3. MATERIAL ACCOUNTING POLICIES

a) Statement of Compliance

In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has adopted Indian
Accounting Standards (referred to as “Ind AS”) notified under the Companies (Indian Accounting Standards)
Rules 2015 with effect from 1 April 2016.

b) Critical Accounting Estimates and Judgments

The preparation of Company's financial statements requires management to make accounting estimates,
assumptions and judgments that affect the reported amounts of revenues, expenses, assets and liabilities and
the accompanying disclosures of contingencies at the end of the reporting period. Uncertainty about these
assumptions and estimates could result in outcomes that require a material adjustment to the carrying amounts
of assets or liabilities affected in future periods.

The areas involving critical estimates or judgments are -

- Useful lives of property plant and equipment and intangible assets

- Measurement of defined benefit obligation.

- Estimation of impairment

- Estimation of Provision and Contingent liabilities

- Recognition of deferred taxes

c) Current vs 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 satisfies the below mentioned criteria:

i. Expected to be realized or intended to be sold or consumed in normal operating cycle;

ii. Expected to be realized within twelve months after the reporting period, or

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

All other assets are classified as non-current assets.

A liability is classified as current when it satisfies the below mentioned criteria:

i. Expected to settle the liability in normal operating cycle;

ii. Due to be settled within twelve months after the reporting period, or

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

All other liabilities are classified as non-current.

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.

d) Property, Plant and Equipment

Property, plant, and equipment are stated at cost net of input tax credits, less accumulated depreciation, and
accumulated impairment losses, if any. Cost comprises the purchase price and all attributable cost, to bring the
asset to its working condition for its intended use. Borrowing costs relating to acquisition of property, plant and
equipment which take a substantial period to get ready for its intended use are also included to the extent they
relate to the period till such assets are ready to use.

The Company adopted the cost model as its accounting policy, in recognition of the property, plant and
equipment and recognizes transaction value as the cost.

Capital work in progress includes cost of property, plant, and equipment under installation/under development
as at the balance sheet date.

An item of Property, Plant and Equipment is derecognized upon disposal or when no future economic benefits
are expected from its use. Any gain or loss arising from derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the asset) is recognized in the Statement of Profit
and Loss. Property, Plant and Equipment which are found to be not usable or retired from active use or when no
further benefits are expected from their use are removed from property, plant, and equipment and the carrying
amount net of scrap value, if any is charged to Statement of Profit and Loss.

The improvements/modifications carried out on the lease hold land/property are recognized as lease hold
improvements and are written off over the primary lease period or the life of such improvement whichever is
lower.

e) Intangible Assets
Computer software

Computer software is recognized at cost and is amortized over the useful life as estimated by the Management
which is about 3 years for all the intangible computer software assets.

Other Intangible Assets

Internally generated intangible assets

Research and development expenditure

Expenditure on research activities is recognized as an expense in the period in which it is incurred. An internally
generated intangible asset arising from the development phase of an internal project is recognized, if and only
if, the conditions under the Ind AS 38 - Intangible Asset, are fulfilled. If the conditions are not fulfilled the same
is recognized in profit and loss in the period in which it is incurred.

f) Impairment of non-financial assets

i. The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of
impairment based on internal/external factors. An impairment loss is recognized wherever the carrying
amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset's net
selling price and value in use.

ii. Reversal of impairment losses recognized in prior years is recorded when there is an indication that the
impairment losses recognized for the asset do no longer exist or have decreased.

g) Leases

The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The Company assesses whether a contract contains a lease, at the inception of 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 use of an identified asset,
the Company assesses whether:

a) The contract involves use of an identified asset;

b) The Company has substantially all the economic benefits from the use of the asset through the period of
lease; and

c) The Company has the right to direct the use of an asset.

At the date of commencement of lease, the Company recognizes a Right-of-use asset (“ROU”) and a
corresponding liability for all lease arrangements in which it is a lessee, except for leases with the term of twelve
months or less (short term leases) and low value leases. For short term and low value leases, the Company
recognizes the lease payment as an operating expense on straight line basis over the term of lease.

Right-of-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 amortized cost at the present value of the future lease payments. The
lease payments are discounted using the interest rate explicit in the lease or, if not readily determinable, using
the incremental borrowing rates in the country of domicile of these leases.

Lease liability and ROU asset have been separately presented in the Balance Sheet and the lease payments have
been classified as financing cash flows.

h) Inventories

Raw materials, stores and spares, work in progress and finished goods are stated at the lower of cost and net
realizable value. Costs are assigned to individual items of inventory and are determined based on a first in first
out basis (FIFO).

The cost of raw materials comprises cost of purchases and includes all other costs incurred in bringing the
inventories to their present location and condition. Cost of work-in-progress and finished goods comprises

direct materials, direct labor and an appropriate proportion of variable and fixed overhead expenditure, the
latter being allocated based on normal operating capacity.

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

Spare parts, stand-by equipment and servicing equipment are recognized in accordance with this Ind AS-
16 when they meet the definition of Property, Plant and Equipment. Otherwise, such items are classified as
inventory. Spare parts, stand-by equipment and servicing equipment are stated at lower cost or net realizable
value.

i) Revenue recognition

Revenue is measured at the fair value of consideration received or receivable and is recognized to the extent that
it is probable that the economic benefits will flow to the Company. Specifically, the following basis is adopted for
various sources of income:

Sale of goods

Revenue is recognized when a performance obligation in a customer contract has been satisfied by transferring
control over the promised goods to the customer. Control over the promised goods refers to the ability to direct
the use of, and obtain substantially all of the remaining benefits from, those goods. Control is usually transferred
upon shipment, delivery to, upon receipt of goods by the customer, in accordance with the individual delivery
and acceptance terms agreed with the customers. The amount of revenue to be recognized (transaction price)
is based on the consideration expected to be received in exchange for goods, excluding amounts collected on
behalf of third parties such as goods and services tax or other taxes directly linked to sales.

Revenue from rendering of services is recognized over time as and when the customer receives the benefit of the
Company’s performance and the Company has an enforceable right to payment for services transferred.

j) Other income
Interest income

Interest income primarily comprises of interest on Margin money deposits with the banks, interest income is
recorded using the effective interest rate (EIR). 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 gross
carrying amount of financial asset.

k) Foreign currency transactions

i. Functional and Reporting Currency

The Company’s functional and reporting currency is Indian Rupee.

ii. Initial Recognition

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency
amounts the exchange rate between the reporting currency and the foreign currency at the date of the
transaction.

iii. Conversion on reporting date

Foreign currency monetary items are reported using the closing rate. 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.

iv. Exchange Differences

Exchange difference arising on the settlement of monetary items or on reporting monetary items of
Company at rates different from those at which they were initially recorded during the year or reported in
previous financial statements are recognized as income or as expenses in the year in which they arise.

l) Retirement and other employee benefits

i. Employer’s contribution to Provident Fund/Employee State Insurance, which is in the nature of defined
contribution scheme is expensed off when the contributions to the respective funds are due. There are no
other obligations other than the contribution payable to the fund.

ii. Gratuity liability is in the nature of defined benefit obligation. This liability is provided based on independent
actuarial valuation on projected unit credit method made at the end of each financial year as per the
requirements of Ind AS 19 “Employee Benefits”. Actuarial gain/ (loss) in the valuation are recognized as
other comprehensive income for the period.

iii. Compensated absences which are in the nature of defined benefit obligation are provided for based on
estimates of independent actuarial valuation on projected unit credit method made at the end of each
financial year as per the requirements of Ind AS 19 “Employee Benefits”.

m) Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily
takes a substantial period to get ready for its intended use or sale are capitalized as part of the cost of the asset.
All other borrowing costs are incurred in the period in which they occur. Borrowing costs consist of interest and
other costs that an entity incurs in connection with the borrowing of funds.

n) Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Executive
Management.

o) Dividends

Annual dividend distribution to the shareholders is recognized as a liability in the period in which the dividend
is approved by the shareholders. Any interim dividend paid is recognized on approval by the Board of Directors.
Dividend payable and corresponding tax on dividend distribution is recognized directly in equity.

p) Earnings per Share

Basic earnings per share are calculated by dividing the profit for the period attributable to equity shareholders
by the weighted average number of equity shares outstanding during the period, net off treasury shares. For
calculating diluted earnings per share, the profit for the period attributable to equity shareholders and the
weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive
potential equity shares.