2 Summary of material accounting policies

This note provides a list of the material accounting
policies adopted in the preparation of these
standalone financial statements. These policies have
been consistently applied to all the years presented,
unless otherwise stated.

Basis of Preparation

(i) Compliance with Ind AS

These standalone financial statements (SFS)
comply in all material aspects with Indian
Accounting Standards (Ind AS) notified under
Section 133 of the Companies Act, 2013 (the
Act) read with Companies (Indian Accounting
Standards) Rules, 2015 as amended, and
presentation requirements of Division II of
Schedule III to the Companies Act, 2013 (as
amended from time to time), (Ind AS compliant
Schedule III), as applicable to the SFS.

All amounts included in these financial
statements are reported in Million of Indian
rupees (H in Million) except earnings per share
data and unless stated otherwise.

All amounts in the financial statements have
been rounded off to the nearest million or
decimal thereof.

(ii) Use of estimates and assumptions

The preparation of the financial statements
requires the management to make certain
judgments, estimates and assumptions. It also
requires the management to exercise judgement
in the process of applying the accounting
policies. The areas involving a higher degree
of judgement or complexity, or areas where
assumptions and estimates are significant to the
financial statements are disclosed in Note 2A.

(iii) Historical cost convention

The financial statements have been prepared on
a historical cost basis, except for the following:

• certain financial assets and liabilities
(including derivative instruments)
that are measured at fair value (refer
accounting policy on financial instruments
for details); and

• defined benefit plans, plan assets measured
at fair value (refer accounting policy on
defined benefit plans for details);

(iv) Current/non-current classification:

All assets and liabilities, other than deferred tax
assets and liabilities, have been classified as
current or non-current as per the company's
operating cycle and other criteria set out
in Schedule III to the Companies Act, 2013.
Deferred tax assets and liabilities are classified
as non-current assets and liabilities. Based on
the nature of products and the time between
the acquisition of assets for processing and their
realisation in cash and cash equivalents, the
Company has ascertained its operating cycle as
12 months for the purpose of current/non-current
classification of assets and liabilities

A) Property, plant and equipment
Tangible assets

Freehold land is carried at historical cost. All
other items of property, plant and equipment
are stated at historical cost less depreciation
and Impairment if any. Historical cost includes
expenditure that is directly attributable to the
acquisition of the items.

Subsequent costs are included in the asset's
carrying amount or recognised as a separate
asset, as appropriate, only when it is probable
that future economic benefits associated with
the item will flow to the Company and the
cost of the item can be measured reliably. The
carrying amount of any component accounted
for as a separate asset is derecognised when
replaced. All other repairs and maintenance are
charged to Statement of Profit and Loss during
the reporting period in which they are incurred.

Depreciation methods, estimated useful lives
and residual value

Depreciation is calculated using the straight-line
method to allocate their cost, net of their residual
values, over their estimated useful lives as follows:
*Evaluated useful lives is different from Schedule II of
Companies Act, 2013

The useful lives which have been determined to
be different than those specified by Schedule
II of the Companies Act, 2013 are based on
technical evaluation done by the management's
expert which are in order to reflect the actual
usage of the assets.

The residual values are not more than 5% of the
original cost of the asset.

Depreciation on additions is provided on pro
rata basis from the date of such additions.

The asset's carrying amount is written down
immediately to its recoverable amount if the
asset's carrying amount is greater than its
estimated recoverable amount.

Gains and losses on disposals are determined
by comparing proceeds with carrying amount.
These are included in Statement of Profit and
Loss within other income.

Capital work in progress is stated at cost, net of
accumulated impairment loss, if any.

The residual values, useful lives and methods of
depreciation of property, plant and equipment
are reviewed at each financial year end and
adjusted prospectively, if appropriate.

Goodwill acquired in business combination

Goodwill is initially measured at cost, being the
excess of the aggregate of the consideration
transferred over the net identifiable assets
acquired and liabilities assumed.

After initial recognition, goodwill is measured
at cost less any accumulated impairment
losses. For the purpose of impairment testing,
goodwill acquired in a business combination is,
from the acquisition date, allocated to each
of the Company's cash generating units that
are expected to benefit from the combination,
irrespective of whether other assets or liabilities of
the acquiree are assigned to those units.

A cash generating unit to which goodwill has
been allocated is tested for impairment annually,
or more frequently when there is an indication
that the unit may be impaired. If the recoverable
amount of the cash generating unit is less than
its carrying amount, the impairment loss is
allocated first to reduce the carrying amount
of any goodwill allocated to the unit and then
to the other assets of the unit pro rata based on
the carrying amount of each asset in the unit.
Any impairment loss for goodwill is recognised in
profit or loss. An impairment loss recognised for
goodwill is not reversed in subsequent periods.

Where goodwill has been allocated to a cash¬
generating unit and part of the operation within
that unit is disposed of the goodwill associated
with the disposed operation is included in
the carrying amount of the operation when
determining the gain or loss on disposal.
Goodwill disposed in these circumstances is
measured based on the relative values of the
disposed operation and the portion of the cash¬
generating unit retained.

Intangible assets

Intangible assets acquired separately are
measured on initial recognition at cost. Following
initial recognition, intangible assets are carried
at cost less any accumulated amortisation
and accumulated impairment losses. Internally
generated intangibles, excluding capitalised
development costs, are not capitalised and the
related expenditure is reflected in Statement
of Profit and Loss in the period in which the
expenditure is incurred.

The amortisation period and the amortisation
method for an intangible asset with a finite useful
life are reviewed at least at the end of each
reporting period. Changes in the expected useful
life of the asset are considered to modify the
amortisation period or method, as appropriate,
and are treated as changes in accounting
estimates and accounted prospectively.

Gains or losses arising from derecognition of an
intangible asset are measured as the difference
between the net disposal proceeds and the
carrying amount of the asset and are recognised
in the Statement of Profit and Loss when the asset
is derecognised.

(i) Computer software

Software is amortised over a period of 3 years.

(ii) Technical know how

Expenditure on acquiring technical know¬
how (including income tax and R & D
Cess) is capitalised and amortised over a
period of six years.

(iii) Non compete fee

Non compete fee paid is capitalised and
amortised over a period of 5 years.

(iv) Intellectual Property Right

Intellectual property right pertains to
amount paid to acquire right to use
technology for engine components which
has been capitalised and amortised over a
period of 10 years.

(v) Research and development

Research costs are expensed as incurred.
Development costs on an individual project
are recognised as an intangible asset when
the Company can demonstrate:

- The technical feasibility of completing
the intangible asset so that the asset
will be available for use or sale

- Its intention to complete and its ability
and intention to use or sell the asset

- How the asset will generate future
economic benefits

- The availability of resources to
complete the asset

- The ability to measure reliably the
expenditure during development

Development costs previously recognised
as an expense are not recognised as an
asset in a subsequent period. During the
period of development, the asset is tested
for impairment annually. Capitalised
development costs are amortised over
period of underlying project life which is
generally 3 years.

B) Investments in subsidiaries/joint venture

The Company accounts for its investments in
subsidiaries/joint venture at cost less accumulated
impairment losses (if any) in its standalone
financial statements. The Company assesses at
the end of each reporting period, if there are

any indications that the said investments may
be impaired. If so, the Company estimates the
recoverable value/amount of the investment and
provides for impairment, if any i.e. the deficit in
the recoverable value over cost. (Refer Note 2.D
related to Impairment of Non-Financial Assets).

C) Leases

The Company assesses at contract inception
whether a contract is, or contains, a lease. That
is, if the contract conveys the right to control the
use of an identified asset for a period of time in
exchange for consideration.

Company as a Lessee

The Company applies a single recognition and
m easurement approach for all leases, except
for short-term leases and leases of low-value
assets. The Company recognises lease liabilities
to make lease payments and right-of-use assets
representing the right to use the underlying assets.

(i) Right of use asset

The Company recognises right-of-use
assets at the commencement date of the
lease (i.e., the date the underlying asset is
available for use). Right-of-use assets are
measured at cost, less any accumulated
depreciation and impairment losses, and
adjusted for any remeasurement of lease
liabilities. The cost of right-of-use assets
includes the amount of lease liabilities
recognised, initial direct costs incurred,
and lease payments made at or before
the commencement date less any lease
incentives received. Right-of-use assets are
depreciated on a straight-line basis over the
shorter of the lease term and the estimated
useful lives of the assets, as follows:

• Premises and building : 2 to 10 years

• Lease hold land : 30 to 99 years

• Plant and machinery : 5 to 10 years

If ownership of the leased asset transfers to
the Company at the end of the lease term or

the cost reflects the exercise of a purchase
option, depreciation is calculated using the
estimated useful life of the asset. The right-
of-use assets are also subject to impairment.
Refer to the accounting policies in section
(D) Impairment of non-financial assets.

(ii) Lease liabilities

At the commencement date of the lease,
the Company recognises lease liabilities
measured at the present value of lease
payments to be made over the lease term.
The lease payments include fixed payments
(including in-substance fixed payments) less
any lease incentives receivable, variable
lease payments that depend on an index or
a rate, and amounts expected to be paid
under residual value guarantees. The lease
payments also include the exercise price of
a purchase option reasonably certain to be
exercised by the Company and payments
of penalties for terminating the lease, if the
lease term reflects the Company exercising
the option to terminate. Variable lease
payments that do not depend on an index
or a rate are recognised as expenses (unless
they are incurred to produce inventories) in
the period in which the event or condition
that triggers the payment occurs.

In calculating the present value of lease
payments, the Company uses its incremental
borrowing rate at the lease commencement
date because the interest rate implicit in the
lease is not readily determinable. After the
commencement date, the amount of lease
liabilities is increased to reflect the accretion
of interest and reduced for the lease
payments made. In addition, the carrying
amount of lease liabilities is remeasured
if there is a modification, a change in the
lease term, a change in the lease payments
(e.g., changes to future payments resulting
from a change in an index or rate used
to determine such lease payments) or a
change in the assessment of an option to
purchase the underlying asset.

(iii) Short-term leases and leases of low-value
assets

The Company applies the short-term lease
recognition exemption to its short-term
leases of machinery and equipment (i.e.,
those leases that have a lease term of 12
months or less from the commencement
date and do not contain a purchase
option). It also applies the lease of low-value
assets recognition exemption to leases of
office equipment that are considered to be
low value. Lease payments on short-term
leases and leases of low value assets are
recognised as expense on a straight-line
basis over the lease term.

The Company applies the low-value asset
recognition exemption on a lease-by-lease
basis, if the lease qualifies as leases of low-
value assets. In making this assessment, the
Company also factors below key aspects:

a. The assessment is conducted
on an absolute basis and is
independent of the size, nature, or
circumstances of the lessee.

b. The assessment is based on the value
of the asset when new, regardless of
the asset's age at the time of the lease.

c. The lessee can benefit from the
use of the underlying asset either
independently or in combination with
other readily available resources, and
the asset is not highly dependent on or
interrelated with other assets.

d. If the asset is subleased or expected to
be subleased, the head lease does not
qualify as a lease of a low-value asset.

Based on the above criteria, the Company
has classified leases of office equipment as
leases of low value assets

D) Impairment of non-financial assets

The Company assesses, at each reporting date,
whether there is an indication that an asset

may be impaired. If any indication exists, the
Company estimates the asset's recoverable
amount. An asset's recoverable amount is the
higher of an asset's or cash-generating unit's
(CGU) fair value less costs of disposal and its
value in use. Recoverable amount is determined
for an individual asset, unless the asset does
not generate cash inflows that are largely
independent of those from other assets or group
of assets. When the carrying amount of an asset
or CGU exceeds its recoverable amount, the
asset is considered impaired and is written down
to its recoverable amount.

In assessing value in use, the estimated future
cash flows are discounted to their present value
using a pre-tax discount rate that reflects current
market assessments of the time value of money
and the risks specific to the asset. In determining
fair value less costs of disposal, recent market
transactions are taken into account. If no such
transactions can be identified, an appropriate
valuation model is used. These calculations are
corroborated by valuation multiples, quoted
share prices for publicly traded companies or
other available fair value indicators.

The Company bases its impairment calculation on
detailed budgets and forecast calculations, which
are prepared separately for each of the Company's
CGUs to which the individual assets are allocated.
These budgets and forecast calculations generally
cover a period of five years. For longer periods, a
long-term growth rate is calculated and applied
to project future cash flows after the fifth year. To
estimate cash flow projections beyond periods
covered by the most recent budgets/forecasts,
the Company extrapolates cash flow projections
in the budget using a steady or declining growth
rate for subsequent years, unless an increasing rate
can be justified. In any case, this growth rate does
not exceed the long-term average growth rate
for the products, industries, or country or countries
in which the entity operates, or for the market in
which the asset is used.

Impairment losses of non-financial assets are
recognised in the statement of profit or loss.

E) Borrowing costs

Borrowing costs are expensed in the period in
which they are incurred. There are no general
and specific borrowing costs incurred by the
Company that are directly attributable to the
acquisition, construction or production of a
qualifying asset during the year.

F) Inventories

Inventories are valued at the lower of cost and
net realisable value.

Costs incurred in bringing each product to its
present location and condition are accounted
for as follows:

a) Raw materials, Stores and spare-parts, Loose
tools and Packing materials: Cost includes
cost of purchase and other costs incurred
in bringing the inventories to their present
location and condition. Cost is determined
on weighted average basis.

b) Finished goods and work in progress:
Cost includes cost of direct materials
and labour and a proportion of
manufacturing overheads based on the
normal operating capacity, but excluding
borrowing costs. Cost is determined on
weighted average basis.

c) 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.

d) Duties and other taxes (other than those
subsequently recoverable by the entity
from the taxing authorities) are included in
the value of inventory.

G) Government grants

Grants from the government are recognised
at their fair value where there is a reasonable
assurance that the grant will be received
and the Company will comply with all
attached conditions.

Government grants relating to income are
deferred and recognised in the Statement
of Profit and Loss over the period necessary
to match them with the costs that they are
intended to compensate and presented within
other operating revenue.

Government grants relating to purchase of
property, plant and equipment are included in
current and non-current liabilities as deferred
income and are credited to profit or loss on
straight-line basis over the expected lives of
the related assets and presented within other
operating revenue.

H) Revenue Recognition

Revenue from contracts with customers

Revenue from contracts with customers is
recognised when control of the 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.The Company has
generally concluded that it is the principal in
its revenue arrangements because it typically
controls the goods or services before transferring
them to the customer. Amounts disclosed as
revenue are net of goods and service tax (GST).

Sale of goods

Revenue from sale of goods is recognised at
the point in time when control of the goods is
transferred to the customer, generally on delivery
of the goods. The normal credit term is 30 to 120
days upon delivery.

The Company considers whether there are
other promises in the contract that are separate
performance obligations to which a portion of
the transaction price needs to be allocated (e.g.,
warranties). In determining the transaction price
for the sale of goods, the Company considers the
effects of variable consideration, the existence
of significant financing components, noncash
consideration, and consideration payable to the
customer (if any).

Variable consideration

If the consideration in a contract includes a
variable amount (like volume rebates/incentives,
cash discounts etc.), the Company estimates
the amount of consideration to which it will be
entitled in exchange for transferring the goods
to the customer. The variable consideration is
estimated at contract inception and constrained
until it is highly probable that a significant revenue
reversal in the amount of cumulative revenue
recognised will not occur when the associated
uncertainty with the variable consideration is
subsequently resolved. The estimate of variable
consideration for expected future volume
rebates/incentives, cash discounts etc. are
made on the most likely amount method.
Revenue is disclosed net of such amounts.

Warranty obligations

The Company typically provides warranties for
general repairs of defects as per terms of the
contract with customers, . These assurance-type
warranties are accounted for under Ind AS 37
Provisions, Contingent Liabilities and Contingent
Assets. Refer to the accounting policy on
warranty provisions in section (L) Provisions.

Sale of services

Income from services is recognised on the
basis of time/work completed as per contract
with the customers. The Company collects
goods and service tax (GST) on behalf of the
government and, therefore, it is not an economic
benefit flowing to the Company. Hence, it is
excluded from revenue.

Tooling Revenue

Development of toolings for the customers
has been identified by the Company to be a
separate performance obligation. Further, the
Company has determined that the performance
obligation in respect of development of toolings
is satisfied at a point in time.

The revenue is recognised at an amount
that reflects the consideration to which the
Company expects to be entitled in exchange.
for supply of tooling

Contract balances
Trade receivables

A receivable represents the Company's right to
an amount of consideration that is unconditional
(i.e., only the passage of time is required before
payment of the consideration is due). Refer
to accounting policy, refer note P - Financial
instruments - Financial assets at amortised cost.

Contract assets

A contract asset is the right to consideration
in exchange for goods or services transferred
to the customer. If the Company performs by
transferring goods or services to a customer
before the customer pays consideration or before
payment is due, a contract asset is recognised
for the earned consideration that is conditional

Contract liabilities

A contract liability is the obligation to transfer
goods to a customer for which the Company
has received consideration (or an amount
of consideration is due) from the customer.
If a customer pays consideration before the
Company transfers goods or services to the
customer, a contract liability is recognised when
the payment is made. Contract liabilities are
recognised as revenue when the Company
performs under the contract.

Wind/solar power generation

Income from the wind / solar power generation
is recognised when earned on the basis of
contractual arrangements with the buyers.

Export Incentives

Income from duty drawback and export
incentives is recognised on an accrual basis.

I) Foreign currency translation

The Company's financial statements are presented
in INR, which is also the functional currency.

Transactions in foreign currencies are initially
recorded by the Company at their respective
functional currency spot rates at the date the
transaction first qualifies for recognition.

Monetary assets and liabilities denominated
in foreign currencies are translated at the
functional currency spot rates of exchange at
the reporting date.

Exchange differences arising on settlement or
translation of monetary items are recognised in
Statement of Profit and Loss

Non-monetary items that are measured in
terms of historical cost in a foreign currency are
translated using the exchange rates at the dates
of the initial transactions.

J) Employee benefits

(i) Short-term obligations

Liabilities for wages and salaries, including
non-monetary benefits that are expected to
be settled wholly within 12 months after the
end of the period in which the employees
render the related service are recognised
in respect of employee's services up to
the end of the reporting period and are
measured at the amounts expected to be
paid when the liabilities are settled. The
liabilities are presented as current employee
benefit obligations in the balance sheet.

(ii) Other long-term employee benefit
obligations

The liabilities for earned leaves are not
expected to be settled wholly within 1 2
months after the end of the period in which
the employees render the related service.
They are therefore measured as the present
value of expected future payments to be
made in respect of services provided by
employees up to the end of the reporting
period using the projected unit credit
method. The benefits are discounted using
the market yields at the end of the reporting
period that have terms approximating
to the terms of the related obligation.
Remeasurements as a result of experience
adjustments and changes in actuarial
assumptions are recognised in Statement of
Profit and Loss.

The obligations are presented as current
liabilities in the balance sheet if the entity
does not have an unconditional right to defer
settlement for at least twelve months after
the reporting period, regardless of when the
actual settlement is expected to occur.

(iii) Post-employment obligations

The Company operates the following post¬
employment schemes:

(a) defined benefit plans such
as gratuity and

(b) defined contribution plans such
as provident fund

Gratuity obligations

The liability or asset recognised in the
balance sheet in respect of defined benefit
gratuity 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 defined benefit obligation is
calculated annually by actuaries using the
projected unit credit method.

The present value of the defined benefit
obligation is determined by discounting the
estimated future cash outflows by reference
to market yields at the end of the reporting
period on government bonds that have
terms approximating to the terms of the
related obligation.

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. This cost
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 are recognised
in the period in which they occur, directly
in other comprehensive income. They
are included in retained earnings in the
statement of changes in equity and in
the balance sheet.

carrying amounts for financial reporting purposes
at the reporting date.

Deferred tax liabilities are recognised for all the
taxable temporary differences.

Deferred tax assets are recognised for all
deductible temporary differences, the carry
forward of unused tax credits and any unused
tax losses. Deferred tax assets are recognised
to the extent that it is probable that taxable
profit will be available against which the
deductible temporary differences, and the
carry forward of unused tax credits and unused
tax losses can be utilised, except in respect of
deductible temporary differences associated
with investments in subsidiaries, associates and
interests in joint ventures, deferred tax assets are
recognised only to the extent that it is probable
that the temporary differences will reverse in
the foreseeable future and taxable profit will
be available against which the temporary
differences can be utilised.

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 utilised.
Unrecognised deferred tax assets are re-assessed
at each reporting date and are recognised to
the extent that it has become probable that
future taxable profits will allow the deferred tax
asset to be recovered.

Deferred tax assets and liabilities are measured
at the tax rates that are expected to apply in
the year when the asset is realised or the liability
is settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted at
the reporting date.

Deferred tax relating to items recognised outside
Statement of Profit and Loss is recognised
outside Statement of Profit and Loss (either in
other comprehensive income or in equity).
Deferred tax items are recognised in correlation
to the underlying transaction either in OCI or
directly in equity.

Deferred tax assets and deferred tax liabilities are
offset if a legally enforceable right exists to set
off current tax assets against current tax liabilities
and the deferred taxes relate to the same
taxable entity and the same taxation authority.