1.1 Significant Accounting Policies
i. Basis of Preparation of Financial Statements
The financial statements are prepared on historical cost 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.
ii. Statement of Compliance with Indian Accounting Standards (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 the Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act, 2013 (‘Act’) read
with the Companies (Indian Accounting Standards) Rules, 2015 as amended and other relevant provisions of the Act.
iii. Current and Non-current Classification
All assets and liabilities have been classified as current and non-current as per the Company’s normal operating cycle
(not exceeding twelve months) and other criteria set out in Schedule III to the Act and IND-AS 1- Presentation of Financial
Statements.
iv. Rounding of amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest lakh as per the requirement
of Schedule III, unless otherwise stated.
1.2 Summary of significant accounting policies
I. Foreign currency translation
(i) Functional and presentation currency
The company’s financial statements are presented in INR, which is also the Company’s functional and presentation
currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of
the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally
recognised in the Statement of profit or loss.
Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the statement of profit and
loss, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit and loss
on a net basis under the head other expenses.
Non-monetary items that are measured at historical cost in a foreign currency, are translated using the exchange rate
at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated
using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities
carried at fair value are reported as part of the fair value gain or loss (i.e. translation differences on items whose fair
value gain or loss is recognised in Other Comprehensive Income or Statement of Profit and Loss are also recognised in
Other Comprehensive Income or Statement of Profit and Loss, respectively).
II. Property, plant and equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if
any. The cost comprises purchase price including import duties and other non-refundable purchase taxes or levies, directly
attributable cost of bringing the asset to its working condition for its intended use and the initial estimate of decommissioning,
restoration and similar liabilities, if any. Any trade discounts and rebates are deducted in arriving at the purchase price.
Subsequent expenditure related to an item of property, plant and equipment is added to its book value only if future economic
benefit will flow to the entity and cost can be reliably measured.
All other expenses on existing property, plant and equipment, including day-to-day repair and maintenance expenditure and
cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.
Borrowing costs directly attributable to acquisition of property, plant and equipment which take substantial period of time to get
ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use.
An item of property, plant and equipment and any significant part initially recognized is de-recognized upon disposal or when
no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the
statement of profit and loss when the Property, plant and equipment is de-recognized.
Depreciation method, estimated useful lives and residual values
Depreciation is calculated on straight line basis using the useful lives estimated by the management, which are equal to those
prescribed under Schedule II to the Companies Act, 2013.
The residual values are not more than 5% of the original cost of the asset.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An
asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than
its estimated recoverable amount.
III. Intangible assets and Amortisation
Intangible Assets are stated at acquisition cost, net of accumulated amortisation and accumulated impairment losses, if any.
Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the
net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Profit
and Loss.
Amortisation method and estimated useful life
Intangible assets comprising of software is amortized on a straight-line basis over the useful life of three years to six years
which is estimated by the management.
Intangible assets under development
It includes assets not ready for the intended use and are carried at cost, comprising direct cost and related incidental expenses.
IV. Capital Work In Progress
Cost of assets not ready for intended use, as on the balance sheet date, is shown as capital work in progress.
V. Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication
exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s fair value less costs of disposal and its value in use. Recoverable
amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent
of those from other assets or groups of assets. When the carrying amount of an asset exceeds its recoverable amount, the
asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair
value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an
appropriate valuation model is used.
Impairment losses are recognized in the statement of profit and loss. After impairment, depreciation is provided on the revised
carrying amount of the asset over its remaining useful life.
VI. Leases:
The Company as a lessee
The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if
the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To
assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (1) the
contract involves the use of an identified asset (2) the Company has substantially all of the economic benefits from use of the
asset through the period of the lease and (3) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use asset (“ROU”) and a corresponding lease
liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term
leases) and low value leases. For these short-term and low value leases, the Company recognizes the lease payments as an
operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements include the options to extend or terminate the lease before the end of the lease term. ROU assets
and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any
lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives.
They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter period of the lease
term and useful life of the underlying asset.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments
are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates
in the country of domicile of the leases. Lease liabilities are remeasured with a corresponding adjustment to the related right
of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified
as financing cash flows.
The Company as a lessor
Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other
leases are classified as operating leases.
When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. The
sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
For operating leases, rental income is recognized on a straight line basis over the term of the relevant lease.
Transition
Effective April 1,2019, the Company adopted Ind AS 116 “Leases” and applied the standard to all lease contracts existing on
April 1,2019 using the modified retrospective method on the date of initial application. Consequently, the Company recorded
the lease liability at the present value of the lease payments discounted at the incremental borrowing rate and the right of use
asset at its carrying amount as if the standard had been applied since the commencement date of the standard Ind AS 116,
but discounted at the lessee’s incremental borrowing rate at the date of initial application.
The following is the summary of practical expedients elected on initial application:
• Applied a single discount rate to a portfolio of leases of similar assets in similar economic environment with a similar end
date.
• Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease
term on the date of initial application.
• Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application.
• Applied the practical expedient to grandfather the assessment of which transactions are leases. Accordingly, Ind AS 116
is applied only to contracts that were previously identified as leases under Ind AS 17.
VII. Investment
• Long term Investment are being valued at cost of acquisition.
• Short term investment are being valued at cost or market value whichever is lower.
VIII. Inventories
• Raw Materials (Including goods in transit) are valued at cost. However, materials and other items held for use in
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.
• Stores and Spares are valued at cost.
• Work in process is valued at cost which includes direct materials and labour and a proportion of manufacturing overheads
based on normal operating capacity.
• Finished Stocks are valued at lower of cost or net realizable value. Cost for this purpose includes direct cost and
attributable overheads.
• Cost is ascertained on the FIFO basis as applicable. Cost comprises of all cost of purchase, cost of conversion and
other cost incurred in bringing 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.
IX. Revenue recognition
The Company derives revenue primarily from sale of manufactured goods, traded goods and related services.
Revenue is measured at the value of the consideration received or receivable. Amounts disclosed as revenue are net
of returns, trade allowances, rebates, discounts. Goods and service Tax (GST) is collected by the seller on behalf of the
government; accordingly, it is excluded from the revenue.
(i) Sale of goods
Revenue from sale of goods is recognized when control of the products being sold is transferred to our customer and
when there are no longer any unfulfilled obligations. The performance obligation in case of sale of product is satisfied at
a point in time i.e., when the material is shipped to the customer or on delivery to the customer, as may be specified in
the contract.
(ii) Sale of Services
Revenue from services are recognised as they are rendered based on agreements/ arrangements with the concerned
parties.
(iii) Interest Income
Interest income is recognized using the effective interest rate (EIR) method.
X. Financial Instruments
Financial assets and financial liabilities are recognised when a Company becomes a party to the contractual provisions of the
instruments.
Initial Recognition
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly 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 and ancillary costs related to borrowings) are added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, 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 immediately in Statement of Profit and
Loss.
Classification and Subsequent Measurement: Financial Assets
The Company classifies financial assets as subsequently measured at amortised cost, fair value through other comprehensive
income (“FVOCI”) or fair value through profit or loss (“FVTPL’) on the basis of following:
- The entity’s business model for managing the financial assets and
- The contractual cash flow characteristics of the financial asset.
a) Amortised Cost
A financial asset shall be classified and measured at amortised cost if both of the following conditions are met:
- The financial asset is held within a business model whose objective is to hold financial assets 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) Fair Value through other comprehensive income
A financial asset shall be classified and measured at fair value through OCI if both of the following conditions are met:
- The financial asset 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) Fair Value through Profit or Loss
A financial asset shall be classified and measured at fair value through profit or loss unless it is measured at amortised
cost or at fair value through OCI.
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value,
depending on the classification of the financial assets.
Classification and Subsequent Measurement: Financial liabilities
Financial liabilities are classified as either financial liabilities at FVTPL or ‘other financial liabilities’.
d) Financial Liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is held for trading or are designated upon initial
recognition as FVTPL. Gains or Losses on liabilities held for trading are recognised in the Statement of Profit and Loss.
e) Other Financial Liabilities:
Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortised
cost using the effective interest method.
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.
f) Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period.
The Company recognises a loss allowance for expected credit losses on financial asset. In case of trade receivables, the
Company follows the simplified approach permitted by Ind AS 109 - Financial Instruments for recognition of impairment
loss allowance. The application of simplified approach does not require the Company to track changes in credit risk. The
Company calculates the expected credit losses on trade receivables using a provision matrix on the basis of its historical
credit loss experience.
g) Derecognition of financial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control
the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts
it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial
asset, the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the
proceeds received.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the
consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive
income and accumulated in equity is recognised in profit or loss if such gain or loss would have otherwise been
recognised in profit or loss on disposal of that financial asset.
h) Derecognition of financial liabilities
A financial liability is derecognized 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 recognized in
the statement of profit or loss.
Equity investment in subsidiaries, joint ventures and associates
The Company does not have investment in subsidiaries, joint ventures and associates.
i) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a
currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to
realise the assets and settle the liabilities simultaneously.
j) 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.
k) 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 are recognised at the proceeds received.
l) Fair Value Measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
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.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value
measurement as a whole:
• Level 1 — Quoted prices 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.
XI. Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12
months after the end of the period in which the employees render the related service are recognised in respect of
employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when
the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
(ii) Other long-term employee benefit obligations
Entitlements to annual leave are recognized when they accrue to employees subject to a restriction on the maximum
number of accumulation of leave. Expenses related to other long term employee benefits is recognized in the Statement
of Profit and loss (including actuarial gain and loss).
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of
the period in which the employees render the related service. They are therefore 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.
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.
Post-employment obligations
The Company operates the following post-employment schemes:
(i) defined benefit plans viz. gratuity,
(ii) defined contribution plans viz. provident fund.
Defined benefit plans
The liability or asset recognised in the balance sheet in respect of defined benefit gratuity plans is the present value of
the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit
obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by
reference to market yields at the end of the reporting period on government bonds that have terms approximating to the
terms of the related obligation.
Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are
recognised in the period in which they occur, directly in other comprehensive income. They are included in retained
earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are
recognised immediately in the statement of profit or loss as past service cost.
Defined contribution plans
The company pays provident fund contributions to publicly administered provident funds as per local regulations. The
company has no further payment obligations once the contributions have been paid. The contributions are accounted
for as defined contribution plans and the contributions are recognised as employee benefit expense when they are due.
Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments
is available.
(iii) Termination benefits
Termination benefits are payable when employment is terminated by the company before the normal retirement date, or
when an employee accepts voluntary redundancy in exchange for these benefits.
XII. Income Tax (includes current tax as well as deferred tax)
The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the
applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and
to unused tax losses.
The Company’s liability for current tax is calculated using the Indian tax rates and laws that have been enacted or substantially
enacted as on the reporting date.
The Company periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax
regulations are subject to interpretations and provisions where appropriate.
Deferred tax is provided in full, using the Balance Sheet Approach on temporary differences arising between the tax bases of
assets and liabilities and their carrying amount in the financial statements.
Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the
reporting period and are expected to apply when the related deferred income tax assets is realised or the deferred income tax
liability is settled.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses, only if, it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and current
tax liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities
are offset where the Company has a legally enforceable right to offset and intends either to settle on a net basis, or to realize
the asset and settle the liability simultaneously.
Current and deferred tax is recognised in the Statement of Profit and Loss, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
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