1. Material Accounting Policies
1.1 Basis of Preparation
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under
Section 133 of the Companies Act, 2013 (the “Act”) [Companies (Indian Accounting Standards) Rules, 2015] (as
amended) and other relevant provisions of the Act.
The Company follows the mercantile system of accounting and recognises income and expenditure on an accrual
basis. The financial statements are prepared under the historical cost convention, except for the following:
♦ certain financial assets and liabilities that are measured at fair value;
♦ defined benefit plans where plan assets are measured at fair value; and
Estimates and assumptions used in the preparation of the financial statements and disclosures are based upon
management's evaluation of the relevant facts and circumstances as of the date of the financial statements, which
may differ from the actual results at a subsequent date. The critical estimates and judgments are presented in detail
in Material Accounting Policy no. 1.15.
All assets and liabilities have been classified as current or non-current as per the Company's normal operating
cycle. An operating cycle is the time between the acquisition of assets for processing and their realisation in cash
or cash equivalents. As set out in the Schedule III to the Companies Act, 2013, since normal operating cycle cannot
be identified for the Company and hence it is assumed to have duration of twelve months.
Functional and presentation currency
These Ind AS Financial Statements are prepared in Indian Rupee which is the Company's functional currency. All
financial information presented in Rupees has been rounded to the nearest lakhs with two decimals.
1.2 Business Combination:
In accordance with IND AS 103, Business combinations involving entities or business under common control shall
be accounted for using the pooling of interest method whereby the assets and liabilities of the transferred entity is
accounted at their carrying amounts in the transferee books.
The difference if any, between the amount 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 transferor shall be transferred to capital reserve
and should be presented separately from other capital reserves. Transaction cost are expensed as incurred.
1.3 Revenue Recognition
(1) Sale of Goods:
Revenue is recognised upon transfer of control of promised products or services to customers in an amount
that reflects the probable consideration which the Company expects to receive in exchange for those products
or services.
Revenue is measured based on the transaction price, which is the consideration, and it is adjusted for volume
discounts, cash discounts, price concessions and incentives, if any, as specified in the contract with the
customer. Revenue excludes taxes collected from customers.
Contracts are subject to modification to account for changes in contract specification and requirements. The
Company reviews modification to contract in conjunction with the original contract, based on which the transaction
price could be allocated to a new performance obligation, or transaction price of an existing obligation could
undergo a change. In the event transaction price is revised for existing obligation, a cumulative adjustment is
accounted for. Contract costs are expensed of as and when incurred.
Use of significant judgments and estimates in revenue recognition
• Contracts with customers could include promise to transfer multiple products and services to a customer.
The company assesses a contract and identifies distinct performance obligations in the contract.
Identification of distinct performance obligation involves judgment to determine the deliverables and
the ability of the customer to benefit independently from such deliverables.
• The company needs to decide transaction price for the contract. The transaction price could be either
a fixed amount of customer consideration or variable consideration with elements such as volume
discounts, cash discounts, price concessions and incentives. The Company allocates the elements of
variable considerations to all the performance obligations of the contract unless there is observable
evidence that they pertain to one or more distinct performance obligations.
• The company exercises judgment in determining whether the performance obligation is satisfied. The
Company considers indicators such as how the customers consume the benefit or who controls the
asset, transfer of significant risk and rewards to the customers, acceptance of delivery by the customer,
specific bill and hold instructions from customers, etc.
(2) Other Operating Revenue:
Other operating revenue comprises of income from activities incidental to the operations of the company
and is recognised when the right to receive the income is established and there exists no uncertainty of its
ultimate realization or collection.
(3) Other Income is accounted on accrual basis except when the realization of such income is uncertain. Interest
income on financial asset is recognized using the effective interest rate method. Dividend income is accounted
when right to receive the same is established.
1.4 Financial Instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual
provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in
profit or loss.
Classification of Financial Assets
The financial assets are initially measured at fair value along with transaction cost.
After initial recognition
i. Financial assets (other than Investments) are subsequently measured at amortised cost using the effective
interest method.
Effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash receipts (including all fees and points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts) through the expected life of the debt
instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Investments in debt instruments that meet the following conditions are subsequently measured at amortised
cost:
♦ the asset is held within a business model whose objective is to hold assets in order to collect contractual
cash flows;
♦ the contractual terms of the instrument give rise on specified dates to cash flows that are solely
payments on principal and interest on the principal amount outstanding.
Interest Income and Impairment loss on such debt instruments is recognised in statement of profit or loss.
The Company has not designated any debt instruments as fair value through other comprehensive income.
I. Investments in equity instruments of subsidiaries:
The Company measures its investments in equity instruments of subsidiaries at cost in accordance
with Ind AS 27.
II. Investment in Equity instruments of Related Entity:
The company has designated its investments in Equity Shares of one of its related entity at fair value
through OCI. Such financial assets are measured at fair value at the end of each reporting period, with
gains or losses arising on re-measurement recognised in OCI which are not subsequently reclassified
to P & L and are reported in Other Equity.
III. Investment in Preferential instruments of Related Entity:
At initial recognition, the company measures its investments in preference shares at fair value and on
re-measurement it is carried out at amortised cost. Gains or losses arising on re-measurement are
recognized in P & L.
IV. Other Financial assets which are not carried at amortised cost or FVTOCI are measured at fair value
through P & L.
Such financial assets are measured at fair value at the end of each reporting period, with any gains or
losses arising on re-measurement recognised in profit or loss.
Impairment of financial assets
In accordance with Ind AS 109 Financial Instruments, the Company applies expected credit loss (ECL) model
for measurement and recognition of impairment loss for financial assets.
A financial asset is regarded as credit impaired when one or more events that may have a detrimental effect
on estimated future cash flows of the asset have occurred. The Company applies the expected credit loss
model for recognising impairment loss on financial assets (i.e. the shortfall between the contractual cash
flows that are due and all the cash flows (discounted) that the Company expects to receive).
The Company follows 'simplified approach' for recognition of impairment loss allowance on trade receivables.
The application of simplified approach does not require the Company to track changes in credit risk. Rather,
it recognises impairment loss allowance based on lifetime Expected Credit Losses (ECLs) at each reporting
date, right from its initial recognition.
Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as
the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in
accordance with the contract and the cash flows that the Company expects to receive).
Expected Credit Losses / impairment loss allowance (or reversal) recognized during the period is recognized
as expense / income in the statement of profit and loss.
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. If the Company neither transfers nor retains substantially all the risks and rewards of
ownership and continues to control the transferred asset, the Company recognises its retained interest in the
asset and an associated liability for amounts it may have to pay. On de-recognition of a financial asset in its
entirety, the difference between the asset's carrying amount and the sum of the consideration received and
receivable is recognised in the Statement of profit and loss.
Financial liabilities and equity instruments
Classification as debt or equity
Equity instruments issued by the Company is classified as equity in accordance with the substance of the
contractual arrangements and the definitions of an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting
all its liabilities. Equity instruments issued by an entity are recognised at the proceeds received, net of direct
issue costs.
Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest method. The
carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined
based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is
included in the “Finance Costs”.
Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse
the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with
the terms of a debt instrument.
Financial guarantee contracts issued by the Company are initially measured at their fair values and are
subsequently measured (if not designated as at Fair value though profit or loss) at the higher of:
♦ the amount of impairment loss allowance determined in accordance with requirements of Ind AS 109;
and
♦ the amount initially recognised less, when appropriate, the cumulative amount of income recognised in
accordance with the principles of Ind AS 18.
De-recognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company's obligations are
discharged, cancelled, or have expired. An exchange with a lender of debt instruments with substantially
different terms is accounted for as an extinguishment of the original financial liability and the recognition of a
new financial liability. Similarly, a substantial modification of the terms of an existing financial liability (whether
or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original
financial liability and the recognition of a new financial liability. The difference between the carrying amount of
the financial liability derecognized and the consideration paid and payable is recognised in profit or loss.
1.5 Foreign Currency Transactions
Transactions in foreign currency in respect of exports are recorded at exchange rates as notified by the concerned
authorities at regular intervals. Transactions in foreign currency in respect of other items are recorded at the
exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currency
are restated at year end exchange rates. Non-monetary items (Investments) denominated in foreign currency are
stated using the exchange rate on the date of transaction. Exchange differences arising on settlement of transactions
and on restatement of monetary items are recognized as income or expense in the year in which they arise, except
in respect of the foreign borrowing liabilities, if any for acquisition of fixed assets, where such exchange difference
is adjusted in the carrying cost of fixed assets.
1.6 Taxes on Income
The tax expenses for the period comprises of current tax and deferred income tax. Tax is recognised in Statement
of Profit and Loss, except to the extent that it relates to items recognised in the Other Comprehensive Income. In
which case, the tax is also recognised in Other Comprehensive Income.
A. Current Tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the
Income Tax authorities, based on tax rates and laws that are enacted at the Balance sheet date.
B. 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 bases used in the computation of taxable profit. Deferred
tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally
recognised for all deductible temporary differences to the extent 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 (other than in
a business combination) 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 (and tax laws) 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.
Deferred tax assets and deferred tax liabilities are offset 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.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in
the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence
that the Company will pay normal income tax. Accordingly, MAT is recognised as an asset in the Balance
Sheet when it is probable that future economic benefit associated with it will flow to the Company.
1.7 Cash Flow Statement
Cash flows are reported using indirect method as set out in Ind AS -7 “Statement of Cash Flows”, whereby profit /
(loss) before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or
future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company
are segregated based on the available information.
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