual evaluation performed by an
external independent valuer for Office Building.
(D) Impairment of non-financial assets - property, plant and equipment and Intangible Assets:
The Company assesses at each reporting date as to whether there is any indication that any property, plant and equipment
and intangible assets or group of assets, called cash generating units (CGU) may be impaired. If any such indication exists the
recoverable amount of an asset or CGU is estimated to determine the extent of impairment, if any. When it is not possible to
estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the CGU to which
the asset belongs.
An impairment loss is recognised in the Statement of Profit and Loss to the extent, asset's carrying amount exceeds its
recoverable amount. The impairment loss recognised in prior accounting period is reversed if there has been a change in the
estimate of recoverable amount.
(E) Government Grants and Subsidy:
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be
received and the company will comply with all attached conditions. Government grants relating to income are deferred and
recognised in the profit or loss over the period necessary to match them with the costs that they are intended to compensate
for and presented within other income.
Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred
income and are credited to profit or loss on a straight-line basis over the expected lives of the related assets and presented
within other income or reduced from respective Property, plant and equipment.
(F) Tax Expenses:
Tax expense is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and
deferred tax.
Current tax:
Current tax is the amount of income taxes payable in respect of taxable profit for a period. 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 under the Income Tax Act, 1961.
Current tax is measured using tax rates that have been enacted by the end of reporting period for the amounts expected to be
recovered from or paid to the taxation authorities.
Deferred tax:
Deferred tax is recognized 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 under Income Tax Act, 1961.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period 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 period. The carrying amount of Deferred tax liabilities and assets are reviewed at the end of each reporting period.
Presentation of current and deferred tax:
Current and deferred tax are recognized as income or an expense in the Statement of Profit and Loss, except when they relate
to items that are recognized in Other Comprehensive Income, in which case, the current and deferred tax income/expense are
recognized in Other Comprehensive Income.
(G) Inventories:
Items of inventories are measured at lower of cost or net realisable value after providing for obsolescence , if any. Cost of
Inventories comprises of cost of purchase, cost of conversion and other costs incurred in bringing them to their respective
present location and condition. Cost of raw materials, stores & spares, packing materials are determined on weighted average
basis. However raw materials are written down to realisable value only if the cost of the related finished goods is not expected
to recover the cost of raw materials.
Work-in-progress and finished goods are valued at lower of cost and net realisable value. Cost of work in progress and finished
goods is determined on absorption costing method which include cost of conversion and other costs incurred in bringing the
inventories to their present location and condition.
(H) Financial Instruments:1 Financial Assetsa Initial recognition and measurement:
All financial assets are recognized initially at fair value, plus in the case of financial assets not recorded at fair
value through profit or loss (FVTPL), transaction costs that are attributable to the acquisition of the financial asset.
However, trade receivables that do not contain a significant financing component are measured at transaction price.
b Subsequent measurement
I Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised cost if it is held within a business model whose
objective is to hold the asset 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.
II Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income if it 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.
III Financial assets at fair value through profit or loss
A financial asset which is not classified in any of the above categories are subsequently fair valued through
profit or loss.
c Impairment of financial assets
In accordance with Ind AS 109, the Company uses 'Expected Credit Loss' (ECL) model, for evaluating impairment of
financial assets other than those measured at fair value through profit and loss (FVTPL).
Expected credit losses are measured through a loss allowance at an amount equal to:
- The 12-months expected credit losses (expected credit losses that result from those default events on the financial
instrument that are possible within 12 months after the reporting date); or
- Full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the
financial instrument)
For trade receivables Company applies 'simplified approach' which requires expected lifetime losses to be recognised
from initial recognition of the receivables. The Company uses historical default rates to determine impairment loss on
the portfolio of trade receivables. At every reporting date these historical default rates are reviewed and changes in the
forward looking estimates are analysed.
For other assets, the Company uses 12 month ECL to provide for impairment loss where there is no significant increase
in credit risk. If there is significant increase in credit risk full lifetime ECL is used.
2 Financial Liabilitiesa Initial recognition and measurement:
All financial liabilities are recognized initially at fair value and in case of loans and borrowings, net of directly
attributable cost. Cost of recurring nature are directly recognised in profit or loss as finance cost.
b Subsequent measurement:
Financial liabilities are subsequently carried at amortized cost using the effective interest method. For trade and
other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value
due to the short maturity of these instruments.
3 Derivative Financial Instruments
The Company uses various derivative financial instruments such as forwards and options to mitigate the risk of changes
in foreign exchange rates. Such derivative financial instruments are initially recognised at fair value on the date on which
a derivative contract is entered into and are also subsequently measured at fair value. Derivatives are carried as other
financial assets when the fair value is positive and as other financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and
Loss, except for the effective portion of cash flow hedges which is recognised in Other Comprehensive Income and later
to Statement of Profit and Loss when the hedged item affects profit or loss or treated as basis adjustment if a hedged
forecast transaction subsequently results in the recognition of a non-financial assets or non-financial liability.
4 Derecognition of financial instruments
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire
or it transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109. A financial liability (or a part
of a financial liability) is derecognized from the Company's Balance Sheet when the obligation specified in the contract is
discharged or cancelled or expires.
(I) Fair Value:
The Company measures financial instruments at fair value in accordance with the accounting policies mentioned above. Fair
value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the
asset or transfer the liability takes place either:
- in the principal market for the asset or liability, or
- in the absence of a principal market, in the most advantageous market for the asset or liability
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair
value hierarchy that categorizes into three levels, described as follows, the inputs to valuation techniques used to measure
value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level
1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).
Level 1 — quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 — inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly
Level 3 — inputs that are unobservable for the asset or liability
For assets and liabilities that are recognized in the financial statements 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 and discloses the same.
(J) Investment in Subsidiary and Associate Companies:
The Company has elected to recognize its investments in subsidiary and associate companies at cost in accordance with the
option available in Ind AS 27, 'Separate Financial Statements'.
The details of such investments are given in Note 3.
(K) Revenue Recognition:
(i) Revenue from contracts with customers is recognised when control of the goods or services are transferred to the
customer at an amount that reflects the consideration entitled in exchange for those goods or services.
Generally, control is transferred upon shipment of goods to the customer or when the goods is made available to the
customer, provided transfer of title to the customer occurs and the Company has not retained any significant risks of
ownership or future obligations with respect to the goods shipped.
Revenue from rendering of services is recognised over time by measuring the progress towards complete satisfaction of
performance obligations at the reporting period.
Revenue is measured at the amount of consideration which the company expects to be entitled to in exchange for
transferring distinct goods or services to a customer as specified in the contract, excluding amounts collected on behalf of
third parties (for example taxes and duties collected on behalf of the Government). Consideration is generally due upon
satisfaction of performance obligations and a receivable is recognized when it becomes unconditional.
(ii) Income from Power generation is accounted on the basis of certification of Gujarat Electricity Development Authority and
Maharashtra State Electicity Distribution Company Ltd.
(iii) Credits on account of Duty drawback and other benefits, which are due to be received with reasonable certainty, are
accrued upon completion of exports.
(iv) Interest income is recognized on a time proportion basis taking into account the amount outstanding and the rate
applicable.
(v) Profit / Loss from investment in LLP is accounted at the time of finalisation of accounts of LLP
(vi) Revenue in respect of EPR credits is accounted on an accrual basis by valuing them at the minimum rate notified by the
Central Pollution Control Board.
(vii) Dividend income is recognized when the right to receive dividend is established.
(viii) Rental income arising from operating leases on investment properties is accounted for on a straight- line basis over the
lease terms and is included in other income in the statement of profit or loss due to its non-operating nature.
(L) Foreign currency transactions and translation:
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Monetary assets and
liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting
date.
Exchange differences arising on settlement or translation of monetary items are recognised in Statement of Profit and Loss
except to the extent of exchange differences which are regarded as an adjustment to interest costs on foreign currency
borrowings that are directly attributable to the acquisition or construction of qualifying assets, are capitalized as cost of assets.
(M) Employees Benefits:Short Term Employee Benefits:
All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee
benefits. Expense in respect of other short term benefits is recognized on the basis of the amount paid or payable for the period
during which services are rendered by the employee.
Post Employment Employee Benefits :(i) Defined Contribution Plans :(a) Provident Fund:
The company makes specified monthly contribution to statutory provident fund in accordance with the Employees
Provident Fund & Miscellaneous Provisions Act, 1952, which is a defined contribution plan and contribution paid or
payable is recognized as an expense in the period in which services are rendered by the employee.
(b) Superannuation:
The Company has Superannuation Plan for its executives - a defined contribution plan. The Company makes annual
contribution of the covered employees' salary, subject to maximum of ? 1.50 lakh per employee, for the executive
opting for the benefit. The plan is managed by a Trust and the funds are invested with Life Insurance Corporation of
India under its Group Superannuation Scheme. Annual contributions as specified under the Trust deed are paid to
the Life Insurance Corporation of India and recognised as an expense of the year in which the liability is incurred.
(ii) Defined Benefit Plans:(a) Gratuity:
The Company pays gratuity to the employees who have completed five years of service with the Company at the
time of resignation/superannuation. The gratuity is paid @15 days salary for every completed year of service as per
the Payment of Gratuity Act, 1972.
The gratuity liability amount is contributed to the approved gratuity fund formed exclusively for gratuity payment to
the employees. The gratuity fund has been approved by respective Income Tax authorities.
The liability in respect of gratuity is made based on actuarial valuation done by an independent agency of notified
actuaries by using the projected unit credit method.
Re-measurement of defined benefit plans in respect of post-employment and other long term benefits are charged
to the Other Comprehensive Income.
(b) Leave Encashment:
Provision for leave encashment, which is a defined benefit, is made based on actuarial valuation done by an
independent agency of notified actuaries by using the projected unit credit method. Actuarial Gains / Losses, if any
are recognised in the statement of profit and loss.
(c) Employee Share based Payments:
The Company operates equity settled sharebased plan for the employees (Referred to as Employee Stock Option
Plan (ESOP)). ESOPs granted to the employees are measured at the fair value of the stock options at the grant
date. Such fair value of the equity settled share based payments is expensed on a straight line basis over the
vesting period, based on the Company's estimate of equity shares that will eventually vest, with a corresponding
increase in equity (share based payment reserve).
(N) Lease:
The Company, as a lessee, recognizes a right-of-use asset and a lease liability for its leasing arrangements, if the contract
conveys the right to control the use of an identified asset.
The contract conveys the right to control the use of an identified asset, if it involves the use of an identified asset and the
Company has substantially all of the economic benefits from use of the asset and has right to direct the use of the identified
asset. The cost of the right-of-use asset shall comprise of the amount of the initial measurement of the lease liability adjusted
for any lease payments made at or before the commencement date plus any initial direct costs incurred. The right-of-use assets
is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted
for any remeasurement of the lease liability. The right-of-use assets is depreciated using the straight-line method from the
commencement date over the shorter of lease term or useful life of right-of-use asset.
The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement
date of the lease. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily
determined. If that rate cannot be readily determined, the Company uses incremental borrowing rate.
For short-term and low value leases, the Company recognizes the lease payments as an operating expense on a straight-line
basis over the lease term.
(O) Research and Development:
Revenue expenditure on Research and Development is charged in the period in which it is incurred. Capital Expenditure
for Research and Development is capitalised when commissioned and included in the Plant, Property and Equipment and
depreciated in accordance with the policies stated for Property, Plant and Equipment.
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