2 MATERIAL ACCOUNTING POLICIES
2.01 Statement of Compliance:
These financial statements of the Company comprising of Balance Sheet, Statement of Profit and Loss, Statement
of changes in Equity and Cash Flow Statement together with the notes have been prepared in accordance with
Indian Accounting Standards notified under the Companies (Indian Accounting Standards) Rules, 2015 ("Ind AS")
as amended by the Companies (Indian Accounting Standards) Rules, 2016, the Companies (Indian Accounting
Standards) Rules, 2017 and other relevant provisions of the Companies Act, 2013.
2.02 Basis of Preparation and Presentation:
The Financial Statements have been prepared on the historical cost basis except for certain financial instruments
measured at fair value at the end of each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
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, regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes
in to account the characteristics of the asset or liability if market participants would take those characteristics into
account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure
purposes in these financial statements is determined on such a basis, except for leasing transactions that are within
the scope of Ind AS 17, and measurements that have some similarities to fair value but are not fair value, such as net
realizable value in Ind AS 2 or value in use in Ind AS 36.
In addition, for financial reporting purposes, fair value measurements are categorized into Level 1,2, or 3 based on
the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the
fair value measurements in its entirety, which are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within level 1, that are observable for the asset or liability,
either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
The financial statements are presented in Indian Rupees (?) which is the Company's functional and presentation
currency.
All amounts disclosed in the financial statements and notes have been rounded off to the nearest Rupees in lakhs (upto
two decimals), except share data and as otherwise stated as per the requirement of Schedule III of the Companies Act,
2013.
The financial statements were approved by the Board of Directors on 30th May, 2025.
All assets and liabilities have been classified as current or non-current as per the Company's operating cycle and other
criteria set out in the Schedule III to the Companies Act, 2013 and Ind AS 1 “Presentation of financial statements”.
Based on the nature of products and the time between the acquisition of assets for processing and their realisation
in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of
current-non current classification of assets and liabilities.
2.03 Revenue Recognition:
Revenue from the sale of the Company is recongnised when delivery has taken place and control of the goods has
been transferred to the customer, and when there are no longer any unfulfilled obligations.
a) The customer obtains control of the goods when the significant risks and reward of products sold are transferred
according to the specific delivery term that have been agreed with the customer.
b) Revenue is measured at fair value of the consideration received or receivable, after deduction of any discounts,
price concessions, volume rebates and any taxes or duties collected on behalf of the government such as
goods and services tax, etc. Accumulated experience is used to estimate the provision for such discounts, price
concessions and rebates. Revenue is only recognised to the extent that it is highly probable a significant reversal
will not occur.
2.04 Goods and Service Tax:
All items in the financial statements are presented exclusive of Goods and Services Tax (GST) except for receivables
and payables, which are presented on a GST-inclusive basis. Where GST is not recoverable as input tax, it is
recognized as part of the related asset or expense. The net amount of GST recoverable from the Department is
included as part of receivables in the Financial Statement.
2.05 Other Income:
a) I nterest income is recognised on the time proportion basis, by reference to the principal outstanding and the
effective interest rate applicable.
b) Insurance and other claims are accounted as and when unconditionally admitted by the appropriate authorities.
c) Gains or Losses arising on retirement or disposal of property, plant and equipment are recognised in the
Statement of Profit and Loss in the year of such retirement or disposal.
2.06 Property, Plant and Equipment:
Property, plant and equipment is stated at acquisition cost net of accumulated depreciation and accumulated
impairment losses, if any. Subsequent costs are included in the asset's carrying amount or recognised as asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company
and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Statement of
Profit and Loss during the period in which they are incurred.
Gains or Losses arising on retirement or disposal of property, plant and equipment are recognised in the Statement of
Profit and Loss.
Capital work-in-progress / intangible assets under development are carried at cost, comprising direct cost, related
incidental expenses and attributable borrowing cost.
The management's estimate of useful lives are in accordance with Schedule II to the Companies Act, 2013. Depreciation
is provided on pro-rata basis on the straight line method over the useful life of assets. The useful life, residual value
and the depreciation method are reviewed atleast at each financial year end and adjusted prospectively.
Spares in the nature of capital spares/ insurance spares are added to the cost of the assets. The total cost of such
spares is depreciated over a period not exceeding the useful life of the asset to which they relate.
Capital Subsidy under TUFS from Ministry of Textiles on specified processing machinery has been deducted from the
respective Fixed Assets and is represented at their Net off values.
2.07 Intangible Assets:
Intangible assets are stated at acquisition cost, net of accumulated amortisation and accumulated impairment losses,
if any. Intangible assets are amortised on a straight line basis over their estimated useful lives. The amortisation period
and amortisation method are reviewed at least at each financial year end. If the expected useful life of the asset is
significantly different from previous estimates, the amortisation period is changed accordingly.
2.08 Impairment of assets:
Property, plant and equipment and intangible assets with finite life are evaluated for recoverability whenever there
is any indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable
amount (i.e. higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis
unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases,
the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount
of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised in the Statement of Profit
and Loss.
When an impairment loss subsequently reverses, the carrying amount of the asset or a cash-generating unit is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset
(or cash-generating unit) earlier.
2.09 Investments :
Investments are classified as Long Term Investments and Current Investments. Long term investments are stated at
Cost. Provision is made for diminution in the value of Long term Investments to recognise a decline, if any other than
temporary in nature.
2.10 Financial instruments:
1. Initial recognition and measurement
Financial assets and/or financial liabilities are recognised when the Company becomes party to a contract
embodying the related financial instruments. All financial assets, financial liabilities are initially measured at fair
value. Transaction costs that are 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 as the case may be, the fair value of such assets or liabilities, 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.
2. Financial assets:
Classification and subsequent measurement of financial assets:
a) Classification of financial assets:
(i) The Company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through other comprehensive income,
or through profit or loss), and
- those measured at amortised cost.
(ii) The classification is done depending upon the Company's business model for managing the financial
assets and the contractual terms of the cash flows.
b) Subsequent Measurement
(i) Equity instruments:
The Company subsequently measures all equity investments at fair value. There are two measurement
categories into which the Company classifies its equity instruments:
Investments in equity instruments at FVTPL:
Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects
on initial recognition to present subsequent changes in fair value in other comprehensive income for
equity instruments which are not held for trading.
Investments in equity instruments at FVTOCI:
On initial recognition, the Company can make an irrevocable election (on an instrument-by¬
instrument basis) to present the subsequent changes in fair value in other comprehensive income.
This election is not permitted if the equity investment is held for trading. These elected investments
are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair
value with gains and losses arising from changes in fair value recognised in other comprehensive
income and accumulated in the reserve for 'equity instruments through other comprehensive income'.
The cumulative gain or loss is not reclassified to Statement of Profit and Loss on disposal of the
investments.
c) Impairment of financial assets:
The Company applies the expected credit loss model for recognising impairment loss on financial assets
measured at amortised cost, lease receivables, trade receivables, other contractual rights to receive cash
or other financial asset. For trade receivables, the Company measures the loss allowance at an amount
equal to lifetime expected credit losses. Further, for the purpose of measuring lifetime expected credit loss
allowance for trade receivables, the Company has used a practical expedient as permitted under Ind AS
109. This expected credit loss allowance is computed based on a provision matrix which takes into account
historical credit loss experience and adjusted for forward-looking information.
d) Derecognition of financial assets
A financial asset is primarily derecognised when:
1. the right to receive cash flows from the asset has expired, or
2. the Company has transferred its rights to receive cash flows from the asset; and
(a) the Company has transferred substantially all the risks and rewards of the asset, or
(b) the Company has neither transferred nor retained substantially all the risks and rewards of the
asset, but has transferred control of the asset.
On derecognition of a financial asset in its entirety (other than investments in equity instruments at
FVOCI), the differences between the carrying amounts measured at the date of derecognition and
the consideration received is recognised in the Statement of Profit and Loss.
3. 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.
Repurchase of the Company's own equity instrument is recognised and deducted directly in equity. No gain
or loss is recognised in the Statement of Profit and Loss on the purchase, sale, issue or cancellation of the
Company's own equity instruments.
Financial Liabilities
Classification and subsequent measurement
The Company's financial liabilities include trade and other payables, loans and borrowings and derivative
financial instruments. Subsequent measurement of financial liabilities depends on their classification as fair
value through Profit and loss or at amortized cost. All changes in fair value of financial liabilities classified as
FVTPL are recognized in the Statement of Profit and Loss. Amortised cost category is applicable to loans
and borrowings, trade and other payables. After initial recognition the financial liabilities are measured at
amortised cost using the Effective Interest Rate method.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or
expires. Gains and losses are recognized in profit and loss when the liabilities are derecognized.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and presented on net basis in the Balance Sheet when
there is a currently enforceable legal right to offset the recognised amounts and there is an intention either
to settle on a net basis or to realise the assets and settle the liabilities simultaneously.
Derivative financial instruments
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are
subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss
is recognised in the Statement of profit and Loss immediately.
2.11 Inventories:
Inventories are stated at the lower of cost and net realisable value.
Cost of inventories comprise all costs of purchasWe (net of input credits), costs of conversion and other costs incurred
in bringing the inventories to their present location and condition.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of
completion and the estimated costs necessary to make the sale.
Cost of raw materials and components, packing materials, stores, spare parts other than specific spares for machinery
and finished goods are determined on the basis of 'First-in-First-out' (FIFO) or 'Weighted Average Cost', as applicable.
Cost of Materials in transit are determined at cost-to-date.
2.12 Foreign currencies:
Items included in the financial statements of the Company are recorded using the currency of the primary economic
environment (INR) in which the Company operates (the ‘functional currency')
Foreign currency transactions are translated into the functional currency using exchange rates at the date of the
transaction. Foreign exchange gains and losses from settlement of these transactions, and from translation of
monetary assets and liabilities at the reporting date exchange rates are recognised in the Statement of Profit and Loss.
2.13 Employee Benefits:
Retirement benefit costs and termination benefits:
Defined Contribution Plans
Payment to defined contriWWbution retirement benefit plans are recognised as an expense when employees have
rendered service entitling them to the contributions.
Contributions to Provident and Family Pension Fund and Superannuation scheme, which are defined contribution
plans, are made as required by the statute and expensed in the Statement of profit and loss.
Defined Benefit Plans
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit
credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement
comprising actuarial gains and losses and the effect of the changes to the return of plan assets (excluding net 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 the other comprehensive income is reflected immediately in
retained earnings and is not reclassified to Statement of Profit and Loss. Past service cost is recognised in Statement
of Profit and 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 defined benefit liability or asset. Defined benefit costs are categorised 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
• remeasurement.
The Company presents the first two components of defined benefit costs in the Statement of Profit and Loss in the line
item “Employee benefits expense”. Curtailment gains and losses are accounted for as past service cost.
Short-term and other long-term employee benefits:
Short term employee benefits are recognized as an expense at undiscounted amount in the Statement of Profit and
Loss of the year in which the related service is rendered.
2.14 Borrowing Costs:
(a) Borrowing costs that are attributable to the acquisition, construction, or production of a qualifying asset are
capitalised as a part of the cost of such asset till such time the asset is ready for its intended use or sale. A
qualifying asset is an asset that necessarily requires a substantial period of time (generally over twelve months)
to get ready for its intended use or sale.
(b) All other borrowing costs are recognised as expense in the period in which they are incurred.
2.15 Taxation:
Tax expense comprises current and deferred tax. Current tax is measured at the amount estimated/calculated to be
paid to the tax authorities in accordance with the Income-tax Act, 1961. Deferred tax reflects the tax effect of the timing
differences between accounting income and taxable income originating and reversing during the year. Deferred tax is
measured based on the tax rate and tax laws enacted or substantially enacted at the balance sheet date. Deferred tax
assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
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