2. Significant Accounting Policies
a. Basis of Preparation of Financial Statement
These financial statements are prepared in accordance with Indian Generally Accepted Accounting
Principles (GAAP) under the historical cost convention on the accrual basis. GAAP comprises
mandatory accounting standards as prescribed under Section 133 of
the Companies Act, 2013 ('the Act') read with the Companies (Accounts) Rules, 2021, the provisions
of the Act as amended time to time. The accounting policies adopted in the preparation of financial
statements have been consistently applied. All assets and liabilities have been classified as current or
non-current as per the company's normal operating cycle and other criteria set out in the Schedule
III to the Companies Act, 2013. Based on the nature of operations and time difference between the
provision of services and realization of cash and cash equivalents, the company has ascertained its
operating cycle as 12 months for the purpose of current and non-current classification of assets and
liabilities.
b. Use of Estimates
The preparation of the financial statements in conformity with GAAP requires Management to make
estimates and judgments that affect the reported balances of assets and liabilities and disclosure
relating to contingent liabilities as at the date of the financial statements and reported amounts of
income and expenses during the period for the periods presented. Management believes that the
estimates used like Net realizable value of Inventories etc. in the preparation of financial statements
are prudent and reasonable. Future results could differ from these estimates.
The following significant accounting policies are adopted in the preparation and presentation of these
financial statements:
1. Revenue recognition
Sale of Goods:-
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the
company and the revenue can be reliably measured.
Revenue is recognised when the significant risks and rewards of ownership of the goods have
passed to the buyer which generally coincides with the dispatch/delivery of goods to customers
and where there is a reasonable certainty of acceptance of goods by the customer.
Goods & Service Tax are not received by the company on its own account. Rather, it is tax collected
on value added to the commodity by the seller on behalf of the government. Accordingly, it is
excluded from revenue.
Interest Income:
Interest income is recognised on a time proportion basis taking into account the amount outstanding
and the rate applicable.
2. Property, plant and equipment
Property, plant and equipment have been stated at cost of acquisition inclusive of expenses
directly attributable / related to the acquisition/ construction/erection of such assets. GST and
other applicable taxes paid on acquisition of property, plant and equipment are capitalized to the
extent not available/ utilizable as input tax credit under GST or other relevant law in force.
Expenditure incurred on renovation and modernization of PPE on completion of the originally
estimated useful life resulting in increased life and/or efficiency of an existing asset, is added to the
cost of the related asset. In the carrying amount of an item of PPE, the cost of replacing the part of
such an item is recognized when that cost is incurred if the recognition criteria are met. The carrying
amount of those parts that are replaced is derecognized in accordance with the derecognition
principles.
After initial recognition, PPE is carried at cost less accumulated depreciation/amortization and
accumulated impairment losses, if any.
An item of property, plant and equipment is derecognized 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)
is included in the Statement of Profit and Loss when the asset is derecognized.
Depreciation and Amortization
a. Property Plant and Equipment
Depreciation on Plant, Property and Equipment is calculated on a written-down value basis as per
useful life of asset prescribed under Schedule II of the Companies Act, 2013.
b. Intangible Assets
In respect of Intangible asset, the company has estimated the useful life of the asset assumed to be 4
years.
3. Impairments
The Company assesses at each reporting date as to whether there is any indication that any property,
plant and equipment and intangible assets or group of assets, called cash generating units (CGU) may
be impaired. If any such indication exists the recoverable amount of an asset or CGU is estimated to
determine the extent of impairment, if any. When it is not possible to estimate the recoverable
amount of an individual asset, the Company estimates the recoverable amount of the CGU to which
the asset belongs.
An impairment loss is recognised in the Statement of Profit and Loss to the extent, asset's carrying
amount exceeds its recoverable amount. The recoverable amount is higher of an asset's fair value
less cost of disposal and value in use. Value in use is based on the estimated future cash flows,
discounted to their present value using pre-tax discount rate that reflects current market
assessments of the time value of money and risk specific to the assets.
The impairment loss recognised in prior accounting period is reversed if there has been a change in the
estimate of recoverable amount.
4. Inventories
Inventories are valued at lower of cost and net realizable value, after providing for obsolesces, if any.
Cost of stores & consumables are computed on FIFO basis and cost of raw materials and finished
goods are computed on Weighted average basis.
Cost of Work in Progress and Finished Goods includes direct materials, labour, conversion and
proportion of manufacturing overheads incurred in bringing the inventories to their present location
and condition. The by-products are valued at net realizable value.
5. Foreign Currency Transactions
The functional currency of the Company is Indian Rupee. The transactions in foreign currencies are
stated at the rate of exchange prevailing on the date of transactions. The difference on account of
fluctuation in the rate of exchange prevailing on the date of transaction and the date of realization is
charged to the Statement of Profit and Loss. Differences on translations of Current Assets and
Current Liabilities remaining unsettled at the year-end are recognized in the Statement of Profit and
Loss. In respect of transactions covered by Forward Foreign Exchange Contracts, the difference
between the forward rate and exchange rate at the inception of contract is recognized as income or
expenses over the life of the contract. The Company has not entered into any foreign exchange
transactions or any forward contracts for the period covered in the financial statements.
6. Cash Flow Statements
Cash Flow Statement is prepared in accordance with the Indirect Method prescribed in the relevant
Accounting Standard. For the purpose of presentation in the cash flow statement, cash and cash
equivalents includes cash on hand and other highly liquid investments with maturities of three
months or less that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
7. Borrowings Cost
Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised
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.
8. Income Taxes
Tax expenses comprises of current and deferred tax. Current income tax is measured at the amount
expected to be paid to the tax authority in accordance with the Income tax Act, 1961 enacted in India
and tax laws prevailing in the respective tax jurisdiction where company operate.
Deferred tax on timing differences between taxable income and accounting income is accounted for,
using the tax rates and the tax laws enacted or substantially enacted as on the balance sheet date.
Deferred tax assets recognized only when there is a reasonable certainty of their realization.
9. Earnings per share
Basis of earning per share are calculated by dividing the net profit or loss for the period attributable
to equity shareholder by the weighted average number of equity share outstanding during the
period. For the purpose of calculating diluted earnings per share, the net profit or loss for the period
attributable to equity shareholder and the weighted average number of shares outstanding during
the period are adjusted for the effects of all dilutive equity shares.
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