3.4 Provisions, Contingent Liabilities and Contingent Assets
Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a
past event, it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the amount of the obligation. When the Company
expects some or all of a provision to be reimbursed, reimbursement is recognized as a separate asset, but
only when the reimbursement is virtually certain. The expense relating to a provision is presented in the
statement of profit and loss net of any reimbursement. If the effect of the time value of money is material,
provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the
liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a
finance cost in respective expense.

Contingent Liabilities and Contingent Assets

Contingent liabilities are not recognized but are disclosed in the notes. Contingent Assets are neither
recognized nor disclosed in the Financial Statements.

3.5 Leases

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

To assess whether a contract conveys the right to control the use of an identified asset, the Company
assesses whether,

(i) the contract involves the use of an identified asset

(ii) the Company has substantially all of the economic benefits from use of the asset through the period of the
lease and

(iii) the Company has the right to direct the use of the asset.

The company applies a single recognition and measurement approach for all leases, except for short term
leases (twelve month or less) and leases of low-value. For short-term and leases of low value, the Company
recognises the lease payments as an operating expense on a straight line basis over the term of the lease. For
all other leases, the Company recognises lease liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets.

The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial
direct costs less any lease incentives. They are subsequently measured at cost less accumulated
depreciation and impairment losses Right-of-use assets are depreciated from the commencement date on a
straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right of use assets
are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying
amounts may not be recoverable.

The lease liability is initially measured at amortized cost at the present value of the future lease payments.
The lease payments are discounted using the incremental borrowing rate at the lease commencement date.
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 or a change in the
assessment of an option to purchase the underlying asset Lease liability and ROU asset, if any, have been
separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.

3.6 Inventories:

Inventories are valued as under:

Raw materials& stores and spares

Lower of cost and net realisable value. Cost is determined on a weighted average basis. Materials and other
items held for use in the production of inventories are not written down below costs, if finished goods in
which they will be incorporated are expected to be sold at or above cost.

Finished Goods & Work In Progress

Lower of cost and net realisable value. Cost includes direct materials, labour and a proportion of attributable
overheads.

Stock-In-Trade

Valued at lower of cost or net realizable value and for this purpose cost is determined on weighted average
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.

3.7 Income tax

Current tax:

Provision for current tax is made as per the provisions of the Income Tax Act, 1961.

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid
to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted
or substantively enacted, at the reporting date.

Current income tax relating to items recognized outside profit or loss is recognized outside profit or loss
(either in other comprehensive income or in equity). Current tax items are recognized in correlation to the
underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken
in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation
and establishes provisions where appropriate.

Deferred tax:

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes at the reporting date. 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. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the
extent that it has become probable that future taxable profits will allow the deferred tax asset to be
recovered. Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss
(either in other comprehensive income or in equity). Deferred tax items are recognized in correlation to the
underlying transaction either in OCI or directly in equity.

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.

Minimum Alternative Tax (‘MAT’) credit entitlement under the provisions of the Income-tax Act, 1961 is
recognized as a deferred tax asset when it is probable that future economic benefit associated with it in the
form of adjustment of future income tax liability, will flow to the Company and the asset can be measured
reliably. MAT credit entitlement is set off to the extent allowed in the year in which the Company becomes
liable to pay income taxes at the enacted tax rates.

MAT credit entitlement is reviewed at each reporting date and is recognized to the extent that is probable that
future taxable profits will be available against which they can be used. MAT credit entitlement has been
presented as deferred tax asset in Balance Sheet. Significant management judgement is required to
determine the probability of recognition of MAT credit entitlement.

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 taxation authority.

3.8 Employee Benefits
Short-term Employee Benefits:

Employee benefit liabilities such as salaries, wages and bonus, etc. that are expected to be settled wholly
within twelve months after the end of the period in which the employees render the related service are
recognized in respect of employees’ services up to the end of the reporting period and are measured at an
undiscounted amount expected to be paid when the liabilities are settled.

Post-employment benefit plans:

Defined Contribution Plans:

State governed Provident Fund Scheme and Employees State Insurance Scheme are defined contribution
plans. The contribution paid / payable under the schemes is recognized during the period in which the
employees render the related services.

Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.

The Company’s gratuity scheme is a defined benefit plan. Currently, the Company’s gratuity scheme is
unfunded. The Company recognises the defined benefit liability in Balance sheet. The present value of the
obligation under such defined benefit plan and the related current service cost and, where applicable past
service cost are determined based on an actuarial valuation done using the Projected Unit Credit Method by
an independent actuary, which recognises each period of service as giving rise to additional unit of employee
benefit entitlement and measures each unit separately to build up the final obligation. The obligations are
measured at the present value of the estimated future cash flows.

Re-measurements, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if
applicable) is reflected immediately in Other Comprehensive Income in the Statement of Profit and loss. All
other expenses related to defined benefit plans are recognized in Statement of Profit and Loss as employee
benefit expenses. Re-measurements recognized in Other Comprehensive Income will not be reclassified to
Statement of Profit and Loss hence it is treated as part of retained earnings in the Statement of Changes In
Equity.

3.9 Fair value measurement

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. The fair value measurement is based on
the presumption that the transaction to sell the asset or transfer the liability takes place either:

? In the principal market for the asset or liability, or

? In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible to/ by the Company.

Fair value hierarchy

All financial instruments for which fair value is recognized or disclosed are categorised within the fair value
hierarchy, described as follows, based on the lowest level input that is significant to the fair value
measurement as a whole;

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: valuation techniques for which the lowest level input that has a significant effect on the fair value
measurement are observable, either directly or indirectly.

Level 3: valuation techniques for which the lowest level input which has a significant effect on the fair value
measurement is not based on observable market data.

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company
determines whether transfers have occurred between levels in the hierarchy by reassessing categorization
(based on the lowest level input that is significant to the fair value measurement as a whole) at the end of
each reporting period.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the
basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as
explained above.

3.10 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.

a) Financial assets

Initial recognition and measurement

All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair
value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
Subsequent measurement

For purposes of subsequent measurement, financial assets are classified in four categories:

? Debt instruments at amortized cost - The Company has cash & cash equivalents, loans and trade
receivables classified within this category.

? Debt instruments at fair value through other comprehensive income (FVTOCI) - The Company does
not have any financial asset classified in this category.

? Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL) - The

Company does not have any financial asset classified in this category.

? Equity instruments measured at fair value through other comprehensive income (FVTOCI) - The

Company does not have any financial asset classified in this category.

Debt instruments at amortized cost

A ‘debt instrument’ is measured at the amortized cost if both the following conditions are met:

a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash
flows, and

b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of
principal and interest (SPPI) on the principal amount outstanding.

After initial measurement, such financial assets are subsequently measured at amortized cost using the
effective interest rate (EIR) method. Amortized cost is calculated by taking into account any discount or
premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization and losses
arising from impairment are recognized in the Statement of Profit & Loss. The amortized cost of the financial
asset is also adjusted for loss allowance, if any.

Debt instrument at FVTPL

FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for
categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.

In addition, the company may elect to designate a debt instrument, which otherwise meets amortized cost or
FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates
measurement or recognition inconsistency (referred to as ‘accounting mismatch’). Company has not
designated any such debt instrument as at FVTPL.

Debt instruments included within the FVTPL category are measured at fair value with all changes recognized
in the Statement of Profit & Loss.

Derecognition

The Company derecognises a financial asset when the contractual rights to the cash flows from the financial
asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which
substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the
Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not
retain control of the financial asset. Any gain or loss on derecognition is recognized in the Statement of Profit
and Loss.

Impairment of financial assets

In accordance with Ind AS 109, the company applies expected credit loss (ECL) model for measurement and
recognition of impairment loss on the following financial assets and credit risk exposure:

Financial assets that are debt instruments, and are measured at amortized cost e.g. Loans and trade
receivables.

The company follows ‘simplified approach’ for recognition of impairment loss allowance on Trade
receivables that do not contain a significant financing component.

The application of simplified approach does not require the Company to track changes in credit risk. Rather, it
recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial
recognition.

b) Financial liabilities

Initial recognition and measurement

All financial liabilities are initially recognized when the Company becomes a party to the contractual
provisions of the instrument.

All financial liabilities are initially measured at fair value deducted by, in the case of financial liabilities not
recorded at fair value through profit or loss, transaction costs that are attributable to the liability.

Subsequent measurement

Financial liabilities are classified as measured at amortized cost using the effective interest method. The
Company’s financial liabilities include trade payables, borrowings and other financial liabilities.

Under the effective interest method, the future cash payments are exactly discounted to the initial
recognition value using the effective interest rate. The cumulative amortization using the effective interest
method of the difference between the initial recognition amount and the maturity amount is added to the
initial recognition value (net of principal repayments, if any) of the financial liability over the relevant period of
the financial liability to arrive at the amortized cost at each reporting date. The corresponding effect of the
amortization under effective interest method is recognized as

expense over the relevant period of the financial liability in the Statement of Profit and Loss.

Derecognition:

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or
expires. When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as the Derecognition of the original liability and the recognition of a new liability. The

difference between the carrying amount of the financial liability derecognized and the consideration paid is
recognized in the Statement of Profit and Loss.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount presented in the Balance Sheet when,
and only when, the Company currently has a legally enforceable right to set off the amounts and it intends
either to settle them on a net basis or to realise the assets and settle the liabilities simultaneously.

3.11 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, which are subject to an insignificant risk of changes in value.

3.12 Revenue Recognition

The Company recognizes revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services.

A 5-step approach is used to recognize revenue as below:

Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligation in contract
Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

Sale of goods

Revenue from the sale of goods is recognized when control of the goods have passed to the buyer, usually on
delivery of the goods. 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).

Interest income

Interest income on financial asset is recognized using the effective interest rate (EIR) method.

Dividends

Dividend income from investment is accounted for when the right to receive is established, which is generally
when shareholders approve the dividend.

3.13 Earnings per share

Basic earnings per share is computed using the net profit for the year attributable to the shareholders’ and
weighted average number of equity shares outstanding during the year.

Diluted earnings per share is computed using the net profit for the year attributable to the shareholders’ and
weighted average number of equity shares.

3.14 Cash flow statement

Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of
transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or
payments and item of income or expenses associated with investing or financing cash flows. The cash flows
from operating, investing and financing activities of the Company are segregated.

3.15 Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision maker. The board of directors of the Company has been identified as being the chief
operating decision maker by the Management of the company.

3.16 Foreign currency transactions

Transactions in foreign currencies are recorded by the Company entities at their respective functional
currency at the exchange rates prevailing at the date of the transaction first qualifies for recognition. Monetary
assets and liabilities denominated in foreign currency are translated to the functional currency at the
exchange rates prevailing at the reporting date.

Non-Monetary asset and liabilities that are measured at fair value in a foreign currency are translated into the
functional currency at the exchange rate when the fair value was determined. Non-monetary assets and
liabilities that are measured based on historical cost in a foreign currency are translated at the exchange rate
at the date of the transaction.

Exchange differences arising on settlement or translation of monetary items are recognized in the statement
of profit and loss with the exception that the exchange differences on foreign currency borrowings included in
the borrowing cost when they are regarded as an adjustment to interest costs on those foreign currency
borrowings.

3.17 Borrowing Cost

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are
capitalized as part of the cost of such assets up to the assets are substantially ready for their intended use.
The loan origination costs directly attributable to the acquisition of borrowings (e.g. loan processing fee,
upfront fee) are amortized in the year in which they occur.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalization. All other borrowing costs
are recognized in the statement of profit and loss in the period in which they are incurred.

3.18 Ind AS 117 — Insurance Contracts

The amendments introduce a new Accounting Standard, Ind AS 117 in place of existing Ind AS 104 (Insurance
Contracts). This amendment is applicable mainly to issuers of Insurance contracts and re-insurance
contracts. The Company does not expect this amendment to have any significant impact in its financial
statements.

3.19 Rounding off of figures of financial statements:

In compliance with the amendment made by Ministry of Corporate Affairs (MCA) vide notification dated 24th
March 2021 in Schedule III of the Companies Act 2013, all the figures forming part of the Financial Statement
e rounded off in Rupees lakhs until and unless stated otherwise.