2. MATERIAL ACCOUNTING POLICIES
This note provides a list of the Material accounting
policies adopted in the preparation and presentation
of these standalone financial statements.
A. Basis of preparation of financial statements
i. Compliance with Ind AS
The standalone financial statements have been
prepared to comply, in all material aspects,
with the Indian Accounting Standards (Ind AS)
notified under Section 133 of the Companies
Act, 2013, read with Companies (Indian
Accounting Standards) Rules, 2015 and the
relevant provisions of the Companies Act, 2013.
ii. Business Combination
Business combinations involving entities that
are controlled by the group (Common Control)
are accounted for using the pooling of interests
method as follows:
• The assets and liabilities of the combining
entities are reflected at their carrying amounts.
• No adjustments are made to reflect fair
values, or recognise any new assets or
liabilities. Adjustments are only made to
harmonise accounting policies. The balance
of the reserves appearing in the financial
statements of the acquiree is aggregated
with the corresponding balance appearing in
the financial statements of the acquiror or is
adjusted against general reserve.
• The identity of the reserves is preserved and
the reserves of the transferor become the
reserves of the transferee.
• The difference, if any, between the amounts
recorded as share capital issued plus any
additional consideration in the form of cash
or other assets and the amount of share
capital of the acquiree is transferred to capital
reserve and is presented separately from
other capital reserves.
• The financial information in the financial
statements in respect of prior periods is
restated as if the business combination
had occurred from the beginning of the
preceding period in the financial statements,
irrespective of the actual date of combination.
However, where the business combination
had occurred after that date, the prior period
information is restated only from that date.
Business combinations (between entities not
having common control) are accounted for using
the acquisition method.
The consideration is measured at the fair value
of the assets transferred, equity instruments
issued and liabilities incurred or assumed on the
date of acquisition, which is the date on which
control is achieved by the Company. The cost
of acquisition also includes the fair value of any
contingent consideration. Identifiable assets
acquired, and liabilities and contingent liabilities
assumed in a business combination are
measured initially at their fair value on the date
of acquisition.
Goodwill is measured as the excess of the sum
of the consideration transferred, the amount of
any non-controlling interest in the acquiree, and
the fair value of the acquiror's previously held
equity interest in the acquiree (if any) over the
net acquisition date amounts of the identifiable
assets acquired and the liabilities assumed.
When a business combination is achieved in
stages, the Company's previously held equity
interest in the acquiree is remeasured to its
acquisition date fair value and the resulting
gain or loss, if any, is recognised in profit or loss.
Amounts arising from interests in the acquiree
prior to the acquisition date that have previously
been recognised in other comprehensive income
are reclassified to profit or loss where such
treatment would be appropriate if that interests
were disposed off.
iii. Classification of assets and liabilities
All assets and liabilities have been classified as
current or non-current based on the Company's
normal operating cycle and other criteria set out
in the Schedule III to the Companies Act, 2013.
Deferred tax assets and liabilities are classified
as non-current on net basis.
For the above purposes, the Company has
determined the operating cycle as twelve
months based on the nature of products and
the time between the acquisition of inputs for
manufacturing and their realisation in cash and
cash equivalents.
iv. Historical cost convention
The financial statements have been prepared
on going concern basis under the historical cost
convention except:
(a) certain financial instruments (including
derivative instruments) and
(b) defined benefit plans
which are measured at fair value at the end
of each reporting period, as explained in the
accounting policies below.
v. Functional and presentation currency
The Company's functional and presentation
currency is Indian Rupee ('). All amounts
disclosed in the financial statements and notes
have been rounded off to the nearest lakhs
(' lakhs), except otherwise indicated.
vi. Fair value measurement
The Company measures certain financial assets
and financial liabilities including derivatives and
defined benefit plans at fair value.
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 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
best economic interest.
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 fair
value measurement as a whole:
Level 1 — Quoted (unadjusted) market prices in
active markets for identical assets or liabilities.
Level 2 — Valuation techniques for which
the lowest level input that is significant to
the fair value measurement is directly or
indirectly observable.
Level 3 — Valuation techniques for which the
lowest level input that is significant to the fair
value measurement is unobservable.
For assets and liabilities that are recognised in
the financial statements on a recurring basis,
the Company determines whether transfers
have occurred between levels in the hierarchy
by re-assessing categorisation (based on the
lowest level input that is significant to the fair
value measurement as a whole) at the end of
each reporting period.
B. Property, plant and equipment
(i) Freehold land is carried at historical cost and
all other property, plant and equipment are
shown at cost (net of adjustable taxes) less
accumulated depreciation and, accumulated
impairment losses. The cost of an asset
comprises of its purchase price, non refundable
/ adjustable purchase taxes and 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 the 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, finance costs. The purchase price is the
aggregate amount paid and the fair value of any
other consideration given to acquire the asset.
The cost also includes trial run cost and other
operating expenses such as freight, installation
charges etc. The projects under construction
are carried at costs comprising of costs directly
attributable to bringing the asset to the
location and condition necessary for it to be
capable of operating in the manner intended by
management and attributable borrowing costs.
(ii) Stores and spares which meet the definition of
property, plant and equipment and satisfy the
recognition criteria of Ind AS 16 are capitalized
as property, plant and equipment.
(iii) When significant parts of plant and equipment
are required to be replaced at intervals, the
Company depreciates them separately based on
their specific useful lives.
(iv) An item of property, plant and equipment
and any significant part initially recognised
is derecognised upon disposal or when no
future economic benefits are expected from
its use or disposal. Any gain or loss arising on
derecognition of the asset (calculated as the
difference between the net disposal proceeds
and the carrying amount of the asset or
significant part) is included in the Statement of
Profit and Loss when the asset is derecognised.
(v) I n line with the provisions of Schedule II to the
Companies Act, 2013, the Company depreciates
significant components of the main asset (which
have different useful lives as compared to the
main asset) based on the individual useful
life of those components. Useful life for such
components of property, plant and equipment
has been assessed based on the historical
experience and internal technical inputs.
(vi) Depreciation on property, plant and equipment
is provided as per written down value method
based on useful life prescribed under Schedule
II to the Companies Act, 2013.The Company
has assessed the estimated useful lives of its
property, plant and equipment and has adopted
the useful lives and residual value as prescribed
in Schedule II.
Depreciation on stores and spares specific to
an item of property, plant and equipment is
based on life of the related property, plant and
equipment. In other cases, the stores and spares
are depreciated over their estimated useful life
based on the internal technical inputs.
(vii) The residual values and useful lives of property,
plant and equipment are reviewed at each
financial year end, and changes, if any, are
accounted prospectively.
C. Investment property
I nvestment properties are properties held to earn
rentals and / or for capital appreciation (including
property under construction for such purpose).
Investment properties are measured initially at cost,
including transaction costs. Subsequent to initial
recognition, investment properties are measured
in accordance with the requirements of Ind AS 16
for cost model.
An investment property is derecognised upon
disposal or when the investment property is
permanently withdrawn from use and no future
economic benefits are expected from the disposal.
Any gain or loss arising on derecognition of the
property is included in the Statement of Profit
and Loss in the period in which the property
is derecognised.
Depreciation on investment property is provided as
per written down value method based on estimated
useful life which is considered at 60 years based on
internal technical inputs.
D. Intangible assets
I ntangible assets acquired separately are measured
on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost
less any accumulated amortisation and accumulated
impairment losses. Internally generated intangibles
are not capitalised and the related expenditure is
reflected in the Statement of Profit and Loss in the
period in which the expenditure is incurred.
Licences and application softwares are classified as
Intangible Assets collectively termed as Computer
Softwares in the financial statements.
Estimated lives of Computer Software is 5 to 7 years.
E. Borrowing costs
Borrowing costs are charged to Statement of
Profit and Loss except to the extent attributable to
acquisition / construction of an asset that necessarily
takes a substantial period of time to get ready for its
intended use or sale.
Borrowing costs consist of interest and other costs
that an entity incurs in connection with the borrowing
of funds. Borrowing cost also includes exchange
differences to the extent regarded as an adjustment
to the borrowing costs.
F. Impairment of non-financial assets
At each balance sheet date, an assessment is made of
whether there is any indication of impairment.
I f any indication exists, or when annual impairment
testing for an asset is required, the Company
estimates the asset's recoverable amount. An asset's
recoverable amount is the higher of an asset's or
cash-generating unit's (CGU) fair value less costs of
disposal and its value in use. Recoverable amount
is determined for an individual asset, unless the
asset does not generate cash inflows that are
largely independent of those from other assets or
groups 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.
I n 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.
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.
G. Non-current assets held for sale
Non-current assets classified as held for sale are
measured at the lower of carrying amount and fair
value less costs to sell.
Non-current assets are classified as held for sale if
their carrying amounts will be recovered through
a sale transaction rather than through continuing
use. This condition is regarded as met only when
the sale is highly probable and the asset is available
for immediate sale in its present condition subject
only to terms that are usual and customary for sale
of such assets.
Property, plant and equipment and intangible assets
are not depreciated or amortized once classified
as held for sale.
H. Inventories
Raw and packing materials, fuels, stores and spares
are valued at lower of weighted average cost and net
realisable value. However, materials and other items
held for use in the production of finished goods 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 and stores
and spares which do not meet the recognition criteria
under property, plant and equipment is determined
on a weighted average basis.
Work-in-progress and finished goods are valued at
lower of weighted average cost and net realisable
value. Cost includes direct materials, labour, other
direct cost and manufacturing overheads based on
normal operating capacity.
Traded Goods are valued at lower of weighted average
cost and net realisable value.
Net realisable value is the estimated selling price
in the ordinary course of business less estimated
costs of completion and estimated costs necessary
to make the sale.
I. Revenue recognition
The Company recognises revenue when the amount
of revenue can be reliably measured and it is probable
that future economic benefits will flow to the entity.
a) Revenue from contracts with customer
Sales are accounted on passing of significant
risks, rewards, and control of ownership attached
to the goods to customers. Revenue from
the sale of goods (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 returns, applicable discounts
and allowances offered by the Company as a
part of the contract.
Revenue from contracts with customers
is recognised when the Company satisfies
performance obligation by transferring promised
goods and services (assets) to the customers.
Performance obligations are satisfied when
the customer obtains control of the goods.
Any amount of income accrued but not billed
to customers in respect of any contracts is
recorded as a contract asset. Such contract
assets are transferred to trade receivables on
actual billing to customers. A contract liability is
the obligation to transfer goods or services to a
customer for which the Company has received
consideration or an amount of consideration is
due from the customer. Such contract liabilities
are recognised as revenue when the Company
performs under the contract.
Revenue is measured based on transaction
price of the consideration received or
receivable, stated net of discounts, returns,
and taxes. Transaction price is recognised
based on the price specified in the contract.
Accumulated experience is used to estimate and
provide for the discounts / right of return, using
the expected value method.
b) Processing income
Revenue from services is recognized as and
when the services are rendered on proportionate
completion method.
c) Rental income
Rental income arising from operating leases
of investment properties is accounted for on
a straight-line basis over the lease unless the
payments are structured to increase in line with
the expected general inflation to compensate for
the lessor's expected inflationary cost increases
and is included in other income in the Statement
of Profit and Loss.
d) Incentives based on renewable energy
generation
Incentives for renewable energy generation are
recognised as income on passing of significant
risks, rewards and control of ownership attached
with such incentive.
e) Interest income
Interest income is recognised using the effective
interest rate method. The effective interest rate
is the rate that exactly discounts estimated
future cash receipts through the expected life of
the financial asset to the gross carrying amount
of a financial asset. When calculating the
effective interest rate, the Company estimates
the expected cash flows by considering all the
contractual terms of the financial instrument
(for example, prepayment, extension, call and
similar options) but does not consider the
expected credit losses.
f) Dividend income
Dividends are recognised in the Statement of
Profit and Loss only when the right to receive
payment is established, the economic benefits
associated with the dividend will flow to the
Company and the amount of the dividend can be
measured reliably.
g) Others
Income in respect of export incentives,
insurance / other claims, etc. is recognised
when it is reasonably certain that the ultimate
collection will be made.
J. Expenditure on research and development
Revenue expenditure on Research and Development
is charged to Statement of Profit and Loss under the
appropriate heads of expenses. Expenditure relating
to property, plant and equipment are capitalised
under respective heads.
Development expenditure incurred on an individual
project is recognized as an intangible asset when the
Company can demonstrate the following :
a) the technical feasibility of completing the
intangible asset so that it will be available
for use or sale;
b) its intention to complete the asset;
c) its ability to use or sell the asset;
d) how the asset will generate future economic
benefits;
e) the availability of adequate resources to
complete the development and use or sell the
asset and
f) the ability to measure reliably the expenditure
attributable to the intangible asset during
development.
K. Foreign currency transactions
Foreign currency transactions are translated into the
functional currency using exchange rate prevailing
on the date of transaction. Monetary assets and
liabilities are translated at rate of exchange prevailing
at the reporting date. The difference arising on
settlement or translation on account of fluctuation in
the rate of exchange is dealt within the Statement of
Profit and Loss.
Foreign exchange differences regarded as an
adjustment to borrowing costs are presented in
the Statement of Profit and Loss, as finance costs.
All other foreign exchange gains and losses are
presented in the Statement of Profit and Loss on a
net basis within other gains / (losses).
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated
using the exchange rates at the dates of the
initial transactions.
L. Employee benefits
Short-term obligations
Short-term employee benefits (benefits which
are payable within twelve months after the end
of the period in which employees render service)
are measured at an undiscounted amount in the
Statement of Profit and Loss for the year in which the
related services are rendered.
Post-employment obligations
The Company operates the following post¬
employment schemes
• defined benefit plan - gratuity, and
• defined contribution plan provident fund.
Defined benefit plan - Gratuity obligation
Post-employment benefits (benefits which are
payable on completion of employment) are measured
on a discounted basis by the Projected Unit Credit
Method on the basis of actuarial valuation carried
out at each reporting date.
The liability or asset recognised in the Balance
Sheet in respect of defined benefit gratuity plan is
the present value of the defined benefit obligation
at the end of the reporting period less fair value
of plan assets.
Defined benefit costs are categorized as follows:
• service cost (including current service cost,
past service cost, as well as gains and losses on
curtailments and settlements);
• net interest expense or income; and
• re-measurement.
Changes in the present value of the defined benefit
obligation resulting from plan amendments or
curtailments are recognised immediately in the
Statement of Profit and Loss as past service cost.
The net interest expense or income is included
in employee benefit expense in the Statement of
Profit and Loss.
Re-measurement gains and losses arising from
experience adjustments and changes in actuarial
assumptions are recognised in the period in which
they occur, directly in Other Comprehensive
Income. They are included in retained earnings
in the Statement of Changes in Equity and in
the Balance Sheet.
Defined contribution plan
Contributions to Provident Fund are made in
accordance with the statute and are recognised as
an employee benefit expense when employees have
rendered service entitling them to the contributions.
Other long-term employee benefit obligations
The eligible employees can accumulate unavailed
privilege leave and are entitled to encash the same
either while in employment, on termination or
on retirement in accordance with the Company's
policy. The present value of such unavailed leave is
measured using the Projected Unit Credit Method,
with actuarial valuations being carried out at each
reporting date. The benefits are discounted using
the market yields at the end of the reporting period
that have terms approximating to the terms of the
related obligation. Re-measurements as a result of
experience adjustments and changes in actuarial
assumptions are recognised in the Statement of
Profit and Loss.
The obligations are presented as current liabilities
in the Balance Sheet if the entity does not have an
unconditional right to defer settlement for at least
twelve months after the reporting period, regardless
of when the actual settlement is expected to occur.
M. Leases
The determination of whether an arrangement is,
or contains, a lease is based on the substance of
the arrangement at the inception date, whether
fulfilment of the arrangement is dependent on the
use of a specific asset(s) or the arrangement conveys
a right to use the asset, even if that right is not
explicitly specified in an arrangement.
a) As a lessee
The Company, as a lessee, recognises a right-of-
use asset and a corresponding lease liability for
its leasing arrangements, if the contract conveys
the right to control the use of an identified asset.
The contract conveys the right to control the
use of an identified asset, if it involves the use
of an identified asset and the Company has
substantially all of the economic benefits from
use of the asset and has right to direct the use
of the identified asset.
The cost of the right-of-use asset shall comprise
of the amount of the initial measurement of the
lease liability adjusted for any lease payments
made at or before the commencement date plus
any initial direct costs incurred. The right-of-
use assets are subsequently measured at cost
less any accumulated depreciation, accumulated
impairment losses, if any and adjusted for
any remeasurement of the lease liability.
The right-of-use assets are depreciated using the
straight-line method from the commencement
date over the shorter of lease term or useful life
of right-of-use asset.
The Company measures the lease liability at the
present value of the lease payments that are not
paid at the commencement date of the lease.
The lease payments are discounted using the
interest rate implicit in the lease, if that rate can be
readily determined. If that rate cannot be readily
determined, the Company uses incremental
borrowing rate.
For short-term and low value leases, the
Company recognises the lease payments as an
operating expense on a straight-line basis over
the lease term.
b) As a Lessor
Rental income from operating leases is generally
recognised on a straight-line basis over the
period of the lease unless the rentals are
structured to increase in line with expected
general inflation to compensate for the
Company's expected inflationary cost increases
and is included in revenue in the Statement of
Profit and Loss due to its operating nature.
N. Government grants
Government grants are recognized when there is
reasonable assurance that the grant will be received
and all attached conditions will be complied with.
The benefit of a government loan at a below market
rate of interest is treated as a government grant,
measured as the difference between proceeds
received and the initial fair value of loan based on
prevailing market interest rates.
Government grants are recognised in Statement
of Profit and Loss on a systematic basis over
the periods in which the Company recognises as
expenses the related costs for which the grants are
intended to compensate.
O. Taxation
Income tax expense comprises of current tax
expense and the net change in the deferred tax asset
or liability during the year. Current and deferred tax
are recognised in the Statement of Profit and 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.
(a) Current Tax
Current tax expense is determined as the
amount of tax payable in respect of taxable
income for the year.
I ncome tax assets and liabilities are measured
at the amount expected to be recovered from
or paid to the taxation authorities. The tax rates
and tax laws used to compute the amount are
those that are enacted or substantively enacted,
at the time of reporting.
(b) Deferred Tax
Deferred income tax is recognised using the
balance sheet approach. Deferred income
tax assets and liabilities are recognised for
deductible and taxable temporary differences
arising between the tax base of assets and
liabilities and their carrying amount.
Deferred tax liabilities are recognised for all
taxable temporary differences.
Deferred tax assets are recognised for all
deductible temporary differences, the carry
forward of unused tax credits and any unused
tax losses. Deferred tax assets are recognised 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 utilised.
The carrying amount of deferred tax assets is
reviewed at each reporting date and reduced
to the extent that it is no longer probable that
sufficient taxable profit will be available to
allow all or part of the deferred tax asset to
be utilised. Unrecognised deferred tax assets
are re-assessed at each reporting date and are
recognised to the extent that it has become
probable that future taxable profits will allow
the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured
at the tax rates that are expected to apply in the
year when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted at
the reporting date.
Deferred tax assets and deferred tax liabilities
are off set if a legally enforceable right exists
to set off current tax assets against current
tax liabilities and the deferred taxes relate
to the same taxable entity and the same
taxation authority.
P. Segment reporting
The Chairman and Managing Director (CMD) of the
Company is the Chief Operating Decision Maker
(CODM). The CODM monitors the operating results
of its business segments separately for the purpose
of making decisions about resources allocation and
performance assessment. Segment performance
is evaluated based on profit or loss and is
measured consistently with profit or loss in the
financial statements.
The operating segments have been identified on the
basis of nature of products / service.
a) Segment revenue includes sales and other
income directly attributable / allocable to
segments including inter-segment revenue.
b) Expenses directly identifiable with / allocable
to segments are considered for determining
the segment results. Expenses which relate to
the Company as a whole and not allocable to
segments are included under un-allocable
expenditure.
c) Income which relates to the Company as a whole
and not allocable to segments is included in
un-allocable income.
d) Segment results include margins on
inter-segment sales which are reduced in
arriving at the profit before tax of the company.
e) Segment assets and liabilities include those
directly identifiable with the respective
segments. Un-allocable assets and liabilities
represent the assets and liabilities that relate
to the Company as a whole and not allocable
to any segment.
Q. Earnings per share
Basic earnings per share is calculated by dividing the
net profit or loss for the year after tax attributable
to equity shareholders by the weighted average
number of equity shares outstanding during the
year. The weighted average number of equity shares
outstanding during the year is adjusted for events,
if any, such as bonus issue, bonus elements in a
rights issue to existing shareholders, shares split
and reverse shares split (consolidation of shares).
For the purpose of calculating diluted earnings per
share, the net profit or loss for the year after tax
attributable to equity shareholders and the weighted
average number of equity shares outstanding during
the year are adjusted for the effects of all dilutive
potential equity shares.
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