Note 1.2 Material accounting policies
i Basis of preparation
The standalone financial statements (""financial statements"") of the Company have been prepared to comply in all material
respects with the Indian Accounting Standards (""Ind AS"" notified under the Companies (Accounting Standards) Rules, 2015
(as amended from time to time).
The financial statements have been prepared under the historical cost convention with the exception of certain financial
assets and liabilities which have been measured at fair value, on an accrual basis of accounting and defined benefit plans
where assets are measured at fair value.
The Company is covered in the definition of Non-Banking Financial Company as defined in Companies (Indian Accounting
Standards) (Amendment) Rules, 2016. As per the format prescribed under Division III of Schedule III to the Companies Act,
2013 on 11 October 2018, the Company presents the Balance Sheet, the Statement of Profit and Loss and the Statement of
Changes in Equity in the order of liquidity. A maturity analysis of recovery or settlement of assets and liabilities within 12
months after the reporting date and more than 12 months after the reporting date is presented in the financials.
The Company's financial statements are reported in Indian Rupees, which is also the Company's functional currency.
ii Accounting estimates
The preparation of the financial statements, in conformity with the Ind AS, requires the management to make estimates
and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities and
disclosure of contingent liabilities as at the date of financial statements and the results of operation during the reported
period. Although these estimates are based upon management's best knowledge of current events and actions, actual results
could differ from these estimates which are recognized in the period in which they are determined.
iii Historical cost convention
These financial statements have been prepared on the historical cost basis except for certain financial assets and liabilities
which are measured at fair value (refer accounting policy regarding financial instruments).
1. Financial instruments measured at fair value through profit or loss, if applicable
2. Financial instruments measured at fair value through other comprehensive income, if applicable
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year. The Company based its assumptions and estimates on parameters available when the financial statements
were prepared. Existing circumstances and assumptions about future developments, however, may change due to market
changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the financial
statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial
statements.
Deferred tax assets
In assessing the realizability of deferred income tax assets, management considers whether some portion or all of the
deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the
generation of future taxable income during the periods in which the temporary differences become deductible. Management
considers the scheduled reversals of deferred income tax liabilities, projected future taxable income and tax planning
strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income
over the periods in which the deferred income tax assets are deductible, management believes that the Company will realize
the benefits of those deductible differences. The amount of the deferred income tax assets considered realizable, however,
could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.
Provision and contingent liability
On an ongoing basis, Company reviews pending cases, claims by third parties and other contingencies. For contingent losses
that are considered probable, an estimated loss is recorded as an accrual in financial statements. Loss contingencies that are
considered possible are not provided for but disclosed as Contingent liabilities in the financial statements. Contingencies,
the likelihood of which is remote are not disclosed in the financial statements. Gain contingencies are not recognized until
the contingency has been resolved and amounts are received or receivable.
Allowance for impairment of financial asset
The Company applies expected credit loss model (ECL) for measurement and recognition of impairment loss. The Company
recognises lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing
transaction. At each reporting date, the Company assesses whether the loans have been impaired. The Company is exposed
to credit risk when the customer defaults on his contractual obligations. For the computation of ECL, the loan receivables
are classified into three stages based on the default and the aging outstanding. The Company recognises life time expected
credit loss for trade receivables and has adopted simplified method of computation as per Ind AS 109.
Property, plant and equipment and intangible assets
Management reviews the estimated useful lives and residual values of the assets annually in order to determine the amount
of depreciation to be recorded during any reporting period. The useful lives and residual values as per schedule II of the
Companies Act, 2013 or are based on the Company's historical experience with similar assets and taking into account
anticipated technological changes, whichever is more appropriate.
Defined benefit plans
The cost of defined benefit plans and the present value of the defined benefit obligations are based on actuarial valuation
using the projected unit credit method. An actuarial valuation involves making various assumptions that may differ from
actual developments in the future. These include the determination of the discount rate, future salary increases and mortality
rates. Due to the complexities involved in the valuation and its long - term nature, a defined benefit obligation is highly
sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
Determining whether an arrangement contains a lease
The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification
of a lease requires significant judgment. The Company uses significant judgement in assessing the lease term (including
anticipated renewals) and the applicable discount rate. The Company determines the lease term as the non-cancellable
period of a lease, together with both periods covered by an option to extend the lease if the Company is reasonably certain
to exercise that option; and periods covered by an option to terminate the lease if the Company is reasonably certain not
to exercise that option.
iv Property, plant and equipment
Property, plant and equipment are stated at cost of acquisition including attributable interest and finance costs, if any, till
the date of acquisition/ installation of the assets less accumulated depreciation and accumulated impairment losses, if
any. Subsequent expenditure relating to property, plant and equipment is capitalized only 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.
All other repairs and maintenance costs are charged to the Statement of Profit and Loss as incurred. The cost and related
accumulated depreciation are eliminated from the financial statements, either on disposal or when retired from active use
and the resultant gain or loss are recognized in the Statement of Profit and Loss.
v Depreciation/ amortization
Depreciation on property, plant and equipment's is provided on 'Straight Line Method' considering their useful lives and
residual value as provided in Schedule II of Companies Act, 2013.
vi 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.
a) Financial assets
A financial asset is
(i) a contractual right to receive cash or another financial asset; to exchange financial assets or financial liabilities
under potentially favourable conditions;
(ii) or a contract that will or may be settled in the entity's own equity instruments and a non-derivative for which
the entity is or may be obliged to receive a variable number of the entity's own equity instruments; or a
derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial
asset for a fixed number of the entity's own equity instruments.
Initial recognition
In the case of financial assets, not recorded at fair value through profit or loss (FVTPL), financial assets are recognized initially
at fair value plus transaction costs that are directly attributable to the acquisition of the financial asset. Purchases or sales
of financial assets that require delivery of assets within a time frame established by regulation or convention in the market
place (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the
asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in following categories:
Financial assets measured at amortized cost
Financial assets are subsequently measured at amortized cost if these financial assets are held within a business model
with an objective to hold these 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. Interest income from these financial assets is included in finance income using the Effective Interest Rate (EIR)
method. Impairment gains or losses arising on these assets are recognized in the Statement of Profit and Loss.
Financial assets measured at fair value
Financial assets are measured at fair value through OCI if these financial assets are held within a
business model with an objective to hold these assets in order to collect contractual cash flows or to
sell these 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. Movements in
the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest
revenue and foreign exchange gains and losses which are recognized in the Statement of Profit and Loss.
Financial asset not measured at amortized cost or at fair value through OCI is carried at FVTPL.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies the Expected Credit Loss (ECL) model for measurement and recognition
of impairment loss on financial assets and credit risk exposures.
The Company follows 'simplified approach' for recognition of impairment loss allowance on trade receivables. Simplified
approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based
on lifetime ECL at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there
has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month
ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a
subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk
since initial recognition, then the entity reverts to recognizing impairment loss allowance based on 12-month ECL.
ECL is the difference between all contractual cash flows that are due to the group in accordance with the contract and all
the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR. Lifetime ECL are the
expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12-month
ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting
date.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the Statement
of Profit and Loss.
De-recognition of financial assets
The Company de-recognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or it
transfers the financial asset and substantially all risks and rewards of ownership of the asset to another entity. If the Company
neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred
asset, the Company recognizes its retained interest in the assets 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 recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.
b) Equity instruments and 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.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of
its liabilities. Equity instruments which are issued for cash are recorded at the proceeds received, net of direct issue costs.
Equity instruments which are issued for consideration other than cash are recorded at fair value of the equity instrument.
Financial liabilities
A financial liability is
(i) a contractual obligation to deliver cash or another financial asset to another entity; or to exchange financial
instruments under potentially unfavourable conditions;
(ii) or a contract that will or may be settled in the entity's own equity instruments and is a non-derivative for which the
entity is or may be obliged to deliver a variable number of its own equity instruments; or a derivative that will or may
be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the
entity's own equity instruments.
Initial recognition
Financial liabilities are classified, at initial recognition, as financial liabilities at FVTPL, loans and borrowings and payables as
appropriate. All financial liabilities are recognized initially at fair value and in the case of loans and borrowings and payables,
net of directly attributable transaction costs.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below
Financial liabilities at FVTPL
Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities designated upon initial
recognition as at FVTPL. Financial liabilities are classified as held for trading if they are incurred for the purpose of
repurchasing in the near term. Gains or losses on liabilities held for trading are recognized in the Statement of Profit and
Loss.
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse
the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms
of a debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction
costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of
the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognized less
cumulative amortization. Amortization is recognized as finance income in the Statement of Profit and Loss.
Financial liabilities at amortized cost
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR
method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is
recognized over the term of the borrowings in the Statement of Profit and Loss.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an
integral part of the EIR. The EIR amortization is included as finance costs in the Statement of Profit and Loss.
De-recognition of financial liabilities
Financial liabilities are de-recognized when the obligation specified in the contract is discharged, cancelled or expired. 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 de-recognition of the original
liability and recognition of a new liability. The difference in the respective carrying amounts is recognized in the Statement
of Profit and Loss.
c) Offsetting 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 recognized amounts and there is an intention to settle on a net basis
to realize the assets and settle the liabilities simultaneously.
vii Equity investments (in subsidiary and associates)
Investments in associates are carried at cost less accumulated impairment losses, if any. Where an indication of impairment
exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On
disposal of investments in subsidiaries, associates and joint venture, the difference between net disposal proceeds and the
carrying amounts are recognized in the Statement of Profit and Loss.
Equity instruments at FVTOCI and FVTPL
All equity instruments are measured at fair value other than investment in associates. Equity instruments held for trading are
classified as FVTPL. For all other equity instruments, the Company may make an irrevocable election to present subsequent
changes in the fair value in OCI. The Company makes such election on an instrument-by-instrument basis.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding
dividend are recognised in OCI which is not subsequently recycled to the Statement of Profit and Loss.
viii Employee benefits
a Defined benefit plan
The company provides for retirement benefits in the form of Gratuity. Benefits payable to eligible employees of the
company with respect to gratuity is accounted for on the basis of an actuarial valuation as at the Balance Sheet date.
The present value of such obligation is determined by the projected unit credit method and adjusted for past service
cost and fair value of plan assets as at the balance sheet date through which the obligations are to be settled.
Remeasurements, comprising of actuarial gains and losses and the return on plan assets (excluding net interest) is
reflected immediately in the balance sheet with a charge/credit recognised in Other Comprehensive Income (""OCI"")
in the period in which they occur.
Remeasurements recognised in OCI is reflected immediately in retained earnings and is not reclassified to profit or
loss in subsequent periods.
b Leave entitlement and compensated absences
Accumulated leave which is expected to be utilized within next twelve months, is treated as short-term employee
benefit. Leave entitlement, other than short term compensated absences, are provided based on a actuarial valuation,
similar to that of gratuity benefit. Re-measurement, comprising of actuarial gains and losses, in respect of leave
entitlement are recognized in the Statement of Profit and Loss in the period in which they occur.
c Short-term benefits
Short-term employee benefits such as salaries, wages, performance incentives etc. are recognized as expenses at the
undiscounted amounts in the Statement of Profit and Loss of the period in which the related service is rendered.
Expenses on non-accumulating compensated absences is recognized in the period in which the absences occur.
ix Cash and cash equivalents
Cash and cash equivalents include cash in hand and at bank and term deposits with bank, with original maturities of 3 months
or less.
x Revenue recognition
The Company recognises revenue from contracts with customers based on a five step model as set out in Ind AS 115, Revenue
from Contracts with Customers, to determine when to recognize revenue and at what amount. Revenue is measured based
on the consideration specified in the contract with a customer. Revenue from contracts with customers is recognised when
services are provided and it is highly probable that a significant reversal of revenue is not expected to occur. Revenue is
measured at fair value of the consideration received or receivable. Revenue is recognised when (or as) the Company satisfies
a performance obligation by transferring a promised service (i.e. an asset) to a customer. An asset is transferred when (or
as) the customer obtains control of that asset. When (or as) a performance obligation is satisfied, the Company recognizes
as revenue the amount of the transaction price (excluding estimates of variable consideration) that is allocated to that
performance obligation.
The Company recognizes revenue from contracts with customers based on a five step model as set out in Ind AS 115 :
Step 1: Identify contract(s) with a customer: A contract is defined as an agreement between two or more parties that creates
enforceable rights and obligations and sets out the criteria for every contract that must be met.
Step 2: Identify performance obligations in the contract: A performance obligation is a promise in a contract with a customer
to transfer a good or service to the customer.
Step 3: Determine the transaction price: The transaction price is the amount of consideration to which the Company expects
to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf
of third parties.
Step 4: Allocate the transaction price to the performance obligations in the contract: For a contract that has more than
one performance obligation, the Company allocates the transaction price to each performance obligation in an amount
that depicts the amount of consideration to which the Company expects to be entitled in exchange for satisfying each
performance obligation.
Step 5: Recognize revenue when (or as) the Company satisfies a performance obligation.
xi Income tax
Income tax comprises of current and deferred income tax. Income tax is recognized as an expense or income in the Statement
of Profit and Loss, except to the extent it relates to items directly recognized in equity or in OCI.
a Current income tax
Current income tax is recognized based on the estimated tax liability computed after taking credit for allowances and
exemptions in accordance with the Income Tax Act, 1961. Current income tax assets and liabilities are measured at
the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively enacted, at the reporting date.
b Deferred income tax
Deferred tax is determined by applying the Balance Sheet approach. Deferred tax assets and liabilities are recognized
for all deductible temporary differences between the financial statements' carrying amount of existing assets and
liabilities and their respective tax base. Deferred tax assets and liabilities are measured using the enacted tax rates
or tax rates that are substantively enacted at the Balance Sheet date. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in the period that includes the enactment date. Deferred tax assets are only
recognized to the extent that it is probable that future taxable profits will be available against which the temporary
differences can be utilized. Such assets are reviewed at each Balance Sheet date to reassess realization.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset. 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 realize the asset and settle the liability simultaneously.
xii Leases
The company has adopted Ind AS 116-Leases effective 1 April 2019, using the modified retrospective method. The company
has applied the standard to its leases with the cumulative impact recognised on the date of initial application (1 April, 2019).
The company's lease asset classes primarily consist of leases for Premises. The company assesses whether a contract is or
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:
(i) the contract involves the use of an identified asset
(ii) the company has substantially all of the economic benefits from use of the asset through the period of the lease and
(iii) the company has the right to direct the use of the asset.
At the date of commencement of the lease, the company recognises a right-to-use asset 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
leases of low value assets. For these short term and leases of low value assets, the company recognises the lease payments
as an operating expense on a straight line basis over the term of the lease.
The right-to-use assets are initially recognised 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, if any. Right-to-use
assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life
of the underlying asset. The lease liability is initially measured 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. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the
lease liability and reducing the carrying amount to reflect the lease payments made. A lease liability is remeasured upon
the occurrence of certain events such as a change in the lease term or a change in an index or rate used to determine lease
payments. The remeasurement normally also adjusts the leased assets. Lease liability and right-to-use asset have been
separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
xiii Impairment of non-financial assets
As at each Balance Sheet date, the Company assesses whether there is an indication that a non-financial asset may be
impaired and also whether there is an indication of reversal of impairment loss recognized in the previous periods. If any
indication exists, or when annual impairment testing for an asset is required, the Company determines the recoverable
amount and impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount.
Recoverable amount is determined:
— In case of an individual asset, at the higher of the assets' fair value less cost to sell and value in use; and
— In case of cash generating unit (a group of assets that generates identified, independent cash flows), at the higher of
cash generating unit's fair value less cost to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate
that reflects current market assessments of the time value of money and risk specified to the asset. In determining fair value
less cost to sell, recent market transaction are taken into account. If no such transaction can be identified, an appropriate
valuation model is used.
Impairment losses of continuing operations, including impairment on inventories, are recognized in the Statement of Profit
and Loss, except for properties previously revalued with the revaluation taken to OCI. For such properties, the impairment
is recognized in OCI up to the amount of any previous revaluation.
When the Company considers that there are no realistic prospects of recovery of the asset, the relevant amounts are
written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an
event occurring after the impairment was recognized, then the previously recognized impairment loss is reversed through
the Statement of Profit and Loss.
Functional currency and foreign currency transactions
(a) Functional and presentation currency
The financial statements are presented in Indian rupee (INR/'), which is the firm's functional and presentation
currency. Foreign currency transactions are recorded and presented in the functional currency by applying the
exchange rate between the functional currency and the foreign currency prevailing at the dates of the transactions.
(b) Translations
On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the
exchange rate between the functional currency and the foreign currency at the date of the transaction.
All monetary items in foreign currencies are restated at the end of each reporting period at the rates prevailing at
that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the
rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.
Foreign exchange differences arising between the transaction date and the settlement/reporting date are recognised
in the Statement of Profit and Loss.
xiv Earnings per share
Basic earnings per share is computed by dividing the net profit or loss for the period attributable to the equity shareholders
of the Company by the weighted average number of equity shares outstanding during the period. The weighted average
number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus
shares, other than the conversion of potential equity shares, that have changed the number of equity shares outstanding,
without a corresponding change in resources.
Diluted earnings per share is computed by dividing the net profit or loss for the period attributable to the equity shareholders
of the Company by the weighted average number of equity shares considered for deriving basic earnings per equity share
and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential
equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable had the equity shares been
actually issued at fair value (i.e. the average market value of the outstanding equity shares).
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