2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of Preparation:
In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has
adopted IND AS notified under the Companies (Indian Accounting Standards) Rules, 2015 with
effect from 1st April, 2016. The financial statements have been prepared under the historical cost
convention with the exception of certain assets and liabilities that are required to be carried at fair
values by IND AS.
2.2 Use of estimates and judgments
The preparation of financial statements in conformity with generally Accepted Accounting
Principles require estimates and assumptions to be made that affect the reported amounts of assets
and liabilities and disclosure of contingent liabilities on the date of financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ
from these estimates and differences between actual results and estimates are recognized in the
periods in which the results are known / materialize.
All the assets and liabilities have been classified as current or non-current as per the Company’s
normal operating cycle. Based on the nature of products and the time between the acquisition of
assets for processing and their realization in cash and cash equivalents, the Company has
ascertained its operating cycle as 12 months for the purpose of current - noncurrent classification
of assets and liabilities.
2.3 Basis of Preparation
The financial statements are prepared in accordance with the historical cost convention, except for
certain items that are measured at fair values, as explained in the accounting policies below. The
financial statements are presented in Indian Rupees (INR) which is also the Company's functional
currency.
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.
2.4 Financial instrument, Financial assets, Financial liabilities
Financial assets and financial liabilities are recognized when the Company becomes a party to the
contractual provisions of the relevant instrument.
Financial assets are derecognized when the rights to receive benefits have expired or been
transferred, and the Company has transferred substantially all risks and rewards of ownership of such
financial asset. Financial liabilities are derecognized when the liability is extinguished, that is when
the contractual obligation is discharged, cancelled or expires.
Classification
The Company determines the classification of its financial assets at initial recognition. The financial
assets are classified in the following measurement categories as:
• Those to be subsequently measured at fair value [either through other comprehensive income (OCI),
or through profit or loss], and
• Those subsequently measured at amortised cost
Measurement
Subsequent measurement of is in accordance with the Company’s business model for managing the
asset and the contractual cash flows characteristics of the asset. There are three measurement
categories into which the company may classify its debt instruments:
• Amortised Cost: Assets which are held within the business model of collection of contractual cash
flows and where those cash flows represent payments solely towards principal and interest on the
principal amount outstanding.
• Fair Value through Other Comprehensive Income: Assets that are held within a business model
of collection of contractual cash flows and for selling and where the assets’ cash flow represents
solely payment of principal and interest on the principal amount outstanding.
• Fair Value through Profit or Loss: Financial assets which are not classified as measured at
amortised cost or fair value through other comprehensive income are classified as fair value through
profit or loss.
Loans and Receivables
Loans and receivables are non - derivative financial asset with fixed or determinable payments that
are not quoted in an active market. Loans and receivables are initially measured at transaction value,
which is the fair value and subsequently retained at cost less appropriate allowance for credit losses
as most loans and receivables of the Company are current in nature. Where significant, non - current
loans and receivables are accounted for at amortised cost using effective interest rate method less
appropriate allowance for credit losses, where the maturity period is specified.
Investments in Equity Instruments: -
In case of investments in subsidiaries, joint ventures and associates the Company has chosen to
measure its investments at deemed cost.
2.5 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable, which is when it is
earned and no significant uncertainty exists as to its realization or collection.
Dividend and interest income:
Dividend income from investments is recognized when the shareholder’s right to receive payment
has been established (provided that it is probable that the economic benefits will flow to the
Company and the amount of income can be measured reliably).
Interest income from a financial asset is recognized when it is probable that the economic benefits
will flow to the Company and the amount of income can be measured reliably. Interest income is
accrued on a time basis, by reference to the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated future cash receipts through the
expected life of the financial asset to that asset’s net carrying amount on initial recognition.
2.6 Foreign currency transactions
The functional currency of the Company is Indian Rupees which has been determined on the basis of
the primary economic environment in which it operates.
In preparing the financial statements of the Company, transactions in currencies other than the
entity's functional currency (foreign currencies) are recognized 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 retranslated at the rates prevailing at that date. Non-monetary items carried at
fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date
when the fair value was determined. Non-monetary items that are measured in terms of historical cost
in a foreign currency are not retranslated.
Exchange differences on monetary items are recognized in Statement of Profit and Loss in the period
in which they arise except for:
• Exchange differences on foreign currency borrowings relating to assets under construction for
future productive use, which are included in the cost of those assets when they are regarded as an
adjustment to interest costs on those foreign currency borrowings;
• Exchange differences on transactions entered into in order to hedge certain foreign currency risks
and;
• Exchange differences on monetary items receivable from or payable to a foreign operation for
which settlement is neither planned nor likely to occur (therefore forming part of the net
investment in the foreign operation), which are recognized initially in other comprehensive
income and reclassified from equity to the Statement of Profit and Loss on repayment of the
monetary items.
2.7 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying
assets, which are assets that necessarily take a substantial period of time to get ready for their
intended use or sale, are added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.
All other borrowing costs are recognized in the Statement of Profit and Loss in the period in which
they are incurred.
The Company determines the amount of borrowing costs eligible for capitalization as the actual
borrowing costs incurred on that borrowing during the period less any investment income on the
temporary investment of those borrowings, to the extent that an entity borrows funds specifically for
the purpose of obtaining a qualifying asset. In case if the Company borrows generally and uses the
funds for obtaining a qualifying asset, borrowing costs eligible for capitalization are determined by
applying a capitalization rate to the expenditures on that asset.
The Company suspends capitalization of borrowing costs during extended periods in which it
suspends active development of a qualifying asset.
2.8 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
Current tax is the amount of tax payable on the taxable income for the year as determined in
accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961 and other
applicable tax laws.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic
benefits in the form of adjustment to future income tax liability, is considered as an asset if there is
convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognized
as an asset in the Balance Sheet when it is highly probable that future economic benefit associated
with it will flow to the Company.
Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax bases used in the computation of
taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences.
Deferred tax assets are generally recognized for all deductible temporary differences to the extent
that it is probable that taxable profits will be available against which those deductible temporary
differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary
difference arises from the initial recognition (other than in a business combination) of assets and
liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition,
deferred tax liabilities are not recognized if the temporary difference arises from the initial
recognition of goodwill.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments
in subsidiaries and associates, and interests in joint ventures, 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. Deferred tax assets arising from deductible temporary
differences associated with such investments and interests are only recognized to the extent that it is
probable that there will be sufficient taxable profits against which to utilize the benefits of the
temporary differences and they are expected to 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.
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 realized, based on tax rates (and tax laws) that have been
enacted or substantively enacted by the end of the reporting period.
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.
For the purposes of measuring deferred tax liabilities and deferred tax assets on non-depreciable
assets, the carrying amounts of such properties are presumed to be recovered entirely through sale.
Current and deferred tax for the year
Current and deferred tax are recognized in profit or loss, except when they are related to items that
are recognized in other comprehensive income or directly in equity, in which case, the current and
deferred tax are also recognized in other comprehensive income or directly in equity respectively.
Where current tax or deferred tax arises from the initial accounting for a business combination, the
tax effect is included in the accounting for the business combination.
2.9 Property, plant and equipment
The cost of property, plant and equipment comprises of
• Purchase price net of any trade discounts and rebates, any import duties and other taxes (other
than those subsequently recoverable from the tax authorities),
• Any directly attributable expenditure on making the asset ready for its intended use, including
relevant borrowing costs for qualifying assets and
• Any expected costs of decommissioning.
Expenditure incurred after the property, plant and equipment have been put into operation, such as
repairs and maintenance, are charged to the Statement of Profit and Loss in the period in which the
costs are incurred. Major shut-down and overhaul expenditure is capitalized as the activities
undertaken improve the economic benefits expected to arise from the asset.
An item of property, plant and equipment is derecognized upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any 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 recognized in Statement of
Profit and Loss.
Assets in the course of construction are capitalized in the assets under construction account. At the
point when an asset is operating at management’s intended use, the cost of construction is transferred
to the appropriate category of property, plant and equipment and depreciation commences. Costs
associated with the commissioning of an asset and any obligatory decommissioning costs are
capitalized where the asset is available for use but incapable of operating at normal levels until a
period of commissioning has been completed. Revenue generated from production during the trial
period is capitalized.
The Company has elected to continue with the carrying value for all of its property, plant and
equipment as recognized in the financial statements as at the date of transition to Ind AS, measured
as per the previous GAAP and use that as its deemed cost as at the date of transition.
The company has not revalued any of its Property, Plant and Equipment and Intangible Assets during
the year.
The company does not own any Immovable property as on 31.03.2025.
Capital work-in-progress:
Projects under which tangible fixed assets are not yet ready for their intended use are carried at cost,
comprising direct cost, related incidental expenses and attributable interest.
2.10 Depreciation and amortization
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its
estimated residual value. Depreciation is provided on a straight-line method as per the useful life
prescribed in Schedule II to the Companies Act, 2013 except in respect of the certain categories of
assets, in whose case the life of the assets has been assessed as under based on technical advice,
taking into account the nature of the asset, the estimated usage of the asset, the operating conditions
of the asset, past history of replacement, anticipated technological changes, manufacturers warranties
and maintenance support, etc. (Refer Note 15)
Intangible assets are amortized over their estimated useful lives on straight line method.
Freehold land is not depreciated. Leasehold land is amortized over the period of the lease, except
where the lease is convertible to freehold land under lease agreements at future dates at no additional
cost.
Major overhaul costs are depreciated over the estimated life of the economic benefit derived from the
overhaul. The carrying amount of the remaining previous overhaul cost is charged to the Statement of
Profit and Loss if the next overhaul is undertaken earlier than the previously estimated life of the
economic benefit.
The Company reviews the residual value, useful lives and depreciation method annually and, if
expectations differ from previous estimates, the change is accounted for as a change in accounting
estimate on a prospective basis.
Impairment of Property, plant and equipment and other intangible assets.
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and
intangible assets to determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in
order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the
recoverable amount of an individual asset, the Company estimates the recoverable amount of the
cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation
can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise
they are allocated to the smallest group of cash-generating units for which a reasonable and
consistent allocation basis can be identified.
2.11 Intangible assets:
Intangible assets with indefinite useful lives that are acquired separately are carried at cost less
accumulated Amortization and accumulated impairment losses. Amortization is recognized on a
straight-line basis over their estimated useful lives. The estimated useful life and Amortization
method are reviewed at the end of each reporting period, with the effect of any changes in estimate
being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are
acquired separately are carried at cost less accumulated impairment losses
Recoverable amount is the higher of fair value less costs to sell and value in use. 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
for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable
amount. An impairment loss is recognized immediately in the Statement of Profit and Loss, unless
the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash¬
generating unit) is increased to the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that would have been determined
had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A
reversal of an impairment loss is recognized immediately in the Statement of Profit and Loss, unless
the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is
treated as a revaluation increase.
Derecognition of intangible assets:
An intangible asset is derecognized on disposal, or when no future economic benefits are expected
from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as
the difference between the net disposal proceeds and the carrying amount of the asset are recognized
in the Statement of Profit and Loss when the asset is derecognized.
2.12 Employee benefits
Retirement benefit costs and termination benefits
Payments to defined contribution retirement benefit plans are recognized as an expense when
employees have rendered service entitling them to the contributions. For defined benefit retirement
benefit plans, the cost of providing benefits is determined using the projected unit credit method, with
actuarial valuations being carried out at the end of each annual reporting period. Re-measurement,
comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and
the return on plan assets (excluding interest), is reflected immediately in the Balance Sheet with a
charge or credit recognized in other comprehensive income in the period in which they occur. Re¬
measurement recognized in other comprehensive income is reflected immediately in retained
earnings and will not be reclassified to profit or loss. Past service cost is recognized in profit or loss
in the period of a plan amendment. Net interest is calculated by applying the discount rate at the
beginning of the period to the net defined benefit liability or asset. Defined benefit costs are
categorized as follows:
• service cost (including current service cost, past service cost, as well as gains and losses on
curtailments and settlements);
• net interest expense or income; and
• re-measurement.
The Company presents the first two components of defined benefit costs in profit or loss in the line
item employee benefits expenses. Curtailment gains and losses are accounted for as past service
costs. The retirement benefit obligation recognized in the statement of financial position represents
the actual deficit or surplus in the Company’s defined benefit plans. Any surplus resulting from this
calculation is limited to the present value of any economic benefits available in the form of refunds
from the plans or reductions in future contributions to the plans. A liability for a termination benefit
is recognized at the earlier of when the entity can no longer withdraw the offer of the termination
benefit and when the entity recognizes any related restructuring costs.
Short-term and other long-term employee benefits
A liability is recognized for benefits accruing to employees in respect of wages and salaries, annual
leave and sick leave in the period the related service is rendered at the undiscounted amount of the
benefits expected to be paid in exchange for that service.
Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted
amount of the benefits expected to be paid in exchange for the related service.
Liabilities recognized in respect of other long-term employee benefits are measured at the present
value of the estimated future cash outflows expected to be made by the Company in respect of
services provided by employees up to the reporting date.
2.13 Share-based payment arrangements
Equity-settled share-based payments to employees and others providing similar services are
measured at the fair value of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on
a straight-line basis over the vesting period, based on the Company’s estimate of equity instruments
that will eventually vest, with a corresponding increase in equity. At the end of each reporting period,
the Company revises its estimate of the number of equity instruments expected to vest. The impact of
the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative
expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee
benefits reserve.
Equity-settled share-based payment transactions with parties other than employees are measured at
the fair value of the goods or services received, except where that fair value cannot be estimated
reliably, in which case they are measured at the fair value of the equity instruments granted,
measured at the date the entity obtains the goods or the counterparty renders the service.
For cash-settled share-based payments, a liability is recognized for the goods or services acquired,
measured initially at the fair value of the liability. At the end of each reporting period until the
liability is settled, and at the date of settlement, the fair value of the liability is re-measured, with any
changes in fair value recognized in the statement of profit and loss for the year.
2.14 Investments
Investments are classified as current or long-term in accordance with Accounting Standard 13
“Accounting for Investments”.
Current investments are stated at lower of cost and fair value. Any reduction in the carrying amount
and any reversals of such reductions are charged or credited to the profit and loss account.
Long term investments are stated at cost. Provision for diminution is made to recognize a decline
other than temporary, in the value of such investments.
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