Financial Assets 6 (a) Trade receivables Accounting policy

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business and reflect the Company's unconditional right to consideration (that is, payment is due only on the passage of time). Trade receivables are recognised initially at the transaction price as they do not contain significant financing components. The Company holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method, less loss allowance.

For trade receivables, the Company applies the simplified approach required by Ind AS 109 "Financial Instruments”, which requires expected lifetime losses to be recognized from initial recognition of the receivables.

10 Inventories

Accounting policy

Inventories are stated at the lower of cost and the net realisable value after providing for obsolescence and other losses, where considered necessary. Costs are assigned to individual items of raw materials, stores and spares, work in progress and stock-in-trade on the basis of weighted average method whereas manufactured goods are ascertained on first-in-first-out method. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Inventories are net of provision on account of obsolescence, slow moving inventory and lower of net realisable value amounted to ' 122 (June 30, 2023: ' 125) recognised as an expense and included in "Changes in inventories of finished goods, work in progress and stock in trade” in the Statement of Profit and Loss.

The Company has one class of equity shares having a par value of ' 10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, if any, in proportion to their shareholding.

(f) During five years immediately preceding June 30, 2024, there are no shares allotted as fully paid up pursuant to contracts without payment being received in cash or shares allotted as fully paid up by way of bonus shares or shares bought back.

(g) There are no shares of the Company reserved for issue under any option, contracts, commitments for the sale of share or disinvestment.

Nature and purpose of reserve:

Securities premium

Securities premium is used to record the premium on issue of shares. This reserve is utilised in accordance with provisions of the Act.

Share based compensation reserve

This reserve relates to share based compensation received by the employees of the Company from Kennametal Inc., USA, the ultimate holding company, net of recharge received. The reserve is created to recognise grant date fair value of awards issued to the employees (refer note 30).

General reserve

The general reserve is created by way of transfer of profits from retained earnings for appropriation purposes. This reserve is utilised in accordance with the provisions of the Act.

Retained earnings

Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve and dividends or other distributions paid to shareholders.

(a) Product support

Provision is made for estimated warranty claims in respect of products sold which are still under warranty at the end of the reporting period. These claims are expected to be settled in the next financial year (12 months) for Hard Metal products segment and 15 months for Machining Solutions segment. However in exceptional cases, the Company provides a general warranty upto 36 months (June 30, 2023: 24 months). Management estimates the provision based on historical warranty claim information and any recent trends that may suggest future claims could differ from historical amounts.

(b) Disputed taxes and duties:

Provision for disputed taxes and duties is towards service tax and excise duty that are expected to materialise.

Accounting policy

The Company provides for gratuity, a defined benefit plan ('the Gratuity Plan') covering eligible employees. The Gratuity Plan provides a lumpsum payment to vested employees a retirement, death, incapacitation or termination of employment, of an amount based on the respective employee's salary and the tenure of employment with the Company.

Liabilities with regard to the Gratuity Plan are determined by a valuation, performed by an independent actuary at each Balance Sheet date using the projected unit credit method. The Company contributes all ascertained liabilities to the Kennametal India Limited Employees Gratuity Fund Trust (the Trust). The Trustees administer the contributions made to the Trust which are invested in a scheme with an insurance company as permitted by law.

The Company recognises the net obligation of a defined benefit plan in its Balance Sheet as an asset or liability. Gains and losses through remeasurements of the net defined liability / (asset) are recognised in other comprehensive income and are not reclassified to profit or loss in subsequent periods. The actual return of the portfolio of plan assets, in excess of the yields computed by applying the discount rate used to measure the defined benefit obligation is recognised in other comprehensive income. The effect of any plan amendments are recognised in the Statement of Profit and Loss.

Every employee is entitled to a benefit equivalent to fifteen days salary last drawn for each completed year of service in line with the Payment of Gratuity Act, 1972. The same is payable at time of separation from the Company or retirement, whichever is earlier. The benefits vest after 5 years of continuous service. The Board of Trustees is responsible for the administration of the Plan assets and the investment strategy.

The estimates of future increase in salary, considered in the actuarial valuation, have been taken on account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

The discount rate is based on the prevailing market yield of India Government securities as at the Balance sheet date for the estimated term of the obligation.

Expected contributions to benefit plans for the year ending June 2025 is ' 20 (June 2024: ' 50).

vii) Sensitivity analysis

Gratuity is a lumpsum plan and the cost of providing these benefits is typically less sensitive to small changes in demographic assumptions. The actuarial assumptions to which the benefit obligations results are particularly sensitive to are discount rate, salary escalation rate, attrition rate and mortality rate. The following table summarises impact on the reported defined benefit obligation arising on account of an increase or decrease in the reported assumptions.

ix) Risk exposure

Valuations are performed on certain basic set of pre-determined assumptions and other regulatory framework which may vary overtime. Thus, the Company is exposed to various risks in providing the above benefit which are as follows:

Interest rate risk

The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability as shown in financial statements.

Salary escalation risk

The present value of the defined benefit plan is calculated with the assumption of salary increase rate of employees in future. Deviation in the increase in salary used to determine the present value of obligation will have a bearing on the plan's liability.

Demographic risk

The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumption.

Liquidity risk

The Company does not perceive any liquidity risk as the Company has investments in Government Securities and Corporate Bonds offers the best returns over the long term, within an acceptable level of risk.

(e) Compensated absences

The leave obligation cover the Company's liability for sick and earned leave. The amount of the provision of ' 133 (June 30, 2023: '133) is presented as current, since the Company does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the Company does not expect all the employees to avail leave accrued to their credit or require payment within next 12 months.

Also, refer note 41.9 for other accounting policies.

(f) Defined benefits plan (Provident Fund - Trust set by employer)

Accounting policy

Eligible employees of the Company receive benefits from a provident fund, which is a defined benefit plan. Both, the eligible employee and the Company, make monthly contributions to the provident fund plan equal to a specified percentage of the covered employee's salary. The Company contributes to Kennametal India Limited Employee's Provident Fund Trust ('the PF Trust'). The PF Trust invests in specific designated instruments as permitted by law. The rate at which the annual interest is payable to the beneficiaries by the PF Trust is stipulated by the Government. The Company has an obligation to make good the shortfall, if any, between the return from investments of the PF Trust and the notified interest rate by the Government.

The contribution by the employer and the employee together with the interest accumulated thereon are payable to the employees at the time of their separation from the Company or retirement, whichever is earlier. The benefits vests immediately on rendering of the services by the employee. The Company currently does not have any unfunded plans. The Board of Trustees of the PF Trust are responsible for the administration of the plan assets and the investment strategy.

The Provident fund expense, other than contribution, is not recognised in Statement of Profit and Loss if the fair value of plan assets exceeds the present value of obligation. Accordingly, the excess of plan assets over present value of obligation has not been recorded in financial statements.

Provident fund expense, excluding contribution towards national pension scheme, recognised in the books for the year ended June 30, 2024 amounts to ' 62 (June 30, 2023: ' 62).

17 Revenue from operations Accounting policy

The Company derives its revenues primarily from contracts with customers for sale of goods and services. Revenue from sale of goods is net of returns, rebates and applicable Goods and Services Tax (GST).

Revenue is recognised when the obligations under the terms of contract with customers are satisfied. Revenue is recognised at a point in time depending on when the underlying products or services are transferred to the customer. Revenue is recognised when control of the products has been transferred to the customer.

When a contract includes multiple performance obligations, the transaction price is allocated to each performance obligation in an amount that depicts the consideration, to which the Company expects to be entitled in exchange of transferring the promised goods and services.

The transaction price reflects the amount of consideration to which the Company expects to be entitled in exchange for transferring products and services to the customer. If the consideration includes variable amount, the Company estimates the amounts to which it expects to be entitled. Generally, variable consideration includes volume discounts, rebates and sales returns that reduce the transaction price. When the Company determines the transaction price it includes the variable consideration only to the extent it is highly probable that a significant reversal will not occur in the future.

The Company sells its products to the distributors with a right of return within 12 months. When such customers have a right to return the product the Company recognises a refund liability included in other current liabilities for the products expected to be returned and an asset (via right to recover returned goods).

The Company recognises the expected annual turnover/volume discounts payable to distributors in relation to sales of goods made until the end of the reporting period. The customers are divided into different grades at the inception of the year and accordingly targets are also set. The annual turnover/ volume discount and year end payable thereon is netted-off to revenue and trade receivable respectively.

The Company provides general product warranty to the customers for a period of 12 months in case of hard metal and 15 months in case of machine solutions upon the sale of products. However, in exceptional cases, the Company provides a general warranty of up to 36 months. The Company's obligation to repair or replace faulty products under the standard warranty terms is recognized as a provision under "product support".

The Company has elected the following practical expedients in accordance with Ind AS 115 "Revenue from contracts with customers":

Ý The Company does not account for significant financing components if the period between revenue recognition and when the customer pays for the product or service will be one year or less.

Ý The Company does not disclose the remaining performance obligation that has an original expected duration of one year or less.

Ý The Company has elected, as a practical expedient, to expense as incurred the cost to obtain a contract equal to or less than one year in duration.

(i) Sale of manufactured and traded Products:

Product revenue consists of sale of hard metal and machining solutions. Revenue from sale of hard metal and machining solutions is recognised when control over the product is transferred in accordance with contractual terms of sale and there are no unfulfilled performance obligations that could affect the customer's acceptance of the products, which is typically upon dispatch or the customer has accepted the product and the Company has a present right to payment, in accordance to the terms of contract.

(ii) Sale of services:

Sale of services includes maintenance (regrinding), installation and commission and other professional support services.

Revenue related to fixed price maintenance (regrinding) services where the Company is standing ready to provide services is recognised on completion. Revenue related to installation and commission services is treated as a separate performance obligation and recognised as and when the services are performed and accepted by customer in accordance with contractual terms. Revenue related to undelivered performance obligations is deferred and recognised when or as the control is transferred to the customer.

(iii) Contract Liabilities:

Contract liabilities (deferred revenue) primarily consists of installation and commission on sale of machine solutions. Deferred revenue is recognised when the Company has the right to invoice and the revenue recognition criteria are not met. Revenue in case of these items is recognised when the revenue recognition criteria is met.

(iv) Disaggregation of revenue:

The Company's revenue is presented on a disaggregated basis based on the information regularly reviewed by the Chief Operating Decision Maker (CODM) for evaluating the financial performance of operating segments, and other information that is used to evaluate the financial performance or make resource allocations. This information includes revenue from products and services and revenue from reportable segments.

Also, refer Notes 41.17 and 41.18 for other accounting policies

29. Contingent liabilities Accounting policy

Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.

a) Primarily relates to transfer pricing adjustments/ disallowances relating to research and development expenditure and additions made on account of manufacturing margins by the Income Tax Department ("ITD") for the tax assessment years 2012-13, 2014-15, 2017-18, 2018-19 and 202122, which is disputed by the Company and the said matters are lying under appeal with the Income Tax Appellate Tribunal, Bengaluru/ the Commissioner of Income Tax (Appeals) LTU, Bengaluru/ the Dispute Resolution Panel, Bengaluru.

Further, for other tax assessment years, no payments have been made, but refund claims have been withheld by ITD, which covers the tax amounts being litigated and as such there may be no additional cash outflow as per management's assessment. The Company is contesting the demands and management believes that its position, supported by external tax advice, will likely be upheld in the appellate process. Further, considering the facts and the nature of the disallowances, management believes that the final outcome of the disputes should likely be in favour of the Company and so it may not have a material adverse effect on the financial position and results of operations.

b) While making the assessment at the year end, the possibility of bearing interest liability on such disputed taxes need to be considered. In the case of the Company's existing tax disputes, there has been no experience of the tax authorities charging interest and hence interest amounts have not been computed for adding it to the amount of contingent liabilities disclosed above.

c) The Supreme Court of India passed a judgement in February 2019 in relation to inclusion of certain allowances within the scope of “basic wages” for the purposes of determining contribution to provident fund under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The management, based on legal advice, is of the view that the applicability of the judgement to the Company, with respect to the period and the nature of allowances to be covered due to interpretation challenges, and resultant impact on the past provident fund liability, cannot be reasonably ascertained.

d) It is not practicable for the Company to estimate the timings of the cash outflows if any in respect of the above pending resolution of the respective proceedings.

e) The Company does not expect any reimbursements in respect of the above contingent liabilities.

30. Shared based payments Accounting policy

Stock-based compensation awards are provided to selected employees under the terms of the long-term incentive plan of Kennametal Inc. USA, the ultimate holding company. Awards available under the plans include restricted stock units ("RSUs") which are granted to certain senior management employees of the Company. Stock-based compensation represents the cost related to group stock-based awards granted to employees.

RSUs entitle the holder to shares of common stock as the award vest, typically over 2 years or 3 years depending upon the scheme and year of grant which are immediately exercised on the vesting date. All the RSUs granted under the plan are equity settled. RSUs are time vesting stock units and therefore the fair value of the units is determined and fixed on the grant date based on market value of Kennametal Inc's share price, adjusted for the exclusion of dividend equivalents. The Company measures stock-based compensation cost at the grant date, based on the estimated fair value of the award and recognises the cost (net of estimated forfeitures) over the employee requisite service period. The service period is no longer contingent on the employee providing additional service (substantive vesting period).

The total expense in respect of the above share based payment scheme is recognised over the vesting period with a corresponding adjustment to equity compensation reserve as a capital contribution from Kennametal Inc. The inter company recharge payable to the ultimate holding company, if any, is offset against the equity compensation reserve. A liability is recognised when the award is released to or exercised by the Company's employees and billed by Kennametal Inc.

32. Lease Accounting

This note provides information on leases where the Company is a lessee. The rental contracts are typically for office premises and lease of plant and machinery. These contracts are entered into for periods ranging from three years to six years, but may have extension and termination options.

(i) Amounts recognised in balance sheet

The balance sheet shows the following amounts relating to leases:

33. Fair value measurements

The fair value of trade receivables, trade payables and other current financial assets and liabilities is considered to be equal to the carrying amounts of these items due to their short-term nature. The carrying amounts of trade receivables, cash and cash equivalents, bank deposits with more than 12 months maturity, trade payables, items falling under other financial assets and financial liabilities are considered to be the same as their fair values.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

34. Financial risk management

The Company's activities expose it to market risk, liquidity risk and credit risk. The Company's risk management is carried out by the Management under the policies approved of the Board of Directors that help in identification, measurement, mitigation and reporting all risks associated with the activities of the Company. These risks are identified on a continuous basis and assessed for the impact on the financial performance. Information on risks and the response strategy is escalated in a timely manner to facilitate timely decision making. Risk response strategy is formulated for key risks by Management.

A Credit Risk

Credit risk arises from cash and cash equivalents, security deposits carried at amortised cost and deposits with banks and financial institutions, as well as credit exposures to customers including outstanding receivables.

Credit risk refers to the risk of default on its obligation by the counter party resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to ' 1781 as of June 30 2024 (June 30 2023: '1420).

Credit risk on cash and cash equivalents is limited as the Company generally invest in deposits with banks with high credit ratings as signed by international and domestic credit rating agencies.

Trade receivables are typically unsecured and are derived from revenue earned from customers primarily located in India, Germany, US and China. Credit risk has been managed by the Company through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of

customers to which the Company grants credit terms in the normal course of business. The provision for expected credit loss takes into account available external and internal credit risk factors including the credit ratings of the various customers and the Company's historical experience for customers. The Company applies the simplified approach to provide for expected credit losses prescribed by Ind AS 109 "Financial instruments”, which permits the use of lifetime expected loss provision for all the trade receivables. The Company measures the expected credit loss of trade receivables based on historical trend, industry and credit ratings.

Financial assets that are past due but not impaired

There is no other class of financial assets that is past due but not impaired except for receivables of '6 and '7 as at 30 June 2024 and 30 June 2023 respectively. The Company's credit period generally ranges from 60-180 days from invoicing date. The aging analysis of the receivables has been considered from the date the invoice falls due.

No expected credit loss provision has been created for loans, i.e., security deposits on leased premises and advances given to employees, as the Company considers the life time credit risk of these financial assets to be very low.

B. Liquidity Risk

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Due to the dynamic nature of the underlying businesses, Company's treasury maintains flexibility in funding by maintaining availability of required funds.

Management monitors rolling forecasts of the Company's liquidity position and cash and cash equivalents on the basis of expected cash flows.

Maturities of financial Liabilities

The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

C. Market Risk

(i) Foreign currency risk

The Company is exposed to foreign currency exchange risk arising from foreign currency transactions. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the companies functional currency (Rupees).

The risk is measured through a forecast of highly probable foreign currency on cash flows. To mitigate the risk of changes in exchange rates on foreign currency exposures, the Company has natural hedge between export receivable and import payables.

35. Capital Management Risk management

The Company's objectives when managing capital is to:

i) safeguard their ability to continue as going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders; and

ii) maintain an optimal capital structure to reduce the cost of capital.

The Management regularly monitors rolling forecasts of liquidity position and cash on the basis of expected cash flows. In addition, the Company projects cash flows in major currencies and considers the level of liquid assets necessary to meet them.

37. Transfer Pricing

As per transfer pricing legislation under Sections 92-92F of the Income Tax Act, 1961, the Company is required to use certain specific methods in computing arm's length price of international transactions with associated enterprises and maintain adequate documentation in this respect. As the law requires maintenance of such information and documentation to be contemporaneous in nature, the Company updates the transfer pricing study documentation every year to ensure that the transactions with associated enterprises undertaken are at an "arms length basis”. The Company has carried out a detailed transfer pricing study for the period April 1,2022 to March 31,2023, which did not envisage any additional tax liability. Similar to prior years, the Company is in the process of updating the transfer pricing documentation for the period April 1, 2023 to March 31,2024 and the subsequent period up to June 30, 2024. Accordingly, these financial statements do not include the effect of the transfer pricing implications, if any. However, based on the analysis of transactions and margins, the Company does not envisage any additional tax liability for the year ended June 30, 2024.

38. Segment Information Accounting policy

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker (CODM).

The Board of Directors (the Board) of the Company assesses the financial performance and position of the Company and makes strategic decisions. The Board has been identified as being the CODM.

A. Description of segments and principal activities

The Company is in the business of manufacturing and trading of hard metal products and manufacturing of machine tools (also known as machining solutions), which are sold in domestic and export markets. The Board examines the Company's performance and has identified two reportable segments in the business:

(i) Machining solutions: Machining solutions segment manufactures and sells customised capital intensive machines. Company specialises in providing an end to end solution, i.e., from design to manufacture and after sales service. The sales comprise of machines, fixtures, sale of spares and after sales service.

(ii) Hard metal products: Hard metal products segment deals in metal and metal cutting tools. The sales of this segment comprise of manufactured and traded goods.

D. Notes

(i) The segment-wise revenue, results, assets and liabilities relate to the respective amounts directly identifiable to each of the segments.

(ii) The segment revenue is measured in the same way as in the Statement of Profit and Loss.

(iii) No customer individually account for more than 10% of the revenue in the year ended June 30, 2024 and June 30, 2023.

(iv) The expenses that are not directly attributable and that cannot be allocated to an operating segment on a reasonable basis are shown as unallocated expenses.

(v) Segment assets include all operating assets used by the segment and consists primarily of property, plant and equipment and current assets. Segment liabilities comprise of liabilities which can be directly allocated against respective segments. Assets and liabilities that have not been allocated between segments are shown as part of unallocated assets and liabilities respectively.

(i) Details of benami property held

The Company does not hold any benami property. No proceedings have been initiated on or are pending against the Company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.

(ii) Borrowing secured against current assets

The Company has no borrowings from banks and financial institutions on the basis of security of current assets.

(iii) Wilful defaulter

The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.

(iv) Relationship with struck off companies

The Company did not have any material transactions with companies struck off under Section 248 of the Companies Act, 2013 or Section 560 of Companies Act, 1956 during the financial year.

(v) Registration of charges or satisfaction with Registrar of Companies

There are no charges or satisfaction which are yet to be registered with the Registrar of Companies beyond the statutory period.

(vi) Compliance with number of layers of companies

The Company does not have any subsidiaries and hence compliance with Section 2(87) of the Companies Act, 2013, read with the Companies (Restriction on number of Layers) Rules, 2017 ('layering rules') is not applicable to the Company.

(vii) Utilisation of borrowed funds and share premium

(A) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:

a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the group (Ultimate Beneficiaries) or

b. provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries

(B) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:

a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

b. provide any guarantee, security or the like on behalf of the ultimate beneficiaries.

(viii) Undisclosed income

There is no income surrendered or disclosed as income during the current or prior year in the tax assessments under the Income Tax Act, 1961, that has not been recorded in the books of accounts of the Company.

(xi) Details of crypto currency or virtual currency

The Company has not traded or invested in crypto currency or virtual currency during the current or previous year.

(xii) Valuation of property, plant and equipment, right-of-use assets, intangible asset and investment property

The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the current or prior year.

40A Audit trail

The Company uses an Enterprise Resource Planning (ERP) software that provides audit trail as a standard functionality and logs changes to financial data. The audit trail feature has been operational throughout the year for all relevant routine transactions recorded in the ERP To operate the ERP at the application level and the database level, a set of users have privileged access. The changes made directly at the database level do not have an effective audit trail (i.e., the system captures only modified values and not pre-modified values). Further, changes made (for e.g., debugging or fixing errors) through privileged access at the application level are not logged by default in the ERP.

The material accounting policies adopted in the preparation of financial statements have been disclosed in the pertinent notes in these financial statements. Other accounting policies are described below.

41.1 Property, plant and equipment Tangible assets

The Company's accounting policy for land is explained in note 3A. 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.

Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under other non-current assets.

Assets in the course of construction are capitalised under CWIP. At the point when the construction of the asset is completed and it is ready to be operated as per management's intended use, the cost of construction is transferred to the appropriate category of property, plant and equipment and depreciation commences. Any revenue (net of cost) generated from production during the trial period is capitalised.

41.2 Intangible assets

Intangible assets are stated at acquisition cost, net of accumulated amortisation and accumulated impairment losses, if any.

Operating software is capitalised along with the related property, plant and equipment and amortised over the useful life of the asset. Application software is capitalised, if it has an enduring benefit, and is amortised over its useful life or term of the contract whichever is lower.

Research expenditure and development expenditure that do not meet the criteria to be recognised as asset (only if probable that future economic benefits that are attributable to the assets will flow to the Company and the costs can be measured reliably) are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

41.3 Investment property

Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Company, is classified as investment property. Investment property is measured initially at its cost, including related transaction costs and where

applicable borrowing costs. Subsequent expenditure is capitalised to the asset's carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.

41.4 Impairment of assets

Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

41.5 Government grants

The export incentives from the Government such as Remission of Duties or Taxes on Export Products (RoDTEP) and duty drawback 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. The fair value is measured as a percentage of export sales as per the scheme.

Government grants relating to income are deferred and recognised in the profit or loss over the period necessary to match them with the costs that they are intended to compensate and presented net of cost of material consumed for RoDTEP and duty drawback.

Government grants related to property plant and equipments are presented in Balance Sheet by deducting the grant in calculating the carrying amount of the assets

41.6 Inventories

Cost of raw materials and traded goods comprises of cost of purchases. Cost of work-in-progress and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition.

41.7 Leases As a lessee

When the Company is the lessee, all leases with a term of more than 12 months are recognised as right-of-use ("ROU") assets and associated lease liabilities in the balance sheet. The lease liabilities are measured at the lease inception date at the present value of the lease

payments not yet paid determined using the Company's incremental borrowing rate, being the rate that the Company would have to pay to borrow the funds necessary to obtain an asset of similar value to the ROU asset in a similar economic environment with similar terms, security and conditions. ROU assets represent the Company's right to control the underlying assets under lease, and the lease liability is the obligation to make the lease payments related to the underlying assets under lease. The interest rate implicit in the lease is generally not determinable in transactions where the Company is the lessee. The ROU asset equals the lease liability adjusted for any initial direct costs, prepaid and accrued rent and lease incentives. Fixed and insubstance fixed payments are included in the recognition of ROU assets and lease liabilities. However, variable lease payments, other than those based on a rate or index, are recognised in the Statement of Profit and Loss in the period in which the obligation for those payments is incurred. Real estate lease contains predefined escalations which are mainly due to inflation and does not have variable portion. The lease agreements do not impose any covenants on the Company.

Contracts may contain both lease and non-lease components. The Company allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate for which the Company is a lessee, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component.

ROU assets are generally amortised on a straight-line basis over the lease term with the interest expense on the lease liability recorded using the incremental borrowing rate. The amortisation and interest expense are recorded separately in the Statement of Profit and Loss. Lease costs for short-term leases (i.e., term less than 12 months) are recognised in the Statement of Profit and Loss.

Payments associated with all leases of low-value assets are recognised on a straight-line-basis as an expense in profit or loss. Low-value assets comprise computer equipment and small items of office furniture.

41.8 Other income

Interest income from financial assets at fair value through profit or loss (FVPL) is disclosed as interest income within other income. Interest income on financial assets at amortised cost and financial assets at fair value through other comprehensive income (FVOCI) is calculated using the effective interest method is recognised in the Statement of Profit and Loss as part of other income.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for financial assets that subsequently become credit-impaired. For credit-impaired financial assets the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowance).

Dividends are received from financial assets at FVPL. Dividends are recognised as other income in profit or loss when the right to receive payment is established. This applies even if they are paid out of preacquisition profits, unless the dividend clearly represents a recovery of part of the cost of the investment in which case it is considered as a return of capital.

41.9 Employee benefits

Other long-term employee benefit obligations Compensated absences

The liabilities for compensated absences are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. These obligations 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 appropriate 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 profit or loss.

Long-term service awards

Certain employees of the Company are entitled to other long-term benefits in the nature of long term service awards as per the policy of the Company. Liability for such benefits is provided for on the basis of valuation performed by an independent actuary using the projected unit credit method at the balance sheet date.

Short-term employee benefits

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 employees' 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.

41.10 Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates. ('the functional currency'). The financial statements are presented in Indian rupee ', which is the Company's functional and presentation currency.

(ii) Transaction and balances

Foreign currency transactions are translated into the functional currency using the exchange rates that approximate the actual rates at the date of transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in Statement of Profit or Loss.

All other foreign exchange gains and losses are presented in the Statement of Profit and Loss on a net basis within Other income or Other expenses.

41.11 Income tax

The income tax expense or credit for the period is the tax payable on the current period's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses, if any.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the entity operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Company measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss). Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses

Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

41.12 Provisions

Provisions for legal claims, service warranties, volume discounts and returns are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

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

Initial recognition

All the financial assets and financial liabilities are initially recognised at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. However, trade receivables that do not contain a significant financing component are measured at transaction price.

Subsequent measurement

(a) Financial assets

(i) Financial assets carried at amortised cost

A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

(ii) Financial assets at fair value through other comprehensive income (FVTOCI)

A financial asset is subsequently measured at FVTOCI if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

(iii) Financial assets at fair value through profit or loss (FVTPL)

Financial assets which are not classified in any of the above categories are subsequently measured at FVTPL . A gain or loss on a debt investment that is subsequently measured at FVTPL and is not part of a hedging relationship is recognised in the Statement of Profit and Loss and presented net in the period in which it arises. Interest income from these financial assets is included in other income.

Derecognition

The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109 'Financial Instruments'. A financial liability (or a part of a financial liability) is derecognised from the Company's balance sheet when the obligation specified in the contract is discharged or cancelled or expires.

Financial liabilities are subsequently carried at amortized cost using the effective interest rate method. For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value due to short maturity of these instruments.

Offsetting financial instruments

Financial assets and liabilities are offset and the net amounts is reported in the balance sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.

41.14 Impairment of financial assets

The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 34 details how the Company determines whether there has been a significant increase in credit risk. For trade receivables, the Company applies the simplified approach required by Ind AS 109 "Financial instruments”, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

41.15 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:

Ý in the principal market for the asset or liability, or

Ý in the absence of a principal market, in the most advantageous market for the asset or l iability

The principal or the most advantageous market must be accessible by the Company.

Fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

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, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements 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) market prices in active markets for identical assets or liabilities;

Level 2- Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable;

Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

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

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

41.16 Cash and cash equivalents

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.

41.17 Contract assets

Contract Assets are recognised when the Company has the rights to consideration in exchange for goods and services that the Company has transferred to a customer and when such right is conditional upon something other than passage of time.

41.18 Other operating revenue

Commission on order based sales is recognised as and when the performance obligation is satisfied and the right to receive the consideration is established.

41.19 Dividends

Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.

41.20 Earnings per share

Basic earnings per share is calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, the net profit for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of dilutive potential equity shares, if any.