3) MATERIAL ACCOUNTING POLICIES

This note provides a list of the material accounting policies
adopted in the preparation of these financial statements.
These policies have been consistently applied to all the years
presented, unless otherwise stated.

a) Property, plant and equipment

• Recognition and measurement

Freehold land is carried at historical cost. All other
items of property, plant and equipment are stated at
cost less accumulated depreciation and accumulated
impairment loss, if any. Cost comprises of purchase
price and any directly attributable costs of bringing the
asset to its working condition for the intended use. Any
trade discounts and rebates are deducted in arriving at
the purchase price.

Borrowing costs attributable to construction or
acquisition of a qualifying asset for the period up to the
date, the asset is ready for its intended use are included
in the cost of the asset to which they relate.

Pre-operative expenditure including trial run expenses
comprising of revenue expenses incurred as reduced by
the revenue generated during the period up to the date,
the asset is ready for its intended use are treated as part
of costs of that asset.

Capital work-in-progress comprises of the cost of
property, plant and equipment that are not yet ready for
their intended use as at the balance sheet date.

Advances paid towards the acquisition of property,
plant and equipment outstanding at each reporting date
are disclosed under “Other non-current assets”.

Property, Plant and Equipments amounting to INR 0.10
Crore are considered immaterial and expensed out to
the Statement of Profit and Loss.

Tube and Steel segment:

Depreciation on Plant & Machinery other than Captive
Power Plant is provided on its useful life estimated by the
management on Written Down Value method. For these
classes of assets, based on the technical evaluation
carried out by the external experts, the management
has estimated the useful lives in the range of 8 years to
65 years.

For Captive power plant, depreciation has been provided
on straight line method with useful life of 20 years which
is supported by technical evaluation.

Freehold land is not depreciated.

b) Intangible assets

• Recognition and measurement

Intangible assets are recognised when the asset is
identifiable, is within the control of the Company, and
is probable that the future economic benefits that are
attributable to the asset will flow to the Company and
cost of the asset can be reliably measured.

I ntangible assets acquired by the Company that have
finite useful lives are measured at cost less accumulated
amortisation and any accumulated impairment losses.

• Derecognition

An item of intangible asset is derecognised upon disposal
or when no future economic benefits are expected from its

use or disposal. Gains and losses on disposal of intangible
asset are determined by comparing the proceeds from
disposal with the carrying amount of intangible asset and
are recognised net and disclosed within other income or
expenses in the Statement of Profit and Loss.

• Amortisation

Amortisation is calculated over the cost of the asset,
or other amount substituted for cost. Amortisation is
recognised in Statement of Profit and Loss on a straight¬
line basis over the estimated useful life of intangible
assets from the date that they are available for use,
since this most closely reflects the expected pattern of
consumption of the future economic benefits embodied
in the asset.

Mine properties and development costs are amortized on
a Unit of Production basis over the mineable reserves of
the respective mines.

The estimated useful life for current and comparative
periods are as follows:

c) Goodwill

Goodwill on acquisitions is included in intangible assets.
Goodwill is not amortised but it is tested for impairment
annually, or more frequently if events or changes in
circumstances indicate that it might be impaired and is
carried at cost less accumulated impairment losses if any.

d) Leases

The Company assesses at the inception of the contract
whether a contract is, or contains, a lease. 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.

As a lessee

The Company recognises a right-of-use asset and a lease
liability at the lease commencement date. The right-of-use
asset is initially 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, less any
lease incentives received.

The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the
earlier of the end of the useful life of the right-of-use asset or
the end of the lease term. In addition, the right-of-use asset
is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of
the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the Company’s
incremental borrowing rate. Generally, the Company uses its
incremental borrowing rate as the discount rate.

The lease liability is measured at amortised cost using the
effective interest method. It is remeasured when there is a
change in future lease payments.

Short-term leases and leases of low-value
assets

The Company has elected not to recognise right-of-use
assets and lease liabilities for short-term leases that have
a lease term of 12 months or less and leases of low-value
assets. The Company recognises the lease payments
associated with these leases as an expense on a straight-line
basis over the lease term.

e) Impairment of non-financial assets

The Company assesses at each balance sheet date whether
there is any indication that an asset or Cash Generating Unit

(CGU) may be impaired. If any such indication exists, the
Company estimates the recoverable amount of the asset.
The recoverable amount is the higher of an asset’s or CGU’s
fair value less costs of disposal or its value in use. Where the
carrying amount of an asset or CGU 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 considered.

Impairment losses are recognised in the Statement of Profit
and Loss. They are allocated first to reduce the carrying
amount of any goodwill allocated to the CGU, and then to
reduce the carrying amounts of the other assets in the CGU
on a pro rata basis.

• Reversal of impairment loss

For assets other than goodwill, an impairment loss is
reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that
would have been determined, net of depreciation
or amortisation, if no impairment loss had been
recognised. An impairment loss in respect of goodwill
is not reversed.

f) Inventories

Raw materials, stores and spares are valued at lower of cost
and net realizable value. Cost is determined using weighted
average method.

Work in process and finished goods other than by-products
are valued at lower of cost and net realizable value. Cost
includes direct material and labour and a proportion of
manufacturing overhead based on normal operating capacity.

By-products are valued at net realisable value.

Necessary provisions are made for obsolete and non-moving
inventories as per the policy framed by the management and
the value of inventory is net of such provision.

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

g) Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise
cash at banks and cash on hand and short-term deposits
with an original maturity of three months or less, which are
subject to an insignificant risk of changes in value.

h) Revenue recognition

The Company is in the business of manufacture and sale of
iron castings, seamless tubes and steel. Sales are recognised
when substantial control of the products has been transferred
to the customer, being when the products are delivered
to the customer or its authorised representative without
any unfulfilled obligation that could affect the customer’s
acceptance of the products. Revenue from these sales is
recognised based on the price specified in the sales order, net
of the estimated discounts, rebates, returns and Goods and
Service Tax. The Company’s obligation to provide a refund
for defects in the products is recognised as a provision. A
receivable is recognised when the goods are delivered as this
is the point in time that the consideration is unconditional
because only the passage of time is required before the
payment is due.

The Company does not have any payment terms exceeding
one year for any contract. Accordingly, the Company does
not adjust any of the transaction prices for the time value
of money.

i) Other income

• Interest income

Interest income from debt instruments is recognised
using Effective Interest Rate method (EIR). EIR is the
rate that exactly discounts the estimated future cash
payments or receipts over the expected life of the financial
instrument or a shorter period, where appropriate, to the
gross carrying amount of the financial asset or to the
amortised cost of a financial liability.

• Dividends

Dividends are recognised in the Statement of Profit
and Loss only when the right to receive the payment is
established, it is probable that the economic benefits
associated with the dividend will flow to the Company,
and the amount can be measured reliably.

• Any other incomes are accounted for on
accrual basis.

j) Borrowing costs

Borrowing costs consist of interest and other costs that
an entity incurs in connection with the borrowing of funds.
Borrowing costs also include exchange differences arising
from foreign currency borrowings to the extent they are
regarded as an adjustment to the interest cost.

Borrowing costs that are not directly attributable to the
acquisition, construction or production of a qualifying asset,
are expensed in the period in which they are incurred.

k) Foreign currency transactions and balances

Transactions in foreign currency are recorded at exchange
rates prevailing at the date of transactions. Exchange
differences arising on foreign exchange transactions settled
during the year are recognised in the Statement of Profit and
Loss of the year.

Monetary assets and liabilities denominated in foreign
currencies which are outstanding, as at the reporting period
are translated at the closing exchange rates and the resultant
exchange differences are recognised in the Statement of
Profit and Loss.

Non-monetary assets and liabilities denominated in
foreign currencies that are measured in terms of historical
cost are translated using the exchange rate at the date of
the transaction.

l) Employee Benefits

• Short-term employee benefits

All employee benefits payable wholly within twelve
months of rendering the services are classified as
short-term employee benefits. Benefits such as
salaries, wages, expected cost of bonus and short-term
compensated absences, ex-gratia, performance pay
etc. are recognised in the period in which the employee
renders the related service.

• Post-employment benefits

Defined contribution plans

The Company’s approved central provident fund
scheme are a defined contribution plan. The Company

has no further payment obligations once the
contributions have been paid. The contributions are
recognised as employee benefit expenses when they
are due.

Defined benefit plans

The employees’ gratuity fund scheme is managed by a
trust, is the Company’s defined benefit plan. The present
value of the obligation under such defined benefit plans
is determined based on actuarial valuation using the
projected unit credit method, which recognises each
period of service as giving rise to additional unit of
employee benefit entitlement and measures each unit
separately to build up the final obligation.

The obligation is measured at the present value of the
estimated future cash flows. The discount rates used
for determining the present value of the obligation
under defined benefit plans, is based on the market
yields on government securities as at the reporting date,
having maturity periods approximating to the terms of
related obligations.

Remeasurements, comprising of actuarial gains and
losses, the effect of the asset ceiling, excluding amounts
included in net interest on the net defined benefit
liability and the return on plan assets, are recognised
immediately in the balance sheet with a corresponding
debit or credit to retained earnings through Other
Comprehensive Income (OCI) in the period in which
they occur. Remeasurements are not reclassified to the
Statement of Profit and Loss in subsequent periods.

In case of funded plans, the fair value of the plan’s assets
is reduced from the gross obligation under the defined
benefit plans, to recognise the obligation on net basis.

Changes in the present value of the defined benefit
obligation resulting from plan amendments or
curtailments are recognised immediately in profit or
loss as past service cost.

Net interest is calculated by applying the discount rate
to the net defined benefit liability or the fair value of the
plan asset. The cost is included in employee benefit
expense in the Statement of Profit and Loss.

• Other long-term employee benefits

The liabilities for earned leave which are not expected
to be settled within twelve months from the date of
reporting period in which the employee render the

related service are measured as the present value of
expected future payments to be made in respect of
services provided by employee 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 the terms of the related obligation.
Remeasurements as a result of experience adjustments
and change in actuarial assumptions are recognised in
the Statement of Profit and Loss. The obligations are
presented as current liabilities in the balance sheet if
the Company does not have an unconditional right to
defer settlement beyond twelve months of the reporting
period, regardless of when the actual settlement is
expected to occur.

m) Share-based payments

Employees of the Company who are entitled to receive

remuneration in the form of share-based payments, whereby

employees render services as consideration for equity

instruments (equity-settled transactions).

• Equity-settled transactions

The cost of equity-settled transactions is determined by
the fair value at the grant date using fair valuation model.

That cost is recognised, together with a corresponding
increase in share-based payment reserves in equity,
over the period in which the performance and/or service
conditions are fulfilled in employee benefits expense.
The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting
date reflects the extent to which the vesting period has
expired and the Company’s best estimate of the number
of equity instruments that will ultimately vest. The
Statement of Profit and Loss represents the movement
in cumulative expense recognised as at the beginning
and at the end of the period and to be recognised in the
employee benefits expense.

The dilutive effect of outstanding options is reflected as
additional share dilution in the computation of diluted
earnings per share.

Employee share-based payment reserve with respect
to vested options which gets forfeited as per ESOS
policy will be transferred to retained earnings.

n) Research and development cost

Revenue expenditure on the research and development
is charged off as expense in the year in which incurred.
Capital expenditure for research and development activity
is grouped with property, plant and equipment under
appropriate categories and depreciation is provided as per
the applicable rates.

o) Income tax

Income tax expense comprises of current tax and deferred
tax. It is recognised in the Statement of Profit and Loss
except to the extent that it relates to the items recognised
directly in OCI.

• Current income tax

Current income tax assets and liabilities are measured
at the amount expected to be recovered from or paid
to the taxation authorities based on the taxable profits
computed for the current accounting period. The tax
rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the
reporting date.

• Deferred tax

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

Deferred tax liabilities are recognised for all taxable
temporary differences, except when the deferred tax
liability arises from the initial recognition of goodwill or
an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss.

Deferred tax assets are recognised for all deductible
temporary differences, the carry forward of unused
tax credits and any unused tax losses. Deferred tax
assets are recognised to the extent that it is probable
that taxable profit will be available against which
the deductible temporary differences, and the carry
forward of unused tax credits and unused tax losses can
be utilised, except when the deferred tax asset relating
to the deductible temporary difference arises from the
initial recognition of an asset or liability in a transaction
that is not a business combination and, at the time of
the transaction, affects neither the accounting profit
nor taxable profit or loss.

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

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

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