II. Material Accounting Policies
(a) Statement of compliance. Basis of preparation and
presentation
The financial statements of the Company have been
prepared to comply with the Indian Accounting
standards ('Ind AS'), including the rules notified under
the relevant provisions of the Companies Act, 2013, (as
amended from time to time) and presentation and
disclosure require ments of Division II of Schedule III to
the Companies Act, 2013, (Ind AS Compliant Schedule
III) as amen ded from time to time.
The Company's financial statements are presented in
Indian Rupees (INR), which is also its functional
currency and all values are rounded to the nearest
Indian Rupees Lakhs (^ 00,000) leaving the scope of
rounding up variations, except when otherwise
indicated.
(b) Property, Plant and Equipment
(i) Property, plant and equipment is stated at cost, less
accumulated depreciation and accumulated
impairment losses. The initial cost of an asset comprises
its purchase price or construction cost, any costs
directly attributable to bringing the asset into the
location and condition necessary for it to be capable of
operating in the manner intended by management, the
initial estimate of any decommissioning obligation, if
any, and, for assets that necessarily take a substantial
period of time to get ready for their intended use, fin
ance costs. Cost includes net of interest on capital
advances and duty credits and is inclusive of freight,
duties, taxes and other incidental expenses. Items such
as spare parts, stand-by equipment and servicing
equipment are recognised in accordance with this Ind
AS 16 when they meet the definition of property, plant
and equipment.
(ii) Capital work-in-progress includes expenditure
incurred in respect of property, plant and equipment
that are not yet ready for their intended use and the
cost of assets not put to use before the Balance Sheet
date.
(iii) Depreciation/ Amortization
Depreciation on property, plant and equipment is
provided on the Written Down Value (WDV) Method as
per the useful life prescribed in Schedule II to the
Companies Act, 2013 except in respect of the following
categories of assets, in whose case the life of the assets
has been assessed as under based on technical advice,
taking into account the nature of the asset, the
estimated usage of the asset, the operating conditions
of the asset, past history of replacement, anticipated
technological changes, manufacturers warranties and
maintenance support etc and accordingly the useful life
of the referred Property plant and equipment has been
reviewed by Chartered Engineer (CE) for the financial
year 2024-25 as per below
* Machinery excludes Co-generation and solar division.
Useful life of all other property, plant and equipment is
as per the Schedule II of the Companies Act, 2013.
The estimated useful life, deprecation method and
residual value are reviewed at the end of each reporting
period, with the effect of any changes in estimate being
accounted for on a prospective basis.
iv) Capital expenditure on enabling assets, the own¬
ership of which is not with the Company are charged off
to revenue in the accounting period of incurrence of
such expenditure. However, capital expenditure on en¬
abling assets, ownership of which rests with the
Company and which have been created on land not
belonging to the Company is written off to the State¬
ment of profit and loss over its approximate period of
utility. For this purpose, land is not considered to be
belonging to the Company, if the same is not owned or
leased/ licensed to the Company.
v) An item of property, plant and equipment is
derecognised upon disposal or when no future
economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising on
the disposal or retirement of an item of property, plant
and equipment is determined as the difference
between the sales proceeds and the carrying amount of
the asset and is recognised in profit or loss.
vi) The management of the company has considered it
to be appropriate to seek the opinion of Chartered
Engineer in order to ascertain the remaining useful life
and residual value of the assets (existing as well as
additions), as it may deem fit on yearly basis.
vii) On the basis of technical advice the management of
the company has considered it to be appropriate to
keep the residual value of all the assets at 5% of the
historical cost.
(c) Intangible Assets
Intangible Assets are recognised, if the future economic
benefits attributable to the assets are expected to flow
to the Company and cost of the asset can be measured
reliably. All other expenditure is expensed as incurred.
The same are amortised over the expected duration of
benefits. Such intangible assets are measured at cost
less any accumulated amortisation and impairment
losses, if any.
Amortization of intangible assets such as softwares is
computed on a straight-line basis, at the rates
representing estimated useful life of up to 6 years.
The amortisation period and the amortisation method
for an intangible asset with a finite useful life are
reviewed at least at the end of each reporting period
and adjusted prospectively, if appropriate.
(d) Impairment of Non-financial Assets
At the end of each reporting period, the Company
reviews the carrying amounts of its tangible and
intangible assets to determine whether there is any
indication that those assets have suffered an
impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any).
When it is not possible to estimate the recoverable
amount of an individual asset, the Company estimates
the recoverable amount of the cash-generating unit to
which the asset belongs. When a reasonable and
consistent basis of allocation can be identified,
corporate assets are also allocated to individual cash-
generating units, or otherwise they are allocated to the
smallest Component of cash-generating units for which
a reasonable and consistent allocation basis can be
identified.
Recoverable amount is the higher of fair value less costs
of disposal and value in use. 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 for which the
estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generat¬
ing unit) is estimated to be less than its carrying amo¬
unt, the carrying amount of the asset (or cash-gen¬
erating unit) is reduced to its recoverable amount. An
impairment loss is recognised immediately in profit or
loss.
(e) Financial Instruments
Financial Assets
Financial assets are recognised when the company
becomes a party to the contractual provisions of the
instruments.
i. Initial recognition and measurement
The financial as sets are initially measured at fair value.
However, trade receivables that do not contain a
significant financing component are measured at
transaction price. Transac-tion costs that are directly
attributable to the acquisi tion or issue of financial
assets and financial liabilities which are not recognised
through the state ment of profit and loss account are
added to or deduct ed from the fair value of the
financial assets or financial liabili-ties, as appropriate,
on initial recognition.
ii. Subsequent measurement
a) Financial Assets measured at Fair Value Through
Other Comprehensive Income (FVTOC1)
A Financial Asset is measured at FVTOCI if it is held
within a business model whose objective is achieved by
both collecting contractual cash flows and selling finan-
asset give rise on specified dates to cash flows that
represents solely payments of principal and interest on
the principal amount outstanding.
b) Financial Assets measured at Fair Value Through
Profit or Loss (FVTPL)
A Financial Asset which is not classified in any of the
above categories are measured at FVTPL. Financial
assets are reclassified subsequent to their recognition,
if the Company changes its business model for
managing those financial assets. Changes in business
model are made and applied prospectively from the
reclassification date which is the first day of
immediately next reporting period following the
changes in business model in accordance with
principles laid down under Ind AS 109 - Financial
Instruments.
iii. De-recognition of financial assets
The Company derecognises 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.
iv. Impairment of financial asset
In accordance with Ind-AS 109, the Company applies
Expected Credit Loss (ECL) model for measurement and
recognition of impairment loss for financial assets.
v. Trade receivable
As a practical expedient the Company has adopted
'simplified approach' using the provision matrix
method for recognition of expected loss on trade
receivables. The provision matrix is based on historical
default rate observed over the expected life of the trade
receivable and is adjusted for forward-looking
estimates. At every reporting date, the historical default
rates are updated and changes in the forward-looking
estimates are analysed. Further receivables are
segmented for this analysis where the credit risk
characteristics of the receivables are similar. On the
basis of above analysis suitable provision for allowance
for credit impaired is to be made.
vi. Other financial assets
Impairment loss on other financial assets is recognised
based on the difference between the present value of
the expected cash flows and carrying value. Impairment
loss on other financial assets is recognised based on the
difference between the present value of the expected
cash flows and carrying value.
Financial Liabilities
i. Initial recognition and measurement
Financial liabilities are initially measured at fair value
except Security deposits. Transaction costs that are
directly attributable to the acquisition or issue of
financial assets and financial liabilities are added to or
deducted from the fair value of the financial assets or
financial liabilities, as appropriate, on initial recogni¬
tion.
ii. Subsequent measurement
The Company's financial liabilities are not held for
trading and are also carried at amortized cost using
effective interest rate except security deposits.
iii. Derivative financial instruments and hedge account
ing.
a. Introduction
The policy of the Company with regards to its derivative
transactions, specifically interest rate swaps, currency
swaps, and forward covers on External Commercial
Borrowings (ECBs). The purpose of these transactions is
to manage and mitigate risks associated with interest
rate fluctuations and foreign exchange exposures. This
note provides an overview of our approach, accounting
treatment, and the impact on financial statements.
b. Derivative instruments
The Company enters into the following derivative
transactions
Interest rate swaps
Interest rate swaps are utilized to manage interest rate
risks associated with our borrowings. Through these
agreements, we exchange fixed and floating interest
rate obligations, thereby effectively converting the
interest rate exposure on our liabilities. This allows us to
mitigate potential fluctuations in interest rates or
minimize the interest costs.
Currency swaps
The Company swap its borrowings from INR to EUR.
Currency swaps help us reduce interest costs through
carry benefits, although they do not eliminate currency
risk entirely. By actively managing this risk, we aim to
achieve a more stable financial position and minimize
the potential adverse effects of currency fluctuations.
c. Accounting treatment
The Company accounting treatment for derivative
transactions follows the guidelines and principles
outlined in the relevant accounting standards. The key
considerations are as follows
Mark-to-Market (MTM) Gain/ Loss
At the balance sheet date, we calculate the fair value of
our derivative instruments including currency swaps.
Any resulting MTM gain or loss is recognized in the
financial statements. However, no initial accounting
recognition is given to these transactions.
Interest cost benefit
If there is a benefit in interest cost resulting from the
derivative transactions, it is recognised accordingly. The
adjustment is made in the finance cost, ensuring a fair
representation of our financial position and
performance.
d. Risk management
The objective of our derivative transactions is to
effectively manage and mitigate risks associated with
interest rate fluctuations and foreign exchange
exposures. The use of these instruments is governed by
our risk management policies, which include robust risk
assessment, approval processes, and ongoing
monitoring to ensure alignment with our strategic
objectives and risk appetite.
iv. De-recognition of financial liabilities
A financial liability is de-recognised when they are
discharged.
v. Offsetting of financial instruments
Financial liabilities are offset and the net amount is
reported in the balance sheet if there is a currently
enforceable legal right to offset the recognised
amounts and there is an intention to settle on a net
basis, to realise the assets and settle the liabilities
simultaneously.
(f) Fair Value Measurement
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
a) In the principal market for the asset or liability, or
b) 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 to/ 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 eco¬
nomic 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 app¬
ropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the
use of relevant observable inputs and minimising the
use of unobservable inputs.
All assets and liabilities for which fair value is measured
or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows,
based on the lowest level input that is significant to the
fairvaluemeasurementasa whole.
Level 1 - Quoted (unadjusted) 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 lev¬
el input that is significant to the fair value measurement
is unobservable.
(g) Revenue Recognition
Under Ind AS 115, the Company recognized revenue
when (or as) a performance obligation is satisfied, i.e.,
when 'control' of the goods underlying the particular
performance obligation are transferred to the
customer. Ind AS 115 establishes a five-step model i.e.,
i). Identify the contract with the customer ii). identify
the performance obligation iii). determine the
transaction price iv). Allocate the transaction price v).
recognise revenue when performance obligations are
satisfied to account for revenue arising from contracts
with customers and requires that revenue be recognis¬
ed at an amount that reflects the consideration
to which an entity expects to be entitled in exchange for
transferring goods or services to a customer.
Company exercised judgements, taking into consider¬
ation all of the relevant facts and circumstances when
applying each step of the model to contracts with their
customers in accordance with Ind AS 115. The standard
also specified the accounting for the incremental costs
of obtaining a contract and the costs directly related to
fulfilling a contract. In addition, the standard requires
extensive disclosures.
Income from CER/VER
Income from Carbon Emission Reductions (CER)/
Voluntary Emission Reductions (VER) is recognized
when the project is registered with the United Nations
Framework Convention on Climate Change (UNFCCC).
Income from REC/E Certs/Dividend
Keeping in view of the Nature REC/E-Certs/ESCERTS/
dividend income is recognised on cash realization basis
unlike other Incomes.
Insurance Claims/Counter claims/Penalties/Awards
Claims/counter-claims/penalties/awards are account¬
ed for in the year of its settlement/crystallize.
Insurance Claims/counter-claims/penalties/awards are
shown separately under the head other income and
corresponding expenses are shown under respective
expense head in the Profit and Loss a/c. Revenue from
these claims are recognised as and when the realization
from the insurer is ascertained.
Export incentives
Export incentive scrips in case of export are valued on
the specific rates allowed on the relevant item of
export.
(h) Inventories
Raw Materials, Stores and Spares
Raw Materials, Stores and Spares are valued at lower of
cost and net realizable value in accordance with Indian
Accounting Standard. However, materials and other
items held for use in the production of inventories are
not written down below cost if the finished products, in
which they will be incorporated, are expected to be sold
at or above cost. Cost of Raw materials is determined on
a moving weighted average basis and cost of chemicals,
stores and spares is determined on transaction moving
weighted average.
Work-in Progress and Finished Goods
Lower of cost and net realizable value. Cost includes
direct materials and labour and a proportion of
manufacturing overheads based on normal operating
capacity. Cost of finished goods except lying in the
factory premises includes Taxes, Duties etc. on which
input credit is not available.
By Products and waste
By products and waste are valued at net realizable
value.
Net realisable value represents the estimated selling
price for inventories less all estimated costs of
completion and costs necessary to make the sale.
Agriculture Operations Inventory valuation for
agricultural produce are as follows:
i. Eucalyptus, poplar and bamboo trees: Trees has been
categorised based on their ageing. Company has
follows mix approach i.e., cost and fair value approach.
Trees ageing below 3 years are valued at cost and trees
ageing more than 3 years are valued on the basis of fair
value less cost to sell of the trees.
Fair value of the trees at different age group is based on
the realisable value of the tree at that age group.
ii. Crops: Inventory for crops are recognised when the
same is full grown up and is under saleable condition at
fair market value less cost to sell.
(i) Foreign Currency Transactions
Initial Recognition
Foreign currency transactions are recorded in the
reporting currency, by applying to the foreign currency
amount the exchange rate between the reporting
currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using
the closing rate. Non-monetary items which are carried
in terms of historical cost denominated in a foreign
currency are reported using the exchange rate at the
date of the transaction.
Exchange Differences
Exchange differences arising on the settlement of
monetary items or on restatement of reporting
Company's monetary items at rates different from
those at which they were initially recorded during the
year or reported in previous financial statements, are
recognized as income or as expenses in the year in
which they arise.
Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognized as income or
as expense for the year.
(j) Government Grants
Government grants are not recognised until there is
reasonable assurance that the Company will comply
with the conditions attaching to them and that the
grants will be received.
Government grants related to income are deferred and
recognised in profit or loss over the period necessary to
match them with the cost that they are intended to
compensate and presented within other income.
Government Grants relating to the specific assets are
disclosed as deduction from the gross value of the
assets concerned.
(k) Employee Benefits
i. Short-term obligations
All employee benefits payable / available within twelve
months of rendering the service such as salaries, wages
and bonus etc., are classified as short-term employee
benefits and are recognised in the statement of profit
and loss in the period in which the employee renders
the related service.
ii. 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.
Obligations for contributions to defined contribution
plans are recognised as an employee benefit expense in
the statement of profit and loss in the periods during
which the related services are rendered by employees.
The Company makes specified contributions towards
the following schemes:
Employees' State Insurance (ESI)
The Company has a scheme of state insurance for its
employees, registered with the regional state insurance
commissioner. The Company's contribution to the state
insurance is charged to the statement of profit and loss
every year.
Emolovees' Provident Fund lEPF1
All directly recruited employees of the Company are
entitled to receive benefits under the provident fund, a
defined contribution plan. Both employee and
employer make monthly contribution to the plan at a
predetermined rate of employee's basic salary and
dearness allowance. These contributions to provident
fund are administered by the provident fund
commissioner. Employer's Contribution to provident
fund is expensed in the statement of profit and loss as
and when incurred.
Labour Welfare Fund
The Company makes contribution to labour welfare
fund scheme in accordance with Labour Welfare Fund
Act. The Company's contribution to the welfare fund is
charged to the statement of profit and loss every year.
iii. Defined benefit plans
Gratuity
Gratuity is a post-employment benefit and is in the
nature of defined benefit plan. The liability recognized
in the balance sheet in respect of gratuity is the present
value of the defined benefit obligation at the balance
sheet date together with adjustments for unrecognized
actuarial gains or losses and past service costs.
Leave Encashment
Leave encashment are post-employment benefit and
are in the nature of defined benefit plans. The liability
recognized in the balance sheet in respect of
compensated absences is the present value of the
defined benefit obligation at the balance sheet date
together with adjustments for unrecognized actuarial
gains or losses and past service costs.
Liability for gratuity and leave salary benefits payable to
employees is provided for on accrual basis using the
Projected Accrued Benefit Method (Projected Unit
Credit Method with control period of one year) done by
an independent actuary as at the annual closing
Balance Sheet date.
Remeasurement, comprising actuarial gains and losses
the effect of the changes to the asset ceiling (if
applicable) and the return on plan assets (excluding
interest), is reflected immediately in the balance sheet
with a charge or credit recognised in other
comprehensive income in the period in which they
occur. Remeasurement recognised in other compre¬
hensive income is reflected immediately in retained
earnings and will not be reclassified to profit or loss.
Past service cost is recognised in profit or loss in the
period of a plan amendment. Net interest is calculated
by applying the discount rate at the beginning of the
period to the net defined benefit liability or asset.
Defined benefit costs are categorised as follows:
a) Service cost (including current service cost, past
service cost, as well as gains and losses on curtailments
and settlements).
b) Net interest expense or income.
c) Remeasurement.
The Company presents the first two components of
defined benefit costs in profit or loss in the line item
("employee benefits expenses'). Curtailment gains and
losses are accounted for as past service costs.
The retirement benefit obligation recognised in the
balance sheet represents the actual deficit or surplus in
the Company's defined benefit plans. Any surplus
resulting from this calculation is limited to the present
value of any economic benefits available in the form of
refunds from the plans or reductions in future
contributions to the plans.
Termination benefits are immediately recognised in the
statement of profit or loss account. A liability for a
termination benefit is recognised at the earlier of when
the entity can no longer withdraw the offer of the
termination benefit and when the entity recognises any
related restructuring costs.
(I) Taxes on Income
Income tax expense represents the sum of the tax
currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for
the year. Taxable profit differs from 'profit before tax' as
reported in the statement of profit and loss because of
items of income or expense that are taxable or
deductible in other years and items that are never
taxable or deductible under the provisions of Income
Tax Act. The Company's current tax is calculated using
tax rates that have been enacted or substantively
enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax
base used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all
taxable temporary differences. Deferred tax assets in
respect of unabsorbed depreciation and carry forward
of losses are recognised only if there is virtual certainty
supported by convincing evidence that there will be
sufficient future taxable income available to realise
such assets. Deferred tax assets are generally recogni¬
sed for all deductible temporary differences to the exte
nt that it is probable that taxable profits will be available
against which those deductible temporary differences
can be utilised. Such deferred tax assets and liabilities
are not recognised if the temporary difference arises
from the initial recognition of assets and liabilities in a
transaction that affects neither the taxable profit nor
the accounting profit.
The carrying amount of deferred tax assets is reviewed
at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the
asset to be recovered.
Deferred tax liabilities and assets are measured at the
tax rates that are expected to apply in the period in
which the liability is settled or the asset realised, based
on tax rates that have been enacted or substantively
enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets
reflects the tax consequences that would follow from
the manner in which the Company expects, at the end
of the reporting period, to recover or settle the carrying
amount of its assets and liabilities.
Current and deferred tax are recognised in profit or loss,
except when they relate to items that are recognised in
other comprehensive income or directly in equity, in
which case, the current and deferred tax are also
recognised in other comprehensive income or directly
in equity respectively.
Minimum Alternative Tax ('MAT') expense under the
provisions of the Income-tax Act, 1961 is recognised as
an asset when it is probable that future economic
benefit associated with it in the form of adjustment of
future income tax liability, will flow to the Company and
the asset can be measured reliably. MAT credit
entitlement is set off to the extent allowed in the year in
which the Company becomes liable to pay income taxes
at the enacted tax rates. MAT credit entitlement is
reviewed at each reporting date and is written down to
reflect the amount that is reasonably certain to be set
off in future years against the future income tax liability.
MAT Credit Entitlement has been presented as Deferred
Tax in the Balance Sheet.
(m) Borrowing Cost
Borrowing costs directly attributable to the acquisition,
construction or production of the qualifying assets,
which are assets that necessarily take a substantial
period of time to get ready for their intended use or
sale, are added to the cost of those assets, until such
time as the assets are substantially ready for their inten¬
ded use or sale.
All other borrowing costs are recognized in the State¬
ment of Profit or Loss in the period in which they are
incurred.
(n) Dividends
The Company recognises a liability to make dividend
distributions to equity holders of the Company when
the distribution is authorised and the distribution is no
longer at the discretion of the Company. As per the
corporate laws in India a distribution is authorised
when it is approved by the shareholders. However,
Board of Directors of a Company may declare interim
dividend during any financial year out of the surplus in
statement of profit and loss and out of the profits of the
financial year in which such interim dividend is sought
to be declared. A corresponding amount is recognised
directly in equity.
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