Accounting Policies of Happy Forgings Ltd. Company

Mar 31, 2025

1. | CORPORATE INFORMATION:

Happy Forgings Limited ("the Company") is a public
company domiciled in India and is incorporated under
the provisions of the Companies Act applicable in India.
The Company is principally engaged in manufacturing of
Auto components and engineering parts. The registered
office of the Company is located at B-XXIX-2254/1,
Kanganwal Road, P.O. Jugiana, Ludhiana 141120, Punjab,
India. The Company''s CIN is L28910PB1979PLC004008.
Information on related party relationships of the
Company is provided in Note 35.

The annual standalone financial statements were
approved for issue in accordance with a resolution of
the Board of Directors on May 17, 2025.

2A. | MATERIAL ACCOUNTING POLICIES:

(i) Basis of Preparation

The Standalone Financial Statements have been

prepared in accordance with Indian Accounting

Standards (Ind AS) notified under the Companies (Indian
Accounting Standards) Rules, 2015 (as amended from
time to time) and presentation requirements of Division
II of Schedule III to the Companies Act, 2013, (Ind AS
compliant Schedule III), as applicable to the financial
statements.

The standalone financial statements have been

prepared on a historical cost basis, except for the
following assets and liabilities which have been

measured at fair value or other amount, as required by
applicable accounting guidance.

â¢ Derivative financial instruments,

â¢ Certain financial assets and liabilities measured
at fair value (refer accounting policy regarding
financial instruments), and

â¢ Defined benefit pension plans - plan assets are
measured at fair value

In addition, the carrying values of recognised assets
and liabilities designated as hedged items in fair value
hedges that would otherwise be carried at amortised
cost are adjusted to record changes in the fair values
attributable to the risks that are being hedged in
effective hedge relationships. The standalone financial
statements are presented in '' and all values are
rounded to the nearest Lakhs ('' 00,000), except when
otherwise indicated.

The Company has prepared the standalone financial
statements on the basis that it will continue to operate
as a going concern.

(ii) Current versus non-current classification

Based on the time involved between the acquisition of
assets for processing and their realisation in cash and
cash equivalents, the Company has identified twelve
months as its operating cycle for determining current
and non-current classification of assets and liabilities
in the balance sheet.

Deferred tax assets and liabilities are classified as nonÂ¬
current assets and liabilities.

(iii) Foreign currencies

â¢ Functional and presentation currency

The standalone financial statements are presented
in '', which is Company''s functional currency.

â¢ Transactions and balances

Foreign currency transactions are translated into
the functional currency using the exchange rates
at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement
of such transactions and from the translation of
monetary assets and liabilities denominated in
foreign currencies at year end exchange rates are
generally recognised in profit or loss. They are
deferred in other comprehensive income if they
relate to qualifying cash flow hedges.

Foreign exchange differences on foreign currency
borrowings are presented in the Statement of
profit and loss, within finance costs. All other
foreign exchange gains and losses are presented
in the Statement of profit and loss on a net basis
within other income or other expenses.
Non-monetary items that are measured at fair
value in a foreign currency are translated using the
exchange rates at the date when the fair value was
determined. Translation differences on assets and
liabilities carried at fair value are reported as part
of the fair value gain or loss.

2B. | SUMMARY OF MATERIAL ACCOUNTING POLICIES:

(i) Revenue from contract with customer

Revenue from contracts with customers is recognised
when the control of goods or services are transferred
to the customer at an amount that reflects the
consideration to which the Company expects to entitle
in exchange for the goods or services. The Company
has concluded that it is the principal in all its revenue
arrangements, because it typically controls the goods
or services before transferring them to the customers.

The disclosures of significant accounting judgments,
estimates and assumptions relating to revenue from
contracts with customers are provided in Note 2C.

Sale of Goods: Revenue from the sale of goods is
recognised at the point in time when control of the asset
is transferred to the customer, generally on delivery of
goods. The normal credit term is 7 to 150 days.

The Company considers whether there are other
promises in the contract that are separate performance
obligations to which a portion of the transaction price
needs to be allocated (e.g., warranties, customer loyalty
points). In determining the transaction price for the
sale of equipment, the Company considers the effects
of variable consideration, the existence of significant
financing components, noncash consideration, and
consideration payable to the customer (if any).

Variable Consideration

If the consideration in a contract includes a variable
amount, the Company estimates the amount of
consideration to which it will be entitled in exchange
for transferring the goods to the customer. The variable
consideration 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. Contracts for the sale of goods
provide customers with a customary right of return in
case of defects, quality issues etc. The rights of return
give rise to variable consideration.

Rights of return

The Company uses the expected value method to
estimate the goods that will not be returned because
this method best predicts the amount of variable
consideration to which the Company will be entitled.
The requirements in Ind AS 115 on constraining
estimates of variable consideration are also applied in
order to determine the amount of variable consideration
that can be included in the transaction price. For goods
that are expected to be returned, instead of revenue, the
Company recognises a refund liability. A right of return
asset (and corresponding adjustment to cost of sales)
is also recognised for the right to recover products
from a customer.

The disclosures of significant estimates and
assumptions if any, relating to the estimation of variable
consideration for returns are provided in Note 2C.

Sale of Services: Revenues from sale of services in the
nature of Tooling Income/die design and preparation
charges are recognised over time using an input method

to measure progress towards complete satisfaction
of the tool development. The Company recognises
revenue from development of tools and dies over time
if it can reasonably measure its progress towards
complete satisfaction of the performance obligation.
Where the Company cannot reasonably measure the
outcome of a performance obligation, but the Company
expects to recover the costs incurred in satisfying the
performance obligation. In those circumstances, the
Company recognises revenue only to the extent of the
costs incurred until such time that it can reasonably
measure the outcome of the performance obligation.
Export Incentives: Revenue from export incentives is
accounted for on export of goods if the entitlements
can be estimated with reasonable assurance and
conditions precedent to claim are fulfilled.

Trade Receivables: A receivable is recognised if an
amount of consideration that is unconditional (i.e., only
the passage of time is required before payment of the
consideration is due). Refer to accounting policies of
financial assets in Section (ix) Financial instruments -
initial recognition and subsequent measurement.
Contract liabilities: A contract liability is recognised if a
payment is received, or a payment is due (whichever is
earlier) from a customer before the Company transfers
the related goods or services. Contract liabilities are
recognised as revenue when the Company performs
under the contract (i.e., transfers control of the related
goods or services to the customer).

Contract assets: A contract asset is initially recognised
for revenue earned from installation services because
the receipt of consideration is conditional on successful
completion of the installation. Upon completion of
the installation and acceptance by the customer, the
amount recognised as contract assets is reclassified
to trade receivables.

Contract assets are subject to impairment assessment.
Refer to accounting policies on impairment of financial
assets in section d) Financial instruments - initial
recognition and subsequent measurement.

Other Income

Dividend Income: Dividend income is recognised when
the right to receive payment is established, which is
generally when shareholders approve the same.
Interest Income: Interest is recognised using the
effective interest rate (EIR) method, as income for the
period in which it occurs. EIR is the rate that exactly
discounts the estimated future cash payments or
receipts over the expected life of the financial instrument
to the gross carrying amount of the financial asset or to
the amortised cost of a financial liability.

(ii) Government Grants

Government grants are recognised where there is
reasonable assurance that the grant will be received,
and all attached conditions will be complied with.

When the grant relates to duty benefit availed under
Export Promotion Capital Goods (EPCG) Scheme, it is
accounted for by way of reducing the cost from related
asset and accordingly value of the asset has been
depreciated with such reduced cost.

When the grant relates to incentives under "Invest
Punjab Scheme", it is accounted as income on a
systematic basis over the period that the related costs,
for which it is intended to compensate are incurred.
These incentives are accrued as income once the
approval of the relevant authority is sanctioned and
there is a reasonable assurance that the grant will be
received.

When loans or similar assistance are provided by
governments or related institutions, with an interest
rate below the current applicable market rate, the effect
of this favorable interest is regarded as a government
grant. The loan or assistance is initially recognised and
measured at fair value and the government grant is
measured as the difference between the initial carrying
value of the loan and the proceeds received. The loan
is subsequently measured as per the accounting policy
applicable to financial liabilities.

(iii) Inventory Valuation

Inventories are valued at the lower of cost and net
realisable value.

Costs incurred in bringing each product to its present
location and condition are accounted for as follows:

â¢ Raw materials: cost includes cost of purchase and
other costs incurred in bringing the inventories to their
present location and condition. Cost is determined on
first in, first out basis.

â¢ Finished goods and work in progress: cost includes
cost of direct materials and labour and a proportion
of manufacturing overheads based on the normal
operating capacity but excluding borrowing costs. Cost
is determined on first in, first out (FIFO) basis.

â¢ Packing Materials and other products are determined
on Weighted Average basis.

â¢ Stores and Spares is value at Weighted Average Value.

â¢ Scrap is valued at estimated realisable value.

Net realisable value is the estimated selling price in
the ordinary course of business, less estimated costs
of completion and estimated costs necessary to make
the sale.

(iv) Cash and Cash Equivalents

Cash and cash equivalents in the balance sheet
comprise cash on hand, cash at banks and short-term
deposits with banks with an original maturity of three
months or less, that are readily convertible to a known
amount of cash and subject to an insignificant risk of
change in value.

(v) Property, Plant and Equipment

Capital work in progress is stated at cost, net of
accumulated impairment loss, if any. Plant and
equipment are stated at cost, net of accumulated
depreciation and accumulated impairment losses, if
any.

Cost comprises purchase price and 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. Such
cost includes the cost of replacing part of the plant
and equipment and borrowing costs for long-term
construction projects if the recognition criteria are met.
Machinery spares which can be used only in connection
with an item of Property, Plant and equipment and
whose use is expected to be irregular are capitalised
and depreciated over the useful life of the principal
item of the relevant assets. When significant parts of
plant and equipment are required to be replaced at
intervals, the Company depreciates them separately
based on their specific useful lives. Likewise, when a
major inspection is performed, its cost is recognised in
the carrying amount of the plant and equipment as a
replacement if the recognition criteria are satisfied. All
other repair and maintenance costs are recognised in
profit or loss as incurred.

Depreciation

Depreciation for identified asset/ components is
computed on straight line method based on useful
lives, determined based on internal technical evaluation
as follows:

*The Company, based on technical assessment
made by technical expert and management estimate,
depreciates certain items of plant and equipment over
estimated useful lives which are different from the
useful life prescribed in Schedule II to 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.

** Useful life mentioned is considering single shift
working, however depreciation charged based on
average number of shifts worked on an annual basis.
Any item of property, plant and equipment and any
significant part initially recognised is derecognised
upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or loss
arising on derecognition of the asset (calculated as the
difference between the net disposal proceeds and the
carrying amount of the asset) is included in income
statement when asset is derecognised.

The residual values, useful lives and method of
depreciation of property, plant and equipment are
reviewed at each financial year end and adjusted
prospectively, if appropriate.

(vi) Intangible Assets

Intangible assets acquired separately are measured
on initial recognition at cost. The cost of intangible
assets acquired in a business combination is their
fair value at the date of acquisition. Following initial
recognition, intangible assets are carried at cost less
any accumulated amortisation and accumulated
impairment losses. Internally generated intangibles,
excluding capitalised development costs, are not
capitalised and the related expenditure is reflected in
profit or loss in the period in which the expenditure is
incurred.

The useful lives of intangible assets are assessed as
either finite or indefinite.

of future economic benefits embodied in the asset
are considered to modify the amortisation period or
method, as appropriate, and are treated as changes in
accounting estimates. The amortisation expense on
intangible assets with finite lives is recognised in the
statement of profit and loss unless such expenditure
forms part of carrying value of another asset.

An intangible asset is derecognised upon disposal (i.e.,
at the date the recipient obtains control) or when no
future economic benefits are expected from its use or
disposal. Any gain or loss arising upon derecognition
of the asset (calculated as the difference between the
net disposal proceeds and the carrying amount of the
asset) is included in the statement of profit and loss.
when the asset is derecognised.

The useful live of intangible assets are as follows:

Research and development costs

Expenditure on research activities is recognised as
an expense in the period in which it is incurred. An
internally generated intangible asset arising from
development (or from the development phase of an
internal project) is recognised if, and only if, all of the
following have been demonstrated:

- the technical feasibility of completing the
intangible asset so that it will be available for use
or sale;

- the intention to complete the intangible asset and
use or sell it;

- the ability to use or sell the intangible asset;

- how the intangible asset will generate probable
future economic benefits;

- the availability of adequate technical, financial and
other resources to complete the development and
to use or sell the intangible asset; and

- the ability to measure reliably the expenditure
attributable to the intangible asset during its
development.

Following initial recognition of the development
expenditure as an asset, the asset is carried at cost
less any accumulated amortisation and accumulated
impairment losses. Amortisation of the asset begins
when development is complete, and the asset is
available for use. It is amortised over the period of
expected future benefit. amortisation expense is
recognised in the statement of profit and loss unless

such expenditure forms part of carrying value of
another asset. During the period of development, the
asset is tested for impairment annually.

(vii) Investment in Subsidiary

A subsidiary is an entity that is controlled by another
entity.

An associate is an entity over which the Company has
significant influence. Significant influence is the power
to participate in the financial and operating policy
decisions of the investee but is not control or joint
control over those policies.

The Company''s investments in its subsidiary and
associates are accounted at cost less impairment.

(viii) Impairment of non- financial assets

The Company assesses at each reporting date, whether
there is an indication that an asset may be impaired.
If any indication exists, or when annual impairment
testing for an asset is required, the Company estimates
the asset''s recoverable amount. An asset''s recoverable
amount is the higher of an asset''s or cash generating
units (CGU)''s fair value less costs of disposal and its
value in use. The recoverable amount is determined for
an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from
other assets or groups of assets. Where the carrying
amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written
down to its recoverable amount.

In assessing value in use, the estimated future cash
flows are discounted to their present value using a
pre-tax discount rate that reflects current market
assessments of the time value of money and the risks
specific to the asset. In determining fair value less costs
of disposal, recent market transactions are taken into
account. If no such transactions can be identified, an
appropriate valuation model is used. These calculations
are corroborated by valuation multiples, quoted share
prices for publicly traded companies or other available
fair value indicators.

recent budgets/forecasts, the Company extrapolates
cash flow projections in the budget using a steady or
declining growth rate for subsequent years, unless
an increasing rate can be justified. In any case, this
growth rate does not exceed the long-term average
growth rate for the products, industries, or country or
countries in which the Company operates, or for the
market in which the asset is used. Impairment losses
including impairment on inventories, are recognised in
the statement of profit and loss.

For assets excluding goodwill, an assessment is made
at each reporting date to determine whether there is
an indication that previously recognised impairment
losses no longer exist or have decreased. If such
indication exists, the Company estimates the asset''s
or CGU''s recoverable amount. A previously recognised
impairment loss is reversed only if there has been a
change in the assumptions used to determine the
asset''s recoverable amount since the last impairment
loss was recognised. The reversal is limited so that
the carrying amount of the asset does not exceed its
recoverable amount, nor exceed the carrying amount
that would have been determined, net of depreciation,
had no impairment loss been recognised for the
asset in prior years. Such reversal is recognised in the
statement of profit and loss unless the asset is carried
at a revalued amount, in which case, the reversal is
treated as a revaluation increase.

Intangible assets with indefinite useful lives are tested
for impairment annually at the end of the financial
year at the CGU level, as appropriate, and when
circumstances indicate that the carrying value may be
impaired.

(ix) Financial Instrument

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

Financial assets are classified, at initial recognition, as
subsequently measured at amortised cost, fair value
through other comprehensive income (OCI), and fair
value through profit or loss

a financial asset at its fair value plus, in the case of
a financial asset not at fair value through profit or
loss, transaction costs. Trade receivables that do not
contain a significant financing component or for which
the Company has applied the practical expedient are
measured at the transaction price determined under
Ind AS 115. Refer to the accounting policies in section
(i) Revenue from contracts with customers.

In order for a financial asset to be classified and
measured at amortised cost or fair value through OCI, it
needs to give rise to cash flows that are ''solely payments
of principal and interest (SPPI)'' on the principal amount
outstanding. This assessment is referred to as the SPPI
test and is performed at an instrument level. Financial
assets with cash flows that are not SPPI are classified
and measured at fair value through profit or loss,
irrespective of the business model.

Purchases or sales of financial assets that require
delivery of assets within a time frame established by
regulation or convention in the marketplace (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

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

â¢ Financial assets at amortised cost (debt

instruments)

â¢ Financial assets at fair value through other
comprehensive income (FVTOCI) with recycling of
cumulative gains and losses (debt instruments)

â¢ Financial assets designated at fair value through
OCI with no recycling of cumulative gains and
losses upon derecognition (equity instruments)

â¢ Financial assets at fair value through profit or loss

a. Financial Assets at amortised Cost (debt

instruments)

A ''financial asset'' is measured at the amortised
cost if both the following conditions are met:

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

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

After initial measurement, such financial assets
are subsequently measured at amortised cost

using the effective interest rate (EIR) method.
Amortised cost is calculated by taking into
account any discount or premium on acquisition
and fees or costs that are an integral part of the
EIR. The EIR amortisation is included in finance
income in the profit or loss. The losses arising from
impairment are recognised in the profit or loss.
The Company''s financial assets at amortised cost
includes trade receivables, and loan to employees
included under other current financial assets.

b. Financial assets at fair value through other
comprehensive income (FVTOCI) (debt
instrument)

A ''financial asset'' is classified as at the FVTOCI if
both of the following criteria are met:

â¢ The objective of the business model is
achieved both by collecting contractual cash
flows and selling the financial assets, and

â¢ The asset''s contractual cash flows represent
SPPI.

Debt instruments included within the
FVTOCI category are measured initially as
well as at each reporting date at fair value.
For debt instruments, at fair value through
OCI, interest income, foreign exchange
revaluation and impairment losses or
reversals are recognised in the profit or
loss and computed in the same manner as
for financial assets measured at amortised
cost. The remaining fair value changes are
recognised in OCI. Upon derecognition, the
cumulative fair value changes recognised in
OCI is reclassified from the equity to profit or
loss.

c. Financial assets designated at fair value through
OCI (equity instruments)

Upon initial recognition, the Company can elect
to classify irrevocably its equity investments as
equity instruments designated at fair value through
OCI when they meet the definition of equity under
Ind AS 32 Financial Instruments: Presentation
and are not held for trading. The classification
is determined on an instrument-by-instrument
basis. Equity instruments which are held for
trading and contingent consideration recognised
by an acquirer in a business combination to which
Ind AS103 applies are classified as at FVTPL.
Gains and losses on these financial assets are
never recycled to profit or loss. Dividends are

recognised as other income in the statement of
profit and loss when the right of payment has
been established, except when the Company
benefits from such proceeds as a recovery of
part of the cost of the financial asset, in which
case, such gains are recorded in OCI. Equity
instruments designated at fair value through OCI
are not subject to impairment assessment.

d. Financial Assets at Fair value through Profit or
Loss (FVTPL)

Financial assets at fair value through profit or
loss are carried in the balance sheet at fair value
with net changes in fair value recognised in the
statement of profit and loss.

This category includes derivative instruments and
listed equity investments which the Company
had not irrevocably elected to classify at fair
value through OCI. Dividends on listed equity
investments are recognised in the statement of
profit and loss when the right of payment has
been established.

Investments in Mutual Funds are accounted for at
Fair value through Profit or Loss Account.

Embedded Derivatives

A derivative embedded in a hybrid contract, with a
financial liability or non-financial host, is separated
from the host and accounted for as a separate
derivative if: the economic characteristics and
risks are not closely related to the host; a separate
instrument with the same terms as the embedded
derivative would meet the definition of a derivative;
and the hybrid contract is not measured at fair
value through profit or loss. Embedded derivatives
are measured at fair value with changes in fair
value recognised in profit or loss. Reassessment
only occurs if there is either a change in the terms
of the contract that significantly modifies the
cash flows that would otherwise be required or a
reclassification of a financial asset out of the fair
value through profit or loss category.

Impairment of Financial Assets

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

a) Financial assets that are debt instruments,
and are measured at amortised cost e.g.

loans, debt securities, deposits, trade
receivables and bank balance

b) Trade receivables or any contractual right to
receive cash or another financial asset that
result from transactions that are within the
scope of Ind AS 115

c) Financial assets that are measured at
FVTOCI

The Company follows ''simplified approach'' for
recognition of impairment loss allowance on trade
receivables.

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

For recognition of impairment loss on other
financial assets and risk exposure, the
Company determines 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.

ECL is the difference between all contractual cash
flows that are due to the Company in accordance
with the contract and all the cash flows that the
entity expects to receive (i.e., all cash shortfalls),
discounted at the original EIR. When estimating
the cash flows, an entity is required to consider:

â¢ All contractual terms of the financial
instrument (including prepayment, extension,
call and similar options) over the expected
life of the financial instrument. However,
in rare cases when the expected life of the
financial instrument cannot be estimated
reliably, then the entity is required to use the
remaining contractual term of the financial
instrument

â¢ Cash flows from the sale of collateral held or
other credit enhancements that are integral
to the contractual terms

As a practical expedient, the Company uses a
provision matrix to determine impairment loss
allowance on portfolio of its trade receivables.
The provision matrix is based on its historically
observed default rates over the expected life of
the trade receivables and is adjusted for forwardÂ¬
looking estimates. At every reporting date, the
historical observed default rates are updated and
changes in the forward-looking estimates are
analyzed.

ECL impairment loss allowance (or reversal)
recognised during the period is recognised as
income/ expense in the statement of profit and
loss. This amount is reflected under the head
''other expenses'' in the statement of profit and
loss.

The balance sheet presentation for various
financial instruments is described below:

â¢ Financial assets measured as at amortised
cost, contractual revenue receivables and
lease receivables:

ECL is presented as an allowance, i.e., as an
integral part of the measurement of those
assets in the balance sheet. The allowance
reduces the net carrying amount. Until the
asset meets write-off criteria, the Company
does not reduce impairment allowance from
the gross carrying amount.

â¢ Debt instruments measured at FVTOCI:

Since financial assets are already reflected
at fair value, impairment allowance is not
further reduced from its value. Rather,
ECL amount is presented as ''accumulated
impairment amount'' in the OCI.

For assessing increase in credit risk and
impairment loss, the Company combines financial
instruments on the basis of shared credit risk
characteristics with the objective of facilitating
an analysis that is designed to enable significant
increases in credit risk to be identified on a timely
basis.

The Company does not have any purchased or
originated credit impaired (POCI) financial assets,
i.e., financial assets which are credit impaired on
purchase/ origination.

e. Trade Receivables

Trade receivables are amounts due from

customers for goods sold or services performed
in the ordinary course of business. They are
generally due for settlement within one year and
therefore are all classified as current. Where the
settlement is due after one year, they are classified
as non-current. Trade receivables are recognised
initially at the amount of consideration that is
unconditional unless they contain significant
financing components, when they are recognised
at fair value. The Company holds the trade
receivables with the objective to collect the
contractual cash flows and therefore measures
them subsequently at amortised cost using the
effective interest method.

Trade receivables are disclosed in Note 9.
De-recognition of Financial Assets:

A financial asset (or, where applicable, a part
of a financial asset or part of a group of similar
financial assets) is primarily derecognised (i.e.,
removed from the Company''s balance sheet)
when:

(i) The right to receive cash flows from asset
have expired, or.

(ii) The Company has transferred its right to
receive cash flows from the asset or has
assumed an obligation to pay the received
cash flows in full without material delay
to a third party under a "pass-through"
arrangement and either:

a) The Company has transferred
substantially all the risks and rewards
of the asset, or

b) The Company has neither transferred
nor retained substantially all the risks
and rewards of the asset but has
transferred control of the asset.

When the Company has transferred its right to
receive cash flows from an asset or has entered
into a pass-through arrangement, it evaluates
if and to what extent it has retained the risks
and rewards of ownership. When it has neither
transferred nor retained substantially all of the
risks and rewards of the asset, nor transferred
control of the asset, the Company continues to
recognise the transferred asset to the extent of
the Company''s continuing involvement. In that
case, the Company also recognises an associated
liability. The transferred asset and the associated
liability are measured on a basis that reflects
the rights and obligations that the Company has
retained.

Continuing involvement that takes the form of a
guarantee over the transferred asset is measured
at the lower of the original carrying amount of the
asset and the maximum amount of consideration
that the Company could be required to repay.

Financial Liabilities:

Initial Recognition and Measurement.

Financial liabilities are classified, at initial
recognition, as financial liabilities at fair value
through profit or loss, loans and borrowings,
payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair
value and, in the case of loans and borrowings and
payables, net of directly attributable transaction
costs. The Company''s financial liabilities include
trade and other payables, loans and borrowings
including bank overdrafts, and derivative financial
instruments.

Subsequent Measurement

For purposes of subsequent measurement,
financial liabilities are classified in two categories:

â¢ Financial liabilities at fair value through profit or
loss

â¢ Financial liabilities at amortised cost (loans and
borrowings)

a) Financial Liabilities at Fair Value through
Profit or Loss

Financial liabilities at fair value through profit
or loss include financial liabilities held for
trading and financial liabilities designated
upon initial recognition as at fair value
through profit or loss. The Company has
not designated any financial liabilities upon
initial measurement recognition at fair value
through profit or loss. Financial liabilities
at fair value through profit or loss are at
each reporting date with all the changes
recognised in the Statement of Profit and
Loss.

Financial liabilities are classified as held for
trading if they are incurred for the purpose of
repurchasing in the near term. This category
also includes derivative financial instruments
entered into by the Company that are not
designated as hedging instruments in hedge
relationships as defined by Ind AS 109.
Separated embedded derivatives are also
classified as held for trading unless they are

designated as effective hedging instruments.
Gains or losses on liabilities held for trading
are recognised in the profit or loss.

Financial liabilities designated upon initial
recognition at fair value through profit or loss
are designated as such at the initial date of
recognition, and only if the criteria in Ind AS
109 are satisfied. For liabilities designated as
FVTPL, fair value gains/ losses attributable
to changes in own credit risk are recognised
in OCI. These gains/ losses are not
subsequently transferred to P&L. However,
the Company may transfer the cumulative
gain or loss within equity. All other changes
in fair value of such liability are recognised
in the statement of profit and loss. The
Company has not designated any financial
liability as at fair value through profit or loss.

b) Financial Liabilities measured at Amortised
Cost (Loan and Borrowings)

This is the category most relevant to
the Company. After initial recognition,
interest-bearing loans and borrowings are
subsequently measured at amortised cost
using the EIR method. Gains and losses
are recognised in profit or loss when the
liabilities are derecognised as well as through
the effective interest rate (EIR) amortisation
process.

Amortised cost is calculated by taking
into account any discount or premium on
acquisition and fees or costs that are an
integral part of the EIR. The EIR amortisation
is included as finance costs in the statement
of profit and loss.

This category generally applies to borrowings.
For more information refer Note 14.

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
terms of a debt instrument. Financial guarantee
contracts are recognised initially as a 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, when
appropriate, the cumulative amount of income
recognised in accordance with the principles of
Ind AS 115.

De-recognition of Financial Liability.

A Financial Liability is derecognised when the
obligation under the liability is discharged or
cancelled or expires. When an existing financial
liability is replaced by another from the same
lender on substantially different terms, or the terms
of an existing liability are substantially modified,
such an exchange or modification is treated as
the derecognition of the original liability and the
recognition of a new liability. The difference in the
respective carrying amounts is recognised in the
statement of profit and loss.

Reclassification of financial assets
The Company determines classification of
financial assets and liabilities on initial recognition.
After initial recognition, no reclassification is made
for financial assets which are equity instruments
and financial liabilities. For financial assets which

Offsetting of Financial Instruments.

Financial Assets and Financial Liabilities are offset,
and the net amount is reported in the balance
sheet if there is a currently enforceable legal right
to offset the recognised amounts and there is an
intention to settle on a net basis, to realise the
assets and settle the liabilities simultaneously.

are debt instruments, a reclassification is made
only if there is a change in the business model
for managing those assets. Changes to the
business model are expected to be infrequent.
The Company''s senior management determines
change in the business model as a result of external
or internal changes which are significant to the
Company''s operations. Such changes are evident
to external parties. A change in the business
model occurs when the Company either begins
or ceases to perform an activity that is significant
to its operations. If the Company reclassifies
financial assets, it applies the reclassification
prospectively from the reclassification date which
is the first day of the immediately next reporting
period following the change in business model.
The Company does not restate any previously
recognised gains, losses (including impairment
gains or losses) or interest.

(x) Supplier finance arrangements

The Company has established supplier finance
arrangements (Refer Note 14). The Company evaluates
whether financial liabilities covered such arrangements
continue to be classified within trade payables, or they
need to be classified as a borrowing or as part of other
financial liabilities/ as a separate line item on the face

of the balance sheet. Such evaluation requires exercise
of judgment basis specific terms of the arrangement.
The Company classifies financial liabilities covered
under supplier finance arrangement within trade
payables in the balance sheet only if (i) the obligation
represents a liability to pay for goods and services, (ii)
is invoiced and formally agreed with the supplier, (iii) is
part of the working capital used in its normal operating
cycle, (iv) the Company is not legally released from its
original obligation to the supplier, and has not assumed
a new obligation toward the bank, and another party (iv)
there is no substantial modification to the terms of the
liability.

If one or more of the above criteria are met, the Company
derecognises its original liability toward the supplier
and recognise a new liability toward the bank which is
classified as bank borrowing or other financial liability,
depending on factors such as whether the Company
(i) has obligation toward bank, (ii) is getting extended
credit period such that obligation is no longer part of its
working capital cycle, (iii) is paying interest directly or
indirectly, (iv) has provided guarantee or security, and/
or (v) is recognised as borrower in the bank books.
Cash flows related to liabilities arising from supplier
finance arrangements that continue to be classified
in trade payables in the standalone balance sheet
are included in operating activities in the standalone
statement of cash flows, when the Company finally
settles the liability.

In cases, where the Company has derecognised its
original liability toward the supplier and recognise
a new liability toward the bank, the Company has
assessed that the bank is acting as its agent in making
payment to the supplier. Accordingly, the Company
presents operating cash outflow and financing cash
inflow, when bank made payment to the supplier. The
payment made by the Company to the bank toward
interest, if any, as well as on settlement is presented as
financing cash outflows.

(xi) Derivative Financial Instruments and hedge accounting
Initial recognition and subsequent measurement

The Company uses derivative financial instruments,
such as forward currency contracts to hedge its foreign
currency risks. Such derivative financial instruments are
initially recognised at fair value on the date on which a
derivative contract is entered into and are subsequently
re-measured at their fair value at the end of each
reporting period. Derivatives are carried as financial
assets when the fair value is positive and as financial
liabilities when the fair value is negative. The purchase

contracts that meet the definition of a derivative under
Ind AS 109 are recognised in the statement of profit
and loss.

Any gains or losses arising from changes in the fair
value of derivatives are taken directly to profit or loss,
except for the effective portion of cash flow hedges,
which is recognised in OCI and later reclassified to
profit or loss when the hedge item affects profit or loss
or treated as basis adjustment if a hedged forecast
transaction subsequently results in the recognition of
a non-financial asset or non-financial liability.

For the purpose of hedge accounting, at the inception
of a hedge relationship, the Company formally
designates and documents the hedge relationship to
which the Company wishes to apply hedge accounting
and the risk management objective and strategy for
undertaking the hedge.

The documentation includes identification of the
hedging instrument, the hedged item, the nature of the
risk being hedged, and how the Company will assess
whether the hedging relationship meets the hedge
effectiveness requirements (including the analysis of
sources of hedge ineffectiveness and how the hedge
ratio is determined). A hedging relationship qualifies
for hedge accounting if it meets all of the following
effectiveness requirements:

- There is ''an economic relationship'' between the hedged
item and the hedging instrument.

- The effect of credit risk does not ''dominate the value
changes'' that result from that economic relationship.

- The hedge ratio of the hedging relationship is the same
as that resulting from the quantity of the hedged item
that the Company actually hedges and the quantity
of the hedging instrument that the Company actually
uses to hedge that quantity of hedged item.

The Company designates certain foreign exchange
forward contracts as cash flow hedges to mitigate the
risk of foreign exchange exposure on highly probable
forecast sales transactions, and thereafter, as a fair
value hedge of the resulting receivables.

the statement of profit or loss. Under fair value hedge,
the change in the fair value of a hedging instrument
is recognised in the statement of profit and loss. The
change in the fair value of the hedged item attributable
to the risk hedged is recorded as part of the carrying
value of the hedged item and is also recognised in the
statement of profit and loss.

(xii) Retirement and other employee Benefits

a) Defined Contribution Scheme:

Provident Fund

Contributions in respect of Employees are made to
the Fund administered by the Regional Provident
Fund Commissioner as per the provisions of
Employees'' Provident Fund and Miscellaneous
Provisions Act, 1952 and are charged to Statement
of Profit and Loss as and when services are
rendered by employees. Such benefits are
classified as Defined Contribution Schemes as the
Company does not carry any further obligations,
apart from the contributions made on a monthly
basis to the Regional Provident fund.

Employee''s State Insurance
The Company maintains an insurance policy to
fund a post-employment medical assistance
scheme, which is a defined contribution plan. The
Company''s contribution to State Plans namely
Employees'' State Insurance Fund and Employees''
Pension Scheme are charged to the statement of
profit and loss every year.

If the contribution payable to the schemes for
service received before the balance sheet date
exceeds the contribution already paid, the deficit
payable to the scheme is recognised as a liability
after deducting the contribution already paid. If the
contribution already paid exceeds the contribution
due for services received before the balance sheet
date, then excess is recognised as an asset to
the extent that the pre-payment will lead to, for
example, a reduction in future payment or a cash
refund.

b) Defined Benefit Plan:

Gratuity

respective employee''s salary and the tenure
of employment. The gratuity plan in Company
is funded through annual contributions to Life
Insurance Corporation of India (LIC) under its
Company''s Gratuity Scheme.

The Company''s Liabilities on account of Gratuity
on retirement of employees are determined at the
end of each financial year on the basis of actuarial
valuation certificates obtained from Registered
Actuary in accordance with the measurement
procedure as per Indian Accounting Standard (Ind
AS)-19 ''Employee Benefits''. The liability or asset
recognised in the balance sheet in respect of
defined benefit gratuity plans is the present value
of the defined benefit obligation at the end of the
reporting period less the fair value of plan assets.
The Company''s liability is actuarially determined
(using the Projected Unit Credit method) at the
end of each year. The present value of the defined
benefit obligation is determined by discounting the
estimated future cash outflows using interest rates
of government bonds. Re-measurement gains and
losses arising from experience adjustments and
changes in actuarial assumptions are charged or
credited to equity through other comprehensive
income in the period in which they arise. They
are included in retained earnings through OCI in
the statement of changes in equity and in the
balance sheet. Past-service costs are recognised
immediately in statement of profit and loss. ReÂ¬
measurements are not reclassified to profit or loss
in subsequent periods.

Past service costs are recognised in profit or
loss on the earlier of:

a) The date of the plan amendment or
curtailment, and

b) The date that the Company recognises
related restructuring costs

Net interest is calculated by applying the
discount rate to the net defined benefit liability
or asset. The Company recognises the following
changes in the net defined benefit obligation as
an expense in the consolidated statement of
profit and loss:

a) Service costs comprising current service
costs, past-service costs, gains and losses
on curtailments and non-routine settlements;
and

b) Net interest expense or income

Compensated Absences

Accumulated compensated absences are either
availed or encashed within 12 months from the end
of the year end are treated as short term employee
benefits. The Company measures the expected
cost of such absences as the additional amount
that it expects to pay as a result of the unused
entitlement that has accumulated at the reporting
date. The Company recognises expected cost of
short-term employee benefit as an expense, when
an employee renders the r

Mar 31, 2024

1. CORPORATE INFORMATION:

Happy Forgings Limited ("the Company") is a public company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. The Company is principally engaged in manufacturing of forgings and related components. The registered office of the Company is located at B-XXIX-2254/1, Kanganwal Road, PO. Jugiana, Ludhiana 141120, Punjab, India. The Company''s CIN is L28910PB1979PLC004008. Information on related party relationships of the Company is provided in Note 35.

The Company has completed its Initial Public Offer (IPO) during the year and accordingly the Company is listed on National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) on 27^th December, 2023.

The annual standalone financial statements were approved for issue in accordance with a resolution of the Board of Directors on 24^th May, 2024.

2A. MATERIAL ACCOUNTING POLICIES:

(i) Basis of Preparation

The Standalone Financial Statements have been

prepared in accordance with Indian Accounting

Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and presentation requirements of Division II of Schedule III to the Companies Act, 2013, (Ind AS compliant Schedule III), as applicable to the financial statements.

The standalone financial statements have been

prepared on a historical cost basis, except for the following assets and liabilities which have been

measured at fair value or other amount, as required by applicable accounting guidance.

â¢ Derivative financial instruments,

â¢ Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments), and

â¢ Defined benefit pension plans - plan assets are measured at fair value

I n addition, the carrying values of recognised assets and liabilities designated as hedged items in fair value hedges that would otherwise be carried at amortised cost are adjusted to record changes in the fair values attributable to the risks that are being hedged in effective hedge relationships. The standalone financial statements are presented in INR and all values are rounded to the nearest Lakhs ('' 00,000), except when otherwise indicated.

The Company has prepared the standalone financial statements on the basis that it will continue to operate as a going concern.

(ii) Current versus non-current classification

Based on the time involved between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has identified twelve months as its operating cycle for determining current and non-current classification of assets and liabilities in the balance sheet.

Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.

(iii) Foreign currencies

â¢ Functional and presentation currency

The standalone financial statements are presented in INR, which is Company''s functional currency.

â¢ Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or loss. They are deferred in other comprehensive income if they relate to qualifying cash flow hedges.

Foreign exchange differences on foreign currency borrowings are presented in the Statement of profit and loss, within finance costs. All other foreign exchange gains and losses are presented in the Statement of profit and loss on a net basis within other income or other expenses. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.

2B. SUMMARY OF MATERIAL ACCOUNTING POLICIES:

(i) Revenue from contract with customer

Revenue from contracts with customers is recognised when the control of goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to entitle in exchange for the goods or services. The Company has concluded that it is the principal in all its revenue

arrangements, because it typically controls the goods or services before transferring them to the customers. The disclosures of significant accounting judgments, estimates and assumptions relating to revenue from contracts with customers are provided in Note 2C.

Sale of Goods: Revenue from the sale of goods is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of goods. The normal credit term is 30 to 150 days.

The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated (e.g., warranties, customer loyalty points). In determining the transaction price for the sale of equipment, the Company considers the effects of variable consideration, the existence of significant financing components, noncash consideration, and consideration payable to the customer (if any).

Variable Consideration

I f the consideration in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration 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. Contracts for the sale of goods provide customers with a customary right of return in case of defects, quality issues etc. The rights of return give rise to variable consideration.

Rights of return

The Company uses the expected value method to estimate the goods that will not be returned because this method best predicts the amount of variable consideration to which the Company will be entitled. The requirements in Ind AS 115 on constraining estimates of variable consideration are also applied in order to determine the amount of variable consideration that can be included in the transaction price. For goods that are expected to be returned, instead of revenue, the Company recognises a refund liability. A right of return asset (and corresponding adjustment to cost of sales) is also recognised for the right to recover products from a customer.

The disclosures of significant estimates and assumptions if any, relating to the estimation of variable consideration for returns are provided in Note 2C.

Sale of Services: Revenue from the sale of services is in nature of job work on customer product which normally takes a shorter period of time and hence, revenue is recognised when products are sent to customer on which job work is completed. The normal credit period is 30 to 60 days.

Revenues from sale of services in the nature of Tooling Income/die design and preparation charges are recognised over time using an input method to measure progress towards complete satisfaction of the tool development. The Company recognises revenue from development of tools and dies over time if it can reasonably measure its progress towards complete satisfaction of the performance obligation. Where the Company cannot reasonably measure the outcome of a performance obligation, but the Company expects to recover the costs incurred in satisfying the performance obligation. In those circumstances, the Company recognises revenue only to the extent of the costs incurred until such time that it can reasonably measure the outcome of the performance obligation. Export Incentives: Revenue from export incentives is accounted for on export of goods if the entitlements can be estimated with reasonable assurance and conditions precedent to claim are fulfilled.

Trade Receivables: A receivable is recognised if an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets in Section (ix) Financial instruments -initial recognition and subsequent measurement. Contract liabilities: A contract liability is recognised if a payment is received, or a payment is due (whichever is earlier) from a customer before the Company transfers the related goods or services. Contract liabilities are recognised as revenue when the Company performs under the contract (i.e., transfers control of the related goods or services to the customer).

Contract assets: A contract asset is initially recognised for revenue earned from installation services because the receipt of consideration is conditional on successful completion of the installation. Upon completion of the installation and acceptance by the customer, the amount recognised as contract assets is reclassified to trade receivables.

Contract assets are subject to impairment assessment. Refer to accounting policies on impairment of financial assets in section d) Financial instruments - initial recognition and subsequent measurement.

Other Income

Dividend Income: Dividend income is recognised when the right to receive payment is established, which is generally when shareholders approve the same. Interest Income: Interest is recognised using the effective interest rate (EIR) method, as income for the period in which it occurs. EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument to the gross carrying amount of the financial asset or to the amortised cost of a financial liability.

(ii) Government Grants

Government grants are recognised where there is reasonable assurance that the grant will be received, and all attached conditions will be complied with.

When the grant relates to duty benefit availed under Export Promotion Capital Goods (EPCG) Scheme, it is accounted for by way of reducing the cost from related asset and accordingly value of the asset has been depreciated with such reduced cost.

When the grant relates to incentives under "Invest Punjab Scheme", it is accounted as income on a systematic basis over the period that the related costs, for which it is intended to compensate are incurred. These incentives are accrued as income once the approval of the relevant authority is sanctioned and there is a reasonable assurance that the grant will be received.

When loans or similar assistance are provided by governments or related institutions, with an interest rate below the current applicable market rate, the effect of this favorable interest is regarded as a government grant. The loan or assistance is initially recognised and measured at fair value and the government grant is measured as the difference between the initial carrying value of the loan and the proceeds received. The loan is subsequently measured as per the accounting policy applicable to financial liabilities.

(iii) Inventory Valuation

Inventories are valued at the lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and condition are accounted for as follows:

â¢ Raw materials: cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on first in, first out basis.

â¢ Finished goods and work in progress: cost includes cost of direct materials and labour and

a proportion of manufacturing overheads based on the normal operating capacity but excluding borrowing costs. Cost is determined on first in, first out (FIFO) basis.

â¢ Packing Materials and other products are determined on Weighted Average basis.

â¢ Stores and Spares is value at Weighted Average Value.

â¢ Scrap is valued at estimated realisable value.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.

(iv) Cash and Cash Equivalents

Cash and cash equivalents in the balance sheet comprise cash on hand, cash at banks and short-term deposits with banks with an original maturity of three months or less, that are readily convertible to a known amount of cash and subject to an insignificant risk of change in value.

(v) Property, Plant and Equipment

Capital work in progress is stated at cost, net of accumulated impairment loss, if any. Plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.

Cost comprises purchase price and 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. Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. Machinery spares which can be used only in connection with an item of Property, Plant and equipment and whose use is expected to be irregular are capitalised and depreciated over the useful life of the principal item of the relevant assets. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.

Depreciation

Depreciation for identified asset/ components is computed on straight line method based on useful

lives, determined based on internal technical evaluation as follows:

Property, Plant & equipment:

Type of Assets	Schedule II life (years)	Useful Lives*
Building -Factory	30	30
Building- others	60	60
Plant & Machinery**	15	3 to 30
Computers	3	3
Office Equipment	5	5
Electrical Fittings & installations	10	10
Furniture & Fixtures	10	10
Vehicles	8	8

*The Company, based on technical assessment made by technical expert and management estimate, depreciates certain items of plant and equipment over estimated useful lives which are different from the useful life prescribed in Schedule II to 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.

** Useful life mentioned is considering single shift working, however depreciation charged based on average number of shifts worked on an annual basis. Any item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in income statement when asset is derecognised.

The residual values, useful lives and method of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

(vi) Intangible Assets

I ntangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.

An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss. when the asset is derecognised.

The useful live of intangible assets are as follows:

Type of Assets	Schedule II life (years)	Useful Lives
Software	6	6

Research and development costs

Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

â¢ the technical feasibility of completing the intangible asset so that it will be available for use or sale;

â¢ the intention to complete the intangible asset and use or sell it;

â¢ the ability to use or sell the intangible asset;

â¢ how the intangible asset will generate probable future economic benefits;

â¢ the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

â¢ the ability to measure reliably the expenditure attributable to the intangible asset during its development.

Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete, and the asset is available for use. It is amortised over the period of expected future benefit. amortisation expense is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset. During the period of development, the asset is tested for impairment annually.

(vii) Investment in Subsidiary

A subsidiary is an entity that is controlled by another entity.

An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The Companyâs investments in its subsidiary and associates are accounted at cost less impairment.

(viii) Impairment of non- financial assets

The Company assesses at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or cash generating units (CGU)âs fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

I n assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Companyâs CGUs to

which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, the Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified. In any case, this growth rate does not exceed the long-term average growth rate for the products, industries, or country or countries in which the Company operates, or for the market in which the asset is used. Impairment losses including impairment on inventories, are recognised in the statement of profit and loss.

For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the assetâs or CGUâs recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the assetâs recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit and loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.

Intangible assets with indefinite useful lives are tested for impairment annually at the end of the financial year at the CGU level, as appropriate, and when circumstances indicate that the carrying value may be impaired.

(ix) Financial Instrument

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

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit or loss

The classification of financial assets at initial recognition depends on the financial assetâs contractual

cash flow characteristics and the Companyâs business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient, the Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient are measured at the transaction price determined under Ind AS 115. Refer to the accounting policies in section (i) Revenue from contracts with customers.

In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ''solely payments of principal and interest (SPPI)â on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (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

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

â¢ Financial assets at amortised cost (debt instruments)

â¢ Financial assets at fair value through other comprehensive income (FVTOCI) with recycling of cumulative gains and losses (debt instruments)

â¢ Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)

â¢ Financial assets at fair value through profit or loss

a. Financial Assets at amortised Cost (debt

instruments)

A ''financial assetâ is measured at the amortised cost if both the following conditions are met:

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

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

After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss. The Companyâs financial assets at amortised cost includes trade receivables, and loan to employees included under other current financial assets.

b. Financial assets at fair value through other comprehensive income (FVTOCI) (debt instrument)

A ''financial assetâ is classified as at the FVTOCI if both of the following criteria are met:

â¢ The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and

â¢ The assetâs contractual cash flows represent SPPI.

Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. For debt instruments, at fair value through OCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognised in the profit or loss and computed in the same manner as for financial assets measured at amortised cost. The remaining fair value changes are recognised in OCI. Upon derecognition, the cumulative fair value changes recognised in OCI is reclassified from the equity to profit or loss.

c. Financial assets designated at fair value through OCI (equity instruments)

Upon initial recognition, the Company can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under Ind AS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS! 03 applies are classified as at FVTPL. Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the statement of

profit and loss when the right of payment has been established, except when the Company benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.

d. Financial Assets at Fair value through Profit or Loss (FVTPL)

Financial assets at fair value through profit or loss are carried in the balance sheet at fair value with net changes in fair value recognised in the statement of profit and loss.

This category includes derivative instruments and listed equity investments which the Company had not irrevocably elected to classify at fair value through OCI. Dividends on listed equity investments are recognised in the statement of profit and loss when the right of payment has been established.

Investments in Mutual Funds are accounted for at Fair value through Profit or Loss Account.

Embedded Derivatives

A derivative embedded in a hybrid contract, with a financial liability or non-financial host, is separated from the host and accounted for as a separate derivative if: the economic characteristics and risks are not closely related to the host; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss category.

Impairment of Financial Assets

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

a) Financial assets that are debt instruments, and are measured at amortised cost e.g. loans, debt securities, deposits, trade receivables and bank balance

b) Trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115

c) Financial assets that are measured at FVTOCI

The Company follows ''simplified approachâ for recognition of impairment loss allowance on trade receivables.

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

For recognition of impairment loss on other financial assets and risk exposure, the Company determines 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.

ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR. When estimating the cash flows, an entity is required to consider:

â¢ All contractual terms of the financial instrument (including prepayment, extension, call and similar options) over the expected life of the financial instrument. However, in rare cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument

â¢ Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms

As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forwardlooking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.

ECL impairment loss allowance (or reversal) recognised during the period is recognised as income/ expense in the statement of profit and loss. This amount is reflected under the head ''other expensesâ in the statement of profit and loss.

The balance sheet presentation for various financial instruments is described below:

â¢ Financial assets measured as at amortised cost, contractual revenue receivables and lease receivables:

ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.

â¢ Debt instruments measured at FVTOCI:

Since financial assets are already reflected at fair value, impairment allowance is not further reduced from its value. Rather, ECL amount is presented as ''accumulated impairment amountâ in the OCI.

For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit risk to be identified on a timely basis.

The Company does not have any purchased or originated credit impaired (POCI) financial assets, i.e., financial assets which are credit impaired on purchase/ origination.

e. Trade Receivables

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within one year and therefore are all classified as current. Where the settlement is due after one year, they are classified as non-current. Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Company holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method.

Trade receivables are disclosed in Note 9. De-recognition of Financial Assets:

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Companyâs balance sheet) when:

(i) The right to receive cash flows from asset have expired, or.

(ii) The Company has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a "pass-through" arrangement and either:

a) The Company has transferred substantially all the risks and rewards of the asset, or

b) The Company has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset.

When the Company has transferred its right to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the

asset and the maximum amount of consideration that the Company could be required to repay.

Financial Liabilities:

Initial Recognition and Measurement.

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, and derivative financial instruments.

Subsequent Measurement

For purposes of subsequent measurement, financial liabilities are classified in two categories:

â¢ Financial liabilities at fair value through profit or loss

â¢ Financial liabilities at amortised cost (loans and borrowings)

a) Financial Liabilities at Fair Value through Profit or Loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. The Company has not designated any financial liabilities upon initial measurement recognition at fair value through profit or loss. Financial liabilities at fair value through profit or loss are at each reporting date with all the changes recognised in the Statement of Profit and Loss.

Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the profit or loss.

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognised in OCI. These gains/ losses are not subsequently transferred to P&L. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of profit and loss. The Company has not designated any financial liability as at fair value through profit or loss. b) Financial Liabilities measured at Amortised Cost (Loan and Borrowings)

This is the category most relevant to the Company. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the effective interest rate (EIR) amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.

This category generally applies to borrowings. For more information refer Note 14.

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 terms of a debt instrument. Financial guarantee contracts are recognised initially as a 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, when appropriate, the cumulative amount of income recognised in accordance with the principles of Ind AS 115.

De-recognition of Financial Liability.

A Financial Liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.

Reclassification of financial assets The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which

are debt instruments, a reclassification is mad only if there is a change in the business mode for managing those assets. Changes to th business model are expected to be infrequent The Companyâs senior management determine; change in the business model as a result of externa or internal changes which are significant to th Companyâs operations. Such changes are eviden to external parties. A change in the busines model occurs when the Company either begin or ceases to perform an activity that is significan to its operations. If the Company reclassifie; financial assets, it applies the reclassificatio prospectively from the reclassification date whicl is the first day of the immediately next reportin period following the change in business mode The Company does not restate any previous! recognised gains, losses (including impairmen gains or losses) or interest.

Offsetting of Financial Instruments.

Financial Assets and Financial Liabilities are offset, and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

(x) Derivative Financial Instruments and hedge accounting

Initial recognition and subsequent measurement

The Company uses derivative financial instruments, such as forward currency contracts to hedge its foreign currency risks. Such derivative financial instruments are

The following table shows various reclassification and how they are accounted for:
Original classification	Revised classification	Accounting treatment
Amortised cost	FVTPL	Fair value is measured at reclassification date. Difference between previous amortised cost and fair value is recognised in profit or loss.
FVTPL	Amortised Cost	Fair value at reclassification date becomes its new gross carrying amount. EIR is calculated based on the new gross carrying amount.
Amortised cost	FVTOCI	Fair value is measured at reclassification date. Difference between previous amortised cost and fair value is recognised in OCI. No change in EIR due to reclassification.
FVTOCI	Amortised cost	Fair value at reclassification date becomes its new amortised cost carrying amount. However, cumulative gain or loss in OCI is adjusted against fair value. Consequently, the asset is measured as if it had always been measured at amortised cost.
FVTPL	FVTOCI	Fair value at reclassification date becomes its new carrying amount. No other adjustment is required.
FVTOCI	FVTPL	Assets continue to be measured at fair value. Cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss the reclassification date.

initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at their fair value at the end of each reporting period. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The purchase contracts that meet the definition of a derivative under Ind AS 109 are recognised in the statement of profit and loss.

end of each financial year on the basis of actuarial valuation certificates obtained from Registered Actuary in accordance with the measurement procedure as per Indian Accounting Standard (Ind AS)-19 ''Employee Benefitsâ. The liability or asset recognised in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The Companyâs liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds. Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity through other comprehensive income in the period in which they arise. They are included in retained earnings through OCI in the statement of changes in equity and in the balance sheet. Past-service costs are recognised immediately in statement of profit and loss. Remeasurements are not reclassified to profit or loss in subsequent periods.

Past service costs are recognised in profit or loss on the earlier of:

a) The date of the plan amendment or curtailment, and

b) The date that the Company recognises related restructuring costs

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the consolidated statement of profit and loss:

a) Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and

b) Net interest expense or income Compensated Absences

or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability.

For the purpose of hedge accounting, at the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge.

The documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged, and how the Company will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:

- There is ''an economic relationshipâ between the hedged item and the hedging instrument.

- The effect of credit risk does not ''dominate the value changesâ that result from that economic relationship.

- The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Company actually hedges and the quantity of the hedging instrument that the Company actually uses to hedge that quantity of hedged item.

The Company designates certain foreign exchange forward contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast sales transactions, and thereafter, as a fair value hedge of the resulting receivables.

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 OCI, e.g., cash flow hedging reserve and accumulated in the cash flow hedging reserve. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the statement of profit and loss. The amount accumulated is retained in cash flow hedge reserve and reclassified to profit or loss in the same period or periods during which the hedged item affects the statement of profit or loss. Under fair value hedge, the change in the fair value of a hedging instrument is recognised in the statement of profit and loss. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in the statement of profit and loss.

(xi) Retirement and other employee Benefits

a) Defined Contribution Scheme:

Provident Fund

Contributions in respect of Employees are made to the Fund administered by the Regional Provident Fund Commissioner as per the provisions of Employeesâ Provident Fund and Miscellaneous Provisions Act, 1952 and are charged to Statement of Profit and Loss as and when services are rendered by employees. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made on a monthly basis to the Regional Provident fund.

Employee''s State Insurance The Company maintains an insurance policy to fund a post-employment medical assistance scheme, which is a defined contribution plan. The Companyâs contribution to State Plans namely Employeesâ State Insurance Fund and Employeesâ Pension Scheme are charged to the statement of profit and loss every year.

If the contribution payable to the schemes for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognised as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognised as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.

b) Defined Benefit Plan:

Gratuity

The Company provides for gratuity, a defined benefit plan (the "Gratuity Planâ) covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employeeâs salary and the tenure of employment. The gratuity plan in Company is funded through annual contributions to Life Insurance Corporation of India (LIC) under its Companyâs Gratuity Scheme.

The Companyâs Liabilities on account of Gratuity on retirement of employees are determined at the

entitlement that has accumulated at the reporting date. The Company recognises expected cost of short-term employee benefit as an expense, when an employee renders the related service.

The Company has a policy to encash the entire leaves balance outstanding as at the end of the year in the subsequent year.

Short-term obligations

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 employeesâ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.

(xii) Earnings per Share (EPS)

Basic earnings per share is computed by dividing net profit or loss attributable to equity shareholders of the Company (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period.

Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources.

For the purpose of c

Mar 31, 2023

Significant Accounting Policies1. Corporate Information:

Happy Forgings Limited ("the Company") is a public company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. The company is principally engaged in manufacturing of forgings and related components. The registered office of the Company is located at B-XXIX-2254/1, Kanganwal Road, P.O. Jugiana, Ludhiana 141120, Punjab, India. The Company''s CIN is U28910PB1979PLC004008.

The financial statements were approved for issue in accordance with a resolution of the Board of Directors on 8^th August, 2023.

2a. Significant Accounting Policies:(i) Basis of Preparation

The Standalone Financial Statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and presentation requirements of Division II of Schedule III to the Companies Act, 2013, (Ind AS compliant Schedule III), as applicable to the financial statements.

The standalone financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value or revalued amount:

â¢ Derivative financial instruments,

â¢ Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments), and

â¢ Defined benefit pension plans - plan assets are measured at fair value.

In addition, the carrying values of recognised assets and liabilities designated as hedged items in fair value hedges that would otherwise be carried at amortised cost are adjusted to record changes in the fair values attributable to the risks that are being hedged in effective hedge relationships. The standalone financial statements are presented in INR and all values are rounded to the nearest Lacs (H 00,000), except when otherwise indicated.

(ii) Current versus non-current classification

The Company presents assets and liabilities in the balance sheet based on current/non-current classification. An asset is treated as current when it is:

â¢ Expected to be realised or intended to be sold or consumed in normal operating cycle,

â¢ Held primarily for the purpose of trading,

â¢ Expected to be realised within twelve months after the reporting period, or

â¢ Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is current when:

â¢ It is expected to be settled in normal operating cycle,

â¢ It is held primarily for the purpose of trading,

â¢ It is due to be settled within twelve months after the reporting period, or

â¢ There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

The Company classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.

(iii) Foreign currencies

â¢ Functional and presentation currency

The financial statements are presented in INR, which is Company''s functional currency

â¢ Transactions and balances

Transactions in foreign currencies are initially recorded by the Company at the 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 monetary items from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates including on forward contracts are generally recognised in profit or loss financial instruments designated as Hedge Instruments are mark to market using the valuation given by the bank on the reporting date.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair

value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI, or profit or loss are also recognised in OCI or profit or loss, respectively).

2b. Summary of significant accounting policies:(i) Revenue from contract with customer

Revenue from contracts with customers is recognised when the control of goods or services are transferred to the customer at an amount that reflects the consideration to which the company expects to entitle in exchange for the goods or services. The company has generally concluded that it is the principal in all its revenue arrangements, because it typically controls the goods or services before transferring them to the customers.

The disclosures of significant accounting judgements, estimates and assumptions relating to revenue from contracts with customers are provided in Note 2C.

Sale of Goods: Revenue from the sale of goods is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of goods. The normal credit term is 30 to 150 days.

The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated (e.g., warranties, customer loyalty points). In determining the transaction price for the sale of equipment, the Company considers the effects of variable consideration, the existence of significant financing components, noncash consideration, and consideration payable to the customer (if any).

Variable Consideration

If the consideration in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration 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. Contracts for the sale of goods provide customers with a customary right of return in case of defects, quality issues etc. The rights of return give rise to variable consideration.

Rights of Return

The Company uses the expected value method to estimate the goods that will not be returned because this method best predicts the amount of variable

consideration to which the Company will be entitled. The requirements in Ind AS 115 on constraining estimates of variable consideration are also applied in order to determine the amount of variable consideration that can be included in the transaction price. For goods that are expected to be returned, instead of revenue, the Company recognises a refund liability. A right of return asset (and corresponding adjustment to cost of sales) is also recognised for the right to recover products from a customer.

The disclosures of significant estimates and assumptions if any, relating to the estimation of variable consideration for returns are provided in Note 2C.

Tooling Income/Die design and preparation charges:

Revenues from Tooling Income/die design and preparation charges are recognised as and when the significant risks and rewards of ownership of dies are transferred to the customers as per the terms of the contract.

Export Incentives: Revenue from export incentives is accounted for on export of goods if the entitlements can be estimated with reasonable assurance and conditions precedent to claim are fulfilled.

Contract liabilities: A contract liability is recognised if a payment is received, or a payment is due (whichever is earlier) from a customer before the Company transfers the related goods or services. Contract liabilities are recognised as revenue when the Company performs under the contract (i.e., transfers control of the related goods or services to the customer).

Contract assets: A contract asset is initially recognised for revenue earned from installation services because the receipt of consideration is conditional on successful completion of the installation. Upon completion of the installation and acceptance by the customer, the amount recognised as contract assets is reclassified to trade receivables.

Contract assets are subject to impairment assessment. Refer to accounting policies on impairment of financial assets in section d) Financial instruments - initial recognition and subsequent measurement.

Other Income

Dividend Income: Dividend income is recognised when the right to receive payment is established, which is generally when shareholders approve the same.

Interest Income: Interest Income is recognised on time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head ''Other Income'' in the Statement of Profit and Loss.

(ii) Government Grants

Government grants are recognised where there is reasonable assurance that the grant will be received, and all attached conditions will be complied with.

When the grant relates to duty benefit availed under Export Promotion Capital Goods (EPCG) Scheme, it is accounted for by way of reducing the cost from related asset and accordingly value of the asset has been depreciated with such reduced cost.

When the grant relates to incentives under "Invest Punjab Scheme", it is accounted as income on a systematic basis over the period that the related costs, for which it is intended to compensate are incurred. These incentives are accrued as income once the approval of the relevant authority is sanctioned and there is a reasonable assurance that the grant will be received.

When loans or similar assistance are provided by governments or related institutions, with an interest rate below the current applicable market rate, the effect of this favorable interest is regarded as a government grant. The loan or assistance is initially recognised and measured at fair value and the government grant is measured as the difference between the initial carrying value of the loan and the proceeds received. The loan is subsequently measured as per the accounting policy applicable to financial liabilities.

(iii) Inventory Valuation

I nventories are valued at the lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and condition are accounted for as follows:

â¢ Raw materials: cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on first in, first out basis.

â¢ Finished goods and work in progress: cost includes cost of direct materials and labour and a proportion of manufacturing overheads based on the normal

operating capacity but excluding borrowing costs. Cost is determined on first in, first out (FIFO) basis.

â¢ Packing Materials and other products are determined on Weighted Average basis.

â¢ Stores and Spares is value at Weighted Average Value.

â¢ Scrap is valued at estimated realisable value.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.

(iv) Cash and Cash Equivalents

Cash and cash equivalents in the balance sheet comprise cash on hand, cash at banks and short-term deposits with banks with an original maturity of three months or less, that are readily convertible to a known amount of cash and subject to an insignificant risk of change in value.

(v) Property, Plant and Equipment

Capital work in progress is stated at cost, net of accumulated impairment loss, if any. Plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.

Cost comprises purchase price and 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. Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. Machinery spares which can be used only in connection with an item of Property, Plant and equipment and whose use is expected to be irregular are capitalised and depreciated over the useful life of the principal item of the relevant assets. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.

Depreciation

Depreciation for identified asset/components is computed on straight line method based on useful lives, determined based on internal technical evaluation as follows:

Property, Plant & equipment:
Type of Assets	Schedule II life (years)	Useful Lives¹
Building -Factory	30	30
Building- others	60	60
Plant & Machinery**	15	3 to 30
Computers	3	3
Office Equipment	5	5
Electrical Fittings & installations	10	10
Furniture & Fixtures	10	10
Vehicles	8	8

''Â¦''The Company, based on technical assessment made by technical expert and management estimate, depreciates certain items of building, plant and equipment over estimated useful lives which are different from the useful life prescribed in Schedule II to 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.

** Useful life mentioned is considering single shift working, however depreciation charged based on average number of shifts worked on an annual basis.

Any item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in income statement when asset is derecognised.

The residual values, useful lives and method of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

(vi) Intangible Assets

I ntangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.

An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss. when the asset is derecognised.

The useful live of intangible assets are as follows:

Type of Assets	Schedule II life (years)	Useful Lives
Software	6	6

(vii) Investment in Joint venture

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

The considerations made in determining whether significant influence or joint control are similar to those necessary to determine control over the subsidiaries.

The Company has elected to recognise its investments in joint venture at cost in accordance with the option available in Ind-AS 27, ''Separate Financial Statements''. These Investments are carried at cost will be tested for impairment as per Ind-AS 36.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the standalone Statement of Profit and Loss.

Any reversal of the previously recognised impairment loss is limited to the extent that the asset''s carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had previously been recognised.

(viii) Impairment of non-financial assets

The Company assesses at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment

testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash generating units (CGU)''s fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

I n assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company''s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, the Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified. In any case, this growth rate does not exceed the long-term average growth rate for the products, industries, or country or countries in which the Company operates, or for the market in which the asset is used. Impairment losses including impairment on inventories, are recognised in the statement of profit and loss.

For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the asset''s or CGU''s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit and loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.

Intangible assets with indefinite useful lives are tested for impairment annually at the end of the financial year at the CGU level, as appropriate, and when circumstances indicate that the carrying value may be impaired.

(iK) Financial Instrument

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

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit or loss

The classification of financial assets at initial recognition depends on the financial asset''s contractual cash flow characteristics and the Company''s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient, the Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient are measured at the transaction price determined under Ind AS 115. Refer to the accounting policies in section (i) Revenue from contracts with customers.

I n order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ''solely payments of principal and interest (SPPI)'' on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (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

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

â¢ Financial assets at amortised cost (debt instruments)

â¢ Financial assets at fair value through other comprehensive income (FVTOCI) with recycling of cumulative gains and losses (debt instruments)

â¢ Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)

â¢ Financial assets at fair value through profit or loss

a. Financial Assets at amortised Cost (debt instruments)

A ''financial asset'' is measured at the amortised cost if both the following conditions are met:

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

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

After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss. The Company''s financial assets at amortised cost includes trade receivables, and loan to employees included under other current financial assets.

b. Financial assets at Fair Value through other Comprehensive Income (FVTOCI) (debt instrument)

A ''financial asset'' is classified as at the FVTOCI if both of the following criteria are met: ¹

c. Financial assets designated at fair value through OCI (equity instruments)

Upon initial recognition, the Company can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under Ind AS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS103 applies are classified as at FVTPL.

Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the statement of profit and loss when the right of payment has been established, except when the Company benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.

d. Financial Assets at Fair Value through Profit or Loss (FVTPL)

Financial assets at fair value through profit or loss are carried in the balance sheet at fair value with net changes in fair value recognised in the statement of profit and loss.

This category includes derivative instruments and listed equity investments which the Company had not irrevocably elected to classify at fair value through OCI. Dividends on listed equity investments are recognised in the statement of profit and loss when the right of payment has been established.

I nvestments in Mutual Funds are accounted for at Fair value through Profit or Loss Account.

Embedded Derivatives

A derivative embedded in a hybrid contract, with a financial liability or non-financial host, is separated from the host and accounted for as a separate derivative if: the economic characteristics and risks are not closely related to the host; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a

reclassification of a financial asset out of the fair value through profit or loss category.

Impairment of Financial Assets

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

a) Financial assets that are debt instruments, and are measured at amortised cost e.g. loans, debt securities, deposits, trade receivables and bank balance

b) Trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115

c) Financial assets that are measured at FVTOCI

The Company follows ''simplified approach'' for recognition of impairment loss allowance on trade receivables.

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

For recognition of impairment loss on other financial assets and risk exposure, the Company determines 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.

ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR. When estimating the cash flows, an entity is required to consider:

â¢ All contractual terms of the financial instrument (including prepayment, extension, call and similar options) over the expected life of the

financial instrument. However, in rare cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument

â¢ Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms

As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forwardlooking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analyzed.

ECL impairment loss allowance (or reversal) recognised during the period is recognised as income/expense in the statement of profit and loss. This amount is reflected under the head ''other expenses'' in the statement of profit and loss.

The balance sheet presentation for various financial instruments is described below:

â¢ Financial assets measured as at amortised cost, contractual revenue receivables and lease receivables:

ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.

â¢ Debt instruments measured at FVTOCI:

Since financial assets are already reflected at fair value, impairment allowance is not further reduced from its value. Rather, ECL amount is presented as ''accumulated impairment amount'' in the OCI.

For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit risk to be identified on a timely basis.

The Company does not have any purchased or originated credit impaired (POCI) financial assets, i.e., financial assets which are credit impaired on purchase/origination.

e. Trade Receivables

Trade receivables are disclosed in Note 9.

De-recognition of Financial Assets:

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Company''s balance sheet) when:

(i) The right to receive cash flows from asset have expired, or.

(ii) The Company has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a "pass-through" arrangement and either:

a) The Company has transferred substantially all the risks and rewards of the asset, or

b) The Company has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset.

When the Company has transferred its right to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.

Financial Liabilities:

Initial Recognition and Measurement

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Company''s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, and derivative financial instruments.

Subsequent Measurement

For purposes of subsequent measurement, financial liabilities are classified in two categories:

â¢ Financial liabilities at fair value through profit or loss

â¢ Financial liabilities at amortised cost (loans and borrowings)

a) Financial Liabilities at Fair Value through Profit or Loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. The Company has not designated any financial liabilities upon initial measurement recognition at fair value through profit or loss. Financial liabilities at fair value through profit or loss are at each reporting date with all the changes recognised in the Statement of Profit and Loss.

Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognised in the profit or loss.

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognised in OCI. These gains/losses are not subsequently transferred to P&L. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of

profit and loss. The Company has not designated any financial liability as at fair value through profit or loss.

b) Financial Liabilities measured at Amortised Cost (Loan and Borrowings)

This is the category most relevant to the Company. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the effective interest rate (EIR) amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.

This category generally applies to borrowings. For more information refer Note 14.

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 terms of a debt instrument. Financial guarantee contracts are recognised initially as a 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, when appropriate, the cumulative amount of income recognised in accordance with the principles of Ind AS 115.

De-recognition of Financial Liability.

A Financial Liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss

Reclassification of financial assets

The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.

The following table shows various reclassification and how they are accounted for:
Original classification	Revised classification	Accounting treatment
Amortised cost	FVTPL	Fair value is measured at reclassification date. Difference between previous amortised cost and fair value is recognised in profit or loss.
FVTPL	Amortised Cost	Fair value at reclassification date becomes its new gross carrying amount. EIR is calculated based on the new gross carrying amount.
Amortised cost	FVTOCI	Fair value is measured at reclassification date. Difference between previous amortised cost and fair value is recognised in OCI. No change in EIR due to reclassification.
FVTOCI	Amortised cost	Fair value at reclassification date becomes its new amortised cost carrying amount. However, cumulative gain or loss in OCI is adjusted against fair value. Consequently, the asset is measured as if it had always been measured at amortised cost.
FVTPL	FVTOCI	Fair value at reclassification date becomes its new carrying amount. No other adjustment is required.
FVTOCI	FVTPL	Assets continue to be measured at fair value. Cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss the reclassification date.

If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognised as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.

b) Defined Benefit Plan:

Gratuity

The Company provides for gratuity, a defined benefit plan (the "Gratuity Plan") covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee''s salary and the tenure of employment. The gratuity plan in Company is funded through annual contributions to Life Insurance Corporation of India (LIC) under its Company''s Gratuity Scheme.

The Company''s Liabilities on account of Gratuity on retirement of employees are determined at the end of each financial year on the basis of actuarial valuation certificates obtained from Registered Actuary in accordance with the measurement procedure as per Indian Accounting Standard (Ind AS)-19 ''Employee Benefits''. The liability or asset recognised in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The Company''s liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds. Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity through other comprehensive income in the period in which they arise. They are included in retained earnings through OCI in the statement of changes in equity and in the balance sheet. Past-service costs are recognised immediately in statement of profit and loss. Remeasurements are not reclassified to profit or loss in subsequent periods.

Past service costs are recognised in profit or loss on the earlier of:

a) The date of the plan amendment or curtailment, and

b) The date that the Company recognises related restructuring costs.

Offsetting of Financial Instruments.

Financial Assets and Financial Liabilities are offset, and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

(k) Derivative Financial Instruments and hedge accounting

Initial recognition and subsequent measurement

The Company uses derivative financial instruments, such as forward currency contracts to hedge its foreign currency risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at their fair value at the end of each reporting period. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The purchase contracts that meet the definition of a derivative under Ind AS 109 are recognised in the statement of profit and loss.

Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognised in OCI and later reclassified to profit or loss when the hedge item affects profit or loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a nonfinancial asset or non-financial liability.

For the purpose of hedge accounting, at the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge.

The documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged, and how the Company will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements: ²

the quantity of the hedging instrument that the Company actually uses to hedge that quantity of hedged item.

The Company designates certain foreign exchange forward contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast sales transactions, and thereafter, as a fair value hedge of the resulting receivables.

(xi) Retirement and other employee Benefits a) Defined Contribution Scheme:

Provident Fund

Contributions in respect of Employees are made to the Fund administered by the Regional Provident Fund Commissioner as per the provisions of Employees'' Provident Fund and Miscellaneous Provisions Act, 1952 and are charged to Statement of Profit and Loss as and when services are rendered by employees. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made on a monthly basis to the Regional Provident fund.

Employee''s State Insurance

The Company maintains an insurance policy to fund a post-employment medical assistance scheme, which is a defined contribution plan. The Company''s contribution to State Plans namely Employees'' State Insurance Fund and Employees'' Pension Scheme are charged to the statement of profit and loss every year.

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the consolidated statement of profit and loss:

a) Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and

b) Net interest expense or income. Compensated Absences

Accumulated compensated absences are either availed or encashed within 12 months from the end of the year end are treated as short term employee benefits. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. The Company recognises expected cost of short-term employee benefit as an expense, when an employee renders the related service.

The Company has a policy to encash the entire leaves balance outstanding as at the end of the year in the subsequent year.

Short-term obligations

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 amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.

(xii) Earnings Per Share (EPS)

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders of the Company and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares. The Company did not have any potentially dilutive securities in any of the years presented.

(Kiii) Dividend

The Company recognises a liability to pay dividend to equity holders when the distribution is authorised, and the distribution is no longer at the discretion of the Company

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