3 Significant Accounting Policies
a Financial Instruments

1 Financial Assets

i Classification

The Company classifies its financial assets in the following measurement categories:

? Those measured at amortized cost and Those to be measured subsequently at fair value (either through
other comprehensive income or through profit or loss)

The classification depends on the Company’s business model for managing the financial assets and the
contractual terms of the cash flows.

? A financial asset is measured at amortized cost if it meets both of the following conditions and is not
designated as at Fair Value through Profit and Loss Account (FVTPL):

- the asset is held within a business model whose objective is to hold assets to collect contractual cash flows;
and

- the contractual terms of a financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.

- the 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.

? Financial assets are not reclassified subsequent to their initial recognition except if and in the period the
Company changes its business model for managing financial assets.

ii Measurement

At initial recognition, the Company measures a financial asset when it becomes a party to the contractual
provisions of the instruments and measures at its fair value except trade receivables which are initially
measured at transaction price. Transaction costs are incremental costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or
loss are expensed in profit or loss. A regular way purchase and sale of financial assets are accounted for at
trade date.

iv Derecognition

The Company derecognises a financial asset when the contractual rights to the cash flows from the financial
asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which
substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the
Company neither transfers nor retains substantially all of the risks and rewards of ownership and does not
retain control of the financial asset.

If the Company enters into transactions whereby it transfers assets recognised on its balance sheet, but
retains either all or substantially all of the risks and rewards of the transferred assets, the transferred assets
are not derecognised.

2 Financial Liabilities

ⁱ Classification, Subsequent Measurement and Gains and Losses

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as
at FVTPL if it is classified as held- for- trading, or it is a derivative or it is designated as such on initial
recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any
interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at
amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses
are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

ii Derecognition

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled,
or expire.

The Company also derecognises a financial liability when its terms are modified and the cash flows under the
modified terms are substantially different. In this case, a new financial liability based on the modified terms is
recognised at fair value. The difference between the carrying amount of the financial liability extinguished and
the new financial liability with modified terms is recognised in the profit or loss.

iii Offsetting

Financial assets and financial liabilities are off set and the net amount presented in the Balance Sheet when,
and only when, the Company currently has a legally enforceable right to set off the amounts and it intends
either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

b Property, Plant and Equipment

i Recognition and Measurement

Items of property, plant and equipment are measured at cost, which includes capitalised borrowing costs, less
accumulated depreciation, and accumulated impairment losses, if any, except freehold land which is carried at
historical cost.

Cost of an item of property, plant and equipment comprises its purchase price, including import duties and
nonrefundable purchase taxes, after deducting trade discounts and rebates, any directly attributable cost of
bringing the item to its working condition for its intended use and estimated costs of dismantling and removing
the item and restoring the site on which it is located.

The cost of a self-constructed item of property, plant and equipment comprises the cost of materials and direct
labor, any other costs directly attributable to bringing the item to working condition for its intended use, and
estimated costs of dismantling and removing the item and restoring the site on which it is located.

If significant parts of an item of property, plant and equipment have different useful lives, then they are
accounted for as separate items (major components) of property, plant and equipment.

Useful lives have been determined in accordance with Schedule II to the Companies Act, 2013. The residual
values are not more than 5% of the original cost of the asset.

Capital Work-in-progress includes cost of assets at sites and constructions expenditure.

Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.

ii Capital work in progress and Capital advances:

Cost of assets not ready for intended use, as on the balance sheet date, is shown as capital work in progress.
Advances given towards acquisition of fixed assets outstanding at each balance sheet date are disclosed as Other
Non-Current Assets

iii Subsequent Expenditure

Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the
expenditure will flow to the Company.

iv Depreciation/Amortisation

Depreciation is calculated on cost of items of property, plant and equipment (other than freehold land and
properties under construction) less their estimated residual values over their estimated useful lives using the
straight-line method and is generally recognised in the statement of profit and loss. Amortization on leasehold
land is provided over the period of lease.

Depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted if
appropriate. Based on technical evaluation and consequent advice, the management believes that its estimates of
useful lives best represent the period over which management expects to use these assets.

Depreciation on additions (disposals) is provided on a pro-rata basis i.e. from (up to) the date on which asset is
ready for use (disposed of).

v Derecognition

An item of Property, Plant and Equipment is derecognised upon disposal.

c. Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories includes expenditure
incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to
their present location and condition. In the case of manufactured inventories and work-in-progress, cost includes an
appropriate share of fixed production overheads based on normal operating capacity.

Cost of raw materials, stores and spares are determined on First In First Out (FIFO) basis

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of
completion and selling expenses.

The net realisable value of work-in-progress is determined with reference to the selling prices of related finished
products.

Raw materials, components and other supplies held for use in the production of finished products are not written
down below cost except in cases where material prices have declined and it is estimated that the cost of the finished
products will exceed their net realisable value.

The comparison of cost and net realisable value is made on an item-by-item basis.

Excess/shortages if any, arising on physical verification are absorbed in the respective consumption accounts.

d. Impairment

i Impairment of Financial Assets

The Company recognizes loss allowances for financial assets measured at amortized cost using expected credit
loss model.

At each reporting date, the Company assesses whether financial assets carried at amortized cost are credit
impaired. A financial asset is ‘credit- impaired’ when one or more events that have a detrimental impact on the
estimated future cash flows of the financial asset have occurred.

For trade receivables, the Company always measures the loss allowance at an amount equal to lifetime expected
credit losses.

For all other financial assets, the Company measures loss allowances at an amount equal to twelve months
expected credit losses unless there has been a significant increase in credit risk from initial recognition in which
those are measured at lifetime expected credit risk.

Lifetime expected credit losses are the expected credit losses that result from all possible default events over the
expected life of a financial asset. Twelve months expected credit losses are the portion of lifetime expected credit
losses that represent the expected credit losses that result from default events on a financial instrument that are
possible within the twelve months after the reporting date (or a shorter period if the expected life of the
instrument is less than twelve months).

When determining whether the credit risk of a financial asset has increased significantly since initial recognition
and when estimating expected credit losses, the Company considers reasonable and supportable information that
is relevant and available without undue cost or effort. This includes both quantitative and qualitative information
and analysis, based on the Company’s historical experience and informed credit assessment and including
forward-looking information.

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 360
days past due. The Company considers a financial asset to be in default when the borrower is unlikely to pay its
credit obligations to the Company in full.

Measurement of Expected Credit Losses Expected credit losses are a probability-weighted estimate of credit
losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash
flows due to the Company in accordance with the contract and the cash flows that the Company expects to
receive).

Presentation of Allowance for Expected Credit Losses in the Balance Sheet

Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of
the assets.

Write-off

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is
no realistic prospect of recovery. This is generally the case when the Company determines (on the basis of
availability of the information) that the debtor does not have assets or sources of income that could generate
sufficient cash flows to repay the amounts subject to the write- off. However, financial assets that are written off
could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of
amounts due.

ii Impairment of Non-Financial Assets

The Company’s non-financial assets are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

An impairment loss is recognised if the carrying amount of an asset exceeds its estimated recoverable amount.
Impairment losses are recognised in the Statement of Profit and Loss.

In respect of assets for which impairment loss has been recognised in prior periods, the Company reviews at each
reporting date whether there is any indication that the loss has decreased or no longer exists. An impairment loss
is reversed if there has been a change in the estimates used to determine the recoverable amount. Such a
reversal is made 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.

e. Employee Benefits

i. Short Term Employee Benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related
service is provided.

ii Long term Employee Benefits:

Provident Fund and Superannuation Contribution are accrued each year in terms of contracts with the
employees. Provision for Gratuity is determined and accrued on the basis of actuarial valuation by Life Insurance
Corporation of India. Leave encashment benefit to employees has been provided on an estimated basis.