2. Significant Accounting Policies
2.1 Basis of Preparation
The Financial Statements of the Company have been prepared in accordance with the Accounting Principles generally accepted in India, on accrual and Going Concern Basis using the Accounting Policies that are applied consistently. The Assets and Liabilities have been classified as Current or Non-Current based on the normal operating cycle of the Company, which has been determined as 12 months based on the nature of products and services, and the time gap between acquisition of Assets for processing and their realisation in Cash and Cash Equivalents. The Financial Statements have been prepared to comply in all material respects with the Accounting Standards, as prescribed under Section 133 of the Companies Act, 2013 ("the Act") and the Rules defined thereunder, as amended from time to time.
The Financial Statements for the year ended March 31, 2024 were approved for issue by the Board of Directors at their Meeting held on May 28, 2024.
(a) Historical Cost Convention
These Financial Statements have been prepared on the Historical Cost basis, except for certain Financial Instruments which are measured at Fair Values at the end of each Reporting Period as explained in the Accounting Policies below. Historical Cost is generally based on the Fair Value of the consideration given in exchange for goods and services.
(b) 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 measuring Fair Value of an Asset or Liability, the Company takes into account those characteristics of the Assets or Liability that market participants would take into account when pricing the Asset or Liability at the measurement date.
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.
2.2 Functional and Presentation Currency
The Financial Statements are presented in Indian Rupees ("INR") which is also the Company's Functional Currency. All the amounts disclosed in the Financial Statements have been rounded to the nearest Rupees in ‘Lakhs’, as per the requirements of Schedule-III of the Act, unless stated otherwise.
2.3 Use of Estimates and Judgements
The preparation of Financial Statements in conformity with the Generally Accepted Accounting Principles requires the Management to make judgements, estimates and assumptions, that affect the application of the Accounting Policies and the reported amounts of Assets and Liabilities, Income and Expenses, the disclosures of Contingent Assets and Liabilities at the date of the Financial Statements and reported amounts of Revenues and Expenses during the year.
The Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to the Accounting Estimates are recognised in the period in which the estimate is revised, and future periods affected.
In particular, following are the significant areas of estimation, uncertainty and critical judgements in applying Accounting Policies that have the most significant effect on the amounts recognised in Standalone Financial Statements:
a. Assessment of Useful Life of Property, Plant and Equipment and Intangible Asset
b. Recognition and estimation of Tax Expense including Deferred Tax
c. Fair Value Measurement
d. Recognition and Measurement of Provision and Contingency
e. Estimated impairment of Financial Assets and Non-Financial Assets
f. Measurement of Lease Liabilities and Right of Use Asset
2.4 Current and Non - Current Classification
The Company presents Assets and Liabilities in the Balance Sheet based on Current / Non-Current Classification. An Asset is treated as Current when it is:
• Expected to be realised or intended to be sold or consumed in the normal operating cycle;
• Held primarily for the purpose of Trading;
• Expected to be realised within twelve months after the Reporting Period; or
• Cash or Cash Equivalent unless restricted from being exchanged or used to settle a Liability for at least twelve months after the Reporting Period.
All other Assets are classified as Non-Current.
A Liability is Current when:
• It is expected to be settled in the normal operating cycle;
• It is held primarily for the purpose of Trading;
• It is due to be settled within twelve months after the Reporting Period; or
• There is no unconditional right to defer the settlement of the Liability for at least twelve months after the Reporting Period.
All other Liabilities are classified as Non-Current.
The Company has deemed its operating cycle as twelve months for the purpose of Current / NonCurrent Classification.
2.5 Revenue Recognition
The Company recognises Revenue from Sale of goods when it satisfies a Performance Obligation in accordance with the provisions of contract with the customers measured at the amount of Transaction Price (Net of Variable Consideration) on the Price specified in the Contract with the customers allocated to that Performance Obligation. The Transaction Price of Goods sold and services rendered is Net of Variable Consideration. This is achieved when it no longer retains control over the goods sold, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the Company and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Sale of goods is recognised net of Taxes collected on behalf of third parties.
Revenue from the Sale of goods is recognized when the control on the goods have been transferred to the Customer. The Performance Obligation in case of sale of product is satisfied at a point in time i.e., when the material is shipped to the customer or on delivery to the customer, as may be specified in the Contract.
Interest
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 proportion basis, by reference to the Principal outstanding and the Effective Interest Rate (‘EIR’) applicable, which is the rate that exactly discounts estimated Future Cash Receipts through the expected life of the Financial Assets to that Asset’s Net Carrying Amount on initial recognition.
Export Incentive
Export Incentives are recognised as per the Schemes specified in the Foreign Trade Policy, as amended from time to time, on accrual basis, in the year when right to receive as per terms of the Scheme is established and are accounted to the extent there in no uncertainty about its ultimate collection.
2.6 Property, Plant and Equipment
Property, Plant and Equipment (PPE) are stated at the Cost comprising of Purchase Price and any initial directly attributable cost of bringing the Asset to its working condition for its intended use, less Accumulated Depreciation and Impairment Loss, if any.
Properties in the course of construction for production, supply or administrative purposes are carried at Cost, less any recognised Impairment Loss. Cost includes Professional Fees and for Qualifying Assets, Borrowing Costs are capitalised in accordance with the Company's Accounting Policy. Such properties are classified to the appropriate categories of PPE when completed and ready for intended use. Subsequent Cost / Expenses related to an item of PPE are recognised in the Carrying Amount of PPE when the Cost / Expenses meet the recognition criteria, i.e. the Cost can be measured reliably and it is probable that the future benefits will flow to the Company.
Depreciation is recognised under Written Down Value Method so as to write-off the Cost of Assets (other than Properties under construction) less their Residual Values, over their useful lives. The Estimated Useful Lives, Residual Value and Depreciation Method are reviewed at the end of each Reporting Period, with the effect of any changes in estimate accounted for on a prospective basis.
Capital Work-In-Progress includes Cost of Property, Plant and Equipment under installation / under development as at the Balance Sheet date. PPE which are not ready for intended use are disclosed under the "Capital work-in-progress". The Company has adopted the Useful Life of the Asset, as specified in Schedule-II to the Act.
The Residual Value, Useful Lives and Depreciation Method are reviewed at the end of each Reporting Period and adjustment required, if any, are done prospectively.
Assets on Leased Premises / Machines, which cannot be used independent of the Leased Premises / Machines are depreciated on the remaining period of Lease or as per the Useful Life, as stated above, whichever is earlier. Assets costing Rs.5,000/- and below are depreciated over a period of one year.
An item of Property, Plant and Equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the Asset. Any gain or loss rising on the disposal or retirement of an item of Property, Plant and Equipment is determined as the difference between the Net Disposal Proceeds and Carrying Amount of the Property, Plant and Equipment and is recognised in the Statement of Profit and Loss.
2.7 Intangible Assets
Intangible Assets are recognised when the Asset is identifiable, is within the control of the Company, it is probable that the future economic benefits that are attributable to the Asset will flow to the Company and Cost of the Asset can be reliably measured.
2.8 Inventory
Inventories consists of Raw Materials, Work-in-Progress, Finished Goods, Stores and Spares and Packing Materials. Inventories are valued at the lower of Cost or Net Realisable Value. Cost is determined on the Weighted Average basis.
Raw Materials, Stores and Spares and Packing Material: Cost of inventories is determined on the ‘Weighted Average’ basis and comprises expenditure incurred in the normal course of business for bringing such Inventories to their present location and condition and includes, wherever applicable, appropriate overheads.
Finished Goods and Work-In-Progress: Cost includes Cost of Direct Materials and Labour and a proportion of the Manufacturing Overheads based on the normal operating capacity on a Weighted Average basis. Cost of Finished Goods includes other costs incurred in bringing the Inventories to their present location and condition. Net Realisable Value is the Estimated Selling Price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the Sale.
2.9 Employee Benefits
All Employee Benefits payable wholly within twelve months of rendering the service are classified as Short-Term Employee Benefits. Benefits such as Salaries, Wages etc. and the expected cost of ex-gratia are recognised in the period in which the employee renders the related service. Liability is recognised for the amount expected to be paid when there is 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.
2.10 Investments
Investments which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as Current Investments. All other investments are classified as Long-Term Investments. On initial recognition, all Investments are measured at Cost. The Cost comprises the Purchase Price and directly attributable acquisition charges such as Brokerage, Fees, and Duties.
Current Investments are carried at the lower of Cost and Fair Value determined on an individual basis. Long-Term Investments are carried at Cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the Long-Term Investments.
On disposal of an Investment, the difference between its Carrying Amount and Net Disposal Proceeds is charged or credited to the Statement of Profit and Loss.
2.10 Taxation
Income Tax expenses comprises Current Tax and Deferred Tax and is recognized in the Statement of Profit and Loss except to the extent that it relates to an item which is recognized directly in Equity or in Other Comprehensive Income. Current Tax is the expected Tax payable on the Taxable Income using applicable Tax Rates enacted or substantively enacted as at the Reporting Date and any adjustments relating to the Income Tax of previous years. Deferred Tax is recognized in respect of temporary difference between the Carrying Amounts of Assets and Liabilities as per the Financial Statements and Taxation Laws. Deferred Tax Liability is recognized based on the expected manner of realisation or settlement of difference in the Carrying Amounts applying Tax Rates enacted or substantively enacted as at the Reporting Date. Deferred Tax Assets are recognised only to the extent that it is probable that future Taxable Profits will be available to utilize the same.
Current Tax
Current Tax is the amount of Tax payable on the Taxable Income for the year, determined in accordance with the provisions of the Income Tax Act, 1961.
Deferred Tax
Deferred Tax is recognised on temporary differences between the Carrying Amounts of Assets and Liabilities in the Balance Sheet and their corresponding Tax bases. Deferred Tax Liabilities are generally recognised for all Taxable temporary differences. Deferred Tax Assets are generally recognised for all deductible temporary differences and unused Tax Losses being carried forward, to the extent that it is probable that Taxable Profits will be available in future against which those deductible temporary differences and Tax Losses can be utilised. Such Deferred Tax Assets and Liabilities are not recognised if the temporary difference arises from initial recognition (other than in a business combination) of Assets and Liabilities in a transaction that affects neither the Taxable Profit nor the Accounting Profit. In addition, Deferred Tax Liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.
The Carrying Amount of Deferred Tax Assets is reviewed at the end of each Reporting Period and reduced to the extent that it is no longer probable that sufficient Taxable profits will be available to allow all or part of the Asset to be recovered.
Deferred Tax Liabilities and Assets are measured at the Tax rates that are expected to apply in the period in which the Liability is settled or the Asset realised, based on Tax Rates (and Tax Laws) that have been enacted or substantively enacted by the end of the Reporting Period.
Presentation of Current and Deferred Tax
Current and Deferred Tax are recognized as income or an expense in the Statement of Profit and Loss, except when they relate to items that are recognized in Other Comprehensive Income, in which case, the Current and Deferred Tax Income / Expense are recognized in Other Comprehensive Income.
The Company offsets Current Tax Assets and Current Tax Liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a Net basis, or to realize the Asset and settle the Liability simultaneously. In case of Deferred Tax Assets and Deferred Tax Liabilities, the same are offset if the Company has a legally enforceable right to set off corresponding Current Tax Assets against Current Tax Liabilities and the Deferred Tax Assets and Deferred Tax Liabilities relate to Income Taxes levied by the Tax Authority on the Company.
2.11 Minimum Alternate Tax (MAT)
MAT Credit is recognised as an Asset only when and to the extent that is more likely than not that they will be recovered and that the Company will pay Income Tax, as per the normal rates, during the specified period i.e. the period for which MAT Credit is allowed to be carried forward. In the year in which the MAT Credit becomes eligible to be recognised as an Asset in accordance with the recommendations contained in the Guidance Note issued by the Institute of Chartered Accountants of India, the said Asset is created by way of a Credit to the Statement of Profit and Loss and shown as MAT Credit Entitlement. The Company reviews the same at each Balance Sheet date and writes down the Carrying Amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that the Company will pay normal Income Tax during the specified period.
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