A Oneindia Venture
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Accounting Policies of Fine Organic Industries Ltd. Company
Mar 31, 2026
3. MATERIAL ACCOUNTING POLICIES3.1 Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment except for
Leasehold land are measured at cost less accumulated
depreciation and any accumulated impairment losses, if
any.
Leasehold land which is carried at cost less accumulated
amortisation cost & impairment loss, if any.
Spare parts which are meeting the requirement of
property, plant and equipment are capitalised as property,
plant and equipment. All other types of spare parts are
charged to the statement of profit and loss.
The cost of an item of property, plant and equipment
comprises:
a) Its purchase price, including import duties and non¬
refundable purchase taxes, after deducting trade
discounts and rebates.
b) Any directly attributable cost of bringing the asset
to its location and condition necessary for it to be
capable of operating in the manner intended by
Management.
If significant parts of an item of property, plant and
equipment have different useful lives, then they are
accounted and depreciated for as separate items (major
components) of property, plant and equipment.
Gains or losses arising from de-recognition of a property,
plant and equipment are measured as the difference
between the net disposal proceeds and the carrying
amount of the asset and are recognised in the Statement
of Profit and Loss when the asset is derecognised.
Capital work-in-progress comprises cost of property,
plant and Equipment that are not yet ready for their
intended use at the year end. Expenditure/ Income
during construction period (including financing cost
related to borrowed funds for construction or acquisition
of qualifying PPE) is included under Capital Work-in¬
Progress, and the same is allocated to the respective PPE
on the completion of their construction. Advances given
towards acquisition or construction of PPE outstanding
at each reporting date are disclosed as Capital Advances
under âOther Non current Assets.
Subsequent expenditure is capitalised only if it is
probable that the future economic benefits associated
with the expenditure will flow to the Company.
Depreciation is calculated on pro-rata basis using the
diminishing balance method on cost of items of property,
plant and equipment less their estimated residual
values over the estimated residual useful lives based on
Schedule II of the Companies Act, 2013 except for plant
& machinery and Leasehold land.
In case of plant & machinery, based on internal
assessment, the management believes that the useful
lives as given below best represent the period over which
management expects to use these assets. Hence the
useful lives for these assets may differ from the useful
lives as prescribed under Part C of Schedule II of the
Companies Act, 2013. The management believes that
these estimated useful lives are realistic and reflect fair
approximation of the period over which the assets are
likely to be used.
Amortisation on leasehold land is charged on straight
line method over a period of lease tenure.
Depreciation methods, useful lives and residual values
are reviewed at each reporting date and adjusted if
appropriate.
3.2 Intangible AssetsRecognition and measurement
Intangible assets comprise of computer software and
patent / trademark, which acquired by the Company
are initially measured at cost. Such intangible assets
are subsequently measured at cost less accumulated
amortisation and any accumulated impairment losses.
Subsequent expenditure is capitalised only when it
increases the future economic benefits embodied in the
specific asset to which it relates.
Amortisation is calculated to write off the cost of
intangible assets less their estimated residual values and
it is included in â Depreciation and Amortisation Expenseâ
in the Statement of profit and loss.
Intangible assets are amortised over the estimated useful
lives as given below:
Inventories which comprise raw materials, packing
materials, work-in-progress, finished goods, trading
goods, consumables and stores & spares are carried at
the lower of cost and net realisable value.
The cost of inventories is based on weighted average
formula and includes expenditure incurred in acquiring the
inventories, costs of production or conversion and other
costs incurred in bringing the inventories to their present
location and condition. In the case of finished goods and
work in progress, cost includes an appropriate share of
fixed production overheads based actual production.
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.
Obsolete, defective and unserviceable inventories
are duly provided for. The comparison of cost and net
realisable value is made on an item-by-item basis.
The net realisable value of work-in-progress is determined
with reference to the selling prices of related finished
products. Raw materials and other supplies held for use
in the production of finished products are not written down
below cost except in cases where material prices have
declined and it is estimated that the cost of the finished
products will exceed their net realisable value.
Borrowing costs are interest and other costs (including
exchange differences 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. Borrowing costs that are directly
attributable to the acquisition or construction of an asset
that necessarily takes a substantial period of time to get
ready for its intended use are capitalised as part of the
cost of that asset till the date it is ready for its intended
use or sale less any investment income on the temporary
investment of those borrowings.
Other borrowing costs are recognised as an expense in
the period in which they are incurred.
3.5 Impairment of Non-Financial assets
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 purpose 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.
Income tax expense comprises current and deferred tax.
It is recognised in profit or loss except to the extent that
it relates to a business combination, or items recognised
directly in equity or in other comprehensive income.
Current tax comprises the expected tax payable or
receivable on the taxable income or loss for the year and
any adjustment to the tax payable or receivable in respect
of previous years. The amount of current tax reflects the
best estimate of the tax amount expected to be paid or
received after considering the uncertainty, if any, related
to income taxes. It is measured using tax rates enacted or
substantively enacted by the reporting date.
Current tax assets and current tax liabilities are offset
only if, the Company:
⢠has a legally enforceable right to set off the
recognised amounts; and
⢠i ntends either to settle on a net basis, or to realise
the asset and settle the liability simultaneously.
Deferred tax is recognised on differences between the
carrying amounts of assets and liabilities in the Balance
sheet and the corresponding tax bases used in the
computation of taxable profit and are accounted for using
the liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences, and
deferred tax assets are generally recognised for all
deductible temporary differences, carry forward tax
losses and allowances to the extent that it is probable
that future taxable profits will be available against which
those deductible temporary differences, carry forward
tax losses and allowances can be utilised. Deferred tax
assets and liabilities are measured at the applicable tax
rates. Deferred tax assets and deferred tax liabilities are
off set, and presented as net.
Unrecognised deferred tax assets are reassessed at
each reporting date and recognised to the extent that it
has become probable that future taxable profits will be
available against which they can be used.
Deferred tax assets and liabilities are offset only if:
⢠t he Company has a legally enforceable right to set
off current tax assets against current tax liabilities;
and
⢠the deferred tax assets and the deferred tax liabilities
relate to income taxes levied by the same taxation
authority on the same taxable Company.
Cash and cash equivalents 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.
For the purpose of the Statement of cash flows, cash
and cash equivalents consist of cash and short-term
deposits, as defined above, as they are considered an
integral part of the Company''s cash Management.
Trade payables represent liabilities for goods including
capital goods and services provided to the Company
prior to the end
of Financial year which are unpaid. Trade and other
payables are reported as current liabilities unless
payment is not due within 12 months after the reporting
period. They are recognised initially at their fair value
and subsequently measured at amortised cost using the
effective interest method.
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 assetsInitial recognition and measurement
All financial assets are recognised 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.
However, trade receivables that do not contain a significant
financing component are measured at transaction price.
Purchases or sales of financial assets that require
delivery of assets within a time frame established by
regulation or convention in the market place (regular way
trades) are recognised on the trade date, i.e., the date
that the Company commits to purchase or sell the asset.
Subsequent measurementa) Financial assets carried at amortised cost (AC)
A financial asset is measured at amortised cost
using the effective interest rate method, 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.
b) Financial assets at fair value through other
comprehensive income (FVTOCI)
A financial asset is 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.
c) Financial assets at fair value through profit or
loss (FVTPL)
A Financial asset which is not classified in any of the
above categories is measured at FVTPL.
Investment in subsidiaries, Associates and Joint
Ventures
The Company has opted to account for its
investments in subsidiaries, associates and joint
venture at cost less provision for diminution other
than temporary.
All other equity investments are measured at
fair value, with value changes recognised in
Statement of Profit and Loss, except for those equity
investments for which the Company has made an
irrevocable choice to present the value changes in
âOther Comprehensive Incomeâ.
Impairment of Financial assets
I n accordance with Ind AS 109, the Company uses
âExpected Credit Loss'' (ECL) model, for evaluating
impairment of Financial assets other than those
measured at fair value through profit and loss
(FVTPL).
ECL are measured through a loss allowance at an
amount equal to:
⢠The 12-months ECL (ECL that result from those
default events on the Financial instrument
that are possible within 12 months after the
reporting date); or
⢠Full lifetime ECL (ECL that result from all
possible default events over the life of the
Financial instrument)
For trade receivables, the Company applies
âsimplified approach'' which requires expected lifetime
losses to be recognised from initial recognition of the
receivables. The Company uses historical default
rates to determine impairment loss on the portfolio
of trade receivables. At every reporting date these
historical default rates are reviewed and changes in
the forward looking estimates are analysed.
For other assets, the Company uses 12-month
ECL to provide for impairment loss where there
is no significant increase in credit risk. If there is
significant increase in credit risk full lifetime ECL is
used.
Financial liabilitiesInitial recognition and measurement
All Financial liabilities are recognised at fair value
and in case of loans, net of directly attributable cost.
Fees of recurring nature are directly recognised in
the Statement of Profit and Loss as finance cost.
Financial liabilities are carried at amortised cost
using the effective interest method. For trade and
other payables maturing within one year from
the balance sheet date, the carrying amounts
approximate fair value due to the short maturity of
these instruments.
a) Derivative Financial instruments and Hedge
Accounting
The Company uses various derivative financial
instruments such as forwards and Interest
rate swaps to mitigate the risk of changes
in exchange rates and Interest rates. Such
derivative financial instruments are initially
recognised at fair value on the date on which
a derivative contract is entered into and are
also subsequently measured at fair value.
Derivatives are carried as financial assets
when the fair value is positive and as financial
liabilities when the fair value is negative.
Any gains or losses arising from changes in
the fair value of derivatives are taken directly
to Statement of Profit and Loss, except for the
effective portion of cash flow hedges which is
recognised in Other Comprehensive Income
and later to Statement of Profit and Loss
when the hedged item affects profit or loss
or treated as basis adjustment if a hedged
forecast transaction subsequently results in
the recognition of a non-Financial assets or
non-Financial liability.
In case of loss / gains from interest rate
swaps, directly attributable to the acquisition or
construction of an asset that necessarily takes
a substantial period of time to get ready for
its intended use are capitalised as part of the
cost of that asset till the date it is ready for its
intended use or sale.
Hedges that meet the criteria for hedge
accounting are accounted for as follows:
The Company designates derivative
contracts or non-derivative financial assets /
liabilities as hedging instruments to mitigate
the risk of movement in interest rates and
foreign exchange rates for foreign exchange
exposure on highly probable future cash
flows attributable to a recognised asset or
liability or forecast cash transactions. When a
derivative is designated as a cash flow hedging
instrument, the effective portion of changes in
the fair value of the derivative is recognised in
the cash flow hedging reserve being part of
other comprehensive income. Any ineffective
portion of changes in the fair value of the
derivative is recognised immediately in the
Statement of Profit and Loss. If the hedging
relationship no longer meets the criteria for
hedge accounting, then hedge accounting
is discontinued prospectively. If the hedging
instrument expires or is sold, terminated or
exercised, the cumulative gain or loss on the
hedging instrument recognised in cash flow
hedging reserve till the period the hedge was
effective remains in cash flow hedging reserve
until the underlying transaction occurs. The
cumulative gain or loss previously recognised
in the cash flow hedging reserve is transferred
to the Statement of Profit and Loss upon the
occurrence of the underlying transaction. If the
forecasted transaction is no longer expected to
occur, then the amount accumulated in cash
flow hedging reserve is reclassified in the
Statement of Profit and Loss.
The Company designates derivative contracts
or non-derivative financial assets / liabilities
as hedging instruments to mitigate the risk
of change in fair value of hedged item due to
movement in interest rates, foreign exchange
rates and commodity prices.
Changes in the fair value of hedging
instruments and hedged items that are
designated and qualify as fair value hedges are
recorded in the Statement of Profit and Loss. If
the hedging relationship no longer meets the
criteria for hedge accounting, the adjustment
to the carrying amount of a hedged item for
which the effective interest method is used is
amortised to Statement of Profit and Loss over
the period of maturity.
b) De-recognition of Financial instruments
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 de-recognition under Ind AS 109. 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 assets and financial liabilities are
offset and the net amount is reported in the
balance sheet when, and only when, the
Company has legally enforceable right to set
off the amount and it intends, either to settle
them on net basis or to realise the assets and
settle the liabilities simultaneously.
3.10 Revenue RecognitionRevenue from contracts with customer
Revenue from contract with customers is recognised
when the Company satisfies performance obligation
by transferring promised goods and services to the
customer. Performance obligations are satisfied at the
point of time when the customer obtains controls of the
asset.
Revenue is measured based on transaction price,
which is the fair value of the consideration received or
receivable, stated net of discounts, returns and value
added tax. Transaction price is recognised based on the
price specified in the contract, net of the estimated sales
incentives/ discounts. Accumulated experience is used to
estimate and provide for the discounts/ right of return,
using the expected value method.
Revenue from sale of goods is recognised on the basis
of approved contracts, when all the significant risks and
rewards of ownership of the goods have been passed
to the buyer, usually on delivery of the goods and
acceptance by the buyer. Any additional amount based on
the terms of the agreement entered into with customers,
is recognised in the period when the collectability of the
profit share becomes probable and a reliable measure
of the profit share is available. Revenue from the sale of
goods is measured at the fair value of the consideration
received or receivable, net of returns and allowances,
trade discounts and volume rebates. The Company does
not provide any warranties or maintenance contracts to
its customers.
This includes incentives, volume rebates, discounts etc.
It is estimated at contract inception and constrained until
it is highly probable that a significant revenue reversal
in the amount of cumulative revenue recognised will not
occur when the associated uncertainty with the variable
consideration is subsequently resolved. It is reassessed
at end of each reporting period.
Significant financing component
Generally, the Company receives short-term advances
from its customers. Using the practical expedient in Ind
AS 115, the Company does not adjust the promised
amount of consideration for the effects of a significant
financing component if it expects, at contract inception,
that the period between the transfer of the promised
good or service to the customer and when the customer
pays for that good or service will be one year or less.
The Company pays sales commission to its selling agents
for each contract that they obtain for the Company. The
Company has elected to apply the optional practical
expedient for costs to obtain a contract which allows the
Company to immediately expense sales commissions
because the amortisation period of the asset that the
Company otherwise would have used is one year or less.
Costs to fulfill a contract i.e. freight, insurance and other
selling expenses are recognised as an expense in the
period in which related revenue is recognised.
Other Operating revenue mainly consists of Sale of Scrap,
Export Incentives from Duty Drawback and RoDTEP
arising from the production of finished goods.
Export benefits under Duty Drawback benefits and
Remission of Duties and Taxes on Exported Products
Scheme (RoDTEP) are accounted as revenue on accrual
basis as and when export of goods take place, where
there is a reasonable assurance that the benefits will
be received, and the Company will comply with all the
attached conditions.
Interest income is recorded using the effective interest rate
(EIR). EIR is the rate that exactly discounts the estimated
future cash payments or receipts over the expected life
of the financial instrument or a shorter period, where
appropriate, to the gross carrying amount of the financial
asset or to the amortised cost of a financial liability.
I nterest income is included in ââOther Incomeâ in the
Statement of profit and loss
Interest income earned on the temporary investment
of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs
eligible for capitalisation.
Revenue is recognised when the Company''s right to
receive the payment is established, which is generally
when shareholders approve the dividend.
Revenue in respect of Insurance and other claim is
recognised only on reasonable certainty of ultimate
collection.
The Financial Statements are presented in Indian rupees,
which is the functional currency of the Company and the
currency of the primary economic environment in which
the Company operates.
Transactions in foreign currencies are initially recorded
by the Company at its functional currency spot rates at
the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign
currencies are translated at the functional currency spot
rates of exchange at the reporting date.
Exchange differences arising on settlement or translation
of monetary items are recognised in profit or loss.
3.12 Employee benefitsShort term employee benefits
Liabilities for short term employee 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''
service 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 reported as current
employee benefits payable in the balance sheet.
Post-employment benefits
a) Defined benefit plans
The liability or asset recognised in the balance
sheet in respect of defined benefit plans is the
present value of the defined benefits obligation at
the end of the reporting period less the fair value
of plan assets. The defined benefit obligation is
calculated annually by actuaries using the Projected
Unit Credit Method at the year end.
The present value of the defined benefit obligation
is determined by discounting the estimated future
cash outflows by reference to market yields at the
end of the reporting period on government bonds
that have terms approximating to the terms of the
related obligations.
The net interest cost is calculated by applying the
discount rate to the net balance of the defined
benefit obligation and the fair value of plan assets.
This cost is included in Employee Benefit Expense
in the Statement of profit and loss.
Re-measurement gains and losses arising from
experience adjustments and changes in actuarial
assumptions are recognised in the period in
which they occur, directly in Other Comprehensive
Income. They are included in retained earnings in
the Statement of changes in equity.
Changes in the present value of the defined
benefit obligation resulting from plan amendments
or curtailments are recognised immediately in the
profit or loss as past service cost.
Contributions under Defined Contribution Plans
payable in keeping with the related schemes are
recognised as expenses for the period in which the
employee has rendered the service.
Leases in which a significant portion of the risks and
rewards of ownership are not transferred to the Company
as lessee are classified as operating leases. Payments
made under operating leases are charged to the
Statement of profit and loss on a straight-line basis over
the period of the lease unless the payments are structured
to increase in line with expected general inflation to
compensate for the lessor''s expected inflationary cost
increases.
At inception of a contract, the Company assesses
whether a contract is, or contains, a lease. 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.
1. The contract involves the use of an identified asset -
this may be specified explicitly or implicitly and should
be physically distinct or represent substantially all
of the capacity of a physically distinct asset. If the
lessor has a substantive substitution right, then the
asset is not identified.
2. The Company has the right to obtain substantially
all of the economic benefits from use of the asset
throughout the period of use; and
3. The Company as a lessee has the right to direct
the use of the asset. The Company has this right
when it has the decision-making rights that are most
relevant to changing how and for what purpose the
asset is used. In rare cases where the decision
about how and for what purpose the asset is used is
predetermined, the Company has the right to direct
the use of the asset if either:
a) the Company as a lessee has the right to
operate the asset; or
b) t he Company as a lessee designed the asset
in a way that predetermines how and for what
purpose it will be used
The Company recognises a right-of-use asset and a
lease liability at the lease commencement date. The
right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability
adjusted for any lease payments made at or before
the commencement date, plus any initial direct
costs incurred and an estimate of costs to dismantle
and remove the underlying asset or to restore the
underlying asset or the site on which it is located,
less any lease incentives received.
The right-of-use assets are subsequently
depreciated using the straight-line method from
the commencement date to the earlier of the end
of the useful life of the right-of-use asset or the end
of the lease term. In addition, the right-of-use asset
is periodically reduced by impairment losses, if any,
and adjusted for certain re-measurements of the
lease liability.
The lease liability is initially measured at amortised
cost at the present value of the lease payments that
are not paid at the commencement date, discounted
using the interest rate implicit in the lease or, if
that rate cannot be readily determined, using the
incremental borrowing rate.
It is re -measured when there is a change in future
lease payments arising from a change in an index
or rate, if there is a change in the estimate of the
amount expected to be payable under a residual
value guarantee, or if the Company changes its
assessment of whether it will exercise a purchase,
extension or termination option.
When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying
amount of the right-of-use asset, or is recorded in
profit or loss if the carrying amount of the right-of-
use asset has been reduced to zero.
Short-term leases and leases of low-value
assets
The Company has elected not to recognise right-
of-use assets and lease liabilities for short-term
leases that have a lease term of 12 months or
less and leases of low-value assets. The Company
recognises the lease payments associated with
these leases as an expense on a straight-line basis
over the lease term.
Mar 31, 2025
1. CORPORATE INFORMATION
Fine Organic Industries Limited is a public limited Company domiciled in India and is incorporated under the provisions of the Companies Act, 1956. The Company was converted in to Public Company with effect from November 02, 2017 and consequently the name of the Company has changed from Fine Organic Industries Private Limited to Fine Organic Industries Limited. The registered office of the Company is situated in the State of Maharashtra.
The Financial Statements were approved and authorised for issue with the resolution of the Board of Directors on May 08, 2025 and are subject to the approval of Shareholders in the Annual General Meeting.
The Company carries on business in India and abroad, as manufacturers, processors, suppliers, distributors, dealers, importers, exporters of wide range of oleochemical-based additives used in foods, plastics, cosmetics, coatings and other specialty application in various industries.
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The Equity shares of the Company are listed on July 02, 2018 on BSE Limited (BSE) and National Stock Exchange of India Limited (NSE). The Company has following investments in subsidiaries, Joint Ventures and Associates: |
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Particulars |
Fine Organics (USA), Inc |
Fine Organics Europe BV |
Fine Organics (SEZ) Pvt Ltd A |
Fine Zeelandia Private Limited |
Fine Organic Industries (Thailand) Co.Ltd. |
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Principal place of business and Country of Incorporation |
United States of America |
Belgium |
India |
India |
Thailand |
|
Investee relationship |
Subsidiary Company |
Subsidiary Company |
Subsidiary Company |
Joint Venture |
Joint Venture |
|
Proportion of ownership interest |
100.00% |
100.00% |
100.00% |
50.00% |
45.00% |
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incorporated on October 10, 2023 |
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2. BASIS OF PREPARATION:2.1 Statement of compliance
The accompanying Financial Statements have been prepared in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) (Amendment) Rules, 2017 notified under section 133 of the Companies Act, 2013, (the ''Act'') and other relevant provisions of the Act.
2.2 Functional and presentation currency
These Financial Statements are presented in Indian rupees, which is also the Company''s functional currency. All amounts have been reported in '', unless otherwise indicated.
The Financial Statements have been prepared on a historical cost basis, except for the following:
⢠Certain Financial assets and liabilities (including derivative instruments) that are measured at fair value; and
⢠Net defined benefit (assets)/ liabilities that are measured at fair value of plan assets less present value of defined benefit obligations
2.4 Use of estimates and judgements
The preparation of the Financial Statements in accordance with Ind AS requires use of judgements, estimates and assumptions, which affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates is recognised prospectively.
Assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ended March 31, 2025 are as follows:
a) Property, plant and equipment
Useful lives of tangible assets are based on the life prescribed in Schedule II of the Act except plant & machineries, which in the opinion of
the Management represent the useful lives as they are based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers'' warranties and maintenance support.
b) Revenue from contracts with customers
The Company''s contracts with customers include promises to transfer goods to the customers. Judgement is required to determine the transaction price for the contract. The transaction price could be either a fixed amount of customer consideration or variable consideration with elements such as schemes, incentives, cash discounts, etc. The estimated amount of variable consideration is adjusted in the transaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur and is reassessed at the end of each reporting period.
Estimates of rebates and discounts are sensitive to changes in circumstances and the Company''s past experience regarding returns and rebate entitlements may not be representative of customers'' actual returns and rebate entitlements in the future.
Costs to obtain a contract are generally expensed as incurred. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recovered
c) Recognition and measurement of defined benefit obligations
The obligation arising from defined benefit plan is determined on the basis of actuarial assumptions. Key actuarial assumptions include discount rate, trends in salary escalation, actuarial rates and life expectancy. The discount rate is determined by reference to market yields at the end of the reporting period on government bonds. The period to maturity of the underlying bonds correspond to the probable maturity of the post-employment benefit obligations.
d) Recognition of deferred tax assets
Deferred tax assets are recognised for the future tax consequences of temporary differences between the carrying values of assets and liabilities and their respective tax bases, and unutilised business loss and depreciation carry-forwards and tax credits, if any. Deferred tax assets are recognised to the extent that it is probable that future taxable income will be available against which the deductible temporary differences, unused tax losses, depreciation carry-forwards and unused tax credits could be utilised.
Contingent Liabilities, Commitments and LitigationsContingent liabilities
Contingent liabilities may arise from the ordinary course of business in relation to claims against the Company, including legal and other claims. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of contingencies inherently involves the exercise of significant judgement and the use of estimates regarding the outcome of future events.
From time to time, the Company might be subject to legal proceedings the ultimate outcome of each being always subject to many uncertainties inherent in litigation. A provision for litigation is made when it is considered probable that a payment will be made and the amount of the loss can be reasonably estimated. Significant judgement is made when evaluating, among other factors, the probability of unfavourable outcome and the ability to make a reasonable estimate of the amount of potential loss. Litigation provisions are reviewed at each accounting period and revisions made for the changes in facts and circumstances.
2.5 Measurement of fair values
The Company''s accounting policies and disclosures require the measurement of fair values, for both Financial and non-Financial assets and liabilities.
The Company has an established control framework with respect to the measurement of fair values, which includes overseeing all significant fair value measurements, including Level 3 fair values by the Management. The Management regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the Management assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which such valuations should be classified.
When measuring the fair value of a financial asset or a financial liability, the Company uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
⢠Level-1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
⢠Level-2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
⢠Level-3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
An operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents.
Based on the nature of services and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the
purpose of current - non-current classification of assets and liabilities.
2.7 Current / non-current classification
An entity shall classify an asset as current when:
a) It expects to realise the asset, or intends to sell or consume it, in its normal operating cycle;
b) It holds the asset primarily for the purpose of trading;
c) It expects to realise the asset within twelve months after the reporting period; or
d) The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
An entity shall classify all other assets as non-current. An entity shall classify a liability as current when-
a) It expects to settle the liability in its normal operating cycle;
b) It holds the liability primarily for the purpose of trading;
c) The liability is due to be settled within twelve months after the reporting period; or
d) It does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
An entity shall classify all other liabilities as non-current.
Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.
2.8 Note on Recent Pronouncements -
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. For the year ended March 31, 2025, MCA has notified Ind AS - 117 Insurance Contracts and amendments to Ind AS 116 - Leases, relating to sale and leaseback transactions, applicable to the Company w.e.f. April 01, 2024. The Company has reviewed the new pronouncements and based on
its evaluation has determined that it does not have any significant impact in its financial statements. standards or amendments to the existing standards applicable to the Company.
3. SIGNIFICANT ACCOUNTING POLICIES3.1 Property, plant and equipment Recognition and measurement
Items of property, plant and equipment except for Leasehold land are measured at cost less accumulated depreciation and accumulated impairment losses, if any.
Leasehold land which is carried at cost less accumulated amortisation cost & impairment loss, if any.
Spare parts which are meeting the requirement of property, plant and equipment are capitalised as property, plant and equipment. All other types of spare parts are charged to the statement of profit and loss.
The cost of an item of property, plant and equipment comprises:
a) Its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates.
b) Any directly attributable cost of bringing the asset to its location and condition necessary for it to be capable of operating in the manner intended by Management.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted and depreciated for as separate items (major components) of property, plant and equipment.
Gains or losses arising from de-recognition of a property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised.
Capital work-in-progress comprises cost of fixed assets that are not yet ready for their intended use at the year end. Expenditure/ Income during construction period (including financing cost related to borrowed funds for construction or acquisition of qualifying PPE) is included under Capital Work-in-Progress, and the same is allocated to the respective PPE on the completion of their construction. Advances given towards acquisition
or construction of PPE outstanding at each reporting date are disclosed as Capital Advances under "Other non-current Assets".
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
Depreciation
Depreciation is calculated on pro-rata basis using the diminishing balance method on cost of items of property, plant and equipment less their estimated residual values over the estimated residual useful lives based on Schedule II of the Companies Act, 2013 except for plant & machinery and Leasehold land.
In case of plant & machinery, based on internal assessment, the management believes that the useful lives as given below best represent the period over which management expects to use these assets. Hence the useful lives for these assets may different from the useful lives as prescribed under Part C of Schedule II of the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
The estimated useful lives of items of property, plant and equipment are as follows:
|
Tangible Assets |
Useful lives as per Schedule II |
|
Buildings |
30 Years |
|
Computers Computer - Server & Network Computer - Others |
6 Years 3 Years |
|
Plant & Machinery |
5 - 15 Years |
|
Furniture and Fixtures |
10 Years |
|
Electrical Installation |
10 Years |
|
Motor Cars & Vehicles |
8 Years |
|
Office Equipments |
5 Years |
|
Laboratory Equipments |
10 Years |
Amortisation on leasehold land is charged on straight line method over a period of lease tenure.
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
3.2 Intangible AssetsRecognition and measurement
Intangible assets comprise of computer software and patent / trademark, which acquired by the Company are initially measured at cost. Such intangible assets are subsequently measured at cost less accumulated amortisation and any accumulated impairment losses.
Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates.
Amortisation is calculated to write off the cost of intangible assets less their estimated residual values and it is included in depreciation and amortisation in the Statement of profit and loss.
Intangible assets are amortised over the estimated useful lives as given below:
|
Intangible Assets |
Useful life |
|
Computer Software (WDV Method) |
3 Years |
|
Patent / Trademark (SLM Method) |
10 Years |
Borrowing costs are interest and other costs (including exchange differences 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. Borrowing costs that are directly attributable to the acquisition or construction of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of that asset till the date it is ready for its intended use or sale less any investment income on the temporary investment of those borrowings.
Other borrowing costs are recognised as an expense in the period in which they are incurred.
3.4 Impairment of non-Financial assets
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 purpose 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.
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. It is measured using tax rates enacted or substantively enacted by the reporting date.
Current tax assets and current tax liabilities are offset only if, the Company:
⢠has a legally enforceable right to set off the recognised amounts; and
⢠intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for Financial reporting purposes and the corresponding amounts used for taxation purposes. Deferred tax is not recognised for:
⢠Temporary differences arising on 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 at the time of the transaction.
⢠Temporary differences related to investments in subsidiaries to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. 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 realised; such reductions are reversed when the probability of future taxable profits improves.
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted by the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if:
⢠the Company has a legally enforceable right to set off current tax assets against current tax liabilities; and
⢠the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable Company.
Inventories which comprise raw materials, packing materials, work-in-progress, finished goods, trading goods, consumables and stores & spares are carried at the lower of cost and net realisable value.
The cost of inventories is based on weighted average formula and includes expenditure incurred in acquiring the inventories, costs of production or conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of finished goods and work in progress, cost includes an appropriate share of fixed production overheads based actual production.
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.
Obsolete, defective and unserviceable inventories are duly provided for. The comparison of cost and net realisable value is made on an item-by-item basis.
The net realisable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw materials and other supplies held for use in the production of finished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realisable value.
Cash and cash equivalents 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.
For the purpose of the Statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, as they are considered an integral part of the Company''s cash Management.
Trade payables represent liabilities for goods including capital goods and services provided to the Company prior to the end of Financial year which are unpaid. Trade and other payables are reported as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
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.
Initial recognition and measurement
All financial assets are recognised 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. Purchases or sales of financial assets that require delivery of assets within a time frame established by
regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurementa) Financial assets carried at amortised cost (AC)
A financial asset is measured at amortised cost using the effective interest rate method, 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.
b) Financial assets at fair value through other comprehensive income (FVTOCI)
A financial asset is 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.
c) Financial assets at fair value through profit or loss (FVTPL)
A Financial asset which is not classified in any of the above categories is measured at FVTPL.
Investment in subsidiaries, Associates and Joint Ventures
The Company has opted to account for its investments in subsidiaries, associates and joint venture at cost less provision for diminution other than temporary.
Other Equity Investments
All other equity investments are measured at fair value, with value changes recognised in Statement of Profit and Loss, except for those equity investments for which the Company has made an irrevocable choice to present the value changes in ''Other Comprehensive Income''.
Impairment of Financial assets
In accordance with Ind AS 109, the Company uses ''Expected Credit Loss'' (ECL) model, for evaluating impairment of Financial assets other than those measured at fair value through profit and loss (FVTPL).
ECL are measured through a loss allowance at an amount equal to:
⢠The 12-months ECL (ECL that result from those default events on the Financial instrument that are possible within 12 months after the reporting date); or
⢠Full lifetime ECL (ECL that result from all possible default events over the life of the Financial instrument)
For trade receivables, the Company applies ''simplified approach'' which requires expected lifetime losses to be recognised from initial recognition of the receivables. The Company uses historical default rates to determine impairment loss on the portfolio of trade receivables. At every reporting date these historical default rates are reviewed and changes in the forward looking estimates are analysed.
For other assets, the Company uses 12 month ECL to provide for impairment loss where there is no significant increase in credit risk. If there is significant increase in credit risk full lifetime ECL is used.
Initial recognition and measurement
All Financial liabilities are recognised at fair value and in case of loans, net of directly attributable cost. Fees of recurring nature are directly recognised in the Statement of Profit and Loss as finance cost.
Financial liabilities are carried at amortised cost using the effective interest method. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
a) Derivative Financial instruments and Hedge Accounting
The Company uses various derivative financial instruments such as Forwards and Interest rate swaps to mitigate the risk of changes in exchange rates and interest rates. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are also subsequently measured at fair value. Derivatives are carried as financial assets
when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and Loss, except for the effective portion of cash flow hedges which is recognised in Other Comprehensive Income and later to Statement of Profit and Loss when the hedged item affects profit or loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a non-Financial assets or nonFinancial liability.
In case of loss / gains from interest rate swaps, directly attributable to the acquisition or construction of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of that asset till the date it is ready for its intended use or sale.
Hedges that meet the criteria for hedge accounting are accounted for as follows:
The Company designates derivative contracts or non derivative financial assets / liabilities as hedging instruments to mitigate the risk of movement in interest rates and foreign exchange rates for foreign exchange exposure on highly probable future cash flows attributable to a recognised asset or liability or forecast cash transactions. When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in the cash flow hedging reserve being part of other comprehensive income. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognised in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the underlying transaction occurs. The cumulative gain or loss previously recognised in the cash flow hedging reserve is transferred to the
Statement of Profit and Loss upon the occurrence of the underlying transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified in the Statement of Profit and Loss.
The Company designates derivative contracts or non derivative financial assets / liabilities as hedging instruments to mitigate the risk of change in fair value of hedged item due to movement in interest rates, foreign exchange rates and commodity prices.
Changes in the fair value of hedging instruments and hedged items that are designated and qualify as fair value hedges are recorded in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to Statement of Profit and Loss over the period of maturity.
b) De-recognition of Financial instruments
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 de-recognition under Ind AS 109. 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.
c) Offsetting
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet when, and only when, the Company has legally enforceable right to set off the amount and it intends, either to settle them on net basis or to realise the assets and settle the liabilities simultaneously.
3.10 Revenue RecognitionRevenue from contracts with customer
Revenue from contract with customers is recognised
when the Company satisfies performance obligation
by transferring promised goods and services to the customer. Performance obligations are satisfied at the point of time when the customer obtains controls of the asset.
Revenue is measured based on transaction price, which is the fair value of the consideration received or receivable, stated net of discounts, returns and value added tax. Transaction price is recognised based on the price specified in the contract, net of the estimated sales incentives/ discounts. Accumulated experience is used to estimate and provide for the discounts/ right of return, using the expected value method.
Revenue from sale of goods is recognised on the basis of approved contracts, when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods and acceptance by the buyer. Any additional amount based on the terms of the agreement entered into with customers, is recognised in the period when the collectability of the profit share becomes probable and a reliable measure of the profit share is available. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. The Company does not provide any warranties or maintenance contracts to its customers.
As per erstwhile Ind AS 18, the Company has assumed that recovery of excise duty (up to June 2017) flows to the Company on its own account. This is for the reason that it is a liability of the manufacturer which forms part of the cost of production, irrespective of whether the goods are sold or not. Since the recovery of excise duty flows to the Company on its own account, revenue includes excise duty.
This includes incentives, volume rebates, discounts etc. It is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved. It is reassessed at end of each reporting period.
Significant financing component
Generally, the Company receives short-term advances from its customers. Using the practical expedient in Ind AS 115, the Company does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer of the promised good or service to the customer and when the customer pays for that good or service will be one year or less.
The Company pays sales commission to its selling agents for each contract that they obtain for the Company. The Company has elected to apply the optional practical expedient for costs to obtain a contract which allows the Company to immediately expense sales commissions because the amortisation period of the asset that the Company otherwise would have used is one year or less.
Costs to fulfil a contract i.e. freight, insurance and other selling expenses are recognised as an expense in the period in which related revenue is recognised.
Other Operating revenue mainly consists of Sale of Scrap, Export Incentives from Duty Drawback and RoDTEP arising from the production of finished goods.
Export benefits under Duty Drawback benefits and Remission of Duties and Taxes on Export Products Scheme (RoDTEP) are accounted as revenue on accrual basis as and when export of goods take place, where there is a reasonable assurance that the benefits will be received, and the Company will comply with all the attached conditions.
Interest Income
Interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortised cost of a financial liability.
Interest income is included in finance income in the Statement of profit and loss.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Revenue is recognised when the Company''s right to receive the payment is established, which is generally when shareholders approve the dividend.
Revenue in respect of Insurance and other claim is recognised only on reasonable certainty of ultimate collection.
The Financial Statements are presented in Indian rupees, which is the functional currency of the Company and the currency of the primary economic environment in which the Company operates.
Transactions in foreign currencies are initially recorded by the Company at its functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognised in profit or loss.
3.12 Employee benefitsShort term employee benefits
Liabilities for short term employee 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'' service 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 reported as current employee benefits payable in the balance sheet.
Post-employment benefits a) Defined benefit plans
The liability or asset recognised in the balance sheet in respect of defined benefit plans is the present value of the defined benefits obligation at the end of the reporting period less the fair value of plan
assets. The defined benefit obligation is calculated annually by actuaries using the Projected Unit Credit Method at the year end.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligations.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in Employee Benefit Expense in the Statement of profit and loss.
Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in Other Comprehensive Income. They are included in retained earnings in the Statement of Changes in Equity.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in the profit or loss as past service cost.
b) Defined contribution plans
Contributions under Defined Contribution Plans payable in keeping with the related schemes are recognised as expenses for the period in which the employee has rendered the service.
As a lessee
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Payments made under operating leases are charged to the Statement of profit and loss on a straight line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases.
As a Lessee
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. 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.
1. The contract involves the use of an identified asset - this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the lessor has a substantive substitution right, then the asset is not identified.
2. The Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
3. The Company as a lessee has the right to direct the use of the asset. The Company has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Company has the right to direct the use of the asset if either :
a) the Company as a lessee has the right to operate the asset; or
b) the Company as a lessee designed the asset in a way that predetermines how and for what purpose it will be used
The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use assets are subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at amortised cost at the present value of the lease payments that are not paid at the commencement date, discounted using the
interest rate implicit in the lease or, if that rate cannot be readily determined, using the incremental borrowing rate.
It is re -measured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
Short-term leases and leases of low-value assets
The Company has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Company recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
3.14 Provisions and contingent liabilities
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events and 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.
Provisions are measured at the present value of Management''s best estimates of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
A disclosure for contingent liabilities is made 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 embodying economic benefits will be required to settle or a reliable estimate of the amount cannot be made.
The Company recognises a liability to pay dividend to equity holders of the Company when the distribution is authorised by the shareholders and the distribution is no longer at the discretion of the Company. A corresponding amount is recognised directly in equity upon approval from shareholders.
3.16 Earnings per share (EPS)Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the equity by the
weighted average number of equity shares outstanding during the financial year.
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
⢠The after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
⢠The weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
Mar 31, 2024
1. CORPORATE INFORMATION
Fine Organic Industries Limited is a public limited Company domiciled in India and is incorporated under the provisions of the Companies Act, 1956. The Company was converted into Public Company with effect from Novembe 02, 2017 and consequently the name of the Company has changed from Fine Organic Industries Private Limited to Fine Organic Industries Limited. The registered office of the Company is situated in the State of Maharashtra.
The Financial Statements were approved and authorised for issue with the resolution of the Board of Directors
on May 10, 2024 and are subject to the approval of Shareholders in the Annual General Meeting.
The Company carries on business in India and abroad, as manufacturers, processors, suppliers, distributors, dealers, importers, exporters of wide range of oleochemical-based additives used in foods, plastics, cosmetics, coatings and other specialty application in various industries.
The Equity shares of the Company are listed on July 2, 2018 on Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE).
|
The Company has following investments in subsidiaries, Joint Ventures and Associates: |
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|
Particulars |
Name of Entities |
|||||
|
Fine Organics (USA), Inc |
Fine Organics Europe BV |
Fine Organics (SEZ) Pvt Ltd A |
Fine Zeelandia Private Limited |
FineADD Ingredients GmbH # |
Fine Organic Industries (Thailand) Co.Ltd. |
|
|
Principal place of business and Country of Incorporation |
United States of America |
Belgium |
India |
India |
Germany |
Thailand |
|
Investee relationship |
Subsidiary Company |
Subsidiary Company |
Subsidiary Company |
Joint Venture |
Joint Venture |
Joint Venture |
|
Proportion of ownership interest |
100.00% |
100.00% |
100.00% |
50.00% |
50.00% |
45.00% |
|
A Incorporated on October 10, 2023 # Ceased to exist wef November 21, 2023 |
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2. BASIS OF PREPARATION:2.1 Statement of compliance
The accompanying Financial Statements have been prepared in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) (Amendment) Rules, 2017 notified under section 133 of the Companies Act, 2013, (the ''Act'') and other relevant provisions of the Act.
2.2 Functional and presentation currency
These Financial Statements are presented in Indian rupees, which is also the Company''s functional currency. All amounts have been reported in '', unless otherwise indicated.
The Financial Statements have been prepared on a historical cost basis, except for the following:
⢠Certain Financial assets and liabilities (including derivative instruments) that are measured at fair value; and
⢠Net defined benefit (assets)/ liabilities that are measured at fair value of plan assets less present value of defined benefit obligations
2.4 Use of estimates and judgements
The preparation of the Financial Statements in accordance with Ind AS requires use of judgements, estimates and assumptions, which affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates is recognised prospectively.
Assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ended March 31, 2024 are as follows:
a) Property, plant and equipment
Useful lives of tangible assets are based on the life prescribed in Schedule II of the Act except plant & machineries, which in the opinion of the Management represent the useful lives as they are based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers'' warranties and maintenance support.
b) Revenue from contracts with customers
The Company''s contracts with customers include promises to transfer goods to the customers. Judgement is required to determine the transaction price for the contract. The transaction price could be either a fixed amount of customer consideration or variable consideration with elements such as schemes, incentives, cash discounts, etc. The estimated amount of variable consideration is adjusted in the transaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur and is reassessed at the end of each reporting period.
Estimates of rebates and discounts are sensitive to changes in circumstances and the Company''s past experience regarding returns and rebate entitlements may not be representative of customers'' actual returns and rebate entitlements in the future.
Costs to obtain a contract are generally expensed as incurred. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recovered
c) Recognition and measurement of defined benefit obligations
The obligation arising from defined benefit plan is determined on the basis of actuarial assumptions. Key actuarial assumptions include discount rate, trends in salary escalation, actuarial rates and life expectancy. The discount rate is determined by reference to market yields at the end of the reporting period on government bonds. The period to maturity of the underlying bonds correspond to the probable maturity of the post-employment benefit obligations.
d) Recognition of deferred tax assets
Deferred tax assets are recognised for the future tax consequences of temporary differences between the carrying values of assets and liabilities and their respective tax bases and unutilised business loss and depreciation carry-forwards and tax credits, if any. Deferred tax assets are recognised to the extent that it is probable that future taxable income will be available against which the deductible temporary differences, unused tax losses, depreciation carry-forwards and unused tax credits could be utilised.
Contingent Liabilities, Commitments and Litigations
Contingent liabilities
Contingent liabilities may arise from the ordinary course of business in relation to claims against the Company, including legal and other claims. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of contingencies inherently involves the exercise of significant judgement and the use of estimates regarding the outcome of future events.
Litigation
From time to time, the Company might be subject to legal proceedings the ultimate outcome of each being always subject to many uncertainties inherent in litigation. A provision for litigation is made when it is considered probable that a payment will be made and the amount of the loss can be reasonably estimated. Significant judgement is made when evaluating, among other factors, the probability of unfavorable outcome and the ability to make a reasonable estimate of the amount of potential loss. Litigation provisions are reviewed at each accounting period and revisions made for the changes in facts and circumstances.
2.5 Measurement of fair values
The Company''s accounting policies and disclosures require the measurement of fair values, for both Financial and Non-Financial assets and liabilities.
The Company has an established control framework with respect to the measurement of fair values, which includes overseeing all significant fair value measurements, including Level 3 fair values by the Management. The Management regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the Management assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which such valuations should be classified.
When measuring the fair value of a financial asset or a financial liability, the Company uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
⢠Level-1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
⢠Level-2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
⢠Level-3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
An operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents.
Based on the nature of services and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current - non-current classification of assets and liabilities.
2.7 Current / non-current classification
An entity shall classify an asset as current when:
a) It expects to realise the asset, or intends to sell or consume it, in its normal operating cycle;
b) It holds the asset primarily for the purpose of trading;
c) It expects to realise the asset within twelve months after the reporting period; or
d) the asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
An entity shall classify all other assets as non-current. An entity shall classify a liability as current when:-
a) It expects to settle the liability in its normal operating cycle;
b) It holds the liability primarily for the purpose of trading;
c) The liability is due to be settled within twelve months after the reporting period; or
d) It does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
An entity shall classify all other liabilities as non-current.
Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.
3. SIGNIFICANT ACCOUNTING POLICIES3.1 Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses, if any.
The cost of an item of property, plant and equipment comprises:
a) Its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates.
b) Any directly attributable cost of bringing the asset to its location and condition necessary for it to be capable of operating in the manner intended by Management.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted and depreciated for as separate items (major components) of property, plant and equipment.
Gains or losses arising from de-recognition of a property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised.
Capital work-in-progress comprises cost of fixed assets that are not yet ready for their intended use at the year end. Expenditure/ Income during construction period (including financing cost related to borrowed funds for construction or acquisition of qualifying PPE) is
included under Capital Work-in-Progress, and the same is allocated to the respective PPE on the completion of their construction. Advances given towards acquisition or construction of PPE outstanding at each reporting date are disclosed as Capital Advances under "Other Non-Current Assets".
Leasehold Rent payable to MIDC relating to new project, during the project development stage prior to its intended use, are considered as pre - operative expenses and disclosed under Non- Current Assets and the same will be amortised in the year of commencement of project.
Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
Depreciation
Depreciation is calculated on pro-rata basis using the diminishing balance method on cost of items of property, plant and equipment less their estimated residual values over the estimated residual useful lives based on Schedule II of the Companies Act, 2013 except for plant & machinery.
In case of plant & machinery, based on internal assessment, the management believes that the useful lives as given below best represent the period over which management expects to use these assets. Hence the useful lives for these assets may Differ from the useful lives as prescribed under Part C of Schedule II of the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
The estimated useful lives of items of property, plant and equipment are as follows:
|
Tangible Assets |
Useful lives as per Schedule II |
|
Buildings |
30 Years |
|
Computers |
|
|
Computer - Server & Network |
6 Years |
|
Computer - Others |
3 Years |
|
Plant & Machinery |
5 - 15 Years |
|
Tangible Assets |
Useful lives as per Schedule II |
|
Furniture and Fixtures |
10 Years |
|
Electrical Installation |
10 Years |
|
Motor Cars & Vehicles |
8 Years |
|
Office Equipments |
5 Years |
|
Laboratory Equipments |
10 Years |
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
Recognition and measurement
Intangible assets comprise of computer software and patent / trademark, which acquired by the Company are initially measured at cost. Such intangible assets are subsequently measured at cost less accumulated amortisation and any accumulated impairment losses.
Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates.
Amortisation
Amortisation is calculated to write off the cost of intangible assets less their estimated residual values and it is included in depreciation and amortisation in the Statement of profit and loss.
Intangible assets are amortised over the estimated useful lives as given below:
|
Intangible Assets |
Useful life |
|
Computer Software (WDV Method) |
3 Years |
|
Patent / Trademark (SLM Method) |
10 Years |
Borrowing costs are interest and other costs (including exchange differences 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. Borrowing costs that are directly attributable to the acquisition or construction of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalised as
part of the cost of that asset till the date it is ready for its intended use or sale less any investment income on the temporary investment of those borrowings.
Other borrowing costs are recognised as an expense in the period in which they are incurred.
3.4 Impairment of non-Financial assets
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 purpose 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.
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
Current Tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. It is measured using tax rates enacted or substantively enacted by the reporting date.
Current tax assets and current tax liabilities are offset only if, the Company:
⢠has a legally enforceable right to set off the recognised amounts; and
⢠intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for Financial reporting purposes and the corresponding amounts used for taxation purposes. Deferred tax is not recognised for:
⢠temporary differences arising on 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 at the time of the transaction.
⢠temporary differences related to investments in subsidiaries to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. 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 realised; such reductions are reversed when the probability of future taxable profits improves.
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted by the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if:
⢠the Company has a legally enforceable right to set off current tax assets against current tax liabilities; and
⢠the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable Company.
Inventories which comprise raw materials, packing materials, work-in-progress, finished goods, consumables and stores & spares are carried at the lower of cost and net realisable value.
The cost of inventories is based on weighted average formula and includes expenditure incurred in acquiring the inventories, costs of production or conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of finished goods and work in progress, cost includes an appropriate share of fixed production overheads based actual production.
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.
Obsolete, defective and unserviceable inventories are duly provided for. The comparison of cost and net realisable value is made on an item-by-item basis.
The net realisable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw materials and other supplies held for use in the production of finished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realisable value.
Cash and cash equivalents 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.
For the purpose of the Statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, as they are considered an integral part of the Company''s cash Management.
Trade payables represent liabilities for goods including capital goods and services provided to the Company prior to the end
of Financial year which are unpaid. Trade and other payables are reported as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
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.
Initial recognition and measurement
All financial assets are recognised 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. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
a) Financial assets carried at amortised cost (AC)
A financial asset is measured at amortised cost using the effective interest rate method, 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.
b) Financial assets at fair value through other comprehensive income (FVTOCI)
A financial asset is 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.
c) Financial assets at fair value through profit or loss (FVTPL)
A Financial asset which is not classified in any of the above categories is measured at FVTPL.
Investment in subsidiaries, Associates and Joint Ventures
The Company has opted to account for its investments in subsidiaries, associates and joint venture at cost less provision for diminution other than temporary.
Other Equity Investments
All other equity investments are measured at fair value, with value changes recognised in Statement of Profit and Loss, except for those equity investments for which the Company has made an irrevocable choice to present the value changes in ''Other Comprehensive Income''.
Impairment of Financial assets
In accordance with Ind AS 109, the Company uses ''Expected Credit Loss'' (ECL) model, for evaluating impairment of Financial assets other than those measured at fair value through profit and loss (FVTPL).
Expected credit losses are measured through a loss allowance at an amount equal to:
⢠The 12-months expected credit losses (expected credit losses that result from those default events on the Financial instrument that are possible within 12 months after the reporting date); or
⢠Full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the Financial instrument)
For trade receivables, the Company applies ''simplified approach'' which requires expected lifetime losses to be recognised from initial recognition of the receivables. The Company uses historical default rates to determine impairment loss on the portfolio of trade receivables. At every reporting date these historical default rates are reviewed and changes in the forward looking estimates are analysed.
For other assets, the Company uses 12 month ECL to provide for impairment loss where there is no significant increase in credit risk. If there is significant increase in credit risk full lifetime ECL is used.
Initial recognition and measurement
AH Financial liabilities are recognised at fair value and in case of loans, net of directly attributable cost. Fees of recurring nature are directly recognised in the Statement of Profit and Loss as finance cost.
Subsequent measurement
Financial liabilities are carried at amortised cost using the effective interest method. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
a) Derivative Financial instruments and Hedge Accounting
The Company uses various derivative financial instruments such as forwards and Interest rate swaps to mitigate the risk of changes in exchange rates and Interest rates. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are also subsequently measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and Loss, except for the effective portion of cash flow hedges which is recognised in Other Comprehensive Income and later to Statement of Profit and Loss when the hedged item affects profit or loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a non-Financial assets or nonFinancial liability.
In case of loss / gains from interest rate swaps, directly attributable to the acquisition or construction of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of that asset till the date it is ready for its intended use or sale.
Hedges that meet the criteria for hedge accounting are accounted for as follows:
The Company designates derivative contracts or non derivative financial assets / liabilities as hedging instruments to mitigate the risk of movement in interest rates and foreign exchange rates for foreign exchange exposure on highly probable future cash flows attributable to a recognised asset or liability or forecast cash transactions. When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in the cash flow hedging reserve being part of other comprehensive income. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognised in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the underlying transaction occurs. The cumulative gain or loss previously recognised in the cash flow hedging reserve is transferred to the Statement of Profit and Loss upon the occurrence of the underlying transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified in the Statement of Profit and Loss.
Fair Value Hedge
The Company designates derivative contracts or non derivative financial assets / liabilities as hedging instruments to mitigate the risk of change in fair value of hedged item due to movement in interest rates, foreign exchange rates and commodity prices.
Changes in the fair value of hedging instruments and hedged items that are designated and qualify as fair value hedges are recorded in the Statement
of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to Statement of Profit and Loss over the period of maturity.
b) De-recognition of Financial instruments
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 de-recognition under Ind AS 109. 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 assets and financial liabilities are offset and the net amount is reported in the balance sheet when, and only when, the company has legally enforceable right to set off the amount and it intends, either to settle them on net basis or to realise the assets and settle the liabilities simultaneously.
3.10 Revenue RecognitionRevenue from contracts with customer
Revenue from contract with customers is recognised when the Company satisfies performance obligation by transferring promised goods and services to the customer. Performance obligations are satisfied at the point of time when the customer obtains controls of the asset.
Revenue is measured based on transaction price, which is the fair value of the consideration received or receivable, stated net of discounts, returns and value added tax. Transaction price is recognised based on the price specified in the contract, net of the estimated sales incentives/ discounts. Accumulated experience is used to estimate and provide for the discounts/ right of return, using the expected value method.
Revenue from sale of goods is recognised on the basis of approved contracts, when all the significant risks
and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods and acceptance by the buyer. Any additional amount based on the terms of the agreement entered into with customers, is recognised in the period when the collectability of the profit share becomes probable and a reliable measure of the profit share is available. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. The Company does not provide any warranties or maintenance contracts to its customers.
As per erstwhile Ind AS 18, the Company has assumed that recovery of excise duty (up to June 2017) flows to the Company on its own account. This is for the reason that it is a liability of the manufacturer which forms part of the cost of production, irrespective of whether the goods are sold or not. Since the recovery of excise duty flows to the Company on its own account, revenue includes excise duty.
This includes incentives, volume rebates, discounts etc. It is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved. It is reassessed at end of each reporting period.
Significant financing component
Generally, the Company receives short-term advances from its customers. Using the practical expedient in Ind AS 115, the Company does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer of the promised good or service to the customer and when the customer pays for that good or service will be one year or less.
The Company pays sales commission to its selling agents for each contract that they obtain for the Company. The Company has elected to apply the optional practical expedient for costs to obtain a contract which allows the Company to immediately expense sales commissions because the amortisation period of the asset that the Company otherwise would have used is one year or less.
Costs to fulfill a contract i.e. freight, insurance and other selling expenses are recognised as an expense in the period in which related revenue is recognised.
Other Operating revenue mainly consists of Sale of Scrap arising from the production of finished goods.
Interest Income
Interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortised cost of a financial liability.
Interest income is included in finance income in the Statement of profit and loss
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Dividends
Revenue is recognised when the Company''s right to receive the payment is established, which is generally when shareholders approve the dividend.
Insurance and other claims
Revenue in respect of Insurance and other claim is recognised only on reasonable certainty of ultimate collection.
The Financial Statements are presented in Indian rupees, which is the functional currency of the Company and the currency of the primary economic environment in which the Company operates.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at its functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognised in profit or loss.
Short term employee benefits
Liabilities for short term employee 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'' service 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 reported as current employee benefits payable in the balance sheet.
Post-employment benefits
a) Defined benefit plans
The liability or asset recognised in the balance sheet in respect of defined benefit plans is the present value of the defined benefits obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the Projected Unit Credit Method at the year end.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligations.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in Employee Benefit Expense in the Statement of profit and loss.
Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in Other Comprehensive Income. They are included in retained earnings in the Statement of changes in equity.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in the profit or loss as past service cost.
Contributions under Defined Contribution Plans payable in keeping with the related schemes are
recognised as expenses for the period in which the employee has rendered the service.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Payments made under operating leases are charged to the Statement of profit and loss on a straight line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases.
As a Lessee
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. 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.
1. The contract involves the use of an identified asset - this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the lessor has a substantive substitution right, then the asset is not identified.
2. The Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
3. The Company as a lessee has the right to direct the use of the asset. The Company has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Company has the right to direct the use of the asset if either :
a) the Company as a lessee has the right to operate the asset; or
b) the Company as a lessee designed the asset in a way that predetermines how and for what purpose it will be used
The Company recognises a right-of-use asset and a lease liability at the lease Commencement date. The
right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use assets are subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at amortised cost at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, using the incremental borrowing rate.
It is re -measured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
Short-term leases and leases of low-value assets
The Company has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Company recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
3.14 Provisions and contingent liabilities
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events and 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.
Provisions are measured at the present value of Management''s best estimates of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
A disclosure for contingent liabilities is made 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 embodying economic benefits will be required to settle or a reliable estimate of the amount cannot be made.
The Company recognises a liability to pay dividend to equity holders of the Company when the distribution is
authorised by the shareholders and the distribution is no longer at the discretion of the Company. A corresponding amount is recognised directly in equity upon approval from shareholders.
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the equity by the weighted average number of equity shares outstanding during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
⢠The after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
⢠The weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
Mar 31, 2022
~| CORPORATE INFORMATION
Fine Organic Industries Limited is a public limited Company domiciled in India and is incorporated under the provisions of the Companies Act, 1956. The Company was converted into Public Company with effect from November 2, 2017 and consequently the name of the Company has changed from Fine Organic Industries Private Limited to Fine Organic Industries Limited. The registered office of the Company is situated in the State of Maharashtra.
The Financial Statements were approved and authorised for issue with the resolution of the Board of Directors
on May 27, 2022 and are subject to the approval of Shareholders in the Annual General Meeting.
The Company carries on business in India and abroad, as manufacturers, processors, suppliers, distributors, dealers, importers, exporters of wide range of oleochemical-based additives used in foods, plastics, cosmetics, coatings and other specialty application in various industries.
The Equity shares of the Company are listed on July 2, 2018 on BSE Limited and National Stock Exchange of India Limited (NSE).
|
The Company has following investments in subsidiaries, Joint Ventures and Associates: |
|||||
|
Particulars |
name of entities |
||||
|
Fine Organics (uSA), Inc |
Fine Organics Europe BV |
Fine Zeelandia Private Limited |
FineADD Ingredients GmbH (upto November 11, 2021) |
Fine Organic Industries (thailand) co., Ltd. |
|
|
Principal place of business and Country of Incorporation |
United States of America |
Belgium |
India |
Germany |
Thailand |
|
Investee relationship |
Subsidiary Company |
Subsidiary Company |
Joint Venture |
Joint Venture |
Joint Venture |
|
Proportion of ownership interest |
100.00% |
*100.00% |
50.00% |
50.00% |
45.00% |
|
* From March 23, 2022 |
|||||
~| BASIS OF PREPARATION:2.1 Statement of compliance
The accompanying Financial Statements have been prepared in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) (Amendment) Rules, 2017 notified under section 133 of the Companies Act, 2013, (the ''Act'') and other relevant provisions of the Act.
2.2 Functional and presentation currency
These Financial Statements are presented in Indian rupees, which is also the Company''s functional currency. All amounts have been reported in INR, unless otherwise indicated.
The Financial Statements have been prepared on a historical cost basis, except for the following:
⢠certain Financial assets and liabilities (including derivative instruments) that are measured at fair value; and
⢠Net defined benefit (assets)/ liabilities that are measured at fair value of plan assets less present value of defined benefit obligations
2.4 use of estimates and judgements
The preparation of the Financial Statements in accordance with Ind AS requires use of judgements, estimates and assumptions, which affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates is recognised prospectively.
Assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ended March 31, 2022 are as follows:
a) Property, plant and equipment
Useful lives of tangible assets are based on the life prescribed in Schedule II of the Act except plant & machineries, which in the opinion of the Management represent the useful lives as they are based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers'' warranties and maintenance support.
b) Revenue from contracts with customers
The Company''s contracts with customers include promises to transfer goods to the customers. Judgement is required to determine the transaction price for the contract. The transaction price could be either a fixed amount of customer consideration or variable consideration with elements such as schemes, incentives, cash discounts etc. The estimated amount of variable consideration is adjusted in the transaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur and is reassessed at the end of each reporting period.
Estimates of rebates and discounts are sensitive to changes in circumstances and the Company''s past experience regarding returns and rebate entitlements may not be representative of customers'' actual returns and rebate entitlements in the future.
Costs to obtain a contract are generally expensed as incurred. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recovered.
c) Recognition and measurement of defined benefit obligations
The obligation arising from defined benefit plan is determined on the basis of actuarial assumptions.
Key actuarial assumptions include discount rate, trends in salary escalation, actuarial rates and life expectancy. The discount rate is determined by reference to market yields at the end of the reporting period on government bonds. The period to maturity of the underlying bonds correspond to the probable maturity of the post-employment benefit obligations.
d) recognition of deferred tax assets
Deferred tax assets are recognised for the future tax consequences of temporary differences between the carrying values of assets and liabilities and their respective tax bases, and unutilised business loss and depreciation carry-forwards and tax credits, if any. Deferred tax assets are recognised to the extent that it is probable that future taxable income will be available against which the deductible temporary differences, unused tax losses, depreciation carry-forwards and unused tax credits could be utilised.
e) contingent Liabilities, commitments and Litigations
contingent liabilities
Contingent liabilities may arise from the ordinary course of business in relation to claims against the Company, including legal and other claims. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of contingencies inherently involves the exercise of significant judgement and the use of estimates regarding the outcome of future events.
Litigation
From time to time, the Company might be subject to legal proceedings the ultimate outcome of each being always subject to many uncertainties inherent in litigation. A provision for litigation is made when it is considered probable that a payment will be made and the amount of the loss can be reasonably estimated. Significant judgement is made when evaluating, among other factors, the probability of unfavourable outcome and the ability to make a reasonable estimate of the amount of potential loss. Litigation provisions are reviewed at each accounting period and revisions made for the changes in facts and circumstances.
2.5 Measurement of fair values
The Company''s accounting policies and disclosures require the measurement of fair values, for both Financial and non-Financial assets and liabilities.
The Company has an established control framework with respect to the measurement of fair values, which includes overseeing all significant fair value measurements, including Level 3 fair values by the Management. The Management regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the Management assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which such valuations should be classified.
When measuring the fair value of a financial asset or a financial liability, the Company uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
⢠Level-1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
⢠Level-2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
⢠Level-3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
An operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents.
Based on the nature of services and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current - non-current classification of assets and liabilities.
2.7 Current / non-current classification
An entity shall classify an asset as current when:
a) It expects to realise the asset, or intends to sell or consume it, in its normal operating cycle;
b) It holds the asset primarily for the purpose of trading;
c) It expects to realise the asset within twelve months after the reporting period; or
d) the asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
An entity shall classify all other assets as non-current. An entity shall classify a liability as current when-
a) It expects to settle the liability in its normal operating cycle;
b) It holds the liability primarily for the purpose of trading;
c) The liability is due to be settled within twelve months after the reporting period; or
d) It does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
An entity shall classify all other liabilities as non-current. Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.
2.8 Note on Recent pronouncements
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On March 23, 2022, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2022, applicable from April 1, 2022, as below:
Ind AS 16 - Proceeds before intended use
The amendments mainly prohibit an entity from deducting from the cost of property, plant and equipment amounts received from selling items produced while the Company is preparing the asset for its intended use. Instead, an entity will recognise such sales proceeds and related cost in profit or loss. The Company does not expect the amendments to have any impact in its recognition of its property, plant and equipment in its financial statements.
Ind AS 37 - Onerous Contracts - Costs of Fulfilling a Contract
The amendments specify that that the ''cost of fulfilling'' a contract comprises the ''costs that relate directly to the contract''. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts. The amendment is essentially a clarification and the Company does not expect the amendment to have any significant impact in its financial statements.
Ind AS 109 - Annual Improvements to Ind AS (2021)
The amendment clarifies which fees an entity includes when it applies the ''10%'' test of Ind AS 109 in assessing whether to derecognise a financial liability. The Company does not expect the amendment to have any significant impact in its financial statements.
Ind AS 106 - Annual Improvements to Ind AS (2021)
The amendments remove the illustration of the reimbursement of leasehold improvements by the lessor in order to resolve any potential confusion regarding the treatment of lease incentives that might arise because of how lease incentives were described in that illustration. The Company does not expect the amendment to have any significant impact in its financial statements.
3. SIGNIFICANT ACCOUNTING POLICIES3.1 Property, plant and equipment Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses, if any.
The cost of an item of property, plant and equipment comprises:
a) Its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates.
b) Any directly attributable cost of bringing the asset to its location and condition necessary for it to be capable of operating in the manner intended by Management.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted and depreciated for as separate items (major components) of property, plant and equipment.
Gains or losses arising from de-recognition of a property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised. Capital work-in-progress comprises cost of fixed assets that are not yet ready for their intended use at the year end. Expenditure/ Income during construction period (including financing cost related to borrowed funds for construction or acquisition of qualifying PPE) is included under Capital Work-in-Progress, and the same is allocated to the respective PPE on the completion of their construction. Advances given towards acquisition or construction of PPE outstanding at each reporting date are disclosed as Capital Advances under "Other non-current Assets".
Leasehold Rent payable to MIDC relating to new project, during the project development stage prior to its intended use, are considered as pre - operative expenses and disclosed under Non- Current Assets and the same will be amortised in the year of commencement of project.
Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
Depreciation
Depreciation is calculated on pro-rata basis using the diminishing balance method on cost of items of property, plant and equipment less their estimated residual values over the estimated residual useful lives based on Schedule II of the Companies Act, 2013 except for plant & machinery.
In case of plant & machinery, based on internal assessment, the Management believes that the useful lives as given below best represent the period over which Management expects to use these assets. Hence the useful lives for these assets may different from the useful lives as prescribed under Part C of Schedule II
of the Companies Act, 2013. The Management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
The estimated useful lives of items of property, plant and equipment are as follows:
|
tangible Assets |
useful lives as per Schedule II |
|
Buildings |
30 Years |
|
computers |
|
|
Computer - Server & Network |
6 Years |
|
Computer - Others |
3 Years |
|
Plant & Machinery |
5 - 15 Years |
|
Furniture and Fixtures |
10 Years |
|
Electrical Installation |
10 Years |
|
Motor Cars & Vehicles |
8 Years |
|
Office Equipments |
5 Years |
|
Laboratory Equipments |
10 Years |
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
Recognition and measurement
Intangible assets comprise of computer software and patent / trademark, which acquired by the Company are initially measured at cost. Such intangible assets are subsequently measured at cost less accumulated amortisation and any accumulated impairment losses.
Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates.
Amortisation
Amortisation is calculated to write off the cost of intangible assets less their estimated residual values and it is included in depreciation and amortisation in the Statement of profit and loss.
Intangible assets are amortised over the estimated useful lives as given below:
|
Intangible Assets |
useful life |
|
Computer Software (WDV Method) |
3 Years |
|
Patent / Trademark (SLM Method) |
10 Years |
Borrowing costs are interest and other costs (including exchange differences 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. Borrowing costs that are directly attributable to the acquisition or construction of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of that asset till the date it is ready for its intended use or sale less any investment income on the temporary investment of those borrowings.
Other borrowing costs are recognised as an expense in the period in which they are incurred.
3.4 Impairment of non-Financial assets
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 purpose 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.
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. It is measured using tax rates enacted or substantively enacted by the reporting date.
Current tax assets and current tax liabilities are offset only if, the Company:
⢠has a legally enforceable right to set off the recognised amounts; and
⢠intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for Financial reporting purposes and the corresponding amounts used for taxation purposes. Deferred tax is not recognised for:
⢠temporary differences arising on 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 at the time of the transaction.
⢠temporary differences related to investments in subsidiaries to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
⢠taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. 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 realised; such reductions are reversed when the probability of future taxable profits improves. Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted by the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if:
⢠the Company has a legally enforceable right to set off current tax assets against current tax liabilities; and
⢠the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable Company. Minimum Alternate Tax (MAT) credit is recognised as a Deferred Tax Asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period.
Inventories which comprise raw materials, packing materials, work-in-progress, finished goods, consumables and stores & spares are carried at the lower of cost and net realisable value.
The cost of inventories is based on weighted average formula and includes expenditure incurred in acquiring the inventories, costs of production or conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of finished goods and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity of production facilities.
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.
Obsolete, defective and unserviceable inventories are duly provided for. The comparison of cost and net realisable value is made on an item-by-item basis.
The net realisable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw materials and other supplies held for use in the production of finished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realisable value.
Cash and cash equivalents in the balance sheet comprise cash at banks and cash 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.
For the purpose of the Statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, as they are considered as an integral part of the Company''s cash Management.
Trade payables represent liabilities for goods including capital goods and services provided to the Company prior to the end of Financial year which are unpaid. Trade and other payables are reported as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
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.
Initial recognition and measurement
All financial assets are recognised 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. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
a) Financial assets carried at amortised cost (Ac)
A financial asset is measured at amortised cost using the effective interest rate method, 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.
b) Financial assets at fair value through other comprehensive income (FVTOcI)
A financial asset is 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.
c) Financial assets at fair value through profit or loss (FVTpL)
A Financial asset which is not classified in any of the above categories is measured at FVTPL. Investment in subsidiaries, Associates and Joint Ventures
The Company has opted to account for its investments in subsidiaries, associates and joint venture at cost less provision for diminution other than temporary.
Other Equity Investments
All other equity investments are measured at fair value, with value changes recognised in Statement of Profit and Loss, except for those equity investments for which the Company has made an irrevocable choice to present the value changes in ''Other Comprehensive Income''. Impairment of Financial assets In accordance with Ind AS 109, the Company uses ''Expected Credit Loss'' (ECL) model, for evaluating impairment of Financial assets other than those measured at fair value through profit and loss (FVTPL). Expected credit losses are measured through a loss allowance at an amount equal to:
⢠The 12-months expected credit losses (expected credit losses that result from those default events on the Financial instrument that are possible within 12 months after the reporting date); or
⢠Full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the Financial instrument)
For trade receivables, the Company applies ''simplified approach'' which requires expected lifetime losses to be recognised from initial recognition of the receivables. The Company uses historical default rates to determine impairment loss on the portfolio of trade receivables. At every reporting date these historical default rates are reviewed and changes in the forward looking estimates are analysed.
For other assets, the Company uses 12 month ECL to provide for impairment loss where there is no significant increase in credit risk. If there is significant increase in credit risk full lifetime ECL is used.
Initial recognition and measurement
AH Financial liabilities are recognised at fair value and in case of loans, net of directly attributable cost. Fees of recurring nature are directly recognised in the Statement of Profit and Loss as finance cost.
Subsequent measurement
Financial liabilities are carried at amortised cost using the effective interest method. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments. a) Derivative Financial instruments and Hedge Accounting
The Company uses various derivative financial instruments such as forwards and Interest rate swaps to mitigate the risk of changes in exchange rates and Interest rates. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are also subsequently measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and Loss, except for the effective portion of cash flow hedges which is recognised in Other Comprehensive Income and later to Statement of Profit and Loss when the hedged item affects profit or loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a non-Financial assets or nonFinancial liability.
In case of loss / gains from interest rate swaps, directly attributable to the acquisition or construction of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of that asset till the date it is ready for its intended use or sale.
Hedges that meet the criteria for hedge accounting are accounted for as follows:
The Company designates derivative contracts or non derivative financial assets / liabilities as hedging instruments to mitigate the risk of movement in interest rates and foreign exchange rates for foreign exchange exposure on highly probable future cash flows attributable to a recognised asset or liability or forecast cash transactions. When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in the cash flow hedging reserve being part of other comprehensive income. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognised in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the underlying transaction occurs. The cumulative gain or loss previously recognised in the cash flow hedging reserve is transferred to the Statement of Profit and Loss upon the occurrence of the underlying transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified in the Statement of Profit and Loss.
The Company designates derivative contracts or non derivative financial assets / liabilities as hedging instruments to mitigate the risk of change in fair value of hedged item due to movement in interest rates, foreign exchange rates and commodity prices.
Changes in the fair value of hedging instruments and hedged items that are designated and qualify as fair value hedges are recorded in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to Statement of Profit and Loss over the period of maturity.
b) De-recognition of Financial instruments
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 de-recognition under Ind AS 109. 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.
c) Offsetting
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet when, and only when, the Company has legally enforceable right to set off the amount and it intends, either to settle them on net basis or to realise the assets and settle the liabilities simultaneously.
Business Combinations are accounted for using Ind AS 103 Business Combination. Acquisitions of businesses are accounted for using the acquisition method unless the transaction is between entities under common control. Acquisition related costs are recognised in the Statement of profit and loss as incurred. The acquiree''s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition are recognised at their respective fair value at the acquisition date, except certain assets and liabilities required to be measured as per applicable standards. Purchase consideration in excess of the Company''s interest in the acquiree''s net fair value of identifiable assets, liabilities and contingent liabilities is recognised as goodwill. Excess of the Company''s interest in the net fair value of the acquiree''s identifiable assets, liabilities and contingent liabilities over the purchase consideration is recognised, after reassessment of fair value of net assets acquired, is recognised as Capital Reserve i.e. Amalgamation Reserve.
Business Combinations arising from transfer of interests in entities that are under common control are accounted using pooling of interest method wherein, assets and liabilities of the combining entities are reflected at their carrying value, no adjustment are made to reflect fair values, or recognise any new assets or liabilities. The identity of the reserves is preserved and appears in the
Financial Statements of the transferee in the same form in which they appeared in the Financial Statements of the transferor.
3.11 Revenue RecognitionRevenue from contracts with customer
Revenue from contract with customers is recognised when the Company satisfies performance obligation by transferring promised goods and services to the customer. Performance obligations are satisfied at the point of time when the customer obtains controls of the goods.
Revenue from sale of goods is recognised when control of the products being sold is transferred to the customers and when there are no longer any unfulfilled obligations. The performance obligations in contracts are fulfilled at the time of dispatch, delivery or upon formal customer acceptance depending on customer terms. Revenue from the sale of goods is measured based on the consideration specified in a contract with a customer, net of returns and allowances, trade discounts, volume rebates and any taxes or duties collected on behalf of the government such as goods and service tax. The Company does not provide any warranties or maintenance contracts to its customers.
Variable consideration
This includes incentives, volume rebates, discounts etc. It is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved. It is reassessed at end of each reporting period.
Significant financing component
Generally, the Company receives short-term advances from its customers. Using the practical expedient in Ind AS 115, the Company does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer of the promised goods or service to the customer and when the customer pays for that goods or service will be one year or less.
The Company pays sales commission to its selling agents for each contract that they obtain for the Company. The Company has elected to apply the optional practical expedient for costs to obtain a contract which allows the Company to immediately expense sales commissions because the amortisation period of the asset that the Company otherwise would have used is one year or less. Costs to fulfill a contract i.e. freight, insurance and other selling expenses are recognised as an expense in the period in which related revenue is recognised.
Other Operating Revenues
Other Operating revenue mainly consists of Sale of Scrap arising from the production of finished goods. Interest Income
Interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortised cost of a financial liability.
Interest income is included in finance income in the Statement of profit and loss
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Dividends
Revenue is recognised when the Company''s right to receive the payment is established, which is generally when shareholders approve the dividend.
Insurance and other claims
Revenue in respect of Insurance and other claim is recognised only on reasonable certainty of ultimate collection.
The Financial Statements are presented in Indian rupees, which is the functional currency of the Company and the currency of the primary economic environment in which the Company operates.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at its functional currency spot rates at
the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognised in profit or loss.
Short term employee benefits
Liabilities for short term employee 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'' service 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 reported as current employee benefits payable in the balance sheet. Post-employment benefits a) Defined benefit plans
The liability or asset recognised in the balance sheet in respect of defined benefit plans is the present value of the defined benefits obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the Projected Unit Credit Method at the year end.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligations.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in Employee Benefit Expense in the Statement of profit and loss. Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in Other Comprehensive Income. They are included in retained earnings in the Statement of changes in equity.
Changes in the present value of the defined benefit obligation resulting from plan amendments or
curtailments are recognised immediately in the profit or loss as past service cost. b) Defined contribution plans
Contributions under Defined Contribution Plans payable in keeping with the related schemes are recognised as expenses for the period in which the employee has rendered the service.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Payments made under operating leases are charged to the Statement of profit and loss on a straight line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases.
3.15 Provisions and contingent liabilities
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events and 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.
Provisions are measured at the present value of Management''s best estimates of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
A disclosure for contingent liabilities is made 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 embodying economic benefits will be required to settle or a reliable estimate of the amount cannot be made.
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the Company, on or before the end of the reporting period but not distributed at the end of the reporting period.
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the equity by the weighted average number of equity shares outstanding during the financial year. diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
⢠The after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
⢠The weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
Mar 31, 2018
1.1 property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses, if any.
The cost of an item of property, plant and equipment comprises:
a) Its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates.
b) Any directly attributable cost of bringing the asset to its location and condition necessary for it to be capable of operating in the manner intended by Management.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted and depreciated for as separate items (major components) of property, plant and equipment.
Gains or losses arising from derecognition of a property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised.
Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
Depreciation
Depreciation is calculated on pro-rata basis using the diminishing balance method on cost of items of property, plant and equipment less their estimated residual values over the estimated residual useful lives based on Schedule II of the Companies Act, 2013.
The estimated useful lives of items of property, plant and equipment are as follows:
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognised as at 1st April, 2016, measured as per the previous GAAP and use that carrying value as the deemed cost of such property, plant and equipment.
1.2 Intangible Assets
Recognition and measurement
Intangible assets comprise of computer software and patents, which are acquired by the Company are initially measured at cost. Such intangible assets are subsequently measured at cost less accumulated amortisation and any accumulated impairment losses.
Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates.
Amortisation
Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the diminishing value method over their estimated useful lives and is included in depreciation and amortisation in the Statement of profit and loss.
Intangible assets are amortised over the estimated useful lives as given below:
transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its Intangible Assets recognised as at 1st April, 2016, measured as per the previous GAAP and use that carrying value as the deemed cost of such Intangible Assets.
1.3 borrowing costs
Borrowing costs are interest and other costs (including exchange differences 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. Borrowing costs that are directly attributable to the acquisition or construction of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of that asset till the date it is ready for its intended use or sale.
Other borrowing costs are recognised as an expense in the period in which they are incurred
1.4 Impairment of non-Financial assets
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 assetâs carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assetâs fair value less costs of disposal and value in use. For the purpose 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.
1.5 Income tax
Income tax expense comprises of current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. It is measured using tax rates enacted or substantively enacted by the reporting date. Current tax also includes any tax arising from dividends.
Current tax assets and current tax liabilities are offset only if, the Company:
- has a legally enforceable right to set off the recognised amounts; and
- intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for Financial reporting purposes and the corresponding amounts used for taxation purposes. Deferred tax is not recognised for:
- temporary differences arising on 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 at the time of the transaction
- temporary differences related to investments in subsidiaries to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
- taxable temporary differences arising on the initial recognition of goodwill
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. 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 realised; such reductions are reversed when the probability of future taxable profits improves.
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted by the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if:
- the Company has a legally enforceable right to set off current tax assets against current tax liabilities; and
- the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable Company.
Minimum Alternate Tax(MAT) credit is recognised as a Deferred Tax Asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period.
1.6 Inventories
Inventories which comprise raw materials, packing materials, work-in-progress and finished goods are carried at the lower of cost and net realisable value.
The cost of inventories is based on weighted average formula and includes expenditure incurred in acquiring the inventories, costs of production or conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of finished goods and work in progress, cost includes an appropriate share of fixed production overheads based on normal operating capacity of production facilities.
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.
The net realisable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw materials and other supplies held for use in the production of finished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realisable value.
The comparison of cost and net realisable value is made on an item-by-item basis.
1.7 cash and cash equivalents
Cash and cash equivalents 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.
For the purpose of the Statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, as they are considered an integral part of the Companyâs cash Management.
1.8 Trade payables
Trade payables represent liabilities for goods and services provided to the Company prior to the end of Financial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within twelve months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
1.9 Financial instruments
A Financial instrument is any contract that gives rise to a Financial asset of one entity and a Financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement
All Financial assets are recognised 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. Purchases or sales of Financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the assets.
Subsequent measurement
a) Financial assets carried at amortised cost (Ac)
A Financial asset is measured at amortised cost using the effective interest rate method, 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.
b) Financial assets at fair value through other comprehensive income (FVTOcI)
A Financial asset is 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.
c) Financial assets at fair value through profit or loss
(fvtpl)
A Financial asset which is not classified in any of the above categories is measured at FVTPL.
Investment in subsidiaries, Associates and Joint Ventures
The Company has opted to account for its investments in subsidiaries, associates and joint venture at cost less provision for diminution other than temporary.
Other Equity Investments
All other equity investments are measured at fair value, with change in value recognised in Statement of Profit and Loss, except for those equity investments for which the Company has made an irrevocable choice to present the change in value in âOther Comprehensive Incomeâ.
Impairment of Financial assets
In accordance with Ind AS 109, the Company uses âExpected Credit Lossâ (ECL) model, for evaluating impairment of Financial assets other than those measured at fair value through profit and loss (FVTPL).
Expected credit losses are measured through a loss allowance at an amount equal to:
- The twelve months expected credit losses (expected credit losses that result from those default events on the Financial instrument that are possible within twelve months after the reporting date); or
- Full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the Financial instrument)
For trade receivables Company applies âsimplified approachâ which requires expected lifetime losses to be recognised from initial recognition of the receivables. The Company uses historical default rates to determine impairment loss on the portfolio of trade receivables. At every reporting date these historical default rates are reviewed and changes in the forward looking estimates are analysed.
For other assets, the Company uses twelve month ECL to provide for impairment loss where there is no significant increase in credit risk. If there is significant increase in credit risk full lifetime ECL is used.
Financial liabilities
Initial recognition and measurement
All Financial liabilities are recognised at fair value and in case of loans, net of directly attributable cost. Fees of recurring nature are directly recognised in the Statement of Profit and Loss as finance cost
Subsequent measurement
Financial liabilities are carried at amortised cost using the effective interest method. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
a) Derivative Financial instruments and Hedge Accounting
The Company uses various derivative Financial instruments such as forwards & options to mitigate the risk of changes in exchange rates. Such derivative Financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are also subsequently measured at fair value. Derivatives are carried as Financial assets when the fair value is positive and as Financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and Loss, except for the effective portion of cash flow hedges which is recognised in Other Comprehensive Income and later to Statement of Profit and Loss when the hedged item affects profit or loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a Non-Financial assets or Non-Financial liability.
Hedges that meet the criteria for hedge accounting are accounted for as follows:
Cash flow hedge
The Company designates derivative contracts or non-derivative Financial assets / liabilities as hedging instruments to mitigate the risk of movement in interest rates and foreign exchange rates for foreign exchange exposure on highly probable future cash flows attributable to a recognised asset or liability or forecast cash transactions. When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in the cash flow hedging reserve being part of other comprehensive income. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognised in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the underlying transaction occurs. The cumulative gain or loss previously recognised in the cash flow hedging reserve is transferred to the Statement of Profit and Loss upon the occurrence of the underlying transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified in the Statement of Profit and Loss.
Fair Value Hedge
The Company designates derivative contracts or non-derivative Financial assets / liabilities as hedging instruments to mitigate the risk of change in fair value of hedged item due to movement in interest rates, foreign exchange rates and commodity prices.
Changes in the fair value of hedging instruments and hedged items that are designated and qualify as fair value hedges are recorded in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to Statement of Profit and Loss over the period of maturity.
b) derecognition of Financial instruments
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. A Financial liability (or a part of a Financial liability) is derecognised from the Companyâs Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.
1.10 business combinations
Business Combinations are accounted for using Ind AS 103 Business Combination. Acquisitions of businesses are accounted for using the acquisition method unless the transaction is between entities under common control. Acquisition related costs are recognised in the Statement of profit and loss as incurred. The acquirerâs identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition are recognised at their respective fair value at the acquisition date, except certain assets and liabilities required to be measured as per applicable standards. Purchase consideration in excess of the Companyâs interest in the acquirerâs net fair value of identifiable assets, liabilities and contingent liabilities is recognised as Goodwill. Excess of the Companyâs interest in the net fair value of the acquirerâs identifiable assets, liabilities and contingent liabilities over the purchase consideration is recognised, after reassessment of fair value of net assets acquired, is recognised as Amalgamation Reserve i.e. Capital Reserve.
Business Combinations arising from transfer of interests in entities that are under common control are accounted using pooling of interest method wherein, assets and liabilities of the combining entities are reflected at their carrying value, no adjustment are made to reflect fair values, or recognise any new assets or liabilities. The identity of the reserves is preserved and appears in the Financial Statements of the transferee in the same form in which they appeared in the Financial Statements of the transferor.
1.11 Revenue Recognition
The Company recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Company and specific criteria have been met for each of the Companyâs activities as described below.
Sale of products
Revenue from sale of goods is recognised when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods and acceptance by the buyer. Any additional amount based on the terms of the agreement entered into with customers, is recognised in the period when the collectability of the profit share becomes probable and a reliable measure of the profit share is available. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.
As per Ind AS 18, the Company has assumed that recovery of excise duty flows to the Company on its own account. This is for the reason that it is a liability of the manufacturer which forms part of the cost of production, irrespective of whether the goods are sold or not. Since the recovery of excise duty flows to the Company on its own account, revenue includes excise duty.
However, sales tax/ value added tax (VAT) / Goods and Service Tax (GST) is not received by the Company on its own account. Rather, it is tax collected on value added to the commodity by the seller on behalf of the government. Accordingly, it is excluded from revenue.
Other Operating Revenues
Other Operating revenue mainly consist of Sale of Scrap arising from the production of finished goods and Research and Development income from various activities.
Interest Income
Interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the Financial instrument or a shorter period, where appropriate, to the gross carrying amount of the Financial asset or to the amortised cost of a Financial liability.
Interest income is included in finance income in the Statement of profit and loss
dividends
Revenue is recognised when the Companyâs right to receive the payment is established, which is generally when shareholders approve the dividend
1.12 Foreign currencies
The Financial Statements are presented in Indian rupees, which is the functional currency of the Company and the currency of the primary economic environment in which the Company operates.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at its functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognised in profit or loss.
1.13 Employee benefits
Short term employee benefits
Liabilities for short term employee benefits 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 recognised in respect of employeesâ service 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 benefits payable in the balance sheet.
Post-employment benefits
a) Defined benefit plans
The liability or asset recognised in the balance sheet in respect of defined benefit plans is the present value of the defined benefits obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the Projected Unit Credit Method at the year end.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligations.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in Employee Benefit Expense in the Statement of profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in Other Comprehensive Income. They are included in retained earnings in the Statement of changes in equity.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in the profit or loss as past service cost.
b) Defined contribution plans
Contributions under Defined Contribution Plans payable in keeping with the related schemes are recognised as expenses for the period in which the employee has rendered the service.
1.14 Leases As a lessee
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Payments made under operating leases are charged to the Statement of profit and loss on a straight line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases.
1.15 provisions and contingent liabilities
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events and 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.
Provisions are measured at the present value of Managementâs best estimates of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
A disclosure for contingent liabilities is made 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 embodying economic benefits will be required to settle or a reliable estimate of the amount cannot be made.
1.16 dividend
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the Company, on or before the end of the reporting period but not distributed at the end of the reporting period.
1.17 Earnings per share (EpS)
Basic earnings per share
Basic earnings per share is calculated by dividing:
- The profit attributable to owners of the equity
- By the weighted average number of equity shares outstanding during the Financial year
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
- The after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
- The weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
1.18 Ind AS Yet to be notified
Appendix B to Ind AS 21, Foreign currency transactions and advance consideration:
On 28th March, 2018, Ministry of Corporate Affairs (âMCAâ) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendment will come into force from 1st April, 2018. There is no material impact expected to arise out of this amendment on the financial statements.
Ind AS 115- Revenue from contract with customers:
On 28th March, 2018, Ministry of Corporate Affairs (âMCAâ) has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognise 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. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entityâs contracts with customers.
The standard permits two possible methods of transition:
- Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8- Accounting Policies, Changes in Accounting Estimates and Errors
- Retrospectively with cumulative effect of initially applying the standard recognised at the date of initial application(Cumulative catch - up approach) The effective date for adoption of Ind AS 115 is financial periods beginning on or after 1 st April, 2018.
There is no material impact expected to arise out of this amendment on the financial statements.
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