3.15 Provisions
Provisions are recognised when the Company
has a present obligation (legal or constructive)
as a result of a past event, it is probable that the
Company will be required to settle the obligation,
and a reliable estimate can be made of the amount
of the obligation.
The amount recognised as a provision is the
best estimate of the consideration required to
settle the present obligation at the end of the
reporting period, taking into account the risks
and uncertainties surrounding the obligation.
When a provision is measured using the cash
flows estimated to settle the present obligation,
its carrying amount is the present value of those
cash flows (when the effect of the time value of
money is material).
Warranties
The estimated liability for product warranties is
recorded when products are sold. These estimates
are established using historical information on the
nature, frequency and average cost of warranty
claims and management estimates regarding
possible future incidence based on corrective
actions on product failures. The timing of outflows
will vary as and when warranty claim will arise.
The initial estimate of warranty-related costs is
revised annually.
Onerous contracts
An onerous contract is a contract under which
the unavoidable costs (i.e., the costs that the
Company cannot avoid because it has the
contract) of meeting the obligations under the
contract exceed the economic benefits expected
to be received under it. The unavoidable costs
under a contract reflect the least net cost of
exiting from the contract, which is the lower of
the cost of fulfilling it and any compensation or
penalties arising from failure to fulfil it. The cost of
fulfilling a contract comprises the costs that relate
directly to the contract (i.e., both incremental
costs and an allocation of costs directly related
to contract activities). If the Company has a
contract that is onerous, the present obligation
under the contract is recognised and measured
as a provision.
Contingent liabilities
A disclosure for a contingent liability is made
when there is a possible obligation or a present
obligation that may, but probably will not, require
an outflow of resources. When the likelihood of
outflow of resources is remote, no provision or
disclosure is made.
Provisions, contingent liabilities are reviewed at
each Balance Sheet date.
3.16 Financial instruments
A financial instrument is any contract that
gives rise to a financial asset of one entity
and a financial liability or equity instrument of
another entity.
Financial assets and financial liabilities are
recognised when the Company becomes a party to
the contractual provisions of the instruments.
Financial assets and financial liabilities are initially
measured at fair value except Trade receivables
that do not contain a significant financing
component or for which the Company has applied
the practical expedient are measured at the
transaction price determined under Ind AS 115.
Transaction costs that are directly attributable
to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and
financial liabilities at fair value through profit or
loss) are added to or deducted from the fair value
of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of
financial assets or financial liabilities at fair value
through profit or loss are recognised immediately
in profit or loss.
3.17 Financial assets
All recognised financial assets are subsequently
measured in their entirety at either amortised cost
or fair value through profit and loss or fair value
through other comprehensive income, depending
on the classification of the financial assets.
Classification and Measurement of
financial assets
Debt instruments that meet the following
conditions are subsequently measured at
amortised cost (except for debt instruments that
are designated at fair value through profit or loss
on initial recognition):
• the asset is held within a business model
whose objective is to hold assets in order to
collect contractual cash flows; and
• the contractual terms of the instrument give
rise on specified dates to cash flows that are
solely payments of principal and interest
(SPPI) on the principal amount outstanding.
Debt instruments that meet the following
conditions are subsequently measured at fair
value through other comprehensive income
("FVTOCI") (except for debt instruments that are
designated at fair value through profit or loss on
initial recognition):
• the asset is held within a business model
whose objective is achieved both by
collecting contractual cash flows and selling
financial assets; and
• the contractual terms of the instrument give
rise on specified dates to cash flows that are
solely payments of principal and interest on
the principal amount outstanding.
Interest income and impairment losses or
reversals are recognised in the profit or loss and
computed in the same manner as for financial
assets measured at amortised cost. The remaining
fair value changes are recognised in OCI. Upon
de-recognition, the cumulative fair value changes
recognised in OCI is reclassified from the equity to
profit or loss.
All other financial assets are subsequently
measured at fair value through profit or loss.
Effective interest method
The effective interest method is a method
of calculating the amortised cost of a debt
instrument and of allocating interest income
over the relevant period. The effective interest
rate is the rate that exactly discounts estimated
future cash receipts (including all fees and points
paid or received that form an integral part of the
effective interest rate, transaction costs and other
premiums or discounts) through the expected
life of the debt instrument, or, where appropriate,
a shorter period, to the net carrying amount on
initial recognition.
Income is recognised on an effective interest basis
for debt instruments other than those financial
assets classified at FVTPL. Interest income is
recognised in profit or loss and is included in the
"Other income" line item.
Financial assets at fair value through profit
or loss (FVTPL)
Investments in equity instruments are classified at
FVTPL, unless the Company irrevocably elects on
initial recognition to present subsequent changes
in fair value in other comprehensive income for
investments in equity instruments which are not
held for trading.
Debt instruments that do not meet the amortised
cost criteria or FVTOCI criteria are measured at
FVTPL. In addition, debt instruments that meet the
amortised cost criteria or the FVTOCI criteria but
are designated at FVTPL are measured at FVTPL.
A financial asset that meets the amortised cost
criteria or debt instruments that meet the FVTOCI
criteria may be designated at FVTPL upon
initial recognition if such designation eliminates
or significantly reduces a measurement or
recognition inconsistency that would arise from
measuring assets or liabilities or recognising the
gains and losses on them on different bases.
Financial assets at FVTPL are measured at fair
value at the end of each reporting period, with
any gains or losses arising on re-measurement
recognised in profit or loss. The net gain or loss
recognised in profit or loss incorporates any
dividend or interest earned on the financial
asset and is included in the 'Other income' line
item. Dividend on financial assets at FVTPL is
recognised when the Company's right to receive
the dividends is established, it is probable that
the economic benefits associated with the
dividend will flow to the entity, the dividend does
not represent a recovery of part of cost of the
investment and the amount of dividend can be
measured reliably.
Financial assets designated at fair value
through OCI (equity instruments)
Upon initial recognition, the Company can elect
to classify irrevocably its equity investments
as equity instruments designated at fair value
through OCI when they meet the definition of
equity under Ind AS 32 Financial Instruments:
Presentation and are not held for trading. The
classification is determined on an instrument-by¬
instrument basis.
Gains and losses on these financial assets are
never recycled to profit or loss. Dividends are
recognised as other income in the statement of
profit and loss when the right of payment has been
established, except when the Company benefits
from such proceeds as a recovery of part of the
cost of the financial asset, in which case, such
gains are recorded in OCI. Equity instruments
designated at fair value through OCI are not
subject to impairment assessment.
Impairment of financial assets
The Company applies the expected credit
loss model for recognising impairment loss on
financial assets measured at amortised cost,
debt instruments at FVTOCI, trade receivables,
other contractual rights to receive cash or other
financial asset, and financial guarantees not
designated at FVTPL.
The Company measures the loss allowance for
a financial instrument at an amount equal to
the lifetime expected credit losses if the credit
risk on that financial instrument has increased
significantly since initial recognition.
Further, for the purpose of measuring lifetime
expected credit loss allowance for trade
receivables, the Company has used a practical
expedient as permitted under Ind AS 109. This
expected credit loss allowance is computed
based on historical credit loss experience and
adjustments for forward looking information.
Derecognition of financial assets
The Company de-recognises a financial asset
when the contractual rights to the cash flows from
the asset expire, or when it transfers the financial
asset and substantially all the risks and rewards of
ownership of the asset to another party.
3.18 Financial liabilities and equity instruments
Classification as financial liability or equity
Debt and equity instruments issued by Company
are classified as either financial liabilities or as
equity in accordance with the substance of the
contractual arrangements and the definitions of a
financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that
evidences a residual interest in the assets of an
entity after deducting all of its liabilities.
Financial liabilities
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.
Financial liabilities designated upon initial
recognition at fair value through profit or loss
are designated as such at the initial date of
recognition, and only if the criteria in Ind AS 109
are satisfied. For liabilities designated as FVTPL,
fair value gains / losses attributable to changes
in own credit risk are recognized in the other
comprehensive income. These gains/ loss are not
subsequently transferred to P&L. However, the
Company may transfer the cumulative gain or
loss within equity. All other changes in fair value
of such liability are recognised in the statement of
profit or loss.
The carrying amounts of financial liabilities that
are subsequently measured at amortised cost
are determined based on the effective interest
method. Interest expense that is not capitalised as
part of cost of an asset is included in the 'Finance
costs' line item.
The effective interest method is a method of
calculating the amortised cost of a financial
liability and of allocating interest expense over
the relevant period. The effective interest rate is
the rate that exactly discounts estimated future
cash payments (including all fees and points
paid or received that form an integral part of the
effective interest rate, transaction costs and other
premiums or discounts) through the expected life
of the financial liability.
All financial liabilities are subsequently measured
at amortised cost using the effective interest
method or at FVTPL.
Derecognition of financial liabilities
The Company de-recognises financial liabilities
when, and only when, the Company's obligations
are discharged, cancelled or have expired.
Reclassification of financial assets
and liabilities
The Company determines classification of
financial assets and liabilities on initial recognition.
After initial recognition, no reclassification is made
for financial assets which are equity instruments
and financial liabilities. For financial assets which
are debt instruments, a reclassification is made
only if there is a change in the business model
for managing those assets. Changes to the
business model are expected to be infrequent.
The Company's senior management determines
change in the business model as a result of
external or internal changes which are significant
to the Company's operations.
3.19 Derivative Instruments
Initial recognition and subsequent
measurement
The Company uses derivative financial
instruments, such as forward currency contracts
to hedge its foreign currency risks. Such derivative
financial instruments are initially recognised at fair
value on the date on which a derivative contract
is entered into and are subsequently re-measured
at fair value. Derivatives are carried as financial
assets when the fair value is positive and as
financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the
fair value of derivatives are taken directly to profit
or loss, except for the effective portion of cash
flow hedges, which is recognised in OCI and later
reclassified to profit or loss when the hedge item
affects profit or loss or treated as basis adjustment
if a hedged forecast transaction subsequently
results in the recognition of a non-financial asset
or non-financial liability.
3.20 Cash and cash equivalents
Cash and cash equivalent in the balance sheet
comprise cash at banks and on hand and short¬
term deposits with an original maturity of three
months or less, that are readily convertible to a
known amount of cash and which are subject to an
insignificant risk of changes in value.
For the purpose of the standalone statement of
cash flows, cash and cash equivalents consist of
cash and short-term deposits, as defined above,
net of outstanding bank overdrafts as they are
considered an integral part of the Company's
cash management.
3.21 Dividend
The Company recognises a liability to make
dividend distributions to equity holders of the
Company when the distribution is authorised and
the distribution is no longer at the discretion of
the Company. As per the corporate laws in India
a distribution is authorised when it is approved by
the shareholders, However, Board of Directors of
a Company may declare interim dividend during
any financial year out of the surplus in statement
of profit and loss and out of the profits of the
financial year in which such interim dividend is
sought to be declared. A corresponding amount is
recognised directly in other equity.
3.22 Earnings per share
Basic earnings per share is computed by
dividing the profit after tax by the weighted
average number of equity shares outstanding
during the year.
Diluted earnings per share is computed by dividing
the profit after tax as adjusted for dividend,
interest and other charges to expense or income
relating to the dilutive potential equity shares, by
the weighted average number of equity shares
considered for deriving basic earnings per share
and the weighted average number of equity shares
which could have been issued on the conversion of
all dilutive potential equity shares.
3.23 Investment in subsidiaries and joint
ventures
A subsidiary is an entity that is controlled by
another entity. An associate is an entity over
which the Company has significant influence.
Significant influence is the power to participate
in the financial and operating policy decisions of
the investee but is not control or joint control over
those policies.
A joint venture is a type of joint arrangement
whereby the parties that have joint control of the
arrangement have rights to the net assets of the
joint venture. Joint control is the contractually
agreed sharing of control of an arrangement,
which exists only when decisions about the
relevant activities require unanimous consent of
the parties sharing control.
The Company's investments in its subsidiaries
and joint ventures are accounted at cost
less impairment.
Impairment of investments
The Company reviews its carrying value of
investments carried at cost annually, or more
frequently when there is indication for impairment.
If the recoverable amount is less than its carrying
amount, the impairment loss is recorded in the
Statement of Profit and Loss.
When an impairment loss subsequently
reverses, the carrying amount of the Investment
is increased to the revised estimate of its
recoverable amount, so that the increased
carrying amount does not exceed the cost of
the Investment. A reversal of an impairment
loss is recognised immediately in Statement of
Profit or Loss.
3.24 Events after the reporting period
If the Company receives information after the
reporting period, but prior to the date of approved
for issue, about conditions that existed at the
end of the reporting period, it will assess whether
the information affects the amounts that it
recognises in its standalone financial statements.
The Company will adjust the amounts recognised
in its financial statements to reflect any adjusting
events after the reporting period and update the
disclosures that relate to those conditions in light
of the new information. For non-adjusting events
after the reporting period, the Company will not
change the amounts recognised in its standalone
financial statements, but will disclose the nature
of the non-adjusting event and an estimate of
its financial effect, or a statement that such an
estimate cannot be made, if applicable.
3.25 New and amended standards
The Company applied for the first-time certain
standards and amendments, which are effective
for annual periods beginning on or after 1 April
2024. The Company has not early adopted any
standard, interpretation or amendment that has
been issued but is not yet effective.
(i) Ind AS 117 Insurance Contracts
The Ministry of Corporate Affairs (MCA)
notified the Ind AS 117, Insurance Contracts,
vide notification dated 12 August 2024,
under the Companies (Indian Accounting
Standards) Amendment Rules, 2024, which
is effective from annual reporting periods
beginning on or after 1 April 2024.
Ind AS 117 Insurance Contracts is a
comprehensive new accounting standard for
insurance contracts covering recognition and
measurement, presentation and disclosure.
Ind AS 117 replaces Ind AS 104 Insurance
Contracts. Ind AS 117 applies to all types of
insurance contracts, regardless of the type of
entities that issue them as well as to certain
guarantees and financial instruments with
discretionary participation features; a few
scope exceptions will apply. Ind AS 117 is
based on a general model, supplemented by:
• A specific adaptation for contracts
with direct participation features (the
variable fee approach)
• A simplified approach (the premium
allocation approach) mainly for short-
duration contracts
The application of Ind AS 117 does not
have material impact on the Company's
separate financial statements as the
Company has not entered any contracts in
the nature of insurance contracts covered
under Ind AS 117.
(ii) Amendments to Ind AS 116 Leases - Lease
Liability in a Sale and Leaseback
The MCA notified the Companies (Indian
Accounting Standards) Second Amendment
Rules, 2024, which amend Ind AS 116,
Leases, with respect to Lease Liability in a
Sale and Leaseback.
The amendment specifies the requirements
that a seller-lessee uses in measuring the
lease liability arising in a sale and leaseback
transaction, to ensure the seller-lessee does
not recognise any amount of the gain or loss
that relates to the right of use it retains.
The amendment is effective for annual
reporting periods beginning on or
after 1 April 2024 and must be applied
retrospectively to sale and leaseback
transactions entered into after the date of
initial application of Ind AS 116.
The amendments do not have a material
impact on the Company's financial
statements since the Company has
not entered into any sale and lease¬
back transactions.
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