1.1 SUMMARY OF MATERIAL ACCOUNTING POLICIES

a) Statement of compliance

The financial statements of Patel Engineering
Limited (“the Company or PEL”) have been prepared
to comply, in all material respects, with the Indian
Accounting Standards (“Ind AS”) as specified
under section 133 of the Companies Act 2013
read together with the Rule 4 of the Companies
(Indian Accounting Standards) Rules, 2015
and amendment thereof issued by the Ministry
of Corporate Affairs in exercise of the power
conferred by section 133 of the Companies Act,
2013 and the other relevant provisions of the Act,
pronouncements of the regulatory bodies applicable
to the company.

These financial statement have been approved for
issue by the Board of Directors, at their meeting
held on May 14, 2026.

b) Basis of preparation

The financial statements are prepared under the
historical cost convention, on a going concern
basis and accrual method of accounting, except for
certain financial assets and liabilities as specified
in defined benefit plans which have been measured
at actuarial valuation as required by relevant Ind AS.
The accounting policies applied are consistent with
those used in the previous year, except otherwise
stated.

The standalone financial statements are presented
in Indian Rupees and all values are rounded off
to the nearest millions (Rupees 000,000), except
where otherwise indicated. Any discrepancies in
any table between totals and sums of the amounts
listed are due to rounding off.

The Company adopted Disclosure of Accounting
Policies (Amendments to Ind AS 1) from April 1,
2023. Although the amendments did not result in
any changes in the accounting policies themselves,
they impacted the accounting policy information
disclosed in the financial statements.

The amendments require the disclosure of
‘material' rather than ‘significant' accounting
policies. The amendments also provide guidance
on the application of materiality to disclosure of

accounting policies, assisting entities to provide
useful, entity-specific accounting policy information
that users need to understand other information in
the financial statements.

c) Current/non-current classification

The Company as required by Ind AS 1 presents
assets and liabilities in the balance sheet based on
current / non-current classification.

Deferred tax assets and liabilities are classified as
non-current assets and liabilities.

The Company has ascertained its operating cycle
as twelve months for the purpose of current / non¬
current classification of its assets and liabilities, as
it is not possible to identify the normal operating
cycle.

d) Critical accounting estimates and judgements:

The preparation of financial statements in
conformity with Generally Accepted Accounting
Principles, requires management to make estimates
and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent
liabilities at the date of the financial statements
and the results of operations during the reporting
period. Although these estimates are based upon
management's best knowledge of current events
and actions, actual results could differ from these
estimates. Revisions to accounting estimates are
recognised prospectively.

The areas involving critical estimates or judgements
are:

- Estimation of defined benefit obligation

- Estimation of useful life of property, plant and
equipment and intangibles

- Estimation of total contract revenue and costs
for revenue recognition

- Estimation of recognition of deferred taxes

- Estimation of impairment and expected credit
loss of financial assets and contract asseets

- Estimation of provision and contingent
liabilities

- Estimation on discounting of lease liability on
application of Ind AS 116

e) Property, plant and equipment

Property, plant and equipment (PPE), except
land, are stated at net of recoverable taxes,
trade discount and rebates less accumulated
depreciation and accumulated impairment losses, if
any. Land is stated at revalued amount determined
by an independent registered valuer from time to
time.

Such cost comprises of purchase price and any
attributable cost of bringing the assets to its
working condition for its intended use. Property,
plant and equipment costing ' 5,000 or less are not
capitalised and charged to the statement of profit
and loss.

Machinery spares that meet the definition of PPE
are capitalised.

Capital work-in-progress in respect of assets which
are not ready for their intended use are carried at
cost, comprising of direct costs, related incidental
expenses and attributable interest.

Subsequent expenditure is capitalised only if it
is probable that the future economic benefits
associated with the expenditure will flow to the
Company and the cost can be measured reliably.

The carrying amount of an item of PPE are
derecognised on disposal or when no future
economic benefits are expected from its use or
disposal. Any gain or loss arising on de-recognition
of the asset (calculated as the difference between
the net disposal proceeds and the carrying amount
of the asset) is included in the profit or loss.

f) Intangible assets

Intangible assets are stated at cost of acquisition
net of recoverable taxes less accumulated
depreciation / amortisation and impairment loss, if
any.

Such cost comprises of purchase price and any
attributable cost of bringing the assets to its
working condition for its intended use. Subsequent
expenditure is capitalised only if it is probable that
the future economic benefits associated with the
expenditure will flow to the Company and the cost
can be measured reliably.

g) Depreciation

Depreciation on the property, plant and equipment
(other than freehold land) is provided based on
useful life of the assets as prescribed in Schedule
II to the Act. Depreciation on property, plant and
equipment, which are added/disposed-off during
the year, is provided on pro-rata basis with reference
to the month of addition/deletion, in the profit or
loss.

The residual values, useful lives and methods of
depreciation of property, plant and equipment
are reviewed at each financial year end and, if
expectations differ from previous estimates, the
change(s) are accounted for as a change in an
accounting estimate in accordance with Ind AS
8, Accounting Policies, Changes in Accounting
Estimates and Errors.

h) Impairment of non-financial assets

The carrying amount of assets/cash generating
units are reviewed at each balance sheet date if
there is any indication of impairment based on
internal/external factors. An impairment loss is
recognised in the statement of profit and loss
whenever the carrying amount of an asset or cash
generating unit exceeds its recoverable amount.
The recoverable amount of the assets (or where
applicable, that of cash generating unit to which

the asset belongs) is estimated as the higher of its
net selling price and its value in use. A previously
recognised impairment loss is increased or reversed
depending on changes in circumstances. However,
the carrying value after reversal is not increased
beyond the carrying value that would have prevailed
by charging usual depreciation if there was no
impairment.

i) Investments in subsidiaries, joint ventures and
associates

Investments in subsidiaries, joint ventures and
associates are recognised at cost less accumulated
impairment (if any) as per Ind AS 27, except where
investments accounted for in accordance with
Ind AS 105, non-current assets held for sale and
discontinued operations, when they are classified
as held for sale.

j) Inventories

The stock of land, construction materials,
stores, spare parts, embedded goods and fuel
is valued at cost (on weighted average basis),
or net realisable value, whichever is lower. Cost
includes expenditures incurred in acquiring the
inventories, conversion costs and other costs
incurred in bringing them to their existing location
and condition. Net realisable value is the estimated
selling price in the ordinary course of business
less the estimated costs of completion and the
estimated cost necessary to make the sale.

Work in progress in respect of project development
and buildings held as stock-in-trade are valued at
cost or net realizable value, whichever is lower.

k) Recognition of income and expenditure

Revenue toward satisfaction of a performance
obligation is measured at the amount of transaction
price (net of variable consideration) allocated to
that performance obligation. The Company satisfies
a performance obligation and recognises revenue
over time, if one of the following criteria's are met:

1. The customer simultaneously receives and
consumes the benefits provided by the
Company's performance as the Company
performs; or

2. The Company's performance creates or
enhances an asset that the customer controls
as the asset is created or enhanced; or

3. The Company's performance does not create
an asset with an alternative use to the
Company and the entity has an enforceable
right to payment for performance completed to
date.

i) Construction revenue

The Company constructs various
infrastructure projects on behalf of
clients. Under the terms of the contracts,
where the Company is contractually
restricted from redirecting the properties
to another customer and has an
enforceable right to payment for work
done; revenue is recognised over a period
of time. The percentage-of-completion
of a contract is determined by the
proportion that contract costs incurred
for work performed up to the reporting
date bear to the estimated total contract
costs. This is achieved by estimating total
revenue including claims / variations
and total cost till completion of the
contract and the profit is recognised in
proportion to the value of work done
when the outcome of the contract can
be estimated reliably. Revenue also
includes claims / variations when it is
highly probable of recovery based on
estimate and assessment of each item
by the management based on their
judgement of recovery. The management
considers that this input method is an
appropriate measure of the progress
towards complete satisfaction of these
performance obligations under
Ind AS 115.

The Company becomes entitled to
invoice customers for construction based
on achieving a series of performance
related milestones. When a particular
milestone is achieved, the customer is
sent a statement of work completed
assessed by expert. Revenue recognised
in excess of billings which are presented
as Contract Assets and is measured
at contract rate. Previously recognised
contract asset for any work performed
is reclassified to trade receivables at

Revenue from building development is
measured based on the consideration
to which the Company expects to be
entitled in a contract with a customer and
excludes amounts collected on behalf of
third parties. The Company recognises
revenue when it transfers control of a
product or service to a customer.

l) Interest in joint arrangements

As per Ind AS 111 - Joint arrangements, investment
in joint arrangement is classified as either joint
operation or joint venture. The classification
depends on the contractual rights and obligations
of each investor rather than legal structure of the
joint arrangement.

The Company recognises its direct right to assets,
liabilities, revenue and expenses of joint operations
and its share of any jointly held or incurred assets,
liabilities, revenues and expenses. These have been
incorporated in the Standalone Financial Statement
under the appropriate headings.

m) Foreign currency transaction/translations

Transactions in foreign currency including
acquisition of property, plant and equipment
are recorded at the prevailing exchange rates on
the date of the transaction. All monetary assets
and monetary liabilities in foreign currencies
are translated at the relevant rates of exchange
prevailing at the year-end. Foreign exchange gains
and losses resulting from the settlement of such
transactions and from the translation of monetary
items denominated in foreign currency at prevailing
reporting date exchange rates are recognised in
profit or loss.

Revenue transactions at the foreign branch/
projects are translated at average rate. Property,
plant and equipment are translated at rate
prevailing on the date of purchase. Net exchange
rate difference is recognized in the statement of
profit and loss. Depreciation is translated at rates
used for respective assets.

n) Financial instrument:

A financial instrument is any contract that gives
rise to a financial asset of one entity and financial
liability or equity instrument of another entity.

(I) Financial asset:

Initial recognition and measurement :

All financial assets are recognized initially at fair
value plus, in the case of financial assets not
recorded at fair value through P&L, transaction
costs that are attributable to the acquisition of the
financial asset. However, trade receivables that do
not contain a significant financing component are
measured at transaction price. Purchase or sales
of financial assets that require delivery of assets
within a time frame established by regulation or
convention in the market place are recognized
on the trade date i.e. the date that the Company
commits to purchase or sell the asset.

Subsequent measurement :

For the purpose of subsequent measurement
financial assets are classified as measured at:

• Amortised cost

• Fair value through profit and loss (FVTPL)

• Fair value through other comprehensive
income (FVTOCI).

(a) Financial asset measured at amortized
cost :

Financial assets held within a business
model whose objective is to hold financial
assets in order to collect contractual
cash flows and the contractual terms
of the financial asset give rise on
specified dates to cash flows that are
solely payments of principal and interest
on the principal amount outstanding
are measured at amortized cost using
effective interest rate (EIR) method. The
EIR amortization is recognized as finance
income in the statement of profit and
loss. The company while applying above
criteria has classified the following at
amortized cost:

(a) Trade receivables

(b) Investment in subsidiaries,
associates and joint ventures

(c) Loans

(d) Other financial assets

(b) Financial assets measured at fair value
through other comprehensive income :

Financial assets that are held within
a business model whose objective
is achieved by both, selling financial
assets and collecting contractual
cash flows that are solely payments of
principal and interest, are subsequently
measured at fair value through other
comprehensive income. Fair value
movements are recognized in the other
comprehensive income (OCI). Interest
income measured using the EIR method
and impairment losses, if any are
recognized in the Statement of Profit
and Loss. On derecognition, cumulative
gain or loss previously recognised in OCI
is reclassified from the equity to ‘other
income' in the statement of profit and
loss.

(c) Financial assets at fair value through
profit or loss (FVTPL) :

Financial asset are measured at fair
value through profit and loss if it does
not meet the criteria for classification as
measured at amortized cost or at FVTOCI.
All fair value changes are recognized in
the statement of profit and loss.

Equity instruments

All investments in equity instruments
classified under financial assets are
initially measured at fair value, the group
may, on initial recognition, irrevocably
elect to measure the same either at
FVTOCI or FVTPL.

De-recognition of financial assets:

Financial assets are derecognized when
the contractual rights to the cash flows
from the financial asset expire or the
financial asset is transferred and the
transfer qualifies for derecognition. On
derecognition of a financial asset in
its entirety, the difference between the
carrying amount (measured on the date
of recognition) and the consideration
received (including any new asset

obtained less any new liability assumed)
shall be recognized in the statement of
profit and loss.

Impairment of financial assets:

In accordance with Ind AS 109, the
company applies expected credit
loss (ECL) model by adopting the
simplified approach using a provision
matrix reflecting current condition and
forecasts of future economic conditions
for measurement and recognition of
impairment loss on the following financial
assets and credit risk exposure:

(a) Financial assets that are debt
instruments, and are measured
at amortized cost e.g. loans,
debt securities, deposits, trade
receivables and bank balance

(b) Lease receivables

(c) Trade receivables or any contractual
right to receive cash or another
financial asset

(d) Loan commitments which are not
measured at FVTPL

(e) Financial guarantee contracts which
are not measured at FVTPL

(II) Financial liability

Initial recognition and measurement :

Financial liabilities are recognized initially at fair
value plus any transaction cost that are attributable
to the acquisition of the financial liability except
financial liabilities at FVTPL that are measured at
fair value.

Subsequent measurement :

Financial liabilities are subsequently measured at
amortised cost using the EIR method. Financial
liabilities carried at fair value through profit or loss
are measured at fair value with all changes in fair
value recognised in the statement of profit and loss.

Financial liabilities at amortized cost:

Amortized cost for financial liabilities represents
amount at which financial liability is measured at
initial recognition minus the principal repayments,

plus or minus the cumulative amortization using the
effective interest method of any difference between
the initial amount and the maturity amount.

The Company is classifying the following under
amortized cost

- Borrowings from banks

- Borrowings from others

- Trade payables

- Other financial liabilities
Derecognition:

A financial liability shall be derecognized when, and
only when, it is extinguished i.e. when the obligation
specified in the contract is discharged or cancelled
or expires. The difference between the carrying
amount and fair value of the liabilities shall be
recognised in the statement of profit and loss.

o) Financial derivative and hedging transactions

In respect of financial derivative and hedging
contracts, gain / loss are recognized on mark-to-
market basis and charged to the statement of profit
and loss along with underlying transactions.

p) Fair value measurement

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, regardless of whether
that price is directly observable or estimated using
another valuation technique. In estimating the fair
value of an asset or a liability, the Company takes
into account the characteristics of the asset or
liability if market participants would take those
characteristics into account when pricing the asset
or liability at the measurement date. Fair value for
measurement and/or disclosure purposes in these
Standalone Financial Statement is determined on
such a basis, except for leasing transactions that
are within the scope of Ind AS 17 - leases, and
measurements that have some similarities to fair
value but are not fair value, such as net realisable
value in Ind AS 2 - inventories or value in use in
Ind AS 36 - impairment of assets.

The Company uses valuation techniques that are
appropriate in the circumstances and for which
sufficient data are available to measure fair value,
maximising the use of relevant observable inputs:

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 recognised in
the Standalone Financial Statement on a recurring
basis, the Company determines whether transfers
have occurred between levels in the hierarchy by
re-assessing categorisation (based on the lowest
level input that is significant to the fair value
measurement as a whole) at the end of each
reporting period.

For the purpose of fair value disclosures, the
Company has determined classes of assets and
liabilities on the basis of the nature, characteristics
and risks of the asset or liability and the level of the
fair value hierarchy as explained above.

q) Employee benefits

Short term employee benefits :

Short-term employee benefits are expensed as the
related service is 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

Contribution towards provident fund/family
pensions are made to the recognized funds, where
the Company has no further obligations. Such
benefits are classified as defined contribution
schemes as the Company does not carry any further
obligations, apart from the contributions made on a
monthly basis.

Defined benefit plans :

Provision for incremental liability in respect of
gratuity and leave encashment is made as per
independent actuarial valuation on projected unit
credit method made at the year-end.

Remeasurement of the net defined benefit liability,
which comprise actuarial gains and losses and the
return on plan assets (excluding interest) and the
effect of the asset ceiling (if any, excluding interest),
are recognized immediately in other comprehensive
income (OCI). Net interest expense (income) on
the net defined liability (assets) is computed by
applying the discount rate, used to measure the net
defined liability (asset). Net interest expense and
other expenses related to defined benefit plans are
recognised in statement of profit and loss.

r) Taxation

The tax expenses for the period comprises of
current tax and deferred income tax. Tax is
recognised in Statement of Profit and Loss, except
to the extent that it relates to items recognised in
the Other Comprehensive Income. In which case,
the tax is also recognised in Other Comprehensive
Income.

Current tax:

Provision for current tax is recognised based on the
estimated tax liability computed after taking credit
for allowances and exemptions in accordance with
the Income Tax Act, 1961.

Deferred tax:

Deferred tax assets and liabilities are recognised
for the future tax consequences attributable to
temporary differences between the Standalone
Financial Statement' carrying amount of existing
assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured at
the tax rates that are expected to apply in the period
in which the liability is settled or the asset realised;
using the enacted tax rates or tax rates that are
substantively enacted at the balance sheet dates.
The effect on the deferred tax assets and liabilities
of a change in tax rate is recognised in the period
that includes the enactment date. Deferred tax
assets are recognised to the extent it is probable
that taxable profit will be available against which
the deductible temporary differences, and the
carry forward of unused tax losses can be utilised.
The carrying amount of Deferred tax liabilities and
assets are reviewed at the end of each reporting
period.