3. MATERIAL ACCOUNTING POLICIES.

a. Foreign currency transaction

Transactions in foreign currencies are translated into the respective functional
currencies of the Company at the exchange rates at the date of the transaction or at
an average rate if the average rate approximates the actual rate at the date of the
transaction.

Monetary assets and liabilities denominated in foreign currencies are translated into
the functional currency at the exchange rate at the reporting date. Non-monetary
assets and liabilities that are measured at fair value in a foreign currency are translated
into the functional currency at the exchange rate when the fair value was determined.
Non-monetary assets and liabilities that are measured based on historical cost in a
foreign currency are translated at the exchange rate at the date of the transaction.
Exchange differences are recognised in profit or loss.

The financial statements are presented in Indian Rupees (INR) which is the
Company’s presentation currency. All financial information presented in Indian
Rupees has been rounded up to the nearest Lakhs except where otherwise indicated.

b. Current and non-current classification

The Company presents assets and liabilities in the balance sheet based on current /
non-current classification. An asset is treated as current when it is:

- expected to be realised or intended to be sold or consumed in normal operating
cycle,

- held primarily for the purpose of trading,

- expected to be realised 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 Company classifies all other liabilities as non-current.

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.

c. Revenue from contracts with customers

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
to which the Company expects to be entitled in exchange for those goods or services.
The Company assesses promises in the contract that are separate performance
obligations to which a portion of transaction price is allocated.

Revenue is measured based on the transaction price as specified in the contract with
the customer. It excludes taxes or other amounts collected from customers in its
capacity as an agent. In determining the transaction price, the Company considers
below, if any:

a) Variable consideration - This includes bonus, incentives, discounts etc. It is
estimated at contract inception and constrained until it is highly probable that a
material revenue reversal in the amount of cumulative revenue recognised will not
occur when the associated uncertainty with the variable consideration is
subsequently resolved. It is reassessed at end of each reporting period.

b) Material financing component - Generally, the Company receives short-term
advances from its customers. Using the practical expedient in Ind AS 115, the
Company does not adjust the promised amount of consideration for the effects of
a material financing component if it expects, at contract inception, that the period
between the transfer of the promised good or service to the customer and when
the customer pays for that good or service will be one year or less.

c) Consideration payable to a customer - Such amounts are accounted as
reduction of transaction price and therefore, of revenue unless the payment to the
customer is in exchange for a distinct good or service that the customer transfers
to the Company.

In accordance with Ind AS 37, the Company recognizes a provision for onerous
contract when the unavoidable costs of meeting the obligations under a contract
exceed the economic benefits to be received.

Contract modifications

Contract modifications are accounted for when additions, deletions or changes are
approved either to the contract scope or contract price. The accounting for
modifications of contracts involves assessing whether the services added to the
existing contract are distinct and whether the pricing is at the standalone selling price.
Services added that are not distinct are accounted for on a cumulative catch up basis,
while those that are distinct are accounted for prospectively, either as a separate
contract, if additional services are priced at the standalone selling price, or as a
termination of existing contract and creation of a new contract if not priced at the
standalone selling price.

Contract assets

A contract asset is the right to consideration in exchange for goods or services
transferred to the customer e.g. unbilled revenue. If the Company performs its
obligations by transferring goods or services to a customer before the customer pays
consideration or before payment is due, a contract asset i.e. unbilled revenue is
recognised for the earned consideration that is conditional. The contract assets are
transferred to receivables when the rights become unconditional. This usually occurs
when the Company issues an invoice to the Customer.

Trade receivables

A receivable represents the Company’s right to an amount of consideration that is
unconditional i.e. only the passage of time is required before payment of
consideration is due.

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. Contract liabilities are recognized as revenue when the
Company performs under the contract.

The accounting policies for the specific revenue streams of the Company as
summarized below:

Sale of goods

Revenue from sale of goods is recognized when control of the goods is transferred
to the customer which usually is on delivery of the goods under the terms of contract
at an amount that reflects the consideration to which the Company expects to be
entitled in exchange for those goods. Sales are inclusive of excise duty but are net of
sales returns, sales tax, goods and service tax and rate difference adjustments if any.

Service income

Revenues from services is recognized based on the services rendered in accordance
with the terms of the contract and there are no uncertainties involved to its ultimate
realization.

Others

Export incentives are accrued in the year when the right to receive credit is
established in respect of exports made and are accounted to the extent there is no
significant uncertainty about the measurability and ultimate realization/ utilization of
such benefits/ duty credit.

Revenue from scrap sales and other ancillary sales is recognized when the control over the
goods is transferred to the customers.

d. Recognition of interest income or expense

Interest on investments is booked on a time proportion basis taking into account the
amounts invested and the rate of interest.

Commission income is recognized on accrual basis.

e. Property, plant and equipment and Depreciation
Recognition and measurement

Property, Plant & Equipment’s (PPE) comprises of Tangible assets and Capital Work
in progress. PPE are stated at cost, net of tax/duty credit availed, if any, after reducing
accumulated depreciation until the date of the Balance Sheet.

The Cost of PPE comprises of its purchase price or its construction costs (net of
applicable tax credit, if any), any cost directly attributable to bring the asset into the
location and condition necessary for it to be capable of operating in the manner
intended by the management. It includes professional fees and, for qualifying PPE,
borrowing costs capitalised in accordance with the Company’s accounting policy.
Such properties are classified to the appropriate categories of PPE when completed
and ready for intended use. Parts of an item of PPE having different useful lives and
material value and subsequent expenditure on PPE arising on account of capital
improvement or other factors are accounted for as separate components. Critical
spares of PPE having life of more than one year are capitalized as a separate
component in PPE. Capital work in progress includes the cost of PPE that are not yet
ready for the intended use.

Subsequent expenditure

Subsequent expenditure is capitalised only if it is probable that the future economic
benefits associated with the expenditure will flow to the Company.

Pre-Operative Expenses

Expenses incurred relating to project, net of income earned during the project
development stage prior to its intended use, are considered as pre-operative
expenses and disclosed under Capital Work-in-Progress. Cost of assets not ready
for intended use, as on 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

In respect of Property, Plant and Equipment, depreciation is charged on a straight
line basis so as to write off the cost of the assets over the useful lives as prescribed
under Part C of Schedule II to the Companies Act 2013.

Derecognition

An item of property, plant and equipment is derecognized upon disposal or when no
future economic benefits are expected to arise from the continued use of the asset.
Any gain or loss arising on the disposal or retirement of an item of property, plant and
equipment is determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in the statement of profit and loss.

f. Intangible assets

Intangible assets with finite useful lives that are acquired separately are carried at
cost less accumulated amortisation and accumulated impairment losses.

Intangible assets with indefinite useful lives that are acquired separately are carried
at cost less accumulated impairment losses.

g. Impairment of Assets

Property, Plant and Equipment or Intangible asset is evaluated for recoverability
whenever events or changes in circumstances indicate that their carrying amounts
may not be recoverable. For the purpose of impairment testing, the recoverable
amount (i.e. the 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 CGU to which the asset belongs. If such assets are
considered to be impaired, the impairment has to be recognised in the Statement of
Profit and Loss.

An impairment loss is reversed in the Statement of Profit and Loss if there has been
a change in the estimates used to determine the recoverable amount. The carrying
amount of the asset is increased to its revised recoverable amount, provided that this
amount does not exceed the carrying amount that would have been determined (net
of any accumulated amortisation) had no impairment loss been recognised for the
asset in prior years.

h. Impairment Financial instruments

The Company recognises loss allowances for expected credit losses on financial
assets measured at amortised cost.

At each reporting date, the Company assesses whether financial assets carried at
amortised cost are credit-impaired. A financial asset is ‘credit-impaired’ when one or
more events that have a detrimental impact on the estimated future cash flows of the
financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable
data:

— material financial difficulty of the borrower or issuer;

— a breach of contract such as a default or being past due for 180 days or more;

— the restructuring of a loan or advance by the Company on terms that the Company
would not consider otherwise;

— it is probable that the borrower will enter bankruptcy or other financial
reorganization; or

— the disappearance of an active market for a security because of financial
difficulties.

The Company measures loss allowances at an amount equal to lifetime expected
credit losses, except for bank balances for which credit risk (i.e. the risk of default
occurring over the expected life of the financial instrument) has not increased
significantly since initial recognition, which are measured as 12 month expected credit
losses.

Loss allowances for trade receivables are always measured at an amount equal to
lifetime expected credit losses. Lifetime expected credit losses are the expected credit
losses that result from all possible default events over the expected life of a financial
instrument. Twelve months expected credit losses are the portion of expected credit
losses that result from default events that are possible within 12 months after the
reporting date (or a shorter period if the expected life of the instrument is less than 12
months).

In all cases, the maximum period considered when estimating expected credit losses
is the maximum contractual period over which the Company is exposed to credit risk.
When determining whether the credit risk of a financial asset has increased
significantly since initial recognition and when estimating expected credit losses, the
Company considers reasonable and supportable information that is relevant and
available without undue cost or effort. This includes both quantitative and qualitative
information and analysis, based on the Company’s historical experience and informed
credit assessment and including forward-looking information.

Measurement of expected credit losses

Expected credit losses are a probability-weighted estimate of credit losses. Credit
losses are measured as the present value of all cash shortfalls (i.e. the difference
between the cash flows due to the Company in accordance with the contract and the
cash flows that the Company expects to receive).

Presentation of allowance for expected credit losses in the balance sheet

Loss allowances for financial assets measured at amortised cost are deducted from
the gross carrying amount of the assets.

Impairment of non-financial instruments

The Company’s non-financial assets, other than inventories and deferred tax assets,
are reviewed at each reporting date to determine whether there is any indication of
impairment. If any such indication exists, then the asset’s recoverable amount is
estimated.

For impairment testing, assets that do not generate independent cash inflows are
grouped together into cash-generating units (CGUs). Each CGU represents the
smallest group of assets that generates cash inflows that are largely independent of
the cash inflows of other assets or CGUs.

The recoverable amount of a CGU (or an individual asset) is the higher of its value in
use and its fair value less costs to sell. Value in use is based on the estimated future
cash flows, discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the
CGU (or the asset).

The Company’s corporate assets (e.g., central office building for providing support to
various CGUs) do not generate independent cash inflows. To determine impairment
of a corporate asset, recoverable amount is determined for the CGUs to which the
corporate asset belongs.

An impairment loss is recognised if the carrying amount of an asset or CGU exceeds
its estimated recoverable amount. Impairment losses are recognised in the statement
of profit and loss. Impairment loss recognised in respect of a CGU is allocated first to
reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce
the carrying amounts of the other assets of the CGU (or group of CGUs) on a pro rata
basis.

In respect of other assets for which impairment loss has been recognised in prior
periods, the Company reviews at each reporting date whether there is any indication
that the loss has decreased or no longer exists. An impairment loss is reversed if there
has been a change in the estimates used to determine the recoverable amount. Such

a reversal is made only to the extent that the asset’s carrying amount does not exceed
the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.

i. Financial instruments

Recognition and initial measurement

Trade receivables and debt securities issued are initially recognised when they are
originated. All other financial assets and financial liabilities are initially recognised
when the Company becomes a party to the contractual provisions of the instrument.

A financial asset or financial liability is initially measured at fair value plus, for an item
not at fair value through profit and loss (FVTPL), transaction costs that are directly
attributable to its acquisition or issue.

Classification and subsequent measurement

Financial assets on initial recognition, a financial asset is classified as measured at

— amortised cost;

— FVOCI - debt investment;

— FVOCI - equity investment; or

— FVTPL

Financial assets are not reclassified subsequent to their initial recognition, except if
and in the period the Company changes its business model for managing financial
assets.

A financial asset is measured at amortised cost if it meets both of the following
conditions and is not designated as at FVTPL:

a) the asset is held within a business model whose objective is to hold assets to
collect contractual cash flows; and

b) 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.

A debt investment is measured at FVOCI if it meets both of the following conditions
and is not designated as at FVTPL:

a) the asset is held within a business model whose objective is achieved by both
collecting contractual cash flows and selling financial assets; and

b) the contractual terms of the financial asset give rise on specified dates to cash
flows that are solely payments of principal and interest on the principal amount
outstanding.

At present, the Company does not have investments in any debt securities classified
as FVOCI.

j. Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified
payments to reimburse the holder for a loss it incurs because a specified debtor fails
to make payments when due in accordance with the terms of a debt instrument.

Financial guarantee contracts issued by a Company entity are initially measured at
their fair values and, if not designated as at FVTPL, are subsequently measured at
the higher of:

• the amount of loss allowance determined in accordance with impairment
requirements of Ind AS 109; and

• the amount initially recognised less, when appropriate, the cumulative amount of
income recognised in accordance with the principles of Ind AS 18.

k. Financial assets: Business model assessment

The Company makes an assessment of the objective of the business model in which
a financial asset is held at a portfolio level because this best reflects the way the
business is managed and information is provided to management. The information
considered includes:

• the stated policies and objectives for the portfolio and the operation of those
policies in practice. These include whether management’s strategy focuses on
earning contractual interest income, maintaining a particular interest rate profile,
matching the duration of the financial assets to the duration of any related liabilities
or expected cash outflows or realising cash flows through the sale of the assets;

• how the performance of the portfolio is evaluated and reported to the Company’s
management;

• the risks that affect the performance of the business model (and the financial
assets held within that business model) and how those risks are managed;

• how managers of the business are compensated - e.g. whether compensation is
based on the fair value of the assets managed or the contractual cash flows
collected; and

• the frequency, volume and timing of sales of financial assets in prior periods, the
reasons for such sales and expectations about future sales activity.

Transfers of financial assets to third parties in transactions that do not qualify for
derecognition are not considered sales for this purpose, consistent with the
Company’s continuing recognition of the assets.

Assessment whether contractual cash flows are solely payments of principal and
interest.

For the purposes of this assessment, ‘principal’ is defined as the fair value of the
financial asset on initial recognition. ‘Interest’ is defined as consideration for the time
value of money and for the credit risk associated with the principal amount outstanding
during a particular period of time and for other basic lending risks and costs (e.g.
liquidity risk and administrative costs),as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and
interest, the Company considers the contractual terms of the instrument. This includes
assessing whether the financial asset contains a contractual term that could change
the timing or amount of contractual cash flows such that it would not meet this
condition. In making this assessment, the Company considers:

• contingent events that would change the amount or timing of cash flows;

• terms that may adjust the contractual coupon rate, including variable interest rate
features;

• prepayment and extension features; and

• terms that limit the Company’s claim to cash flows from specified assets (e.g.
non-recourse features).

A prepayment feature is consistent with the solely payments of principal and interest
criterion if the prepayment amount substantially represents unpaid amounts of
principal and interest on the principal amount outstanding, which may include
reasonable additional compensation for early termination of the contract. Additionally,
for a financial asset acquired at a material discount or premium to its contractual
paramount, a feature that permits or requires prepayment at an amount that
substantially represents the contractual par amount plus accrued (but unpaid)
contractual interest (which may also include reasonable additional compensation for
early termination) is treated as consistent with this criterion if the fair value of the
prepayment feature is insignificant at initial recognition.

Financial liabilities: Classification, subsequent measurement and gains and losses

Financial liabilities are classified as measured at amortised cost or FVTPL. A financial
liability is classified as at FVTPL if it is classified as held-for-trading, or it is a derivative
or it is designated as such on initial recognition. Financial liabilities at FVTPL are
measured at fair value and net gains and losses, including any interest expense, are
recognised in profit or loss. Other financial liabilities are subsequently measured at
amortised cost using the effective interest method. Interest expense and foreign
exchange gains and losses are recognised in profit or loss. Any gain or loss on
derecognition is also recognised in profit or loss.

Derecognition
Financial assets

The Company derecognizes a financial asset when the contractual rights to the cash
flows from the financial asset expire, or it transfers the rights to receive the contractual
cash flows in a transaction in which substantially all of the risks and rewards of
ownership of the financial asset are transferred or in which the Company neither
transfers nor retains substantially all of the risks and rewards of ownership and does
not retain control of the financial asset. If the Company enters into transactions
whereby it transfers assets recognised on its balance sheet, but retains either all or
substantially all of the risks and rewards of the transferred assets, the transferred
assets are not derecognized.

Financial liabilities

The Company derecognizes a financial liability when its contractual obligations are
discharged or cancelled or expire. The Company also derecognizes a financial liability
when its terms are modified and the cash flows under the modified terms are
substantially different. In this case, a new financial liability based on the modified
terms is recognised at fair value. The difference between the carrying amount of the
financial liability extinguished and the new financial liability with modified terms is
recognised in profit or loss.

Offsetting

Financial assets and financial liabilities are offset and the net amount presented in the
balance sheet when, and only when, the Company currently has a legally enforceable
right to set off the amounts and it intends either to settle them on a net basis or to
realise the asset and settle the liability simultaneously.

I. Borrowing costs

Borrowing cost includes interest expense as per Effective Interest Rate (EIR), other
costs incurred in connection with the borrowing of funds and exchange differences
arising from foreign currency borrowings to the extent they are regarded as an
adjustment to the interest cost. Borrowing costs directly relating to the acquisition,
construction or production of a qualifying capital project under construction are
capitalised and added to the project cost during construction until such time that the
assets are substantially ready for their intended use i.e. when they are capable of
commercial production. Where funds are borrowed specifically to finance a project,
the amount capitalised represents the actual borrowing costs incurred. Where surplus
funds are available out of money borrowed specifically to finance a project, the income
generated from such current investments is deducted from the total capitalized
borrowing cost. Capitalisation of borrowing costs is suspended and charged to profit
and loss during the extended periods when the active development on the qualifying
assets is interrupted. EIR is the rate that exactly discounts the estimated future cash
payments or receipts over the expected life of the financial liability or a shorter period,
where appropriate, 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 (for example, prepayment,
extension, call and similar options).

m. Inventories

The inventories are valued at cost or net realizable value whichever is lower. The
provision for inventory obsolescence is assessed at regular intervals and is provided
as considered necessary. The basis of determining the value of each class of
inventory is as follows:

n. Taxation

Tax expense comprises of current and deferred tax. It is recognised in the Statement
of Profit and Loss except to the extent that it relates to a business combination, or
items recognised directly in equity or in other comprehensive income

Current tax

Current tax is provided at amounts expected to be paid (or recovered) using the tax
rates and laws that have been enacted or substantively enacted by the reporting date
and includes any adjustment to tax payable in respect of previous years. The amount
of current tax reflects the best estimate of the tax amount expected to be paid or
received after considering the uncertainty, if any, related to income taxes. It is
measured using tax rates (and tax laws) enacted or substantively enacted by the
reporting date.

Deferred Taxes

Deferred tax is provided, using the balance sheet method, on all deductible temporary
differences at the reporting date between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes and on carry forward of unused
tax credits and unused tax loss.

Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply to 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 reporting date.
Tax relating to items recognized outside profit or loss is recognised outside profit or
loss (either in other comprehensive income or equity).

Deferred tax assets are recognized only to the extent that there is reasonable certainty
that sufficient future taxable income will be available against which such deferred tax
assets can be realised. In situations where the Company has unabsorbed depreciation
or carry forward tax losses, deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that they can be realised against future
taxable profits.

At each balance sheet date the Company reassesses unrecognized deferred tax
assets. It recognises unrecognised deferred tax assets to the extent that it has become
reasonably certain or virtually certain, as the case may be that sufficient future taxable
income will be available against which such deferred tax assets can be realized.

The measurement of deferred tax reflects the tax consequences that would follow from
the manner in which the Company expects, at the reporting date, to recover or settle
the carrying amount of its assets and liabilities.

Minimum Alternative Tax ("MAT") credit is recognised an item in deferred tax asset
only when and to the extent there is convincing evidence that the Company will pay
normal income tax during the specified period. Such asset is reviewed at each Balance
Sheet date and the carrying amount of the MAT credit asset is written down to the
extent there is no longer a convincing evidence to the effect that the Company will pay
normal income tax during the specified 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 or Equity, 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 or Equity.

The Company offsets current tax assets and current tax liabilities, where it has a legally
enforceable right to set off the recognized amounts and where it intends either to settle
on a net basis, or to realize the asset and settle the liability simultaneously. In case of
deferred tax assets and deferred tax liabilities, the same are offset if the Company has
a legally enforceable right to set off corresponding current tax assets against current
tax liabilities and the deferred tax assets and deferred tax liabilities relate to income
taxes levied by the same tax authority on the Company.