c) Capital work-in-progress and Intangible assets under development
Capital work-in-progress and Intangible assets under development representing expenditure incurred in respect of assets under
development and not ready for their intended use, are carried at cost less impairment, if any. Cost includes related acquisition
expenses, construction cost, related borrowing cost and other direct expenditure.
d) Depreciation and amortisation on property, plant and equipment and intangible assets
Depreciation is calculated on straight line method using the rates arrived at based on the estimated useful lives given in Schedule
II of the Companies Act, 2013 which are as follows:
2. Material accounting policies
The material accounting policies applied by the Company in the preparation of the financial statements are listed below.
Such accounting policies have been applied consistently to all the periods presented in these financial statements, unless
otherwise indicated.
a) Property, plant and equipment
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation and impairment, if
any. For this purpose, cost includes deemed cost which represents the carrying value of property, plant and equipment recognised
as per the Indian Accounting Standards (Ind AS). Property, plant and equipment acquired under the Scheme of arrangement has
been stated at carrying value in the Demerged Company on appointed date i.e. July 1,2024 as defined under Ind AS 103 "Business
Combination". Subsequent additions are made at cost. Cost includes all direct costs and expenditures incurred to bring the asset
to its working condition and location for its intended use. Trial run expenses (net of revenue) are capitalised. Borrowing costs
and incidental expenses incurred during the period of construction are capitalised upto the date when the assets are ready for
intended use.
An item of property, plant and equipment is recognised as an asset if it is probable that future economic benefits associated with
the item will flow to the Company and its cost can be measured reliably. This recognition principle is applied to costs incurred
initially to acquire an item of property, plant and equipment and also to costs incurred subsequently to add to, replace part of, or
service it. All other repair and maintenance costs, including regular servicing, are recognised in the statement of profit and loss as
incurred. When a replacement occurs, the carrying value of the replaced part is derecognised. Where an item of property, plant
and equipment comprises major components having different useful lives, these components are accounted for as separate items.
The gain or loss arising on disposal of an item of property, plant and equipment is determined as the difference between sale
proceeds and carrying value of such item, and is recognised in the statement of profit and loss.
Advances paid towards the acquisition of property, plant and equipment, outstanding at each balance sheet date are disclosed as
'capital advances' under 'other non-current assets'.
b) Intangible assets (other than goodwill)
Intangible assets (other than goodwill) are stated at cost of acquisition or construction less accumulated amortisation and
impairment, if any. For this purpose, cost includes deemed cost which represents the carrying value of intangible assets recognised
as per the Indian Accounting Standards (Ind AS). Intangible assets acquired under the Scheme of arrangement has been stated at
carrying value in the Demerged Company on appointed date i.e. July 1,2024 as defined under Ind AS 103 "Business Combination".
Intangible assets subsequently purchased are measured at cost as at the date of acquisition, as applicable, less accumulated
amortisation and accumulated impairment, if any.
Depreciation and amortisation on all assets commences from the dates the assets are available for their intended use and are
spread over their estimated useful economic lives or, in the case of leased assets, over the lease period or estimated useful life
whichever is less.
The Depreciation and amortisation methods, useful lives and residual values are reviewed at each reporting date and, when
necessary, are revised.
Assets value up to H5,000 are fully depreciated in the year of acquisition.
e) Borrowing and Borrowing Costs
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised
cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in Statement of
profit and loss over the period of the borrowings using the effective interest rate method. Borrowings are derecognised from the
balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying
amount of a borrowings 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 Statement of profit and loss as other gains/(losses). Borrowings
are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12
months after the reporting period.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial
period of time to get ready for its intended use are capitalised as part of the cost of the asset. All other borrowing costs are
expensed 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. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the
borrowing costs.
Ancillary costs incurred in connection with the arrangement of borrowings are adjusted with the proceeds of the borrowings.
f) Inventories
Inventories are valued as follows:
Raw materials, stock in trade, packing materials, fuel and stores and spares - Lower of cost and net realisable value. Cost is
determined on a weighted average basis. Materials and other items held for use in the production of inventories are not written
down below costs, if finished goods in which they will be incorporated are expected to be sold at or above cost.
Work-in-progress and finished goods - Lower of cost and net realisable value. Cost includes direct materials, labour and a
proportion of manufacturing overheads.
Waste - At net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and to
make the sale. However, materials and other items held for use in the production of finished goods or providing services are not
written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. The
comparison of cost and net realizable value is made on item-by-item basis.
Provision for obsolete/ old inventories is made, wherever required.
g) Revenue Recognition
Revenue is measured at amount of transaction price (net of variable consideration) received or receivable when control of the
goods is transferred to the customer and there are no unfulfilled performance obligations as per the contract with the customers.
The Company recognizes revenue when it satisfies a performance obligation in accordance with the provisions of contract with the
customer. This is achieved when;
Ý effective control of goods along with significant risks and rewards of ownership has been transferred to customer;
Ý the amount of revenue can be measured reliably;
Ý it is probable that the economic benefits associated with the transaction will flow to the Company; and
Ý the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Revenue represents net value of goods and services provided to customers after deducting for certain incentives including, but not
limited to discounts, rebates etc. The Company has generally concluded that it is the principle in its revenue arrangements.
The Company considers shipping and handling activities as costs to fulfill the promise to transfer the related products and the
customer payments for shipping and handling costs are recorded as a component of revenue. In certain customer contracts,
shipping and handling services are treated as a distinct separate performance obligation and the Company recognizes revenue for
such services when the performance obligation is completed.
Revenue are net of Goods and Service Tax. No element of significant financing is present as the sales are made with a credit term,
which is consistent with market practice.
Export entitlements are recognized in the statement of profit and loss when the right to receive credit as per the terms of the
scheme is established in respect of exports made and when there is no significant uncertainty regarding the ultimate collection of
the relevant export proceeds.
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company
and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts
through the expected life of the financial asset to that asset's net carrying amount on initial recognition.
Contract assets
Contract asset is right to consideration in exchange for goods or services transferred to the customer and performance obligation
satisfied. If the Company performs by transferring goods or services to a customer before the customer pays consideration or before
payment is due, a contract asset is recognised for the earned consideration that is conditional. Upon completion of the attached
condition and acceptance by the customer, the amounts recognised as contract assets is reclassified to trade receivables upon
invoicing. A receivable represents the Company's right to an amount of consideration that is unconditional. Contract assets are
subject to impairment assessment.
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration
from the customer. If customer pays consideration before the Company transfers goods or services to the customer, a contract
liability is recognised when the payment is made. Contract liabilities are recognised as revenue when the Company performs under
the contract (i.e., transfers control of the related goods or services to the customer).
Trade receivables
A trade receivable is recognised if an amount of consideration that is unconditional (i.e., only the passage of time is required before
payment of the consideration is due).
h) Foreign currencies
The Company's financial statements are presented in INR, which is also its functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at functional currency spot rates at the date the transaction
first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rate of exchange
at the reporting date.
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. Non-monetary items measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value is determined. Translation differences on assets and liabilities carried at fair value are
reported as part of the fair value gain or loss.
i) Income Taxes
Current tax
Current 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 in India, at the reporting date.
Current tax relating to items recognised outside statement of profit or loss is recognised outside statement of profit or loss (either
in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in
OCI 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.
Current tax assets are offset against current tax liabilities if, and only if, a legally enforceable right exists to set off the recognised
amounts and there is an intention either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
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 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. Deferred tax
liabilities are generally recognised for all the taxable temporary differences.
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 relating to items recognised outside statement of profit or loss is recognised outside statement of profit or loss (either
in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either
in OCI or directly in equity.
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.
Minimum Alternative Tax (MAT) is recognized as an asset only when and to the extent there is convincing evidence that the
Company will pay normal income tax during the specified period. In the year in which the MAT credit becomes eligible to be
recognized as an asset the said asset is created by way of credit to the statement of profit and loss and included in deferred tax
assets. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT entitlement to the
extent there is no longer convincing evidence to the effect that Company will pay normal income tax during the specified period.
j) Employee benefits
Short-term benefits
Short-term employee benefits are expensed in the year in which the related services are provided. A liability is recognised for the
amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past
service provided by the employee and the obligation can be estimated reliably.
Defined contribution plans
Retirement benefit in the form of provident fund and other pension scheme are defined contribution schemes. The Company has
no obligation, other than the contribution payable to the provident fund and other pension scheme. The Company recognizes
contribution payable to the provident fund scheme and other pension scheme as an expense, when an employee renders the
related service.
Defined benefits plan
The Company operates a defined benefit gratuity plan in India, which requires contributions to be made to a separately administered
fund. Gratuity is a defined benefit obligation.
The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method at each
reporting date. In respect of post-retirement benefit re-measurements comprising of actuarial gains and losses, the effect of the
asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets, 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 statement of profit or loss in subsequent periods.
Past service cost is recognised as an expense when the plan amendment or curtailment occurs or when any related restructuring
costs or termination benefits are recognised, whichever is earlier.
Other long-term benefits
Accumulated leave, which is expected to be utilized within the next twelve months, is treated as short-term employee benefit. The
Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused
entitlement that has accumulated at the balance sheet date. Actuarial gains/ losses on the compensated absences are immediately
taken to the statement of profit and loss and are not deferred. The obligation is measured on the basis of independent actuarial
valuation using project unit credit method at each reporting date.
The liability for long term compensated absences are provided based on actuarial valuation as at Balance Sheet date based on
Projected Unit Credit Method, carried out by an independent actuary.
k) Leases
Company as a lessee
The Company assesses if a contract is or contains a lease at inception of the 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 time in exchange for consideration.
The Company recognizes a right-of-use asset and a lease liability at the commencement date, except for short-term leases of twelve
months or less and leases for which the underlying asset is of low value, which are expensed in the statement of operations on a
straight-line basis over the lease term.
The right-of-use asset comprises, at inception, the initial lease liability, any initial direct costs and, when applicable, the obligations
to refurbish the asset, less any incentives granted by the lessors. The right-of-use asset is subsequently depreciated, on a straight¬
line basis, over the lease term, if the lessor transfers the ownership of the underlying asset to the Company at the end of the lease
term or, if the cost of the right-of-use asset reflects that the lessee will exercise a purchase option, over the estimated useful life
of the underlying asset, others are also subject to testing for impairment if there is an indicator for impairment. Variable lease
payments not included in the measurement of the lease liabilities are expensed to the statement of operations in the period in
which the events or conditions which trigger those payments occur. In the statement of financial position right-of-use assets and
lease liabilities are classified respectively as part of property, plant and equipment and short-term/long-term debt.
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 not readily determinable, the incremental borrowing rate specific to
the country, term and currency of the contract. Lease payments can include fixed payments, variable payments that depend on an
index or rate known at the commencement date, as well as any extension or purchase options, if the Company is reasonably certain
to exercise these options. The lease liability is subsequently measured at amortized cost using the effective interest method and
remeasured with a corresponding adjustment to the related right-of-use asset when there is a change in future lease payments in
case of renegotiation, changes of an index or rate or in case of reassessments of options.
The Company applies the low-value asset recognition exemption on a lease-by-lease basis, if the lease qualifies as leases of low-
value assets. In making this assessment, the Company also factors below key aspects:
a. the assessment is conducted on an absolute basis and is independent of the size, nature, or circumstances lease.
b. the assessment is based on the value of the asset when new, regardless of the asset's age at the time of the lease.
c. the lessee can benefit from the use of the underlying asset either independently or in combination with other readily available
resources, and the asset is not highly dependent on or interrelated with other assets.
d. if asset is subleased or expected to be subleased, the head lease does not qualify as a lease of a low-value asset.
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