3 Material Accounting Policies

3.1 Recognition of interest income

3.1.1 The effective interest rate method

Under Ind AS 109 interest income is recorded using
the Effective Interest Rate (EIR) method for all financial
instruments measured at amortised cost, debt instrument
measured at FVOCI and debt instruments designated
at FVTPL. The EIR is the rate that exactly discounts
estimated future cash receipts through the expected life
of the financial instrument or, when appropriate, a shorter
period, to the net carrying amount of the financial asset.

The EIR (and therefore, the amortised cost of the asset)
is calculated by taking into account any discount or
premium on acquisition, fees and costs that are an
integral part of the EIR. The Company recognises interest
income using a rate of return that represents the best
estimate of a constant rate of return over the expected life
of the loan. Hence, it recognises the effect of potentially
different interest rates charged at various stages, and
other characteristics of the product life cycle (including
prepayments, penalty interest and charges).

I f expectations regarding the cash flows on the financial
asset are revised for reasons other than credit risk. The
adjustment is booked as a positive or negative adjustment
to the carrying amount of the asset in the balance sheet
with an increase or reduction in interest income. The
adjustment is subsequently amortised through Interest
income in the statement of profit and loss.

3.1.2 Interest Income

The Company calculates interest income by applying
the EIR to the gross carrying amount of financial assets
other than credit-impaired assets. The financial asset
is credit impaired when one or more events that have
detrimental impact on the estimated future cash flows
of that financial asset have occurred.

When a financial asset becomes credit-impaired and is,
therefore, regarded as 'Stage 3', the Company calculates
interest income by applying the effective interest rate
to the net amortised cost of the financial asset. If the
financial assets cures and is no longer credit-impaired,
the Company reverts to calculating interest income on a
gross basis.

For purchased or originated credit-impaired (POCI)
financial assets, the Company calculates interest
income by calculating the credit-adjusted EIR and

applying that rate to the amortised cost of the asset. The
credit-adjusted EIR is the interest rate that, at original
recognition, discounts the estimated future cash flows
(including credit losses) to the amortised cost of the
POCI assets.

Interest income on all trading assets and financial assets,
if any, mandatorily required to be measured at FVTPL is
recognised using the contractual interest rate in net gain
on fair value changes.

3.2 Financial instruments-initial recognition

3.2.1 Date of recognition

Financial assets and liabilities, with the exception of
loans, debt securities, deposits and borrowings are
initially recognised on the trade date, i.e., the date that
the Company becomes a party to the contractual
provisions of the instrument. This includes regular
way trades: purchases or sales of financial assets that
require delivery of assets within the time frame generally
established by regulation or convention in the market
place. Loans are recognised when funds are transferred
to the customers' account. The Company recognises
debt securities, deposits and borrowings when funds
reach the Company.

3.2.2 Initial measurement of financial instruments

The classification of financial instruments at initial
recognition depends on their contractual terms and the
business model for managing the instruments. Financial
instruments are initially measured at their fair value,
except in the case of financial assets and financial
liabilities recorded at FVTPL, transaction costs are added
to, or subtracted from, this amount. Trade receivables are
measured at the transaction price. When the fair value
of financial instruments at initial recognition differs from
the transaction price, the Company account for the Day
1 profit or loss, as described below.

3.2.3 Day 1 Profit or Loss

When the transaction price of the instrument differs from
the fair value at origination and the fair value is based
on a valuation technique using only inputs observable
in market transactions, the Company recognises the
difference between the transaction price and fair value
in net gain/(loss) on fair value changes. In those cases
where fair value is based on models for which some of
the inputs are not observable, the difference between
the transaction price and the fair value is deferred and is

only recognised in profit or loss when the inputs become
observable, or when the instrument is derecognised.

3.2.4 Measurement categories of financial assets and
liabilities

The Company classifies all of its financial assets based
on the business model for managing the assets and the
asset's contractual terms, measured at either:

• Amortised cost or FVTPL

The Company classifies and measures its derivatives
(other than those designated in a cash flow hedging
relationship) and trading portfolio at FVTPL. The Company
may designate financial instruments at FVTPL, if so
doing eliminates or significantly reduces measurement
or recognition inconsistencies. Financial liabilities, other
than loan commitments and financial guarantees, are
measured at FVTPL when they are derivative instruments
or the fair value designation is applied.

3.3 Financial Instruments - Classification and Sub
measurement

3.3.1 Bank balances, Loans, Trade receivables and
financial investments at amortised cost

The Company measures Bank balances, Loans, Trade
receivables and other financial investments at amortised
cost if both of the following conditions are met:

(i) The financial asset is held within a business model
with the objective to hold financial assets in order
to collect contractual cash flows.

(ii) The contractual terms of the financial asset give
rise on specified dates to cash flows that are solely
payments of principal and interest (SPPI) on the
principal amount outstanding. The details of these
conditions are outlined below.

3.3.1.1 Business model assessment

The Company determines its business model at the
level that best reflects how it manages the Company's
financial assets to achieve its business objective.

The Company's business model is not assessed on an
instrument-by-instrument basis, but at a higher level of
aggregated portfolios and is based on observable factors
such as:

• How the performance of the business model and
the financial assets held within that business model
are evaluated and reported to the entity's key
management personnel

• The risks that affect the performance of the business
model (and the financial assets held within that
business model) and, in particular, the way those risks
are managed

The business model assessment is based on reasonably
expected scenarios without taking 'worst case' or 'stress
case' scenarios into account. If cash flows after initial
recognition are realised in a way that is different from
the Company's original expectations, the Company does
not change the classification of the remaining financial
assets held in that business model, but incorporates such
information when assessing newly originated or newly
purchased financial assets going forward.

3.3.1.2 The Solely Payments of Principal and Interest
(SPPI) test.

As a second step of its classification process the
Company assesses the contractual terms of financial
to identify whether they meet the Solely Payments of
Principal and Interest (SPPI) test.

'Principal' for the purpose of this test is defined as the fair
value of the financial asset at initial recognition and may
change over the life of the financial asset.

The most significant elements of interest within a
lending arrangement are typically the consideration for
the time value of money and credit risk. To make the
SPPI assessment, the Company applies judgment and
considers relevant factors such as the currency in which
the financial asset is denominated, and the period for
which the interest rate is set.

I n contrast, contractual terms that introduce a more
than de minimise exposure to risks or volatility in the
contractual cash flows that are unrelated to a basic
lending arrangement do not give rise to contractual cash
flows that are solely payments of principal and interest
on the amount outstanding. In such cases, the financial
asset is required to be measured at FVTPL.

3.3.2 Financial assets or financial liabilities held for
trading

The Company classifies financial assets as held for trading
when they have been purchased or issued primarily for
short-term profit making through trading activities or
form part of a portfolio of financial instruments that
are managed together, for which there is evidence of
a recent pattern of short-term profit taking. Held-for-
trading assets and liabilities are recorded and measured
in the balance sheet at fair value. Changes in fair value are
recognised in net gain on fair value changes. Interest and
dividend income or expense is recorded in net gain on fair
value changes according to the terms of the contract, or
when the right to payment has been established.

Included in this classification are debt securities, equities,
and customer loans that have been acquired principally
for the purpose of selling or repurchasing in the near term.

3.3.3 Debt instruments at FVOCI

Debt instruments are measured at FVOCI when both of
the following conditions are met:

• The instrument is held within a business model, the
objective of which is achieved by both collecting
contractual cash flows and selling financial assets.

• The contractual terms of the financial asset meet the
SPPI test.

FVOCI debt instruments are subsequently measured at
fair value with gains and losses arising due to changes in
fair value recognised in OCI. Interest income and foreign
exchange gains and losses are recognised in profit or loss
in the same manner as for financial assets measured at
amortised cost. Where the Company holds more than one
investment in the same security, they are deemed to be
disposed of on a first-in first-out basis. On derecognition,
cumulative gains or losses previously recognised in OCI
are reclassified from OCI to profit or loss.

3.3.4 Equity instruments at FVOCI

The Company subsequently measures all equity
investments at fair value through profit or loss, unless
the Company's management has elected to classify
irrevocably some of its equity investments as equity
instruments at FVOCI, when such instruments meet
the definition of Equity under Ind AS 32 Financial
Instruments: Presentation and are not held for trading.
Such classification is determined on an instrument-by¬
instrument basis.

Gains and losses on these equity instruments are never
recycled to profit or loss. Dividends are recognised
in profit or loss as dividend income when the right of
the payment has been established, except when the
Company benefits from such proceeds as a recovery of
part of the cost of the instrument, in which case, such
gains are recorded in OCI. Equity instruments at FVOCI
are not subject to an impairment assessment.

3.3.5 Debt securities and other borrowed funds:

After initial measurement, debt issued and other borrowed
funds are subsequently measured at amortised cost.
Amortised cost is calculated by taking into account any
discount or premium on issue funds, and costs that are an
integral part of the EIR. A compound financial instrument
which contains both a liability and an equity component
is separated at the issue date.

The Company has issued financial instruments with
equity conversion rights and call options. When
establishing the accounting treatment for these non¬
derivative instruments, the Company first establishes
whether the instrument is a compound instrument and
classifies such instrument's components separately as
financial liabilities or equity instruments in accordance
with Ind AS 32. Classification of the liability and equity
components of a convertible instrument is not revised
as a result of a change in the likelihood that a conversion
option will be exercised, even when exercising the option
may appear to have become economically advantageous
to some holders. When allocating the initial carrying
amount of a compound financial instrument to the
equity and liability components, the equity component
is assigned as the residual amount after deducting
from the entire fair value of the instrument, the amount
separately determined for the liability component. The
value of any derivative features (such as a call options)
embedded in the compound financial instrument, other
than the equity component (such as an equity conversion
option), is included in the liability component. Once the
Company has determined the split between equity
and liability, it further evaluates whether the liability
component has embedded derivatives that must be
separately accounted.

3.3.6 Financial assets and financial liabilities at fair value
through profit or loss

Financial assets and financial liabilities in this category are
those that are not held for trading and have been either
designated by management upon initial recognition or are

mandatorily required to be measured at fair value under
Ind AS 109. Management only designates an instrument at
FVTPL upon initial recognition when one of the following
criteria are met. Such designation is determined on an
instrument-by-instrument basis:

• The designation eliminates, or significantly reduces,
the inconsistent treatment that would otherwise arise
from measuring the assets or liabilities or recognising
gains or losses on them on a different basis.

Or

• The liabilities are financial liabilities, which are managed
and their performance evaluated on a fair value basis,

Or

• The liabilities containing one or more embedded
derivatives, unless they do not significantly modify the
cash flows that would otherwise be required by the
contract, or it is clear with little or no analysis when a
similar instrument is first considered that separation
of the embedded derivative(s) is prohibited.

Financial assets and financial liabilities at FVTPL are
recorded in the balance sheet at fair value. Changes in fair
value are recorded in profit and loss with the exception of
movements in fair value of liabilities designated at FVTPL
due to changes in the Company's own credit risk. Such
changes in fair value are recorded in the Own credit reserve
through OCI and do not get recycled to the profit or loss.
Interest earned or incurred on instruments designated
at FVTPL is accrued in interest income or finance cost,
respectively, using the EIR, taking into account any
discount/ premium and qualifying transaction costs
being an integral part of instrument. Interest earned on
assets mandatorily required to be measured at FVTPL is
recorded using contractual interest rate.

3.3.7 Financial guarantees and undrawn loan
commitments

Financial guarantees are initially recognised in the
financial statements (within Provisions) at fair value.
Subsequent to initial recognition, the Company's liability
under each guarantee is measured at the higher of the
amount initially recognised less cumulative amortisation
recognised in the statement of profit and loss.

The premium/deemed premium is recognised in the
statement of profit and loss on a straight line basis over
the life of the guarantee.

Undrawn loan commitments are commitments under
which, over the duration of the commitment, the
Company is required to provide a loan with pre-specified
terms to the customer. Undrawn loan commitments are
in the scope of the ECL requirements.

The nominal contractual value of undrawn loan
commitments, where the loan agreed to be provided is
on market terms, are not recorded in the balance sheet.

The Company occasionally issues loan commitments
at below market interest rates drawdown. Such
commitments are subsequently measured at the higher
of the amount of the ECL allowance and the amount
initially recognised less, when appropriate.

3.4 Reclassification of financial assets and liabilities

The Company does not reclassify its financial assets
subsequent to their initial recognition, apart from the
exceptional circumstances in which the Company
acquires, disposes of, or terminates a business line. The
Company has reclassified financial liability in 2023-24.
[Refer note no. 19 & 51(c)]

3.5 Derecognition of financial assets and liabilities

3.5.1 Derecognition of financial assets due to substantial

modification of terms and conditions

The Company derecognises a financial asset, such as
a loan to a customer, when the terms and conditions
have been renegotiated to the extent that, substantially,
it becomes a new loan, with the difference recognised
as a derecognition gain or loss, to the extent that an
impairment loss has not already been recorded. The
newly recognised loans are classified as Stage 1 for ECL
measurement purposes, unless the new loan is deemed
to be POCI.

When assessing whether or not to derecognise a loan to
a customer, amongst others, the Company considers the
following factors:

• Change in currency of the loan

• Introduction of an equity feature

• Change in counterparty

I f the modification is such that the instrument would no
longer meet the SPPI criterion

If the modification does not result in cash flows that are
substantially different, the modification does not result
in derecognition. Based on the change in cash flows
discounted at the original EIR, the Company records a
modification gain or loss, to the extent that an impairment
loss has not already been recorded.

3.5.2 Derecognition of financial assets other than due to
substantial modification

3.5.2.1 Financial assets

A financial asset (or, where applicable, a part of a financial
asset or part of a Company of similar financial assets)
is derecognised when the rights to receive cash flows
from the financial asset have expired. The Company
also derecognises the financial asset if it has both
transferred the financial asset and the transfer qualifies
for derecognition.

The Company has transferred the financial asset if, and
only if, either:

(i) The Company has transferred its contractual rights
to receive cash flows from the financial asset

Or

(ii) It retains the rights to the cash flows, but has
assumed an obligation to pay the received cash
flows in full without material delay to a third party
under a 'pass-through' arrangement.

Pass-through arrangements are transactions whereby
the Company retains the contractual rights to receive
the cash flows of a financial asset (the 'original asset'),
but assumes a contractual obligation to pay those cash
flows to one or more entities (the 'eventual recipients'),
when all of the following three conditions are met:

(i) The Company has no obligation to pay amounts
to the eventual recipients unless it has collected
equivalent amounts from the original asset,
excluding short-term advances with the right to full
recovery of the amount lent plus accrued interest at
market rates

(ii) The Company cannot sell or pledge the original asset
other than as security to the eventual recipients

(iii) The Company has to remit any cash flows it collects
on behalf of the eventual recipients without material
delay. In addition, the Company is not entitled to
reinvest such cash flows, except for investments
in cash or cash equivalents including interest
earned, during the period between the collection
date and the date of required remittance to the
eventual recipients.

A transfer only qualifies for derecognition if either:

(i) The Company has transferred substantially all the
risks and rewards of the asset

Or

(ii) The Company has neither transferred nor retained
substantially all the risks and rewards of the asset,
but has transferred control of the asset

The Company considers control to be transferred if and
only if, the transferee has the practical ability to sell the
asset in its entirety to an unrelated third party and is able
to exercise that ability unilaterally and without imposing
additional restrictions on the transfer.

When the Company has neither transferred nor retained
substantially all the risks and rewards and has retained
control of the asset, the asset continues to be recognised
only to the extent of the Company's continuing
involvement, in which case, the Company also recognises
an associated liability. The transferred asset and the
associated liability are measured on a basis that reflects
the rights and obligations that the Company has retained.

3.5.3 Financial liabilities

A financial liability is derecognised when the obligation
under the liability is discharged, cancelled or expires.
Where 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 a derecognition of the original liability and the
recognition of a new liability. The difference between the
carrying value of the original financial liability and the
consideration paid is recognised in profit or loss.

3.6 Impairment of financial assets

3.6.1 Overview of the Expected Credit Loss (ECL)
principles

ECL on Inter Company Loans

The Company calculates ECL's based on total loans
receivable (including accrued interest).The Loan assets
are generally classified under three stages based on the
evaluation of the following criteria:

• Stage 1 - Loans with low credit risk and where there is
no significant increase in credit risk.

Financial assets where no significant increase in
credit risk has been observed are considered to be in
'stage 1' for which a 12 month ECL is recognised. The
Company calculates the 12mECL allowance based on
the expectation of a default occurring in the 12 months
following the reporting date.

These expected 12-month default probabilities
are applied to a forecast EAD and multiplied by the
expected LGD and discounted by an approximation
to the original ROI.

• Stage 2 - Loans with significant increase in credit risk
i.e assets with 30 days past due date.

When a loan has shown a significant increase in credit
risk since origination, the Group records an allowance
for the LTECLs.

The mechanics for computation of ECL is same as
in stage 1 but Probability of default (PD's) and Loss
Given Default (LGD's) are estimated over the LTECL of
the financial asset. The expected cash shortfalls are
discounted by an approximation to the original ROI.

• Stage 3 - Credit impaired loans. The asset with 90 days
past due date.

For loans considered credit-impaired, the Company
recognises the lifetime expected credit losses for
these loans. The financial asset in stage 3 will be
fully impaired.

As ECL model is a forward-looking framework and
considered reasonable and supportable information
that includes forecasts of future economic conditions
including, where relevant, multiple macroeconomic
scenarios. When incorporating forward looking
information, such as macro-economic forecasts to

determine expected credit losses, an entity should
consider the relevance of information for each specific
financial instrument or group of financial instruments.

Significant increase in credit risk (Stage -2 )

An assessment of whether credit risk has increased
significantly since initial recognition is performed at each
reporting period by considering the change in the risk of
default of the loan exposure. However, unless identified
at an earlier stage, 30 days past due is considered as an
indication of financial assets to have suffered a significant
increase in credit risk. Based on other indications such
as borrower's frequently delaying payments beyond due
dates though not 30 days past due are included in stage
2 for mortgage loans.

Credit Impaired (Stage -3)

The Company recognises a financial asset to be credit
impaired and in stage 3 by considering relevant objective
evidence, primarily whether:

1. Delay in payment of Interest on loan past over dues
for more than 90 days.

2. Default in repayment of Loan outstanding

Restructured loans (other than OTR) where repayment
terms are renegotiated as compared to the original
contracted terms due to significant credit distress of
the borrower are classified as credit impaired. Such
loans continue to be in stage 3 until they exhibit regular
payment of renegotiated principal and interest over a
minimum observation of period, typically 12 months-
post renegotiation, and there are no other indicators of
impairment. Having satisfied the conditions of timely
payment over the observation period these loans could
be transferred to stage 1 or 2 and a fresh assessment of
the risk of default be done for such loans.

ECL on Receivables from Support Services - Simplified
Approach

For receivables with no significant financing component
with less than 12 months life cycle entity can directly
calculate life time expected losses. The Company uses
a provision matrix to calculate ECL on recoverable from
support services. The provision matrix is based on
historical rate with over the expected life of receivable
and is adjusted for forward-looking estimates.

At every reporting date, the historical observed
default rates are updated for changes in the forward
-looking estimates.

3.6.2 Credit-impaired financial assets:

At each reporting date, the Company assesses
whether financial assets carried at amortised
cost and debt financial assets carried at FVOCI
are credit-impaired. A financial asset is 'credit-
impaired' when one or more events that have a
detrimental impact on the estimated future cash
flows of the financial asset have occurred. Evidence
that a financial asset is credit-impaired includes the
following observable data:

a) Significant financial difficulty of the borrower
or issuer;

b) A breach of contract such as a default or past
due event;

c) The restructuring of a loan or advance by the
Company on terms that the Company would not
consider otherwise;

d) It is becoming probable that the borrower will enter
bankruptcy or other financial reorganisation; or

e) The disappearance of an active market for a security
because of financial difficulties.

POCI: Purchased or originated credit impaired (POCI)
assets are financial assets that are credit impaired on
initial recognition. POCI assets are recorded at fair value at
original recognition and interest income is subsequently
recognised based on a credit-adjusted EIR. ECLs are
only recognised or released to the extent that there is a
subsequent change in the expected credit losses.

For financial assets for which the Company has no
reasonable expectations of recovering either the entire
outstanding amount, or a proportion thereof, the gross
carrying amount of the financial asset is reduced. This is
considered a (partial) derecognition of the financial asset.

The Company derecognizes a financial asset when the
contractual rights to the cash flows from the asset expire,
or when it transfers the financial asset and substantially
all the risks and rewards of ownership of the asset to
another party.

On derecognition of a financial asset accounted under
Ind AS 109 in its entirety, the difference between the
asset's carrying amount and the sum of consideration
received and receivable is recognized in profit or loss.

I f the transferred asset is part of a larger financial asset
and the part transferred qualifies for derecognition in
its entirety, the previous carrying amount of the larger
financial asset shall be allocated between the part
that continues to be recognised and the part that is
derecognised, on the basis of the relative fair values of
those parts on the date of the transfer."

3.6.3 Debt instruments measured at fair value through OCI

The ECLs for debt instruments measured at FVOCI do not
reduce the carrying amount of these financial assets in
the balance sheet, which remains at fair value. Instead,
an amount equal to the allowance that would arise if the
assets were measured at amortised cost is recognised
in OCI as an accumulated impairment amount, with a
corresponding charge to profit or loss. The accumulated
loss recognised in OCI is recycled to the profit and loss
upon derecognition of the assets.

3.6.4 Purchased or originated credit impaired financial
assets (POCI)

For POCI financial assets, the Company only recognises
the cumulative changes in LTECL since initial recognition
in the loss allowance.

3.6.5 Trade receivables and contract assets

The Company follows 'simplified approach' for recognition
of impairment loss allowance on trade receivables. The
application of simplified approach does not require
the Company to track changes in credit risk. Rather,
it recognises impairment loss allowance based on
lifetime ECLs at each reporting date, right from its initial
recognition. The Company uses a provision matrix to
determine impairment loss allowance on portfolio of its
trade receivables. The provision matrix is based on its
historically observed default rates over the expected
life of the trade receivables and is adjusted for forward¬
looking estimates. At every reporting date, the historical
observed default rates are updated for changes in the
forward-looking estimates.

3.7 Write-offs

Financial assets are written off either partially or in their
entirety only when the Company has stopped pursuing
the recovery. If the amount to be written off is greater
than the accumulated loss allowance, the difference
is first treated as an addition to the allowance that is
then applied against the gross carrying amount. Any
subsequent recoveries are credited to impairment on
financial instrument on statement of profit and loss.

3.8 Forborne and modified loans

The Company sometimes makes concessions or
modifications to the original terms of loans as a response
to the borrower's financial difficulties, rather than
taking possession or to otherwise enforce collection of
collateral. The Company considers a loan forborne when
such concessions or modifications are provided as a
result of the borrower's present or expected financial
difficulties and the Company would not have agreed
to them if the borrower had been financially healthy.
Indicators of financial difficulties include defaults on
covenants, or significant concerns raised by the Credit
Risk Department. Forbearance may involve extending
the payment arrangements and the agreement of new
loan conditions. Once the terms have been renegotiated,
any impairment is measured using the original EIR as
calculated before the modification of terms. It is the
Company's policy to monitor forborne loans to help
ensure that future payments continue to be likely to occur.

When the loan has been renegotiated or modified but
not derecognised, the Company also reassesses whether
there has been a significant increase in credit risk. The
Company also considers whether the assets should be
classified as Stage 3.

3.9 Determination of fair value

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.

I n order to show how fair values have been derived,
financial instruments are classified based on a hierarchy
of valuation techniques, as summarised below:

• Level 1 financial instruments -Those where the inputs
used in the valuation are unadjusted quoted prices
from active markets for identical assets or liabilities
that the Company has access to at the measurement
date. The Company considers markets as active only
if there are sufficient trading activities with regards
to the volume and liquidity of the identical assets or
liabilities and when there are binding and exercisable
price quotes available on the balance sheet date.

• Level 2 financial instruments-Those where the
inputs that are used for valuation and are significant,
are derived from directly or indirectly observable
market data available over the entire period of the
instrument's life. Such inputs include quoted prices
for similar assets or liabilities in active markets, quoted
prices for identical instruments in inactive markets
and observable inputs other than quoted prices such
as interest rates and yield curves, implied volatilities,
and credit spreads. In addition, adjustments may be
required for the condition or location of the asset or the
extent to which it relates to items that are comparable
to the valued instrument. however, if such adjustments
are based on unobservable inputs which are significant

to the entire measurement, the Company will classify
the instruments as Level 3.

• Level 3 financial instruments -Those that include one
or more unobservable input that is significant to the
measurement as whole.

For assets and liabilities that are recognised 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.

The Company periodically reviews its valuation
techniques including the adopted methodologies and
model calibrations. However, the base models may not
fully capture all factors relevant to the valuation of the
Company's financial instruments such as credit risk
(CVA), own credit (DVA) and/or funding costs (FVA).
Therefore, the Company applies various techniques
to estimate the credit risk associated with its financial
instruments measured at fair value, which include a
portfolio-based approach that estimates the expected
net exposure per counterparty over the full lifetime of the
individual assets, in order to reflect the credit risk of the
individual counterparties for non-collateralised financial
instruments. The Company estimates the value of its own
credit from market observable data, such as secondary
prices for its traded debt and the credit spread on credit
default swaps and traded debts on itself.

The Company evaluates the levelling at each reporting
period on an instrument-by-instrument basis and
reclassifies instruments when necessary based on the
facts at the end of the reporting period.

3.10 Foreign currency translation

3.10.1 Functional and presentational currency

The Standalone financial statements are presented in INR
which is also functional currency of the Company. The
Company determines the functional currency and items
included in the financial statements are measured using
that functional currency. The Company uses the direct
method of standalone.

3.10.2 Transactions and balances

Transactions in foreign currencies are initially recorded
in the functional currency at the spot rate of ex-change

ruling at the date of the transaction. However, for
practical reasons, the Company uses an average rate if
the average approximates the actual rate at the date of
the transaction.

Monetary assets and liabilities denominated in foreign
currencies are retranslated into the functional currency
at the spot rate of exchange at the reporting date. All
differences arising on non-trading activities are taken to
other income/expense in the statement of profit and loss.

Non-monetary items that are measured at historical
cost in a foreign currency are translated using the spot
exchange rates as at the date of recognition.

3.11 Leasing

At inception of a contract, the Company assesses
whether a contract is, or contains a lease. A contract
is, or contains a lease if the contract conveys the right
to control the use of an identified asset for a period of
time in exchange for consideration. To assess whether
a contract conveys the right to control the use of an
identified asset, the Company uses the definition of a
lease in Ind AS 116.

The determination of whether an arrangement is a lease,
or contains a lease, is based on the substance of the
arrangement and requires an assessment of whether the
fulfilment of the arrangement is dependent on the use of
a specific asset or assets or whether the arrangement
conveys a right to use the asset.

There are arrangement wherein the common expenses
for usage of assets which are not identified as per
application guidance given in Appendix B of IND AS 116,
accordingly IND AS 116 is not applicable.

3.11.1 Company as a lessee

Leases that do not transfer to the Company substantially
all of the risks and benefits incidental to ownership of
the leased items are operating leases. Operating lease
payments are recognised as an expense in the statement
of profit and loss on a straight-line basis over the lease
term, unless the increase is in line with expected general
inflation, in which case lease payments are recognised
based on contractual terms. Contingent rental payable
is recognised as an expense in the period in which they it
is incurred.

At commencement or on modification of a contract that
contains a lease component, the Company allocates the
consideration in the contract to each lease component
on the basis of its relative stand alone prices. However,
for leases of property, the Company has elected not
to separate non - lease components and account
for the lease and non - lease components as a single
lease component.

The Company recognizes a right - of - use asset and a lease
liability at the lease commencement date. The right- of -
use asset is initially measured at cost, which comprises
the initial amount of the lease liability adjusted for any
lease payments made at or before the commencement
date plus any initial direct costs incurred and an estimate
of costs to dismantle and remove the underlying asset or
to restore the underlying asset or the site on which it is
located, less any lease incentives received.

The right- of - use asset is subsequently depreciated using
the straight - line method from the commencement date
to the end of the lease term, unless the lease transfers
ownership of the underlying asset to the Company by
the end of the lease term or the cost of the right - of
- use asset reflects that the Company will exercise a
purchase option. In that case the right - of - use asset
will be depreciated over the useful life of the underlying
asset, which is determined on the same basis as those
of property and equipment. In addition, the right - of -
use asset is periodically reduced by impairment losses,
if any, and adjusted for certain remeasurements of the
lease liability.

The lease liability is initially measured at the present
value of the lease payments that are not paid at the
commencement date, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily
determined, the Company's incremental borrowing rate
as the discount rate.

The Company determines its incremental borrowing rate
by obtaining interest rates from various external financing
sources and makes certain adjustments to reflect the
terms of the lease and type of the asset leased.

Lease payment included in the measurement of lease
liability comprise the following:

• Fixed payments, including in - substance
fixed payments;

• Variable lease payments that depend on an index or
a rate, initially measured using the index or rate as at
the commencement date;

• Amounts expected to be payable under a residual
value guarantee; and

• The exercise price under a purchase option that the
Company is reasonable certain to exercise, lease
payments in an optional renewal period if the Company
is reasonably certain to exercise an extension option,
and penalties for early termination of a lease unless the
Company is reasonably certain not to terminate early.

The lease liability is measured at amortized cost using the
effective interest method. It is remeasured when there is
a change in future lease payments arising from a change
in an index or rate, if there is a change in the Company's
estimate of the amount expected to be payable under
a residual value guarantee, if the Company changes
its assessment of whether it will exercise a purchase,
extension or termination option or if there is a revised
in - substance fixed lease payment.

When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying
amount of the right - of - use asset, or is recorded in
profit or loss if the carrying amount of the right - of - use
asset has been reduced to zero.

The Company presents right - of - use assets that do not
meet the definition of investment property in 'property,
plant and equipment' and lease liabilities under the head
non - current 'borrowings'.

Short - term leases and leases of low value assets

The Company has elected not to recognize right - of -
use assets and lease liabilities for leases of low - value
assets and short - term leases. The Company recognizes
the lease payments associated with these leases as an
expense on a straight - line basis over the lease term.

3.11.2 Company as a lessor

Leases where the Company does not transfer substantially
all of the risk and benefits of ownership of the asset are
classified as operating leases. Rental income arising from
operating leases is accounted for on a straight-line basis
over the lease terms and is included in rental income in
the statement of profit or loss, unless the increase is in
line with expected general inflation, in which case lease
income is recognised based on contractual terms. Initial
direct costs incurred in negotiating operating leases
are added to the carrying amount of the leased asset
and recognised over the lease term on the same basis
as rental income. Contingent rents are recognised as
revenue in the period in which they are earned.

3.12 Recognition of income and expenses
INCOME

Revenue (other than for those items to which Ind AS 109
Financial Instruments are applicable) is measured at fair
value of the consideration received or receivable. Ind AS
115 Revenue from contracts with customers outlines a
single comprehensive model of accounting for revenue
arising from contracts with customers and supersedes
current revenue recognition guidance found within
Ind ASs.

The Company recognises revenue from contracts with
customers based on a five step model as set out in
Ind 115:

Step 1: Identify contract(s) with a customer: A contract
is defined as an agreement between two or more parties
that creates enforceable rights and obligations and sets
out the criteria for every contract that must be met.

Step 2: Identify performance obligations in the contract:
A performance obligation is a promise in a contract with
a customer to transfer a good or service to the customer.

Step 3: 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 or services to a customer,
excluding amounts collected on behalf of third parties.

Step 4: Allocate the transaction price to the performance
obligations in the contract: For a contract that has more

than one performance obligation, the Company allocates
the transaction price to each performance obligation in
an amount that depicts the amount of consideration to
which the Company expects to be entitled in exchange
for satisfying each performance obligation.

Step 5: Recognize revenue when (or as) the Company
satisfies a performance obligation

I ncome related to service is recognise as per principles
of the IND AS 115 as mentioned above.

3.12.1 Interest Income

Interest Income is recognised as per policy mentioned in
Note no 3.1.2.

3.12.2 Dividend income

Dividend income (including from FVOCI investments)
is recognised when the Company's right to receive the
payment is established, it is probable that the economic
benefits associated with the dividend will flow to the
entity and the amount of the dividend can be measured
reliably. This is generally when the shareholders approve
the dividend.

3.12.3 EXPENSE

3.12.3.1 Finance Cost

Finance costs represents Interest expense recognised
by applying the Effective Interest Rate (EIR) to the gross
carrying amount of financial liabilities other than financial
liabilities classified as FVTPL. The EIR in case of a financial
liability is computed

i). As the rate that exactly discounts estimated future
cash payments through the expected life of the
financial liability to the gross carrying amount of the
amortised cost of a financial liability.

I I). By considering all the contractual terms of the
financial instrument in estimating the cash flows.

III). Including all fees paid between parties to the
contract that are an integral part of the effective
interest rate, transaction costs, and all other
premiums or discounts.

3.15 Intangible assets

I ntangible Assets are recognised only if it is probable
that the future economic benefits that are attributable
to assets will flow to the Company and the cost of the
assets can be measured reliably. Intangible assets are
recorded at cost and carried at cost less accumulated
depreciation and accumulated Impairment losses, if any.

I ntangible assets are amortised on a straight line basis
over their estimated useful lives. The amortisation period
and the amortisation method are reviewed at least at
each financial year end. If the expected useful life of the
asset is significantly different from previous estimates,
the amortisation period is changed accordingly.

Gains or losses arising from the retirement or disposal
of an intangible asset are determined as the difference
between the net disposal proceeds and the carrying
amount of the asset and recognised as income or
expense in the Statement of Profit and Loss.

Computer software which is not an Integral part of the
related hardware is classified as an intangible asset and
is belong amortised over the estimated useful life. The
estimated useful lives of Intangible assets are 5 years.

3.16 Impairments of Non-financial assets

The Company assesses, at each reporting date, whether
there is an indication that an asset may be impaired and
when circumstances indicate that the carrying value
may be impaired. 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 Company 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.

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, are
recognised in the statement of profit and loss.

For assets excluding goodwill, an assessment is made
at each reporting date to determine whether there is an
indication that previously recognised 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 recognised 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 recognised.
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 recognised for the asset in prior years. Such reversal
is recognised 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.

Goodwill is tested for impairment annually and when
circumstances indicate that the carrying value may
be impaired.

I mpairment is determined for goodwill by assessing the
recoverable amount of each CGU (or Company of CGUs)
to which the goodwill relates. When the recoverable
amount of the CGU is less than its carrying amount, an
impairment loss is recognised. Impairment losses relating
to goodwill cannot be reversed in future periods.

3.17 Retirement and other employee benefits
Short term employee benefits

Employee benefits payable wholly within twelve months
of receiving employees services are classified as short
term employee benefits. These benefits include salaries
and wages, performance incentives and compensated
absences which are expected to occur in next twelve
months. The undiscounted amount of short term
benefits to be paid in exchange for employee services
is recognised as an expense as and when the related
service is rendered by employees.

Compensated absences

Compensated absences accruing to employees and
which can be carried to future periods but where there
are restriction on availment or encashment or where the
availment or encashment is not expected to occur wholly
with in next twelve months, the liability on account of
benefits is determined actuarially using the projected
unit credit method.

Defined Benefit Plans - Gratuity and Provident Fund
Provident Fund

Retirement benefit in the form of provident fund is a
defined contribution scheme. The Company has no
obligation, other than the contribution payable to the
provident fund. The Company recognises contribution
payable to the provident fund scheme as an expense,
when an employee renders the related service. If the
contribution payable to the scheme for service received
before the balance sheet date exceeds the contribution
already paid, the deficit payable to the scheme is
recognised as a liability after deducting the contribution
already paid. If the contribution already paid exceeds the
contribution due for services received before the balance
sheet date, then excess is recognised as an asset to the
extent that the pre-payment will lead to, for example, a
reduction in future payment or a cash refund.

Gratuity

The Company operates a defined benefit gratuity plan,
which requires contributions to be made to a separately
administered fund. The cost of providing benefits under
the defined benefit plan is determined using the projected
unit credit method. Remeasurements, comprising of
actuarial gains and losses, the effect of the asset ceiling,
excluding amounts included in net interest on the net
defined benefit liability and the return on plan assets
(excluding amounts included in net interest on the net
defined benefit liability), are recognised immediately in
the balance sheet with a corresponding debit or credit to
retained earnings through OCI in the period in which they
occur. Remeasurements are not reclassified to profit or
loss in subsequent periods.

Past service costs are recognised in profit or loss on the
earlier of:

• The date of the plan amendment or curtailment, and

• The date that the Company recognises related
restructuring costs

Net interest is calculated by applying the discount rate
to the net defined benefit liability or asset. The Company
recognises the following changes in the net defined
benefit obligation as an expense in the Standalone
statement of profit and loss:

• Service costs comprising current service costs, past-
service costs, gains and losses on curtailments and
non-routine settlements; and

• Net interest expense or income