3. Significant accounting policies

The significant accounting policies applied by the Company in the preparation of its financial statements are
listed below. Such accounting policies have been applied consistently to all the period (before CIRP) presented
in the financial statements, unless otherwise indicated.

(i) Basis of preparation

a) Statement of compliance with Ind AS:

These financial statements have been prepared in accordance with the Indian Accounting Standards
(hereinafter referred to as the ‘Ind AS’) as notified by Ministry of Corporate Affairs pursuant to section 133
of the Companies Act, 2013 and the Companies (Indian Accounting Standards) Rules, 2015 as amended and
other relevant provisions of the Act.

b) Basis of measurement

These financial statements are prepared under the historical cost convention except for the following material
items those have been measured at fair value as required by relevant Ind AS :

• certain financial assets and liabilities that are measured at fair value;

• defined benefit plans - plan assets measured at fair value;

Also, the fair values of financial instruments measured at amortised cost are required to be disclosed in the said
financial statements.

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

Fair value measurement:

Fair value is the price that would be received on sale of an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date (that is, an exit price). It is a market-based
measurement, not an entity-specific measurement. 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

The principal or the most advantageous market must be accessible by the Company. The fair value of an asset
or a liability is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant that
would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data
is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.

Where required/appropriate, external valuers are involved.

All financial assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorised within the fair value hierarchy established by Ind AS113, that categorises into three levels, the
inputs to valuation techniques used to measure fair value. These are 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:

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 inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly(i.e. as prices) or indirectly(i.e. derived from prices).

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

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical
assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).

For financial assets and liabilities maturing within one year from the Balance Sheet date and which are not
carried at fair value, the carrying amount approximates fair value due to the short maturity of these instruments.

The Company recognises transfers between levels of fair value hierarchy at the end of reporting period during
which change has occurred.

c) Current 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
twelvemonths 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.

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 realisation in cash and
cash equivalents. Based on the nature of products / services and time between acquisition of assets for
processing / rendering of services and their realization in cash and cash equivalents, operating cycle is less than
12 months. However, for the purpose of current/non-current classification of assets & liabilities period of 12
months has been

considered as normal operating cycle.

d) Functional and presentation currency

Items included in the financial statements of the Company are measured using the currency of the primary
economic environment in which the Company operates (i.e. the “functional currency”). The financial
statements are presented in Indian Rupee, the national currency of India, which is the functional currency of the
Company.

e) Rounding of amounts:

All amounts disclosed in the financial statements and notes are in Indian Rupees in lakhs rounded off to two
decimal places as permitted by Schedule III to the Companies Act, 2013, unless otherwise stated.

(ii) Use of estimates

The preparation of financial statements in conformity with the recognition and measurement principles of the
Ind AS requires management to make judgements, estimates and assumptions that affect the application of the
accounting policies and the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenues, expenses and the results
of operations during the reporting period. Actual results could differ from those estimates. The estimates and
underlying assumptions are reviewed on an ongoing basis. Such estimates & assumptions are based on
management evaluation of relevant facts & circumstances as on date of financial statements. Revisions to
accounting estimates are recognised in the period in which the estimate is revised if the revision affects only
that period; they are recognised in the period of the revision and future periods if the revision affects both
current and future periods.

(iii) Revenue recognition

Sale of goods

Revenue from sale of goods is recognised when all the significant risks and rewards of ownership in the goods
are transferred to the buyer as per the terms of the contract, which is mainly upon delivery and the amount of
revenue can be measured reliably. The Company retains no effective control of the goods transferred to a
degree usually associated with ownership and no significant uncertainty exists regarding the amount of the
consideration that will be derived from the sale of goods. Revenue is measured at fair value of the consideration
received or receivable, after deduction of any trade discounts, volume rebates and any taxes or duties collected
on behalf of the government which are levied on sales such as goods and services tax, value added tax, etc.

Interest Income:

Interest income is recognized on a time proportion basis taking into account the amount outstanding and the
applicable effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments
or receipts over the expected life of a financial liability or a financial asset to their gross carrying amount.

(iv) Property, plant and equipment (PPE)

Property, plant and equipment is stated at acquisition cost net of accumulated depreciation and accumulated
impairment losses, if any. Subsequent costs are included in the asset’s carrying amount or recognized as a
separate asset, as appropriate, only when it is probable that future economic benefits associated with the item
will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance
are charged to the Statement of Profit and Loss during the period in which they are incurred.

Cost of an item of property, plant and equipment comprises -

i. its purchase price, including import duties and non -refundable purchase taxes (net of duty/ tax credit
availed), after deducting trade discounts and rebates.

ii. any costs directly attributable to bringing the asset to the location and condition necessary for it to be
capable of operating in the manner intended by management.

iii. borrowing cost directly attributable to the qualifying asset in accordance with accounting policy on
borrowing cost.

iv. the costs of dismantling, removing the item and restoring the site on which it is located.

PPE in the course of construction for production, supply or administrative purposes are carried at cost, less any
recognised impairment loss. Cost includes direct costs, related pre-operational expenses and for qualifying
assets applicable borrowing costs to be capitalised in accordance with the Company’s accounting policy.
Administrative, general overheads and other indirect expenditure (including borrowing costs) incurred during
the project period which are not directly related to the project nor are incidental thereto, are expensed.

Property, plant and equipment which are not ready for intended use as on the date of Balance Sheet are
disclosed as “Capital work-in-progress”. They are classified to the appropriate categories of property, plant and
equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other
items of PPE, commences when the assets are ready for their intended use.

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 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.

The Company identifies and determines cost of each component/part of the plant and equipment separately, if
the component/part has a cost which is significant to the total cost of the plant and equipment and has useful
life that is materially different from that of the remaining plant and equipment.

Machinery spares which meets the criteria of PPE is capitalized and depreciated over the useful life of the
respective asset.

Deemed cost on transition to Ind AS:

Under the Previous GAAP, all property, plant and equipment were carried at in the Balance Sheet on basis of
historical cost, except leasehold land which was carried at revalued amount. The Company has elected to
continue with the carrying value of all of its property, plant and equipment recognized as of April 1, 2016 (the
transition date) measured as per the previous GAAP (including previous GAAP revaluation of leasehold land as
at 31st December, 2008) and use such carrying value as its deemed cost as of the transition date.

Depreciation:

Depreciation on fixed assets (other than freehold land and capital work in progress) is provided on the straight
line method, based on their respective estimate of useful lives, as given below. Estimated useful lives of assets
are determined based on internal assessment estimated by the management of the Company and supported by
technical advice wherever so required. The management believes that useful lives currently used, which is as
prescribed under Schedule II to the Companies Act, 2013, fairly reflect its estimate of the useful lives and
residual values of fixed assets, though these lives in certain cases are different from lives prescribed under
Schedule II.

*Based on internal technical evaluation and external advised received, the management believes that the useful
lives as considered for arriving at the depreciation rates, best represent the period over which management
expect to use these assets. Hence, the useful lives for these assets is different from the useful lives as prescribed
under Part C of Schedule II of the Companies Act, 2013.

Assets individually costing Rs. 5000 or less are fully depreciated in the year of acquisition.

Depreciation of an asset begins when it is available for use, i.e., when it is in the location and condition
necessary for it to be capable of operating in the manner intended by management. Depreciation of an asset
ceases at the earlier of the date that the asset is retired from active use and is held for disposal and the date that
the asset is derecognised.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned
assets or, where shorter, the term of the relevant lease.

Depreciation methods, useful lives and residual values are reviewed periodically including at the end of each
financial year. Any changes in depreciation method, useful lives and residual values are treated as a change in
accounting estimate and applied/adjusted prospectively, if appropriate.

(v) Intangible assets

Identifiable intangible assets are recognized when the Company controls the asset, it is probable that future
economic benefits attributed to the asset will flow to the Company and the cost of the asset can be reliably
measured.

At initial recognition, the separately acquired intangible assets with finite useful lives are recognised at cost of
acquisition. Following initial recognition, the intangible assets are carried at cost less any accumulated
amortisation and accumulated impairment losses, if any.

Intangible assets not ready for the intended use on the date of the balance sheet are disclosed as ‘intangible
assets under development’.

An intangible asset should be derecognised (eliminated from the balance sheet) on disposal or when no future
economic benefits are expected from its use and subsequent disposal.

Gains or losses arising from the retirement or disposal of an intangible asset should be determined as the
difference between the net disposal proceeds and the carrying amount of the asset and should be recognised as
income or expense in the statement of profit and loss.

Deemed cost on transition to Ind AS:

Under the Previous GAAP, all Intangible assets were carried at in the Balance Sheet on basis of historical cost.
The Company has elected to continue with the carrying value of all of its intangible assets recognised as of
April 1, 2016 (the transition date) measured as per the previous GAAP and use such carrying value as its
deemed cost as of the transition date.

Amortisation:

Intangible assets are amortised on a straight line basis over the estimated useful lives of respective assets from
the date when the asset are available for use, on pro-rata basis. Estimated useful lives by major class of finite-
life intangible assets are as follows:

The amortisation period and the amortisation method for finite-life intangible assets is reviewed at each
financial year end. Changes in the expected useful life or the expected pattern of consumption of future
economic benefits embodied in the asset are considered to modify the amortisation period or method, as
appropriate, and are treated as changes in accounting estimates and adjusted prospectively.

(vi) Financial instruments
Financial Assets:

Initial recognition and measurement:

Financial assets are recognised when the Company becomes a party to the contractual provisions of the
instrument.

On initial recognition, a financial asset is recognised at fair value, except for trade receivables which are
initially measured at transaction price. In case of financial assets which are recognised at fair value through
profit and loss (FVTPL), its transaction costs are recognised in the statement of profit and loss. In other cases,
the transaction costs are added to or deducted from the fair value of the financial assets.

Financial assets are subsequently classified as 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)

• fair value through profit and loss (FVTPL)

• fair value through other comprehensive income (FVTOCI).

Derecognition:

The Company derecognises a financial asset when the contractual rights to the cash flows from the financial
asset expire, or it transfers the contractual rights to receive the cash flows from the asset.

Impairment of Financial Asset:

In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and
recognition of impairment loss on the financial assets and credit risk exposures.

The Company follows ‘simplified approach’ for recognition of impairment loss allowance on trade receivables
or contract revenue receivables. Simplified approach does not require the Company to track changes in credit
risk. Rather, it recognizes impairment loss allowance based on lifetime ECL at each reporting date, right from
its initial recognition. This involves use of provision matrix constructed on the basis of historical credit loss
experience and adjusted for forward looking information. The expected credit loss allowance is based on the
ageing of the receivables that are due and the rates used in the provision matrix.

ECL is the difference between all contractual cash flows that are due to the group in accordance with the
contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the
original EIR. Lifetime ECL are the expected credit losses resulting from all possible default events over the
expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from
default events that are possible within 12 months after the reporting date.

The Company measures the expected credit loss associated with its assets based on historical trend, industry
practices and the business environment in which the entity operates or any other appropriate basis. The
impairment methodology applied depends on whether there has been a significant increase in credit risk.

ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in
the statement of profit and loss.

Financial Liabilities and equity instruments:

Classification as debt or equity

Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangements and the definitions of a financial liability and an
equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting
all of its liabilities. Equity instruments issued by a company entity are recognised at the proceeds received, net
of direct issue costs.

Financial liabilities

Initial recognition and measurement:

Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the
instrument.

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or
loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge,
as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and
borrowings and payables, net of directly attributable transaction costs.

The fair value of a financial instrument at initial recognition is normally the transaction price. If the Company
determines that the fair value at initial recognition differs from the transaction price, difference between the fair
value at initial recognition and the transaction price shall be recognized as gain or loss unless it qualifies for
recognition as an asset or liability. This normally depends on the relationship between the lender and borrower
or the reason for providing the loan. Accordingly, in case of interest-free loan from promoters to the Company,
the difference between the loan amount and its fair value is treated as an equity contribution to the Company.

In accordance with Ind AS 113, the fair value of a financial liability with a demand feature is not less than the
amount payable on demand, discounted from the first date that the amount could be required to be paid.

The Company’s financial liabilities include trade and other payables and loans and borrowings including bank
overdrafts.

Subsequent measurement

The measurement of financial liabilities depends on their classification, as described below:

Loans and borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost
using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as
well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs
that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit
and loss, unless and to the extent capitalised as part of costs of an asset.

The effective interest method is a method of calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts
estimated future cash payments (including all fees and points paid or received that form an integral part of the
effective interest rate, transaction costs and other premiums or discounts) through the expected life of the
financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Trade and other payables

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.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or
expires. When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original liability and the recognition of a new liability. The
difference in the respective carrying amounts is recognised in the statement of profit or loss.

Offsetting of Financial Instruments

Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet if there is
currently enforceable legal right to offset the recognised amount and there is an intention to settle on a net
basis, to realise the assets and settle the liabilities simultaneously.

(vii) Preference shares

a. Convertible preference shares

Convertible preference shares are separated into liability and equity components based on the terms of the
contract.

On issuance of the convertible preference shares, the fair value of the liability component is determined using a
market rate for an equivalent non-convertible instrument. This amount is classified as a financial liability
measured at amortised cost (net of transaction costs) until it is extinguished on conversion or redemption.

The remainder of the proceeds is allocated to the conversion option that is recognised and included in equity
since conversion option meets Ind AS 32 criteria for fixed to fixed classification. Transaction costs are
deducted from equity, net of associated income tax. The carrying amount of the conversion option is not
remeasured in subsequent years.

Transaction costs are apportioned between the liability and equity components of the convertible preference
shares based on the allocation of proceeds to the liability and equity components when the instruments are
initially recognised.

b. Contingent Convertible preference shares

A contingent convertible preference shares is an instrument that is convertible, at the option of the holder, only
on the occurrence of a contingent event outside of the control of the holder or the issuer. If the contingent event
occurs then the holder has the option, but not the obligation, to convert. If the contingent event does not occur,
then the instrument will be settled in cash at maturity/due dates.

The fact that conversion is only contingent does not mean the instrument has no equity component. If, on
occurrence of the contingent event, exercise of the conversion option would result in the exchange of a fixed
number of the issuer’s own equity instruments for a fixed amount of cash (in the functional currency of the
issuing entity), the conversion option would meet the definition of an equity instrument under IAS 32 and the
overall instrument would be treated as compound instrument.

Whether or not the contingency is within the control of the issuer is an important consideration when
classifying financial instruments with contingent settlement provisions as either financial liabilities or equity.

If a contingent settlement provision is regarded as outside the control of the issuing entity, the instrument is
classified as a liability by the issuer. If a contingent settlement provision is regarded as within the control of the
reporting entity, the instrument will be classified as equity, provided that it has no other features requiring its
classification as a liability and that the contingent settlement event is also outside the control of the holder.

The Company has issued 1% Optionally Convertible Cumulative Redeemable Preference shares (OCCRPS) to
Union Bank of India under Debt Settlement Agreement pursuant to One Time Settlement with them. In case of
an event of default by the Company in timely repayment/redemption as defined in the said Agreement, the
Bank has a right to convert the preference shares into equity at a Conversion Price, being higher of par value
and market value of the equity share in accordance with SEBI formula. Hence the contingent settlement event
is Event of default by the Company which is not within the issuer’s (the Company’s) control and the exercise of
the conversion option would result in the exchange of a variable number of the issuer’s own equity instruments.

The Company, the issuer of the instrument does not have the unconditional right to avoid delivering cash or
another financial asset (or otherwise to settle it in such a way that it would be a financial liability). Therefore, it
is a financial liability of the Company.

(viii) Impairment of Non-financial assets

The carrying amounts of non-financial assets other than inventories are assessed at each reporting date to
ascertain whether there is any indication of impairment. If any such indication exists, then the asset’s
recoverable amount is estimated. An impairment loss is recognised, as an expense in the Statement of Profit
and Loss, for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less cost to sell and value in use. Value in use is
ascertained through discounting of the estimated future cash flows using a discount rate that reflects the current
market assessments of the time value of money and the risk specific to the assets. For the purpose of assessing
impairment, assets are grouped at the lowest levels into cash generating units for which there are separately
identifiable cash flows.

Impairment losses recognised in prior years are reversed when there is an indication that the impairment losses
recognised no longer exist or have decreased. Such reversals are recognised as an increase in carrying amounts
of assets to the extent that it does not exceed the carrying amounts that would have been determined (net of
amortization or depreciation).

(ix) Borrowing costs

Borrowing costs comprises interest expense on borrowings calculated using the effective interest method and
exchange differences arising from foreign currency borrowings to the extent that they are regarded as an
adjustment to interest costs.

The effective interest method is a method of calculating the amortised cost of a financial asset or a financial
liability and of allocating the interest income or interest expense over the relevant period.

The effective interest rate (EIR) is the rate that exactly discounts estimated future cash payments or receipts
through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying
amount of the financial asset or financial liability. EIR calculation does not include exchange differences.

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset,
which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are

included in the cost of those assets. Such borrowing costs are capitalised as part of the cost of the asset when it
is probable that they will result in future economic benefits to the entity and the costs can be measured reliably.
Other borrowing costs are recognised as an expense in the period in which they are incurred.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for
the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the
asset for its intended use or sale are in progress.

Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to
prepare the qualifying asset for its intended use or sale are interrupted or completed.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalisation.

(x) Foreign currency transactions

The financial statements are presented in Indian Rupees (INR), the functional currency of the Company. Items
included in the financial statements of the Company are recorded using the currency of the primary economic
environment in which the Company operates (the ‘functional currency’).

Foreign currency transactions are translated into the functional currency using exchange rates at the date of the
transaction. Foreign exchange gains and losses from settlement of these transactions, and from translation of
monetary assets and liabilities at the reporting date exchange rates are recognised in the Statement of Profit and
Loss.

Non-monetary assets and liabilities denominated in a foreign currency and measured at historical cost are
translated at the exchange rate prevalent at the date of transaction.

Under Previous GAAP, the Company had opted for paragraph 46A of Accounting Standard for 'Effect of
Changes in Foreign Exchange Rates' (AS 11) which provided an alternative accounting treatment whereby
exchange differences arising on long term foreign currency monetary items relating to depreciable capital asset
can be added to or deducted from the cost of the asset and should be depreciated over the balance life of the
asset.

Ind AS 101 includes an optional exemption that allows a first-time adopter to continue the above accounting
treatment in respect of the long-term foreign currency monetary items recognised in the financial statements for
the period ending immediately before the beginning of the first Ind AS financial reporting period as per the
previous GAAP. The Company has elected to avail this optional exemption. However, the capitalization of
exchange differences is not allowed on any new long term foreign currency monetary item recognized from the
first Ind AS financial reporting period.

(xi) Leases

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

Company as a lessee

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

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.

Finance lease:

Assets held under finance leases are initially recognised as assets of the Company at their fair value at the
inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding
liability to the lessor is included in the balance sheet as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to
achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised
immediately in Statement of Profit and Loss, unless they are directly attributable to qualifying assets, in which
case they are capitalized in accordance with the Company’s policy on borrowing cost. Contingent rentals are
recognised as expenses in the periods in which they are incurred.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that
the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the
estimated useful life of the asset and the lease term.

Operating lease:

In respect of assets taken on operating lease, lease rentals are recognized as an expense in the Statement of
Profit and Loss on straight line basis over the lease term unless another systematic basis is more representative
of the time pattern in which the benefit is derived from the leased asset or the payments to the lessor are
structured to increase in the line with expected general inflation to compensate for the lessor’s expected
inflationary cost increases.

(xii) Inventories

Inventories are valued at the lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and condition, are accounted for as follows:

• Raw materials, stores and spares: cost includes cost of purchase (viz. the purchase price, import duties
and other taxes (other than those subsequently recoverable by the entity from the taxing authorities), and
transport, handling and other costs directly attributable to the acquisition and is net of trade discounts,
rebates and other similar items) and other costs incurred in bringing the inventories to their present
location and condition. Cost is determined on first in, first out basis.

• Materials and other supplies held for use in the production of inventories are not written down below cost
if the finished products in which they will be incorporated are expected to be sold at or above cost.

• Spare parts, which do not meet the definition of property, plant and equipment are classified as inventory.

• Finished goods and work in progress: cost includes cost of direct materials and labour and a proportion of
manufacturing overheads based on the normal operating capacity, but excluding borrowing costs. Cost is
determined on first in, first out basis.

• Traded goods: cost includes cost of purchase and other costs incurred in bringing the inventories to their
present location and condition. Cost is determined on first in, first out basis.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of
completion and the estimated costs necessary to make the sale.

Obsolete, slow moving and defective inventories are identified from time to time and, where necessary, a
provision is made for such inventories.

(xiii) Employee benefits

Short- term employee benefits:

All employee benefits payable wholly within twelve months of rendering the service are classified as short¬
term employee benefits. Benefits such as salaries, wages, social security contributions, short term compensated
absences (paid annual leaves) etc. are measured on an undiscounted basis at the amounts expected to be paid
when the liabilities are settled and are expensed in the period in which the employee renders the related service.

Post-employment benefits:

i) Defined contribution plan

The defined contribution plan is postemployment benefit plan under which the Company contributes fixed
contribution to a government administered fund and will have no obligation to pay further contribution. The
Company’s defined contribution plan comprises of Provident Fund, Employee State Insurance Scheme and
Labour Welfare Fund. The Company’s contribution to defined contribution plans are recognized in the
Statement of Profit and Loss in the period in which employee renders the related service.

ii) Defined benefit plan

The Company’s obligation towards gratuity liability is funded to an approved gratuity fund, which fully covers
the said liability under Cash Accumulation Policy of Life Insurance Corporation of India (LIC). The present
value of the defined benefit obligations is determined based on actuarial valuation using the projected unit
credit method. The rate used to discount defined benefit obligation is determined by reference to market yields
at the Balance Sheet date on Indian Government Bonds for the estimated term of obligations.

The amount recognised as ‘Employee benefit expenses’ in the Statement of Profit and Loss is the cost of
accruing employee benefits promised to employees over the current year and the costs of individual events such
as past/future service benefit changes and settlements (such events are recognised immediately in the Statement
of Profit and Loss).

The amount of net interest expense calculated by applying the liability discount rate to the net defined benefit
liability or asset is charged or credited to ‘Finance costs’ in the Statement of Profit and Loss.

Re-measurement of net defined benefit liability/ asset pertaining to gratuity comprise of actuarial gains/ losses
(i.e. changes in the present value of the defined benefit obligation resulting from experience adjustments and
effects of changes in actuarial assumptions), the return on plan assets (excluding interest) and the effect of the

asset ceiling (if any, excluding interest)and is recognised immediately in the balance sheet with a charge or
credit recognised in other comprehensive income in the period in which they occur. Re-measurements are not
reclassified to profit or loss account in subsequent periods.

Other long-term employee benefit obligations:

The liabilities for earned leave that are not expected to be settled wholly within 12 months are measured as the
present value of expected future payments to be made in respect of services provided by employees up to the
end of the reporting period using the projected unit credit method. The benefits are discounted using the market
yields at the end of the reporting period that have terms approximating to the terms of the related obligation.
Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in
the Statement of Profit and Loss. Accumulated leave, which is expected to be utilized within the next 12
months, is treated as short term employee benefit.

(xiv) Government Grant:

Government grants are recognised only when there is reasonable assurance that the Company will comply with
the conditions attaching to them and the grants will be received.

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Company
recognises as expenses the related costs for which the grants are intended to compensate.

Accordingly, government grants:

a) related to or used for assets are included in the Balance Sheet as deferred income and recognised as
income in profit or loss on a systematic basis over the useful life of the assets.

b) related to an expense item is recognised as income on a systematic basis over the periods that the related
costs, for which it is intended to compensate, are expensed.

In the unlikely event that a grant previously recognized is ultimately not received, it is treated as a change in
estimate and the amount cumulatively recognised is expensed in the Statement of Profit and Loss.

(xv) Corporate Social Responsibility

The Company is not required to spend towards Corporate Social Responsibility (CSR) as per Section 135 of the
Companies Act, 2013, since there is no average profit in the last 3 years calculated as per the provisions of the
Act.

(xvi) Taxation

Tax expense comprises of current and deferred tax and includes any adjustments related to past periods in
current and/or deferred tax adjustments that may become necessary due to certain developments or reviews
during the relevant period.

Current income tax:

Tax on income for the current period is determined on the basis of taxable income (or on the basis of book
profits wherever minimum alternate tax is applicable) and tax credits computed in accordance with the
provisions of the Income Tax Act 1961, and based on the expected outcome of assessments/appeals.

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to
the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted, at the reporting date in the countries where the company operates and generates taxable
income.

Current income tax relating to items recognised, either in other comprehensive income or directly in equity, is
also recognized in other comprehensive income or in equity, as appropriate and not in the Statement of Profit
and Loss. Management periodically evaluates positions taken in the tax returns with respect to situations in
which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the
recognized amounts and there is an intention to settle the asset and the liability on a net basis.

Deferred tax:

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

• When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss.

• In respect of taxable temporary differences associated with investments in subsidiaries, associates and
interests in joint arrangements, when the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax
credits and any unused tax losses &unabsorbed tax depreciation. Deferred tax assets are recognised to the
extent that it is probable that taxable profit will be available against which the deductible temporary
differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:

• When the deferred tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss.

• In respect of deductible temporary differences associated with investments in subsidiaries, associates and
interests in joint arrangements, deferred tax assets are recognised only to the extent that it is probable that
the temporary differences will reverse in the foreseeable future and taxable profit will be available against
which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is
no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to
be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the
extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

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

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

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

Deferred Tax Assets include Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India,
which is likely to give future economic benefits in the form of availability of set off against future income tax
liability. Accordingly, MAT is recognised as deferred tax assets in the Balance sheet when the asset can be
measured reliably and it is probable that the future economic benefit associated with the asset will be realised.