Accounting Policies of Paramount Speciality Forgings Ltd. Company

Mar 31, 2025

1 Corporate Information

The Company is formed by conversion of a Limited Liability Partnership (“LLP”), under the provisions of Companies Act, 2013. The LLP was registered as a Limited Liability Partnership pursuant to section 58(1) of the LLP Act, 2008. The Partners of the LLP at their meeting held on January 06, 2023, inter alia, has given their consent for adoption of table F of Schedule I of the Companies Act, 2013, so as to convert the LLP to Public Limited Company and accordingly change the name from Paramount Speciality Forgings LLP to Paramount Speciality Forgings Limited (the “Company”).

On January 9, 2023, LLP has received the name approval from Ministry of Corporate Affairs, thereafter which the LLP has filed an application for registration under section 366, pursuant to Rule 3(2) of the Companies (Authorised to Register) Rules, 2014 read with section 366 of the Companies Act, 2013. MCA has granted Certificate of Incorporation (COI) to Paramount Speciality Forgings Limited, public limited company w.e.f. May 05, 2023.

The Company is into manufacturing of carbon steel and stainless steel flanges and fittings and other engineering goods made from steel and stainless steel goods or any other goods and merchandise and allied business thereto.

2 Significant Accounting Policies

i. Basis of Preparation of financial statements:

These financial statements have been prepared and presented under the historical cost convention, in accordance with Generally Accepted Accounting Principles (Indian GAAP) on accrual basis and on principles of going concern. The accounting policies, in all material respects, have been consistently applied by the Company.

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

ii. Use of Estimates:

The preparation of financial statements in conformity with generally accepted accounting principles in India requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that the estimates used in the preparation of financial statements are prudent and reasonable. Actual results could differ from those estimates. Differences between the actual results and estimates are recognised in the period in which the results are known/ materialized.

iii. Property Plant and Equipment, Depreciation and Amortization

Property Plant and Equipment are stated at cost of acquisition or construction, less accumulated depreciation and impairment losses, if any. Cost includes all expenses related to acquisition and

installation of the concerned assets and any attributable cost of bringing the asset to the condition of its intended use excluding Input tax credit (IGST/CGST and SGST) or other tax credit available to the Entity. Tools and Dies used in Hammers are charged to Profit and Loss Account.

Direct financing cost incurred during the construction period on major projects is also capitalised.

Property Plant and Equipment acquired under finance lease are capitalized at the lower of their fair value and the present value of the minimum lease payments.

Subsequent expenditure incurred on existing Property Plant and Equipment is expensed out except where such expenditure increases the future economic benefits from the existing assets.

The Company has changed the depreciation method from Written Down Value (WDV) method to Straight Line Method (SLM) with effect from April 01, 2024. This change was implemented by the management to align with best practices, enhance compliance, and improve the financial presentation of the company''s assets.

During the year, depreciation is provided under Straight Line Method over the useful life specified in Schedule II to the Companies Act, 2013, pro-rata to the period of use, except for leasehold improvements. The Company has used following useful lives to provide depreciation of different class of its property, plant and equipment and Intangible assets.

1 Tangible Asset	Useful lives in years
Building	30
Plant and Machinery	15
Factory Equipment	10
Furniture, Fixtures and Fittings	10
Office Equipment	5
Computers	3
Software	3
Vehicles	8

Tools and Dies used in Press machine are capitalised and depreciated @15%.

Leasehold improvements are depreciated over the lease period.

Assets individually costing less than Rs. 5,000 each are depreciated at 100% in the year of acquisition itself.

iv. Intangible Assets

Intangible Assets, acquired for internal use, are recognised as assets and are stated at cost less accumulated amortisation. Cost includes cost of acquisition, import duties, taxes and any expenditure directly attributable to the making of the asset ready for its use.

Subsequent expenditure incurred on existing assets is expensed out except where such expenditure increases the future economic benefits from the existing assets, in which case the expenditure is amortised over the remaining useful life of the original asset.

v. Capital Work-in-Progress

The cost of the Property, Plant and Equipment not ready for its intended use on such date, is disclosed under capital work-inprogress. Advances paid towards the acquisition of Property, Plant and Equipment, outstanding at each balance sheet date are shown under capital advances.

vi. Asset Impairment:

Management periodically assesses using, external and internal sources, whether there is an indication that an asset may be impaired. An impairment occurs where the carrying value exceeds its recoverable amount. An impairment loss, if any, is recognized in the period in which the impairment takes place.

vii. Operating Leases

Leases of assets under which all the risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments under operating leases are recognized

as an expense on a straight-line basis over the lease term.

viii. Investments

Investments are carried at cost. Cost of acquisition includes all costs directly incurred on the acquisition of the investment.

Provision for diminution, if any, in the value of long-term investments is made to recognize a decline, other than of a temporary nature. Current investments are stated at lower of cost and net realisable value.

ix. Inventories:

Raw materials are valued at lower of actual cost and net realisable value on FIFO basis.

Work-in-progress is valued at lower of average cost of production and net realisable value. Cost of production includes cost of material, labour and appropriate factory overheads.

Finished goods are valued at lower of average cost of production or net realisable value. Cost of production includes cost of material, labour and appropriate factory overheads.

Fixed and Variable Overheads are identified and apportioned to WIP and FG based on normal capacity/ actual production.

x. Cash and Cash Equivalents

Cash and Cash Equivalents includes cash in hand, bank balances and term deposits with bank having maturity term of less than three months.

xi. Revenue Recognition:

• Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

• Sale of goods is recognised when the control of the goods is transferred to the customer upon dispatch or delivery, in accordance with the terms of customer contracts. Revenue is recognised at an amount that the Company expects to receive from customers that is net of returns, trade discounts, rebates, and Goods and Service Tax.

• Export incentives are accounted on accrual basis.

• Interest income is recognised on a time proportion basis.

• Given the nature of business, scrap generated is valued only on sale thereof.

xii. Expenditure

Expenses are accounted for on accrual basis and provision is made for all known losses and liabilities.

xiii. Borrowing Costs:

Borrowing costs that are directly attributable to the acquisition of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of that asset till the date it is put to use. Other borrowing costs are recognised as an expense in the period in which they are incurred.

Borrowing costs also include exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs. If the difference between the interest payable on local currency borrowings and interest payable on foreign currency borrowings is equal to or more than the exchange difference on the amount of principal of the foreign currency borrowings, the entire amount of exchange difference is considered as borrowing cost and are regarded as an adjustment to interest cost.

xiv. Foreign Exchange Transactions:

Transactions in foreign currency are recorded at the exchange rates prevailing on the date of the transaction. Assets and liabilities related to foreign currency transactions, remaining unsettled at the year end, are stated at the contracted rates, when covered under forward foreign exchange contracts and at year end rates in other cases.

xv. Free Service Warranty Obligations:

The Company provides a free warranty service to certain customers against manufacturing defects, based on client specific

contractual requirements. This warranty is for a period of one and a half year from date of dispatch or one year from the date of commissioning of products, whichever occurs earlier, in line with client expectations and agreed terms. No warranty provision made based on past experience where no material claims have been made by customers.

xvi. Employee Benefits:

i) Short-term Employee benefits

All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, bonus etc., are recognized as an expense at the undiscounted amount in the Profit and Loss Account of the period in which the employee renders the related service.

ii) Post employment benefits Defined Contribution Plan:

Employee benefits in the form of Provident Fund is considered as defined contribution plans and the contributions are charged to the statement of Profit and Loss of the period when the contributions to the respective funds is due.

Defined Benefit Plan:

Retirement benefit in the form of Gratuity is considered as a defined benefit obligation. The LLP''s liability in respect of gratuity is provided for, on the basis of actuarial valuations, using the projected unit credit method, as at the date of the Balance Sheet. Actuarial losses / gains are recognised in the statement of profit and loss in the period in which they arise.

Other Long-Term Benefits

Provision for the unutilized leave balances is accounted for on the basis of accrued liability method based on number of days leave to the credit of each employee computed on the basis of last drawn basis salary.

The Company has no policy for accumulation of leaves.

xvii. Taxes on Income

i. Current Tax

Current income tax is measured at the amount expected to be paid to taxation authorities in accordance with the provisions of the Income-tax Act, 1961.

ii. Deferred Tax

Deferred tax subject to consideration of prudence, is recognised on timing differences; being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets on unabsorbed tax losses and tax depreciation are recognised only when there is a virtual certainty of their realisation supported by convincing evidence and on other items when there is reasonable certainty of realisation. The tax effect is calculated on the accumulated timing differences at the year-end based

on the tax rates and laws enacted or substantially enacted on the balance sheet date.

xviii. Earnings per share

Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effect of all potentially dilutive

xix. Provisions and Contingent Liabilities

Provisions are recognized when there is a present obligation as a result of a past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

No Provision is recognized for :

i. Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or

ii. Any present obligation that arises from past events but is not recognized because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or a reliable estimate of the amount of obligation cannot be made.

xx. Segment Reporting

Business Segments:

Based on the guiding principles given in Accounting Standard 17 (AS - 17) on Segment Reporting issued by ICAI, the Company has only one reportable Business Segment, which is manufacturing of carbon steel and stainless steel flanges and fittings and other engineering goods made from steel and stainless steel goods or any other goods and merchandise and allied business thereto, hence no separate disclosure pertaining to attributable Revenues, Profits, Assets, Liabilities, Capital employed are given. Accordingly, the figures appearing in these financial statements relate to the Company’s single Business Segment.