2. Significant accounting policies
a) Basis of preparation
The financial Statements have been prepared to comply in all material respects with the Indian
Accounting Standards notified under Section 133 of Companies Act, 2013 (the Act) read with
Companies (Indian Accounting Standards (Ind AS) Rules, 2015 and other relevant provisions of the
Act and rules framed thereunder.
The financial statements have been prepared under the historical cost convention and on
accrual basis, except for certain financial assets and liabilities measured at fair value as explained
in accounting policies below.
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 into 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.
The financial statements are presented in ' lakhs, except when otherwise indicated.
b) Current and non-current classification
Based on the nature of products / activities of the Company and the normal time between
acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its
operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and
non-current.
c) Property, plant and equipment
i) All property, plant and equipment are stated at original cost of acquisition/installation
(net of input credits availed) less accumulated depreciation and impairment loss, if any,
except freehold land which is carried at cost. Cost includes cost of acquisition,
construction and installation, taxes, duties, freight and other incidental expenses that are
directly attributable to bringing the asset to its working condition for the intended use
and estimated cost for decommissioning of an asset.
ii) Subsequent expenditure is capitalised only if it is probable that the future economic
benefit associated with the expenditure will flow to the Company.
iii) Property, plant and equipment is derecognised from financial statements, either on
disposal or when no future economic benefits are expected from its use or disposal. Any
gain or loss arising on derecognition of the property (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 in the period in which the property, plant and equipment is
derecognised.
iv) On transition to Ind AS, the Company has elected to continue with the carrying value
of all of its property, plant and equipment measured as per the previous GAAP and use
that carrying value as the deemed cost of the property, plant and equipment.
v) Depreciation on property, plant and equipment is provided on written down value
method based on the useful life specified in Schedule II of the Companies Act, 2013.
d) Inventories
Inventories are valued at the lower of cost and net realizable value except scrap, which is valued
at net realizable value. 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. The
cost of inventories comprises of cost of purchase, cost of conversion and other costs incurred in
bringing the inventories to their respective present location and condition. Cost is computed on the
FIFO basis.
e) Fair value measurement
The Company's accounting policies and disclosures require the measurement of fair values for
financial instruments.
The Company has an established control framework with respect to the measurement of fair
values. The management regularly reviews significant unobservable inputs and valuation
adjustments.
All financial assets and financial liabilities for which fair value is measured or disclosed in the
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 (unadjusted) market prices in active markets for identical assets or
liabilities;
• Level 2 — Valuation techniques for which the lowest level input that is significant to the fair
value measurement is directly or indirectly observable, or
• Level 3 — Valuation techniques for which the lowest level input that is significant to the fair
value measurement is unobservable.
The Company recognises transfers between levels of the fair value hierarchy at the end of the
reporting period during which the change has occurred.
f) Financial instruments
I) Financial assets
i) Classification
The Company classifies its financial assets either at Fair Value through Profit or Loss
(FVTPL), Fair Value through Other Comprehensive Income (FVTOCI) or at amortised Cost,
based on the Company's business model for managing the financial assets and their
contractual cash flows. recognition and measurement
ii) Initial recognition and measurement
The Company at initial recognition measures a financial asset at its fair value plus
transaction costs that are directly attributable to it's acquisition. However, transaction costs
relating to financial assets designated at fair value through profit or loss (FVTPL) are expensed
in the statement of profit and loss for the year.
iii) Subsequent measurement
For the purpose of subsequent measurement, the financial asset are classified in four
categories:
a) Debt instrument at amortised cost
b) Debt instrument at fair value through other comprehensive Income
c) Debt instrument at fair value through profit or loss
d) Equity investments
Debt instruments
• Amortised cost:
Assets that are held for collection of contractual cash flows where those cash flows represent
solely payments of principal and interest are measured at amortised cost. A gain or loss on such
instruments is recognised in profit or loss when the asset is derecognised or impaired. Interest income
from these financial assets is calculated using the effective interest rate method and is included under
the head "Finance income".
• Fair value through other comprehensive income (FVTOCI):
Assets that are held for collection of contractual cash flows and for selling the financial assets,
where the assets' cash flows represent solely payments of principal and interest, are measured at fair
value through other comprehensive income (FVTOCI). Movements in the carrying amount are taken
through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign
exchange gains and losses which are recognised in the statement of profit and loss. When the financial
asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from
equity to statement of profit and loss. Interest income from these financial assets is calculated using
the effective interest rate method and is included under the head "Finance income".
• Fair value through profit or loss:
Assets that do not meet the criteria for amortised cost or fair value through other
comprehensive income (FVTOCI) are measured at fair value through profit or loss. Gain and losses on
fair value of such instruments are recognised in statement of profit and loss. Interest income from
these financial assets is included in other income.
iv) Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with
its assets carried at amortised cost and FVOCI debt instruments. The impairment methodology
applied depends on whether there has been a significant increase in credit risk.
v) De-recognition of financial assets
A financial asset is derecognised only when:
• The rights to receive cash flows from the financial asset have expired
• The Company has transferred substantially all the risks and rewards of the financial asset or
• The Company has neither transferred nor retained substantially all the risks and rewards of the
financial asset, but has transferred control of the financial asset.
II) Financial liabilities
i) Classification
The Company classifies all financial liabilities at amortised cost or fair value through profit or
loss.
ii) Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value
through profit or loss, loans and borrowings, deposits or as payables, as appropriate. All financial
liabilities are recognised initially at fair value and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs.
iii) Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
a) Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading
and financial liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing
in the near term. Gains or losses on liabilities held for trading are recognised in the profit or loss.
b) Loans, borrowings and deposits
After initial recognition, loans, borrowings and deposits are subsequently measured at
amortised cost using the effective interest rate (EIR) method. Gains and losses are recognised in the
statement of profit and loss when the liabilities are derecognised as well as through the EIR
amortization process. The EIR amortisation is included in finance costs in the statement of profit and
loss.
c) Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end
of financial year which are unpaid. For trade and other payables maturing within one year from the
balance sheet date, the carrying amounts approximate fair value due to the short-term maturity of
these instruments.
iv) De-recognition of financial liabilities
A financial liability is de-recognised when the obligation under the liability is discharged or
cancelled or expires. When an existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as the de-recognition of the original liability
and the recognition of a new liability. The difference in the respective carrying amounts is
recognised in the statement of profit or loss.
g) Cash and cash equivalents
i) Cash and cash equivalents in the balance sheet comprise cash at bank and on hand and short¬
term deposit with original maturity upto three months, which are subject to insignificant risk of
changes in value.
ii) For the purpose of presentation in the statement of cash flows, cash and cash equivalents
consists of cash and short-term deposit, as defined above, net of outstanding bank overdraft as
they are considered as an integral part of Company's cash management.
h) Revenue recognition
Pursuant to adoption of Ind AS 115, Revenue from contracts with customers are recognised when
the control over the goods or services promised in the contract are transferred to the customer. The
amount of revenue recognised depicts the transfer of promised goods and services to customers for
an amount that reflects the consideration to which the Company is entitled to in exchange for the
goods and services.
i) Sale of goods and services
Revenue is measured at the fair value of the consideration received or receivable for goods
supplied and services rendered, net of returns and discounts to customers. Revenue from the sale of
goods is shown to include excise duties and National Calamity Contingent Duty which are payable on
manufacture of goods but excludes taxes such as VAT and Goods and Services Tax which are payable
in respect of sale of goods and services. Revenue from the sale of goods and services is recognised
when the Group performs its obligations to its customers and the amount of revenue can be measured
reliably and recovery of the consideration is probable. The timing of such recognition in case of sale
of goods is when the control over the same is transferred to the customer, which is mainly upon
delivery and in case of services, in the period in which such services are rendered.
ii) Interest income
Interest income on financial asset is accrued on a time proportion basis by reference to the
principal amount outstanding and the applicable effective interest rate.
i) Income taxes
The income tax expenses comprises current and deferred tax. It is recognised in the statement
of profit and loss except to the extent that it relates to items recognised directly in equity or in other
comprehensive income.
Current tax:
The current tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the end of the reporting period.
Deferred tax:
Deferred tax is recognised in respect of temporary differences between the carrying amount
of assets and liabilities for financial reporting purposes and the amount used for taxation purposes.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible
temporary differences to the extent that is probable that future taxable profits will be available against
which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to
the extent that it is no longer probable that the related tax benefit will be realised, such reductions
are reversed when the probability of future taxable profits improves.
Unrecognised deferred tax assets are measured at each reporting date and recognised to the
extent that it has become probable that future taxable profits will be available against which they can
be used.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary
differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the
manner in which the Company expects at the reporting date to recover or settle the carrying amount
of its assets and liabilities.
Minimum Alternate Tax (MAT) credit is recognised as deferred tax asset only when and to the
extent there is convincing evidence that the Company will pay normal income tax during the specified
period. Such asset is reviewed at each balance sheet date and the carrying amount of the Balance with
Direct Tax Authorities asset is written down to the extent there is no longer a convincing evidence to
the effect that the Company will pay normal income tax during the specified period.
j) Employee benefits
i) Short-term benefits
Short-term employee benefits are recognized as an expense at the undiscounted amount in
the statement of profit and loss for the year in which the related services are rendered.
ii) Defined contribution plans
Payments to defined contribution retirement benefit schemes are charged to the statement
of profit and loss of the year when the contribution to the respective funds are due. There
are no other obligations other than the contribution payable to the fund.
iii) Defined benefit plans
The Company does not have any defined benefit plans for its employee.
iv) Other long-term employee benefits
Other long-term benefits are recognised as an expense in the statement of profit and loss at
the present value of the amounts payable determined using actuarial valuation
techniques in the year in which the employee renders services. Re-measurements are
recognised in the statement of profit and loss in the period in which they arise.
k) Impairment of non-financial assets
The carrying amounts of non-financial assets are reviewed at each balance sheet date if there
is any indication of impairment based on internal/external factors. An asset is treated as impaired
when the carrying amount exceeds its recoverable value. The recoverable amount is the greater of an
asset's or cash generating unit's, net selling price and value in use. In assessing value in use, the
estimated future cash flows are discounted to the present value using a pre-tax discount rate that
reflects current market assessment of the time value of money and risks specific to the assets. An
impairment loss is charged to the statement of profit and loss in the year in which an asset is identified
as impaired. After impairment, depreciation is provided on the revised carrying amount of the asset
over its remaining useful life. The impairment loss recognized in prior accounting periods is reversed
by crediting the statement of profit and loss if there has been a change in the estimate of recoverable
amount.
l) Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for the period
attributable to equity shareholders (after deducting preference dividends and attributable taxes)
by the weighted average number of equity shares outstanding during the period. For the purpose
of calculating diluted earnings per share, the net profit or loss for the period attributable to equity
shareholders and the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares except when the results would be
anti-dilutive.
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