NOTE 1: MATERIAL ACCOUNTING POLICIES
CORPORATE INFORMATION:
JNK India Limited (JNK), the Company, was incorporated in 2010 as
private limited company. The Company got converted into a public
limited company on 26th May 2023.
The Company is in the business of manufacturing the process
fired heaters, reformers and cracking furnaces (together, the
"Heating Equipment") that are required in process industries
such as for Oil and Gas refineries, Petrochemical and Fertilizer
industries. The Company's main activity consists of Designing,
Engineering, Manufacture, Fabrication, Procurement, Erection and
Commissioning of Heating Equipment.
The Company's registered office is at Unit No. 203 to 206, Opp.
TMC Office, Centrum IT Park, Near Satkar Hotel, Thane (West)-
400604, Maharashtra.
The CIN of the company is U29268MH2010PLC204223.
A. Basis of Preparation of Financial Statements:
The Company's financial statements have been prepared in
accordance with the provisions of the Companies Act, 2013
and the Indian Accounting Standards ("Ind AS") notified under
the Companies (Indian Accounting Standards) Rules, 2015 and
amendments thereto issued by Ministry of Corporate Affairs
under section 133 of the Companies Act, 2013. In addition,
the guidance notes/announcements issued by the Institute of
Chartered Accountants of India (ICAI) are also applied except
where compliance with other statutory promulgations require
a different treatment. These financials statements have been
approved for issue by the Board of Directors at its meeting held
on May 29, 2025.
B. Basis of Accounting:
The Company maintains its accounts on accrual basis following
historical cost convention, except for certain financial assets
and liabilities that are measured at fair value or amortised cost,
defined benefit plans and share based payments in accordance
with Ind AS. Fair value measurements are categorized as
below, 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 Company can access at
measurement date;
Level 2 inputs are inputs, other than quoted prices included
in level 1, that are observable for the assets or liabilities, either
directly or indirectly; and
Level 3 inputs are unobservable inputs for the valuation of
assets or liabilities.
Above levels of fair value hierarchy are applied consistently and
generally, there are no transfers between the levels of the fair
value hierarchy unless the circumstances change warranting
such transfer.
• Presentation of financial statements 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 Schedule III to the Companies Act, 2013
(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
Ind AS and the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 as amended.
Amounts in the financial statements are presented in
Indian Rupee in millions [1 million = 10 lakhs] rounded off
to two decimal places as permitted by Schedule III to the
Act. Per share data are presented in Indian Rupee to two
decimals places.
• Operating cycle for current and non-current classification :
The Company presents assets and liabilities in the balance
sheet based on current/ non-current classification.
An asset is treated as current when it is:
• Expected to be realized or intended to be sold or consumed
in normal operating cycle;
• Held primarily for the purpose of trading;
• Expected to be realized within twelve months after the
reporting period; or
• Cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least twelve
months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
• It is expected to be settled in normal operating cycle;
• It is held primarily for the purpose of trading;
• It is due to be settled within twelve months after the
reporting period; or
• There is no unconditional right to defer the settlement
of the liability for at least twelve months after the
reporting period.
The Company classifies all other liabilities as non-current.
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 realization in cash and cash
equivalents. The Company has identified twelve months as its
operating cycle.
C. Revenue Recognition:
The Company earns revenue primarily from projects with
respect to Designing, Engineering, Manufacture, Fabrication,
Procurement, Erection and Commissioning Heating Equipment.
Revenue from Operations:
(i) Revenue from projects with performance obligations
satisfied over time are recognized using input method.
Revenue from such contracts is recognized over
time because of the continuous transfer of control
to the customer. With control transferring over time,
revenue is recognized based on the extent of progress
towards completion of the performance obligation.
Cost based input method of progress is used because
it best depicts the transfer of control to the customer
that occurs as costs are incurred. Under the cost-based
method, the extent of progress towards completion is
measured based on the proportion of costs incurred to
date to the total estimated costs at completion of the
performance obligation. Cost estimates on significant
contracts are reviewed on a periodic basis, or when
circumstances change and warrant a modification to
a previous estimate. Cost estimates are largely based
on negotiated or estimated purchase contract terms,
historical performance trends and other economic
projections. Significant factors that influence these
estimates include if the desired site is made available
on time, inflationary trends, technical and schedule risk,
internal and subcontractor performance trends, business
volume assumptions, asset utilization and anticipated
labour agreements. Provisions for anticipated losses on
long-term contracts are recorded in full when such losses
become evident, to the extent required.
(ii) Revenue from contract with customers is recognised
when control of the goods or services are transferred to
the customer at an amount that reflects the consideration
Company expects to be entitled in exchange for those
goods or services.
(iii) A contract asset is the right to consideration in exchange
for goods or services transferred to the customer. If the
Company performs by transferring goods or services to
a customer before the customer pays consideration or
before payment is due, a contract asset is recognised
for the earned consideration excluding any amounts
presented as a receivable.
(iv) A contract liability is the obligation to transfer goods
or services to a customer for which the Company has
received consideration (or an amount of consideration is
due) from the customer. If a customer pays consideration
before the Company transfers goods or services to the
customer, a contract liability is recognised when the
payment is made or the payment is due (whichever is
earlier). Contract liabilities are recognised as revenue
when the Company performs under the contract.
Other income:
(i) I nterest income on loans accrued on a time basis by
reference to the principal outstanding and the effective
interest rate including interest on investments
(ii) Other items of income are accounted as and when the
right to receive such income arises and it is probable that
the economic benefits will flow to the Company and the
amount of income can be measured reliably.
D. Exceptional Items:
An item of income or expense which by its size, type or incidence
requires disclosure in order to improve an understanding of
the performance of the Company is treated as an exceptional
item and disclosed as such in the financial statements.
E. Property, Plant And Equipment (PPE):
PPE is recognised 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. PPE is stated
at original cost net of tax/duty credits availed, if any, less
accumulated depreciation and cumulative impairment, if any.
All directly attributable costs related to the acquisition of PPE
and borrowing costs in case of qualifying assets are capitalised
in accordance with the Company's accounting policy.
Administrative and other general overhead expenses that are
specifically attributable to construction or acquisition of PPE
or bringing the PPE to working conditions are allocated and
capitalised as a part of the cost of the PPE.
Subsequent costs are included in the asset's carrying amount
or recognised 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 can be
measured reliably.
PPE not ready for the intended use on the date of the Balance
Sheet are disclosed as "capital work-in-progress". (Also refer to
the policies on leases, borrowing costs, impairment of assets
and foreign currency transactions below).
Depreciation is recognised using written down value method
so as to write off the cost of the assets (other than capital
work-in-progress) less their residual values over their useful
lives specified in Schedule II to the Companies Act, 2013, or
in the case of Plant and Equipment* where the useful life
was determined by technical evaluation, over the useful life
so determined.
Lease hold improvements are depreciated over the tenure of
the Lease Term.
The useful life of material assets are estimated as follows :
Depreciation charge for impaired assets is adjusted in future
periods in such a manner that the revised carrying amount of
the asset is allocated over its remaining useful life. Depreciation
method is reviewed at each financial year end to reflect the
expected pattern of consumption of the future economic
benefits embodied in the asset. The estimated useful life and
residual values are also reviewed at each financial year end and
the effect of any change in the estimates of useful life/residual
value is accounted on prospective basis.
Where cost of a part of the asset ("asset component") is
significant to total cost of the asset and useful life of that part
is different from the useful life of the remaining asset, useful
life of that significant part is determined separately and such
asset component is depreciated over its separate useful life.
Depreciation on additions to/deductions from, owned assets
is calculated pro-rata to the period of use.
PPE is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss
arising on derecognition is recognized in the Statement of
Profit and Loss in the same period.
F. Intangible assets:
Intangible assets are recognized when it is probable that the
future economic benefits that are attributable to the asset will
flow to the Company and the cost of the asset can be measured
reliably. Intangible assets are stated at original cost net of tax/
duty credits availed, if any, less accumulated amortization and
cumulative impairment. All directly attributable costs and
other administrative and other general overhead expenses
that are specifically attributable to acquisition of intangible
assets are allocated and capitalized as a part of the cost of the
intangible assets.
Intangible assets are amortized over the estimated useful life.
The method of amortization and useful life are reviewed at the
end of each financial year with the effect of any changes in the
estimate being accounted for on a prospective basis.
Amortization on impaired assets is provided by adjusting
the amortization charge in the remaining periods so as to
allocate the asset's revised carrying amount over its remaining
useful life.
G. Impairment of non-financial assets:
As at the end of each financial year, the carrying amounts of PPE,
and intangible assets are reviewed to determine whether there
is any indication that those assets have suffered an impairment
loss. If such indication exists, PPE, and intangible assets are
tested for impairment so as to determine the impairment loss,
if any.
Impairment loss is recognized when the carrying amount of
an asset exceeds its recoverable amount. Recoverable amount
is determined:
(i) in the case of an individual asset, at the higher of the fair
value less costs of disposal and the value-in-use; and
(ii) in the case of a cash generating unit (the smallest
identifiable group of assets that generates independent
cash flows), at the higher of the cash generating unit's fair
value less costs of disposal and the value-in-use.
The amount of value-in-use is determined as the present value
of estimated future cash flows from the continuing use of an
asset, which may vary based on the future performance of
the Company and from its disposal at the end of its useful life.
For this purpose, the discount rate (post-tax) is determined
based on the weighted average cost of capital of the Company
suitably adjusted for risks specified to the estimated cash flows
of the asset.
If recoverable amount of an asset (or cash generating unit) is
estimated to be less than its carrying amount, such deficit is
recognised immediately in the Statement of Profit and Loss as
impairment loss and the carrying amount of the asset (or cash
generating unit) is reduced to its recoverable amount.
When an impairment loss recognised earlier is subject to full
or partial reversal, the carrying amount of the asset (or cash
generating unit), is increased to the revised estimate of its
recoverable amount, such that the increased carrying amount
does not exceed the carrying amount that would have been
determined had no impairment loss is recognised for the
asset (or cash generating unit) in prior years. A reversal of
an impairment loss (other than impairment loss allocated to
goodwill) is recognised immediately in the Statement of Profit
and Loss.
H. Employee Benefits:
(i) Short-term employee benefits:
Employee benefits such as salaries, wages, short¬
term compensated absences, bonus, ex-gratia and
performance-linked rewards falling due wholly within
twelve months of rendering the service are classified as
short-term employee benefits and are expensed in the
period in which the employee renders the service.
(ii) Post-employment benefits:
a) Provident Fund scheme and Employee State
Insurance Scheme:
Eligible employees receive benefits of a state run
provident fund and insurance scheme. These
are defined contribution plans. Both the eligible
employee and the Company make monthly
contributions to provident fund plan and the
insurance scheme equal to a specified percentage
of the covered employees' salary. There are no
other obligations other than the contribution
payable to the relevant fund / scheme.
b) Gratuity scheme:
The Company provides for gratuity, a defined benefit
retirement plan covering eligible employees.
The Gratuity plan provides a lump sum payment
to the vested employees at retirement, death,
incapacitation or termination of employment of
an amount based on the respective employees'
salary and tenure with the Company. Liabilities with
regard to Gratuity are determined in accordance
with the actuarial valuation.
c) Compensated Absences:
Accumulated compensated absences, which are
expected to be availed or encashed within 12
months from the end of the year, are treated as
short-term employee benefits. The obligation
towards the same is measured at the expected
cost of accumulating compensated absences as the
additional amount expected to be paid as a result
of the unused entitlement as at the year end.
Actuarial gain or losses and remeasurements:
Actuarial gains or losses on defined benefit obligations
are recognized in other comprehensive income. Further,
the profit or loss does not include an expected return
on plan assets. Instead, net interest recognized in profit
and loss is calculated by applying the discount rate
used to measure the defined benefit obligation to the
net defined benefit liability or asset. The actual return
on the plan assets above or below the discount rate is
recognized as part of re-measurement of net defined
liability or asset through other comprehensive income.
Remeasurements comprising actuarial gains or losses
and return on plan assets (excluding amounts included
in net interest on the net defined benefit liability) are not
reclassified to profit and loss in subsequent periods.
I. Share-based payment:
Certain employees of the Company receive remuneration in
the form of equity settled instruments given by the Company,
for rendering services over a defined vesting period. Equity
instruments granted are measured by reference to the fair
value of the instrument at the date of grant.
The expense is recognized in the statement of profit and loss
with a corresponding increase to the share-based payment
reserve, as a component of equity. The equity instruments
generally vest in a graded manner over the vesting period.
The fair value determined at the grant date is expensed over
the vesting period of the respective tranches of such grants.
The stock compensation expense is determined based on
the Company's estimate of equity instruments that will
eventually vest.
J. Leases
Assets taken on lease are accounted as right-of-use assets and
the corresponding lease liability is recognised at the lease
commencement date.
I nitially the right-of-use asset is measured at cost which
comprises the initial amount of the lease liability adjusted for
any lease payments made at or before the commencement
date, plus any initial direct costs incurred and an estimate
of costs to dismantle and remove the underlying asset or to
restore the underlying asset or the site on which it is located,
as reduced by any lease incentives received.
The lease liability is initially measured at the present value
of the lease payments, discounted using the Company's
incremental borrowing rate. It is remeasured when there is a
change in future lease payments arising from a change in an
index or a rate, or a change in the estimate of the guaranteed
residual value, or a change in the assessment of purchase,
extension or termination option. When the lease liability is
remeasured in this way, a corresponding adjustment is made
to the carrying amount of the right-of-use asset or is recorded
in profit or loss if the carrying amount of the right-of-use asset
has been reduced to zero.
The right-of-use asset is measured by applying cost model
i.e. right-of-use asset at cost less accumulated depreciation
and cumulative impairment, if any. The right-of-use asset
is depreciated using the straight-line method from the
commencement date to the end of the lease term or useful life
of the underlying asset whichever is earlier. Carrying amount
of lease liability is increased by interest on lease liability and
reduced by lease payments made.
Lease payments associated with following leases are
recognised as expense on straight-line basis:
(i) Low value leases; and
(ii) Leases which are short-term.
K. Financial instruments
Financial assets and/or financial liabilities are recognised
when the Company becomes party to a contract embodying
the related financial instruments. All financial assets, financial
liabilities and financial guarantee contracts are initially
measured at fair value excepting for trade receivables not
containing a significant financing component are initially
measured at transaction price. Transaction costs that are
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial
liabilities at fair value through profit or loss) are added to
or deducted from as the case may be, the fair value of such
financial assets or liabilities, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are
recognised in profit or loss.
A financial asset and a financial liability is offset and presented
on net basis in the balance sheet when there is a current legally
enforceable right to set-off the recognised amounts and it is
intended to either settle on net basis or to realise the asset and
settle the liability simultaneously.
Financial assets:
A. All recognised financial assets are subsequently
measured in their entirety either at amortised cost or at
fair value as follows:
(i) Investment in equity instruments issued by
subsidiary, associate and joint venture companies
are measured at cost less impairment.
(ii) Trade receivables, security deposits, cash and cash
equivalents, employee and other advances - at
amortised cost.
B. For financial assets that are measured at FVTOCI,
income by way of interest and dividend, provision for
impairment and exchange difference, if any, (on debt
instrument) are recognised in profit or loss and changes
in fair value (other than on account of above income or
expense) are recognised in other comprehensive income
and accumulated in other equity. In case of equity
instruments at FVTOCI, such cumulative gain or loss is not
reclassified to profit or loss on disposal of investments.
C. A financial asset is primarily derecognised when:
(i) the right to receive cash flows from the asset has
expired, or
(ii) the Company has transferred its rights to receive
cash flows from the asset or has assumed an
obligation to pay the received cash flows in full
without material delay to a third party under a
pass-through arrangement; and (a) the Company
has transferred substantially all the risks and
rewards of the asset, or (b) the Company has neither
transferred nor retained substantially all the risks
and rewards of the asset, but has transferred
control of the asset.
On derecognition of a financial asset in its entirety,
the difference between the carrying amount at
the date of derecognition and the consideration
received is recognised in profit or loss.
D. Impairment of financial assets: Impairment loss on
trade receivables is recognised using expected credit
loss model, which involves use of a provision matrix
constructed on the basis of historical credit loss
experience as permitted under Ind AS 109 and is adjusted
for forward looking information. Impairment loss on
investments is recognised when the carrying amount
exceeds its recoverable amount. For all other financial
assets, expected credit losses are recognised based on
the difference between the contractual cashflows and
all the expected cash flows, discounted at the original
effective interest rate. ECLs are measured at an amount
equal to 12-month expected credit losses or at an amount
equal to lifetime expected credit losses if the credit risk
on the financial asset has increased significantly since
initial recognition.
Financial liabilities:
A. Financial liabilities, which are designated for
measurement at FVTPL are subsequently measured
at fair value. Financial guarantee contracts are
subsequently measured at the amount of impairment
loss allowance or the amount recognised at inception
net of cumulative amortisation, whichever is higher. All
other financial liabilities including loans and borrowings
are measured at amortised cost using Effective Interest
Rate (EIR) method.
B. A financial liability is derecognised when the related
obligation expires or is discharged or cancelled.
L. Inventories
Inventories are valued after providing for obsolescence,
as under:
(i) Raw materials, components, construction materials,
stores, spares and loose tools at lower of weighted
average cost or net realisable value. However, these items
are considered to be realisable at cost if the finished
products in which they will be used, are expected to be
sold at or above cost.
(ii) Manufacturing work-in-progress at lower of weighted
average cost including related overheads or net realisable
value. In some cases, manufacturing work-in-progress
are valued at lower of specifically identifiable cost or net
realisable value. In the case of qualifying assets, cost also
includes applicable borrowing costs vide policy relating
to borrowing costs.
(iii) Finished goods and stock-in-trade (in respect of goods
acquired for trading) at lower of weighted average cost
or net realisable value. Cost includes costs of purchases,
costs of conversion and other costs incurred in bringing
the inventories to their present location. Taxes which are
subsequently recoverable from taxation authorities are
not included in the cost.
Assessment of net realisable value is made at each
reporting period end and when the circumstances that
previously caused inventories to be written-down below
cost no longer exist or when there is clear evidence of
an increase in net realisable value because of changed
economic circumstances, the write-down, if any, in the
past period is reversed to the extent of the original
amount written-down so that the resultant carrying
amount is the lower of the cost and the revised net
realisable value.
M. Cash and bank balances
Cash and bank balances include fixed deposits, margin
money deposits, earmarked balances with banks and other
bank balances which have restrictions on repatriation. Short¬
term and liquid investments being subject to more than
insignificant risk of change in value, are not included as part
of cash and cash equivalents.
N. Securities premium
Securities premium includes:
(i) The difference between the face value of the equity
shares and the consideration received in respect of
shares issued.
(ii) The fair value of the stock options which are treated as
expense, if any, in respect of shares allotted pursuant to
Stock Options Scheme.
(iii) The issue expenses of securities which qualify as equity
instruments are written off against securities premium.
O. Borrowing Costs
Borrowing costs include finance costs calculated using the
effective interest method.
Borrowing costs net of any investment income from the
temporary investment of related borrowings that are
attributable to the acquisition, construction or production of
a qualifying asset are capitalised /inventorised as part of cost
of such asset till such time the asset is ready for its intended use
or sale. A qualifying asset is an asset that necessarily requires a
substantial period of time to get ready for its intended use or
sale. All other borrowing costs are recognised in profit or loss
in the period in which they are incurred.
P. Share-based payment arrangements
The stock options granted to employees in terms of the
Company's Stock Options Schemes, are measured at the fair
value of the options at the grant date. The fair value of the
options is treated as discount and accounted as employee
compensation cost over the vesting period on a straight¬
line basis. The amount recognised as expense in each year is
arrived at based on the number of grants expected to vest. If a
grant lapses after the vesting period, the cumulative discount
recognised as expense in respect of such grant is transferred
to the general reserve within equity.
The share- based payment equivalent to the fair value as
on the date of grant of employee stock options granted to
key managerial personnel is disclosed as a related party
transaction in the year of grant.
The dilutive effect of outstanding options is reflected as
additional share dilution in the computation of diluted
earnings per share.
Q. Foreign currencies
(i) The functional currency and presentation currency of the
Company is Indian Rupee.
(ii) Transactions in currencies other than the Company's
functional currency are recorded on initial recognition
using the exchange rate at the transaction date. At each
Balance Sheet date, foreign currency monetary items are
reported at the closing spot rate.
(iii) Non-monetary items that are measured in terms of
historical cost in foreign currency are not translated.
Exchange differences that arise on settlement of
monetary items or on reporting of monetary items at
each Balance Sheet date at the closing spot rate are
recognised in the Statement of Profit and Loss in the
period in which they arise.
(iv) Financial statements of foreign operations whose
functional currency is also Indian Rupee, differences on
account of translation are routed through statement of
profit or loss.
R. Accounting and reporting of information for
Operating Segments
Operating segments are those components of the business
whose operating results are regularly reviewed by the chief
operating decision making body in the Company to make
decisions for performance assessment and resource allocation.
The reporting of segment information is the same as provided
to the management for the purpose of the performance
assessment and resource allocation to the segments.
Segment accounting policies are in line with the accounting
policies of the Company. In addition, the following specific
accounting policies have been followed for segment reporting:
(i) Segment revenue includes sales and other operational
revenue directly identifiable with/allocable to the
segment including intersegment revenue.
(ii) Expenses that are directly identifiable with/allocable
to segments are considered for determining the
segment result.
(iii) Most of the common costs are allocated to segments
mainly on the basis of the respective segment revenue
estimated at the beginning of the reporting period.
(iv) Segment result represents profit before interest and
tax and includes margins on inter-segment capital jobs,
which are reduced in arriving at the profit before tax of
the Company.
(v) Segment results are not adjusted for any exceptional item.
(vi) Segment assets and liabilities include those directly
identifiable with the respective segments. Unallocable
corporate assets and liabilities represent the assets and
liabilities that relate to the Company as a whole.
S. Taxes on income
Tax on income for the current period is determined on the basis
of taxable income and tax credits computed in accordance
with the provisions of the Income Tax Act,1961 and using
estimates and judgments based on the expected outcome of
assessments/appeals and the relevant rulings in the areas of
allowances and disallowances.
Deferred tax is recognised on temporary differences between
the carrying amounts of assets and liabilities in the Company's
financial statements and the corresponding tax bases used in
computation of taxable profit and quantified using the tax
rates as per laws enacted or substantively enacted as on the
Balance Sheet date.
Deferred tax liabilities are generally recognised for all taxable
temporary differences except where the Company is able
to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the
foreseeable future.
Deferred tax assets are generally recognised for all taxable
temporary differences to the extent that is probable that
taxable profits will be available against which those deductible
temporary differences can be utilised. The carrying amount of
deferred tax assets is reviewed at the end of each reporting
period and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or
part of the asset to be recovered.
Transaction or event which is recognised outside profit or loss,
either in other comprehensive income or in equity, is recorded
along with the tax as applicable.
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