Note-2.3 Material Accounting Policies:
2.3.1 Revenue Recognition
2.3.1 (a) Sale of goods or services
Revenue from the sale of goods or services is recognized at the point in time on satisfaction of distinct performance obligations when control is transferred to the
customer and the amount of revenue can be measured reliably and recovery of consideration is probable.
Revenue is measured based on the transaction price (net of variable consideration) which is consideration, adjusted for volume discounts, rebates, scheme
allowances, price concessions, incentives, and returns, if any, as specified in the contracts with the customers. Revenue excludes taxes collected from customers
on behalf of the government. Due to short nature of credit period given to customers, there is no financing component in the contract.
2.3.1(b) Interest Income
Interest Income from financial asset is recognized when it is probable that economic benefits will flow to the company and amount of income can be measured
reliably. Interest income is accrued on time basis, by reference to principal outstanding and at effective interest rate applicable, which is the rate that exactly
discounts estimated future cash receipts through the expected life of financial asset to that asset's net carrying amount on initial recognition.
(i) Rental income from leases is recognized on straight line basis over lease term.
(ii) Insurance claims and export incentives are accounted for as and when the estimated amounts recoverable can be reasonably determined as being
acceptable to the concerned authorities/parties.
2.3.2 Employee Benefits
2.3.2(a) Short term Employee Benefits:
Employee benefits payable wholly within twelve months of receiving employee services are classified as short-term employee benefits. The amount of short-term
employee benefits are recognized as an expense on an undiscounted basis in the statement of profit and loss of the year in which the related service is rendered.
2.3.2(b) Post-Employment benefit plans
(a) Defined Contribution Plan:
Contribution towards Provident fund and national pension scheme is classified as defined contribution scheme as the Company has no obligation,
other than the contribution made to the fund. The Company recognizes contribution payable to the such schemes as an expense, when an employee
renders the related service.
(b) Defined Benefit Plan:
Gratuity
The Company provides for gratuity, a defined benefit retirement plan covering eligible employees. The gratuity plan provides for lump sum payment
to vested employee at retirement, death, incapacitation or termination of employee, based on the respective employee's salary and the tenure of
employment.
The liability or asset recognised in the balance sheet in respect of the defined benefit plan is the present value of the defined benefit obligation at the
end of the reporting period less the fair value of plan assets. The liability/asset is determined using projected unit credit method, through actuarial
valuation carried out at the end of each annual reporting period.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets.
Such net interest cost along with the current service cost and, if applicable, the past service cost and settlement gain/loss, is included in employee
benefit expense in the statement of profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions, comprising actuarial gains/losses and
return on plan assets (excluding the amount recognised in net interest on the net defined liability), are recognised in the period in which they occur,
directly in other comprehensive income. These are recognized as a part of in retained earnings in the statement of changes in equity and in the
balance sheet.
2.3.2(c) Other long term employee benefits- Compensated absences
Compensated absences, which are not expected to occur within twelve months after the end of the period in which the employee renders the related service,
are recognised at the present value of the obligation based on actuarial valuation as on the reporting date,performed by an independent actuary using
projected unit credit method.
The expense related to other long term employee benefits including re-measurements as a result of past experience adjustments and changes in actuarial
assumptions are recognised in statement of profit and loss.
2.3.3 Property, plant and equipment:
Recognition and measurement
The cost of an item of property, plant and equipment is recognised as an asset when it is probable that future economic benefits associated with the item
will flow to the entity and the cost of the item can be measured reliably.
Freehold land is carried at cost. All other items of Property, plant and equipment are stated at cost less accumulated depreciation and impairment loss, if
any. The cost directly attributable to acquisition are capitalised until the property plant and equipment are ready for use as intended by the management.
The cost of an item of Property, plant and equipment comprises of:
(i) Purchase price including import duties and non-refundable purchase taxes after deducting trade discounts and rebates.
(ii) Any expenditure directly attributable for bringing an asset to the location and the working condition for its intended use and
(iii) The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity
incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce
inventories during that period.
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.
Subsequent expenditures relating to property, plant and equipment are included in the asset's carrying value or recognised as separate assets as appropriate,
only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. All
other repairs and maintenance costs are charged to the statement of profit and loss when incurred.
Property, plant and equipment (including directly attributable expenditure) which are not ready for intended use at each balance sheet date are disclosed
as “Capital work-in-progress”.
De-recognition of Property, Plant and Equipment
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. The cost and the related accumulated depreciation are eliminated from the financial statements upon disposal or retirement of the asset
and any gain or loss arising thereon is determined as the difference between sale proceeds and the carrying amount of the asset and is recognised in the
statement of profit and loss.
2.3.4 Intangible Assets
Intangible assets are recognized when it is probable that the expected future economic benefits that are attributable to the asset will flow and the cost of
the asset can be measured reliably.
Intangible assets are stated at cost less accumulated amortization and accumulated impairment losses, if any. The cost of intangible asset comprises of its
purchase price, net of recoverable taxes and any directly attributable cost of preparing the asset for its intended use.
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other
expenditure is recognised in statement of profit and loss as and when incurred.
De-recognition of intangible assets
An intangible asset is derecognised upon disposal or retirement of the asset. The cost and the related accumulated amortization are eliminated from the
financial statements upon disposal or when no future economic benefits are expected from its use or disposal and resultant gains or losses are recognized
in the statement of Profit and Loss when the asset is derecognized.
2.3.5 Depreciation and amortization
Depreciation
Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life.
Depreciation is provided on Property, plant and equipment on straight line method on the basis of useful lives of such assets specified in Schedule II to the
Act. Assets costing upto ?5,000 are fully depreciated in the year of purchase.
Depreciation method and useful lives are reviewed periodically, including at each financial year end with the effect of any changes in estimate accounted for
on a prospective basis.
Amortization
Intangible assets are amortized on straight line method over the estimated useful life. The amortization method and useful life are reviewed at each financial
year end. The estimated useful life is based on number of factors including effect of obsolescence and other economic factors and is as under:
2.3.6 Inventories
Inventories are valued at cost or net realizable value, whichever is lower except production waste which is valued at net realizable value. The raw materials
and other supplies held for use in the production are valued at net realisable value only if the finished products in which they are to be incorporated are
expected to be sold below cost. The cost in respect of the various items of inventory is computed as under:
(i) In case of raw materials at first-in first-out (FIFO) basis. The cost includes cost of purchase and other costs incurred in bringing the inventories to their
present location and condition.
(ii) In case of stores and spares at weighted average cost plus direct expenses. The cost includes cost of purchase and other costs incurred in bringing
the inventories to their present location and condition.
(iii) In case of work in progress at raw material cost plus conversion costs depending upon the stage of completion.
(iv) In case of finished goods at raw material cost plus conversion costs, and other overheads incurred to bring the goods to their present location and
condition.
Net Realisable Value is the estimated selling price in ordinary course of business less estimated costs of completion and the estimated costs necessary to
make the sales.
2.3.7 Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets i.e. the assets that necessarily takes a substantial
period of time to get ready for its intended use are capitalized as part of the cost of the asset. All other borrowing costs are expensed in the period in which
they occur. Borrowing costs consist of interest and other costs that the Company 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.
2.3.8 Earnings per Share
Basic earnings per share is computed by dividing the profit for the period attributable to the equity shareholders of the company by the weighted average
number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the profit for the period attributable to the equity shareholders and the weighted average number
of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares, if any.
2.3.9 Income Taxes
Income tax expense comprises current tax and deferred tax.
Income tax expense is recognised in statement of Profit and Loss except to the extent that it relates to items recognised in other comprehensive income or
directly in equity. In such case, the tax is also recognised in other comprehensive income or directly in equity, as the case may be.
Current tax is the tax payable/receivable on the taxable profit/loss for the year using the tax rates and tax laws that have been enacted or substantively
enacted by the end of the reporting period and any adjustment to taxes in respect of previous years. Interest expenses and penalties, if any, related to
income tax are included in finance cost and other expenses respectively. Interest Income, if any, related to income tax is included in other income.
Deferred tax is recognised in respect of temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial
reporting purpose at the reporting date using tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date and are
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
A deferred tax asset is recognized to the extent, it is probable that future taxable profit will be available against where the deductible temporary differences
and tax losses can be utilized. 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 utilized.
2.3.10 Government Grants
Government grants are recognized only when there is reasonable assurance that the conditions attached to them shall be complied with, and the grants will
be received.
Government grants relating to the purchase of property, plant and equipment are deducted from its gross value and are recognised in the statement of profit
and loss profit or loss on a systematic over the expected useful lives of the related assets by way of reduced depreciation.
When the grants relates to an expense item, it is recognised in the statement of profit and loss by way of reduction from the related cost, which the grants
are intended to compensate.
Government grants that become receivable as compensation for expenses or losses already incurred or for the purpose of giving financial support to
the Company with no related costs is recognised in the Statement of profit or loss of the period in which it becomes receivable under ‘Other operating
income'/Other income' based on the nature of grant.
2.3.11 Foreign Currency translations
Transactions in foreign currency are initially recorded in the functional currency i.e. Indian Rupees using the exchange rate prevailing at the date of
transactions.
Monetary items denominated in foreign currency are reported using the exchange rate prevailing at the end of reporting period.
The exchange difference arising on the settlement or reporting of monetary items at rates different from rates at which these were initially recorded / reported
in previous financial statements, are recognised in the statement of profit and loss in the period in which they arise.
Non-monetary items denominated in foreign currency and measured at historical cost are recorded at the exchange rate prevalent at the date of transaction.
Non-monetary items that are measured in term of historical cost in foreign currency are not retranslated.
2.3.12 Dividends
Final dividends on shares are recorded as a liability after approval by the shareholders and interim dividends are recorded as a liability on the date of
declaration by the company's Board of Directors.
2.3.13 Leases
(i) Company as a lessee
The Company's lease asset classes primarily consist of leases for land and buildings. The Company assesses whether a contract contains a lease, at
inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:
(i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the
period of the lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use asset (“ROU”) and a corresponding lease liability for all lease
arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and leases for which underlying asset is
of low value. For these short-term and leases for which underlying asset is of low value, the Company recognizes the lease payments as an operating
expense on a straight-line basis over the term of the lease.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the
underlying asset.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using
the interest rate implicit in the lease or, if not readily determinable, using the lessee's incremental borrowing rate.
Lease Liability and Right-of-Use Asset have been separately presented in the Balance Sheet. The interest expense on the lease liability has been
separately presented as a component of finance costs in the statement of profit and loss. The payments of principal portion and interest portion of
lease liability have been classified under financing activities in the statement of cash flows.
The payments for short-term leases and leases of low-value assets have been recognized in the statement of profit and loss have been classified
under operating activities in the statement of cash flows.
Company as a lessor
Leases for which the company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
For operating leases, lease payments received are recognized on systematic basis over the term of the relevant lease as a part of other income.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
2.3.14(a) Initial Recognition and measurement
The company recognises the financial assets and financial liabilities when it becomes party to the contractual provision of the instruments. All financial assets
and liabilities are recognised at fair value on initial recognition except for trade receivables which are initially measured at transaction price. Transaction
costs that are directly attributable to the acquisition of financial assets and or issue of financial liabilities that are not recognized at fair value through profit
or loss, are added to or reduced from the fair value of the financial assets or financial liabilities, as appropriate. Transaction cost directly attributable to the
acquisition of financial assets and financial liabilities recognized at fair value through Profit or Loss are recognised immediately in the Statement of Profit
and Loss.
2.3.14(b) Subsequent measurement
For the purposes of subsequent measurement, financial instruments are classified as follows:
(a) Non-derivative financial instruments
Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect
contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Interest income for such instruments is recognised in profit or loss using the effective interest rate (EIR) method, which is the rate that exactly
discounts estimated future cash receipts through the expected life of the financial asset to that asset's gross carrying amount.
The carrying amounts of financial assets that are subsequently measured at amortised cost are determined based on the effective interest method
less any impairment losses.
Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is
achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified
dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Interest income for such instruments is recognised in profit or loss using the effective interest rate(EIR) method, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial asset to that asset's gross carrying amount.
Fair value movements are recognised in the other comprehensive income (OCI) until the financial asset is derecognised. On de-recognition, cumulative
gain or loss previously recognised in OCI is reclassified from the equity to the profit and loss.
Financial assets at fair value through profit or loss
A financial asset is subsequently measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other
comprehensive income. Such financial assets are measured at fair value with all changes in fair value recognised in the statement of profit and
loss.
Dividend and interest income from such instruments is recognized in the statement of profit and loss, when the right to receive the payment is
established.
Fair value changes on such assets are recognised in the statement of profit and loss.
Financial liabilities
Financial liabilities are classified as at fair value through profit or loss when the financial liability is either contingent consideration recognised by the
Company as an acquirer in a business combination to which Ind AS 103 applies or is held for trading or it is designated as at Fair Value Through Profit
& Loss ( FVTPL).
All other financial liabilities are subsequently measured at amortized cost using the effective interest method unless at initial recognition, they are
classified as measured at fair value through profit and loss.
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.
For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short
maturity of these instruments.
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. Incremental costs directly attributable to the issuance of equity instruments and buy back of equity
instruments are recognized as a deduction from equity, net of any tax effects.
(b) Derivative financial instruments
The Company holds derivative financial instruments such as foreign exchange forward contracts to mitigate the risk of changes in exchange rates on
foreign currency exposures. The counterparty for these contracts is generally a bank.
Although the Company believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting
under Ind AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per Ind AS 109,
is categorized as a financial asset or financial liability, at fair value through profit or loss.
Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in the statement of
profit and loss when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting
exchange gains or losses are charged to Statement of Profit and Loss.
(c) Compound financial instruments
The non-convertible non-cumulative preference shares issued by the company that provides for mandatory redemption by the company for a fixed or
determinable amount at a fixed or determinable future date are treated as compound financial instruments as per criteria mentioned in Ind AS 32.
On issuance of the convertible preference shares, the fair value of the liability component is determined using a market interest rate for an equivalent
non-convertible instrument. This amount is classified as a financial liability measured at amortised cost (net of transaction costs). The remainder of
the proceeds is recognised and included in other equity. The change in liability component on account of modification of terms of redemption, if any,
is recognized in statement of profit and loss.
2.3.14(c) De-recognition of financial instrument
a) A financial asset (or, a part of a financial asset) is primarily derecognized when the contractual right to the cash flows from the financial asset expires,
or the company transfers its right to receive cash flow from the financial assets and substantially all the risks and rewards of ownership of the asset
to another party.
On de-recognition of a financial asset, the difference between the asset's carrying amount and the sum of the consideration received/receivable is
recognised in the profit or loss.
b) A financial liability (or a part of financial liability) is derecognized when obligation specified in the contract is discharged or cancelled or expires.
On de-recognition of a financial liability, the difference between the carrying amount of the financial liability de-recognised and the consideration paid/
payable is recognised in profit or loss.
2.3.14(d) Offsetting financial instruments
Financial assets and 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 them on a net basis or to realise the assets and settle the liabilities simultaneously.
2.3.14(e) Impairment of Financial Assets
Financial assets that are carried at amortised cost and fair value through other comprehensive income (FVOCI) are assessed for possible impairments basis
expected credit losses taking into account the past history of recovery, risk of default of the counterparty, existing market conditions etc. The impairment
methodology applied depends on whether there has been a significant increase in credit risk since initial recognition.
Expected Credit Losses are measured through a loss allowance at an amount equal to:
- 12-months expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12
months after the reporting date); or
- Lifetime expected credit losses (expected credit losses that result from all possible default events over the life of financial instruments).
For trade receivables or any contractual right to receive cash or another financial asset that result from transaction that are within the scope of Ind AS 115
and Ind AS 116, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses.
For all other financial assets, expected credit losses are measured at an amount equal to the 12- months ECL, unless there has been a significant increase
in credit risk from initial recognition in which case those are measured at lifetime ECL.
2.3.14(f) Write off
The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering the financial asset in its
entirety or a portion thereof.
2.3.15 Impairment of Non-financial assets
Property, plant and equipment and other intangible assets are tested for impairment whenever events or changes in circumstances indicate that their
carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the 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 such assets are considered to be impaired, the impairment to be recognized in the statement of profit and loss is measured by the amount by which the
carrying value of the assets exceeds the estimated recoverable amount of the asset. The recoverable amount is the higher of an asset's fair value less costs
of disposal and value in use.
The assets that are impaired are reviewed for possible reversal of the impairment at the end of each reporting period. When an impairment loss subsequently
reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, however that the increased carrying amount
does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been
recognised for the asset in prior years. The reversal of an impairment loss is recognised in the statement of profit and loss.
Impairment is reviewed periodically including at the end of each financial year.
2.3.16 Cash and cash equivalents
The Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and short-term deposits with the original maturity period of three
months or less, which are subject to an insignificant risk of changes in value and all highly liquid investments that are readily convertible to known amounts
of cash to be cash equivalents.
2.3.17 Statement of Cash flows
The statement of cash flows is prepared in accordance with the Indian Accounting Standard (Ind AS) - 7 “Statement of Cash flows” using the indirect method
for operating activities whereby profit for the period is adjusted for the effects of transaction of a non-cash nature, and item of income or expenses associated
with investing or financing cash flows. The cash flows from operating, investing and financing activities of the company are segregated. The Company
considers all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.
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