2.5 Summary of Material accounting policies

a. Current versus non-current classification

The Company presents assets and liabilities in the balance sheet based on current/ non-current classification.
An asset is treated as current when it is:

• Expected to be realized or intended to be sold or consumed in normal operating cycle

• Held primarily for the purpose of trading

• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at
least twelve months after the reporting period

A liability is current when:

• It is expected to be settled in normal operating cycle

• It is held primarily for the purpose of trading

• There is no unconditional right to defer the settlement of the liability for at least twelve months after
the reporting period.

All other assets and liabilities are classified as non-current assets and liabilities. Deferred tax assets and
liabilities are classified as non-current assets and liabilities.

The operating cycle is the time between the acquisition of assets for processing and their realization in cash
and cash equivalents. The Company has identified twelve months as its operating cycle.

b. Revenue Recognition

Revenue from contracts with customers is recognized on transfer of control of promised goods or services
to a customer at an amount that reflects the consideration to which the Company is expected to be entitled
to in exchange for those goods or services.

Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price
(net of variable consideration) allocated to that performance obligation. The transaction price of goods sold
and services rendered is net of variable consideration on account of various discounts and schemes offered
by the Company as part of the contract.

This variable consideration is estimated based on the expected value of outflow. Revenue (net of variable
consideration) is recognized only to the extent that it is highly probable that the amount will not be subject
to significant reversal when uncertainty relating to its recognition is resolved.

1) Sale of products

Revenue from sale of products is recognized when the control on the goods have been transferred
to the customer. The performance obligation in case of sale of product is satisfied at a point in time

i.e., when the material is shipped to the customer or on delivery to the customer, as may be specified
in the contract.

2) Interest Income

For all financial instruments measured at amortized cost, interest income is recorded using the
effective interest rate (EIR). The EIR is the rate that exactly discounts the estimated future cash
receipts over the expected life of the financial instrument or a shorter period, where appropriate, to
the net carrying amount of the financial asset. When calculating the effective interest rate, the
Company estimates the expected cash flows by considering all the contractual terms of the financial
instrument (for example, prepayment, extension, call and similar options) but does not consider the
expected credit losses. Interest income is included in other income in the statement of profit or loss.

c. Fair value measurements

The Company measures financial instruments at fair value at each balance sheet date on a portfolio basis.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is based
on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• In the principal market for the asset or liability, or

• In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company.

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
categorised within the fair value hierarchy, described as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:

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

• Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable

• Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company
determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization
(based on the lowest level input that is significant to the fair value measurement as a whole) at the end
of each reporting period.

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

This note summarizes accounting policy for fair value. Other fair value related disclosures are given in the
relevant notes. (Refer Note 38)

Quantitative disclosures of fair value measurement hierarchy

• Financial instruments (including those carried at amortised cost)

• Disclosures for valuation methods, significant estimates and assumptions.

d. Property, Plant & Equipment (PPE)

Property, plant and equipment (PPE) and capital work in progress is stated at cost, net of accumulated
depreciation and accumulated impairment losses, if any. When significant parts of plant and equipment are
required to be replaced at intervals, the Company depreciates them separately based on their specific useful
lives. All other repair and maintenance costs are recognized in profit or loss as incurred.

Capital work-in-progress comprises cost of fixed assets that are not yet installed and ready for their
intended use at the balance sheet date.

An item of property, plant and equipment and any significant part initially recognized is derecognized upon
disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising
on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in the Statement of Profit and Loss when the asset is derecognized.

Depreciation is calculated on a straight-line method on the basis of the useful life as specified in Schedule
II to the Companies Act, 2013, except in certain assets where the useful life was determined by technical
evaluation. Depreciation method is reviewed at each financial year end to reflect expected pattern of
consumption of the future economic benefits embodied in the asset. The management believes that these
estimated useful lives are realistic and reflect fair approximation of the period over which the assets are
likely to be used. Estimated useful lives of the assets are as follows:

Depreciation:

Depreciation charge for impaired assets is adjusted in future periods in such a manner that the revised
carrying amount of the asset is allocated over its remaining useful life.

Land is not depreciated

The residual values are not more than 5% of the original cost of the item of Property, Plant and Equipment.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed
at each financial year end and adjusted prospectively, if appropriate.

e. Impairment of non-financial assets

The Company assesses, at each reporting date, whether there is an indication that an asset may be
impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company
estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or
cash-generating unit's (CGU) fair value less costs of disposal and its value in use. Recoverable amount is
determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. When the carrying amount of an asset 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 taken
into account. If no such transactions can be identified, an appropriate valuation model is used. These
calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or
other available fair value indicators.

The Company bases its impairment calculation on detailed budgets and forecast calculations, which are
prepared separately for each of the Company's CGUs to which the individual assets are allocated. These
budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term
growth rate is calculated and applied to project future cash flows after the fifth year.

Impairment losses of continuing operations, including impairment on inventories, are recognised in the
statement of profit and loss.

f. Inventories

Inventories are stated at the lower of cost and net realizable value.

(i) Stores and spares, packing materials and raw materials are valued at lower of cost or net realisable
value and for this purpose, cost is determined on moving weighted average basis. However, the
aforesaid items are not valued below cost if the finished products in which they are to be incorporated
are expected to be sold at or above cost.

(ii) Work-in-Process products and finished products are valued at lower of cost or net realisable value
and for this purpose, cost is determined on standard cost basis which approximates the actual cost.
Cost comprises direct materials and where applicable, direct labour costs, those overheads that have
been incurred in bringing the inventories to their present location and condition. Variances, exclusive
of abnormally low volume and operating performance, are adjusted to inventory.

Net realisable 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 equivalent in the balance sheet comprise cash at banks and 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.

j. 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.

1) Financial assets

Initial recognition and measurement

All financial assets are recognized initially at fair value plus, in the case of financial assets not
recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition
of the financial assets. However, trade receivables that do not contain a significant financing component
are measured at transaction price.

Equity investments

All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which
are held for trading are classified as at FVTPL. For all other equity instruments, the company may
make an irrevocable election to present in other comprehensive income subsequent changes in the
fair value. The company makes such election on an instrument-by instrument basis. The classification
is made on initial recognition and is irrevocable.

If the company decides to classify an equity instrument as at FVTOCI, then all fair value changes
on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the
amounts from OCI to statement of profit and loss, even on sale of investment. However, the company
may transfer the cumulative gain or loss within equity.

Equity instruments included within the FVTPL category are measured at fair value with all changes
recognized in the statement of profit and loss

Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a company of similar
financial assets) is primarily derecognised (i.e. removed from the Company's balance sheet) when:

• The rights to receive cash flows from the asset have expired, or

• The company has transferred its rights to receive cash flows from the asset or has assumed
an obligation to pay the received cash flows in full without material delay to a third party under
a ‘pass-through' arrangement; and either the company has transferred substantially all the
risks and rewards of the asset, or the company has neither transferred nor retained substantially
all the risks and rewards of the asset, but has transferred control of the asset.

When the company has transferred its rights to receive cash flows from an asset or has entered into
a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards
of ownership. When it has neither transferred nor retained substantially all of the risks and rewards
of the asset, nor transferred control of the asset, the company continues to recognise the transferred
asset to the extent of the Company's continuing involvement. In that case, the company also
recognises an associated liability. The transferred asset and the associated liability are measured
on a basis that reflects the rights and obligations that the Company has retained.

Impairment of financial assets

In accordance with Ind AS 109, the company applies expected credit loss (ECL) model for measurement
and recognition of impairment loss on the following financial assets and credit risk exposure:

a) Financial assets that are debt instruments, and are measured at amortised cost e.g., loans,
term deposits with banks, trade receivables, cash and cash equivalents, and bank balance

b) Trade receivables or any contractual right to receive cash or another financial asset that result
from transactions that are within the scope of Ind AS 115 (referred to as ‘contractual revenue
receivables' in these financial statements)

The company follows ‘simplified approach' for recognition of impairment loss allowance on Trade
receivables.

The application of simplified approach does not require the company to track changes in credit risk.
Rather, it recognizes impairment loss allowance based on lifetime ECLs 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. Lifetime
ECL are the expected credit losses resulting from all possible default events over the expected life
of a financial instrument.

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. The expected credit loss allowance is based on the ageing of the
receivables that are due and allowance rates used in the provision matrix.ECL is the difference
between all contractual cash flows that are due to the company in accordance with the contract and
all the cash flows that the company expects to receive (i.e., all cash shortfalls) that do not constitute
a financing transaction, discounted at the original EIR.

For Financial assets measured as at amortised cost, and contractual revenue receivables: ECL is
presented as an allowance, i.e., as an integral part of the measurement of those assets in the
balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off
criteria, the company does not reduce impairment allowance from the gross carrying amount.

2) Financial Liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit
or loss, loans and borrowings, payables, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings
and payables, net of directly attributable transaction costs of material amount.

The Company's financial liabilities include trade and other payables, loans and borrowings.

Subsequent measurement of financial liabilities

The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and
financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial
liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the
near term. This category also includes derivative financial instruments entered into by the company
that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109.

Gains or losses on liabilities held for trading are recognised in the profit or loss.

Loans and Borrowings

After initial recognition, interest-bearing borrowings are subsequently measured at amortised cost
using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are
derecognised as well as through the EIR amortisation process.

Amortised 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 amortisation is included as finance costs in
the statement of profit and loss. This category generally applies to borrowings.

De-recognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled
or expires. When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as the de-recognition of the original liability and the recognition
of a new liability. The difference in the respective carrying amounts is recognised in the statement
of profit and loss.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet
if there is a currently enforceable legal right to offset the recognised amounts and there is an intention
to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

k. Taxes on income

Tax expense comprises of current income tax and deferred tax.

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. The tax rates and tax laws used to compute the amount are those that
are enacted or substantively enacted at the reporting date.

Current income tax relating to items recognised outside Statement of profit and loss is recognised outside
Statement of profit and loss (either in other comprehensive income or equity). Current tax items are
recognised in correlation to the underlying transaction either in other comprehensive income or directly in
equity. Management periodically evaluates positions taken in the tax returns with respect to situations in
which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of taxable profit under
Income tax Act, 1961.

Deferred tax liabilities are generally recognized for all taxable temporary differences. 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 liabilities
are not recognized. Also, for temporary differences if any that may arise from initial recognition of goodwill,
deferred tax liabilities are not recognized.

Deferred tax assets are generally recognized for all deductible temporary differences to the extent it is
probable that taxable profits will be available against which those deductible temporary difference can be
utilized. 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 the benefits
of part or all of such deferred tax assets to be utilized.

Deferred tax assets and liabilities are measured at the tax rates that have been enacted or substantively
enacted by the balance sheet date and are expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.

Presentation of current and deferred tax:

Current and deferred tax are recognized as income or an expense in the Statement of Profit and Loss,
except when they relate to items that are recognized in Other Comprehensive Income, in which case, the
current and deferred tax income/expense are recognized in Other Comprehensive Income.

The Company offsets current tax assets and current tax liabilities, where it has a legally enforceable right
to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset
and settle the liability simultaneously. Incase of deferred tax assets and deferred tax liabilities, the same
are offset if the Company has a legally enforceable right to setoff corresponding current tax assets against
current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied
by the same tax authority on the Company.

l. Retirement and other employee benefits
Defined Benefit plan

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more
of service gets a gratuity on post-employment at 15 days salary (last drawn salary) for each completed year
of service as per the rules of the Company. From the current year, the aforesaid liability at the end of the
financial year is provided based on the actuarial valuation report prepared using the projected unit credit
method. The scheme is funded with an insurance Company in the form of a qualifying insurance policy.

Re-measurements, comprising of acturial gains and losses, the effect of asset ceiling, excluding amounts
included in the net interest on the net defined benefit liability and the return on plan assets (excluding
amounts included in net interest on the net defined benefit liability), are recognised immediately in the
balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which
they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.

Liabilities for wages, salaries, including non-monetary benefits that are expected to be settled wholly within
12 months after the end of the period in which the employees render the related services are recognised
in respect of employees' services up to the end of the reporting period and are measured at the amounts
expected to be paid when the liabilities are to be settled. The liabilities are presented as current employee
benefit obligations in the balance sheet.

Defined contribution plan

Provident Fund is a defined contribution scheme established under a State Plan. The contributions to the
scheme are charged to the statement of profit and loss in the year when employee rendered related
services.