Note 2: Significant accounting policies
The significant accounting policies applied by the Company in preparation of its financial
statements are listed below. Such accounting policies have been applied consistently
to all the periods presented in these financial statements and in preparing the opening
Ind AS financial statement for financial position as at April 1, 2018.
2.1 Statement of compliance
The financial statements have been prepared in accordance with Ind ASs notified
under the Companies (Indian Accounting Standards) Rules, 2015 as amended from
time to time . Upto the year ended March 31, 2019, the Company prepared its financial
statements in accordance with the requirements of previous GAAP, which includes
Standards notified under the Companies (Accounting Standards) Rules, 2006.
These are Company's first Ind AS financial statements. The date of transition to Ind AS
is April 1, 2018.
2.2 Basis of Preparation and Measurement
(i) Basis of preparation
The financial statements have been prepared on accrual and going concern basis. The
accounting policies are applied consistently to all the periods presented in the financial
statements. All assets and liabilities have been classified as current or non-current as
per the Company's normal operating cycle and other criteria as set out in the Division
II of Schedule III to the Companies Act, 2013.
Based on the nature of products and the time between acquisition of
assets for processing and their realisation in cash and cash equivalents,
the Company has ascertained its operating cycle as 12 months for the
purpose of current or non-current classification of assets and liabilities.
The financial statementsare presentedin INR, the functional currency ofthe Company. Items
included in the financial statements of the Company are recorded using the currency of the
primary economic environment in which the Company operates (the 'functional currency').
Transactions and balances with values below the rounding off norm adopted by the
Company have been reflected as "0" in the relevant notes to these financial statements.
The financial statements of the Company for the year ended March 31, 2026 were
approved for issue in accordance with the resolution of the Board of Directors on May
7, 2026.
(ii) Basis of measurement
The financial statements have been prepared under the historical cost convention with
the exception of certain assets and liabilities that are required to be carried at fair
values by Ind AS. 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.
2.3 Use of estimates and judgment
Thepreparationofthefinancial statementsinconformitywithIndASrequiresmanagement
to make judgments, estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from those estimates. Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are recognized
in the period in which the estimates are revised and in any future periods affected.
Significant judgments and estimates relating to the carrying values of assets and
liabilities include useful lives of property, plant and equipment and intangible assets,
impairment of property, plant and equipment, intangible assets and investments,
provision for employee benefits and other provisions, recoverability of deferred tax
assets, commitments and contingencies.
2.4 Revenue from contract with customers
Company has adopted Ind AS 115 "Revenue from Contract With Customers" starting
April 01, 2018. Revenue from contract with customers is recognised when the Company
satisfies performance obligation by transferring promised goods and services to
the customer. Performance obligations are satisfied at a point of time. Performance
obligations are said to be satisfied at a point of time when the customer obtains controls
of the asset.
Revenue is measured based on transaction price, which is the fair value of the consideration
received or receivable, stated net of discounts, returns and Goods and Service Tax.
Transaction price is recognised based on the price specified in the contract, net of the
estimated sales incentives/ discounts. Accumulated experience is used to estimate
and provide for the discounts/ right of return, using the expected value method.
Revenue is only recognised to the extent that it is highly probable a significant reversal
will not occur. Our customers have the contractual right to return goods only when
authorised by the Company. An estimate is made of goods that will be returned and
a liability is recognised for this amount using a best estimate based on accumulated
experience.
Income from services rendered is recognised based on agreements/arrangements
with the customers as the service is performed and there are no unfulfilled obligations.
Interest income is recognised using the effective interest rate (EIR) method.
2.5 Foreign currency transactions and translation
The financial statements of the Company is presented in INR, which is the functional
currency of the Company and the presentation currency for the financial statements.
In preparing the financial statements of the Company, transactions in currencies
other than the entity's functional currency are recorded at the rates of exchange
prevailing on the date of the transaction. At the end of each reporting period,
monetary items denominated in foreign currencies are retranslated at the rates
prevailing at the end of the reporting period. Non-monetary items that are
measured in terms of historical cost in a foreign currency are not translated.
Exchange differences arising on the settlement of monetary items, and on retranslation
of monetary items are included in the statement of profit and loss for the period.
2.6 Property, plant and equipment
An item of property, plant and equipment is recognised as an asset if it is probable that
future economic benefits associated with the item will flow to the Company and its cost
can be measured reliably. This recognition principle is applied to the costs incurred
initially to acquire an item of property, plant and equipment and also to costs incurred
subsequently to add to,replace partof, or serviceit. Allother repair and maintenance costs,
including regular servicing, are recognised in the statement of profit and loss as incurred.
When a replacement occurs, the carrying amount of the replaced part is de-recognised.
Property, plant and equipment are stated at cost, less accumulated depreciation and
impairment. Cost includes all direct costs and expenditures incurred to bring the asset
to its working condition and location for its intended use. Trial run expenses (net of
revenue) are capitalised. Borrowing costs during the period of construction are added
to the cost of eligible tangible assets.
Gain or loss arising on disposal of an asset is determined as the difference between the
sale proceeds and the carrying amount of the asset, and is recognised in the statement
of profit and loss.
Property, plant and equipment which are not ready for intended use as on the date of
Balance Sheet are closed as “Capital work-in-progress".
Advances paid towards the acquisition of property, plant and equipment outstanding
at each balance sheet date is classified as capital advances under “Other Non-Current
Assets".
2.7 Intangible assets
Patents, trademarks, License and software costs are included in the balance sheet as
intangible assets where they are clearly linked to long term economic benefits for the
Company. In this case they are measured initially at purchase cost and then subsequently
intangible assets are carried at cost less any accumulated amortisation and accumulated
impairment losses, if any. The useful
lives of intangible assets are assessed as either finite or indefinite. Finite-life intangible
assets are amortised on a straight-line basis over the period of their estimated useful
lives. Estimated useful lives by major class of finite-life intangible assets are as follows:
Design - 10 years
Know-how - NIL
Computer software - 5 years
Trademarks - 5 years
The amortisation period and the amortisation method for finite-life intangible assets
is reviewed at each financial year end and adjusted prospectively, if appropriate. For
indefinite life intangible assets, the assessment of indefinite life is reviewed annually
to determine whether it continues, if not, it is impaired or changed prospectively basis
revised estimates.
2.8 Depreciation and amortization of property, plant and equipment
Depreciation is the systematic allocation of the depreciable amount of an asset over its
useful life and is provided on written down value basis over the useful life as prescribed in
Schedule II of the Companies Act, 2013 unless otherwise specified. Depreciable amount
for the assets is the cost of an asset less its estimated residual value. Depreciation on
addition to/deductions from fixed assets is provided on pro rata basis from/to the date
of acquisition/disposal. Depreciation on assets under construction commences only
when the assets are ready for their intended use.
2.9 Financial Instruments
I. Financial Assets:
Financial assets are recognised when the Company becomes a party to the contractual
provisions of the instrument.
On initial recognition, a financial asset is recognised at fair value. In case of Financial
assets which are recognised at fair value through profit and loss (FVTPL), its transaction
cost is recognised in the statement of profit and loss. In other cases, the transaction
cost is attributed to the acquisition value of the financial asset.
Financial assets are subsequently classified and measured at
- amortised cost
- fair value through profit and loss (FVTPL)
- fair value through other comprehensive income (FVOCI).
Financial assets are not reclassified subsequent to their recognition, except during the
period the Company changes its business model for managing financial assets.
(a) Trade Receivables and Loans:
Trade receivables are initially recognised at fair value. Subsequently, these assets
are held at amortised cost, using the effective interest rate (EIR) method net of any
expected credit losses. The EIR is the rate that discounts estimated future cash income
through the expected life of financial instrument.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial
instrument and of allocating interest income or expense over the relevant period.
The effective interest rate is the rate that exactly discounts future cash receipts or
payments through the expected life of the financial instrument, or where appropriate,
a shorter period.
(b) Debt Instruments:
Debt instruments are initially measured at amortised cost, fair value through other
comprehensive income ('FVOCI') or fair value through profit or loss ('FVTPL') till
derecognition on the basis of (i) the Company's business model for managing the
financial assets and (ii) the contractual cash flow haracteristics of the financial asset.
Financial assets at amortised cost(AC)
Financial assets that are held within a business model whose objective is to hold financial
assets in order to collect contractual cash flows that are solely payments of principal
and interest, are subsequently measured at amortised cost using the 'EIR' method less
impairment, if any. The amortisation of EIR and loss arising from impairment, if any is
recognised in the Statement of Profit and Loss.
Financial assets measured at fair value through Other Comprehensive Income
(FVOCI)
Financial assets that are held within a business model whose objective is achieved
by both, selling financial assets and collecting contractual cash flows that are
solely payments of principal and interest, are subsequently measured at fair value
through other comprehensive income. Fair value movements are recognised in the
other comprehensive income (OCI).Interest income measured using the EIR method
and impairment losses, if any are recognised in the Statement of Profit and Loss. On
derecognition, cumulative gain or loss previously recognised in OCI is reclassified from
the equity to 'other income' in the Statement of Profit and Loss.
Financial assets measured at fair value through Other Profit or Loss (FVTPL)
A financial asset not classified as either amortised cost or FVOCI, is classified as
FVTPL. Such financial assets are measured at fair value with all changes in fair value,
including interest income and dividend income if any, recognised as 'other income' in
the Statement of Profit and Loss.
(c) Equity Instruments
All investments in equity instruments classified under financial assets are initially
measured at fair value, the Company may, on initial recognition, irrevocably elect to
measure the same either at FVOCI or FVTPL.
The Company makes such election on an instrument-by instrument basis. Fair value
changes on an equity instrument is recognised as 'other income' in the Statement of
Profit and Loss unless the Company has elected to measure such instrument at FVOCI.
Fair value changes excluding dividends, on an equity instrument measured at FVOCI
are recognised in OCI. Amounts recognised in OCI are not subsequently reclassified
to the Statement of Profit and Loss. Dividend income on the investments in equity
instruments are recognised as 'other income' in the Statement of Profit and Loss.
(d) Derivative Financial Instruments
The Company uses derivative financial instruments to hedge its foreign currency and
commodity risks. Derivatives are measured at fair value. The treatment of changes in
the value of derivative depends on their use as explained below:
Cash Flow Hedges:
Derivatives are held to hedge the uncertainty in timing or amount of future forecast cash
flows. Such derivatives are classified as being part of cash flow hedge relationships.
For an effective hedge, gains and losses from changes in the fair value of derivatives
are recognised in other comprehensive income. Any ineffective elements of the hedge
are recognised in the statement of profit and loss. If the hedged cash flow relates to a
non-financial asset, the amount accumulated in equity is subsequently included within
the carrying value of that asset. For other cash flow hedges, amounts accumulated in
other comprehensive income are taken to the statement of profit and loss at the same
time as the related cash flow.
Derivatives for which hedge accounting is not applied
Derivative financial instruments for which hedge accounting is not applied are initially
recognised at fair value on the date on which a derivative contract is entered and are
subsequently measured at FVTPL.
Impairment of financial assets
The Company applies expected credit loss (ECL) model for measurement and
recognition of loss allowance on the following:
i. Trade receivables
ii. Financial assets measured at amortised cost (other than trade receivables)
iii. Financial assets measured at fair value through other comprehensive income
(FVTOCI).
In case of trade receivables, the Company follows a simplified approach wherein an
amount equal to lifetime ECL is measured and recognised as loss allowance. In case
of other assets (listed as ii and iii above), the Company determines if there has been
a significant increase in credit risk of the financial asset since initial recognition. If the
credit risk of such assets has not increased significantly, an amount equal to 12-month
ECL is measured and recognised as loss allowance. However, if credit risk has increased
significantly,anamountequaltolifetimeECLismeasuredandrecognisedaslossallowance.
Subsequently, if the credit quality of the financial asset improves such that there is
no longer a significant increase in credit risk since initial recognition, the Company
reverts to recognising impairment loss allowance based on 12-month ECL.
ECL is the difference between all contractual cash flows that are due to the Company
in accordance with the contract and all the cash flows that the Company expects to
receive (i.e. all cash shortfalls), discounted at the original effective interest rate.
Lifetime ECL are the expected credit losses resulting from all possible default events over
the expected life of a financial asset. 12-month ECL are a portion of the lifetime ECL which
result from default events that are possible within 12 months from the reporting date.
ECL are measured in a manner that they reflect unbiased and probability
weighted amounts determined by a range of outcomes, taking into account the
time value of money and other reasonable information available as a result of
past events, current conditions and forecasts of future economic conditions.
As a practical expedient, the Company uses a provision matrix to measure lifetime ECL
on its portfolio of trade receivables.
The provision matrix is prepared based on historically observed default rates over
the expected life of trade receivables and is adjusted for forward-looking estimates.
At each reporting date, the historically observed default rates and changes in the
forward-looking estimates are updated.
ECL allowance recognised (or reversed) during the period is recognised as income/
expense in the Statement of Profit and Loss under the head 'Other expenses'. conditions
and forecasts of future economic conditions.
Derecognition of financial assets
The Company derecognises a financial asset only when the contractual rights to the
cash flows from the asset expire, or it transfers the financial asset and substantially all
risks and rewards of ownership of the asset to another entity. 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
assets and an associated liability for amounts it may have to pay. If the Company
retains substantially all the risks and rewards of ownership of a transferred financial
asset, the Company continues to recognise the financial asset and also recognises a
collateralised borrowing of the proceeds received.
II. Financial liabilities and equity instruments
Classification as debt or equity
Financial liabilities and equity instruments issued by the Company are classified
according to the substance of the contractual arrangements entered into and the
definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of
the Company after deducting all of its liabilities. Equity instruments are recorded at the
proceeds received, net of direct issue costs.
Financial Liabilities
Initial Recognition and measurement
Financial liabilities are recognised when the Company becomes a party to the
contractual provisions of the instrument. Financial liabilities are initially measured at
the amortised cost unless at initial recognition, they are classified as fair value through
profit and loss. In case of trade payables, they are initially recognised at fair value and
subsequently, these liabilities are held at amortised cost, using the effective interest
rate method.
Subsequent measurement
Financial liabilities are subsequently measured at amortised cost using the EIR method.
Financial liabilities carried at fair value through profit or loss are measured at fair value
with all changes in fair value recognised in the Statement of Profit and Loss.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company's
obligations are discharged, cancelled or they expire.
2.10 Employee benefits
Defined contribution plans
Contributions to defined contribution schemes such as employees' state insurance,
labour welfare fund etc. are charged as an expense based on the amount of contribution
required to be made as and when services are rendered by the employees.
Company in respect of above schemes has made contribution to a Government
administered fund(s) and charged as an expense to the Statement of Profit and Loss.
The above benefits are classified as Defined Contribution Schemes as the Company
has no further defined obligations beyond the monthly contributions.
Defined benefit plans
For defined benefit retirement schemes, the cost of providing benefits is determined
using the Projected Unit Credit Method, with actuarial valuation being carried out at
each balance sheet date. Re-measurement gains and losses of the net defined benefit
liability / (asset) are recognised immediately in Other Comprehensive Income.
The service cost, net interest on the net defined benefit liability / (asset) is treated as
a net expense within employment costs.
Past service cost is recognised as an expense, when the plan amendment or curtailment
occurs, or when any related restructuring cost or termination benefits are recognised,
whichever is earlier.
The retirement benefit obligation recognised in the balance sheet represents the
present value of the defined-benefit obligation, as reduced by the fair value plan assets.
2.11 Inventories
Inventories are valued at the lower of cost and net realisable value. Cost is computed
on a weighted average basis. Cost of finished goods and work-in-progress include all
costs of purchases, conversion costs and other costs incurred in bringing the inventories
to their present location and condition. The net realisable value is the estimated selling
price in the ordinary course of business less the estimated costs of completion and
estimated costs necessary to make the sale.
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