3 MATERIAL ACCOUNTING POLICIES3.1 Basis of Measurement
These standalone financial statements have
been prepared under the historical cost principle
except for certain financial assets and liabilities
which have been measured at fair value:
The standalone financial statements are
presented in Indian Rupees ('), which is the
Company's functional and presentation currency
and all amounts are rounded to the nearest crore
and two decimals thereof, except as stated
otherwise.
3.2 Property, Plant and Equipment (PPE) & Other
Intangible Assets
Property, plant and equipment are stated at cost,
net of accumulated depreciation and accumulated
impairment losses, if any. Cost comprises of
the purchase price (net of GST/ CENVAT / duty
credits, Government Grants,wherever applicable)
and all direct costs attributable to bringing the
asset to its working condition for intended use
and includes the borrowing costs for qualifying
assets if the recognition criteria's are met.
All other repair and maintenance costs are
recognised in the statement of profit and loss as
incurred.
An item of property, plant and equipment is de¬
recognised upon disposal or when no future
economic benefits are expected from its use
or disposal. The gain or loss arising on the
disposal or retirement of an item of property,
plant and equipment is determined as the
difference between the sales proceeds and the
carrying amount of the asset and is recognised
in the Statement of Profit and Loss on the date of
disposal or retirement.
Capital work-in-progress includes cost of
property, plant and equipment under installation
and not put to use as at the balance sheet
date. 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.
Intangible assets acquired separately are
measured at initial recognition at cost. Following
initial recognition, intangible assets are carried
at cost less any accumulated amortisation and
accumulated impairment losses, if any.
3.3 Depreciation and Amortisation
i Depreciation on the property, plant and
equipment is provided over the useful life
of assets which is coincide with the life
specified in Schedule II to the Companies
Act, 2013. The range of useful lives of
the Property, Plant and Equipment are as
follows:
The useful lives of assets as mentioned
above is on single shift basis, if an asset is
used for any time during the year for double
shift, the depreciation increased by 50% and
for triple shift by 100% for that period.
ii Property, plant and equipment (PPE) which
are added/ disposed- of during the year,
depreciation is provided on pro-rata basis
from (up- to) the date on which the PPE is
available for use (disposed-off).
iii The residual values and useful lives
of PPE are reviewed in every financial
year considering the physical condition,
benchmarking analysis or indicators for
review of residual value and useful life of the
respective assets and the same is adjusted
prospectively. Lease hold land is amortised
over the period of lease.
iv Free-hold land are not subject to
amortisation.
v The "Right of use Assets" arising from
Leases are amortised on straight-line
method basis over the life of the respective
leases.
Intangible asset are amortised over their
estimated useful life on straight-line method
basis.
3.4 Impairment of PPE and other non-financial
assets
Property, plant and equipment and other non¬
financial assets are evaluated for recoverability
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 or group of 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 is measured by the
amount by which the carrying value of the assets
exceeds the estimated recoverable amount of
the asset and recognised in the statement of
Profit and Loss. An impairment loss is reversed
in the statement of profit and loss if there
has been a change in the estimates used to
determine the recoverable amount. The carrying
amount of the asset is increased to its revised
recoverable amount, provided that this 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.
A reversal of impairment loss is recognised
immediately in Statement of Profit and Loss.
3.5 Cash and cash equivalents
Cash and cash equivalents includes cash in hand
and Cheques / drafts in hand, balances with
banks, deposits held at call with banks, other
short-term highly liquid investments with original
maturities of three months or less that are readily
convertible to a known amount of cash and are
subject to an insignificant risk of changes in
value and are held for the purpose of meeting
short-term cash commitments. The cash flow
statement has been prepared under the indirect
method as set out in Indian Accounting Standard
(IND AS) 7 statement of cash flows.
3.6 Inventories
Inventories are carried in the balance sheet as
follows:
The cost of inventories comprises of cost of
purchase, cost of conversion and other related
costs incurred in bringing the inventories to their
respective present location and condition. Net
realisable value is the estimated selling price in
the ordinary course of business, less estimated
costs of completion and the estimated costs
necessary to make the sale.
3.7 Employee benefits
Expenses and liabilities in respect of employee
benefits are recorded in accordance with Ind-AS
19 - Employee Benefits.
a) Defined contribution plan
i Provident Fund: Contribution to the
provident fund with the government
at pre-determined rates is a defined
contribution scheme and is charged to
the statement of Profit and Loss when
employees have rendered services
entitling them to such benefit.
ii National pension scheme : Contribution
to the national pension scheme with
the at pre-determined rates is a defined
contribution scheme and is charged to
the statement of Profit and Loss when
employees have rendered services
entitling them to such benefit.
b) Defined benefit plan
Gratuity : The Company provides for gratuity,
a defined benefit retirement plan ('the
Gratuity Plan') covering eligible employees.
The Gratuity Plan provides a lump-sum
payment to vested employees at retirement,
death, or termination of employment, of an
amount based on the respective employee's
salary and the tenure of employment with
the Company.
Liabilities with regard to the Gratuity Plan
are determined by actuarial valuation,
performed by an independent actuary, at
each balance sheet date using the projected
unit credit method.
The Company recognizes the net obligation
of a defined benefit plan in its balance sheet
as an asset or liability. Gains and losses
through re-measurements of the net defined
benefit liability/ (asset) are recognised in
other comprehensive income. The actual
return of the portfolio of plan assets, in
excess of the yields computed by applying
the discount rate used to measure the
defined benefit obligations is recognised in
Other Comprehensive Income. The effect
of any plan amendments are recognised in
net profits in the Statement of Profit and
Loss.
c) Long term employee benefits
Provisions for other long term employee
benefits-compensated absences, a
defined benefit scheme, is made on the
basis of actuarial valuation at the end of
each financial year and are charged to the
statement of profit and loss. All actuarial
gains or losses are recognised immediately
in the statement of profit and loss.
d) Other Short-term employee benefits
All employee benefits payable wholly within
twelve months rendering services are
classified as short term employee benefits.
Benefits such as salaries, wages, short¬
term compensated absences, performance
incentives etc. and the expected cost of
bonus, ex-gratia are recognised during
the period in which the employee renders
related service.
3.8 Foreign currency reinstatement and translation
a) Functional and presentation currency
The standalone financial statements have
been presented in Indian Rupees ('), which is
the Company's functional and presentation
currency.
b) Transactions and balances
Transactions in currencies other than
the entity's functional currency (foreign
currencies) are recognised at the rates of
exchange prevailing at the dates of the
transactions. At the end of each reporting
period, monetary items denominated in
foreign currencies are translated at the
rates prevailing on the balance sheet date
and exchange gain and losses arising on
settlement and restatement are recognised
in statement of profit and loss. Non¬
monetary items are measured in terms of
historical cost in foreign currencies and are
therefore not retranslated.
3.9 Financial instruments
Initial recognition:
The Company recognises financial assets
and financial liabilities when it becomes
a party to the contractual provisions of
the instrument. All financial assets and
liabilities are recognised at fair value on
initial recognition. Transaction costs that
are directly attributable to the acquisition
or issue of financial assets and financial
liabilities that are not at fair value through
profit or loss, are added to or deducted from
the fair value on initial recognition.
Subsequent measurement:
i 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.
ii Financial assets carried 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.
iii Financial assets at fair value through
profit or loss: A financial asset which
is not classified in any of (i) & (ii) above
categories are subsequently fair valued
through profit or loss.
iv Financial Liabilities: Financial
liabilities are subsequently carried at
amortised cost using the effective
interest method. 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.
De-recognition
The Company de-recognises of financial
assets when the contractual rights to receive
cash flows from the financial asset expire
or transfer the financial asset and transfer
qualifies for de-recognition under IND AS
109.A financial liability is derecognised
when the obligation under the liability is
discharged or cancelled or expired. The
difference between the carrying amount of a
financial liability that has been extinguished
is recognised in profit or loss as other
income.
Offsetting of 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 on a net basis, to realise the assets
and settle the liabilities simultaneously.
Impairment of financial assets
In accordance with IND AS 109, the
Company applies expected credit
losses(ECL) model for measurement and
recognition of impairment loss on the
following financial asset and credit risk
exposure - Financial assets measured at
amortised cost; - Financial assets measured
at fair value through other comprehensive
income(FVTOCI); ECLs are based on the
difference between the contractual cash
flows due in accordance with the contract
and all the cash flows that the Company
expects to receive, discounted at an
approximation of the original effective
interest rate. The expected cash flows
will include cash flows from the sale of
collateral held or other credit enhancements
that are integral to the contractual terms.
3.10 Investments in subsidiary :
The investments in subsidiary is carried in these
standalone financial statements at historical
'cost'. Where the carrying amount of an investment
is greater than its estimated recoverable amount,
it is written down immediately to its recoverable
amount and the difference is transferred to
the Statement of Profit and Loss. On disposal
of investment, the difference between the net
disposal proceeds and the carrying amount is
charged or credited to the Statement of Profit
and Loss.
3.11 Derivative financial instruments:
The Company uses derivative financial
instruments, such as forward contracts to hedge
its foreign currency exposure. The recognising of
the resulting gain or loss depends on whether the
derivative is designated as a hedging instrument,
and if so, on the nature of the item being hedged.
Any gains or losses arising from changes in the
fair value of derivatives are taken directly to profit
or loss.
3.12 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 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.
3.13 Taxation
Income tax expense represents the sum of
current tax and deferred tax. Tax is recognised in
the Statement of Profit and Loss, except to the
extent that it relates to items recognised directly
in equity or other comprehensive income.
Current Tax
The tax currently payable is based on taxable
profit for the year. Taxable profit differs from 'profit
before tax' as reported in the Statement of Profit
and Loss because of items of income or expense
that are taxable or deductible in other years and
items that are never taxable or deductible under
the Income Tax Act. The Company's current tax
is calculated using tax rates and laws that have
been enacted or substantively enacted by the end
of the reporting period.
Deferred Tax
Deferred tax is recognised on differences between
the carrying amounts of assets and liabilities
in the Balance sheet and the corresponding tax
bases used in the computation of taxable profit
and are accounted for using the Balance Sheet
approach for all taxable temporary differences to
the extent that it is probable that future taxable
profits will be available. Deferred tax assets and
liabilities are measured at the applicable tax rates
and tax laws those are enacted or substantively
enacted. Deferred tax assets and deferred tax
liabilities are set-off, and presented on net basis.
The carrying amount of deferred tax is reviewed
at each balance sheet date. 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.
3.14 Revenue recognition and other income
The Company is in the business of sale of Steel
Pipes and 3LPE Coated API Pipes and Colled
Rolled Sheets, LED and conventional lighting
Products, fans, appliances, PVC pipes and
fittings etc. The Company also provide extended
warranties for its LED street lighting.
Revenue from contracts with customers is
recognised when control of the promised goods
or services are transferred to the customer at an
amount that reflects the consideration to which
the Company expects to be entitled in exchange
for those goods or services.
a) Sale of Product/Goods
Revenue from sale of Product/Goods is
recognised at the point in time when control
of the asset is transferred to the customer,
generally on delivery of the Product/Goods
and there is no uncertainty in receiving the
same and there is reasonable assurance
that the Company will comply with the
conditions attached to them in recognition
of revenue from sale of goods. The
Company also considers the effects of sales
returns, volume rebates, schemes discount,
incentives, price concessions and financing
components.
Extended warranty:- The extended
warranties provided to the customers
having separate performance obligation are
considered as the separate contract and
revenue from these contracts recognised
accordingly.
Volume rebates and schemes discounts:
The Company provides volume rebates
and schemes discounts to its customers
based on quantity of products sold to
them during the period. To estimate for
the expected future outgo for revenue
recognition, the Company applies the most
likely amount method for contracts with a
single-volume threshold and the expected
value method for contracts with more than
one volume threshold. The selected method
that best predicts the amount of variable
consideration is primarily driven by the
number of volume thresholds contained in
the contract.
Financing component: In case of extended
trade credit agreed with the customers
containing significant financing component,
the transaction price for such contract are
discounted, using the effective interest rate
that would be considered separate financing
transaction at transaction inception, to take
into consideration the significant financing
component.
b) Rendering of Service
Revenue from Services is recognised as per
terms of the contract with customers based
on stage of completion when the outcome
of the transaction involving rendering of
services can be estimated reliably.
c) Export incentives
Export benefits are accounted for in the
year of exports based on eligibility as well
as reasonable assurance that the Company
will comply with the conditions attached to
them and when there is no uncertainty in
receiving the same.
d) Other Income
Interest income is recognised on a time
proportion basis taking into account the
amount outstanding, the rate applicable
and reasonable certainty of receiving the
same.
3.15 Government grants / Assistance
Government grants/Assistance recognised in
profit and loss account on a systematic basis
where there is reasonable assurance that the
same will be received and the eligibility criteria is
met out. The same are periodically reviewed and
adjusted for changes in policies and regulations.
3.16 Dividend Distribution
Annual dividend distribution to the shareholders
is recognised as a liability in the period in which
the dividends are approved by the shareholders.
Any interim dividend paid is recognised on
approval by Board of Directors. Dividend payable
and corresponding tax on dividend distribution, if
leviable, is recognised directly in equity.
3.17 Fair Value measurement
The Company measures financial instruments at
fair value at each balance sheet date.
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. The fair value
measurement is based on the presumption that
the transaction to sell the asset or transfer the
liability takes place either:
(i) In the principal market for the asset or
liability,
or
(ii) In the absence of a principal market, in the
most advantageous market for the asset or
liability
The principal or the most advantageous market
must be accessible by the Company. The fair
value of an asset or a liability is measured using
the assumptions that market participants would
use when pricing the asset or liability, assuming
that market participants act in their economic
best interest.
A fair value measurement of a non-financial
asset takes into account a market participant's
ability to generate economic benefits by using
the asset in its highest and best use or by selling
it to another market participant that would use
the asset in its highest and best use.
The Company uses valuation techniques that are
appropriate in the circumstances and for which
sufficient data are available to measure fair
value, maximising the use of relevant observable
inputs and minimising the use of unobservable
inputs.
All assets and liabilities for which fair value
is measured or disclosed in the standalone
financial statements are categorised within the
fair value hierarchy, described as follows, based
on the lowest level input that is significant to the
fair value measurement as a whole:
Level 1: Quoted prices in active markets for
identical assets and liabilities
Level 2: Directly or indirectly observable market
inputs, other than Level 1 inputs. This includes the
assets and liabilities carried at forward contract
rates / prevailing exchange rate at year end and
assets carried at present value using appropriate
discounting rate
Level 3: Inputs which are not based on observable
market data.
For assets and liabilities that are recognised
in the standalone financial statements on
a recurring basis, the Company determines
whether transfers have occurred between levels
in the hierarchy by re-assessing categorisation
(based on the lowest level input that is significant
to the fair value measurement as a whole) at the
end of each reporting period.
For the purpose of fair value disclosures, the
Company has determined classes of assets &
liabilities on the basis of the nature, characteristics
and the risks of the asset or liability and the level
of the fair value hierarchy as explained above.
3.18 Earnings per share
Basic earnings per share is computed by dividing
the net profit after tax by weighted average
number of equity shares outstanding during the
period. The weighted average number of equity
shares outstanding during the year is adjusted
for treasury shares, bonus issue, bonus element
in a rights issue to existing shareholders, share
split and reverse share split (consolidation of
shares).
Diluted earnings per share is computed by
dividing the Net profit after tax after considering
the effect of interest and other financing costs or
income (net of attributable taxes) associated with
dilutive potential equity shares by the weighted
average number of equity shares considered
for deriving basic earnings per share and also
the weighted average number of equity shares
that could have been issued upon conversion
of all dilutive potential equity shares including
the treasury shares held by the Company to
satisfy the exercise of the share options by the
employees.
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