2. Material Accounting Policies:
(A) Basis of Preparation of Financial Statements
(i) Compliance with Ind AS: The standalone financial
statements have been prepared to comply, in
all material aspects, with the Indian Accounting
Standards (Ind AS) notified under Section 133 of the
Companies Act, 2013, read with Companies (Indian
Accounting Standards) Rules, 2015 and the relevant
provisions of the Companies Act, 2013.
Accounting policies have been consistently applied
except where a newly-issued accounting standard is
initially adopted or a revision to an existing accounting
standard requires a change in the accounting policy
hitherto in use.
(ii) Classification of assets and liabilities : All assets and
liabilities have been classified as current or non¬
current based on the Company's normal operating
cycle and other criteria set out in the Schedule III
to the Companies Act, 2013. Deferred tax assets
and liabilities are classified as non-current on net
basis. For the above purposes, the Company has
determined the operating cycle as twelve months
based on the nature of products and the time between
the acquisition of inputs for manufacturing and their
realisation in cash and cash equivalents.
(iii) Historical cost convention : The financial statements
have been prepare on going concern basis under the
historical cost convention except:
(a) certain financial assets and liabilities (including
derivative instruments) and
(b) defined benefit plans
(c) assets held for sale - measured at lower of its
carrying amount and fair value less costs to sell
Which are measured at fair value at the end
of each reporting period, as explained in the
accounting policies below.
(iv) Functional and presentation currency : The
Company's functional and presentation currency
is Indian Rupee (H). All amounts disclosed in
the financial statements and notes have been
rounded off to the nearest Crore (H Crore), except
otherwise indicated.
(v) Fair value measurement : The Company
measures certain financial assets and financial
liabilities including derivatives and defined
benefit plans at fair value.
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 take place either
(a) in the principal market for the asset
or liability or
(b) in the absence or a principal market, in
the most advantageous market for the
asset or liability.
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.
All assets and liabilities for which fair value
is measured or disclosed in the financial
statements are categorized 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.
(B) Property, Plant and Equipment
(i) Freehold land is carried at historical cost and alt other
property, plant and equipment are shown at cost (net
of adjustable taxes) less accumulated depreciation
and accumulated impairment losses. The cost of an
asset comprises of its purchase price, non refundable
/ adjustable purchase taxes and any cost directly
attributable to bringing the asset into the location and
condition necessary for it to be capable of operating in
the manner intended by the management, the initial
estimate of any decommissioning obligation, if any and
for assets that necessarily take a substantial period of
time to get ready for their intended use, finance costs.
The purchase price is the aggregate amount paid and
the fair value of any other consideration given to acquire
the asset. The cost also includes trial run cost and other
operating expenses such as freight, installation charges
etc. The projects under construction are carried at costs
comprising of costs directly attributable to bringing
the asset to the location and condition necessary for it
to be capable of operating in the manner intended by
management and attributable borrowing costs.
(ii) Stores and spares which meet the definition of
property, plant and equipment and satisfy the
recognition criteria of Ind AS 16 are capitalized as
property, plant and equipment.
(iii) 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.
(iv) 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 derecognition of the asset (calculated as
the difference between the net disposal proceeds and
the carrying amount of the asset or significant part) is
included in the Statement of Profit and Loss when the
asset is derecognized.
(v) In line with the provisions of Schedule II to the
Companies Act, 2013, the Company depreciates
significant components of the main asset (which
have different useful lives as compared to the main
asset) based on the individual useful life of those
components. Useful life for such components of
property, plant and equipment has been assessed
based on the historical experience and internal
technical inputs.
(vi) Depreciation on property, plant and equipment is
provided as per straight line method based on useful
life prescribed under Schedule II to the Companies
Act, 2013. The Company has assessed the estimated
useful lives of its property, plant and equipment and
has adopted the useful lives and residual value as
prescribed in Schedule II.
The property, plant and equipment acquired under
finance lease are depreciated over the period of
lease. Depreciation on stores and spares specific to
an item or property, plant and equipment is based on
life of the related property, plant and equipment. In
other cases, the stores and spares are depreciated
over their estimated useful life based on the
technical assessment.
(vii) The residual values and useful lives of property, plant
and equipment are reviewed at each financial year
end, and changes, if any, are accounted prospectively.
(viii) Capital work-in-progress includes cost of property,
plant and equipment under installation / under
development as at the balance sheet date. These are
stated at cost to date relating to items or project in
progress, incurred during construction / preoperative
period. Advances given towards acquisition or
construction of PPE outstanding at each reporting
date are disclosed as Capital Advances under “Other
non-current Assets".
(C) Investment Property
Investment properties are properties held to earn rentals
and / or for capital appreciation (including property under
construction for such purpose). Investment properties are
measured initially at cost, including transaction costs.
Subsequent to initial recognition, investment properties
are measured in accordance with the requirements of Ind
AS 16 for cost model.
An investment property is derecognized upon disposal or
when the investment property is permanently withdrawn
from use and no future economic benefits are expected from
the disposal. Any gain or loss arising on derecongnition of
the property is included in the Statement of Profit and Loss
in the period in which the property is derecognized.
Depreciation on investment property is provided as per
straight line method based on estimated useful life which
is considered at 60 years based on internal assessment.
(D) Intangible Assets
Intangible assets acquired are measured on initial
recognition at cost. After initial recognition, intangible
assets are carried at cost less any accumulated amortisation
and accumulated impairment losses. Intangible assets
with finite lives are amortised on a straight- line basis
over their estimated useful economic lives and assessed
for impairment whenever there is an indication that the
intangible asset may be impaired.
Gains or losses arising from derecognition of an intangible
asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset
and are recognized in the Profit and Loss Statement when
the asset is derecognized.
(E) Borrowing Costs
Borrowing costs are charged to Statement of Profit and Loss
except to the extent attributable to acquisition / construction
of and asset that necessarily takes a substantial period of
time to get ready for its intended use or sale.
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.
(F) Impairment of Non-financial Assets
At each balance sheet date, an assessment is made of
whether there is any indication of impairment.
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.
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.
(G) Non-current Assets held for sale
Non-current assets classified as held for sale are
measured at the lower of carrying amount and fair value
less costs to sell.
Non-current assets are classified as held for sale if
their carrying amounts will be recovered through a sale
transaction rather than through continuing use. This
condition is regarded as met only when the sale is highly
probable and the assets is available for immediate sale in
its present condition subject only to terms that are usual
and customary for sale of such assets
Property, plant and equipment and intangible assets are not
depreciated or amortized once classified as held for sale.
(H) Inventories
Inventories are valued as follows:
Net realizable value is the estimated selling price
in the ordinary course of business, less estimated
costs of completion and estimated costs necessary to
make the sale.
(I) Revenue from contracts with customer:
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 discounts 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.
(i) Sale of Goods:
Revenue from sate of products is recognized when
the control on the goods have been transferred to the
customer. The performance obligation in case of sate
of product is satisfied at a point in time i.e., when the
materiat is shipped to the customer or on detivery to
the customer, as may be specified in the contract.
(ii) Interest income:
Under Ind AS 109, Interest income is recognized by
applying the Effective Interest Rate (EIR) to the gross
carrying amount of financial assets other than credit-
impaired assets and financial assets classified as
measured at fair value through Profit and toss (FVTPL).
The EIR in case of a financiat asset is computed
a. As the rate that exactly discounts estimated
future cash receipts through the expected life of
the financiat asset to the gross carrying amount
of a financiat asset.
b. By considering att the contractual terms
of the financiat instruments in estimating
the cash ftows.
c. Inctuding att fees received between parties
to the contract that are an integrat part of the
effective interest rate, transaction costs and att
other premium or discounts.
Any subsequent changes in the estimation of the
future cash ftows is recognized in interest income
with the corresponding adjustment to the carrying
amount of the assets.
(iii) Net Gain on fair value changes :
Any differences between the fair vatues of financiat
assets ctassified as fair vatue through the profit or
toss hetd by Company on the batance sheet date is
recognized as an unreatized gain / toss. In cases there
is a net gain in the aggregate, the same is recognized
in “Net gains on fair vatue changes" under “Other
Income" and if there is a net toss the same is disctosed
under “Expenses" in the statement of Profit and Loss.
Simitarty, any reatized gain or toss on sate of financiat
instruments measured at FVTPL and debt instruments
measured at Fair vatue through Other Comprehensive
Income (“FVTOCI") is recognized in net gain / toss on
fair vatue changes.
However, net gain / toss on derecognition of financiat
instruments ctassified as amortized is presented
separatety under the respective head in the Statement
of Profit and Loss.
(iv) Dividend income:
Dividend income is recognized :
a. When the right to receive the payment
is estabtished.
b. It is probabte that the economic benefits
associated with the dividend witt ftow
to the entity and
c. The amount of the dividend can be
measured retiabty.
(v) Rental Income:
Revenue is recognized on the basis of income arising
from operating tease of investment properties is
accounted for on a straight-tine basis over the tease
untess the payments are structured to increase in tine
with the expected generat inftation to compensate
for the tessor's expected inftationary cost increases
and is inctuded in the head “other income" in the
Statement of Profit and Loss.
(vi) Others:
Revenue is recognized in respect of export incentives,
insurance / other ctaims etc., when it is reasonabty
certain that the uttimate cottection witt be made.
(J) Expenditure on Research and Development
Revenue expenditure on Research and Devetopment
is charged to Statement of Profit and Loss under the
appropriate heads of expenses. Expenditure retating
to property, ptant and equipment are capitatized under
respective heads.
(K) Foreign Currency Transactions
(i) Initial Recognition
Foreign currency transactions are recorded in the
reporting currency, by apptying to the foreign currency
amount the exchange rate between the reporting
currency and the foreign currency at the date of
the transaction.
(ii) Conversion
Foreign currency monetary items are retranslated
using the exchange rate prevailing at the reporting
date. Non-monetary 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 transaction. Non-monetary items, which
are measured at fair value or other similar valuation
denominated in a foreign currency, are translated
using the exchange rate at the date when such value
was determined.
(iii) Exchange Differences
Exchange differences arising on the settlement of
monetary items or on reporting such monetary items
of Company at rates different from those at which they
were initially recorded during the year, or reported in
financial statements, are recognized as income or as
expenses in the year in which they arise.
(iv) Forward Contracts
The premium or discount arising at the inception of
forward exchange contracts is booked as expense or
income immediately. Exchange differences on such
contracts are recognized in the Statement of Profit
and Loss in the year in which the exchange rates
changes. Any profit or loss arising on cancellation or
renewal of forward exchange contract is recognized
as income or as expense for the year.
(L) Employee Benefits
ALL employee benefits payable wholly within 12 months of
rendering services are classified as short term employee
benefits. Benefits such as salaries, wages, short-term
compensated absences, performance incentives etc., and
the expected cost of bonus, ex-gratia are recognized during
the period in which the employee renders related service.
Post Retirement Benefits
The Company operates the following post¬
empLoyment schemes:
(a) defined benefit pLan - gratuity
(b) defined contribution pLan - provident fund
Defined benefit plan - Gratuity obligation
Post-employment benefits (benefits which are payable on
completion of employment) are measured on a discounted
basis by the Projected Unit Credit Method on the basis of
actuarial valuation annually.
The LiabiLity or asset recognized in the BaLance Sheet in
respect of defined benefit gratuity plan is the present value
of the defined benefit obligation at the end of the reporting
period less fair value of plan assets.
Re-measurement gains and losses arising from experience
adjustments and changes in actuarial assumptions are
recognized 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.
Defined contribution plan
Retirement benefits in the form of Provident Fund is a
defined contribution scheme and the contributions are
charged to the Profit and Loss Account of the year when
the contributions to the respective fund are due. There are
no other obLigations other than the contribution payabLe to
the respective fund.
(M) Leases
Ind AS 116 requires lessees to determine the lease term
as the non-canceLLabLe period of a Lease adjusted with
any option to extend or terminate the Lease, if the use of
such option is reasonabLy certain. The Company makes
an assessment on the expected Lease term on a Lease-by¬
Lease basis and thereby assesses whether it is reasonabLy
certain that any options to extend or terminate the
contract wiLL be exercised. In evaLuating the Lease term,
the Company considers factors such as any significant
LeasehoLd improvements undertaken over the Lease term,
costs reLating to the termination of the Lease and the
importance of the underlying asset to Panama's operations
taking into account the location of the underlying asset
and the avaiLabiLity of suitabLe aLternatives. The Lease term
in future periods is reassessed to ensure that the Lease
term reflects the current economic circumstances. After
considering current and future economic conditions, the
company has concLuded that no changes are required to
Lease period reLating to the existing Lease contracts. Refer
note no. 5.1 and 11.1
(a) As Company is the lessee
The Company's lease asset classes primarily consist of
leases for land and buildings. The Company assesses
whether a contract contains a lease, at inception of
a 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 the use of an identified asset, the
Company assesses whether: (i) the contract invoLves
the use of an identified asset (ii) the Company has
substantiaLLy aLL of the economic benefits from use of
the asset through the period of the Lease and (iii) the
Company has the right to direct the use of the asset
At the date of commencement of the lease, the
Company recognizes a right-of-use asset ("ROU")
and a corresponding Lease LiabiLity for aLL Lease
arrangements in which it is a lessee, except for
leases with a term of twelve months or less (short¬
term leases) and low value leases. For these short¬
term and low value leases, the Company recognizes
the lease payments as an operating expense on a
straight-line basis over the term of the lease
Certain lease arrangements includes the options to
extend or terminate the lease before the end of the
lease term. ROU assets and lease liabilities includes
these options when it is reasonably certain that they
will be exercised.
The right-of-use assets are initially recognized at
cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or
prior to the commencement date of the lease plus
any initial direct costs less any lease incentives. They
are subsequently measured at cost less accumulated
depreciation and impairment losses.
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. Right of use assets are evaluated
for recoverability whenever events or changes in
circumstances indicate that their carrying amounts
may not be recoverable. For the purpose of impairment
testing, the recoverable amount (i.e. the higher of the
fair value less cost to sell and the value-in-use) is
determined on an individual asset basis unless the
asset does not generate cash flows that are largely
independent of those from other assets. In such cases,
the recoverable amount is determined for the Cash
Generating Unit (CGU) to which the asset belongs.
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 implicit in the lease or, if not readily determinable,
using the incremental borrowing rates in the country
of domicile of these leases. Lease liabilities are
remeasured with a corresponding adjustment to the
related right of use asset if the Company changes its
assessment if whether it will exercise an extension or
a termination option.
Lease liability and ROU asset have been separately
presented in the Balance Sheet and lease payments
have been classified as financing cash flows.
(b) Company is the lessor
Leases for which the Company is a lessor is classified
as a finance or operating lease. Whenever the terms
of the lease transfer substantially all the risks and
rewards of ownership to the lessee, the contract
is classified as a finance lease. All other leases are
classified as operating leases.
When the Company is an intermediate lessor, it
accounts for its interests in the head lease and the
sublease separately. The sublease is classified as a
finance or operating lease by reference to the right-
of-use asset arising from the head lease.
For operating leases, rental income is recognized on a
straight line basis over the term of the relevant lease.
For leases classified as finance leases, the underlying
asset is derecognised and a lease receivable is
recognised at an amount equal to the net investment
in the lease, which comprises:
(a) The gross investment in the lease, being the
aggregate of the lease payments receivable by
the lessor under the lease and any unguaranteed
residual value accruing to the lessor, discounted
at the interest rate implicit in the lease, and
(b) Any initial direct costs incurred by the lessor.
Subsequent to initial recognition, finance income is
recognised over the lease term based on a pattern
reflecting a constant periodic rate of return on the net
investment in the lease.
The lease payments received are allocated between
a reduction in the lease receivable and the finance
income. The net investment in finance leases is
presented as a financial asset.
(N) Taxation
Income tax expense comprises of current tax expense
and the net change in the deferred tax asset or liability
during the year.
(a) Current income tax is measured at the amount
expected to be paid to the tax authorities in accordance
with the Income-tax Act, 1961 enacted in India.
(b) Deferred Tax: Deferred income tax is recognized
using the balance sheet approach. Deferred income
tax assets and liabilities are recognized for deductible
and taxable temporary differences arising between
the tax base of assets and liabilities and their
carrying amount.
Deferred tax liabilities are recognized for all taxable
temporary differences. Deferred tax assets are
recognized for all deductible temporary differences,
the carry forward of unused tax credits and any
unused tax losses. Deferred tax assets are recognized
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 utilized.
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 utilized. Unrecognized deferred tax
assets are re-assessed at each reporting date and are
recognized 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 realized 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 off set 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.
(O) Segment Reporting
The Company prepares its segment information in
conformity with the accounting policies adopted for
preparing and presenting the financial statements of the
Company as a whole.
The Chief Operational Decision Maker monitors the
operating results of its business Segments separately for
the purpose of making decisions about resource allocation
and performance assessment. Segment performance
is evaluated based on profit or loss and is measured
consistently with profit or loss in the financial statements.
The operating segments have been identified on the basis
of geography and the nature of product/services.
The board of directors of the Company has appointed
the Managing Director as the chief operating decision
maker (CODM) who is assessesing the financial
performance and position of the Company, and makes
strategic decisions.
(P) Earning per share
Basic earnings per share are calculated by dividing the
net profit or loss for the period attributable to equity
shareholders (after deducting attributable taxes) 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, if
any, such as bonus issue, bonus elements in a rights issue
to existing shareholders, shares 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.
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