2.3. MATERIAL ACCOUNTING POLICIES:

A. Current and non-current classification

Any asset or liability is classified as current or non¬
current based on company's normal- operating
cycle and other criteria as set out in the Division II of
schedule III to the Companies Act, 2013.

Asset/ Liability is classified as current, if it satisfies
any of the following conditions:

• the asset/liability is expected to be realized/
settled in the Company's normal operating cycle;

• the asset is intended for sale or consumption;

• the asset/liability is held primarily for the
purpose of trading;

• the asset/liability is expected to be realized/
settled within twelve months after the
reporting period;

• the asset is cash or cash equivalent unless it
is restricted from being exchanged or used to
settle a liability for at least twelve months after
the reporting date;

• In the case of a liability, the Company does not
have an unconditional right to defer settlement
of the liability for at least twelve months after the
reporting date.

All other assets/ liabilities are classified as non current.

For the purpose of current/non-current classification
of assets and liabilities, the Company has ascertained
its normal operating cycle as twelve months. This is
based on the nature of product and the time between
the acquisition of assets or inventories for processing
and their realization in cash and cash equivalents.

B. Property, plant and equipment (PPE)

An item of property, plant and equipment is
recognised as an asset if it is probable that the future
economic benefits associated with the item will flow to
the Company and its cost can be measured reliably.
Items of Property, plant and equipment acquired/
constructed are initially recognised at actual cost.
The cost of an item of property, plant and equipment
comprises of its 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 discount or
rebate is deducted in arriving at the purchase price.
Cost includes cost of replacing a part of a plant and
equipment if the recognition criteria are met.

Following initial recognition, freehold land is stated
at actual cost. All other items of Property, plant and
equipment are stated at actual cost less accumulated
depreciation and impairment loss.

Items such as spare parts, stand-by equipment
and servicing equipment that meet the definition of
property, plant and equipment are capitalized at cost
and depreciated over their useful life. Costs in nature
of repairs and maintenance are recognized in the
statement of profit and loss as and when incurred.

All other repair and maintenance costs, including
regular servicing, are recognised in the statement
of profit and loss as incurred. When a replacement
occurs, the carrying value of the replaced part is
de-recognised. Where an item of property, plant
and equipment comprises major components
having different useful lives, these components are
accounted for as separate items.

Capital work-in-progress includes cost of property,
plant and equipment not ready for the intended use
as at the balance sheet date. Advances paid towards

the acquisition of property, plant and equipment
outstanding at each Balance Sheet date is classified
as 'capital advances' under other non-current assets.

The cost and related accumulated depreciation are
eliminated from the Financial Statements upon sale
or retirement of the property, plant and equipment
and the resultant gains or losses are recognised
in the statement of profit and loss. Property, plant
and equipment to be disposed of are reported at
the lower of the carrying value or the fair value less
cost of disposal.

The Company had elected to continue with the
carrying value of all of its property, plant and
equipment appearing in the financial statements
prepared as per accounting standards notified under
section 133 of the Companies Act, 2013 read with
Rule 7 of the Companies (Accounts) Rules, 2014
(Generally Accepted Accounting Standards "Previous
GAAP") as the deemed cost of the property, plant and
equipment in the opening balance sheet under Ind AS
effective 1st April, 2018.

C. Depreciation and amortization

Depreciation method, estimated useful lives
and residual values are determined based on
technical parameters / assessment, taking into
account the nature of the asset, the estimated
usage of the asset, the operating conditions of
the asset, past history of replacement, anticipated
technological changes, manufacturers warranties and
maintenance support, etc.

The estimated useful life of Property, Plant &
Equipment are as follows:

The management believes that these estimated useful
lives are realistic and reflect fair approximation of the
period over which the Property, Plant and Equipment
are likely to be used.

Depreciation on property, plant and equipment
is provided on pro rata basis using the straight¬
line method based on useful life of the assets as
prescribed in Schedule II to the Companies Act,
2013 in consideration with useful life of the assets as
estimated by the management.

Depreciation on an item of property, plant and
equipment sold, discarded, demolished or scrapped,
is provided up to the date on which such item of
property, plant and equipment is sold, discarded,
demolished or scrapped.

The estimated useful lives, residual values and
methods of depreciation of property, plant & equipment
are reviewed at the end of each financial year. If any
of these expectations differ from previous estimates,
such change is accounted for as a change in an
accounting estimate and adjusted prospectively, if any.

D. Impairment of assets

As at the end of each accounting year, the Company
reviews the carrying amounts of its Property, Plant and
Equipment (PPE) and intangible assets to determine
whether there is any indication that those assets
have suffered an impairment loss. If such indication
exists, the said assets are tested for impairment
so as to determine the impairment loss, if any. The
intangible assets with indefinite life are tested for
impairment each year.

Impairment loss is recognized when the carrying
amount of an asset exceeds its recoverable amount.
Recoverable amount is determined:

a) In the case of an individual asset, at the higher
of the net selling price and the value in use; and

b) In the case of a cash generating unit (a group
of assets that generates identified, independent
cash flows), at the higher of the cash generating
unit’s net selling price 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 and from its disposal at the
end of its useful life.

For this purpose, a cash generating unit is ascertained
as the smallest identifiable group of assets that
generates cash inflows that are largely independent of
the cash inflows from other assets or groups of assets.

When an impairment loss subsequently reverses, the
carrying amount of the asset (or cash generating unit)
is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount
does not exceed the carrying amount that would have

been determined had no impairment loss is recognized
for the asset (or cash generating unit) in prior years.
A reversal of an impairment loss is recognized
immediately in the Statement of Profit and Loss.

E. Leases:

As a Lessee

The Company implemented a single accounting
model as per Ind AS 116, requiring lessees to
recognize assets and liabilities for all leases excluding
exceptions listed in the standard. The Company
elected to apply exemptions to short term leases or for
leases for which the underlying asset is of low value.

Based on the accounting policy applied the Company
recognizes a right-of-use asset and a lease liability at
the commencement date of the contract for all leases
conveying the right to control the use of an identified
assets for a period of time. The commencement date
is the date on which a lessor makes an underlying
asset available for use by a lessee.

The right-of-use assets are initially measured at cost,
which comprises:

- The amount of the initial measurement of the
lease liability,

- Any lease payments made at or before the
commencement date, less any lease incentives,

- Any initial direct costs incurred by the lessee,

- An estimate of costs to be incurred by the lessee
in dismantling and removing the underlying
assets or restoring the site on which the
assets are located.

After the commencement date the right-of-use
assets are measured at cost less any accumulated
depreciation and any accumulated impairment losses
and adjusted for any re-measurement of the lease
liability. Depreciation is calculated using the straight¬
line method over the shorter of lease term or useful of
underlying assets.

The lease liability is initially measured at the present
value of the lease payments that are not paid at that
date. These include:

- fixed payments, less any lease
incentives receivable;

- Variable leased payments that depend on an
index or a rate, initially measured using the
index or rate as at the commencement date;

- Amounts expected to be payable by the lessee
under residual value guarantees;

- The exercise price of a purchase option if
the lessee is reasonably certain to exercise
that option and;

- Payments of penalties for terminating the lease,
if the lease term reflects the lessee exercising
an option to terminate the lease.

The lease payments exclude variable elements which
are dependent on external factors. Variable lease
payments not included in the initial measurement of
the lease liability are recognized directly in the profit
and loss. The lease payments are discounted using
the Company’s incremental borrowing rate or the rate
implicit in the lease contract.

F. Financial Instruments

A financial instrument is any contract that gives rise to
a financial asset of one entity and a financial liability
or equity instrument of another entity.

i) Financial assets

The Company recognizes financial assets and
financial liabilities when it becomes a party to the
contractual provisions of the instrument. All financial
assets and liabilities are recognized at fair value on
initial recognition and adjusted for transaction costs
that are attributable to the acquisition or issues
of financial assets and financial liabilities in case
of financial assets or financial liabilities not at fair
value through profit or loss account.

Where the fair value of financial assets and
financial liabilities at initial recognition is
different from its transaction price, the difference
between the fair value and transaction price is
recognised in the statement of profit and loss.
However, trade receivables that do not contain
a significant financing component are initially
measured at transaction price.

Financial assets are subsequently classified
as measured at:

• amortized cost

• fair value through profit and loss (FVTPL)

• fair value through other comprehensive
income (FVTOCI)

Financial assets measured at amortised cost

A financial asset is subsequently measured
at amortised cost if both of the following
conditions are met:

• If is held within a business model whose
objective is to hold the asset in order to
collect contractual cash flows, and

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

This category applies to trade receivables,
loans and other financial assets of the Company
measured using the Effective Interest Rate
(EIR) method less impairment, if any, and
the amortisation of EIR and loss arising from
impairment, if any is recognised in the statement
of profit and loss.

Financial assets measured at fair value

A financial asset is measured at fair value
through other comprehensive income if both of
the following conditions are met:

• If it is held within a business model whose
objective is to hold these assets in order
to collect contractual cash flows and to sell
these financial assets, and

• The contractual terms of the financial
assets give rise on specified dates to
cash flows that are solely payments of
principal and interest on the principal
amount outstanding.

Fair value movements are recognised in the
other comprehensive income.

A financial asset not classified as either
amortised cost or at fair value through other
comprehensive income is carried at fair value
through the statement of profit and loss.

De-recognition of Financial Assets

A financial asset is de-recognised only when

• The contractual rights to cash flows from
the financial asset expire;

• The Company has transferred the
contractual rights to receive cash flows
from the financial asset or;

• Retains the contractual rights to receive
the cash flows of the financial asset, but
assumes a contractual obligation to pay
the cash flows to one or more recipients.

Where the entity has transferred an asset, the
Company evaluates whether it has transferred
substantially all risks and rewards of ownership
of the financial asset. In such cases, the financial
asset is de-recognised. Where the entity has not

transferred substantially all risks and rewards
of ownership of the financial asset, the financial
asset is not de-recognised.

Where the entity has neither transferred a
financial asset nor retained substantially all
risks and rewards of ownership of the financial
asset, the financial asset is de-recognised if the
Company has not retained control of the financial
asset. Where the Company retains control
of the financial asset, the asset is continued
to be recognised to the extent of continuing
involvement in the financial asset.

Impairment of financial assets

The Company assesses at each date of balance
sheet whether a financial asset or a group of
financial assets is impaired. Ind AS 109 requires
expected credit losses to be measured through a
loss allowance. In determining the allowances for
doubtful trade receivables, the Company has used
a practical expedient by computing the expected
credit loss allowance for trade receivables based
on a provision matrix. The provision matrix takes
into account historical credit loss experience and
is adjusted for forward looking information. For all
other financial assets, expected credit losses are
measured at an amount equal to the 12-months
expected credit losses or at an amount equal to
the life time expected credit losses if the credit risk
on the financial asset has increased significantly
since initial recognition.

ECL Impairment Loss allowance (or reversal)
recognised during the period is recognised
as income/ expense in the Statement of
Profit and Loss.

ii) Financial liabilities

Financial liabilities and equity instruments issued
by the Company are classified according to the
substance of the contractual arrangements
entered into and the definitions of a financial
liability and an equity instrument.

Financial liabilities are recognised when the
Company becomes a party to the contractual
provisions of the instrument. Financial liabilities
are initially measured at the amortised cost
unless at initial recognition, they are classified
as fair value through profit and loss.

Classification as debt or equity

Debt and equity instruments issued by a
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.

Equity Instrument

An equity instrument is any contract that
evidences a residual interest in the assets of
the entity after deducting all of its liabilities.
Equity instruments issued by the Company are
recognized at the proceeds received, net of
direct issue costs.

Financial Liability

Trade and other payables are initially measured
at fair value, net of transaction costs and are
subsequently measured at amortised cost using
the effective interest rate method. Financial
liabilities carried at fair value through profit or
loss are measured at fair value with all changes
in fair value recognised in the statement of
profit and loss.

Interest bearing loans and overdrafts are initially
measured at fair value, and are subsequently
measured at amortised cost using effective
interest rate method. Any difference between
proceeds (net of transaction cost) and the
settlement amount of borrowing is recognised
over the terms of the borrowings in the statement
of profit and loss.

De-recognition of Financial liabilities

A financial liability is de-recognised when the
obligation specified in the contract is discharged,
cancelled or has expired.

iii) Offsetting financial instruments

Financial assets and liabilities are offset and
the net amount is reported in the Balance Sheet
where there is a legally enforceable right to
offset the recognised amounts and there is an
intention to settle on a net basis or realise the
asset and settle the liability simultaneously. The
legally enforceable right must not be contingent
on future events and must be enforceable in
the normal course of business and in the event
of default, insolvency or bankruptcy of the
Company or the counterparty.

G. Fair Value Measurement

The Company measures financial instruments at
fair value in accordance with the accounting policies
mentioned above.

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 asset or liability, or

• In the absence of a principal market, in the most
advantageous market for the asset or liability
and the Company has access to the principal or
the most advantageous market.

The fair value of an asset or a liability is measured
using the assumptions that market participants would
use when pricing the asset or liability, assuming that
market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes
into account a market participant’s ability to generate
economic benefits by using the asset in its highest and
best use or by selling it to another market participant
that would use the asset in its highest and best use.

The Company uses valuation techniques that are
appropriate in the circumstances and for which
sufficient data are available to measure fair value,
maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.

All assets and liabilities for which fair value is
measured or disclosed in the financial statements
are categorized within the fair value hierarchy that
categorizes into three levels, described as follows: -

• Level 1 - quoted (unadjusted) market prices in
active markets for identical assets or liabilities

• Level 2 - inputs other than quoted prices included
within Level 1 that are observable for the asset
or liability, either directly or indirectly

• Level 3 - inputs that are unobservable for the
asset or liability

For assets and liabilities that are recognized in the
financial statements at fair value on a recurring
basis, the Company determines whether transfers
have occurred between levels in the hierarchy by re¬
assessing categorization at the end of each reporting
period and discloses the same.

For the purpose of fair value disclosures, the Company
has determined classes of assets and liabilities on
the basis of the nature, characteristics and the risks
of the asset or liability and the level of the fair value

Deferred tax assets (including unused tax credits
such as MAT credit) are generally recognized for all
deductible temporary differences to the extent that it is
probable that taxable profits will be available against
which those deductible temporary differences can be
utilized. However, in case of temporary differences
that arise from initial recognition of assets or liabilities
in a transaction (other than business combination)
that affect neither the taxable profit nor the accounting
profit, deferred tax assets are not recognized. 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.

Deferred tax is calculated at the tax rates that are
expected to apply in the period when the liability
is settled or the asset is realised based on the tax
rates and tax laws in force. The measurement of
deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner
in which the Company expects, at the end of the
reporting period, to cover or settle the carrying value
of its assets and liabilities.

Deferred tax assets and liabilities are offset when
there is a legally enforceable right to offset current
tax assets and liabilities and when the deferred tax
balances relate to the same taxation authority. Current
tax assets and tax liabilities are offset where the entity
has a legally enforceable right to offset and intends
either to settle on a net basis, or to realise the asset
and settle the liability simultaneously.

Deferred tax assets include Minimum Alternate Tax
(MAT) paid in accordance with the tax laws in India,
which is likely to give future economic benefits in the
form of availability of set off against future income
tax liability. Accordingly, MAT credit is recognized
as deferred tax asset in the balance sheet when the
asset can be measured reliably and it is probable that
the future economic benefit associated with the asset
will be realized. Minimum Alternative Tax (MAT) credit
is recognized as an asset only when and to the extent
there is convincing evidence that the Company will
pay normal income tax during the specified period.

Current and deferred tax are recognized in statement
of profit and loss, except when they relate to items
that are recognized in other comprehensive income or
directly in equity, in which case, the current and deferred
tax are also recognized in other comprehensive
income or directly in equity respectively.

J. Inventories

Raw Materials, Packing Materials, Consumable
Stores and Spares including Fuel, Stock in trade and
Finished goods are valued at the lower of cost or net
realizable value as under:

The cost of purchase comprises of the purchase
price including duties and taxes (other than those
subsequently recoverable by the Company from the
taxing authorities), freight inward and other costs
incurred in bringing the inventories to their present
location and condition but net of trade discount,
rebates, and other similar items.

The cost of Inventories of finished goods and work
in progress comprises the cost of direct materials
and labour and a proportion of manufacturing
overheads based on the normal operating capacity,
but excluding borrowing costs. Cost is determined on
Standard Cost Method.

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

K. Cash and cash equivalents

The Company considers all highly liquid financial
instruments, which are readily convertible into known
amounts of cash that are subject to an insignificant
risk of change in value and having original maturities
of three months or less from the date of purchase,
to be cash equivalents. Cash and cash equivalents
consist of balances with banks which are unrestricted
for withdrawal and usage.

L. Foreign currency translation

The functional currency and presentation currency of
the Company is Indian Rupee.

Transactions denominated in foreign currencies
entered into by the Company are recorded in the
functional currency (i.e. Indian Rupees), by applying
the exchange rate prevailing on the date of transaction.

Monetary items denominated in foreign currency at
the year-end are translated at the functional currency
spot rate of exchange at the reporting date. Any

income or expense on account of exchange difference
between the date of transaction and on settlement or
on translation is recognised in the Statement of Profit
and Loss as income or expense.

Non-monetary items are recorded at exchange rate
prevailing on the date of 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 is measured.

The forward exchange contracts are marked to market
and gain/loss on such contracts are recognised in
the statement of profit and loss at the end of each
reporting period.

M. Employee benefits

i) Short-term benefits:

All employee benefits payable wholly within twelve
months of rendering the service are classified
as short-term employee benefits and they are
recognized in the period in which the employee
renders the related service. The Company
recognizes the undiscounted amount of short-term
employee benefits expected to be paid in exchange
for services rendered as a liability (accrued
expense) after deducting any amount already paid.

ii) Post-Employment Benefits:

a) Defined benefit plan

Gratuity liability is a defined benefit
obligation and is provided for on the basis
of actuarial valuation on Project Unit
Credit Method made at the end of each
financial year. The scheme is maintained
and administered by Life Insurance
Corporation of India to which the Company
makes periodical contributions through a
Employees Gratuity Trust.

Remeasurement actuarial gains and losses
arising from experience adjustments and
changes in actuarial assumptions are
recognized in the period in which they occur
directly in other comprehensive income.
They are included in retained earnings in
the statement if changes in equity and in
the balance sheet.

b) Defined contribution plan

A Defined Contribution Plan is plan under
which the Company makes contribution to
Employee’s Provident Fund administrated
by the Central Government. The
Company’s contribution is charged to the
statement of profit and loss.

iii) Other Long Term Employee Benefits -
Leave Salary

The liability towards leave salary which is
not expected to be settled wholly within 12
months after the end of the period in which
the employees render the related services is
recognized based on actuarial valuation carried
out using the Projected Unit Credit Method.

Termination benefits are recognised as an
expense in the period in which they are incurred.