2. Summary of significant accounting policies
a. Basis of Preparation
These financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) under the historical cost convention on the
accrual basis except for certain financial instruments which are measured at fair values, the provisions of the Companies Act, 2013 (‘the Act’) (to
the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133 of
the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules issued thereafter.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an
existing accounting standard requires a change in the accounting policy hitherto in use.
b. Use of estimates and judgements
The preparation of financial statements in conformity with Ind A Srequires the management to make judgments, estimates and assumptions.
These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the
disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the period. Although, these estimates, judgements and assumptions are based on the management’s best knowledge of current events and
actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts
of assets or liabilities in future periods.
c. Property Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment, if any. Costs directly attributable to acquisition
are capitalized until the property, plant and equipment are ready for use, as intended by the Management. The Company depreciates property,
plant and equipment over their estimated useful lives using the straight-line method. The Estimated useful lives of assets are as follows:
* The life for solar generation plant is not prescribed in the under-Part C of Schedule II of the Companies Act, 2013 therefore the useful lives as given
above represent the period over which the Management expects to use these assets.
Useful lives for the rest of the assets are as prescribed under Part C of Schedule II of the Companies Act, 2013
Gains and losses on disposals are determined by comparing the proceeds with carrying amount.
d. Intangible assets
An intangible asset is recognized when it is probable that the future economic benefits attributable to the asset will flow to the enterprise and
where its cost can be reliably measured. Intangible assets are stated at cost of acquisition less accumulated amortization and impairment
losses, if any. Cost comprises the purchase price and any cost attributable to bringing the assets to its working condition for its intended use
which includes taxes, freight, and installation and allocated incidental expenditure during construction/ acquisition and exclusive of tax credit
available to the Company.
Subsequent expenditure relating to intangible fixed assets is capitalized only if such expenditure results in an increase in the future benefits
from such asset beyond its previously assessed standard of performance.
e. Impairment of Assets
The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets’ net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their
present value at the weighted average cost of capital.
After impairment, depreciation/amortization is provided on the revised carrying amount of the asset over its remaining useful life.
f. Revenue Recognition
Revenue from sales has been recognized only when the entity completes its performance obligation and transfers the control in the goods to the
customer. Thus, Revenue from sales has been recognized at the point of dispatch of the goods to the customer since its performance obligation
has been completed and the control in goods has been transferred.
All other incomes are recognized on accrual basis.
g. Government Grants
Government grants needs to be recognized when there is a reasonable assurance that, the entity will comply with the conditions attached to it and
the grants will be received. The government grant receivable to the company has various conditions attached to it which includes making
specified investment, annual production capacity and annual export score and is receivable in 7 yearly installments. Also, company has opted to
apply Income based approach. Since, the amount of government grant cannot be reliably measured due to the conditions attached to it and there
is uncertainty regarding the fulfillment of conditions and future installments of grant, government grants has been recognized through Statement
of Profit and Loss on receipt basis.
h. Borrowing Costs
Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings.
Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that takes a substantial period of time to get
ready for its intended use are capitalized. All other borrowing costs are recognized as expenditure in the period in which they are incurred.
i. Foreign currency translation
Initial recognition : Foreign currency transactions are recorded in the reporting currency by applying the exchange rate between the reporting
currency and the foreign currency at the date of the transaction.
Conversion : Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical
cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; non-monetary items which are carried
at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when such values
were determined.
Exchange differences : Exchange differences arising on the settlement of monetary items or on reporting the Company’s monetary items at
rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are being dealt in the
statement of profit & loss.
j. Investment and other financial assets
Classification
The company classifies its financial assets in the following measurement categories:
• Those to be measured subsequently at fair value and
• Those measured at amortized cost.
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will be recorded other comprehensive income.
Measurement
At initial recognition, the company measures financial assets at its fair value plus, in the case of a financial asset not at fair value through profit and
loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value
through profit and loss are expensed in profit and loss.
Investment property
An investment in land or buildings, which is not intended to be occupied substantially for use by, or in the operations of, the Company, is classified as
investment property. Investment properties are stated at cost.
k. Retirement and other employee benefits Defined contribution plan
The Company makes defined contribution to Government Employee Provident Fund, Government Employee Pension Fund, Employee Deposit
Linked Insurance, ESI and Superannuation Schemes, which are recognized in the Statement of Profit and Loss on accrual basis.
The Company has no further obligations under these plans beyond its monthly contributions.
Gratuity
The Company provides for retirement benefits in the form of Gratuity. Benefits payable to eligible employees of the company with respect to gratuity,
a defined benefit plan is accounted for on the basis of an actuarial valuation as at the Balance Sheet date. The present value of such obligation is
determined by the projected unit credit method and adjusted for past service cost and fair value of plan assets as at the balance sheet date through
which the obligations are to be settled. The resultant actuarial gain or loss on change in present value of the defined benefit obligation or change in
return of the plan assets is recognized as an income or expense in the Statement of Profit and Loss.
l. Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand deposits with banks, other short term highly liquid investments with original maturities
of three months or less.
m. Inventories
Raw materials, components, stores and spares, and packing material are valued at lower of cost or net realizable value. However, these items are
considered to be realizable at replacement cost if the finished goods, in which they will be used, are expected to be sold below cost.
Cost of inventories is computed on a FIFO basis. Cost includes purchase price, (excluding those subsequently recoverable by the enterprise from
the concerned revenue authorities), freight inwards and other expenditure incurred in bringing such inventories to their present location and
condition.
Work in progress and manufactured finished goods are valued at the lower of cost and net realizable value. Cost of work in progress and is
determined on the basis of stage of completion, while cost for finished goods is determined by reducing the estimated gross margin from the billing
price.
n. Income taxes
Tax expense for the period comprises of current tax and deferred tax.
Provision for current tax is made on the basis of estimated taxable income for the current accounting year in accordance with the Income-tax Act,
1961.
The deferred tax for timing differences between the book and tax profits for the year is accounted for, using the tax rates and laws that have been
substantively enacted as of the reporting date.
Deferred tax charge or credit reflects the tax effects of timing differences between accounting income and taxable income for the period. The
deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or
substantively enacted by the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the
assets can be realized in future. Deferred tax assets are reviewed at each balance sheet date and are written down or written up to reflect the
amount that is reasonably/virtually certain (as the case may be) to be realized.
o. Leases
As a Lessee : Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the
lease term.
As a Lessor : Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as
operating leases. Lease income on an operating lease is recognized in the Statement of Profit and Loss on a straight-line basis over the lease
term. Costs are recognized as an expense in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs, etc. are
recognized immediately in the Statement of Profit and Loss.
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