3. Significant Accounting Policies
a. Basis of preparation of financial statements:-
The financial statements of the Company have been prepared in accordance with Indian accounting standards (IND AS) notified under the Section 133 of the Companies Act read with Rule 3 of Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
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 accounting policy hitherto in use. Financial statements of the company are prepared under the historical cost convention on the accrual basis except some assets and liabilities which have been measured at their fair value.
The financial statements are presented in INR and all values are rounded to the nearest rupees in lakh.
b. Current and non-current classification
The company presents assets and liabilities in the balance sheet based on current/non-current classification
An asset is treated as current when:
(a) it expects to realise the asset, or intends to sell or consume it, in its normal operating cycle;
(b) it holds the asset primarily for the purpose of trading;
(c) it expects to realise the asset within twelve months after the reporting period; or
(d) the asset is cash or a cash equivalent (as defined in Ind AS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period;
Current maturities of non-current asset are also termed as current assets.
An entity shall classify a liability as current when:
(a) it expects to settle the liability in its normal operating cycle;
(b) it holds the liability primarily for the purpose of trading;
(c) the liability is due to be settled within twelve months after the reporting period; or
(d) it does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting.
Current maturities of non-current liabilities are also termed as current liability.
Company always classifies deferred tax assets (liabilities) as non-current assets (liabilities).
All other liabilities are classified as non-current.
The operating cycle of a company is the time between the acquisition of assets for processing and their realization in cash or cash equivalents. When the entity's normal operating cycle is not clearly identifiable, it is assumed to be twelve months.
c. Foreign Currency
The company's reporting currency and the functional currency for its operations is Indian Rupees (INR) being the principal currency of the economic environment in which it operates.
(i) Transaction and balances
A foreign currency transaction shall be recorded, on initial recognition in the functional currency, by applying to the foreign currency amount the spot exchange rate, of the date on which transaction first qualifies for recognition as per Ind AS's, between the functional currency and the foreign currency at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies outstanding at the end of the reporting period are translated at the exchange rates prevailing as at the end of reporting period. 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. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.
Exchange differences arising on the settlement of monetary assets and liabilities or on translating monetary assets and liabilities at rates different from those at which they were translated on initial recognition during the period or in previous financial statements shall be recognized in statement of profit and loss in the period in which they arise. When a gain or loss on a non-monetary item is recognized in other comprehensive income, any exchange component of that gain or loss shall be recognized in profit or loss, any exchange component of that gain or loss shall be recognized in profit or loss.
d. Fair value measurement
The Company measures some financial instruments at fair value at each reporting 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. 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, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
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:
- Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities.
- Level 2 — inputs other than quoted prices included in level 1 that are observed for the assets or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
- Level 3 — inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Company recognizes transfers between level of the fair value hierarchy at the end of reporting period during which the change has occurred. The management has an established control framework with respect to fair value measurement.
e. Revenue recognition (i) Sales of goods:-
Revenue from the sale of goods shall be recognised when all the following conditions have been satisfied:
(a) the entity has transferred to the buyer the significant risks and rewards of ownership of the goods;
(b) the entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
(c) the amount of revenue can be measured reliably;
d) it is probable that the economic benefits associated with the transaction will flow to the entity; and
e) the costs incurred or to be incurred in respect of the transaction can be measured reliably;
f) subsidies and other incentives are recognized on collection/receipt basis;
Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes, levies or duties collected on behalf of the government/ other statutory bodies. Taxes, levies or duties are not considered to be received by the Company on its own account and excluded from net revenue.
Warranty is not a separate performance obligation but assurance type warranty and no separate provisions has been accounted for a warranty.
(ii) Rendering of services:
When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction shall be recognised by reference to the stage of completion of the transaction at the end of the reporting period.
The outcome of a transaction can be estimated reliably when all the following conditions are satisfied:
(a) the amount of revenue can be measured reliably;
(b) it is probable that the economic benefits associated with the transaction will flow to the entity;
(c) the stage of completion of the transaction at the end of the reporting period can be measured reliably; and
(d) the costs incurred for the transaction and the costs to complete the transaction can be measured reliably;
(iii) Interest income
For all debt instruments measured either at amortised cost or at fair value through other comprehensive income, interest income is recorded using the effective interest rate (EIR).
Interest Income from Bank- interest income is recorded on a time- proportionate basis that takes into account the effective interest rate (EIR)
Interest Received from Security with Electricity Board- Interest is recorded on the basis of agreement with Electricity Board while depositing the security amount.
Interest Received on IT Refund- Interest received at half percent per month as per rate defined under Income Tax Act
Other Income- It comprises of Interest Income received from Banks, Electricity board and other misc. interest.
f. Grants from government
Government Grants including non-monetary grants are not recognised until there is reasonable assurance that the company will comply with the conditions attaching to them and that the grants will be received. Government grants related to depreciable assets is treated as deferred income and are recognised in Statement of Profit & Loss on a systematic basis over the useful life of asset. Government Grants related to assets are presented in the balance sheet by setting up the grant as deferred income. Grants related to income are presented as part of profit or loss under the general heading 'Other Income'.
A government grant that becomes receivable as compensation for expense or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs shall be recognised in profit or loss of the period in which it become receivable. A government grant may take form of a transfer of a non-monetary asset, such as land or other resources, for the use of company. In these circumstances, the fair value of the non- monetary asset is assessed and both the grant and asset are accounted for at that fair value.
g. Taxation
Income tax expense represents the sum of the current tax payable and deferred tax. The current tax is based on taxable profit for the year, which is determined pursuant to Income Tax Act, 1961. Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income, in which case, the current tax and deferred tax are also recognised in other comprehensive income.
Deferred tax liability is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary difference to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, except where the company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Unrecognised deferred tax assets are reassessed at the end of each reporting year and are recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of 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 period in which the liability is settled or the asset is realized, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
h. Property, Plant and Equipment
Capital work in progress, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of plant and equipment and borrowing cost for long-term construction projects. The cost of an item of property, plant and equipment comprises:
(a) its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates.
(b) any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
(c) the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.
Subsequent costs are included in the carrying amount of assets or recognised as separate assets, as appropriate, only when it is probable that future economic benefits associated with them will flow to the company and the cost of the item can be measured reliably and it is expected to be used for more than one year.
An item of Property, plant or equipment is derecognised upon disposal or when no future economic benefits are expected from the continued use of assets. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is recognised in profit and loss. Depreciation on property, plant and equipment, except leasehold land, has been provided on written down value method as per the useful life of assets prescribed in Schedule II to the Companies Act, 2013.
The residual value of PPE for depreciation purpose is considered as 5% of the original cost of the asset. The estimated useful life of the assets is reviewed at the end of each financial year. Depreciation on the assets added / disposed of during the year is provided on pro-rata basis with reference to the month of addition / disposal. Value of leasehold land is amortised on the basis of lease period or balance life of the project whichever is earlier.
1) Property and equipment comprise of Land of Rs. 4,42,04,328 for which the company has title and management has intention to use this asset for business purpose in near future.
2) The Company has recorded depreciation charge of Rs 580.46 Lakhs for the period ended 31 March 2024.
i. 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 amortization and accumulated impairment losses.
j. Borrowing Costs
Borrowing cost attributable to the acquisition or construction of qualifying/ eligible assets are capitalized as part of the cost of such assets. A qualifying/ eligible asset is an asset that necessarily takes a substantial period of time to get ready for intended use. All other borrowing cost are recognised as expenses and are charged to revenue in the year.
k. Leases
Company as a lessee
The company has applied Ind AS 116 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under Ind AS 17.
As a lessee
The company recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease.
Lease payments included in the measurement of the lease liability comprise the following:
- Fixed payments, including in-substance fixed payments;
- Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
- Amounts expected to be payable under a residual value guarantee; and
- The exercise price under a purchase option that the company is reasonably certain to exercise, lease payments in an optional renewal period if the company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the company is reasonably certain not to terminate early.
For Operating leases, security expenses is recognized on a straight line basis over the term of the relevant lease.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the company's estimate of the amount expected to be payable under a residual value guarantee, or if company changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The company presents right-of-use assets that do not meet the definition of investment property in 'property, plant and equipment' and lease liabilities in 'loans and borrowings' in the statement of financial position.
l. Inventories
Cost shall comprise:
For Raw Materials 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 first in first out method basis.
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 first in first out basis material cost and includes cost of conversion and cost incurred in bringing the goods to present location and condition.
Traded goods: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on first in first out basis. 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.
Stores & Spares: The Stock of stores & spare parts are charged to revenue account except loose tools. Stores are valued at cost calculated on the basis of first in first out method. Provisions are made for unserviceable, damaged, obsolete, slow moving, defective stores and spares identified during the physical stock taking.
Scrap
Scrap is valued at cost or net realizable value whichever is lower.
m. Impairment
At the end of each reporting period, entity assesses whether there is any indication that an asset (tangible or intangible) may be impaired. If any such indication exists, the entity estimates the recoverable amount of the asset. Asset is impaired when its carrying value exceeds its recoverable amount. Where an indication of impairment exists, the asset's recoverable amount is estimated. An asset's recoverable amount is the higher of the asset's or cash- generating unit's value in use and its fair value less costs of disposal, and 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, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.
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