1 Material accounting policies
1.1 Basis of preparation
(a) Compliance with Ind AS:
The Financial Statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind
AS) notified under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules,
2015, as amended and Companies (Indian Accounting Standards) Amendment Rules, 2016 (Ind AS) and presentation
requirements of Division II of Schedule III notified under Section 133 of Companies Act, 2013 (“the Act”), amendments
thereto and other relevant provisions of the Act and guidelines issued by the Securities and Exchange Board of India
(“SEBI”), as applicable. The Financial Statements comply in all material respects with Ind AS.
(b) Historical cost convention
The Standalone Financial Statements have been prepared on a historical cost basis, except for the following:
a. certain financial assets and liabilities that are measured at fair value;
b. defined benefit plans - plan assets measured at fair value;
The Standalone Financial Statements (SFS) are presented in Indian Rupees (‘INR’) which is the functional and
presentational currency and all values are rounded to the nearest Lakh, except otherwise indicated.
1.2 Property, plant and equipment:
All items of property, plant and equipment are stated at acquisition cost net of accumulated depreciation and
accumulated impairment losses, if any. Historical Cost includes purchase price (net of trade discount and rebates)
and any directly attributable cost of bringing the asset to its working condition for its intended use and for qualifying
assets, borrowing costs capitalised in accordance with the Ind AS 23. The Company follows cost model for subsequent
measurement for all classes and items of property, plant and equipment.
Subsequent costs are included in the carrying amount of asset or recognised as a separate asset, as appropriate,
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 expenses are charged to the Statement of
Profit and Loss during the period in which they are incurred. Gains or losses arising on retirement or disposal of
assets are recognised in the Statement of Profit and Loss.
Spare parts, stand-by equipment and servicing equipment are recognised as property, plant and equipment if they
meet the definition of property, plant and equipment.
Property, plant and equipment which are not ready for intended use as on the date of Balance Sheet are disclosed as
‘Capital work-in-progress’. Capital work in progress is stated at cost, net of accumulated impairment loss, if any.
Depreciation on Tangible Fixed Assets is provided on Written Down Value (WDV) on the basis of useful life of
assets specified in Part C of Schedule II of the Companies Act, 2013.
Property, plant and equipment which are added / disposed off during the year, depreciation is provided on pro-rata
basis with reference to the day of addition / deletion.
Gains and losses on disposals are determined by comparing the proceeds with the carrying method.
The residual values are not more than 5% of the original cost of the asset, wherever applicable.
The residual values, useful lives and method of depreciation of property, plant and equipment are reviewed at each
financial year end and any changes there-in are considered as change in estimate and accounted prospectively.
Depreciation and useful life
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated
residual value. Depreciation is recognised so as to write off the cost of assets (other than freehold land and properties
under construction) less their residual values over their useful lives, using written down value method as per the
useful life prescribed in Schedule II to the Companies Act, 2013.
Derecognition
An item of PPE is de-recognised upon disposal or when no future economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and
equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is
recognised in Statement of Profit and Loss.
1.3 Intangible assets
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation
and accumulated impairment losses. Amortisation is recognised on a written down value basis over their estimated
useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting year, with
the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite
useful lives that are acquired separately are carried at cost less accumulated impairment losses.
Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an
intangible asset when the Company can demonstrate the technical feasibility of completing the intangible asset so
that the asset will be available for use or sale, its intention to complete and its ability and intention to use or sell the
asset, how the asset will generate future economic benefits, the availability of resources to complete the asset, the
ability to measure reliably the expenditure during development.
Useful life and amortisation
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation
and impairment losses. Amortisation is recognised on a straight-line basis over the useful lives of the asset from the
date of capitalisation:
Derecognition
Intangible assets are derecognised on disposal, or when no future economic benefits are expected from use or
disposal. Gains or losses arising from derecognition of an intangible asset are determined as the difference between
the net disposal proceeds and the carrying amount.
1.4 Investment properties:
Property that is held for long-term rental yields or for capital appreciation or both, and that is not in use by the
Company, is classified as investment property. Land held for a currently undetermined future use is also classified as
an investment property.
Investment property is measured initially at its acquisition cost, including related transaction costs and where
applicable borrowing costs and are carried at cost less accumulated impairment losses.
1.5 Impairment of fixed 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. Impairment losses are recognised in statement
of profit and loss.
1.6 Inventories:
Inventories are carried in the balance sheet as follows:
(i) Raw materials, components, stores and spares :
Raw materials, components, stores and spares are valued at lower of cost or net realisable value. Cost is
determined on a FIFO basis.
(ii) Work-in-progress and Finished goods:
Cost of work-in-progress and finished goods comprises direct materials, direct labour and an appropriate
proportion of variable and fixed overhead expenditure. Fixed overheads are allocated on the basis of normal
operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to their
present location and condition. Costs are assigned to the individual items in a group of inventories on the
basis of First in first out basis. Costs of purchased inventory are determined after deducting rebates and
discounts. Net realisable 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.
1.7 Statement of Cash Flows:
Cash flows are reported using the “indirect method”, whereby profit for the period is adjusted for the effects of
transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments
and item of income or expenses associated with investing or financing cash flows. The cash flows from operating,
investing and financing activities of the Company are segregated.
(i) 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.
1.8 Foreign currency transactions:
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of
the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are
recognised in statement of profit and loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at
the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are
reported as part of the fair value gain or loss.
1.9 Revenue recognition:
(i) Sale of goods
Revenue is measured at the fair value of the consideration received or receivable. The Company recognises
revenues on sale of products, when control of the good or services are tranferred to the customer at an amount
that reflect the consideration to which company expects to entitled in exchange for those goods and services.
Revenue from sales is recognised when control of the products has transferred, being when the products are
delivered to the customer, the customer has full discretion over the channel and price to sell / consume the
products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products.
Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and
loss have been transferred to the customer, and either the customer has accepted the products in accordance
with the sales contract or the acceptance provisions have lapsed.
(ii) Sale of Services
Revenue is recognized as and when services are rendered and related costs are incurred in accordance with
terms and conditions of the agreement entered into by the company with its customers and exclude the amount
collected towards indirect tax
(iii) Interest income
Interest income is recognised on a time proportion basis taking into account the amount outstanding using the
effective interest rate method.
(iv) Dividend income
Revenue is recognised when the company’s right to receive the payment is established.
1.10 Leases
The company has applied Ind AS 116 using the modified retrospective approach. Ind AS 116 is applicable for
annual reporting period beginning on or after 1 April 2019. The Company has adopted Indian Accounting Standards
(Ind AS) retrospectively as notified by the Ministry of Corporate Affairs.
(i) Company as a lessee:
The company recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-
use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any
lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate
of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it
is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date
to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated
useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In
addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain re¬
measurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, company’s incremental borrowing rate. Generally, the company uses its incremental borrowing rate
as the discount rate.
Lease payments included in the measurement of the lease liability comprise the following:
- Fixed payments, including in-substance fixed payments;
- Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the
commencement date;
- Amounts expected to be payable under a residual value guarantee; and
- The exercise price under a purchase option that the company is reasonably certain to exercise, lease payments
in an optional renewal period if the company is reasonably certain to exercise an extension option, and
penalties for early termination of a lease unless the company is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there
is a change in future lease payments arising from a change in an index or rate, if there is a change in the
company’s estimate of the amount expected to be payable under a residual value guarantee, or if company
changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount
of the right-of-use asset, or is recorded in statement of profit or loss if the carrying amount of the right-of-use
asset has been reduced to zero.
(ii) Short-term leases and leases of low-value assets - Company as a lessee:
The company has elected not to recognise right-of-use assets and lease liabilities for short term leases of real
estate properties that have a lease term of 12 months. The company recognises the lease payments associated
with these leases as an expense on a straight-line basis over the lease term.
(iii) Company as a lessor:
Lease income from operating leases where the Company is a lessor is recognised in income on a straight-line
basis over the lease term unless the receipts are structured to increase in line with expected general inflation to
compensate for the expected inflationary cost increases. The respective leased assets are included in the
balance sheet based on their nature.
Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer
from the company to the lessee. Amounts due from lessees under finance leases are recorded as receivables.
Finance lease income is allocated to accounting periods to reflect a constant periodic rate of return on the net
investment outstanding in respect of the lease.
1.11 Employee Benefits
(i) Short term employee benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short term
employee benefits and they are recognized in the period in which the employee renders the related service. The
Company recognizes the undiscounted amount of short term employee benefits expected to be paid in exchange
for services rendered as a liability (accrued expense) after deducting any amount already paid.
(ii) Post-Employment Benefits
The company operates the following post-employment schemes:
(i) defined benefit plans and
(ii) defined contribution plans
Defined benefit plans - Gratuity obligations
The liability or asset recognised in the balance sheet in respect of defined benefit pension and gratuity plans is
the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan
assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash
outflows by reference to market yields at the end of the reporting period on government bonds that have terms
approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit
obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement
of profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are
recognised in the period in which they occur, directly in other comprehensive income. They are included in
retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments
are recognised immediately in statement of profit and loss as past service cost.
Defined contribution plans - Provident fund
The company pays provident fund contributions to publicly administered provident funds as per local
regulations. The company has no further payment obligations once the contributions have been paid. The
contributions are accounted for as defined contribution plans and the contributions are recognised as employee
benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash
refund or a reduction in the future payments is available.
1.12 Borrowing Costs:
Borrowing costs attributable to the acquisition or construction of qualifying assets are capitalized as part of the
cost of such asset up to the date when the asset is ready for its intended use. All other borrowing costs are
expensed as incurred. Borrowing costs consist of interest and other cost that an entity incurs in connection with
the borrowing of funds. Borrowing cost includes exchange differences to the extent regarded as an adjustment to
the borrowing costs.
1.13 Earnings Per Share:
Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders
by the weighted average number of equity shares outstanding during the year. The weighted average number of
equity shares outstanding during the year is adjusted for events of bonus issue; bonus element in a rights issue,
share split; and reverse share split (consolidation of shares).
For the purpose of calculating diluted earnings per share, the net profit or loss 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.
1.14 Taxes on Income:
Income tax expense comprises current and deferred tax. It is recognised in the statement of profit and loss except to
the extent that it relates to a business combination, or items recognised directly in equity or in OCI.
(i) 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 in the countries where the company operates and generates taxable
income.
Current income tax relating to items recognised outside profit or loss is either in other comprehensive income or
in equity. Current tax items are recognised in correlation to the underlying transaction either in OCI (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.
(ii) Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
- When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither the accounting
profit nor taxable profit or loss
- Taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax
credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that
taxable profit will be available against which the deductible temporary differences, and the carry forward of
unused tax credits and unused tax losses can be utilised, except:
- When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition
of an asset or liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset
to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the
extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the
asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively
enacted at the reporting date.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation
authority.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax
items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
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