4. Summary of material accounting policies
information
The financial statements have been prepared using the
material accounting policies information and measurement
basis summarized below.
a) Current/non-current classification
AH assets and liabilities have been classified as current
or non-current as per the Company's normal operating
cycle and other criteria set out in the Schedule III to the
Companies Act, 2013. Based on the nature of services
and the time between the acquisition of assets for
processing and their realisation in cash and cash
equivalents, the Company has ascertained its operating
cycle as 12 months for the purpose of current or non¬
current classification of assets and liabilities.
Assets
An asset is classified as current when it satisfies any of
the following criteria:
1) It is expected to be realised in, or is intended to
be sold or consumed in, the Company's normal
operating cycle;
2) It is held primarily for the purpose of being traded;
3) It is expected to be realised within twelve months
after the reporting date; or
4) It is cash or cash equivalent unless it is restricted
from being exchanged or used to settle a liability
for at least twelve months after the reporting date.
Current assets include the current portion of non¬
current financial assets. AH other assets are classified
as non-current.
Liabilities
A liability is classified as current when it satisfies any of
the following criteria:
1) It is expected to be settled in the Company's
normal operating cycle;
2) It is held primarily for the purpose of being traded;
3) It is due to be settled within twelve months after
the reporting date; or
4) The Company does not have an unconditional
right to defer settlement of the liability for at least
twelve months after the reporting date.
Current liabilities include current portion of non-current
financial liabilities. AH other liabilities are classified
as non-current.
b) Property, plant and equipment
Recognition, measurement and de-recognition
Items of property, plant and equipment are measured
at cost, which includes capitalised borrowing costs,
less accumulated depreciation and accumulated
impairment losses, if any. Cost of an item of property,
plant and equipment comprises its purchase price,
including import duties and non-refundable purchase
taxes, after deducting trade discounts and rebates,
any directly attributable cost of bringing the item to its
working condition for its intended use.The Company
identifies and determines separate useful lives for each
major component of the property, plant and equipment,
if they have a useful life that is materially different from
that of the asset as a whole.
An item of property, plant and equipment and any
significant part initially recognised is derecognised
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) is included
in the Statement of Profit and Loss when the asset
is derecognised.
Subsequent expenditure
Subsequent expenditure related to an item of property,
plant and equipment is added to its book value only if
it increases the future benefits from the existing asset
beyond its previously assessed standard or period of
performance. AH other expenses on existing property,
plant and equipment, including day-to-day repairs,
maintenance expenditure and cost of replacing parts,
are charged to the Statement of Profit and Loss for the
year during which such expenses are incurred.
Depreciation
Depreciation on property, plant and equipment (other
than freehold land) is provided on the straight-line
method over their estimated useful lives, net of their
residual values, as determined by the management.
Depreciation is charged on a pro-rata basis for assets
purchased/sold during the year.
Based on technical assessment made by technical
expert and management estimate, the Company have
assessed the estimated useful lives of certain property,
plant and equipment that are different from the useful
life prescribed in Schedule II to the Companies Act,
2013. The management believes that these estimated
useful lives are realistic and reflect fair approximation
of the period over which the assets are likely to be used.
The estimated useful lives of items of property, plant
and equipment are as follows:
Leasehold improvements are amortised over the period
of lease or their useful lives, whichever is shorter.
c) Capital work-in-progress
Capital work-in-progress represents expenditure
incurred in respect of capital projects and are carried
at cost. Cost comprises of purchase cost, related
acquisition expenses, development / construction costs,
borrowing costs and other direct expenditure.
d) Intangible assets
Recognition, measurement and de-recognition
Intangible assets are stated at cost less accumulated
amortisation and impairment losses (if any). Cost related
to technical assistance for new projects are capitalised.
Gains or losses arising from de-recognition of an
intangible asset are measured as the difference between
the net disposal proceeds and the carrying amount of
the asset and are recognised in the Statement of Profit
and Loss when the asset is derecognised.
Subsequent expenditure
Subsequent expenditure related to an item of intangible
asset is added to its book value only if it increases
the future benefits from the existing asset beyond its
previously assessed standard or period of performance.
All other expenses are charged to the Statement
of Profit and Loss for the year during which such
expenses are incurred.
Amortisation
Intangible assets include software that are amortised
over the useful economic life of 6 years. The amortisation
period and the amortisation method for an intangible
asset with a finite useful life are reviewed at least at the
end of each reporting period.
e) Inventories
Inventories are stated at the lower of cost and net
realisable value.
Raw materials, packing material, stores and spares
and loose tools: The cost of inventories is calculated
on first in and first out basis, and includes expenditure
incurred in acquiring the inventories, production or
conversion costs and other costs incurred in bringing
them to their present location and condition. Raw
materials, components and other supplies held for use
in the production of finished products are not written
down below cost except in cases where material prices
have declined and it is estimated that the cost of the
finished products will exceed their net realisable value.
Work-in-progress and manufactured finished goods:
Cost includes raw material costs and an appropriate
share of fixed production overheads based on normal
operating capacity. Net realisable value is the estimated
setting price in the ordinary course of business,
less the estimated costs of completion and setting
expenses. The net realisable value of work-in-progress
is determined with reference to the setting prices of
retated finished products.
The comparison of cost and net reatisabte vatue is made
on an item by item basis/contract basis depending on
the nature of work.
f) Trade Receivables
Trade receivabtes are amounts due from customers for
goods sotd or services performed in the ordinary course
of business and reftects Company's unconditionat right
to consideration (that is, payment is due onty on the
passage of time). Trade receivabtes are recognised
initiatty at the transaction price as they do not contain
significant financing components. The Company hotds
the trade receivabtes with the objective of cottecting the
contractuat cash ftows and therefore measures them
subsequentty at amortised cost using the effective
interest method, tess toss attowance.
For trade receivabtes onty, the Company appties the
simptified approach required by Ind AS 109, which
requires expected tifetime tosses to be recognised from
initiat recognition of the receivabtes.
As a practicat expedient, the Company uses a provision
matrix to determine impairment toss attowance on
portfotio of its trade receivabtes. The provision matrix
is based on its historicatty observed defautt rates over
the expected tife of the trade receivabtes and is adjusted
for forward-tooking estimates. At every reporting date,
the historicat observed defautt rates are updated and
changes in the forward-tooking estimates are anatysed.
g) Foreign exchange transactions
Transactions in foreign currencies are initiatty recorded
by the Company at its functionat currency spot rates at
the date the transaction first quatifies for recognition. Att
monetary assets and tiabitities denominated in foreign
currencies are transtated into the functionat currency at
the exchange rate at the reporting date. Non-monetary
assets and tiabitities that are measured at fair vatue
in a foreign currency are transtated into the functionat
currency at the exchange rate when the fair vatue was
determined. Non-monetary assets and tiabitities if any
that are measured based on historicat cost in a foreign
currency are transtated at the exchange rate at the date
of the transaction.
Att exchange differences retating to foreign currency
items are deatt with in the Statement of Profit and Loss
in the year in which they arise.
h) Employee benefits
i. Short-term employee benefits
Short-term emptoyee benefit obtigations are
measured on an undiscounted basis and are
expensed as the retated service is provided. A
tiabitity is recognised for the amount expected
to be paid e.g., under short-term cash bonus, if
the Company has a present tegat or constructive
obtigation to pay this amount as a resutt of past
service provided by the emptoyee, and the amount
of obtigation can be estimated retiabty.
ii. Defined contribution plans
A defined contribution ptan is a post-emptoyment
benefit ptan under which an entity pays fixed
contributions into a separate entity and witt have
no tegat or constructive obtigation to pay further
amounts. Obtigations for contributions to defined
contribution ptans are recognised as an emptoyee
benefit expense in Statement of Profit and Loss in
the periods during which the retated services are
rendered by emptoyees.
Prepaid contributions are recognised as an asset
to the extent that a cash refund or a reduction in
future payments is avaitabte.
iii. Defined benefit plans
A defined benefit ptan is a post-emptoyment
benefit ptan other than a defined contribution
ptan. The Company's net obtigation in respect of
defined benefit ptans is catcutated separatety for
each ptan by estimating the amount of future
benefit that emptoyees have earned in the current
and prior periods, discounting that amount
and deducting the fair vatue of any ptan assets.
The catcutation of defined benefit obtigation is
performed annuatty by a quatified actuary using
the projected unit credit method.
Re-measurements of the net defined benefit
tiabitity, which comprise actuariat gains and
tosses, are recognised in OCI. The Company
determines the net interest expense (income)
on the net defined benefit tiabitity or the period
by apptying the discount rate used to measure
the defined benefit obtigation at the beginning of
the annuat period to the then net defined benefit
tiabitity, taking into account any changes in the
net defined benefit tiabitity during the period as a
resutt of contributions and benefit payments. Net
interest expense and other expenses retated to
defined benefit ptans are recognised in Statement
of Profit and Loss.
When the benefits of a plan are changed or when a
plan is curtailed, the resulting change in benefit that
relates to past service (‘past service cost' or ‘past
service gain') or the gain or loss on curtailment is
recognised immediately in Statement of Profit and
Loss. The Company recognises gains and losses
on the settlement of a defined benefit plan when
the settlement occurs.
iv. Other long-term employee benefits
Entitlements to annual leave are recognised when
they accrue to employees. Leave entitlements
may be availed/encashed while in service or
encashed at the time of retirement/termination
of employment, subject to a restriction on the
maximum number of accumulation. The Company
determines the liability for such accumulated
leave entitlements on the basis of actuarial
valuation carried out by an independent actuary
at the year end.
i) Revenue
i. Sale of goods
Revenue arises mainly from the sale of goods.
To determine whether to recognise revenue, the
Company follows a 5-step process:
(i) Identifying the contract with a customer
(ii) Identifying the performance obligations
(iii) Determining the transaction price
(iv) Allocating the transaction price to the
performance obligations
(v) Recognising revenue when/as performance
obligation(s) are satisfied.
The Company considers the terms of the contract
and its customary business practices to determine
the transaction price. The transaction price is the
amount of consideration to which the Company
expects to be entitled in exchange for transferring
promised goods to a customer, excluding amounts
collected on behalf of third parties (for example,
indirect taxes). The consideration promised in
a contract with a customer may include fixed
consideration, variable consideration (if reversal
is less likely in future), or both. Revenue is
measured at fair value of consideration received or
receivable, after deduction of any trade discounts,
volume rebates.
Revenue is recognised either at a point in time
or over time, when (or as) the Company satisfies
performance obligations by transferring the
promised goods or services to its customers.
A receivable is recognised when the goods are
delivered as this is the case of point in time
recognition where consideration is unconditional
because only the passage of time is required.
The Company recognises contract liabilities for
consideration received in respect of unsatisfied
performance obligations and reports these
amounts as other liabilities in the statement
of financial position. Similarly, if the Company
satisfies a performance obligation before
it receives the consideration, the Company
recognises either a contract asset or a receivable
in its statement of financial position, depending
on whether something other than the passage of
time is required before the consideration is due.
The advance consideration received on contracts
entered with customers for which performance
obligations are yet to be performed, therefore,
revenue will be recognised when the goods and
services are passed on to the customers.
ii. Interest income
Interest income is recognised on a time proportion
basis taking into account the amount outstanding
and the interest rate applicable.
iii. Dividend income
Dividend income is recognized at the time
when the right to receive is established by the
reporting date.
iv. Income from power generation:
Income from power generation from windmill
located in district Kutch is recognised on the basis
of the terms of the contract.
v. Export benefits/incentives
Export entitlements from government authorities
are recognised 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 the
exports made by the Company, and where there is
no significant uncertainty regarding the ultimate
collection of the relevant export proceeds.
j) Borrowings
Borrowing cost consists of interest and other costs
incurred in connection with the borrowing of funds and
also include exchange differences to the extent regarded
as an adjustment to the same. Borrowing costs directly
attributable to the acquisition and/ or construction of a
qualifying asset are capitalized during the period of time
that is necessary to complete and prepare the asset
for its intended use or sale. A qualifying asset is one
that necessarily takes substantial period of time to get
ready for its intended use. AH other borrowing costs are
charged to the Statement of Profit and Loss as incurred.
k) Government grants
Government grant is recognized only when there is
a reasonable assurance that the entity will comply
with the conditions attached to them and the grants
will be received.
Grants related to assets is recognized as deferred
income which is recognized in the Statement of
Profit and Loss on systematic basis over the useful
life of the assets.
l) Right of use assets and lease liabilities
For all existing and new contract, the Company
considers whether a contract is, or contains a lease. A
lease is defined as ‘a contract, or part of a contract, that
conveys the right to use an asset (the underlying asset)
for a period of time in exchange for consideration'.
The Company as a lessee
Classification of leases
The Company enters into leasing arrangements for
various assets. The assessment of the lease is based on
several factors, including, but not limited to, transfer of
ownership of leased asset at end of lease term, lessee's
option to extend/purchase etc.
Recognition and initial measurement
At lease commencement date, the Company recognises
a right-of-use asset and a lease liability on the balance
sheet. The right-of-use asset is measured at cost,
which is made up of the initial measurement of the
lease liability, any initial direct costs incurred by the
Company, an estimate of any costs to dismantle and
remove the asset at the end of the lease (if any), and
any lease payments made in advance of the lease
commencement date (net of any incentives received).
Subsequent measurement
The Company depreciates the right-of-use assets on a
straight-line basis from the lease 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 Company
also assesses the right-of-use asset for impairment
when such indicators exist.
At lease commencement date, the Company measures
the lease liability at the present value of the lease
payments unpaid at that date, discounted using the
interest rate implicit in the lease if that rate is readily
available or the Company's incremental borrowing rate.
Lease payments included in the measurement of the
lease liability are made up of fixed payments (including
in substance fixed payments) and variable payments
based on an index or rate. Subsequent to initial
measurement, the liability will be reduced for payments
made and increased for interest. It is re-measured to
reflect any reassessment or modification, or if there
are changes in in-substance fixed payments. When
the lease liability is re-measured, the corresponding
adjustment is reflected in the right-of-use asset.
The Company has elected to account for short-term
leases and leases of low-value assets using the practical
expedients. Instead of recognising a right-of-use asset
and lease liability, the payments in relation to these are
recognised as an expense in statement of profit and
loss on a straight-line basis over the lease term.
The Company as a 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 recognised on a
straight-line basis over the term of the relevant lease.
m) Financial instruments
i. Recognition and initial measurement
Financial assets and financial liabilities are
recognised when the Company becomes a party to
the contractual provisions of the instrument and
are measured initially at fair value adjusted for
transaction costs, except for those carried at fair
value through profit or loss which are measured
initially at fair value.
ii. Subsequent measurement
Financial assets
i. Financial assets carried at amortised
cost - A financial instrument is measured
at amortised cost if both the following
conditions are met:
• The asset is held within a business
model whose objective is to hold
assets for collecting contractual
cash flows, and
• Contractual terms of the asset give
rise on specified dates to cash flows
that are solely payments of principal
and interest ("SPPI") on the principal
amount outstanding.
After initial measurement, such financial
assets are subsequently measured
at amortised cost using the effective
interest method.
ii. Financial assets at fair value
• Investments in equity instruments
other than above -Investments in equity
instruments which are held for trading
are generally classified as at fair value
through profit or loss ("FVTPL"). For all
other equity instruments, the Company
makes irrevocable choice upon initial
recognition, on an instrument to
instrument basis, to classify the same
either as at fair value through other
comprehensive income ("FVOCI") or
fair value through profit or loss FVTPL.
If the Company decides to classify an equity
instrument as at FVOCI, then all fair value changes
on the instrument, excluding dividends, are
recognised in the OCI. There is no recycling of
the amounts from OCI to profit or loss, even on
sale of investment.
However, the Company transfers the cumulative
gain or loss within equity. Dividends on such
investments are recognised in the statement of
profit or loss unless the dividend clearly represents
a recovery of part of the cost of the investment.
Equity instruments included within the FVTPL
category are measured at fair value with all
changes recognised in the profit or loss.
De-recognition of financial assets
A financial asset is primarily de-recognised when
the rights to receive cash flows from the asset
have expired or the Company has transferred its
rights to receive cash flows from the asset.
Impairment of financial assets
The Company assesses on a forward-looking
basis the expected credit loss associated with its
assets carried at amortised cost. The impairment
methodology applied depends on whether there
has been a significant increase in credit risk. Note
41 details how the Company determines whether
there has been a significant increase in credit risk.
For trade receivables only, the Company applies
the simplified approach permitted by Ind AS 109
Financial Instruments, which requires expected
lifetime losses to be recognised from initial
recognition of the receivables.
Financial liabilities
Subsequent to initial recognition, all non-derivative
financial liabilities, other than derivative liabilities,
are subsequently measured at amortised cost
using the effective interest method.
De-recognition of financial liabilities
A financial liability is de-recognised when the
obligation under the liability is discharged or
cancelled or expires. When an existing financial
liability is replaced by another from the same
lender on substantially different terms, or the
terms of an existing liability are substantially
modified, such an exchange or modification is
treated as the de-recognition of the original
liability and the recognition of a new liability.
The difference in the respective carrying amounts
is recognised in the statement of profit and loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset
and the net amount is reported in the balance
sheet if there is a currently enforceable legal right
to offset the recognised amounts and there is an
intention to settle on a net basis, to realize the
assets and settle the liabilities simultaneously.
n) Fair value measurement
In determining the fair value of its financial instruments,
the Company uses a variety of methods and assumptions
that are based on market conditions and risks existing
at each reporting date. All methods of assessing fair
value result in general approximation of value, and such
value may never actually be realised.
Fair values are categorised into different levels in a
fair value hierarchy based on the inputs used in the
valuation techniques as follows.
- Level 1: quoted prices (unadjusted) in active
markets for identical assets or liabilities.
- Level 2 : inputs other than quoted prices included
in Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices).
- Level 3 : inputs for the asset or liability that
are not based on observable market data
(unobservable -inputs)
When measuring the fair value of an asset or a liability,
the Company uses observable market data as far as
possible. If the inputs used to measure the fair value
of an asset or a liability fall into different levels of the
fair value hierarchy, then the fair value measurement
is categorised in its entirety in the same level of the
fair value hierarchy as the lowest level input that is
significant to the entire measurement.
The Company recognises transfers between levels
of the fair value hierarchy at the end of the reporting
period during which the change has occurred.
o) Cash and cash equivalents
For the purpose of the Statement of Cash Flows, cash and
cash equivalents consist of cash and cheques in hand,
bank balances, demand deposits with banks where
the original maturity is three months or less and other
short term highly liquid investments net of outstanding
bank overdrafts and cash credit facilities as they are
considered an integral part of the cash Management.
p) 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.
For the purpose of calculating diluted earnings per
share, the net profit or loss for the year attributable
equity shareholders and the weighted average number
of shares outstanding during the year are adjusted for
the effects of all dilutive potential equity shares.
Potential ordinary shares shall be treated as dilutive
when, and only when, their conversion to ordinary
shares would decrease earnings per share or increase
loss per share from continuing operations.
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