2 Summary of Material accounting policies followed by the Company

2.1 Accounting Charges:

(i) The Company follows the mercantile system of accounting and recognises income and
expenditure on an accrual basis.

(ii) The Company mainta ins its ac cou nts on accrual basis fo I lowing historica I cost convention,
except for certain assets and liabil ities that are measured at fair value in accordance with
Ind AS which are as under.

Financial assets and liabilities are measured at fair value or at amortised cost depending
on classification Refer note no; 2.6

Defined benefit plans - plan assets measured at fair value ; Refer note no 2.9

Lease liability and Right-of-use assets are measured at amortised cost; Refer note no 2.11
and

(iii) Estimates and assumptions used in the preparation of these financial statements and
disclosures made therein are based upon Management's evaluation of the relevant facts
and circumstances as on the date of the financial statements, which may differ from the
actual results at a subsequent date.

Key Estimates

The preparation of standalone financial statements requires management to make
judgments, estimates and assumptions in the application of accounting policies that
affect th e rep orted amounts of assets, liabilities, income and exp enses. Actual results may
differ from these estimates. Continuous evaluation is done on the estimation and
judgments based on historical experience and other factors, including expectations of
future events that are believed to be reasonable. Revisions to accounting estimates are
recognised prospectively.

Information about critical judgments in applying accounting policies, as well as estimates
and assumptions that have the most significant effect to the carrying amounts of assets
and liabilities within the next financial year, are included in the following notes:

A. Estimation of useful lives and residual value of Property, Plant and equipment and
intangible assets refer Note- 2.4

B. Estimate of Tax

Recognisation of provision of current tax and deferred tax refer- Note 2.5

C. Financial Assets:

Estimating Fa ir value of Financial Assets re fer N ote 2.6
Impairmrnt of Financial Assets refer Note 2.6

D. Long term Em plovee benefit plan

Estimation of Long term Employee benefit plan refer Note 2.9

E. Lease

Measurement of Right of Use Asset and Lease liabilities refer-Note-2.11

F. Provision, Contingent Liabilities and Contingent Assets:

E stimating amount of provisions refer Note 2.15
Estimati ng amount of Contingent Liability refer Note 32

2.2 Current vs Non Current Classification

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

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

b. held primarily for the purpose of trading;

c. expected to be realized within twelve months after the reporting period; or

d. 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.

A liability is current when

a. expecte d to be settled in normal operating cycle

b. held primari ly for the purpose of trading;

c. due to be settled within twelve months after the reporting period; or

d. there is no unconditional right to defer the settlement of the liabi lity for at least twelve
mon ths afte r th e reporting period.

All other liabilities are classified as non-current.

Deferred Tax Assets and Liabilities are classified as non current assets and liabilities
respectively.

2.3 Revenue Recognition:

a Revenue from sale of goods is recognised when control of the machine being sold is
transferred to the customer and when there are no longer any unfulfilled obligations. The
Performance Obligations in the contracts are fulfilled at the time of dispatch, delivery or
upon formal customer acceptance depending on customer terms.

b Revenue is measured on the basis of contracted price, after deduction of any trade
discounts, and any taxes or duties collected on behalf of the Government such as goods
and services tax, etc. Revenue is only recognised to the extent that it is highly probable a
significant reversal will not occur.

c Income from services rendered is recognised based on agreements/arrangements with
the customers as the service is performed and there are no unfulfilled obligations.

d Revenue in respect of other income is recognised when no significant uncertainty as to its
determination or realisation exists.

2.4 Property, plant and equipment and Intangible Assets
Property, plant and equipment

a Property, plant and equipment are stated at cost less accumulated depreciation /
amorti sation and im pairment loss, if any, except freehold land wh ich is carried at cost. The
cost comprises its purchases price, borrowing cost and any cost directly attributable to
the bringing the assets to its working condition for its intended use. Subsequent
expenditures related to an item of Property, plant and equipment are added to its book
value only if they increases the future benefits from the existing asset beyond its previously
assessed standard of performance.

b Property, plant and equipme nts which are not ready for intended use as on the date of
Balance Sheet are disclosed as "Capital work-in-progress”.

c Own construction or manufactured PPE is capitalised at cost including administrative and
other general overhead expenses that are specifically attri butable to construction or
acquisition of PPE or bringing the PPE to working condition are allocated and capitalised
as a part of the cost of the PPE.

d All other expenses on Property, plant and equipment, including repair and maintenance
expend iture a nd repla cement expenditure of parts, are charged to Statement of Profit
and Loss for the period during the which such expenses are incurred.

e Gains or losses that arise on disposal or retirement of an asset are measured as the
difference between net disposal proceeds and the carrying value of an asset and are
re cognised in the statement of profit and loss when the asset is derecognised.

^f Depreciation methods, estimated useful lives and residual value:

Depreciation is recognized so as to write off the cost of assets (other than freehold land)
less their residual values over their useful lives prescribed in Schedule II to the Companies
Act, 2013, using the straight-line method. The estimated useful lives, residual values and
depreciation method are reviewed at the end of each reporting period, with the effect of
any changes in estimate accounted for on a prospective basis.

The management of the company believes that the useful lives as given below best
represent the useful lives of these assets based on internal assessment and supported by
technical ad vice w herever necessary which is a s prescribed under Par t C of Schedule II
of the Companies Act 2013.

Intangible Assets

^a Intangible assets purchased are initially measured at cost. The cost of an intangible asset
comprises its purchase price including duties and taxes and any costs directly attributable
to making the asset ready for their intended use.

^b The Company expenses costs incurred during research phase to profit or loss in the year in
which they are incurred. Expenses incurred during the development phase are initially
re cognised as intangible assets under development until the development phase is
complete, upon which the amount is capitalised as intangible asset.

c Subsequent expenditure is capitalised only whe n it increases the future economic benefits
embodied in the specific asset to which it relates. All other expenditure are recognised in
standalone statement of profit or loss as incurred.

Subsequently, intangible assets are carried at cost less any accumulated amortisation
and accumulated impairment losses, if any.

2.5 Taxation

Tax expense represents the sum of the current tax and deferred tax. Current and deferred
tax are recognized in profit or 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.

(a) Current Tax:

The current tax payable is based on taxable profit for the year. Taxable profit differs from
‘profit before tax' as reported in the Statement of Profit and Loss because of items of
income or expense that are taxable or deductible in other years and items that are never
taxable or deductible. The Company's current tax is calculated using tax rates that have
been enacted by the end of the reporting period. Current tax assets and current tax
liabilities are off set, and presented as net.

(b) Deferred Tax:

Deferred tax is recog nized on temporary differences between the ca rrying amo unts of
assets and liabilities in the financial statements and the corresponding tax bases used in
the computation of taxable profit. Deferred tax liabilities are generally recognized for all
taxable temporary differences. Deferred tax assets are generally recognized for all
deductible temporary differences to the extent that it is probable th at taxable profits will
be available against which those deductible temporary differences can be utilized. Such
deferred tax assets and liabilities are not reco gnized if the temporary difference arises
from the initial recognition of assets and liabilities in a transaction that affects neither the
taxable profit nor the accounting profit.Deferred tax assets and deferred tax liabilities are
off set, and presented as net.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient taxable profits will be
available against which the temporary differences can be utilised.

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. Financial assets and financial
liabilities are recognized when a Company becomes a party to the contractual provisions
of the instruments.

(a ) Financial assets

(i) Classification

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

Those to be measured subsequently, at fair value (either through other comprehensive
income, or through profit or loss), and those already measured, at amortised cost.

The classification is done depending upon the Company's business model for managing
the financial assets and the contractual terms of the cash flows. For assets meas ured at
fair value, gains and losses will be recorded in profit or loss or in Other Comprehensive
Income as per the requirement of applicable Ind AS .

(ii) Measurement

At initial recognition

At initial recognition, the Company measures a financial asset at its fair value. Trade
receivables that d o not contain significant financing component are measured at
transaction price.

Subsequent Measurement

All recognised financial assets are subsequently measured in their entirety either at
amortised cost or at fair value as follows:

At amortised cost

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

(i) The asset is held within a business model whose objective is to hold assets for collecting
contractual cash flows, and

(ii) Contractual terms of the asset give rise, on specified dates, to cash flows that are solely
payments of principal and interest (SPPI) on the principal amount outstanding.

At Fair Value through Other Co mprehensive Income (FVTOCI)

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

(i) The objective of the business model is achieved both by collecting contractual cash
flows and selling the financial assets, and

(ii) Contractual terms of the asset give rise on specified dates to cash flows that are solely
payments of principal and interest (SPPI) on the principal amount outstanding.

At Fair Value through Profit & Loss (FVTPL)

Fina ncial assets which are not measured at amortised cost or FVTOCI and are held for
trading are measured at FVTPL.

⁽ⁱⁱⁱ⁾ Im pairment of financial assets

The Company a ssesses on a forward looking basis of the expected credit losses
associated with its assets carried at amortised cost. The impairment methodology applied
depends on whether there has been a significan t increase in credit risk and if so, assess
the need to provide for the same in the Statement of Profit and Loss.

Lifetime ECL are the expected credit losses resulting from all possible default events over
the expected life of a financial asset. 12-month ECL are a portion of the lifetim e ECL which
result from default events that are possible within 12 months from the reporting date.

For Trade Receivables the Company applies ‘simplified approach' which requires
expected lifetime losses to be recognised from initial recognition of the receivables

ECL impairment allowance recognised (or reversed) during the year is recognised as
income/expense in the Statement of Profit and Loss under the head ‘Other expenses' /
'Other Income'.

^(iv) Derecognition of financial assets

A financial asset is derecognised only when Company has transferred the rights to receive
cash flows from the financial asset. 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 derecognised.

(i) Classification as debt or Equity

Debt and equity instruments issued by the Company are classified as either financial
liabilities or as equity in accordance with the substance of the contractual arrangements
and the definition of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residu al interest in the assets of an
entity after deducting all of its liabilities.

(ii) Measurement

At initial recognition

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

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

Subsequent measurement

The measurement of financial liabilities depends on their classification, as described
below:

The amount for tra de payables & other payables represent obligations to pay for goods
or services that have been acquired in the ordi nary cou rse of business from suppliers.
These payable are classified as 'current liabilities' if payments are due within one year or
less otherwise they are presented as 'non-current liabilities'. Trade payables are
subsequently measured at amortised cost.

(iii) Derecogniti on

Liability is removed from the balance sheet when the obligation specified in the contract
is discharged, cancelled or expired. The difference between the carrying amount of a
financial liability that has been extinguished or transferred to another party and the
consideration paid, including any non-cash assets transferred or liabilities assumed, is
recognised in profit or loss as other gains/ (losses).

When an existing fin ancial 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 derecognition 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 or loss.

2.7 Foreign Currency Transactions:

Ite ms included in the financial statements are measured and presented in Indian rupee
(INR), which is Company's functional and presentation currency.

a Initial Recognition:

Foreign currency transactions are recorded in the reporting currency by applying to the
foreign currency amount the exchange rate between the reporting current and the
foreign currency at the date of the transac tions.

b Conversion:

Foreign currency monetary items are retranslated using the exchange rate prevailing at
the reporting date. Non- mo netary items, which are measured in terms of historical cost
denominated in a foreign currency, are reported using the exchange rate at the date of
the transactions. Non- monetary items, which are measured at fair value or others similar
valuation de nominated in a foreign currency, are translated usi ng the excha nge rate at
the date when such value was determined.

c Exchange Differences:

The company accounts for exchange differences arising on translation/ settlement of
foreign cu rrency monetary are recognized as incom e or as expenses in the period in
which they arise.

2.8 Inventories:

Inventories are valued after providing for obsolescence, as under:

Raw Materials, Work-In-Progress and Finished Goods are valued at lower of Cost or Net
Realizab l e Value. FIFO method is used for determining cost.

Cost of Inventories comprises cost of purchase, cost of conver >ion and other costs
incurred in bringing the inventories to the present location and condition.

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

2.9 Employee Benefits:

^A Short-term employee benefits:

a Employee benefits such as salaries, wages, bonus, etc falling due wholly within twelve
months of rendering the service are classified as short-term employee benefits and are
expensed in the period in which the employee renders the service.

^B Post-employment benefits:

^a Retirement benefit in the form of provident fund is a defined contribution scheme. The
company has no obligation, other than the contribution payable to the provident fund.
The company recognizes contributions payable to the provident fund scheme as an
expenditure, whe n a n employee ren ders the related servi ces.

^b The Company has defined benefit plans for its employees, viz., gratuity. The cost of
providing benefits under this plans are determined on the basis of actuarial valuation at
each year end. Actuarial valuation is carried out for the plan using the projected unit
credit method. Ac tuarial gains and losses for defined benefit plans are recognised in
Other Comprehensive Income.

²-l ⁰ Brrowing Cost:

^a Borrowing cost includes interest and ancillary costs incurred in connection with the
arrangement of borrowings.

^b Borrowing costs directly attributable to the construction of an asset that necessarily take a
substantial pe riod of time to get ready for its intende d use are capitali zed as part of the
cost of the respective asset. All of these borrowing cos ts are expensed in the period they
are incurred.

²-!¹ Lease:

Company as lessee measures the right-of-use asset at cost by recognition of right-of-use
asset and a lease liability on initial measurement of the right-of-use asset at the
comme ncement date of the lease.

The cost of the righ t-of-use asset comprises:

i) the amount of the initial measurement of the lease liability,

ii) any lease payments made at or before the commencement date less any incentives
received,

iii) any initial direct costs incurred,

iv) an estimate of costs to be incurred in dismantling and removing the underlying asset,
restoring the site on w hich it is located or restoring the underlying asset to the condition
required by the terms and conditions of the lease, unless those costs are incurred to
produce inventories.

Lease liability is initially measured at the present value of the lease payments that are not
paid at that date. The lease payments are discounted using the interest rate implicit in the
lease, if the rate cannot be readily determined incremental borrowing rate is considered.
Interest on lease liability in each period during the lease is the amount that produces a
constant periodic rate of interest on the remaining balance of the lease liability.

Lease payments comprises the following payments for the right to use asset during the
lease term that are not paid at the commencement date:

i) fixed payments less any lease incentives receivable

ii) variable lease payments

iii) amounts expected to be payable under residual value guarantees

iv) the exercise price of a purchase option, if the Company is reasonably certain to
exercise that option

v) payments of penalties for terminating the lease, if the lease term reflects the Company
exercising an option to terminate the lease.

Subsequent measurement of the right-of-use asset after the commencement date is at
cost model, the value of righ t-of-use asset is initia l ly measured cost less accumulated
depreciation and any accumulated impairment loss and adjustment for any re¬
measurement of the lease liability.

The right-of-use asset is depreciated from the commencement date to the earlier of the
end of the useful life of the asset or the end of lease term, unless lease transfers ownership
of the underlying asset to the company by th e end o f the lease term or if the cost of the
right-of-asset reflects that the Company will exercise a purchase option, in such case the
Company depreciates asset to the end of the useful life. Subsequent measurement of the
lease liability after the commencement date reflects the initially measured liability
increased by interest on lease liability, reduced by lease p ayments and re-measuring the
carrying amount to reflect any re-assessment or lease modification.

Right-of-use asset and lease liability are presented on the face of balance sheet.
Depreciation charge on right-to-use is presented under depreciation expense as a
separate line item. Interest charge on lease liability is presented under finance cost as a
separate line item. Under the cash flow statement, cash flow from lease payments
including interest are p resente d un der fin ancing activities.

2.12 Cash and cash equivalents

Cash and cash equivalents includes cash on hand and at bank, deposits held at call with
banks, other short-term highly liquid investments with original maturities of three months or
less that are readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value and are held for the purpose of meeting short-term
cash commitments. For the purpose of the Statement of Cash Flows, cash and cash
equivalents consists of cash and short term deposits, as defined above, net of outstanding
bank overdraft as they are being considered as integral part of the Company's cash
management.

2.13 Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting
provided to the chief operating decision maker (CODM). Managing Director of the
Company has been identified as CODM and he assesses the financial performance and
position of th e Company and makes strategic decisions. Refer to note 40 for the segment
information presented.

2.14 Earning Per Share:

Basic earnings per share is calculated by dividing the net profit or loss for the period
attributable to equity shareholders by the weighted average number of equity shares
outstanding during the period. Earnings considered in ascertaining the Company's
earnings per sh are is the net profit for the period. The wei ghted average number of equity
shares outstanding during the period and all periods presented is adjusted for events,
such as bonus shares, other th an the conversion of potentiai equity shares, that have
changed the number of equity shares outstanding, without a corresponding change in
resources. For the purpose of calculating diluted earnings per share, the net profit or loss
for the period attributable to equity shareholde rs and the weighted average number of
share outstanding during the period is adjusted for the effects of all dilutive potential
equity shares.