2A. Material accounting policies
2.1 Statement of Compliance with Ind AS
These financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) specified under
Section 133 of the Companies Act, 2013 ('the Act'). The financial statements have also been prepared in accordance with the
relevant presentation requirements of the Act.
2.2 Basis of preparation
These financial statements have been prepared in accordance with Ind AS under the historical cost basis except for the
following:
i) Certain financial assets and financial liabilities (including derivative instruments) - measured at fair value, and
ii) Defined benefits plan - plan assets measured at fair value.
Historical cost is generally based on the fair value of the consideration in exchange for goods and services.
All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other
criteria set out in Schedule III to the Act.
The Company has ascertained its operating cycle as 12 months for the purpose of current and non-current classification of
assets and liabilities.
The Balance Sheet, the Statement of Profit and Loss and the Statement of Changes in Equity are prepared and presented in
the format prescribed in the Division II to the Schedule III to the Act. The Statement of Cash Flows has been prepared and
presented in accordance with Ind AS 7 "Statement of Cash Flows". The disclosures with respect to items in the Balance Sheet
and Statement of Profit and Loss, as prescribed in the Schedule III to the Act, are presented by way of notes forming part of
the financial statements along with the other notes required to be disclosed under the notified Accounting Standards and the
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 as amended.
The financial statements including notes thereon are presented in Indian Rupees (" ' " "Rupees" or "Rs."), which is the
Company's functional and presentation currency. All amounts disclosed in the financial statements including notes thereon
have been rounded off to the nearest lakh upto 2 decimals as per the requirement of Schedule III to the Act, unless stated
otherwise.
Accounting policies have been consistently applied except where a newly issued Indian Accounting Standard is initially
adopted or a revision to an existing Indian Accounting Standard requires a change in the accounting policy hitherto in use.
2.3 Use of estimates
The preparation of financial statements in conformity with 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
and expenses during the year. Actual results could differ from those estimates. The estimates and underlying assumptions are
reviewed on an ongoing basis. 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.
2.4 Property, plant and equipment (PPE), Intangible assets, depreciation and amortization
a) All Property, plant and equipment are stated at cost of acquisition with subsequent improvements thereto. For this
purpose, cost includes deemed cost on the date of transition. Cost of acquisition includes taxes, duties, inward freight
and installation expenses. In addition, interest on borrowings used to finance the construction of qualifying assets is
capitalised as part of the asset's cost until such time that the asset is ready for its intended use.
Expenditure incurred on improvements/ modifications of PPE that increases the future benefits from the existing asset
beyond its previously assessed standard of performance, e.g., increase in capacity / efficiency, are capitalized.
The cost and related accumulated depreciation are derecognised from the financial statements upon sale or retirement
of the asset and the resultant gains or losses are recognized in the Statement of Profit and Loss.
b) Depreciation of these assets commences when the assets are ready for their intended use and is provided on written
down value method based on the useful life of the assets as per Schedule II of the Act. In case of certain items of Plant
and Equipments where useful life ranging from 10 to 30 years have been considered based on technical assessment,
which is different from the useful life prescribed under Schedule II of the Act. However, assets costing ' 5,000/- or less
are depreciated fully in the year of addition.
The management believes that these estimated useful lives are realistic and reflect a fair approximation of the period
over which the assets are likely to be used.
Additions on account of improvements/ modifications, which becomes an integral part of the existing asset and either do
not have separate identity and/or are not capable of being used after the existing asset is disposed off are depreciated
over the remaining useful life of the assets (improved /modified) they are attached with.
The estimated useful lives, residual values and method of depreciation are reviewed at each Balance sheet date and
changes, if any, are adjusted prospectively, wherever appropriate.
c) Treatment of expenditure during construction period:
Property, plant and equipment that are not ready for intended use on the balance sheet date are disclosed as "Capital
work in-progress". Advances paid towards acquiring property, plant and equipment outstanding at each balance sheet
date are classified as Capital advances under "Other non-current assets". Directly attributable expenditures (including
finance costs relating to borrowed funds for construction or acquisition of property, plant and equipment) incurred on
projects under implementation are treated as pre-operative expenses pending allocation to the assets and are shown
under "Capital work-in-progress".
d) Intangible Assets
Intangible assets are stated at cost of acquisition (includes deemed cost on the date of transition) less accumulated
amortization. Computer software packages are amortized over a period of five year on straight line basis. The estimated
useful lives, residual values, and amortisation method are reviewed at least annually during each financial year-end and
adjusted prospectively, wherever appropriate.
2.5 Financial instruments
Financial assets and financial liabilities are recognized in the Balance sheet when the Company becomes a party to the
contractual provisions of the instrument. The Company determines the classification of its financial assets and financial
liabilities at initial recognition based on its nature and characteristics.
(a) Financial assets
(i) 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, transaction costs that are attributable to the acquisition of the financial asset. Trade
receivables that do not contain a significant financing component or for which the Company has applied the
practical expedient are measured at the transaction price determined under Ind AS 115. The financial assets include
equity and debt securities, trade and other receivables, loans and advances, cash and bank balances and derivative
financial instruments.
(ii) Subsequent measurement
For the purpose of subsequent measurement, financial assets are classified in the following categories:
1) At amortized cost,
2) At fair value through other comprehensive income (FVTOCI), and
3) At fair value through profit or loss (FVTPL).
Financial Assets carried at Amortised Cost (AC):
A financial asset is 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.
After initial measurement, such financial assets are subsequently measured at amortized cost using the effective
interest rate (EIR) method. Amortized 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.
Financial Assets at Fair Value through Other Comprehensive Income (FVTOCI):
A financial asset is measured at FVTOCI 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.
Financial Assets at Fair Value through Profit or Loss (FVTPL):
A financial asset which is not classified in any of the above categories are measured at FVTPL. A financial asset
that meets the amortised cost criteria or debt instruments that meet the FVTOCI criteria may be designated as at
FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition
inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on
different bases. The Company has not designated any debt instrument as at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses
arising on re-measurement recognised in the statement of profit and loss.
Equity investments
All equity investments in the scope of Ind AS 109 are measured at fair value except in case of investment in
subsidiary carried at deemed cost. Deemed cost is the carrying amount under the previous GAAP as at the transition
date i.e. April 1, 2016.
Equity instruments included within the FVTPL category, if any, are measured at fair value with all changes recognized
in profit or loss. The Company may make an irrevocable election to present in OCI subsequent changes in the fair
value. The Company makes such election on an instrument-by-instrument basis. The classification is made on
initial recognition and is irrevocable. Dividends on such investments are recognised in the statement of profit and
loss unless the dividend clearly represents a recovery of part of the cost of the investment.
When the fair value has been determined based on level 3 inputs, the difference between the fair value at initial
recognition and the transaction price is deferred and after initial recognition deferred difference is recognized as
gain or loss to the extent it arises from change in input to valuation technique.
If the Company decides to classify an equity instrument at FVTOCI, then all fair value changes on the instrument,
excluding dividends, are recognized in OCI. There is no recycling of the amounts from OCI to profit or loss, even on
sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
(iii) De-recognition
The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset
expires or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset.
On derecognition of a financial asset accounted under Ind AS 109 in its entirety:
a) for financial assets measured at amortised cost, the gain or loss is recognized in the statement of profit and
loss.
b) for financial assets measured at fair value through other comprehensive income, the cumulative fair value
adjustments previously taken to reserves are reclassified to the Statement of Profit and Loss unless the asset
represents an equity investment in which case the cumulative fair value adjustments previously taken to
reserves is reclassified within equity.
(b) Financial liabilities
(i) Initial recognition and measurement
All financial liabilities are recognized initially at fair value and, in the case of financial liabilities classified at
amortized cost, net of directly attributable transaction costs.
The financial liabilities include trade and other payables, borrowings, derivative financial instruments, etc.
(ii) Subsequent measurement
For the purpose of subsequent measurement, Financial liabilities are classified in two categories:
1) Financial liabilities at amortized cost, and
2) Derivative instruments at fair value through profit or loss (FVTPL).
Financial liabilities at amortized cost
After initial recognition, financial liabilities are subsequently measured at amortized cost using the EIR method.
Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR
amortization process.
Amortized 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 amortization is included as finance costs in the Statement of Profit and Loss.
(iii) De-recognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.
(c) Derivative financial instruments
Initial recognition and subsequent measurement
A derivative financial instrument, such as forward currency contracts are used to hedge foreign currency risks and interest
rate risks respectively and includes options. Such derivative financial instruments are initially recognized at fair value on
the date on which a derivative contract is entered into and are subsequently re-measured at fair value.
Derivatives are carried as financial assets when the fair value is positive and as 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 profit or loss.
When the fair value has been determined based on level 3 inputs, the difference between the fair value at initial
recognition and the transaction price is deferred and after initial recognition deferred difference is recognized as gain or
loss to the extent it arises from change in input to valuation technique.
(d) Offsetting of financial instruments
Financial assets and financial liabilities including derivative instruments are offset and the net amount is reported in
the Balance sheet, if there is currently enforceable legal right to offset the recognized amounts and there is an intention
to settle on a net basis or to realize the assets and settle the liabilities simultaneously.
(e ) Share capital/Equity instruments
An Equity Instrument is any contract that evidences a residual interest in the assets of the Company after deducting all
of its liabilities. Repurchase of the Company's own equity instruments is recognised and deducted directly in equity. No
gain or loss is recognised in the statement of profit and loss on the purchase, sale, issue or cancellation of the Company's
own equity instruments. Incremental costs directly attributable to the issuance of new equity shares and buy-back of
equity shares are shown as a deduction from the Equity net of any tax effects.
(f) Fair value measurement
Fair value is a market-based measurement, not an entity-specific measurement. Under Ind AS, fair valuation of financial
instruments is guided by Ind AS 113 "Fair Value Measurement".
For some assets and liabilities, observable market transactions or market information might be available. For other
assets and liabilities, observable market transactions and market information might not be available. However, the
objective of a fair value measurement in both cases is the same to estimate the price at which an orderly transaction to
sell the asset or to transfer the liability would take place between market participants at the measurement date under
current market conditions (i.e. an exit price at the measurement date from the perspective of a market participant that
holds the asset or owes the liability).
Three widely used valuation techniques specified in the said Ind AS are the market approach, the cost approach and the
income approach which have been dealt with separately in the said Ind AS.
Each of the valuation techniques stated as above proceeds on different fundamental assumptions, which have greater or
lesser relevance, and at times there is no relevance of a particular methodology to a given situation. Thus, the methods
to be adopted for a particular purpose must be judiciously chosen. The application of any particular method of valuation
depends on the company being evaluated, the nature of industry in which it operates, the company's intrinsic strengths
and the purpose for which the valuation is made.
In determining the fair value of financial instruments, the Company uses a variety of methods and assumptions that are
based on market conditions and risks existing at each balance sheet date.
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation
technique:
Level 1: Quoted prices (unadjusted) 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 for the assets or liabilities that are not based on observable market data (unobservable inputs).
2.6 Inventories
Inventories are valued at lower of the cost and net realizable value. The cost in respect of raw materials and stores and spares
is determined on FIFO basis and in respect of finished goods and stock in process is determined on average basis. Cost of
raw materials and stores and spares include the taxes and duties other than those recoverable from taxing authorities and
expenses incidental to the procurement of the same. Cost in case of stock-in-process and finished goods represent prime cost
and appropriate portion of overheads.
Inventories are written down on a case-by-case basis if the anticipated net realizable value declines below the carrying
amount of inventories. Such write downs are recognised in the Statement of profit and loss.
2.7 Impairments of Assets
(a) Non-financial assets
Property, plant and equipment and intangible assets are reviewed at each Balance Sheet date for impairment. In case
events and circumstances indicate any impairment, recoverable amounts of fixed assets is determined. An impairment
loss is recognized, whenever the carrying amount of assets belonging to the Cash Generating Unit (CGU) exceeds
recoverable amount. The recoverable amount is the greater of assets net selling price or its value in use. In assessing the
value in use, the estimated future cash flows from the use of assets are discounted to their present value as appropriate.
An impairment loss is reversed if there has been change in the recoverable amount and such loss either no longer exists
or has decreased. Impairment loss/reversal thereof is adjusted to the carrying value of the respective assets, which in
case of CGU, are allocated to its assets on a prorate basis.
(b) Financial assets
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not
fair valued through profit or loss.
The Company measures the loss allowance for a financial asset at an amount equal to the lifetime expected credit losses
if the credit risk on that financial instrument has increased significantly since initial recognition. If the credit risk on a
financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for
that financial asset at an amount equal to 12-month expected credit losses.
In case of debt instruments measured at FVTOCI, the loss allowance shall be recognised in other comprehensive income
with a corresponding effect to the profit or loss and not reduced from the carrying amount of the financial asset in the
balance sheet. In case of such instrument, amount recognized in the statement of profit and loss are the same as the
amount would have been recognized in case the debt instrument is measured at amortised cost.
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that
are within the scope of Ind AS 115, the Company measures the loss allowance using 'simplified approach' which is at an
amount equal to lifetime expected credit losses taking into account historical credit loss experience and adjusted for
forward-looking information.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income or expense in the
Statement of Profit and Loss. This amount is reflected under the head "Other expenses" in the profit or loss. ECL is
presented as an allowance, i.e. as an integral part of the measurement of those assets in the Balance sheet. The allowance
reduces the net carrying amount.
Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying
amount.
2.8 Foreign Currency Transaction
Transactions in Foreign Currencies are accounted for at the exchange rate prevailing as on the date of the transaction. Foreign
Currency monetary assets and liabilities at the year end are translated using closing rates whereas non monetary assets are
translated at the rate on the date of transaction. The loss or gain thereon and also on the exchange differences on settlement
of the foreign currency transaction during the year are recognized as revenue or expenses in the Statement of Profit and Loss.
2.9 Revenue Recognition
Revenue is recognised upon transfer of control of promised goods or services to customers at an amount to which the
entity expects to be entitled following a five-step model in accordance with Ind AS 115. Revenue is measured based on
the consideration specified in a contract with a customer, and is reduced for volume discounts, rebates and other similar
allowances.
a) Revenue from Operations:
Revenue is measured at fair value of the consideration received/receivable taking into account contractually defined
terms of payment and excluding taxes or duties collected on behalf of the Government.
Revenue is measured based on the transaction price adjusted for discounts and rebates and excludes amounts collected
on behalf of third parties.
Revenue from sale of goods is recognised at point in time when control is transferred to the customer and it is probable
that consideration will be collected. Control of goods is transferred upon the shipment of the goods to the customer or
when goods is made available to the customer.
The transaction price is documented on the sales invoice or contract and payment is generally due as per agreed credit
terms with customer. Payment terms agreed with a customer are as per business practice and the financing component,
if significant, is separated from the transaction price and accounted as interest income.
The consideration is generally fixed. Variable consideration, if any is recognised when it is highly probable that a
significant reversal will not occur.
Sales return is variable consideration that is recognised and recorded based on historical experience, market conditions
and provided for in the year of sale as reduction from revenue. The methodology and assumptions used to estimate
returns are monitored and adjusted regularly in line with trade practices, historical trends, past experience and projected
market conditions.
b) Sale of Electricity
Sale of Electricity is accounted for on delivery of Electricity to grid in terms of agreement with the Electricity Board.
Other Income:
a) Interest income
For all debt instruments measured at amortized cost, interest income is recognized using the effective interest rate
(EIR). Interest income is included in "Other income" in the Statement of Profit and Loss.
b) Insurance and other claims are accounted for as and when admitted or realized.
c) Dividend is recognized when the right to receive is established.
d) All other income are accounted for on accrual basis.
2.10 Expenses
All expenses are accounted for on accrual basis.
Expenses under primary heads such as salary, wages, consumption of stores etc., are being shown under respective heads and
have not been functionally reclassified.
2.11 Employee Benefits
Short term employee benefits are recognized as an expense at the undiscounted amount in the Statement of Profit and Loss
of the year in which the related service is rendered.
The Company has Defined Contribution Plan for its employees retirement benefits comprising of Provident Fund and Pension
Fund. The Company makes regular contribution to Provident Fund, which are fully funded and administered by the Government.
Contributions are recognized in Statement of Profit and Loss on accrual basis.
The Company has Defined Benefit Plan comprising of Gratuity. The Company's net obligation in respect of an approved gratuity
plan is calculated using the projected unit credit method and the same is carried out by qualified actuary. The Company
contributes to the Gratuity Fund under the Group Gratuity Cash Accumulation Scheme with Life Insurance Corporation (LIC)
for future payment of gratuity liability to its employees.
The current service cost and interest on the net defined benefit liability / (asset) is recognized in the statement of profit and
loss. Past service cost are immediately recognized in the statement of profit and loss. Actuarial gains and losses net of deferred
taxes arising from experience adjustment and changes in actuarial assumptions are recognized in other comprehensive
income in the period in which they arise.
The Company's current policy permits eligible employees to accumulate compensated absences up to a prescribed limit and
receive cash in lieu thereof in accordance with the terms of the policy. The Company measures the expected cost of accumulating
compensated absences as the additional amount that the Company expects to pay as a result of unused entitlement that has
accumulated as at the reporting date. The expected cost of these benefits is calculated using the projected unit credit method
by qualified actuary every year. Actuarial gains and losses arising from experience adjustment and changes in actuarial
assumptions are recognized in the statement of profit and loss in the period in which they arise. The obligations are presented
as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least
twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
2.12 Government Grants
Government Grants are recognized at fair value when there is reasonable assurance that the grant would be received and the
Company would comply with all the conditions attached with them.
Government grants related to asset are recognized as deferred income and charged to statement of profit and loss on a
systematic basis over expected useful life of the related asset. Government grants of revenue in nature are recognised on a
systematic basis in the Statement of Profit and Loss over the period necessary to match them with the related costs and are
adjusted with the related expenditure. If not related to a specific expenditure, it is considered income and included under
"Other operating revenue" or "Other income.
2.13 Borrowing Cost
Borrowing Cost that are directly attributable to the acquisition or construction of a qualifying asset are capitalized as part of
the cost of such asset till such time that is required to complete and prepare the asset to get ready for its intended use.
All other borrowing cost are charged to the statement of Profit and Loss in the period in which they are incurred.
2.14 Taxes
Income tax expense comprises current tax and deferred tax and is recognized in the Statement of Profit and Loss except to the
extent it relates to items directly recognized in Equity or in OCI.
a) Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities using the tax rates and tax laws that are enacted or substantively
enacted by the balance sheet date and applicable for the period.
Current tax items in correlation to the underlying transaction relating to OCI and Equity are recognized in OCI and in
Equity respectively.
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 on the basis of amounts expected
to be paid to the tax authorities.
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 realise the assets and settle the liabilities
simultaneously.
b) Deferred income tax
DDeferred income tax is recognized using the balance sheet approach. Deferred income tax assets and liabilities are
recognized for deductible and taxable temporary differences arising between the tax base of assets and liabilities and
their carrying amount in financial statements, except when the deferred income tax arises from the initial recognition
of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor
taxable profits or loss at the time of the transaction.
Deferred tax assets are recognized for deductible temporary differences, the carry forward of unused tax credits and any
unused tax losses 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 utilized.
The carrying amount of deferred tax assets is reviewed at each balance sheet 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 assets to be utilized.
Unrecognized deferred tax assets are re-assessed at each balance sheet date and are recognized 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
realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at
the balance sheet date.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off deferred tax assets
against deferred tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
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