1. Material accounting policies
1.1 Statement of compliance
These financial statements are prepared and presented in accordance with the Indian Accounting Standards (Ind AS) notified under the
Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time as notified under Section 133 of Companies Act,
2013, the relevant provisions of the Companies Act, 2013 (“the Act”), and the guidelines issued by the Securities and Exchange Board of
India (SEBI), as applicable.
The financial statements are approved for issue by the Board of Directors of the company at their meeting held on 28th May 2025.
1.2 Basis of preparation
The standalone financial statements have been prepared on the going concern basis and at historical cost, on the accrual basis of accounting
except for certain financial assets and financial liabilities that are measured at fair values at the end of each reporting period, as stated in the
accounting policies set out below. The accounting policies have been applied consistently over all the periods presented in these financial
statements.
The standalone financial statements includes financials statements of IEI Shareholding (Staff Welfare) Trusts (60 trusts) and HMIL
Shareholding (Staff Welfare) Trusts (17 trusts).
1.3 Current and non-current classification
The operating cycle in case of projects division comprising of turnkey projects which forms a part of engineering segment is determined for
each project separately based on the expected execution period of the contract. In case of the other divisions the company has ascertained
its operating cycle as twelve months.
The company presents assets and liabilities in the balance sheet based on current / non-current classification. It has been classified as
current or non-current as per the company's normal operating cycle.
1.4 Functional and presentation currency
The standalone financial statements are presented in Indian rupees, which is also the company's functional currency. All amounts have
been rounded off to two decimal places to the nearest lacs, unless otherwise indicated.
1.5 Basis of measurement
The standalone financial statements have been prepared on a historical cost convention, except for the following:
• certain financial assets and liabilities (including derivative instruments) that are measured at fair value; and
• net defined benefit (asset)/ liability that are measured at fair value of plan assets less present value of defined benefit obligations.
1.6 Use of estimates and judgements
The preparation of the standalone financial statements in accordance with Ind AS requires use of judgments, estimates and assumptions
that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The actual results may
differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised prospectively. Assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to
the carrying amounts of assets and liabilities within the next financial year.
a) Evaluation of percentage completion
Determination of revenues under the percentage of completion method necessarily involves making estimates, some of which are
technical in nature, concerning, where relevant, the percentage of completion, costs to completion, expected revenues from the
project or activity and the foreseeable losses to completion. Estimates of project income, as well as project costs, are reviewed
periodically. The effect of changes, if any, to estimates is recognised in the financial statements for the period in which such changes
are determined.
1.6 Use of estimates and judgements (contd...)
b) Useful life of property, plant and equipment
Determination of the estimated useful lives of tangible assets and the assessment as to which components of the cost may be
capitalised. Useful lives of tangible assets are based on the life prescribed in Schedule II of the Act. In cases, where the useful lives
are different from that prescribed in Schedule II, they are based on technical advice, taking into account the nature of the asset, the
estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes,
manufacturers' warranties and maintenance support.
c) Recognition and measurement of defined benefit obligations
The obligation arising from defined benefit plan is determined on the basis of actuarial assumptions. Key actuarial assumptions
include discount rate, trends in salary escalation, actuarial rates and life expectancy. The discount rate is determined by reference to
market yields at the end of the reporting period on government bonds. The period to maturity of the underlying bonds correspond to
the probable maturity of the post-employment benefit obligations.
d) The company determines the lease term as non - cancellable term of the lease, together with any periods covered by an option
to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is
reasonably certain not to be exercised
e) Expected credit loss (ECL) - Refer note no. 1.14 on Impairment of financial assets
1.7 Measurement of fair values
The company's accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and
liabilities.
The company has an established control framework with respect to the measurement of fair values, which includes overseeing all significant
fair value measurements, including level 3 fair values by the management. The management regularly reviews significant unobservable
inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values,
then the management assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the
requirements of Ind AS, including the level in the fair value hierarchy in which such valuations should be classified.
When measuring the fair value of a financial asset or a financial liability, the company uses observable market data as far as possible. Fair
values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
- Level 2: inputs other than quoted prices included in 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 for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value
measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire
measurement. The company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which
the change has occurred.
1.8 Property, plant and equipment and depreciation
Items of property, plant and equipment are measured at cost, which includes capitalised borrowing costs, less accumulated depreciation
and accumulated impairment losses, if any. Cost includes taxes, duties, freight and other incidental expenses directly related to acquisition/
construction and installation of the assets. Any trade discounts and rebates are deducted in arriving at the purchase price.
Depreciation is provided on straight line basis based on life assigned to each asset in accordance with Schedule II of the Act or as per life
estimated by the Management based on technical evaluation, whichever is lower, as stated below.
1.8 Property, plant and equipment and depreciation (contd...)
Freehold land is not depreciated.
In case of certain class of assets, the company uses different useful life than those prescribed in Schedule II of the Companies Act, 2013.
The useful life has been assessed based on technical advice, taking into account the nature of the asset, the estimated usage of the asset
on the basis of the management's best estimation of getting economic benefits from those class of assets. The company uses its technical
expertise along with historical and industry trends for arriving the economic life of an asset.
Depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.
An item of property, plant and equipment is eliminated from the financial statements on disposal or when no further benefit is expected from
its use and disposal. Gains / losses arising from disposal are recognised in the statement of profit and loss.
1.9 Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost and are carried at cost less accumulated amortisation and
impairment.
Intangible assets are amortised on a straight-line basis over the estimated useful economic life. The amortisation period and the amortisation
method are reviewed at each financial year end. If the expected useful life of the asset is significantly different from previous estimates, the
amortisation period is changed accordingly.
Computer software is amortised on a straight-line basis over the period of 5 years.
Technology acquired is amortised over period of license.
An intangible asset is eliminated from the financial statements on disposal or when no further benefit is expected from its use and disposal.
Gains / losses arising from disposal are recognised in the statement of profit and loss.
1.10 Impairment
Impairment loss, if any, is provided to the extent the carrying amount of assets or a group of assets (cash generating units) exceeds their
recoverable amount. Recoverable amount is the higher of an asset's net selling price and its value in use. Carrying amounts of assets are
reviewed at each balance sheet date for any indication of impairment based on internal/external factors. Value in use is the present value of
estimated future cash flows expected to arise from the continuing use of an asset / or a group of assets (cash generating units) and from its
disposal at end of its useful life. In assessing value in use, the present value is discounted using a pre-tax discount rate that reflects current
market assessments of the time value of money and risks specific to the asset. Net selling price is the amount obtainable from sale of an
asset in an arm's length transaction between knowledgeable, willing parties, less the costs of disposal.
The company reviews its carrying value of investments carried at cost and amortised cost annually, or more frequently when there is
indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for.
1.11 Foreign currency transactions
Transactions in foreign currencies are recognised at exchange rates prevailing on the transaction dates. Exchange differences arising on
the settlement of monetary items at rates different from those at which they were initially recorded during the year, or reported in previous
financial statements, are recognised as income or as expenses in the year in which they arise. Foreign currency monetary items are
reported at the year-end rates. Exchange differences arising on reinstatement of foreign currency monetary items are recognised as income
or expense in the statement of profit and loss. Non-monetary items which are carried in terms of historical cost denominated in a foreign
currency are reported using the exchange rate at the date of the transaction.
1.12 Inventories
Inventories are valued at lower of cost and net realizable value.
Cost of raw materials, components, stores and spares are computed on a weighted average basis. However, materials and other items
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.
Cost of work-in-progress includes cost of raw material and components, cost of conversion and other costs incurred in bringing the
inventories to their present location and condition. Cost is computed on weighted average basis.
Contract cost that has been incurred and relates to the future activity of the contract are recognised as contract work-in-progress as it is
probable that it will be recovered from the customer.
Cost of finished goods includes cost of raw material and components, cost of conversion, other costs including manufacturing overheads
incurred in bringing the inventories to their present location/ condition. Cost is computed on weighted average basis.
1.12 Inventories (contd...)
Costs of traded goods are computed on first-in-first-out basis. Cost includes cost of purchases and other costs incurred in bringing the
inventories to their present location and condition.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs
necessary to make the sale.
1.13 Research and development
Capital expenditure on research and development is treated in the same manner as property, plant and equipment. Research costs are
expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can
reasonably be regarded as assured.
1.14 Financial instruments
Financial assets and financial liabilities are recognised 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
Financial assets other than trade receivables are initially measured at fair value. Transaction costs that are directly attributable
to the acquisition or issue of financial assets (other than financial assets at fair value through profit or loss) are added to the
fair value measured on initial recognition of financial asset.
The financial assets include debt instruments, equity investments and other receivables, loans, cash and bank balances and
derivative financial instruments.
(ii) Classification and subsequent measurement
For the purpose of subsequent measurement, financial assets are classified in the following categories:
a) At amortised cost,
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.
b) 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.
c) At fair value through profit or loss (FVTPL).
A financial asset which is not classified in any of the above categories is measured at FVTPL.
(iii) Equity investments
All equity investments in the scope of Ind AS 109 are measured at fair value except in case of investment in subsidiaries,
associates and joint venture carried at deemed cost. Deemed cost is the carrying amount under the previous GAAP as at the
transition date i.e. 1st April 2016.
Equity instruments included within the FVTPL category, if any, are measured at fair value with all changes recognised 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.
If the company decides to classify an equity instrument at FVTOCI, then all fair value changes on the instrument, excluding
dividends, are recognised 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.
(iv) Impairment of financial assets
The Company assesses impairment based on Expected Credit Losses (ECL) model for the following:
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
Other financial assets such as deposits, advances etc., the company follows ‘simplified approach' for recognition of impairment
loss allowance. The application of simplified approach does not require the company to track changes in credit risk. Rather,
it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. For
recognition of impairment loss on other financial assets and risk exposure, the company determines that whether there has
been a significant increase in the credit risk since initial recognition.
As a practical expedient, the Company uses the provision matrix to determine impairment loss allowance on the trade
receivables. The provision matrix is based on its historical observed default rates over the expected life of the trade receivables
and its adjusted forward looking estimates. At every reporting date, the historical observed default rates are updated and
changes in the forward-looking estimates are analysed.
ECL impairment loss allowance (or reversal) during the period is recognised as other expense in the statement of profit and
loss.
(v) De-recognition of financial assets
The company de-recognises 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 assets.
B. Financial liabilities
(i) Initial recognition and measurement
Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or
issue of financial liabilities (other than financial liabilities at fair value through profit or loss) are deducted from the fair value
measured on initial recognition of financial liabilities.
The financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, derivative financial
instruments, etc.
(ii) Classification and subsequent measurement
For the purpose of subsequent measurement, financial liabilities are classified in two categories:
a) Financial liabilities excluding derivative financial instruments at amortised cost, and
b) Derivative financial instruments at fair value through profit or loss (FVTPL).
- Financial liabilities excluding derivative financial instruments at amortised cost
After initial recognition, financial liabilities are subsequently measured at amortised cost using the EIR method. Gains
and losses are recognised in profit or loss when the liabilities are de-recognised 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.
- Derivative financial instruments
The company uses derivative financial instruments, such as forward currency contracts. Such derivative financial
instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are
subsequently re-measured at fair value at each reporting period. Any changes therein are generally recognised in the
profit and loss account.
(iii) De-recognition
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. The difference
between the carrying amount of the financial liability de-recognised and the consideration paid and payable is recognised in
the statement of profit and loss.
1.15 Financial guarantees
Where guarantees in relation to loans of group companies are provided for no compensation, the fair value are accounted for as contribution
and recognised as part of cost of investment.'
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