2.1 Basis of preparation
The financial statements of the Company have been prepared in accordance with Indian
Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards)
Rules, 2015 and Companies (Indian Accounting Standards) (Amendment) Rules, 2018.
For all the periods up to and including 31March 2017, the financial statements were prepared
in accordance accounting standards specified under Section 133 of the Companies Act, 2013,
read together with paragraph 7 of the Companies (Accounts) Rules, 2014 and from the year
ended 31 March 2018 the financial statements were prepared in accordance with Indian
Accounting Standard as specified under Section 133 of the Companies Act, 2013.
The financial statements have been prepared on a historical cost basis, except for the following
assets and liabilities which have been measured at fair value or revalued amount:
• Derivative financial instruments
• Investment in preference shares (unquoted)
The financial statements are presented in Indian Rupees (INR), except when otherwise
indicated.
2.2 Summary of significant accounting policies
a) Property, Plant and Equipment
Recognition and Measurement
Company has elected to continue with the carrying value for all its property, plant and
equipment as recognized in the financial statements at the date of transition to IndAS and use
the same as its deemed cost as at the date of transition.
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) is included in the
income statement when the asset is derecognized.
The Company does not adjust exchange differences arising on translation/settlement of long¬
term foreign currency monetary items pertaining to the acquisition of a depreciable asset to
the cost of the asset but charges the same to the statement of profit & loss in the year in which
such gain/loss arises.
Gains or losses arising from de-recognition of Property Plant & Equipment are measured as
the difference between the net disposal proceeds and the carrying amount of the asset and are
recognized in the statement of profit and loss when the asset is derecognized.
The residual values, useful lives and methods of depreciation of property, plant and equipment
are reviewed at each financial year end and adjusted prospectively, if appropriate.
Depreciation
Depreciation on Property Plant & Equipment is calculated on a straight-line basis to allocate
their cost, net of their residual values, over the estimated useful lives. The identified
components are depreciated over their useful life, the remaining asset is depreciated over the
life of the principal asset.
The Company has used the following rates to provide depreciation which coincides with the
rates indicated in Schedule II of the Companies Act, 2013 on its Property plant & Equipments.
The management has estimated, supported by independent assessment by technical experts,
professionals, the useful lives of the following classes of assets:
• The useful life of temporary erection is estimated 1year, which is lower than those
indicated in schedule II
• Computers (Servers and networks) are depreciated over the estimated useful lives of
3 years, which is lower than those indicated in schedule II.
• Non-Commercial Vehicles are depreciated over the estimated useful lives of 6 years,
which is lower than those indicated in schedule II.
Depreciation methods, useful lives and residual values are reviewed at each financial year end
and adjusted prospectively, if appropriate
b) Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following
initial recognition, intangible assets are carried at cost less any accumulated amortization and
accumulated impairment losses.
Internally generated intangibles, excluding capitalized development costs, are not capitalized
and the related expenditure is reflected in profit or loss in the period in which the expenditure
is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite
Intangible assets with finite lives are amortized over the useful economic life and assessed for
impairment whenever there is an indication that the intangible asset may be impaired. The
amortization period and the amortization method for an intangible asset with a finite useful
life are reviewed at least at the end of each reporting period. Changes in the expected useful
life or the expected pattern of consumption of future economic benefits embodied in the asset
are considered to modify the amortization period or method, as appropriate, and are treated as
changes in accounting estimates. The amortization expense on intangible assets is recognized
in the statement of profit and loss unless such expenditure forms part of carrying value of
another asset. Intangible assets with indefinite useful lives are not amortized, but are tested for
impairment annually, either individually or at the cash generating unit level. The assessment
of indefinite life is reviewed annually to determine whether the indefinite life continues to be
supportable. If not, the change in useful life from indefinite to finite is made prospective basis.
- Technical knowhow
Amounts paid towards technical know-how fees for specifically identified projects/products
being development expenditure incurred towards product design is carried forward based on
assessment of benefits arising from such expenditure. Such expenditure is amortized over the
period of expected future sales from the related product, i.e. the estimated period of 60 to 72
months on straight line basis based on past trends, commencing from the month of
commencement of commercial production.
- Software
Software purchased by the Company are amortized on a straight line basis i.e. non-standard
(customized) software in four years and standard (non-customized) software in five years.
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 statement of profit or loss when the asset is derecognized.
c) Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance
of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if
fulfilment of the arrangement is dependent on the use of a specific asset or assets and the
arrangement conveys a right to use the asset or assets, even if that right is not explicitly
specified in an arrangement.
For arrangements entered into prior to 1 April 2016, the Company has determined whether the
arrangement contains lease on the basis of facts and circumstances existing on the date of
transition.
Company as a lessee
A lease is classified at the inception date as a finance lease or an operating lease. A lease that
transfers substantially all the risks and rewards incidental to ownership to the Company is
classified as a finance lease.
Finance leases are capitalized at the commencement of the lease at the inception date fair value
of the leased property or, if lower, at the present value of the minimum lease payments. Lease
payments are apportioned between finance charges and reduction of the lease liability so as to
achieve a constant rate of interest on the remaining balance of the liability. Finance charges
are recognized in finance costs in the statement of profit and loss, unless they are directly
attributable to qualifying assets, in which case they are capitalized in accordance with the
Company’s general policy on the borrowing costs. Contingent rentals are recognized as
expenses in the periods in which they are incurred.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable
certainty that the Company will obtain ownership by the end of the lease term, the asset is
depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease payments are not straight lined in cases where the escalation is expected to
increase in line with the expected general inflation to compensate for the lessor’s expected
inflationary cost.
d) Borrowing Costs
Borrowing cost includes interest, amortization of ancillary costs incurred in connection with
the arrangement of borrowings and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction or production of an asset
that necessarily takes a substantial period of time to get ready for its intended use or sale are
capitalized as part of the cost of the respective asset. All other borrowing costs are expensed
in the period they are incurred.
e) Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may
be impaired. 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 group 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. These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded companies or other available fair value
indicators.
After impairment, depreciation is provided on the revised carrying amount of the asset over its
remaining useful life.
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. These budgets and forecast calculations generally cover a period of five years.
For longer periods, a long-term growth rate is calculated and applied to project future cash
flows after the fifth year. To estimate cash flow projections beyond periods covered by the
most recent budgets/forecasts, the Company extrapolates cash flow projections in the budget
using a steady or declining growth rate for subsequent years, unless an increasing rate can be
justified. In any case, this growth rate does not exceed the long-term average growth rate for
the products, industries, or country or countries in which the entity operates, or for the market
in which the asset is used.
Impairment losses of continuing operations, including impairment on inventories, are
recognized in the statement of profit and loss, except for properties previously revalued with
the revaluation surplus taken to OCI. For such properties, the impairment is recognized in OCI
up to the amount of any previous revaluation surplus.
An assessment is made at each reporting date to determine whether there is an indication that
previously recognized impairment losses no longer exist or have decreased. If such indication
exists, the Company estimates the asset’s or CGU’s recoverable amount. A previously
recognized impairment loss is reversed only if there has been a change in the assumptions used
to determine the asset’s recoverable amount since the last impairment loss was recognized.
The reversal is limited so that the carrying amount of the asset does not exceed its recoverable
amount, nor exceed the carrying amount that would have been determined, net of depreciation,
had no impairment loss been recognized for the asset in prior years. Such reversal is recognized
in the statement of profit or loss unless the asset is carried at a revalued amount, in which case,
the reversal is treated as a revaluation increase.
f) Inventories
Inventories which includes Commercial Units, are valued at the lower of cost and net realizable
value.
Shares(Quoted) as Inventory are valued at lower of cost or market value. Unquoted shares are
valued at cost.
Costs incurred in bringing each product to its present location and condition are accounted for
as follows:
Net realizable 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.
g) Foreign currencies
Functional and presentational currency
Company’s financial statements are presented in Indian Rupees (INR) which is also the
Company’s functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at functional currency
spot rates at the date the transaction first qualifies for recognition. Monetary assets and
liabilities denominated in foreign currencies are translated at the functional currency spot rates
of exchange at the reporting date. Exchange differences arising on settlement or translation of
monetary items are recognized in statement of profit and loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rates at the dates of the initial transactions. Non-monetary
items measured at fair value in a foreign currency are translated using the exchange rates at
the date when the fair value is determined. The gain or loss arising on translation of non¬
monetary items measured at fair value is treated in line with the recognition of the gain or
loss on the change in fair value of the item (i.e., translation differences on items whose fair
value gain or loss is recognized in OCI or the statement of profit and loss are also recognized
in OCI or the statement of profit and loss, respectively).
h) Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to
the Company and the revenue can be reliably measured, regardless of when the payment is
being made. Revenue is measured at the fair value of the consideration received or receivable,
taking into account contractually defined terms of payment and excluding taxes or duties
collected on behalf of the government.
The specific recognition criteria described below must also be met before revenue is
recognized.
Sale of goods
Revenue from the sale of goods is recognized when the significant risks and rewards of
ownership of the goods have passed to the buyer, usually on delivery of the goods. Revenue
from the sale of goods is measured at the fair value of the consideration received or receivable,
net of returns and allowances, trade discounts and volume rebates.
Sale of commercial units
Sale of commercial units is recognized when the 100% payment is received against the
booking or when the possession of the unit is handed over to the buyer, whichever is earlier.
Sale of Securities
Profit / Loss on sale of securities is accounted on weighted average method & is calculated
based on daily mark to market position. Profit on sale of securities is netted with the loss on
sale of securities.
Interest income
For all debt instruments measured either at amortized cost or at fair value through other
comprehensive income, interest income is recorded using the effective interest rate (EIR). EIR
is the rate that exactly discounts the estimated future cash payments or receipts over the
expected life of the financial instrument or a shorter period, where appropriate, to the gross
carrying amount of the financial asset or to the amortized cost of a financial liability. When
calculating the effective interest rate, the Company estimates the expected cash flows by
considering all the contractual terms of the financial instrument (for example, prepayment,
extension, call and similar options) but does not consider the expected credit losses. Interest
income is included in finance income in the statement of profit and loss.
i) Fair value measurement
The Company measures financial instruments such as derivatives at fair value at each balance
sheet date.
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 takes place either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most advantageous market for the asset or
liability
The principal or the most advantageous market must be accessible by the Company.
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.
A fair value measurement of a non-financial asset takes into account a market participant’s
ability to generate economic benefits by using the asset in its highest and best use or by selling
it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for
which sufficient data are available to measure fair value, maximizing the use of relevant
observable inputs and minimizing the use of unobservable inputs.
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.
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.
This note summarizes accounting policy for fair value. Other fair value related disclosures are
given in the relevant notes.
• Significant estimates and assumptions (note 29)
• Quantitative disclosures of fair value measurement hierarchy (note 29)
• Financial instruments (including those carried at amortized cost) (note 8, 13, 16, 29)
j) Current versus 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 realized or intended to be sold or consumed in normal operating cycle (the
company considers 12 month period as normal operating cycle).
• Held primarily for the purpose of trading.
• Expected to be realized 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 normal operating cycle (the company considers 12 month
period as 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.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their
realization in cash and cash equivalents.
k) Taxes
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating11 to items recognized outside profit or loss is recognized outside
profit or loss (either in other comprehensive income or in equity). Current tax items are
recognized in correlation to the underlying transaction either in OCI or directly in equity.
Management periodically evaluates positions taken in the tax returns with respect to situations
in which applicable tax regulations are subject to interpretation and establishes provisions
where appropriate.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes at the
reporting date.
Deferred tax 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.
However, following the prudence policy, the management has decided not to recognize
deferred tax asset on the carry forward losses.
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 relating to items recognized outside profit or loss is recognized outside profit or
loss (either in other comprehensive income or in equity). Deferred tax items are recognized in
correlation to the underlying transaction either in OCI or directly in equity
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to
set off current tax assets against current tax liabilities and the deferred taxes relate to the same
taxable entity and the same taxation authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as
current tax. The Company recognizes MAT credit available as an asset only to the extent that
there is convincing evidence that the Company will pay normal income tax during the specified
period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in
which the Company recognizes MAT credit as an asset in accordance with the Guidance Note
on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-
tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and
shown as “MAT Credit Entitlement.” The Company reviews the “MAT credit entitlement”
asset at each reporting date and writes down the asset to the extent the Company does not have
convincing evidence that it will pay normal tax during the specified period.
1) 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. The weighted average number of equity shares outstanding during the year is adjusted for
events of bonus issue, if any, that have changed the number of equity shares outstanding,
without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year
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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