Provisions and Contingent Liabilities
The assessments undertaken in recognizing
provisions and contingencies have been made in
accordance with Ind AS 37, ‘Provisions, Contingent
Liabilities and Contingent Assests’. The evaluation
of the likelihood of the contingent events has
required best judgment by management regarding
the probability of exposure to potential loss. The
timings of recognition and quantification of the
liability requires the application of judgment to
existing facts and circumstances, which can be
subject to change.
e) Revenue
The Company assesses the products /services
promised in a contract and identifies distinct
performance obligations in the contract.
Identification of distinct performance obligation
involves judgement to determine the deliverables
and the ability of the customer to benefit
independently from such deliverables.
Judgement is also required to determine the
transaction price for the contract. The transaction
price is also adjusted for the effects of the time
value of money if the contract includes a significant
financing component.
The Company uses judgement to determine
an appropriate standalone selling price for a
performance obligation. The Company allocates the
transaction price to each performance obligation on
the basis of the relative standalone selling price of
each distinct product or service promised in the
contract.
The Company exercises judgement in determining
whether the performance obligation is satisfied at
a point in time. The Company considers indicators
such as how customer consumes benefits as
services are rendered or who controls the asset as it
is being created or existence of enforceable right to
payment for performance to date and alternate use
of such product or service, transfer of significant
risks and rewards to the customer, acceptance of
delivery by the customer, etc.
2.4 Revenue Recognition
Revenue from sale of products/goods & services
is recognized upon satisfaction of the performance
obligation by transferring the control of promised
products or provision of services to a customer in an
amount that reflects the consideration which a company
expects to receive in exchange for those products or
services.
‘Revenue is recognized net of returns and is
measured based on the transaction price, which is the
consideration, adjusted for trade discounts, incentives
etc agreed as a term of contract. Revenue also excludes
taxes collected from customers.
Income from Interest is recognized using Effective
Interest rate method. Dividend income from investments
is recognized when the shareholder’s right to receive
payment has been established. Rental Incomes are
recognized on periodic basis.
Export Incentive Entitlements are recognized as Income
when right to receive credit as per the terms of the
scheme is established in respect of eligible exports
made and when there is no significant uncertainty
regarding the ultimate collection of the relevant export
proceeds.
Insurance claim are accounted for on the basis of claims
admitted/expected to be admitted and to the extent that
the amount recoverable can be measured reliably and it
is reasonable to expect ultimate collection.
All other incomes are accounted on accrual basis.
2.5 Foreign Currency Transactions
The functional and presentation currency of the
Company is Indian Rupee (“'”) which is the currency
of the primary economic environment in which the
Company operates.
The transactions in the currencies other than the entity’s
functional currency (foreign currency’s) are accounted
for at the exchange rate prevailing on the transaction’s
date.
Monetary assets and liabilities denominated in foreign
currencies are translated at the functional currency at
closing rates of exchange at the reporting date and the
resultant difference is charged/ credited in Standalone
Statement of Profit & Loss account.
Exchange differences arising on settlement or
translation of monetary items are recognized in
Standalone Statement of Profit & Loss except to the
extent of exchange differences which are regarded
as an adjustment to interest costs on foreign currency
borrowings that are directly attributable to the acquisition
or construction of qualifying assets, are capitalized as
cost of assets.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated
on reporting date.
2.6 Borrowing Costs
Borrowing Costs that are attributable to the acquisition
or construction of qualifying assets are added to the
cost of those assets, until such time as the assets are
substantially ready for their intended use. A qualifying
asset is an asset that necessarily requires a substantial
period of time to get ready for its intended use.
All other Borrowing costs are recognized in the
Standalone Statement of Profit and Loss in the period in
which they are incurred.
Borrowing costs include interest and exchange
difference arising from currency borrowing to the extent
they are regarded as an adjustment to the interest cost.
2.7 Government Grant and Assistance
Government grants are assistance by government in the
form of transfer of resources to an entity in return for past
or future compliance with certain conditions relating to
the operating activities of the entity and the same are
not recognized until there is reasonable assurance that
the Company will comply with the conditions attached
to them and that the grants will be received.
Government grants related to assets, including non¬
monetary grants recorded at fair value are treated as
deferred income and are recognized and credited in the
Standalone Statement of Profit and Loss on a systematic
and rational basis over the estimated useful life of the
related asset.
2.8 Employees’ Benefits
Defined Contribution Plans:
The Company has contributed to State Governed
Provident Fund scheme, Employees State Insurance
scheme and Employee Pension Scheme which are
defined contribution plans. Contribution paid or payable
under the scheme is recognized as expense during the
period in which employees have rendered the service
entitling them to the contributions.
Defined Benefit Plans:
The employees’ gratuity is a defined benefit plan. The
present value of the obligation under such plan is
determined based on the Actuarial Valuation using the
projected unit credit method which recognizes each
period of service as giving rise to an additional unit
of employee benefit entitlement and measures each
unit separately to build up the financial obligation. The
Company has an employee gratuity fund managed by
Life Insurance Corporation of India (LIC).
The gains or losses are charged to Standalone
Statement Profit and Loss Account.
Liability in respect of compensated absence is provided
based on Actuarial Valuation using the projected unit
credit method.
Compensation to employees, who opt for retirement
under the Voluntary Retirement Scheme of the company,
is charged to the Standalone Statement of Profit & Loss
in the year of exercise of option by the employee.
Re-measurement of defined benefit plans in respect
of post-employment are charged to the Other
Comprehensive Income.
All employee benefits payable wholly within twelve
months of rendering the service are classified as short¬
term employee benefits. Benefits such as salaries,
wages, bonus etc. are recognized in the period in which
the employee renders the related service. A liability is
recognized for the amount expected to be paid when
there is a present legal or constructive obligation to pay
this amount as a result of past service provided by the
employee and the obligation can be estimated reliably.
2.9 Taxes on Income
Current Tax
Tax on income for the current period is determined on
the basis of taxable income and tax credits/ benefits
computed in accordance with the provisions of the
Income Tax Act, 1961.
Advance taxes and provisions for current income taxes
are presented in the balance sheet after off-setting
advance tax paid and income tax provision arising in
the same tax jurisdiction and where the company has
a legally enforceable right and also intends to settle the
asset and liability on a net basis.
Deferred Tax
Deferred tax is recognized on temporary differences
between the carrying amounts of assets and liabilities
in the standalone financial statements and the
corresponding tax bases used in the computation
of taxable profit. Deferred tax liabilities are generally
recognized for all taxable temporary differences.
Deferred tax assets are generally recognized for all
deductible temporary differences to the extent it is
probable that taxable profits will be available against
which those deductible temporary differences can be
utilised. Such deferred tax assets and liabilities are not
recognized if the temporary difference arises from the
initial recognition of assets and liabilities in a transaction
that affects neither the taxable profit nor the accounting
profit.
The carrying amount of deferred tax assets is reviewed
at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to
be recovered.
Deferred tax assets and deferred tax liabilities are offset
if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred
taxes relate to same taxation authority.
Current and deferred tax are recognized in profit or
loss, except when they are relating to items that are
recognized in other comprehensive income or directly
in equity, in which case, the current and deferred tax
are also recognized in other comprehensive income or
directly in equity respectively.
Deferred tax assets and liabilities are measured at
the tax rates that have been enacted or substantively
enacted at the balance sheet date.
2.10 Property, Plant and Equipment and Capital
Work-In-Progress
The cost of Property, Plant and Equipment comprises
its purchase price net of any trade discounts, if any and
rebates, import duties and other taxes (other than those
subsequently recoverable from the tax authorities), any
directly attributable expenditure on making the asset
ready for its intended use, including relevant borrowing
cost attributable to the Qualifying Asset in compliance
with Ind AS 23.
Expenditure incurred after the Property, Plant and
Equipment have been put into operation, such as
repairs and maintenance, are charged to the Standalone
Statement of Profit and Loss in the period in which
the costs are incurred. Major shut-down and overhaul
expenditure is capitalized as the activities undertaken
improves the economic benefits expected to arise from
the asset.
An item of Property, Plant and Equipment is derecognized
upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset.
Any gain or loss arising on the disposal or retirement of
an item of Property, Plant and Equipment is determined
as the difference between the sales proceeds and
the carrying amount of the asset and is recognized in
Standalone Statement of Profit and Loss.
Property, Plant and Equipment except freehold land
held for use in the production, supply or administrative
purposes, are stated in the balance sheet at cost less
accumulated depreciation and accumulated impairment
losses., if any. Freehold lands are stated at cost.
Depreciation commences when the assets are ready
for their intended use. Depreciable amount for assets
is the cost of an asset, or other amount substituted for
cost, less its estimated residual value. Depreciation is
recognized so as to write off the cost of assets (other
than freehold land) less their residual values over their
useful lives, using straight-line method as per the useful
life prescribed in Schedule II to the Companies Act,
2013.
When significant parts of plant and equipment are
required to be replaced at intervals, the Company
depreciates them separately based on estimate of their
specific useful lives.
Major overhaul costs are depreciated over the estimated
life of the economic benefit derived from the overhaul.
The carrying amount of the remaining previous overhaul
cost is charged to the Standalone Statement of Profit
and Loss if the next overhaul is undertaken earlier than
the previously estimated life of the economic benefit.
‘Capital work-in-progress represents the cost of
Property, Plant and Equipment that are not yet ready for
their intended use at the reporting date.
‘The Company reviews the residual value, useful lives
and depreciation method annually and, if expectations
differ from previous estimates, the change is accounted
for as a change in accounting estimate on a prospective
basis.
‘Cost of in-house assembled/fabricated Property, Plant
& Equipment comprise those costs that relate directly to
the specific assets and other costs that are attributable
to the assembly/fabrication thereof.
Depreciation on Property, Plant & Equipment is
provided based on useful lives of assets as prescribed in
Schedule-II to Companies Act 2013 except in respect of
followings assets where estimated useful life is different
than these mentioned in Schedule II are as follows: -
i) Plant & Machinery 15-30 Years
ii) Dies & Tools 2 Years
iii) Assets costing below ' 5,000/- 1 Year
iv) Temporary Building Shed 3 Years
v) Machinery Spares 2-10 Years
vi) Leasehold Land Lease term
2.11 Intangible Assets
Intangible assets are initially recorded at consideration
paid for acquisition of such assets and are subsequently
carried at cost less accumulated depreciation or
amortization and accumulated impairment loss, if any.
Amortization is recognized on a straight-line basis over
their estimated useful lives.
Estimated useful life of Intangible Assets as follows:
i) Computer Software 3-6 Years
2.12 Inventories
Basis of valuation of Inventories;
• Raw materials, stores and spares: At cost, on “FIFO”
basis;
• Work-in-progress: At raw material cost plus related
cost of conversion including appropriate overheads;
• Finished goods: At cost or net realisable, whichever
is less;
• Saleable Scrap is valued at estimated realizable
value.
Raw Material, Work-In-Progress and other supplies are
not valued below cost except in cases where material
prices have declined and it is estimated that the cost of
the finished products will not exceed their net realisable
value. The comparison of cost and net realisable value
is made on item by item basis.
Cost of raw materials include cost of purchase and
other costs incurred in bringing the inventories to their
present location and condition.
Cost of finished goods and work in progress include cost
of direct materials, labour and appropriate overheads
based on the normal operating capacity.
2.13 Impairment of non-financial assets
‘The Carrying amounts of assets are reviewed at each
Balance Sheet date and if there is any indication to the
effect that the recoverable amount of the Asset/ CGU
(Cash Generating Unit) is less than it carrying amount,
the difference is treated as “Impairment Loss”. The
recoverable amount is greater of the asset’s net selling
price less cost to sell and value in use.
‘Intangible assets with indefinite useful lives and
intangible assets not yet available for use are tested for
impairment at least annually, and whenever there is an
indication that the asset may be impaired, the impairment
loss is recognized in the Standalone Statement of Profit
and Loss account.
2.14 Leases
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
contract.
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.
Company as Lessee
At the date of commencement 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 a straight-line basis over the
term of the lease. Certain lease arrangements include
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.
Right-of-Use Assests (ROU)
The ROU assets are initially recognized at cost, which
comprises the initial amount of the lease liability
adjusted for any lease payments made at or prior to the
commencement date of the lease plus any initial direct
costs less any lease incentives. They are subsequently
measured at cost less accumulated depreciation and
impairment losses. ROU assets are depreciated from the
commencement 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.
Lease Liabilities
The lease liability is initially measured at amortized
cost at the present value of the future lease payments.
The lease payments are discounted using the interest
rate implicit in the lease or, if not readily determinable,
using the incremental borrowing rates in the country of
domicile of these leases. 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 Standalone Financial Statements and
lease payments have been classified as financing cash
flows.
Company as 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.
For operating leases, rental income is recognized on a
straight-line basis over the term of the relevant lease.
Short Term Leases are Leases for Low Value Assets
The Companies apply the short-term lease recognition
exemption to its short-term leases (i.e., those leases
that have a lease term 12 months and less from the
commencement date and do not contain a purchase
options).
It also applies the leave of low-value assets recognition
exemption to leases that are considered of low values.
Leases payments on such leases are recognised as
expense on straight line basis over the lease term.
2.15 Non-Current Assets Held for sale
Non-Current assets are classified as held for sale if it
is highly probable that they will be recovered primarily
through sale rather than through continuing use. Such
assets are generally measured at the lower of their
carrying amount and their fair value less cost to sell.
Losses on initial classification as held for sale and
subsequent gains and losses on re-measurement are
recognized in the Standalone Statement of Profit &
Loss.
Once Classified as held for sale, property, plant and
equipment and intangible assets are no longer amortized
or depreciated.
Non-current assets and disposal group that ceases to
be classified as “Held for Sale” shall be measured at the
lower of carrying amount before the non-current asset
and disposal group was classified as “Held for Sale” and
its recoverable amount at the date of the subsequent
decision not to sell.
2.16 Cash and cash equivalents
Cash comprises cash on hand and demand deposits
with banks. Cash equivalents are short-term balances
(with an original maturity of three months or less from
the date of acquisition), highly liquid investments that
are readily convertible into known amounts of cash
and which are subject to insignificant risk of changes in
value.
2.17 Cash Flow Statements
Standalone Cash flows are reported using the indirect
method, whereby Profit before tax is adjusted for the
effects of transactions of a non-cash nature and any
deferrals or accruals of past or future cash receipts
or payments. The cash flows from regular revenue
generating, financing and investing activities of the
company are segregated.
2.18 Financial Instruments
A Financial instrument is any contract that gives rise to
a financial asset of one entity and a financial liability or
equity instrument of another entity.
Financial Assets
A. Initial Recognition and Measurement
The Company recognizes financial assets and
financial liabilities when it becomes a party to
the contractual provisions of the instrument. All
financial assets are initially recognized at fair value.
Transaction costs that are directly attributable to the
acquisition or issue of financial assets, which are
not at fair value through profit or loss, are adjusted
to the fair value on initial recognition. Purchase and
sale of financial assets are recognized using trade
date accounting.
B. Subsequent Measurement
a) Financial assets carried at amortized cost
(AC)
A financial asset is measured at amortized
cost if it is held within a business model whose
objective is to hold the asset in order to collect
contractual cash flows and the contractual
terms of the financial asset give rise on specified
dates to cash flows that are solely payments of
principal and interest on the principal amount
outstanding.
b) Financial assets at fair value through other
comprehensive income (FVTOCI).
A financial asset is measured at FVTOCI, if it is
held within a business model whose objective
is achieved by both collecting contractual
cash flows and selling financial assets and the
contractual terms of the financial asset give
rise on specified dates to cash flows that are
solely payments of principal and interest on the
principal amount outstanding.
c) Financial assets at fair value through profit
or loss (FVTPL)
A financial asset which is not classified in any of
the above categories are measured at FVTPL.
This includes equity investment in other than
Joint Ventures and Associates.
C. Impairment of Financial Assets
In accordance with Ind AS 109, the Company
uses ‘Expected Credit Loss’ (ECL) model, for
evaluating impairment of financial assets other
than those measured at fair value through profit
and loss (FVTPL).
Expected credit losses are measured through a
loss allowance at an amount equal to:
The 12-months expected credit losses
(expected credit losses that result from those
default events on the financial instrument
that are possible within 12 months after the
reporting date); or
Lifetime expected credit losses (expected
credit losses that result from all possible default
events over the life of the financial instrument)
For trade receivables Company applies
‘simplified approach’ which requires expected
lifetime losses to be recognized from initial
recognition of the receivables. The Company
uses historical default rates to determine
impairment loss on the portfolio of trade
receivables. At every reporting date these
historical default rate are reviewed and changes
in the forward-looking estimates are analysed.
Financial Liabilities
A. Initial Recognition and Measurement
All financial liabilities are recognized at fair value
and in case of loans, net of directly attributable cost.
Fees of recurring nature are directly recognized
in the Standalone Statement of Profit & Loss as
finance cost.
B. Subsequent Measurement
Financial liabilities are carried at amortized cost
using the effective interest method. For trade and
other payables maturing within one year from
the balance sheet date, the carrying amounts
approximate fair value due to the short maturity of
these instruments.
Derivative Financial Instruments
The Company enters into derivative financial instruments
to manage its exposure to foreign exchange rate risks,
in the form of foreign exchange forward contracts.
Derivatives are initially recognized at fair value at the
date the derivative contracts are entered into and are
subsequently remeasured to their fair value at the end
of each reporting period. The resulting gain or loss is
recognized in Standalone Statement of Profit & Loss
immediately unless the derivative is designated and
effective as a hedging instrument, in which event the
timing of the recognition in Standalone Statement of
Profit & Loss depends on the nature of the hedge item.
Derecognition of Financial Instruments
The Company derecognizes a financial asset when the
contractual rights to the cash flows from the financial
asset expire or it transfers the financial asset and the
transfer qualifies for derecognition under Ind AS 109.
A financial liability (or a part of a financial liability) is
derecognized from the Company’s Balance Sheet when
the obligation specified in the contract is discharged or
cancelled or expires.
The carrying value and fair value of financial instruments
by categories as at the year ended are disclosed at Note
No. 43.2.
2.19 Investment in Subsidiary(s) and Joint Ventures
The Company has accounted for its investments in
subsidiary(s) and joint ventures at cost less accumulated
impairment loss, if any in “accordance with Ind AS 27,
separate financial statements”.
2.20 Research and Development Expenditure
Key focus area of Research and Development (R&D)
activities at Shivalik includes;
• Optimising of resource utilisation.
• Quality & productivity improvements and
cost optimization through process efficiency
improvements.
• Product development, customisation and new
applications.
Revenue as well Capital expenditure pertaining to
research and development and costs pertaining to
manpower directly part of R&D activities is charged
to the Standalone Statement of Profit and Loss.
2.21 Earnings Per share
(i) Basic Earnings Per Share
Basic Earnings per Share is computed by dividing:
a. net profit or loss for the period attributable to
equity shareholders
b. by the weighted average number of Equity
Shares outstanding during the period
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used
in determination of basic earnings per share to take
into account:
a. the after-income tax effect of interest and
other financing costs associated with dilutive
potential equity and:
b. the weighted average number of additional
equity shares that would have been outstanding
assuming the conversion of all dilutive potential
equity shares.
2.22 Provision and Contingent Liabilities
Provisions are recognized for liabilities that can be
measured only by using substantial degree of estimation,
if
a. the company has a present obligation as a result of
past event,
b. a probable outflow of resources is expected to
settle the obligation; and
c. the amount of the obligation can be reliably
estimated.
Contingent liability is disclosed in case of
i. a present obligation arising from past events, when
it is not probable that an outflow of resources will be
required to settle the obligation;
ii. a present obligation arising from past events, when
no reliable estimate is possible; and
iii. a possible obligation arising from past events where
the probability of outflow of resources is not remote.
Provisions and contingent liabilities are reviewed at
each Balance Sheet date.
2.23 Segment reporting
The Company’s business activity primarily falls within a
single segment i.e. Process and Product Engineering.
The geographical segments considered are “within
India” and “outside India”. The analysis of geographical
segments is based on geographical location of the
customers.
2.24 Recent accounting pronouncements
Ministry of Corporate Affairs (“MCA”) notifies new
standards or amendments to the existing standards
under Companies (Indian Accounting Standards) Rules,
2015 as amended from time to time. On March 31,2023,
MCA amended the Companies (Indian Accounting
Standards) Amendment Rules, 2023, as below:
Ind AS 1 - Presentation of Financial Statements -
This amendment requires the entities to disclose their
material accounting policies rather than their significant
accounting policies. The effective date for adoption
of this amendment is annual periods beginning on
or after April 1, 2023. The Company has evaluated
the amendment and the impact of the amendment is
insignificant in the standalone financial statements.
Ind AS 8 - Accounting Policies, Changes in
Accounting Estimates and Errors - This amendment
has introduced a definition of ‘accounting estimates’
and included amendments to Ind AS 8 to help entities
distinguish changes in accounting policies from changes
in accounting estimates. The effective date for adoption
of this amendment is annual periods beginning on or
after April 1, 2023. The Company has evaluated the
amendment and there is no impact on its standalone
financial statements.
Ind AS 12 - Income Taxes - This amendment has
narrowed the scope of the initial recognition exemption
so that it does not apply to transactions that give rise to
equal and offsetting temporary differences. The effective
date for adoption of this amendment is annual periods
beginning on or after April 1, 2023. The Company has
evaluated the amendment and there is no impact on its
standalone financial statement.
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