3 Material accounting policies

3.1 Revenue

Revenue from contracts with customers is recognized
on transfer of control of promised goods or services
to a customer at an amount that reflects the

consideration to which the Company is expected to
be entitled to in exchange for those goods or services.

Revenue towards satisfaction of a performance
obligation is measured at the amount of transaction
price (net of variable consideration) allocated to
that performance obligation. The transaction price
of goods sold is net of variable consideration on
account of various discounts and schemes offered
by the Company as part of the contract. This
variable consideration is estimated based on the
expected value of outflow. Revenue (net of variable
consideration) is recognized only to the extent that it
is highly probable that the amount will not be subject
to significant reversal when uncertainty relating to its
recognition is resolved.

Revenue excludes taxes collected from customers on
behalf of the government. Due to the short nature of
credit period given to customers, there is no financing
component in the contract."

a Sale of products

Revenue from sale of products is recognised
when the control of promised goods have been
transferred to the customers at an amount that
reflects the consideration which the Company
expects to receive in exchange for those goods.
The performance obligation in case of sale of
product is satisfied at a point in time i.e., when
the material is shipped to the customer or on
delivery to the customer, as may be specified in
the contract/agreed with parties.

Advance from customers is recognized under
other liabilities and released to revenue on
satisfaction of performance obligation.

b Rental income, Technical know how and
Management fees

Rental income (including income from sub¬
leasing), included under other operating
income, is recognised on a straight-line basis
over the term of the lease except where the
rentals are structured to increase in line with
expected general inflation.

Technical know how and Management fees are
recognised on accrual basis.

c Export incentives

Export incentives principally comprises of focus
market scheme, and other export incentive
schemes. The benefits under these incentive
schemes are available based on the guidelines
formulated for respective schemes by the
government authorities. These incentives are
recognised as revenue on accrual basis to the
extent it is probable that realisation is certain.

3.2 Foreign currency

Foreign currency transactions initial recognition:

On initial recognition, transactions in foreign
currencies entered into by the Company are recorded
in the functional currency (i.e. Indian Rupees), by
applying to the foreign currency amount, the spot
exchange rate between the functional currency and
the foreign currency at the date of the transaction.
Exchange differences arising on foreign exchange
transactions settled during the year are recognized in
the Statement of Profit and Loss.

Measurement of foreign currency items at
reporting date:

Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency
at the closing exchange rate at the reporting date.
Non-monetary assets and liabilities that are measured
at fair value in a foreign currency are translated into
the functional currency at the exchange rate when
the fair value was determined. Non-monetary assets
and liabilities that are measured based on historical
cost in a foreign currency are not translated.

Exchange differences arising out of these translations
are recognized in the Statement of Profit and Loss.

3.3 Employee benefits

Short-term employee benefits

Short-term employee benefits obligations payable
wholly within twelve months of rendering the
service are measured on an undiscounted basis and
are recognized in the period in which the employee
renders the related service. These benefits include
bonus and other employee benefits.

A liability is recognised for the amount expected
to be paid if the Company has a present legal or

constructive obligation to pay this amount as a result

of past service provided by the employee and the

amount of obligation can be estimated reliably.

Post-employment employee benefits

i Defined contribution plans

A defined contribution plan is a post¬
employment benefit plan under which an entity
pays fixed contributions into a separate entity
and will have no legal or constructive obligation
to pay further amounts

The Company makes specified monthly
contributions to Employee State Insurance and
Labour Welfare Fund and are recognised as an
employee benefit expense in the standalone
Statement of Profit and Loss on an accrual basis.

Contribution to Superannuation Fund, a
defined contribution scheme, is made at
pre-determined rates to the Superannuation
Fund Trust and is charged to the standalone
Statement of Profit and Loss. There are no other
obligations other than the contribution payable
to the Superannuation Fund Trust.

If the contributions payable for services
received from employees before the reporting
date exceeds the contributions already paid,
the deficit payable is recognized as a liability
after deducting the contribution already paid.
If the contribution already paid exceeds the
contribution due for services received before
the reporting date, the excess is recognized
as an asset to the extent that the prepayment
will lead to, for example, a reduction in future
payments or a cash refund.

ii Defined benefit plans

A defined benefit plan is a post-employee
benefit plan other than a defined contribution
plan. The Company's net obligation in respect
of defined benefit plans is calculated separately
for each plan by estimating the amount of
future benefit that employees have earned in
the current and prior periods, discounting that
amount and deducting the fair value of any
plan assets.

The calculation of defined benefit obligations
is performed annually by a qualified actuary
using the projected unit credit method. When
the calculation results in a potential asset for
the Company, the recognised asset is limited
to the present value of economic benefits
available in the form of any future refunds from
the plan or reductions in future contributions
to the plan. To calculate the present value of
economic benefits, consideration is given to any
applicable minimum funding requirements.

Re-measurement of the net defined benefit
liability, which comprise actuarial gains and
losses, the return on plan assets (excluding
interest) and the effect of the asset ceiling (if any,
excluding interest), are recognised immediately
in other comprehensive income (OCI). Net
interest expense (income) on the net defined
liability (assets) is computed by applying the
discount rate, used to measure the defined
benefit obligation at the beginning of the
annual period to the then-net defined liability
(asset) after taking into account any changes as
a result of contribution and benefit payments
during the year. Net interest expense and other
expenses related to gratuity benefit scheme
are recognised in the standalone Statement of
Profit or 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 or the
gain or loss on curtailment is recognised
immediately in Statement of Profit or Loss. The
Company recognises gains and losses on the
settlement of a defined benefit plan when the
settlement occurs.

Gratuity

The Company has an obligation towards gratuity, a
defined benefit scheme covering eligible employees.
The Company accounts for gratuity benefits payable
in future based on an independent actuarial valuation
method as stated above. Also, the Company's
contribution paid/ payable to the Gratuity fund
managed by the trust set up by the Company is
recognised as expense in the standalone Statement
of Profit and Loss during the period in which the
employee renders the related service.

Provident fund trust

Eligible employees receive benefits from a provident
fund which is a defined benefit plan and managed by
the trust set up by the Company. Both the employee
and the Company make monthly contributions to the
provident fund plan equal to a specified percentage
of the covered employee's salary. The rate at which
the annual interest is payable to the beneficiaries of
the trust shall not be lower than the statutory rate of
interest declared by the Central Government under
the Employees Provident Funds and Miscellaneous
Provisions Act, 1952. Accordingly, the Company has
an obligation to make good the shortfall, if any,
between the return from the investments of the Trust
and the notified interest rate. An obligation in this
respect is measured and accounted on the basis of
independent actuarial valuation as stated above.

The Company presents the above liability/(asset)
as current and non-current in the balance sheet as
per actuarial valuation by the independent actuary;
however, the entire liability towards gratuity is
considered as current as the Company will contribute
this amount to the gratuity fund within the next
twelve months.

Other employee benefits

Entitlements to annual leave and sick leave are
recognized when they accrue to employees. Sick
leave can only be availed while annual leave can
either be availed or encashed subject to a restriction
on the maximum number of accumulation of leave.
The Company determines the liability for such
accumulated leaves using the Projected Accrued
Benefit method with actuarial valuations being
carried out at each Balance Sheet date. Expenses
related to other long term employee benefits are
recognized in the Statement of Profit and loss
(including actuarial gain and loss).

3.4 Recognition of dividend income, interest income
or expense

I nterest income or expense is recognised using the
effective interest rate method. The 'effective interest
rate' is the rate that exactly discounts estimated future
cash payments or receipts through the expected life
of the financial instrument to:

- the gross carrying amount of the financial
asset; or

- the amortised cost of the financial liability.

Dividend income is recognised in the standalone
Statement of Profit or Loss on the date on which
the Company's right to receive the payment
is established.

3.5 Income tax

Income tax expense comprises current and deferred
tax. It is recognised in the Statement of Profit or
Loss except to the extent that it relates to a business
combination, or items recognised directly in equity
or in other comprehensive income.

i Current tax

Current tax comprises the expected tax payable
or receivable on the taxable income or loss for
the year and any adjustment to the tax payable
or receivable in respect of previous years. The
amount of current tax reflects the best estimate
of the tax amount expected to be paid or
received after considering the uncertainty, if
any, related to income taxes. It is measured
using tax rates that have been enacted by
the end of reporting period for the amounts
expected to be recovered from or paid to the
taxation authorities. Current tax also includes
any tax arising from dividends.

Current tax assets and current tax liabilities are
offset only if, the Company:

a) has a legally enforceable right to set off the
recognised amounts; and

b) intends either to settle on a net basis,
or to realise the asset and settle the
liability simultaneously.

ii Deferred tax

Deferred tax is recognised in respect of
temporary differences between the carrying
amounts of assets and liabilities for financial
reporting purposes and the corresponding
amounts used for taxation purposes.

Deferred tax assets are recognised to the extent
that it is probable that future taxable profits will
be available against which they can be used. The
existence of unused tax losses is strong evidence
that future taxable profit may not be available.
Therefore in case of a history of recent losses,
the Company recognises a deferred tax asset

only to the extent that it has sufficient taxable
temporary differences or there is convincing
evidence that sufficient taxable profit will be
available against which such deferred tax asset
can be realised. Deferred tax assets recognised
or unrecognised are reviewed at each reporting
date and are reduced to the extent that it is no
longer probable that the related tax benefit will
be realised.

Deferred tax is measured at the tax rates that are
expected to be applied to temporary differences
when they reverse, using tax rates enacted or
substantively enacted by the reporting date.

The measurement of deferred tax reflects the
tax consequences that would follow from the
manner in which the Company expects, at the
reporting date, to recover or settle the carrying
amount of its assets and liabilities.

3.6 Inventories

I nventories which comprise raw materials, packing
materials, work-in-progress and finished goods are
carried at the lower of cost and net realisable value.
The cost of inventories is based on weighted
average formula and includes expenditure incurred
in acquiring the inventories, costs of production or
conversion and other costs incurred in bringing the
inventories to their present location and condition.
In the case of manufactured inventories and work
in progress, cost includes an appropriate share of
fixed production overheads based normal operating
capacity of production facilities.

Net realisable value is the estimated selling price in
the ordinary course of business, less the estimated
costs of completion and the estimated costs
necessary to make the sale.

The net realisable value of work-in-progress is
determined with reference to the selling prices of
related finished products. Raw materials 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.

The comparison of cost and net realisable value is
made on an item-by-item basis.

3.7 Property, Plant and Equipment

i Recognition and measurement

Items of property, plant and equipment are
measured at cost less accumulated depreciation
and accumulated impairment losses, if any.

The cost of an item of property, plant and
equipment comprises:

a) its purchase price, including import duties
and non-refundable purchase taxes, after
deducting trade discounts and rebates.

b) any directly attributable cost of bringing
the asset to its location and condition
necessary for it to be capable of operating
in the manner intended by management.

c) the estimated costs of dismantling and
removing the item and restoring the site
on which it is located.

Income and expenses related to the
incidental operations, not necessary
to bring the item to the location and
condition necessary for it to be capable
of operating in the manner intended
by management, are recognised in the
standalone Statement of Profit and Loss.

If significant parts of an item of property,
plant and equipment have different
useful lives, then they are accounted
and depreciated for as separate items
(major components) of Property, Plant
and Equipment.

Any gain or loss on disposal of an item
of Property, Plant and Equipment is
recognised in the standalone Statement of
Profit and Loss.

ii. Subsequent expenditure

Subsequent expenditure is capitalised only if it
is probable that the future economic benefits
associated with the expenditure will flow to
the Company.

iii. Capital work in progress and Capital advances:

Cost of assets not ready for intended use, as
on the balance sheet date, is shown as capital
work in progress. Advances given towards
acquisition of fixed assets outstanding at each
balance sheet date are disclosed as Other Non¬
Current Assets.

iv. Depreciation

Depreciation is calculated using the straight-line
method on cost of items of property, plant and
equipment less their estimated residual values
over the estimated useful lives prescribed under
Schedule II of the Act.

The estimate of the useful life of the assets has
been assessed based on technical advice which
considers the nature of the asset, the usage of
the asset, expected physical wear and tear, the
operating conditions of the asset, anticipated
technological changes, manufacturers warranties
and maintenance support, etc.

Assets acquired under finance leases are
depreciated over the shorter of the lease term
and their useful lives unless it is reasonably
certain that the Company will obtain ownership
by the end of the lease term, in which case the
depreciation rates applicable for similar assets
owned by the Company are applied.

Freehold land is not depreciated.

The estimated useful lives of items of property,
plant and equipment are as follows:

3.8 Borrowing costs

Borrowing costs are interest and other costs
(including exchange differences relating to foreign
currency borrowings to the extent that they are
regarded as an adjustment to interest costs) incurred
in connection with the borrowing of funds. Borrowing
costs that are directly attributable to the acquisition
or construction of an asset that necessarily takes a
substantial period of time to get ready for its intended
use are capitalised as part of the cost of that asset till
the date it is ready for its intended use or sale. Other
borrowing costs are recognised as an expense in the
period in which they are incurred.

3.9 Investment property:

i Recognition and measurement

Property (building or part of a building or both)
that is held for long term rental yields or for
capital appreciation or both, rather than for:

i. use in the production or supply of goods or
services or for administrative purposes; or

ii. sale in the ordinary course of business
is recognised as Investment Property in
the books.

Investment property is measured initially at
its cost, including related transaction costs
and where applicable borrowing costs.

ii. Subsequent expenditure

Subsequent expenditure is capitalised to the
assets carrying amount only when it is probable
that future economic benefits associated with
the expenditure will flow to the Company and
the cost of the item can be measured reliably.
All other repairs and maintenance costs are
expensed when incurred. When part of an
investment property is replaced, the carrying
amount of the replaced part is derecognised.

iii. Depreciation

Depreciation is provided on all Investment
Property on straight line basis, based on useful
life of the assets determined in accordance with
para 3.7(iv) above. The estimated useful lives as
given below, residual values and depreciation

3.10 Intangible assets

i. Recognition and measurement

Internally generated: Research and development

Expenditure on research activities is recognised
in the standalone Statement of Profit and Loss
as incurred.

Development expenditure is capitalised as part
of the cost of the fragrance development, only
if the expenditure can be measured reliably,
the product or process is technically and
commercially feasible, future economic benefits
are probable, and the Company intends to
and has sufficient resources to complete
development and sell the asset. Otherwise,
it is recognised in standalone Statement of
profit or loss as incurred. Subsequent to initial
recognition, the asset is measured at cost less
accumulated amortisation and any accumulated
impairment losses.

Intangible asset under development
includes formulations.

Other intangible assets

Other intangible assets, which include technical
know-how, computer software and patent
& trademarks, which are acquired by the
Company are initially measured at cost. Such
intangible assets are subsequently measured
at cost less accumulated amortisation and any
accumulated impairment losses.

ii. Subsequent expenditure

Subsequent expenditure is capitalised only
when it increases the future economic benefits
embodied in the specific asset to which it relates.
All other expenditure, including expenditure
on internally generated goodwill and brands,
is recognised in the Statement of profit or loss
as incurred.

iii. Amortisation

Amortisation is calculated to write off the cost
of intangible assets less their estimated residual
values using the straight-line method over
their estimated useful lives and is included in
depreciation and amortisation in the standalone
Statement of Profit and Loss.

Amortisation methods, useful lives and residual
values are reviewed at each reporting date and
adjusted if appropriate.

3.11 Financial Instruments

a. Financial assets

i. Initial Recognition and measurement

Trade receivables are initially recognised
when they are originated. All other
financial assets are initially recognised
when the Company becomes a party to the
contractual provisions of the instrument.

A financial asset is initially measured at
fair value plus, for an item not at fair value
through profit and loss(FVPTL), transaction
cost that are directly attributable to its
acquisition or issue. Trade receivables
that do not contain a significant
financing component are measured at
transaction price.

ii. Classification

On initial recognition, a financial asset is
classified as measured at

- amortised cost; or

- fair value through profit or loss (FVTPL); or

- fair value through other comprehensive
income (FVOCI) - debt investment or
equity investment

that otherwise meets the requirements
to be measured at amortised cost or at
FVOCI as at FVTPL if doing so eliminates
or significantly reduces an accounting
mismatch that would otherwise arise.

Financial assets that are held for trading
or are managed and whose performance
is evaluated on a fair value basis are
measured at FVTPL.

iii Subsequent measurement and gains and

losses

Financial assets at FVTPL

These assets are subsequently measured
at fair value. Net gains and losses, including
any interest or dividend income, are
recognised in the standalone Statement of
Profit or Loss.

Financial assets at amortised cost

These assets are subsequently measured
at amortised cost using the effective
interest method. Interest income, foreign
exchange gains and losses and impairment
are recognised in the standalone
Statement of Profit or Loss. Any gain or
loss on derecognition is recognised in the
standalone Statement of Profit or Loss.

Debt investments at FVOCI

These assets are subsequently measured
at fair value. Interest income under
the effective interest method, foreign
exchange gains and losses and impairment
are recognised in the standalone Statement
of Profit or Loss. Other net gains and losses
are recognised in OCI. On derecognition,
gains and losses accumulated in OCI are
reclassified to Statement of Profit or Loss.

Equity investments at FVOCI

These assets are subsequently measured
at fair value. Dividends are recognised as
income in Statement of Profit or Loss unless
the dividend clearly represents a recovery
of part of the cost of the investment. Other
net gains and losses are recognised in OCI
and are not reclassified to profit or loss.

iv. Derecognition

The Company derecognises a financial
asset when the contractual rights to the
cash flows from the financial asset expire,
or it transfers the rights to receive the
contractual cash flows in a transaction
in which substantially all of the risks and
rewards of ownership of the financial asset
are transferred or in which the Company
neither transfers nor retains substantially
all of the risks and rewards of ownership
and does not retain control of the
financial asset.

If the Company enters into transactions
in which it transfers assets recognised on
its balance sheet, but retains either all or
substantially all of the risks and rewards
of the transferred assets, the transferred
assets are not derecognised.

On Derecognition of a financial asset,
the difference between the carrying
amount and the consideration received
is recognized in the Statement of Profit
and Loss.

v. Impairment of financial assets:

The Company applies expected credit
losses (ECL) model for measurement
and recognition of loss allowance on
the following:

i. Trade receivables and

lease receivables

ii. Financial assets measured at
amortized cost (other than trade
receivables and lease receivables)

iii. Financial assets measured at fair
value through other comprehensive
income (FVTOCI)

In case of trade receivables and lease
receivables, the Company follows a
simplified approach wherein an amount
equal to lifetime ECL is measured
and recognized as loss allowance.

In case of other assets (listed as ii and iii
above), the Company determines if there
has been a significant increase in credit
risk of the financial asset since initial
recognition. If the credit risk of such assets
has not increased significantly, an amount
equal to 12-month ECL is measured and
recognized as loss allowance. However, if
credit risk has increased significantly, an
amount equal to lifetime ECL is measured
and recognized as loss allowance.

Subsequently, if the credit quality of the
financial asset improves such that there is
no longer a significant increase in credit
risk since initial recognition, the Company
reverts to recognizing impairment loss
allowance based on 12-month ECL.

ECL is the difference between all
contractual cash flows that are due to the
Company in accordance with the contract
and all the cash flows that the entity
expects to receive (i.e., all cash shortfalls),
discounted at the original effective
interest rate.

Lifetime ECL are the expected credit losses
resulting from all possible default events
over the expected life of a financial asset.
12-month ECL are a portion of the lifetime
ECL which result from default events that
are possible within 12 months from the
reporting date.

ECL are measured in a manner that
they reflect unbiased, and probability
weighted amounts determined by a range
of outcomes, taking into account the time
value of money and other reasonable
information available as a result of past
events, current conditions and forecasts of
future economic conditions.

As a practical expedient, the Company
uses a provision matrix to measure lifetime
ECL on its portfolio of trade receivables.
The provision matrix is prepared based
on historically observed default rates over
the expected life of trade receivables and

is adjusted for forward-looking estimates.
At each reporting date, the historically
observed default rates and changes in the
forward-looking estimates are updated.
ECL impairment loss allowance (or
reversal) recognized during the period
is recognized as income/ expense in the
Statement of Profit and Loss under the
head 'Other expenses'.

b. Financial liabilities

i. Initial recognition and measurement

All financial liabilities are initially
recognised when the Company becomes
a party to the contractual provisions of
the instrument.

A financial liability is initially measured at
fair value minus, for an item not at fair value
through profit and loss(FVTPL), transaction
cost that are directly attributable to its
acquisition or issue.

ii Classification, subsequent measurement
and gains and losses

Financial liabilities are classified as
measured at a mortised cost or FVTPL. A
financial liability is classified as at FVTPL
if it is classified as held- for- trading, or
it is a derivative or it is designated as
such on initial recognition. Financial
liabilities at FVTPL are measured at fair
value and net gains and losses, including
any interest expense, are recognised
in the standalone statement of profit
or loss. Other financial liabilities are
subsequently measured at amortised
cost using the effective interest method.
Interest expense and foreign exchange
gains and losses are recognised in the
standalone statement of profit or loss.

iii. Derecognition

The Company derecognises a financial
liability when its contractual obligations
are discharged or cancelled or expire.

The Company also derecognises a financial
liability when its terms are modified and the

cash flows under the modified terms are
substantially different. In this case, a new
financial liability based on the modified
terms is recognised at fair value. The
difference between the carrying amount
of the financial liability extinguished and
the new financial liability with modified
terms is recognised in profit or loss.

iv. Offsetting

Financial assets and financial liabilities are
offset and the net amount presented in
the balance sheet when, and only when,
the Company currently has a legally
enforceable right to set off the amounts
and it intends either to settle them on a
net basis or to realise the asset and settle
the liability simultaneously.

c. Derivative financial instruments

The Company uses derivative financial
instruments, such as foreign currency forward
contracts, to hedge its foreign currency risks.
Such derivative financial instruments are
initially recognised at fair value on the date on
which a derivative contract is entered into and
are subsequently re-measured at fair value at
each reporting period. Any changes therein are
generally recognised in the statement of profit
and loss account.

d. Hedge Accounting

The Company uses derivative financial
instruments, such as interest rate swaps and
interest rate options to hedge its interest rate
risks. Such derivative financial instruments are
initially recognized at fair value on the date on
which a derivative contract is entered into and
are subsequently re-measured at fair value.
Derivative is carried as financial assets when the
fair value is positive and as financial liabilities
when the fair value is negative.

Any gains or losses arising from changes in
the fair value of derivatives are taken directly
to statement of profit and loss, except for the
effective portion of cash flow hedges which is
taken in the other comprehensive income (net
of tax).

The Company uses interest rate swaps and
interest rate options to hedge the cash flows of
the foreign currency denominated debt related
to variation in foreign currency interest rates.

The Company designates these interest rate
swaps and options in a cash flow hedging
relationship by applying the hedge accounting
principles. These derivatives are stated at fair
value at each reporting date. Changes in the fair
value of these derivatives that are designated
and effective as hedges of future cash flows are
recognized in other comprehensive income (net
of tax) and the ineffective portion is recognized
immediately in statement of profit and loss.
Amounts accumulated in equity are reclassified
to profit or loss when the hedged transaction
affects the profit or loss. Hedge accounting is
discontinued when the hedging instrument
expires or is sold, terminated, or exercised, or no
longer qualifies for hedge accounting.

e. Investment in subsidiaries

The Company accounts for the investments in
equity shares of subsidiaries at cost in accordance
with Ind AS 27- Separate Financial Statements.