Accounting Policies of Forbes Precision Tools and Machine Parts Ltd. Company

Mar 31, 2025

2A. MATERIAL ACCOUNTING POLICIES

i) Statement of Compliance with Ind AS

The financial statements have been prepared in
accordance with Indian Accounting Standards (Ind
AS) notified under Section 133 of Companies Act,
2013 (‘the Act’) read together with Companies (Indian
Accounting Standards) Rules, 2015 and other relevant
provisions of the Act.

ii) Basis of Preparation and Presentation

The financial statements have been prepared on the
historical cost basis except for the following;

• Certain financial assets and liabilities
(including derivative instruments) is measured
at fair value;

• defined benefit plans - plan asset measured at
fair value

Historical cost is generally based on the fair value of
the consideration given in exchange for goods and
services.

For financial reporting purposes, fair value
measurements are categorised into Level 1, 2, or 3
based on the degree to which the inputs to the fair value
measurements are observable and the significance of
the inputs to the fair value measurement in its entirety,
which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities
that the entity can access at the measurement
date;

• Level 2 inputs are inputs, other than quoted
prices included within Level 1, that are
observable for the asset or liability, either
directly or indirectly; and

• Level 3 inputs are unobservable inputs for the
asset or liability

All assets and liabilities have been classified as current
or non-current as per the Company’s normal operating
cycle and other criteria set out in the Schedule III to
the Companies Act, 2013. Based on the nature of
products/activities of the Company and the normal

time between acquisition of assets for processing
and their realisation in cash and cash equivalents, the
Company has ascertained its operating cycle as 12
months for engineering business for the purpose of
classification of its assets and liabilities as current and
non current .

These financial statements are presented in Indian
Rupees which is the Company’s functional currency.
All amounts are rounded off to the nearest lakhs
(including two decimals), unless otherwise stated. The
accounting policies adopted in the preparation of the
financial statements are consistent with those of the
previous year.

iii) Property, Plant and Equipment

Property, Plant and Equipment are stated at cost
of acquisition, less accumulated depreciation and
accumulated impairment losses, if any. The cost
comprises purchase price (excluding refundable
taxes), borrowing costs if capitalization criteria are
met and includes directly attributable cost of bringing
the asset to its working condition for the intended
use. Any trade discounts and rebates are deducted in
arriving at the purchase price. Freehold land is not
depreciated.

Subsequent expenditures related to an item of property,
plant and equipment are added to its carrying value
only when it is probable that the future economic
benefits from the asset will flow to the Company and
cost can be reliably measured. All other repairs and
maintenance are charged to the Statement of Profit
and Loss during the reporting period in which they are
incurred.

Losses arising from the retirement of, and gains or
losses arising from disposal of property, plant and
equipment are recognised in the Statement of Profit
and Loss.

Depreciation on property, plant and equipment has
been provided on straight line method as per the useful
lives estimated by management. The life of the assets
has been assessed based on technical evaluation which
are higher than those specified by Schedule II to the
Act, taking into account the nature of the assets, the
estimated usage of the assets, the operating conditions
of the assets, past history of replacement, anticipated
technological changes, etc.

The estimated useful lives, residual values and
depreciation method are reviewed at the end of each
reporting period, with the effect of any changes in
estimate accounted for on a prospective basis.

Gains and losses on disposals are determined by
comparing proceeds on sale with carrying amount.
These are included in Statement of Profit and Loss
within other gains / losses.

iv) Capital work-in-progress

Projects under which tangible fixed assets are not
yet ready for their use are carried at cost, comprising
direct cost, related incidental expenses and attributable
interest, if any.

v) Intangible Assets

Intangible assets, being computer software, are stated
at acquisition cost, net of accumulated amortisation
and accumulated impairment losses, if any. The cost
comprises acquisition and implementation cost of
software for internal use (including software coding,
installation, testing and certain data conversion).

Amortisation is recognised on a straight-line basis
over their estimated useful lives. The estimated useful
life and amortisation method are reviewed at the end
of each reporting period, with the effect of any changes
in estimate being accounted for on a prospective basis.

Gains or losses arising from the retirement or disposal
of an intangible asset are determined as the difference
between the disposal proceeds and the carrying
amount of the asset and are recognised as income or
expense in the Statement of Profit and Loss.

Research costs are charged to the Statement of Profit
and Loss as they are incurred.

vi) Impairment of Assets

The Company assesses at end of each reporting period
whether there is any indication that an asset may be
impaired. If any such indication exists, the Company

estimates the recoverable amount of the asset. The
recoverable amount is the higher of an asset’s fair
value less costs of disposal and value in use. If such
recoverable amount of the asset or the recoverable
amount of the cash generating unit to which the
asset belongs is less than its carrying amount, the
carrying amount is reduced to its recoverable amount
(cash generating unit). The reduction is treated as an
impairment loss and is recognised in the Statement of
Profit and Loss. If at the Balance Sheet date there is an
indication that if a previously assessed impairment loss
no longer exists, the recoverable amount is reassessed
and the asset is reflected at the lower of recoverable
amount and the carrying amount that would have been
determined had no impairment loss been recognised.
Non financial asset other than goodwill that suffered
an impairment are reviewed for possible reversal of
the impairment at the end of each reporting period.
For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are
separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or
groups of assets (cash generating unit).

vii) Financial instruments

Financial assets and financial liabilities are
recognised when the Company becomes a party
to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially
measured at fair value except trade recievable which
is measured at transaction price. Transaction costs
that are directly attributable to the acquisition or issue
of financial assets and financial liabilities (other than
financial assets and financial liabilities at fair value

through profit or loss) are added to or deducted from the
fair value of the financial assets or financial liabilities,
as appropriate, on initial recognition,. Transaction
costs directly attributable to the acquisition of financial
assets or financial liabilities at fair value through profit
or loss are recognised immediately in the Statement of
Profit and Loss. “

Financial assets

All recognised financial assets are subsequently
measured in their entirety at either amortised cost
or fair value, depending on the classification of the
financial assets.

Classification:

Debt instruments that meet the following conditions
are subsequently measured at amortised cost:

- the asset is held within a business model whose
objective is to hold assets in order to collect
contractual cash flows; and

- the contractual terms of the instrument give
rise on specified dates to cash flows that are
solely payments of principal and interest on the
principal amount outstanding.

All other financial assets are subsequently measured
at fair value.

Effective interest method

The effective interest method is a method of
calculating the amortised cost of a debt instrument and
of allocating interest income over the relevant period.
The effective interest rate is the rate that exactly
discounts estimated future cash payments or receipts
(including all fees and amounts that form an integral
part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected
life of the debt instrument, or, where appropriate, a
shorter period, to the net carrying amount on initial
recognition.

Income is recognised on an effective interest basis
for debt instruments other than those financial assets
classified as at FVTPL. Interest income is recognised
in the Statement of Profit and Loss and is included in
the “Other income” line item.

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

Financial assets at FVTPL are measured at fair
value at the end of each reporting period, with any
gains or losses arising on remeasurement recognised
in the Statement of Profit and Loss. The net gain or
loss recognised in the Statement of Profit and Loss
incorporates any dividend or interest earned on the
financial asset. Dividend on financial assets at FVTPL
is recognised when the Company’s right to receive
the dividends is established, it is probable that the

economic benefits associated with the dividend will
flow to the entity, the dividend does not represent
a recovery of part of cost of the investment and the
amount of dividend can be measured reliably.

Impairment of financial assets

The Company applies the expected credit loss model
for recognising impairment loss on financial assets
measured at amortised cost, loan commitments, trade
receivables, financial guarantees not designated as
FVTPL and fair value through other comprehensive
income and other contractual rights to receive cash or
other financial asset.

For trade receivables or any contractual right to
receive cash or another financial asset that result from
revenue transactions, the Company always measures
the loss allowance at an amount equal to lifetime
expected credit losses.

Further, for the purpose of measuring lifetime
expected credit loss (“”ECL””) allowance for trade
receivables, the Company has used a practical
expedient as permitted under Ind AS 109 Financial
Instruments. This expected credit loss allowance is
computed based on a provision matrix which takes
into account historical credit loss experience and
adjusted for forward-looking information.

For recognition of impairment loss on other financial
assets and risk exposure, the Company determines
that whether there has been a significant increase in
the credit risk since initial recognition. If credit risk
has not increased significantly, 12-month ECL is used
to provide for impairment loss. However, if credit risk
has increased significantly, lifetime ECL is used. If, in
a subsequent period, credit quality of the instrument
improves such that there is no longer a significant
increase in credit risk since initial recognition, then
the entity reverts to recognising impairment loss
allowance based on 12-month ECL.

Lifetime ECL are the expected credit losses resulting
from all possible default events over the expected
life of a financial instrument. The 12-month ECL is a
portion of the lifetime ECL which results from default
events that are possible within 12 months after the
reporting date.

Derecognition of financial assets

A financial asset is derecognised only when

• The contractual rights to the cash flows from
the financial asset expire, or

• The Company has transferred the rights to
receive cash flows from the financial asset or

• retains the contractual rights to receive the
cash flows of the financial asset but assumes a
contractual obligation to pay the cash flows to
one or more recipients.

• The company has no obligation to pay amounts
to the eventual recipients unless it collects
equivalent amounts from the original asset.
Short-term advances by the company with the
right of full recovery of the amount lent plus
accrued interest at market rates do not violate
this condition.

• The company is prohibited by the terms of
the transfer contract from selling or pledging
the original asset other than as security to the
eventual recipients for the obligation to pay
them cash flows.

• The company has an obligation to remit any
cash flows it collects on behalf of the eventual
recipients without material delay. In addition,
the company is not entitled to reinvest such cash
flows, except for investments in cash or cash
equivalents (as defined in Ind AS 7 Statement
of Cash Flows) during the short settlement
period from the collection date to the date of
required remittance to the eventual recipients,
and interest earned on such investments is
passed to the eventual recipients.

Where the entity has transferred an asset, the Company
evaluates whether it has transferred substantially all
risks and rewards of ownership of the financial asset.
In such cases, the financial asset is derecognised.

Foreign exchange gains and losses

The fair value of financial assets denominated in a
foreign currency is determined in that foreign currency
and translated at the spot rate at the end of each
reporting period. For foreign currency denominated
financial assets measured at amortised cost and
FVTPL, the exchange differences are recognised in
the Statement of Profit and Loss.

Financial liabilities and equity instruments

Classification as debt or equity

Debt and equity instruments issued by a Company
are classified as either financial liabilities or as equity
in accordance with the substance of the contractual
arrangements and the definitions of a financial liability
and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences
a residual interest in the assets of an entity after
deducting all of its liabilities. Equity instruments
issued by a group entity are recognised at the proceeds
received, net of direct issue costs.

Financial liabilities

All financial liabilities are subsequently measured at
amortised cost using the effective interest method or

at FVTPL. Borrowings are intially recognised at fair
value, net of transaction costs incurred.

Financial liabilities that are not held-for-trading and
are not designated as at FVTPL are measured at
amortised cost at the end of subsequent accounting
periods. The carrying amounts of financial liabilities
that are subsequently measured at amortised cost are
determined based on the effective interest method.

Derecognition of financial liabilities

The Company derecognises financial liabilities
when, and only when, the Company’s obligations are
discharged, cancelled or have expired. An exchange
with a lender of debt instruments with substantially
different terms is accounted for as an extinguishment
of the original financial liability and the recognition
of a new financial liability. A substantial modification
of the terms of an existing financial liability (whether
or not attributable to the financial difficulty of the
debtor) is accounted for as an extinguishment of the
original financial liability and the recognition of a
new financial liability. The difference between the
carrying amount of the financial liability derecognised
and the consideration paid including any non-cash
assets transferred or liabilities assumed, and payable
is recognised in the Statement of Profit and Loss.

Offsetting financial instruments

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

Financial guarantee contracts

Financial guarantee contracts issued by the Company
are those contracts that require a payment to be made
to reimburse the holder for a loss it incurs because
the specified debtor fails to make a payment when
due in accordance with the original or modified terms
of a debt instrument, financial guarantee contracts
are recognised initially as a financial liability at
fair value, adjusted for transaction costs that are
directly attributable to the issuance of the guarantee.
Subsequently, the liability is measured at the higher
of the amount of loss allowance determined as
per impairment requirements of Ind AS 109 and
the amount recognised less cumulative amount
amortisation where appropriate.

The Fair value of financial guarantees is determined
based on the present value of the difference in cash
flows between the contractual payments required
under the debt instrument and the payments that would

be required without the guarantee, or the estimated
amount that would be payable to a third party for
assuming the obligation.

viii) Inventories

Inventories are valued at the lower of the acquisition
/ production cost and net realisable value. Costs of
inventories are determined on weighted average basis.
Raw materials and stores, work in progress, traded and
finished goods are stated at the lower of cost and net
realisable value. Cost of raw materials, consumables
spares and traded goods comprises cost of purchases
and other costs incurred in bringing the inventories
to their present location and condition. Cost of work-
in-progress and finished goods comprises direct
materials, direct labour and an appropriate proportion
of variable and fixed overhead expenditure, the latter
being allocated on the basis of normal operating
capacity. Cost of inventories also include all other
costs incurred in bringing the inventories to their
present location and condition.

ix) Earnings per share

Basic Earnings per share are calculated by dividing the
net profit / (loss) after tax for the year attributable to
equity shareholders of the Company by the weighted
average number of equity shares outstanding during
the 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.

x) Employee Benefits

a) Short-term employee benefits

Liabilities for wages and salaries, including
non-monetary benefits that are expected to
be settled wholly within 12 months after the
end of the period in which the employees
render the related service are recognised in
respect of employees’ services up to the end
of the reporting period and are measured at
the undiscounted amounts expected to be paid
when the liabilities are settled. The liabilities
are presented as current employee benefit
obligations in the Balance Sheet.

b) Other long-term employee benefits

The liabilities for earned leave are not expected
to be settled wholly within 12 months after

the end of the period in which the employees
render the related service. They are therefore
measured as the present value of expected future
payments to be made in respect of services
provided by employees up to the end of the
reporting period using the projected unit credit
method. The benefits are discounted using the
market yields at the end of the reporting period
that have terms approximating to the terms of
the related obligation. Remeasurements as a
result of experience adjustments and changes
in actuarial assumptions are recognised in the
Statement of Profit and Loss.

The obligations are presented as current
liabilities in the Balance Sheet if the entity
does not have an unconditional right to defer
settlement for at least twelve months after the
reporting period, regardless of when the actual
settlement is expected to occur.

c) Post-employment obligations

The Company operates the following post¬
employment schemes:

- Defined Contribution plans such as
employee state insurance scheme.

- Defined Benefit plans such as gratuity.

Defined Contribution Plans

The Company’s contribution to pension
and employee state insurance scheme are
considered as defined contribution plans,
as the Company does not carry any further
obligations apart from the contributions made
on a monthly basis and are charged as an
expense based on the amount of contribution
required to be made.

The Company’s liability towards gratuity,
which is a defined benefit plan, is determined
on the basis of valuations, as at Balance Sheet
date, carried out by an independent actuary
using Projected Unit Credit Method. 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 obligation.

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 and in the Balance Sheet.

Changes in the present value of the defined
benefit obligation resulting from plan
amendments or curtailments are recognised
immediately in the Statement of Profit and
Loss as past service cost.

The eligible employees of the Company are
entitled to receive post-employment benefits
in respect of provident fund, in which both the
employees and the Company make monthly
contributions at a specified percentage as
applicable of the employees’ eligible salary.
The contributions are made to the Employees
provident fund department.

d) A liability for a termination benefit is
recognised at the earlier of when the entity can
no longer withdraw the offer of the termination
benefit and when the entity recognises any
related restructuring costs.

---

Mar 31, 2024

1. GENERAL INFORMATION

Forbes Precision Tools And Machine Parts Limited was incorporated on August 30, 2022 in India having registered office at Forbes Building, Charanjit Rai Marg, Fort, Mumbai-400001. Its parent company is Shapoorji Pallonji & Company Private Limited.The Company is mainly engaged in the business of manufacturing , trading & servicing of engineering and related products and Machine & Machine parts.

2. MATERIAL ACCOUNTING POLICIES

i) Statement of Compliance with Ind AS

The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under Section 133 of Companies Act, 2013 (''the Act'') read together with Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act.

ii) Basis of Preparation and Presentation

The financial statements have been prepared on the historical cost basis except for the following;

• Certain financial assets and liabilities (including derivative instruments) is measured at fair value;

• defined benefit plans - plan asset measured at fair value

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

For financial reporting purposes, fair value measurements are categorised into Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability

All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products/activities of the Company and the normal time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for engineering business for the purpose of classification of its assets and liabilities as current and non current .

These financial statements are presented in Indian Rupees which is the Company''s functional currency. All amounts are rounded off to the nearest lakhs (including two decimals), unless otherwise stated. The accounting policies adopted in the preparation of the financial statements are consistent with those of the previous year.

During the year, the Company engaged in a Scheme of Arrangement known as the "Scheme" that resulted in the demerger of the Precision Tools business of Forbes & Company Limited (the "Demerged Company") into a Forbes Precision Tools and Machine Parts Limited (the "Resulting Company"). This demerger was approved by the National Company Law Tribunal (NCLT), Mumbai Bench on 9^th February 2024, and the certified copy of the order was received on 20^th February 2024. The effective date of the merger is 1^st March 2024.

iii) Property, Plant and Equipment

Property, Plant and Equipment are stated at cost of acquisition, less accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price (excluding refundable taxes), borrowing costs if capitalization criteria are met and includes directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. Freehold land is not depreciated.

Subsequent expenditures related to an item of property, plant and equipment are added to its carrying value only when it is probable that the future economic benefits from the asset will flow to the Company and cost can be reliably measured. All other repairs and maintenance are charged to the Statement of Profit and Loss during the reporting period in which they are incurred.

Losses arising from the retirement of, and gains or losses arising from disposal of property, plant and equipment are recognised in the Statement of Profit and Loss.

Depreciation on property, plant and equipment has been provided on straight line method as per the useful lives estimated by management. The life of the assets has been assessed based on technical evaluation which are higher than those specified by Schedule II to the Act, taking into account the nature of the assets, the estimated usage of the assets, the operating conditions of the assets, past history of replacement, anticipated technological changes, etc.

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Gains and losses on disposals are determined by comparing proceeds on sale with carrying amount. These are included in Statement of Profit and Loss within other gains / losses.

The estimated useful lives of the property, plant and equipment are as under:
Sr. No.	Class of assets	Estimated useful life
a	Building - Factory & Office Buildings	30 - 60 years
b	Plant and Equipment	03 - 20 years
c	Furniture and Fixtures	03 -10 years
d	Vehicles	4 years
e	Office equipment, Data processing equipments:-
	- Owned	Office equipments 5 years and Data processing equipments 3 to 6 years.
	- Leased	Lower of lease term and useful life as stated above
f	Buildings on leasehold land	Lower of the useful life in the range of 30 - 60 years and the lease term building useful life is based on technical certification
g	Temporary structures (included in building)	5 years
h	Solar Power Plant	25 years

Fixed assets individually costing '' 5,000 and less are depreciated fully in the year of purchase.

iv) Capital work-in-progress

Projects under which tangible fixed assets are not yet ready for their use are carried at cost, comprising direct cost, related incidental expenses and attributable interest, if any.

v) Intangible Assets

Intangible assets, being computer software, are stated at acquisition cost, net of accumulated amortisation and accumulated impairment losses, if any. The cost comprises acquisition and implementation cost of software for internal use (including software coding, installation, testing and certain data conversion).

Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the disposal proceeds and the carrying amount of the asset and are recognised as income or expense in the Statement of Profit and Loss.

Research costs are charged to the Statement of Profit and Loss as they are incurred.

Cost of software is amortised over a period of 3-5 years being the estimated useful life.

vi) Impairment of Assets

The Company assesses at end of each reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the

recoverable amount of the asset. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount (cash generating unit). The reduction is treated as an impairment loss and is recognised in the Statement of Profit and Loss. If at the Balance Sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the lower of recoverable amount and the carrying amount that would have been determined had no impairment loss been recognised. Non financial asset other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating unit).

vii) Financial instruments

Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value except trade recievablewhich is measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition,. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in the Statement of Profit and Loss.

Financial assets

All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.

Classification:

Debt instruments that meet the following conditions are subsequently measured at amortised cost:

- the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and

- the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

All other financial assets are subsequently measured at fair value.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts (including all fees and amounts that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognised in the Statement of Profit and Loss and is included in the “Other income” line item.

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

Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on remeasurement recognised in the Statement of Profit and Loss. The net gain or loss recognised in the Statement of Profit and Loss incorporates any dividend or interest earned on the financial asset. Dividend on financial assets at FVTPL is recognised when the Company’s right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.

Impairment of financial assets

The Company applies the expected credit loss model for recognising impairment loss on financial assets measured at amortised cost, loan commitments, trade receivables, financial guarantees not designated as FVTPL and fair value through other comprehensive income and other contractual

rights to receive cash or other financial asset.

For trade receivables or any contractual right to receive cash or another financial asset that result from revenue transactions, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses.

Further, for the purpose of measuring lifetime expected credit loss ("ECL") allowance for trade receivables, the Company has used a practical expedient as permitted under Ind AS 109 Financial Instruments. This expected credit loss allowance is computed based on a provision matrix which takes into account historical credit loss experience and adjusted for forward-looking information.

For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on 12-month ECL.

Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date.

Derecognition of financial assets

A financial asset is derecognised only when

• The contractual rights to the cash flows from the financial asset expire, or

• The Company has transferred the rights to receive cash flows from the financial asset or

• retains the contractual rights to receive the cash flows of the financial asset but assumes a contractual obligation to pay the cash flows to one or more recipients.

• The company has no obligation to pay amounts to the eventual recipients unless it collects equivalent amounts from the original asset. Short-term advances by the company with the right of full recovery of the amount lent plus accrued interest at market rates do not violate this condition.

• The company is prohibited by the terms of the transfer contract from selling or pledging the original asset other than as security to the eventual recipients for the obligation to pay them cash flows.

• The company has an obligation to remit any cash flows it collects on behalf of the eventual recipients without material delay. In addition, the company is not entitled to reinvest such cash flows, except for

investments in cash or cash equivalents (as defined in Ind AS 7 Statement of Cash Flows) during the short settlement period from the collection date to the date of required remittance to the eventual recipients, and interest earned on such investments is passed to the eventual recipients.

Where the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised.

Foreign exchange gains and losses

The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period. For foreign currency denominated financial assets measured at amortised cost and FVTPL, the exchange differences are recognised in the Statement of Profit and Loss.

Financial liabilities and equity instruments

Classification as debt or equity

Debt and equity instruments issued by a Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by a group entity are recognised at the proceeds received, net of direct issue costs.

Financial liabilities

All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL. Borrowings are intially recognised at fair value, net of transaction costs incurred.

Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method.

Derecognition of financial liabilities

The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or have expired. An exchange with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. A substantial modification of the terms of an existing financial liability (whether or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of

the financial liability derecognised and the consideration paid including any non-cash assets transferred or liabilities assumed, and payable is recognised in the Statement of Profit and Loss.

Offsetting financial instruments

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

Financial guarantee contracts

Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the original or modified terms of a debt instrument, financial guarantee contracts are recognised initially as a financial liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amount amortisation where appropriate.

The Fair value of financial guarantees is determined based on the present value of the difference in cash flows between the contractual payments required under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligation.

viii) Inventories

Inventories are valued at the lower of the acquisition / production cost and net realisable value. Costs of inventories are determined on weighted average basis. Raw materials and stores, work in progress, traded and finished goods are stated at the lower of cost and net realisable value. Cost of raw materials, consumables spares and traded goods comprises cost of purchases and other costs incurred in bringing the inventories to their present location and condition. Cost of work-in-progress and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition.

ix) Earnings per share

Basic Earnings per share are calculated by dividing the net profit / (loss) after tax for the year attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the 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.

x) Employee Benefits

a) Short-term employee benefits

Liabilities for wages and salaries, including nonmonetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the undiscounted amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the Balance Sheet.

b) Other long-term employee benefits

The liabilities for earned leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in the Statement of Profit and Loss.

The obligations are presented as current liabilities in the Balance Sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.

c) Post-employment obligations

The Company operates the following postemployment schemes:

- Defined Contribution plans such as employee state insurance scheme.

- Defined Benefit plans such as gratuity.

Defined Contribution Plans

The Company''s contribution to pension and employee state insurance scheme are considered as defined contribution plans, as the Company does not carry any further obligations apart from the contributions made on a monthly basis and are charged as an expense based on the amount of contribution required to be made.

The Company’s liability towards gratuity, which is a defined benefit plan, is determined on the basis of valuations, as at Balance Sheet date, carried out by an independent actuary using Projected Unit Credit Method. 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 obligation.

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 and in the Balance Sheet.

Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in the Statement of Profit and Loss as past service cost.

The eligible employees of the Company are entitled to receive post-employment benefits in respect of provident fund, in which both the employees and the Company make monthly contributions at a specified percentage as applicable of the employees’ eligible salary. The contributions are made to the Employees provident fund department.

d) A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.

xi) Provisions and Contingent Liabilities

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Onerous Contracts

Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.

Contingent liability is disclosed for (i) Possible obligations that arises from past events and whose existence 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 (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made, unless the possibility of outflows of resources embodying economic benefits are remote.

xii) Revenue recognition

Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable consideration) allocated to that performance obligation.

The Company applies the five-step approach for recognition of revenue:-

• Identification of contract(s) with customers;

• Identification of the separate performance obligations in the contract;

• Determination of transaction price;

• Allocation of transaction price to the separate

performance obligations; and

• Recognition of revenue when (or as) each performance obligation is satisfied.

1 Sale of goods:

Further recognition is done when the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the entity.

The transaction price of goods sold and services rendered is net of variable consideration on account of various discounts and schemes offered by the Company as part of the contract.

A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

At contract inception, since for most of the contracts it is expected that the period between the transfer of the promised goods or services to a customer and payment for these goods or services by the customer will be one year or less, practical expedient in IND AS 115 have been applied and accordingly:

a) The Company does not adjust the promised amount of consideration for the effects of a significant financing component

b) The Company recognises the incremental costs of obtaining a contract as an expense when incurred

c) No information on remaining performance obligations as of the year end that have an expected original term of one year or less was reported.

A contract liability is the Company’s obligation to transfer goods or services to a customer, for which the Company has already received consideration from customers.

2 Sale of Services:

Income from other services is recognised as and when the services are performed as per the terms of agreement with the respective parties.

3 Interest and Dividend Income:

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the amortised cost and at the effective interest rate applicable.

Dividend income from investments is recognised when the shareholder''s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).

4 Export Incentives:

Income from export incentives is recognised on accrual basis to the extent the ultimate realisation is reasonably certain.

xiii) Foreign currency transactions and balances

In preparing the financial statements of the Company, transactions in currencies other than the Company’s functional currency viz. Indian Rupee are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date.

Exchange differences on monetary items are recognised in the Statement of Profit and Loss in the period in which they arise.

Non-monetary items that are measured in terms of historical costs in a foreign currency are not retranslated.

xiv) Lease accounting As a lessee:

From 1 April 2019, leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Company. Contracts may contain both lease and non lease components. The Company allocates the consideration in the contracts to the lease and non-lease components based on their relative standalone prices. However, the Company has elected not to separate lease and non-lease components and instead account for these as a single lease components.

Assets and liabilities arising from a lease are initially measured on present value basis. Lease liabilities include the net present value of the following lease payments:

- fixed payments (including in substances fixed payments), less any lease incentive receivable

- variable lease payments that depend on an index or a rate,initially measured using the index or rate as at the commencement date;

- any residual value guarantees provided to the lessor by the lessee, a party related to the lessee or a third party unrelated to the lessor that is financially capable of discharging the obligations under the guarantee;

- the exercise price of the purchase option if the Company is reasonably certain to exercise that option, and

- payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option

Lease payments to be made under reasonably certain extension option are also included in the measurement of the liability. The lease payments are discounted using the lessee''s incremental borrowing rate, being the rate that lessee would have to pay to borrow the fund necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar term, security and conditions.

To determine the incremental borrowing rate, the Company:

- where possible, uses recent third party financing received by the lessee as a starting point, adjusted to reflects changes in financing condition since third party financing received

- use a build-up approach that starts with the risk-free interest rate adjusted for credit risk for leases, which does not have recent third party financing, and

- make adjustments specific to the leases, e.g. term, security, currency etc.

The Company is exposed to potential future increases in variable lease payments based on index or rate, which are not included in the lease liability until they take effect. When

adjustment to lease payments based on index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.

Lease payments are allocated between principal and finance cost. Finance cost is charged to Statement of Profit and Loss over the lease period so as to produce a constant periodical rate of interest on the remaining balance of the liability for each period.

Right-of-use assets are measured at cost comprising the following:

- the amount of initial measurement of lease liability

- any lease payments made at or before the commencement date less any lease incentives received

- any initial direct costs, and

- restoration costs

Right-of-use assets are generally depreciated over the shorter of the asset''s useful life and the lease term on a straight line basis. If the Company is reasonably certain to exercise purchase option, the right-of-use asset is depreciated over the underlying asset''s useful life.

Payments associated with short-term leases of equipment and all leases of low-value assets are recognized on a straight-line basis in the Statement of Profit and Loss. Short term leases are leases with a lease term of 12 months or less.

As a lessor:

Lease income from operating leases where the Company is a lessor is recognized in income on a straight line basis over the lease term. Initial direct costs incurred in obtaining an operating leases are added to the carrying amount of the underlying asset and recognized as expense over the lease term on the same basis as lease income. The respective leased assets are included in the balance sheet based on their nature. The Company did not need to make any adjustments to the accounting for assets held as a lessor as a result of adopting the new leasing standard.

xv) Taxes on Income

Tax expense for the year, comprising current tax and deferred tax, are included in the determination of the net profit or loss for the year. Current tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the

temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

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

Current and deferred tax are recognised in the Statment of Profit and Loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. The Company recognises Minimum Alternate Tax credit under the Income Tax Act, 1961 as an asset only when and to the extent there is convincing evidence that the Company will be liable to pay normal income tax during the specified period.

xvi) Segment Reporting

An operating segment is a component of the Company that engages in business activities from which it may earn revenue and incur expenses, whose operating results are regularly reviewed by the Company’s chief operating decision maker in order to effectively allocate the Company''s resources and assess performance.

xvii) Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset (or disposal group) and its sale is highly probable. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.

Non-current assets are not depreciated or amortised while they are classified as held for sale.

xviii) Cash and cash equivalents

For the purpose of presentation in the Statement of Cash Flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other shortterm, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the Balance Sheet.

xix) Dividend

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

xx) Exceptional Items

Exceptional items reflect items which individually or, if of a similar type, in aggregate, are disclosed separately due to their size or incidence in order to obtain clear and consistent presentation of the Company’s performance.

2B. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the material accounting policies, which are described in note 2, the directors of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

(a) Critical judgements in applying accounting policies

The following are the critical judgements, apart from those involving estimations that the directors have made in the process of applying the accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

(b) Key sources of estimation uncertainty

i) Contingent Liabilities and Provisions :

Contingent Liabilities and Provisions are liabilities of uncertain timing or amount and therefore in making a reliable estimate of the quantum and timing of liabilities judgement is applied and re-evaluated at each reporting date.

ii) Useful life and residual value of Property, Plant and Equipment :

As described in Note 2A(iii), the Company reviews the estimated useful life and residual values of property, plant and equipment at each reporting date.

iii) Impairment

Determining whether an asset is impaired requires as estimation of fair value/value in use. Such valuation requires the Company to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

iv) Impairment of Trade Receivables

The impairment provisions for trade receivables are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Company’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.

v) Impairment/ Obsolence of Invetory

The impairement/obsolence provisions of inventory are based on assumptions of its consumption/usage

in near future whether short term of long term. The Company uses its judgement in making these assumptions and selecting the inputs based on the past historical data, present and future market condition estimated at the end of each reporting period.

vi) Defined Benefit Obligations

The present value of defined benefit obligations is determined by discounting the estimated future cash outflows by reference to market yields at the end of reporting period that have terms approximating to the terms of the related obligation.

vii) Deferred Tax Asset

Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. The Company recognises Minimum Alternate Tax credit under the Income Tax Act, 1961 as an asset only when and to the extent there is convincing evidence that the Company will be liable to pay normal income tax during the specified period.