11. Provisions

Provisions are recognized if, as a result of a past event, the
Company has a present legal or constructive obligation that
can be estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation. If
the effect of the time value of money is material, provisions
are discounted using a current pre tax rate that reflects,
where appropriate, the risks specific to the liability. Where
discounting is used, the increase in the provision due to the
passage of time is recognized as a finance cost.

A provision for onerous contract is recognised when the
expected benefits to be derived by the Company from a
contract are lower than the unavoidable cost of meeting its
obligations under the contract. The provision is measured at
the present value of the lower the expected cost of terminating
the contract and the expected net cost of continuing with
the contract. Before a provision is established, the Company
recognises any impairment loss on the assets associated with
that contract.

12. Revenue Recognition

The Company earns revenue from export/domestic of
manufactured garments, sale of traded garments, sale of
products and services at spinning and processing division and
right to receive export incentives from Government.

The Company recognizes revenue when its customer obtains
control of promised goods or services, in an amount that
reflects the consideration which the entity expects to receive
in exchange for those goods or services excluding the amount
collected on behalf of third parties.

The revenue recognition in respect of the various streams of
revenue is described as follows

Export/Domestic sale of garments:-

Revenue is earned from manufacture and export/domestic
sale knitted garments for infants and children wear. Revenue
is recognised upon completion of performance obligation of
the Company.

Revenue is recognised at the transaction price agreed
with the customer through a sale order received from the
customers.

Sales of products and services at spinning and processing
division:-

Revenue is earned from sale of products and services.
Revenue is recognised upon completion of services or upon
transfer of control over the product to the customer.

Right to receive export incentives from Government: -

The Company has right to receive export incentives under
Duty Drawback Scheme, Scheme for Rebate for State and
Central Taxes and Levies [RoSCTL] and Remission of Duties
and Taxes on Export Products [RoDTEP] on export of garments
and made ups.

The Company recognizes export incentive upon fulfilling the
conditions established by respective regulations as applicable
to the Company and as amended from time to time.

Income is recognised at the value or rate prescribed by
respective regulations.

13. Interest Income and expense

Other income comprises of interest income on funds
invested, dividend income, and fair value gains on financial
assets at fair value through profit or loss. Interest income
is recognized as it accrues in Statement of Profit and Loss,
using the effective interest method. Dividend income is
recognized in Statement of Profit and Loss on the date when
the company’s right to receive payment is established, which
in the case of quoted securities is the ex-dividend date.

Finance expense comprises of interest expense on loans
and borrowings, bank charges, unwinding of discount on
provision, fair value losses on financial assets at fair value
through profit or loss that are recognized in Statement of
Profit and Loss. Fair value changes attributable to hedged
risk are recognised in Statement of Profit and Loss.

14. Government grants, subsidies and export incentives

Grants and subsidies from the government are recognised
when there is reasonable assurance that the grant/ subsidy
will be received and all attaching conditions will be complied
with. When the grant or subsidy relates to an expense item,it
is recognised as income over the periods necessary to match
them on a systematic basis to the costs,which is intended to
compensate. When the grant or subsidy relates to an asset,
its value is deducted in arriving at the carrying amount of the
related asset.

Export benefits are accounted for in the year of exports based
on eligibility and when there is no uncertainty in receiving
the same.

15. Borrowing Costs

Borrowing costs are interest and other costs (including
exchange difference relating to foreign currency borrowings
to the extent that they are regarded as an adjustment to
interest costs) incurred in connection with the borrowing of
funds. Interest expense is recognised using effective interest
method.

Borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset
are capitalized as part of the cost of that asset. Other
borrowing costs are recognized as expenses in the period in
which they are incurred. To the extent the Company borrows
funds generally and uses them for the purpose of obtaining
a qualifying asset, the Company determines the amount of
borrowings costs eligible for capitalization by applying a
capitalization rate to the expenditure incurred on such asset.
The capitalization rate is determined based on the weighted
average of borrowing costs applicable to the borrowings of
the Company which are outstanding during the period, other
than borrowings made specifically towards purchase of the
qualifying asset. The amount of borrowing costs that the
Company capitalizes during a period does not exceed the
amount of borrowing costs incurred during that period.

16. Income Taxes

Income tax expense comprises current and deferred tax.
Income tax expense is recognized in profit or loss except
to the extent that it relates to items recognized directly in
equity or in other comprehensive income. Current tax is the
expected tax payable on the taxable income for the year,

using tax rates enacted or substantively enacted at the
reporting date. Minimum Alternate Tax (MAT) is accounted
as current tax when the Company is subjected to such
provisions of the Income Tax Act. However, credit of such
MAT paid is available when the Company is subjected to tax
as per normal provisions in the future. Credit on account of
MAT is recognized as an asset based on the management’s
estimate of its recoverability in the future.

Deferred tax is recognized using the balance sheet method,
providing for temporary differences between the carrying
amount of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes.
Deferred tax is not recognized for the following temporary
differences:

(i) the initial recognition of assets or liabilities in a transaction
that is not a business combination and that affects neither
accounting nor taxable profit or loss, and

(ii) differences relating to investments in subsidiaries and
associates to the extent that it is probable that they will not
reverse in the foreseeable future.

(iii) Arising due to taxable temporary differences arising
on the initial recognition of goodwill, as the same is not
deductible for tax purposes.

Deferred tax is measured at the tax rates that are expected
to be applied to temporary differences when they reverse,
based on the laws that have been enacted or substantively
enacted by the reporting date. Deferred tax assets and
liabilities are offset if there is a legally enforceable right to
offset current tax liabilities and assets, and they relate to
income taxes levied by the same tax authority on the same
taxable entity, or on different tax entities, but they intend to
settle current tax liabilities and assets on a net basis or their
tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized to the extent that it is
probable that future taxable profits will be available against
which the temporary difference can be utilized. Deferred tax
assets are reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the related
tax benefit will be realized.

Deferred taxation arising on investments in subsidiaries and
associates is recognized except where the Company is able

to control the reversal of the temporary difference and it
is probable that the temporary difference will not reverse
in the foreseeable future. Deferred taxation on temporary
differences arising out of undistributed earnings of the
equity method accounted investee is recorded based on the
management’s intention. If the intention is to realize the
undistributed earnings through sale, deferred tax is measured
at the capital gains tax rates that are expected to be applied
to temporary differences when they reverse. However, when
the intention is to realize the undistributed earnings through
dividend, the company’s share of the income and expenses
of the equity method accounted investee is recorded in the
statement of income, after considering any taxes on dividend
payable by the equity method accounted investee and no
deferred tax is set up in the books as the tax liability is not
with the company.

17. Earnings per share

Basic earnings per share is computed by dividing the profit /
(loss) after tax (including the post tax effect of extraordinary
items, if any) by the weighted average number of equity
shares outstanding during the year. Diluted earnings per
share is computed by dividing the profit / (loss) after tax
(including the post tax effect of extraordinary items, if
any) as adjusted for dividend, interest and other charges to
expense or income (net of any attributable taxes) 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. Potential equity shares are deemed
to be dilutive only if their conversion to equity shares would
decrease the net profit per share from continuing ordinary
operations. Potential dilutive equity shares are deemed
to be converted as at the beginning of the period, unless
they have been issued at a later date. The dilutive potential
equity shares are adjusted for the proceeds receivable had
the shares been actually issued at fair value (i.e. average
market value of the outstanding shares). Dilutive potential
equity shares are determined independently for each period
presented. The number of equity shares and potentially
dilutive equity shares are adjusted for share splits / reverse
share splits and bonus shares, as appropriate.

18. Fair value measurement

A number of the Company’s accounting policies and disclosures
require the determination of fair value, for both financial
and non-financial assets and liabilities. Fair value is the price
that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants
at the measurement date. A fair value measurement assumes
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
market or the most advantageous market must be accessible
to the Company.

The 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 Standalone financial statements are
categorised within the fair value hierarchy based on the lowest
level input that is significant to the fair value measurement
as a whole. The fair value hierarchy is described as below:

Level 1 - unadjusted quoted prices in active markets for
identical assets and liabilities.

Level 2 - Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly or indirectly.

Level 3 - unobservable inputs for the asset or liability

For assets and liabilities that are recognised in the Standalone
financial statements at fair value on a recurring basis, the
Company determines whether transfers have occurred

between levels in the hierarchy by re-assessing categorisation
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 fair value hierarchy.

Fair values have been determined for measurement and / or
disclosure purposes based on the following methods. When
applicable, further information about the assumptions made
in determining fair values is disclosed in the notes specific to
that asset or liability.

(i) Investments in equity and debt securities

The fair value is determined by reference to their quoted
price at the reporting date. In the absence of quoted price,
the fair value of the financial asset is measured using
valuation techniques.

(ii) Derivatives

The fair value of forward exchange contracts is based on their
quoted price, if available. If a quoted price is not available,
the fair value is estimated by discounting the difference
between the contractual forward price and the current
forward price for the residual maturity of the contract using
a risk free interest rate (based on government bonds). The
fair value of foreign currency option contracts is determined
based on the appropriate valuation techniques, considering
the terms of the contract. Fair values reflect the credit risk
of the instrument and include adjustments to take account
of the credit risk of the Company and the counter party when
appropriate.

(iii) Non derivative financial liabilities

Fair value, which is determined for disclosure purposes, is
calculated based on the present value of future principal and
interest cash flows, discounted at the market rate of interest
at the reporting date. For finance leases, the market rate
of interest is determined by reference to similar lease
agreements.

(iv) For financial assets and liabilities maturing within one
year from the Balance Sheet date and which are not carried
at fair value, the carrying amounts approximate fair value
due to the short maturity of these instruments.

19. Dividend distribution to Equity shareholders

Dividend distributed to Equity shareholders is recognised as
distribution to owners of capital in the Statement of Changes
in Equity, in the period in which it is paid.

20. Cash flow Statement

Cash flows are reported using the indirect method, whereby
profit for the year 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. The
Company considers all highly liquid investments that are
readily convertible to known amounts of cash to be cash
equivalents. Cash and cash equivalents consist of balances
with banks and which are unrestricted for withdrawal and
usage.

21. Current/ non-current classification

An asset is classified as current if:

(a) it is expected to be realised or sold or consumed in the
Company’s normal operating cycle;

(b) it is held primarily for the purpose of trading;

(c) it is expected to be realised within twelve months after
the reporting period; or

(d) it is cash or a cash equivalent unless it is restricted from
being exchanged or used to settle a liability for at least
twelve months after the reporting period.

All other assets are classified as non-current.

A liability is classified as current if:

(a) it is expected to be settled in normal operating cycle;

(b) it is held primarily for the purpose of trading;

(c) it is expected to be settled within twelve months after
the reporting period;

(d) it has no unconditional right to defer the settlement of
the liability for at least twelve months after the reporting
period.

All other liabilities are classified as non-current.

The operating cycle is the time between acquisition of
assets for processing and their realisation in cash and cash
equivalents. The Company’s normal operating cycle is twelve
months.