2 Significant Accounting Policies

This note provides a list of the significant accounting policies adopted in the preparation of these
financial statements. These policies have been consistently applied to all the years presented, unless
otherwise stated.

2.1 Basis of preparation and presentation

(a) Statement of Compliance with Ind AS

The financial statements of the Company have been prepared in accordance with Indian Accounting
standards (Ind AS) as prescribed under Section 133 of the Companies Act ,2013 read with Rule 3
of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules issued
thereafter.

(b) Basis of Measurement

The financial statements have been prepared on a historical cost convention on accrual basis, except
for the following material items that have been measured at fair value as required by relevant Ind AS:-

i) Certain financial assets and liabilities measured at fair value (refer accounting policy 2.10 on financial
instruments)ii) Defined benefit and other long-term employee benefitsAII assets and liabilities have
been classified as current or non-current as per the Company’s operating cycle and other criteria set
out in the Schedule III to the Companies Act, 2013. Based on the nature of services and the time
between the rendering of service and their realization in cash and cash equivalents, the Company has
ascertained its operating cycle as twelve months for the purpose of current and non-current classification
of assets and liabilities.

(c) Use of estimates

The preparation of financial statements in conformity with Ind AS requires the Management to make
estimate and assumptions that affect the reported amount of assets and liabilities as at the Balance
Sheet date, reported amount of revenue and expenses for the year and disclosures of contingent
liabilities as at the Balance Sheet date. The estimates and assumptions used in the accompanying
financial statements are based upon the Management’s evaluation of the relevant facts and circum¬
stances as at the date of the financial statements. Actual results could differ from these estimates.
Estimates and underlying assumptions are reviewed on a periodic basis. Revisions to accounting
estimates, if any, are recognized in the year in which the estimates are revised and in any future years
if the revision effects such periods.

Also key sources of estimation uncertainty is mentioned below:

(i) Useful lives of property, plant and equipment and intangible assets:

As described in the significant accounting policy, the Company reviews the estimated useful lives of
property, plant and equipment and intangible assets at the end of each reporting period.

ii) The fair value measurements and valuation processes:

Some of the Company’s assets and liabilities are measured at fair value for financial reporting
purposes. In estimating the fair value of an asset or liability, the Company uses market-observable
data to the extent it is available. Where level 1 input are not available, the Company engages third
party valuers, where required, to perform the valuation. Information about the valuation techniques and
inputs, used in determining the fair value of various assets, liabilities are disclosed in notes to financial
statements.

ii!) Actuarial valuation:

The determination of Company’s liability towards defined benefit obligation to employees is made
through independent actuarial valuation including determination of amounts to be recognized in the
statement of profit or loss and in other comprehensive income. Such valuation depend upon assump¬
tions determined after taking into account inflation, seniority, promotion and other relevant factors such
as supply and demand factors in the employment market. Information about such valuation is provided
in notes to financial statements.

2.2 Property, Plant and Equipment & Capital Work-in Progress

A) Property, plant and equipment are stated at cost of acquisition less accumulated depreciation and
accumulated impairment losses, if any. Direct costs are capitalized until the assets are ready for use and
include inward freight, and expenses incidental to acquisition and installation. Subsequent expenditures
related to an item of Property, plant and equipment are added to its book value only if they increase
the future benefits from the existing asset beyond its previously assessed standard of performance.

Depreciation methods, estimated useful lives

Depreciation on Property, plant and equipment is provided when the assets are ready for use on the
straight line method, on a pro rata basis, over the estimated useful lives of assets, in order to reflect
the period over which the depreciable asset is expected to be used by the Company. Depreciation
on addition to property plant and equipment is provided on pro-rata basis from the date of acquisition.
Depreciation on sale/deduction from property plant and equipment is provided up to the date
preceding the date of sale, deduction as the case may be. Losses arising from the retirement of, and
gains or losses arising from disposal of Property, plant and equipment measured as the difference
between amount realized and net carrying value which are carried at cost are recognized in the
Statement of Profit and Loss, under ‘Other Income/ Other Expenses’. Depreciation methods, useful
lives and residual values are reviewed periodically at each financial year end and adjusted prospec¬
tively, as change in accounting estimates. Estimated residual lives and residual value of the assets is
given below.

ii) Estimated residual value:

The Estimated residual value of assets other than Land is taken as 5% of its original cost. Depreciation
is calculated on a pro-rata basis from the date of additions. On assets sold, discarded etc. during the
year, depreciation is provided up to the date of sale/discard.

B) Capital work-in-progress are carried at cost, comprising direct cost,related incidental expenses and
attributable borrowingcost, less impairment losses if any.

2.3 Impairment of Financial Assets

At each Balance Sheet date, the Company assesses whether there is any indication that an asset may
be impaired. If any such indication exists, management estimates the recoverable amount. Recoverable
amount is higher of an asset’s net selling price and value in use. Value in use is the present value of
estimated future cash flows expected to arise from the continuing use of an asset and from its disposal
at the end of its useful life. If the carrying amount of the asset exceeds its recoverable amount, an
impairment loss is recognized in the Profit and Loss Statement to the extent carrying amount exceeds
recoverable amount. Assessment is also done at each Balance sheet date as to whether there is any
indication that an impairment loss recognized for an asset in prior accounting periods may no longer
exists or may have decreased.

2.4 Employee Benefits

(a) Short Term Obligations

The undiscounted amount of short term employee benefits expected to be paid in exchange for the
services rendered by employees is recognized in the year during which the employee rendered the
services. These benefits comprise compensated absences such as paid annual leave and performance
incentives.

(b) Long Term Defined Benefit Obligation

Gratuity: The Company has defined benefit plans for post employment benefits in the form of gratuity
for its employees in India. The gratuity scheme of the Company is administered through Life Insurance
Corporation of India (LIC). Liability for defined benefit plans is provided on the basis of actuarial
valuations, as at the Balance Sheet date, carried out by an independent actuary. The actuarial valuation
method used by independent actuary for measuring the liability is the projected unit credit method.
Actuarial gains and losses are recognized immediately in the Other Comprehensive Income (OCI) as
income or expense (net of taxes).

Compensated absences: The employees of the Company are also entitled for other long-term
benefit in the form of compensated absences as per the policy of the Company. Leave encashment
vests with employees on an annual basis for leave balance above the upper limit as per the
Company’s policy. At the time of retirement, death while in employment or on termination of
employment leave encashment vests equivalent to salary payable for number of days of accumulated
leave balance subject to an upper limit as per the Company’s policy. Liability for such benefit is
provided on thebasis of actuarial valuation, as at the Balance Sheetdate, carried out by an independent
actuary. The actuarial valuation method used by independentactuary for measuring the liability is the
projected unit credit method. Actuarial gains and losses are recognized immediately in the Profit and
Loss Statement as income or expense.

(c) Long Term Defined Contribution Plan

The Company has defined contribution plans for post employment benefits in the form of provident
fund, employees’ state insurance and Labour Welfare Fund which are administered through Govern¬
ment of India and/or Life Insurance Corporation of India (LIC).

2.5 Fair Value Measurement

The Company measures financial instruments, such as, investments 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 accessible
to the Company.AII 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.

The management determines the policies andprocedures for both recurring fair value measurement and
disclosure. 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.

2.6 Inventories

Inventories of Raw Material, Stores and Spares are valued at lower of cost (determined on weighted
average basis) and net realisable value. Finished Goods are valued at weighted average cost / net
realizable value whichever is less and all expenses attributable to production.Work-in-Progress is
valued at estimated cost plus expenses attributable to production or net realizable value whichever
is less.Tools Dies and Die Blocks are valued at cost less depreciation/estimated consumption.Scrap
is valued at estimated net realisable value.

2.7 Taxes

Tax expense for the year comprises of current tax and deferred tax. Current tax is measured by the
amount of tax expected to be paid to the taxation authorities on the taxable profits after considering
tax allowances and exemptions and using applicable tax rates and laws.

(a) Current Income Tax

Current income tax relating 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. Advance taxes and provisions for
current income taxes are presented in the balance sheet after off-setting advance tax paid. Current tax
assets and liabilities are offset when there is a legally enforceable right to set off the recognized amount
and there is an intention to settle the asset and liability on a net basis.

(a) Deferred Tax

Deferred income tax is recognized using the balance sheet approach. Deferred income tax assets and
liabilities are recognized for deductible and taxable temporary differences arising between the tax base
of assets and liabilities and their carrying amount, except when the deferred income tax arises from the
initial recognition of an asset or liability in a transaction that is not a business combination and affects
neither accounting nor taxable profit or loss at the time of the transaction. Deferred income 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. The carrying amount of deferred income 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 income tax asset to be utilized. Deferred tax assets and liabilities
are measured using substantively enacted tax rates expected to apply to taxable income in the years
in which the temporary differences are expected to be received or settled.Minimum Alternative Tax
(MAT) credit is recognized as an asset only when and to the extent there is convincing evidence that
the Company will pay normal income tax during the specified period. Such asset is reviewed at each
balance sheet date and the carrying amount of the MAT credit asset is written down to the extent their
is no longer convincing evidence to the effect that the Company will pay normal income tax during the
specified period.Deferred tax assets and liabilities are offset when there is a legally enforceable right
to set off assets against liabilities representing the current tax and where the deferred tax assets and
liabilities relate to taxes on income levied by the same governing taxation laws.

2.8 Cash and cash equivalents

The Company considers all highly liquid financial instruments, which are readily convertible into
known amounts of cash that are subject to an insignificant risk of change in value and having
original maturities of three months or less from the date of purchase, to be cash equivalents.
Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal
and usage.