Accounting Policies of IRM Energy Ltd. Company

Mar 31, 2025

3. Summary of Material accounting policies

3.1 Statement of compliance

The Standalone Financial statements of the
Company have been prepared in accordance with
Indian Accounting Standards (Ind AS) notified under
section 133 of the Companies Act, 2013 read with the
Companies (Indian Accounting Standards) Rules,
2015, as amended.

3.2 Historical cost convention

The Standalone Financial Statements have been
prepared on a historical cost convention & on an
accrual basis, except for certain items that are
measured at fair value as required by relevant Ind AS:

• Financial assets & financial liabilities measured
initially at fair value (refer accounting policy on
financial Instruments);

• Defined benefit & other long-term
employee benefits.

3.3 Current vs Non-Current Classification

Any asset or liability is classified as current if it
satisfies any of the following conditions:

a. The asset/liability is expected to be realised/
settled in the Company’s normal operating cycle;

b. The asset is intended for sale or consumption;

c. The asset/liability is held primarily for the
purpose of trading;

d. The asset/liability is expected to be realised/
settled within twelve months after the
reporting period.

e. The asset is Cash or cash equivalent unless
restricted from being exchanged or used to
settle a liability for at least twelve months after
the reporting period;

f. In case of liability, the Company does not have
unconditional right to defer the Settlement of
the liability for at least twelve months after the
reporting period.

All other assets and liabilities are classified
as non-current.

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

For the purpose of current/non-current classification
of assets and liabilities, the Company has
ascertained its normal operating cycle as twelve
months. This is based on the nature of services and
time between acquisition of assets for processing
and their realisation in cash and cash equivalents

3.4 Use of estimates and Judgements

The preparation of Standalone Financial Statements
in conformity with Ind AS requires the use of certain
critical accounting estimates. It also requires
management to exercise its judgement in the
process of applying the Company’s accounting
policies. The management believes that the
estimates used in preparation of the financial
statements are prudent and reasonable the
areas involving a higher degree of judgement or
complexity, or area where assumptions & estimates
are significant to these Standalone Financial
Statements are disclosed below.

The preparation of Standalone Financial
Statements in conformity with the Accounting
Standards generally accepted in India requires, the
management to make estimates & assumptions
that affect the reported amounts of assets &
liabilities & disclosure of contingent liabilities as at
the date of the Standalone Financial Statements
& reported amounts of revenues & expenses for
the year. Actual results could differ from these
estimates. Any revision to accounting estimates is
recognised prospectively in current & future periods.

When preparing the Standalone Financial
Statements, management undertakes a number
of judgments, estimates & assumptions about the
recognition & measurement of assets, liabilities,
income & expenses. In the process of applying
the Company’s accounting policies, the following
judgments have been made apart from those
involving estimations, which have the most
significant effect on the amounts recognised in the
financial information. Judgements are based on the
information available at the date of balance sheet.

(i) Taxes: Significant judgments are involved in
determining the provision for income taxes,
including amount expected to be paid/
recovered for uncertain tax positions. Significant
management judgement is also required to
determine the amount of deferred tax assets
that can be recognised, based upon the likely
timing and the level of future taxable profits
including estimates of temporary differences
reversing on account of available benefits from
the Income Tax Act, 1961.

(ii) Property, plant & equipment and Intangibles
: Property, plant & equipment represent a
significant proportion of the asset base of the
Company. The charge in respect of periodic
depreciation is derived after determining an
estimate of an asset’s expected useful life &
the expected residual value at the end of its life.
Management reviews the residual values, useful
lives & methods of depreciation of property, plant
& equipment at each reporting period end & any
revision to these is recognised prospectively in
current & future periods. The lives are based
on historical experience with similar assets as
well as anticipation of future events, which may
impact their life, such as changes in technology.

(iii) Employee Benefits - Gratuity: The cost of the
defined benefit gratuity plan and the present
value of the gratuity obligation are determined
using actuarial valuations. An actuarial valuation
involves making various assumptions that may
differ from actual developments in the future.
These include the determination of the discount
rate, future salary increases, attrition and
mortality rates. Due to the complexities involved
in the valuation and its long-term nature, a
defined benefit obligation is highly sensitive to
changes in these assumptions. All assumptions
are reviewed at each reporting date.

(iv) Impairment of Financial Asset: The impairment
provisions for trade receivables are made
considering simplified approach based on

assumptions about risk of default and expected
loss rates. The Company uses judgement in
making these assumptions and selecting the
inputs to the impairment calculation based on
the company’s past history and other factors
like financial position of the counter-parties,
market information and other relevant factors
at the end of each reporting period. In case of
other financial assets, the Company applies
general approach for recognition of impairment
losses wherein the Company uses judgement
in considering the probability of default upon
initial recognition and whether there has been a
significant increase in credit risk on an ongoing
basis throughout each reporting period.

(v) Recognition & measurement of unbilled gas sales
revenues: In case of customers where meter
reading dates for billing is not matching with
reporting date, the gas sales between last meter
reading date & reporting date has been accrued
by the company based on past average sales.

(vi) Recognition & measurement of other
provisions: The recognition & measurement of
other provisions are based on the assessment
of the probability of an outflow of resources &
on past experience & circumstances known at
the balance sheet date. The actual outflow of
resources at a future date may therefore vary
from the figure so provided & included as liability.

(vii) Provision for Inventory including Capital
Inventory: The Company has a defined policy
for provision of slow and non-moving inventory
based on the ageing of inventory. The Company
reviews the policy at regular intervals.

(viii) Fair value measurement of financial instruments:
In estimating the fair value of financial assets
and financial liabilities, the Company uses
market observable data to the extent available.
Where such Level 1 inputs are not available, the
Company establishes appropriate valuation
techniques and inputs to the model. The inputs
to these models are taken from observable
markets where possible, but where this is not
feasible, a degree of judgment is required in
establishing fair values. Judgments include
considerations of inputs such as liquidity risk,
credit risk and volatility. Changes in assumptions
about these factors could affect the reported
fair value of financial instruments.

3.5 Property, Plant & Equipment

(i) Freehold land is carried at historical cost.

(ii) Property, Plant and Equipment other than land
are stated at cost of acquisition / construction
less accumulated depreciation and impairment
losses, if any.

The Company capitalises to project assets all
the cost directly attributable & ascertainable,
to completing the project which includes
freight, duties & taxes (to the extent credit is not
available) ,other incidental expenses relating to
acquisition and installation and pre-operative
expenses. These costs include expenditure of
pipelines, plant & machinery, cost of laying
of pipeline, cost of survey, commissioning &
testing charge, detailed engineering & interest
on borrowings attributable to acquisition of
such assets. The gas distribution networks are
treated as commissioned when supply of gas
commences to the customer(s).

Subsequent expenditure related to an item
of property, plant and Equipment is added to
its book value only if it increases the future
economic benefits from the existing asset
beyond its previously assessed standard of
performance. All other expenses incurred
towards normal repairs and maintenance of
the existing property, plant and Equipment
(including cost of replacing parts) are charged
to profit and loss for the period during which
such expenses are incurred.

Interest on borrowings attributable to the
acquisition / construction of Property,
Plant and Equipment for the period of
construction is added to the cost of Property,
Plant and Equipment.

Assets installed at customer premises, including
meters & regulators where applicable, are
recognised as property plant & equipment if
they meet the definition provided under Ind AS
16 subject to materiality as determined by the
management & followed consistently.

(iii) Capital Work in Progress includes expenditure
incurred on assets, which are yet to be
commissioned & capital inventory, which
comprises stock of capital items/construction
materials at respective city gas network.

All the directly identifiable & ascertainable
expenditure, incidental & related to construction
incurred during the period of construction on a
project, till it is commissioned, is kept as Capital
work in progress (CWIP) & after commissioning
the same is transferred / allocated to the
respective “Property, Plant and Equipment”.

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

(iv) Depreciation is provided as follow:

• Depreciation is charged on a pro-rata
basis on the straight line method (‘SLM’) as
prescribed in Schedule II to the Companies
Act, 2013 which are in line with their estimated
useful life , except for the following assets
where depreciation is charged on pro-rata
basis over the estimated useful life of the
assets based on technical advice taking
into account the nature of the asset, the
estimated usage of the asset, the operating
conditions of the asset, past history of
replacement, anticipated technological
changes, manufacturers warranties and
maintenance support etc.

• The management believes that these
useful lives are realistic & reflect fair
approximation of the period over
which the assets are likely to be
used. The useful lives are reviewed by
the management at each financial
year end & revised, if appropriate. In
case of a revision, the unamortised
depreciable amount (remaining net
value of assets) is charged over the
revised remaining useful life.

• For the purpose of calculating the
depreciation, residual value for
Tangible assets has been considered
as 5% of the value of asset concerned.

• Depreciation on items of property, plant &
equipment acquired / disposed-off during
the year is provided on pro-rata basis with
reference to the date of addition / disposal.

• Depreciation on additions to Property, Plant
and Equipment made during the period
having cost ofH 5000 or less is provided @
100% on pro rata basis with reference to
the date of addition.

• Gains & losses on disposals are
determined by comparing proceeds with
carrying amount. These are included in
the statement of profit & loss under Other
Expenses/Income.

• The carrying amount of assets, including
those assets that are not yet available
for use, are reviewed at each balance
sheet date to determine whether there is
any indication of impairment. If any such
indication exists, recoverable amount of
asset is determined. An impairment loss is
recognised in the statement of profit and
loss whenever the carrying amount of an
asset exceeds its recoverable amount.
An impairment loss is reversed only to
the extent that the carrying amount of
asset does not exceed the net book value
that would have been determined if no
impairment loss had been recognised.
(Cross Reference Note Impairment)

(v) Intangible Assets:

Intangible Assets includes amount paid towards
obtaining Right of Way (ROW) permissions
for laying the gas pipeline network & cost
of developing software for internal use. The
Company capitalises software as Intangible
Asset where it is expected to provide future
enduring economic benefits. Cost associated
with maintaining software programmes are
recognised as expenses as & when incurred.

Useful life of the Right of Way (row) charges is
considered as the period for which such charges
are paid. In cases where the tenure of payment
is not specified by the authorities, the useful life
of such ROW charges is considered as 10 years.

Any item of intangible assets is derecognised
upon disposal or when no future economic
benefits are expected from its use or disposal.
Any gain or loss arising on de-recognition
of the intangible asset (calculated as the
difference between the net disposal proceeds
& the carrying amount of the intangible asset)
is charged to revenue in the income statement
when the intangible asset is derecognised.

3.6 Foreign currency transactions

Foreign currency transactions are recorded at
the exchange rates prevailing at the date of such
transactions. Monetary assets & liabilities as at
the Balance Sheet date are translated at the rates
of exchange prevailing at the date of the Balance
Sheet. Gain/Loss arising on account of differences
in foreign exchange rates on settlement/translation
of monetary assets & liabilities are recognised in the
Statement of Profit & Loss, unless they are considered
as an adjustment to borrowing costs, in which case
they are capitalised along with the borrowing cost.

3.7 Revenue recognition

Revenue is recognised upon transfer of control of
promised products or services to customers in an
amount that reflects the consideration which the
company expects to receive in exchange for those
products or services. Revenue is measured based
on the transaction price, which is the consideration,
adjusted for discounts and other incentives, if any, as per
contracts with the customers. Revenue also excludes
taxes collected from customers in its capacity as agent.

Sale of Natural Gas is recognized on supply of gas
to customers by metered/assessed measurements
as no significant uncertainty exists regarding
the measurability or collectability of the sale
consideration. Sales are billed bi-monthly for
domestic customers, monthly/fortnightly for
commercial & non-commercial customers &
fortnightly for industrial customers as the timing of the
transfer of risks & rewards varies depending on the
individual terms of the sales agreement. Revenue on
sale of Compressed Natural Gas (CNG) is recognized
on sale of gas to consumers from retail outlets.

Delayed payment charges are recognized on
reasonable certainty to expect ultimate collection
or otherwise based on actual collection whichever is
earlier. Connection and fitting income is recognized
based on satisfaction of performance obligation.

The amount recognised as revenue is stated
inclusive of excise duty & exclusive of Sales Tax /
Value Added Tax (VAT), Goods & Service Tax And is
net of trade discounts or quantity discounts.

The amounts collected towards connection charges
from certain domestic customers are “Non¬
Refundable Charges”. Accordingly, the same are
recognized as revenue as an when the Company
receives the amount from such customers.

The amounts collected from certain domestic
customers which includes amount “refundable” in

nature. Accordingly, the same are recognized as a
liability under the head “Deposit from Customers” in
the balance sheet.

Interest income is reported on an accrual basis
using the effective interest method.

Dividends Income from investment is recognised at
the time the right to receive payment is established.

3.8 Borrowing Costs

(i) The Company is capitalising borrowing costs
that are directly attributable to the acquisition
or construction of qualifying asset up to the
date of commissioning. Qualifying assets are
assets that necessarily take a substantial
period of time (i.e. twelve months or more) to
get ready for their intended use or sale.

Transaction cost in respect of long-term
borrowings are amortised over the tenure of
respective loan.

(ii) Other borrowing costs are recognised as
an expense in the year in which they are
incurred, if any.

3.9 Impairment of Property, Plant & Equipment &
Intangible Assets and Investment in Associates

The Company, at each balance sheet date, assesses
whether there is any indication of impairment of any
asset &/ or cash generating unit. If such indication
exists, assets are impaired by comparing carrying
amount of each asset &/ or cash generating unit
to the recoverable amount being higher of the net
selling price or value in use. Value in use is determined
from the present value of the estimated future cash
flows from the continuing use of the assets.

3.10 Inventories

Inventory of Gas (including gas inventory in pipeline
& CNG cascades) is valued at lower of cost & net
realizable value. Cost is determined on weighted
average cost method. Where Cost of inventories
includes all other costs incurred in bringing the
inventories to their present location and condition
and Net Realisable Value is the estimated selling price
in the ordinary course of business, less estimated
cost of completion and estimated cost necessary to
make the sale. Necessary adjustment for shortage /
excess stock is given based on the available evidence
and past experience of the company.

Stores, spares & consumables and other inventory
items (viz. CNG Kits, etc) are valued at lower of cost
& net realizable value. Cost is determined on moving
weighted average basis.

3.11 Cash & Cash Equivalents

Cash and cash equivalents in the balance sheet
comprise cash at banks and short-term deposits
with an original maturity of three months or less,
which are subject to an insignificant risk of changes
in value. For the purpose of the statement of cash
flows, cash equivalents include short-term deposits
with an original maturity of three months or less
from the date of acquisition.

3.12 Accounting for Income Taxes

Income tax expenses comprises current tax
(i.e. amount of tax for the period determined in
accordance with the Income Tax Law) & deferred
tax charge or credit (reflecting the tax effects of
timing differences between accounting income
& taxable income for the period). Income tax
expenses are recognised in statement of profit or
loss except tax expenses related to items recognised
directly in reserves (including statement of other
comprehensive income) which are recognised with
the underlying items.

(i) The Income Tax expense or credit for the period
is the tax payable on the current period''s taxable
income based on the applicable income tax
rate for each jurisdiction adjusted by changes
in deferred tax assets & liabilities attributable to
temporary differences & to unused tax losses.

The Current Income Tax charge is calculated
on the basis of the tax laws enacted or
substantively enacted at the end of the reporting
period i.e. as per the provisions of the Income
Tax Act, 1961, as amended from time to time.
Management periodically evaluates positions
taken in tax returns with respect to situations
in which applicable tax regulation is subject to
interpretation. It establishes provisions where
appropriate on the basis of amounts expected
to be paid to the tax authorities.

Advance Taxes & provisions for current income
taxes are presented in the balance sheet after off¬
setting advance tax paid & income tax provision
arising in the same tax jurisdiction for relevant tax
paying units & where the Company is able to &
intends to settle the asset & liability on a net basis.

(ii) Deferred Tax is provided in full on temporary
difference arising between the tax bases of the
assets & liabilities & their carrying amounts in
Standalone Financial Statements at the reporting
date. Deferred tax are recognised in respect
of deductible temporary differences being the
difference between taxable income & accounting

income that originate in one period & are capable
of reversal in one or more subsequent periods,
the carry forward of unused tax losses & the carry
forward of unused tax credits.

Deferred Income Tax is determined using
tax rates (& laws) that have been enacted
or substantially enacted by the end of the
reporting period & are expected to apply when
the related deferred income tax asset is realised
or the deferred income tax liability is settled.

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

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

Current & Deferred Tax is recognised in profit or
loss, except to the extent that it relates to items
recognised in other comprehensive income
or directly in equity. In this case, the tax is also
recognised in other comprehensive income or
directly in equity, respectively.

Any tax credit available including Minimum
Alternative Tax (mat) under the provision of the
Income Tax Act, 1961 is recognised as deferred
tax to the extent that it is probable that future
taxable profit will be available against which
the unused tax credits can be utilised. The
said asset is created by way of credit to the
statement of profit & loss & shown under the
head deferred tax asset.

The carrying amount of deferred tax assets is
reviewed at each reporting date & reduced
to the extent that it is no longer probable that
sufficient taxable profit will be available to
allow all or part of the deferred tax asset to
be utilised. Unrecognised deferred tax assets
are re-assessed at each reporting date & are
recognised to the extent that it has become
probable that future taxable profits will allow
the deferred tax asset to be recovered.

3.13 Leases

The Company as a lessee

The Company’s lease asset classes primarily
consist of leases for land and buildings. The
Company assesses whether a contract contains a
lease, at inception of a initial application date i.e. 1
April 2019. A contract is, or contains, a lease if the
contract conveys the right to control the use of an
identified asset for a period of time in exchange
for consideration. To assess whether a contract
conveys the right to control the use of an identified
asset, the Company assesses whether: (i) the
contract involves the use of an identified asset (ii)
the Company has substantially all of the economic
benefits from use of the asset through the period
of the lease and (iii) the Company has the right to
direct the use of the asset.

At the date of initial application of the lease, the
Company recognizes a right-of-use (rou) asset
and a corresponding lease liability for all lease
arrangements in which it is a lessee, except for
leases with a term of 12 months or less (short-term
leases) and low value leases. For these short-term
and low-value leases, the Company recognizes the
lease payments as an operating expense on actual
payment basis as and when incurred.

Certain lease arrangements includes the options to
extend or terminate the lease before the end of the
lease term. ROU assets and lease liabilities includes
these options when it is reasonably certain that they
will be exercised.

The ROU assets are initially recognized that is equal
to lease liabilities on the initial application date, that
is arrived based on incremental borrowing rate on
the initial application date. They are subsequently
measured at cost less accumulated depreciation
and impairment losses.

ROU assets are depreciated from the initial
application date on a straight-line basis over
the shorter of the lease term and useful life of
the underlying asset. ROU assets are evaluated
for recoverability whenever events or changes
in circumstances indicate that their carrying
amounts may not be recoverable. For the purpose
of impairment testing, the recoverable amount (i.e.
the higher of the fair value less cost to sell and the
value-in-use) is determined on an individual asset
basis unless the asset does not generate cash flows
that are largely independent of those from other
assets. In such cases, the recoverable amount is
determined for the Cash Generating Unit (cgu) to
which the asset belongs.

The lease liability is initially measured at amortized
cost at the present value of the future lease
payments on the date of initial application. The lease
payments are discounted using the incremental
borrowing rate. Lease liabilities are remeasured with
a corresponding adjustment to the related ROU asset
if the Company changes its assessment of whether
it will exercise an extension or a termination option.
Lease liability and ROU assets have been separately
presented in the Balance Sheet and lease payments
have been classified as financing cash flows.

The Company as a lessor

Leases for which the Company is a lessor is classified
as a finance or operating lease. Whenever the terms
of the lease transfer substantially all the risks and
rewards of ownership to the lessee, the contract is
classified as a finance lease. All other leases are
classified as operating leases. When the Company
is an intermediate lessor, it accounts for its interests
in the head lease and the sublease Consolidated.
The sublease is classified as a finance or operating
lease by reference to the ROU asset arising from the
head lease. For operating leases, rental income is
recognized on a straight line basis over the term of
the relevant lease.

3.14 Employee Benefits

Liabilities for wages & salaries, including leave
encashment 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 & 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.

(i) Defined Contribution Plan:

Contribution towards provident fund for
eligible employees are accrued in accordance
with applicable statutes & deposited with
the regulatory provident fund authorities
(Government administered provident fund
scheme). The Company does not carry any other
obligation apart from the monthly contribution.

The Company’s contribution is recognised
as an expense in the Statement of Profit &
Loss during the period in which the employee
renders the related service.

(ii) Defined Benefit Plan:

Gratuity liability is a defined benefit obligation
and is computed at the end of each financial

year on the basis of an actuarial valuation
by an actuary appointed for the purpose as
per projected unit credit method. The present
value of the defined benefit obligation is
determined by discounting the estimated
future cash outflows by reference to market
yields at the end of the reporting period on the
government bonds.

The Liability or asset recognised in the balance
sheet in respect of defined benefit gratuity
plan is the present value of the defined benefit
plan obligation at the end of the reporting
period less the fair value of the plan assets.
The Liabilities with regard to the Gratuity
Plan are determined by actuarial valuation,
performed by an independent actuary, at
each balance sheet date using the projected
unit credit method. The present value of the
defined benefit obligation denominated in
H is determined by discounting the estimated
future cash outflows by reference to the market
yields at the reporting period on government
bonds that have terms approximating to the
terms of the related obligation.

The net interest cost in calculated by applying
the discounting rate to the net balance of
the defined benefit obligation & the fair value
of plan assets. Such costs are included in
employee benefit expenses in the statement of
Profit & Loss. Re-measurements gains or losses
arising from experience adjustments & changes
in actuarial assumptions are recognised
immediately in the period in which they occur
directly in “other comprehensive income” & are
included in retained earnings in the statement
of changes in equity & in the balance sheet. Re¬
measurements are not reclassified to profit or
loss in subsequent periods.

The Company recognises the following
changes in the net defined benefit obligation
as an expense in the statement of profit & loss:

• Service costs comprising current service
costs, past-service costs, gains & losses on
curtailments & non-routine settlements;

• Net interest expense or income.

(iii) Long Term Employee Benefits:

The liability in respect of accrued leave benefits
which are expected to be availed or encashed
beyond 12 months from the end of the year, is
treated as long term employee benefits.

The Company’s liability is actuarially determined
by qualified actuary at balance sheet date by
using the Projected Unit Credit method.

Actuarial losses/ gains are recognized in the
Statement of Other Comprehensive Income in
the year in which they arise.

3.15 Segment Reporting

Operating segments are reported in a manner
consistent with the internal reporting provided to
the chief operating decision maker. The Company
operates in a single segment of natural gas business
and relevant disclosure requirements as per Ind AS
108 “Operating Segments” have been disclosed by
the Company under note no 41.

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Mar 31, 2024

3. Summary of Material accounting policies

3.1 Statement of compliance

The Standalone Financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, as amended.

3.2 Historical cost convention

The Standalone Financial Statements have been prepared on a historical cost convention & on an accrual basis, except for certain items that are measured at fair value as required by relevant Ind AS:

• Financial assets & financial liabilities measured initially at fair value (refer accounting policy on financial Instruments);

• Defined benefit & other long-term employee benefits.

3.3 Current vs Non-Current Classification

Any asset or liability is classified as current if it satisfies any of the following conditions:

a. The asset/liability is expected to be realised/ settled in the Company''s normal operating cycle;

b. The asset is intended for sale or consumption;

c. The asset/liability is held primarily for the purpose of trading;

d. The asset/liability is expected to be realised/settled within twelve months after the reporting period.

e. The asset is Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period;

f. In case of liability, the Company does not have unconditional right to defer the Settlement of the liability for at least twelve months after the reporting period.

All other assets and liabilities are classified as non-current.

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

For the purpose of current/non-current classification of assets and liabilities, the Company has ascertained its normal operating cycle as twelve months. This is based on the nature of services and time between acquisition of assets for processing and their realisation in cash and cash equivalents

3.4 Use of estimates and Judgements

The preparation of Standalone Financial Statements in conformity with Ind AS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company''s accounting policies. The management believes that the estimates used in preparation of the financial statements are prudent and reasonable. The areas involving a higher degree of judgement or complexity, or area where assumptions & estimates are significant to these Standalone Financial Statements are disclosed below.

The preparation of Standalone Financial Statements in conformity with the Accounting Standards generally accepted in India requires, the management to make estimates & assumptions that affect the reported amounts of assets & liabilities & disclosure of contingent liabilities as the date of the Standalone Financial Statements & reported amounts of revenues & expenses for the year. Actual results could differ from these estimates. Any revision to accounting estimates is recognised prospectively in current & future periods.

When preparing the Standalone Financial Statements, management undertakes a number of judgments'', estimates & assumptions about the recognition & measurement of assets, liabilities, income & expenses. In the process of applying the Company''s accounting policies, the following judgments have been made apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial information. Judgements are based on the information available at the date of balance sheet.

(i) Income Taxes: Significant judgments are involved in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions.

(ii) Property, plant & equipment: Property, plant & equipment represent a significant proportion of the asset base of the Company. The charge in respect of periodic depreciation is derived after determining an estimate of an asset''s expected useful life & the expected residual value at the end of its life. Management reviews the residual values, useful lives & methods of depreciation of property, plant & equipment at each reporting period end & any revision to these is recognised prospectively in current & future periods. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology.

(iii) Employee Benefits: Significant judgments are involved in making judgments about the life expectancy, discounting rate, salary increase, etc. Which significantly affect the working of the present value of future liabilities on account of employee benefits by way of defined benefit plans.

(iv) Impairment of assets & investments: Significant judgment is involved in determining the estimated future cash flows from the investments, Property, Plant & Equipment & Goodwill to determine its value in use to assess whether there is any impairment in its carrying amount as reflected in the financials.

(v) Deferred Tax: Deferred tax asset is recognised for all the deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised. The management assumes that taxable profits will be available while recognising deferred tax assets.

(vi) Recognition & measurement of unbilled gas sales revenues: In case of customers where meter reading dates for billing is not matching with reporting date, the gas sales between last meter reading date & reporting date has been accrued by the company based on past average sales. The

actual sales revenue may vary compared to accrued unbilled revenue so included in Sale of natural gas & classified under current financial assets.

(vii) Recognition & measurement of other provisions:

The recognition & measurement of other provisions are based on the assessment of the probability of an outflow of resources & on past experience & circumstances known at the balance sheet date. The actual outflow of resources at a future date may therefore vary from the figure so provided & included as liability.

(viii) Provision on receivables/advances: The Company has a defined policy for provision of receivables which is based on the ageing of receivables. The Company reviews the policy at regular intervals.

(ix) Provision for Inventory including Capital Inventory: The Company has a defined policy for provision of slow and non-moving inventory based on the ageing of inventory. The Company reviews the policy at regular intervals.

(x) Fair value measurement of financial instruments:

In estimating the fair value of financial assets and financial liabilities, the Company uses market observable data to the extent available. Where such Level 1 inputs are not available, the Company establishes appropriate valuation techniques and inputs to the model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

3.5 Property, Plant & Equipment

(i) Freehold land is carried at historical cost.

(ii) Property, Plant and Equipment other than land are stated at cost of acquisition / construction less accumulated depreciation and impairment losses, if any.

The Company capitalises to project assets all the cost directly attributable & ascertainable, to completing the project which includes freight, duties & taxes (to the extent credit is not available) ,other incidental expenses relating to acquisition and installation and pre-operative expenses. These costs include expenditure of pipelines, plant & machinery, cost of laying of pipeline, cost of survey, commissioning & testing charge, detailed engineering & interest on borrowings attributable to acquisition of such assets. The gas distribution networks are treated as commissioned when supply of gas commences to the customer(s).

for the year ended March 31,2024

Subsequent expenditure related to an item of property, plant and Equipment is added to its book value only if it increases the future economic benefits from the existing asset beyond its previously assessed standard of performance. All other expenses incurred towards normal repairs and maintenance of the existing property, plant and Equipment (including cost of replacing parts) are charged to profit and loss for the period during which such expenses are incurred.

Interest on borrowings attributable to the acquisition / construction of Property, Plant and Equipment for the period of construction is added to the cost of Property, Plant and Equipment.

Assets installed at customer premises, including meters & regulators where applicable, are recognised as property plant & equipment if they meet the definition provided under Ind AS 16 subject to materiality as determined by the management & followed consistently.

(iii) Capital Work in Progress includes expenditure incurred on assets, which are yet to be commissioned & capital inventory, which comprises stock of capital items/ construction materials at respective city gas network.

All the directly identifiable & ascertainable expenditure, incidental & related to construction incurred during the period of construction on a project, till it is commissioned, is kept as Capital work in progress (CWIP) & after commissioning the same is transferred / allocated to the respective "Property, Plant and Equipment".

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

(iv) Depreciation is provided as follow:

• Depreciation is charged on a pro-rata basis on the straight line method (''SLM'') as prescribed in Schedule II to the Companies Act, 2013 which are in line with their estimated useful life , except for the following assets where depreciation is charged on pro-rata basis over the estimated useful life of the assets based on technical advice taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support etc.

o The management believes that these useful lives are realistic & reflect fair approximation of the period over which the assets are likely to be used. The useful lives are reviewed by the management at each financial year end & revised, if appropriate. In case of a revision, the unamortised depreciable amount (remaining net value of assets) is charged over the revised remaining useful life.

o For the purpose of calculating the depreciation, residual value for Tangible assets has been considered as 5% of the value of asset concerned.

• Depreciation on items of property, plant & equipment acquired / disposed-off during the year is provided on pro-rata basis with reference to the date of addition / disposal.

• Depreciation on additions to Property, Plant and Equipment made during the period having cost of H 5000 or less is provided @ 100% on pro rata basis with reference to the date of addition.

• Gains & losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of profit & loss under Other Expenses/Income.

• The carrying amount of assets, including those assets that are not yet available for use, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, recoverable amount of asset is determined. An impairment loss is recognised in the statement of profit and loss whenever the carrying amount of an asset exceeds its recoverable amount.

An impairment loss is reversed only to the extent that the carrying amount of asset does not exceed the net book value that would have been determined if no impairment loss had been recognised. (Cross Reference Note Impairment)

(v) Intangible Assets:

Intangible Assets includes amount paid towards obtaining Right of Way (ROW) permissions for laying the gas pipeline network & cost of developing software for internal use. The Company capitalises software as Intangible Asset where it is expected to provide future enduring economic benefits. Cost associated with maintaining software programmes are recognised as expenses as & when incurred.

Useful life of the Right of Way (ROW) charges is considered as the period for which such charges are paid. In cases where the tenor of payment is not specified by the authorities, the useful life of such ROW charges is considered as 10 years.

Any item of intangible assets is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the intangible asset (calculated as the difference between the net disposal proceeds & the carrying amount of the intangible asset) is charged to revenue in the income statement when the intangible asset is derecognised.

3.6 Foreign currency transactions

Foreign currency transactions are recorded at the exchange rates prevailing at the date of such transactions. Monetary assets & liabilities as at the Balance Sheet date are translated at the rates of exchange prevailing at the date of the Balance Sheet. Gain/Loss arising on account of differences in foreign exchange rates on settlement/ translation of monetary assets & liabilities are recognised in the Statement of Profit & Loss, unless they are considered as an adjustment to borrowing costs, in which case they are capitalised along with the borrowing cost.

3.7 Revenue recognition

Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration which the Group expects to receive in exchange for those products or services. Revenue is measured based on the transaction price, which is the consideration, adjusted for discounts and other incentives, if any, as per contracts with the customers. Revenue also excludes taxes collected from customers in its capacity as agent.

Sale of Natural Gas is recognized on supply of gas to customers by metered/assessed measurements as no

significant uncertainty exists regarding the measurability or collectability of the sale consideration. Sales are billed bi-monthly for domestic customers, monthly/ fortnightly for commercial & non-commercial customers & fortnightly for industrial customers as the timing of the transfer of risks & rewards varies depending on the individual terms of the sales agreement. Revenue on sale of Compressed Natural Gas (CNG) is recognized on sale of gas to consumers from retail outlets.

The amount recognised as revenue is stated inclusive of excise duty & exclusive of Sales Tax /Value Added Tax (VAT), Goods & Service Tax And is net of trade discounts or quantity discounts.

Unbilled revenue is recognised from the end of the last billing cycle to the Balance Sheet date since the related supply of natural gas are performed

The amounts collected towards connection charges from certain domestic customers are "Non-Refundable Charges". Accordingly, the same are recognized as revenue as an when the Company receives the amount from such customers.

The amounts collected from certain domestic customers which includes amount "refundable" in nature. Accordingly, the same are recognized as a liability under the head "Deposit from Customers" in the balance sheet.

Interest income is reported on an accrual basis using the effective interest method.

Dividends Income from investment is recognised at the time the right to receive payment is established.

3.8 Borrowing Costs

(i) The Company is capitalising borrowing costs that are directly attributable to the acquisition or construction of qualifying asset up to the date of commissioning. Qualifying assets are assets that necessarily take a substantial period of time (i.e. twelve months or more) to get ready for their intended use or sale.

Transaction cost in respect of long-term borrowings are amortised over the tenor of respective loan.

(ii) Other borrowing costs are recognised as an expense in the year in which they are incurred, if any.

3.9 Impairment of Property, Plant & Equipment & Intangible Assets and investment in associated

The Company, at each balance sheet date, assesses whether there is any indication of impairment of any asset &/ or cash generating unit. If such indication exists, assets are impaired by comparing carrying amount of each asset &/ or cash generating unit to the recoverable

amount being higher of the net selling price or value in use. Value in use is determined from the present value of the estimated future cash flows from the continuing use of the assets.

3.10 Inventories

Inventory of Gas (including gas inventory in pipeline & CNG cascades) is valued at lower of cost & net realizable value. Cost is determined on weighted average cost method. Where Cost of inventories includes all other costs incurred in bringing the inventories to their present location and condition and Net Realisable Value is the estimated selling price in the ordinary course of business, less estimated cost of completion and estimated cost necessary to make the sale. Necessary adjustment for shortage / excess stock is given based on the available evidence and past experience of the company.

Stores, spares & consumables and other inventory items (viz. CNG Kits, etc) are valued at lower of cost & net realizable value. Cost is determined on moving weighted average basis.

3.11 Cash & Cash Equivalents

Cash and cash equivalents in the balance sheet comprise cash at banks and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value. For the purpose of the statement of cash flows, cash equivalents include short-term deposits with an original maturity of three months or less from the date of acquisition.

3.12 Accounting for Income Taxes

Income tax expenses comprises current tax (i.e. amount of tax for the period determined in accordance with the Income Tax Law) & deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income & taxable income for the period). Income tax expenses are recognised in statement of profit or loss except tax expenses related to items recognised directly in reserves (including statement of other comprehensive income) which are recognised with the underlying items.

(i) The Income Tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets & liabilities attributable to temporary differences & to unused tax losses.

The Current Income Tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period i.e. as per the provisions of the Income Tax Act, 1961, as amended from time to time. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax

regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Advance Taxes & provisions for current income taxes are presented in the balance sheet after off-setting advance tax paid & income tax provision arising in the same tax jurisdiction for relevant tax paying units & where the Company is able to & intends to settle the asset & liability on a net basis.

(ii) Deferred Tax is provided in full on temporary difference arising between the tax bases of the assets & liabilities & their carrying amounts in Standalone Financial Statements at the reporting date. Deferred tax are recognised in respect of deductible temporary differences being the difference between taxable income & accounting income that originate in one period & are capable of reversal in one or more subsequent periods., the carry forward of unused tax losses & the carry forward of unused tax credits.

Deferred Income Tax is determined using tax rates (& laws) that have been enacted or substantially enacted by the end of the reporting period & are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

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

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

Current & Deferred Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Any tax credit available including Minimum Alternative Tax (MAT) under the provision of the Income Tax Act, 1961 is recognised as deferred tax to the extent that it is probable that future taxable profit will be available against which the unused tax credits can be utilised. The said asset is created

by way of credit to the statement of profit & loss & shown under the head deferred tax asset.

The carrying amount of deferred tax assets is reviewed at each reporting date & reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date & are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

3.13 Leases

The Company as a lessee

The Company''s lease asset classes primarily consist of leases for land and buildings. The Company assesses whether a contract contains a lease, at inception of a initial application date i.e. 1 April 2019. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.

At the date of initial application of the lease, the Company recognizes a right-of-use (ROU) asset and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of 12 months or less (short-term leases) and low value leases. For these short-term and low-value leases, the Company recognizes the lease payments as an operating expense on actual payment basis as and when incurred.

Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.

The ROU assets are initially recognized that is equal to lease liabilities on the initial application date, that is arrived based on incremental borrowing rate on the initial application date. They are subsequently measured at cost less accumulated depreciation and impairment losses.

ROU assets are depreciated from the initial application date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. ROU assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair

value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.

The lease liability is initially measured at amortized cost at the present value of the future lease payments on the date of initial application. The lease payments are discounted using the incremental borrowing rate. Lease liabilities are remeasured with a corresponding adjustment to the related ROU asset if the Company changes its assessment of whether it will exercise an extension or a termination option. Lease liability and ROU assets have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.

The Company as a lessor

Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases. When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sublease Consolidated. The sublease is classified as a finance or operating lease by reference to the ROU asset arising from the head lease. For operating leases, rental income is recognized on a straight line basis over the term of the relevant lease.

3.14 Employee Benefits

Liabilities for wages & salaries, including leave encashment 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 & 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.

(i) Defined Contribution Plan:

Contribution towards provident fund for

eligible employees are accrued in accordance with applicable statutes & deposited with the regulatory provident fund authorities (Government administered provident fund scheme). The

Company does not carry any other obligation apart from the monthly contribution.

The Company''s contribution is recognised as an expense in the Statement of Profit & Loss during the period in which the employee renders the related service.

(ii) Defined Benefit Plan:

Gratuity liability is a defined benefit obligation and is computed at the end of each financial year on the basis of an actuarial valuation by an actuary appointed for the purpose as per projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on the government bonds.

The Liability or asset recognised in the balance sheet in respect of defined benefit gratuity plan is the present value of the defined benefit plan obligation at the end of the reporting period less the fair value of the plan assets. The Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent actuary, at each balance sheet date using the projected unit credit method. The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to the market yields at the reporting period on government bonds that have terms approximating to the terms of the related obligation.

The net interest cost in calculated by applying the discounting rate to the net balance of the defined benefit obligation & the fair value of plan assets. Such costs are included in employee benefit expenses in the statement of Profit & Loss. Re-measurements gains or losses arising from experience adjustments & changes in actuarial assumptions are recognised immediately in the period in which they occur directly in "other comprehensive income" & are included in retained earnings in the statement of changes in equity & in the balance sheet. Remeasurements are not reclassified to profit or loss in subsequent periods.

The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit & loss:

• Service costs comprising current service costs, past-service costs, gains & losses on curtailments & non-routine settlements;

• Net interest expense or income.

(iii) Long Term Employee Benefits:

The liability in respect of accrued leave benefits which are expected to be availed or encashed beyond 12 months from the end of the year, is treated as long term employee benefits.

The Company''s liability is actuarially determined by qualified actuary at balance sheet date by using the Projected Unit Credit method.

Actuarial losses/ gains are recognized in the Statement of Other Comprehensive Income in the year in which they arise.

3.15 Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Company operates in a single segment of natural gas business and relevant disclosure requirements as per Ind AS 108 "Operating Segments" have been disclosed by the Company under note no 41.

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Mar 31, 2023

1. Company Information

IRM Energy Limited (formerly known qs IRM Energy Private Limited) was incorporated on 01^st December, 2015 with the object, inter alia of undertaking or carry out the business of storage, supply, distribution & sale of natural gas & business relating to or incidental to the laying, operating, maintaining & expanding of the City Gas Distribution Networks. The Company was converted into Public Company consequent to which a fresh certificate of incorporation dated 23^rd March, 2022 was issued by the Registrar of Companies, Gujarat at Ahmedabad. The Company is currently supplying natural gas in Banaskantha District in the State of Gujarat, Fatehgarh Sahib District in the State of Punjab and at Diu and Gir Somnath Districts in the State of Gujarat as per the authorisation granted by Petroleum & Natural Gas Regulatory Board (PNGRB). The Company was awarded the authorisation for City Gas Distribution in the geographical areas of Namakkal and Tiruchirappalli Districts in the State of Tamil Nadu in March, 2022.

The registered office of the Company is located at 4^th Floor, Block 8, Magnet Corporate Park, Near Sola Bridge, S.G. Flighway, Ahmedabad - 380054, Gujarat.

2.    Basis of Preparation & Measurement

The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) prescribed under section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules as amended from time to time. The significant accounting policies that are used in the preparation of these financial statements are summarised below:

3.    Summary of Significant accounting policies

3.1    Statement of compliance

The Standalone Financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, as amended.

3.2    Historical cost convention

The Standalone Financial Statements have been prepared on a historical cost convention & on an accrual basis, except for certain items that are measured at fair value as required by relevant Ind AS:

•    Financial assets & financial liabilities measured initially at fair value (refer accounting policy on financial Instruments);

•    Defined benefit & other long-term employee benefits.

3.3 Current vs Non-Current Classification

Any asset or liability is classified as current if it satisfies any of the following conditions:

a.    The asset/liability is expected to be realised/ settled in the Company's normal operating cycle;

b.    The asset is intended for sale or consumption;

c.    The asset/liability is held primarily for the purpose of trading;

d.    The asset/liability is expected to be realised/settled within twelve months after the reporting period.

e.    The asset is Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period;

f.    In case of liability, the Company does not have unconditional right to defer the Settlement of the liability for at least twelve months after the reporting period.

All other assets and liabilities are classified as non-current.

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

For the purpose of current/non-current classification of assets and liabilities, the Company has ascertained its normal operating cycle as twelve months. This is based on the nature of services and time between acquisition of assets for processing and their realisation in cash and cash equivalents

3.4 Use of estimates and Judgements

The preparation of Standalone Financial Statements in conformity with Ind AS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies. -The management believes that the estimates used in preparation of the financial statements are prudent and reasonable The areas involving a higher degree of judgement or complexity, or area where assumptions & estimates are significant to these Standalone Financial Statements are disclosed below.

The preparation of Standalone Financial Statements in conformity with the Accounting Standards generally accepted in India requires, the management to make estimates & assumptions that affect the reported amounts of assets & liabilities & disclosure of contingent liabilities as the date of the Standalone Financial Statements & reported amounts of revenues & expenses for the year. Actual results could differ from these estimates. Any revision to accounting estimates is recognised prospectively in current & future periods.

When preparing the Standalone Financial Statements, management undertakes a number of judgments’, estimates & assumptions about the recognition & measurement of assets, liabilities, income & expenses. In the process of applying the Company's accounting policies, the following judgments have been made apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial information. Judgements are based on the information available at the date of balance shegfff^^x

(i)    Income Taxes: Significant judgments are involved in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions.

(ii)    Property, plant & equipment: Property, plant & equipment represent a significant proportion of the asset base of the Company. The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life & the expected residual value at the end of its life. Management reviews the residual values, useful lives & methods of depreciation of property, plant & equipment at each reporting period end & any revision to these is recognised prospectively in current & future periods. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology.

(iii)    Employee Benefits: Significant judgments are involved in making judgments about the life expectancy, discounting rate, salary increase, etc. Which significantly affect the working of the present value of future liabilities on account of employee benefits by way of defined benefit plans.

(iv)    Impairment of assets & investments: Significant judgment is involved in determining the estimated future cash flows from the investments, Property, Plant & Equipment & Goodwill to determine its value in use to assess whether there is any impairment in its carrying amount as reflected in the financials.

(v)    Deferred Tax: Deferred tax asset is recognised for all the deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised. The management assumes that taxable profits will be available while recognising deferred tax assets.

(vi)    Recognition & measurement of unbilled gas sales revenues: In case of customers where meter reading dates for billing is not matching with reporting date, the gas sales between last meter reading date & reporting date has been accrued by the company based on past average sales. The actual sales revenue may vary compared to accrued unbilled revenue so included in Sale of natural gas & classified under current financial assets.

(vii)    Recognition & measurement of other provisions: The recognition & measurement of other provisions are based on the assessment of the probability of an outflow of resources & on past experience & circumstances known at the balance sheet date. The actual outflow of resources at a future date may therefore vary from the figure so provided & included as liability.

(viii)    Provision on receivables/advances : The Company has a defined policy for provision of receivables which is based on the ageing of receivables. The Company reviews the policy at regular intervals.

(ix)    Provision for Inventory including Capital Inventory: The Company has a defined policy for provision of slow and non-moving inventory based on the ageing of inventory. The Comus^m^views the policy at regular intervals.

3.5 Property, Plant & Equipment

(i)    Freehold land is carried at historical cost.

(ii)    Property, Plant and Equipment other than land are stated at cost of acquisition / construction less accumulated depreciation and impairment losses, if any.

The Company capitalises to project assets all the cost directly attributable & ascertainable, to completing the project which includes freight, duties & taxes (to the extent credit is not available) ,other incidental expenses relating to acquisition and installation and preoperative expenses. These costs include expenditure of pipelines, plant & machinery, cost of laying of pipeline, cost of survey, commissioning & testing charge, detailed engineering & interest on borrowings attributable to acquisition of such assets. The gas distribution networks are treated as commissioned when supply of gas commences to the customer(s).

Subsequent expenditure related to an item of property, plant and Equipment is added to its book value only if it increases the future economic benefits from the existing asset beyond its previously assessed standard of performance. All other expenses incurred towards normal repairs and maintenance of the existing property, plant and Equipment (including cost of replacing parts) are charged to profit and loss for the period during which such expenses are incurred.

Interest on borrowings attributable to the acquisition / construction of Property, Plant and Equipment for the period of construction is added to the cost of Property, Plant and Equipment.

Assets installed at customer premises, including meters & regulators where applicable, are recognised as property plant & equipment if they meet the definition provided under Ind AS 16 subject to materiality as determined by the management & followed consistently.

(iii)    Capital Work in Progress includes expenditure incurred on assets, which are yet to be commissioned & capital inventory, which comprises stock of capital gitems/construction materials at respective city gas network.

All the directly identifiable & ascertainable expenditure, incidental & related to construction incurred during the period of construction on a project, till it is commissioned, is kept as Capital work in progress (CWIP)

& after commissioning the same is transferred / allocated to the respective "Property, Plant and Equipment".

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

(iv)    Depreciation is provided as follow:

• Depreciation is charged on a pro-rata basis on the straight line method (‘SLM’) as prescribed in Schedule II to the CompoR^^ct, 2013 whldf^fe ' c.

in line with their estimated useful life , except for the following assets where depreciation is charged on pro-rata basis over the estimated useful life of the assets based on technical advice taking into account the nature of the asset, the estimated usage of fhe assef, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support etc.

The estimated Useful life of Asset is below

Name of Asset	Useful life
Building	25 Years
Computer and Laptops	3 Years
Plant and Machinery- Pipelines and Last Mile Connectivity	25 Years
Plant and Machinery- CNG Stations Equipments and Installations	15 Years
Furniture and Fixtures	10 Years
Office Equipment	5 Years
Vehicles	5 Years
Software	5 Years

o The management believes that these useful lives are realistic & reflect fair approximation of the period over which the assets are likely to be used. The useful lives are reviewed by the management at each financial year end & revised, if appropriate. In case of a revision, the unamortised depreciable amount (remaining net value of assets) is charged over the revised remaining useful life.

o For the purpose of calculating the depreciation, residual value for Tangible assets has been considered as 5% of the value of asset concerned.

•    Depreciation on items of property, plant & equipment acquired / disposed-off during the year is provided on pro-rata basis with reference to the date of addition / disposal.

•    Depreciation on additions to Property, Plant and Equipment made during the period having cost of Rs. 5000 or less is provided @ 100% on pro rata basis with reference to the date of addition.

•    Gains & losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of profit & loss under Other Expenses/lncome.

•    The carrying amount of assets, including those assets that are not yet available for use, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, recoverable amount of asset is determined. An impairment loss is recognised in the statement of profit and loss whenever the carrying amount of an asset exceeds its recoverable amount. An impairment loss is reversed only to the extent that the-eemsTnq amount of^-rro

asset does not exceed the net book value that would have been determined if no impairment loss had been recognised. (Cross Reference Note Impairment)

(i) Intangible Assets:

Intangible Assets includes amount paid towards obtaining Right of Way (ROW) permissions for laying the gas pipeline network & cost of developing software for internal use. The Company capitalises software as Intangible Asset where it is expected to provide future enduring economic benefits. Cost associated with maintaining software programmes are recognised as expenses as & when incurred.

Useful life of the Right of Way (ROW) charges is considered as the period for which such charges are paid. In cases where the tenor of payment is not specified by the authorities, the useful life of such ROW charges is considered as 10 years.

Any item of intangible assets is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the intangible asset (calculated as the difference between the net disposal proceeds & the carrying amount of the intangible asset) is charged to revenue in the income statement when the intangible asset is derecognised.

3.6    Foreign currency transactions

Foreign currency transactions are recorded at the exchange rates prevailing at the date of such transactions. Monetary assets & liabilities as at the Balance Sheet date are translated at the rates of exchange prevailing at the date of the Balance Sheet. Gain/Loss arising on account of differences in foreign exchange rates on settlement/translation of monetary assets & liabilities are recognised in the Statement of Profit & Loss, unless they are considered as an adjustment to borrowing costs, in which case they are capitalised along with the borrowing cost.

3.7    Revenue recognition

Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration which the Group expects to receive in exchange for those products or services. Revenue is measured based on the transaction price, which is the consideration, adjusted for discounts and other incentives, if any, as per contracts with the customers. Revenue also excludes taxes collected from customers in its capacity as agent.

Sale of Natural Gas is recognized on supply of gas to customers by metered/assessed measurements as no significant uncertainty exists regarding the measurability or collectability of the sale consideration. Sales are billed bimonthly for domestic customers, monthly/fortnightly for commercial & noncommercial customers & fortnightly for industrial customers as the timing of the transfer of risks & rewards varies depending on the individual terms of the sales agreement. Revenue on sale of Compressed Natural Gas (CNG) is recognized on sale of gas to consumers from retail outlets.

The amount recognised as revenue is stated inclusive of excise duty & exclusive of Sales Tax /Value Added Tax (VAT), Goods & Service Tax    trade.

discounts or quantity discounts.

Unbilled revenue is recognised from the end of the last billing cycle to the Balance Sheet date since the related supply of natural gas are performed

The amounts collected towards connection charges from certain domestic customers are "Non-Refundable Charges". Accordingly, the same are recognized as revenue as an when the Company receives the amount from such customers.

The amounts collected from certain domestic customers which includes amount "refundable" in nature. Accordingly, the same are recognized as a liability under the head "Deposit from Customers" in the balance sheet.

Interest income is reported on an accrual basis using the effective interest method.

Dividends Income from investment is recognised at the time the right to receive payment is established.

3.8    Borrowing Costs

(i)    The Company is capitalising borrowing costs that are directly attributable to the acquisition or construction of qualifying asset up to the date of commissioning. Qualifying assets are assets that necessarily take a substantial period of time (i.e. twelve months or more) to get ready for their intended use or sale.

Transaction cost in respect of long-term borrowings are amortised over the tenor of respective loan.

(ii)    Other borrowing costs are recognised as an expense in the year in which they are incurred, if any.

3.9    Impairment of Property, Plant & Equipment & Intangible Assets and investment in associated

The Company, at each balance sheet date, assesses whether there is any indication of impairment of any asset &/ or cash generating unit. If such indication exists, assets are impaired by comparing carrying amount of each asset &/ or cash generating unit to the recoverable amount being higher of the net selling price or value in use. Value in use is determined from the present value of the estimated future cash flows from the continuing use of the assets.

3.10    Inventories

Inventory of Gas (including gas inventory in pipeline & CNG cascades) is valued at lower of cost & net realizable value. Cost is determined on weighted average cost method. Where Cost of inventories includes all other costs incurred in bringing the inventories to their present location and condition and Net Realisable Value is the estimated selling price in the ordinary course of business, less estimated cost of completion and estimated cost necessary to make the sale. Necessary adjustment for shortage / excess stock is given based on the available evidence and past experience of the company.

Stores, spares & consumables and other inventory items (viz. CNG Kits, etc) are valued at lower of cost & net realizable value. Cost is determined on moving weighted average basis.

3.11 Accounting for Income Taxes

Income tax expenses comprises current tax (i.e. amount of tax for the period determined in accordance with the Income Tax Law) & deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income & taxable income for the period). Income tax expenses are recognised in statement of profit or loss except tax expenses related to items recognised directly in reserves (including statement of other comprehensive income) which are recognised with the underlying items.

(i)    The Income Tax expense or credit for the period is the tax payable on the current period's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets & liabilities attributable to temporary differences & to unused tax losses.

The Current Income Tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period i.e. as per the provisions of the Income Tax Act, 1961, as amended from time to time. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Advance Taxes & provisions for current income taxes are presented in the balance sheet after off-setting advance tax paid & income tax provision arising in the same tax jurisdiction for relevant tax paying units & where the Company is able to & intends to settle the asset & liability on a net basis.

(ii)    Deferred Tax is provided in full on temporary difference arising between the tax bases of the assets & liabilities & their carrying amounts in Standalone Financial Statements at the reporting date. Deferred tax are recognised in respect of deductible temporary differences being the difference between taxable income & accounting income that originate in one period & are capable of reversal in one or more subsequent periods., the carry forward of unused tax losses & the carry forward of unused tax credits.

Deferred Income Tax is determined using tax rates (& laws) that have been enacted or substantially enacted by the end of the reporting period & are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

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

Deferred Tax Assets & Liabilities are offset when there is a legally enforceable right to offset current tpx-assets & liabilities & when the deferred tax balances relate to tK^^jJ^^ation authgrfe^^^nt tax assets & tax liabilities are offset where the Company has a legally enforceable right to offset & intends either to settle on a net basis, or to realise the asset & settle the liability simultaneously.

Current & Deferred Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Any tax credit available including Minimum Alternative Tax (MAT) under the provision of the Income Tax Act, 1961 is recognised as deferred tax to the extent that it is probable that future taxable profit will be available against which the unused tax credits can be utilised. The said asset is created by way of credit to the statement of profit & loss & shown under the head deferred tax asset.

The carrying amount of deferred tax assets is reviewed at each reporting date & reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date & are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

3.12 Leases

The Company as a lessee

The Company’s lease asset classes primarily consist of leases for land and buildings. The Company assesses whether a contract contains a lease, at inception of a initial application date i.e. 1 April 2019. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.

At the date of initial application of the lease, the Company recognizes a right-of-use (ROU) asset and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of 12 months or less (short-term leases) and low value leases. For these shortterm and low-value leases, the Company recognizes the lease payments as an operating expense on actual payment basis as and when incurred.

Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.

The ROU assets are initially recognized that is equal to lease liabilities on the initial application date, that is arrived based on incremental borrowing rate on the initial application date. They are subsequently measured at cost less accumulated dept^p^tiqn and impa^r^^TTqsses.

ROU assets are depreciated from the initial application date on a straight-line basis over the shorter of fhe lease term and useful life of fhe underlying asset. ROU assets are evaluated for recoverabilify whenever evenfs or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-inuse) is determined on an individual asset basis unless the asset does not generate cash flows fhat are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.

The lease liability is initially measured at amortized cost at the present value of the future lease payments on the date of initial application. The lease payments are discounted using the incremental borrowing rate. Lease liabilities are remeasured with a corresponding adjustment to the related ROU asset if the Company changes its assessment of whether it will exercise an extension or a termination option. Lease liability and ROU assets have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.

The Company as a lessor

Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases. When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sublease Consolidatedly. The sublease is classified as a finance or operating lease by reference to the ROU asset arising from the head lease. For operating leases, rental income is recognized on a straight line basis over the term of the relevant lease.

3.13 Employee Benefits

Liabilities for wages & salaries, including leave encashment 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 fhe reporting & 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.

(i) Defined Contribution Plan:

Contribution towards provident fund for eligible employees are accrued in accordance with applicable statutes & deposited with the regulatory provident fund authorifies (Governmenf administered provident fund scheme). The Company does not carry any other obligation apart from the monthly contribution.

The Company's contribution is recognised as an expense in the Statement of Profit & Loss during the period in which the employee renders the related service.

(ii) Defined Benefit Plan:

Gratuity liability is a defined benefit obligation and is computed at the end of each financial year on the basis of an actuarial valuation by an actuary appointed for the purpose as per projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on the government bonds.

The Liability or asset recognised in the balance sheet in respect of defined benefit gratuity plan is the present value of the defined benefit plan obligation at the end of the reporting period less the fair value of the plan assets. The Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent actuary, at each balance sheet date using the projected unit credit method. The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to the market yields at the reporting period on government bonds that have terms approximating to the terms of the related obligation.

The net interest cost in calculated by applying the discounting rate to the net balance of the defined benefit obligation & the fair value of plan assets. Such costs are included in employee benefit expenses in the statement of Profit & Loss. Re-measurements gains or losses arising from experience adjustments & changes in actuarial assumptions are recognised immediately in the period in which they occur directly in "other comprehensive income” & are included in retained earnings in the statement of changes in equity & in the balance sheet. Re-measurements are not reclassified to profit or loss in subsequent periods.

The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit & loss:

•    Service costs comprising current service costs, past-service costs, gains & losses on curtailments & non-routine settlements;

•    Net interest expense or income.

(iii) Long Term Employee Benefits:

The liability in respect of accrued leave benefits which are expected to be availed or encashed beyond 12 months from the end of the year, is treated as long term employee benefits.

The Company’s liability is actuarially determined by qualified actuary at balance sheet date by using the Projected Unit Credit method.

Actuarial losses/ gains are recognized in the Statement of Other Comprehensive Income in the year in which they arise.

3.14 Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Company operates in a single segment of natural gas business and relevant disclosure requirements as per Ind AS 108 "Operating Segments” have been disclosed by the Company under note no 38.    __

3.15    Provisions, Contingent Liabilities & Contingent Assets

Provision is recognised when the Company has a present obligation as a result of past events & it is probable that the outflow of resources will be required to settle the obligation & in respect of which reliable estimates can be made. A disclosure for contingent liability is made when there is a possible obligation that may, but probably will not require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision/ disclosure is made. Contingent assets are not recognised in the financial statement.

Provisions & contingencies are reviewed at each balance sheet date & adjusted to reflect the correct management estimates.

3.16    Statement of Cash Flows

Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or accruals of past or future operating cash receipts or payments &. item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing & financing activities of the Company are segregated.

3.17    Events occurring after the Reporting Date

Adjusting events (that provides evidence of condition that existed at the balance sheet date) occurring after the balance sheet date are recognized in the Standalone Financial Statements. Material non adjusting events (that are inductive of conditions that arose subsequent to the balance sheet date) occurring after the balance sheet date that represents material change & commitment affecting the financial position are disclosed in the Directors’ Report.

3.18    Earnings per Share

Basic earnings per share are calculated by dividing the net profit or loss [excluding other comprehensive income] for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for evenfs such as bonus issue, bonus element in a right issue, shares split & reserve share splits [consolidation of shares] that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss [excluding other comprehensive income] for the year attributable to equity shareholders & the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

3.19    Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial instruments also include derivative contracts such as foreign exchange forward contracts, cross currency interest rate swaps, interest rate swaps, currency options and embedded derivatives in the ho^pantract.

a. Financial Assets

Initial recognition and measurement

All financial assets are recognized initially at fair value (plus transaction costs attributable to the acquisition of the financial assets, in the case of financial assets are not recorded at fair value through profit or loss).

i.    Classifications

The company classifies its financial assets as subsequently measured at either amortized cost or fair value depending on the company's business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.

ii.    Business model assessment

The company assesses the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed, and information is provided to management.

Assessment whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a period, for other basic lending risks, costs (e.g. liquidity risk and administrative costs), and profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.

Financial Assets at amortised cost

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

-    It is held within a business model whose objective is to hold assets to collect contractual cash flows.

-    the contractual terms of the financial asset represents contractual cash flows that are solely payments of principal and interest.

After initial measurement, such financial assets are subsequently measured at amortised cost using the EIR method. Amortised cost is calculated by considering 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 income in the profit or loss. The losses arising from impairment are recognised in the profit or loss.    ___

Financial Assets at Fair Value through Other Comprehensive Income (FVOCI)

A financial asset is measured at amortized cost only if both of the following conditions are met:

- it is held within a business model whose objective is to hold assets in order to collect contractual cash flows.

the contractual terms of the financial asset represent contractual cash flows that are solely payments of principal and interest.

On initial recognition, the Company makes an irrevocable election on an instrument-by-instrument basis to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instruments, other than equity investment which are held for trading. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the 'Reserve for equity instruments through other comprehensive income'. The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.

Financial Assets at Fair Value through Profit and Loss (FVTPL)

Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.

Other financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognised in statement of the profit and loss.

Investment in Subsidiaries, Jointly Controlled Entities and Associates

Investment in subsidiaries, jointly controlled entities and associates are measured at cost less impairment as per the Ind AS 27 -Separate Financial Statements.

Impairment of investments

The Company reviews its carrying value of investments carried at cost or amortised cost annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for.

iii. Derecognition of financial assets

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

- The rights to receive cash flows from th^^efcfiaVe expired,

- The company has transferred its rights 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 rights 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 recognize the transferred asset to the extent of the company's continuing involvement. In that case, the company also recognizes 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.

On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognised in the OCI is recognised in profit or loss.

Impairment of financial assets

The Company assesses the expected credit losses associated with its assets carried at amortised cost and FVOCI debt instruments on a forward-looking basis. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

With regard to trade receivable, the Company applies the simplified approach as permitted by the Ind AS 109, Financial Instruments, which requires expected lifetime losses to be recognised from the initial recognition of the trade receivables.

For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial assets has increased significantly since initial recognition.

b. Financial Liabilities

i. Initial recognition and measurement

Financial liabilities are classified at initial recognition as financial liabilities at fair value through profit or loss or amortised cost, as appropriate.

All financial liabilities are recognised initially at fair value and in the case of amortised cost, net of directly attributable transaction costs.

ii. Subsequent measurement

The measurement of financial liabilities depends on their classification, as described below:

Financial Liabilities measured at amortised cost

After the 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 EIR amortisation process.

Amortised cost is calculated by considering 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.

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. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.

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 the Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ losses are not subsequently transferred to the P&L. Plowever, the Company may transfer the cumulative gain or loss within equity. Ail the other changes in fair value of such liability are recognised in the statement of profit or loss.

iii.Derecognition of financial liabilities

The company derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.

Modifications of financial assets and financial liabilities

Financial assets

If the terms of a financial asset are modified, the company evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is derecognised and a new financial asset is recognised at fair value.

If the cash flows of the modified asset carried at amortised cost are not substantially different, then the modification does not result in derecognition of the financial asset. In this case, the company recalculates the gross carrying amount of the financial asset and recognises the amount arising from adjusting the gross carrying amount as a modification gain or loss in profit or loss. If such a modification is carried out because of financial difficulties of the borrower, then the gain or loss is presented together with impairment losses. In other cases, it is presented as interest income. The gain / loss is recognised in other equity in case of transaction with shareholders.

Financial liabilities

Borrowings and other financial liabilities are initially recognised at fair value (net of transaction costs incurred). Difference between the fair value and the transaction proceeds on initial is recognised as an asset / liability based on the underlying reason for the difference.

Subsequently all financial liabilities are measured at amortised cost using the effective interest rate method. The company derecognises a financial liability when its terms are modified, and the cash flows of the modified liability are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in profit or loss. The gain / loss is recognised in other equity in case of transaction with shareholders.

The Company has computed the Equity component of the Preference Shares considering the terms of the RPS to be non-cumulative and further modified the estimates of future cash flows.

3.20 Fair Value Measurements

These Standalone Financial Statements are prepared under the historical cost convention, except certain financial assets & liabilities measured at fair value (refer accounting policy on financial instruments) as per relevant applicable Ind AS.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to the Company.

Management applies valuation techniques to determine the fair value of financial instruments (where active market quotes are not available) and non-financial assets. This involves developing estimates and assumptions consistent with how market participants would price the instrument. Management bases its assumptions on observable data as far as possible but this is not always available. In that case management uses the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing t^^sjet. or liability, assj^iaQtJhat market participants act in their economic bes^Srer^S^- fair value jrte8s&fe^ent of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest & best use or by selling it to another market participant that would use the asset in its highest & best use.

The Company uses valuation techniques that are appropriate in the circumstances & for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs & minimising the use of unobservable inputs. All assets & liabilities for which fair value is measured or disclosed in the Standalone Financial Statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

•    Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities

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

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

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

3.21 The previous year numbers have been reclassified wherever necessary. Unless otherwise stated, all amounts are in Million Indian Rupees. Items reflecting as 0.00 denotes value less than Rs. 50,000.