2.11 Provisions and contingent liabilities
2.11.1 Provisions
Provisions are recognized when the Company has a present
legal or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle
the obligation and the amount can be reliably estimated.
Provisions are measured at the present value of management's
best estimate of the expenditure required to settle the present
obligation at the end of the reporting period. The discount
rate used to determine the present value is a pre-tax rate
that reflects current market assessments of the time value
of money and the risks specific to the liability. The increase
in the provision due to the passage of time is recognized as
an interest expense. Provisions are not recognized for future
operating losses.
Provisions for onerous contracts are recognized when the
expected benefits to be desired by the Company from a
contract are lower than unavoidable costs of meeting future
obligations under the contract and are measured at the
present value of lower-than-expected net cost of fulfilling the
contract and expected cost of terminating the contract.
2.11.2 Contingencies
Contingent liability is disclosed for all possible obligation
that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one
or more uncertain future events not wholly within the control
of the company (or) present obligations arising from past
events where it is not probable that an outflow of resources
embodying economic benefits will be required to settle the
obligation or a sufficiently reliable estimate of the amount
of the obligation cannot be made. Contingent liabilities are
not recognized but disclose their existence in the Standalone
financial statements unless the probability of outflow of
resources is remote. A contingent asset is neither recognized
nor disclosed in the Standalone financial statements.
2.12 Revenue recognition
Revenue from contracts with customers is recognised, on
the basis of approved contracts, when control of the goods
or services is transferred to the customer at an amount that
reflects the consideration entitled in exchange for those
goods or services. The Company is the principal as it typically
controls the goods or services before transferring them to the
customer.
Revenue from sale of goods is recognised at the point in time
when control of the goods is transferred to the customer,
generally upon delivery of the goods. Revenue from rendering
of services is recognised over time by measuring the progress
towards complete satisfaction of performance obligations at
the reporting period.
Revenue towards satisfaction of a performance obligation is
measured at the amount of transaction price (net of variable
consideration) allocated to that performance obligation.
The arrangement with the customer specifies services to be
rendered which meet criteria of performance obligations.
For allocation, transaction price, the Company measures
the revenue in respect of each performance obligation of a
contract at its relative standalone selling price. The transaction
price of goods sold and services rendered is net of variable
consideration. Variable consideration includes incentives,
volume rebates, discounts etc., which is estimated at contract
inception considering the terms of various schemes with
customers and constrained until it is highly probable that
a significant revenue reversal in the amount of cumulative
revenue recognised will not occur when the associated
uncertainty with the variable consideration is subsequently
resolved. It is reassessed at end of each reporting period.
Trade receivables
A receivable is recognised if an amount of consideration that is
unconditional (i.e., only the passage of time is required before
payment of the consideration is due). Refer to accounting
policies of financial assets in section 2.17 Financial instruments
- initial recognition and subsequent measurement.
Contract liabilities
A contract liability is recognised if a payment is received
or a payment is due (whichever is earlier) from a customer
before the Company transfers the related goods or services.
Contract liabilities are recognised as revenue when the
Company performs under the contract (i.e., transfers control
of the related goods or services to the customer).
Generally, the Company receives advances from few of its
customers. If there is manufacturing lead time of more than
1 year after signing the contract and receipt of payment,
then there is a significant financing component for these
contracts considering the length of time between the
customers' payment and the transfer of the goods. As such,
the transaction price for these contracts is discounted, using
the interest rate implicit in the contract (i.e., the interest rate
that discounts the cash selling price of the equipment to the
amount paid in advance). This rate is commensurate with the
rate that would be reflected in a separate financing transaction
between the Company and the customer at contract inception.
Using the practical expedient in Ind AS 115, the Company
does not adjust the promised amount of consideration for
the effects of a significant financing component if it expects,
at contract inception, that the period between the transfer of
the promised good or service to the customer and when the
customer pays for that good or service will be one year or less.
2.13 Interest Income
Interest income from a financial asset is recognized when
it is probable that the economic benefits will flow to the
Company and the amount of income can be measured reliably.
Interest income is accrued on a time basis, by reference to
the principal outstanding and at the effective interest rate
applicable.
2.14 Employee benefit plans
Employee benefits include provided fund, employee's state
insurance scheme, gratuity fund and compensated absences.
Post-employment obligations:
Defined contribution plans:
Contributions in respect of Employees' Provident Fund
which are defined contribution schemes, are made to a
fund administered and managed by the Government of
India and are charged as an expense based on the amount
of contribution required to be made and when service are
rendered by the employees.
Defined benefit plans
Gratuity:
The Company accounts for its liability towards Gratuity based
on actuarial valuation made by an independent actuary as at
the balance sheet date using projected unit credit method.
The liability recognized in the balance sheet in respect of
the gratuity plan is the present value of the defined benefit
obligation at the end of the reporting period less the fair value
of the plan assets.
The present value of the defined benefit obligation is
determined by discounting the estimated future cash outflows
by reference to market yields at the end of the reporting
period on government bonds that have terms approximating
to the terms of the related obligation. The net interest cost is
calculated by applying the discount rate to the net balance
of the defined obligation and the fair value of plan assets.
This cost is included in the employee benefit expense in the
statement of profit and loss. Remeasurement gains and losses
arising from experience adjustments and changes in actuarial
assumptions are recognized in the period in which they occur,
directly in other comprehensive income. Changes in the
present value of the defined benefit obligation resulting from
plan amendments or curtailments are recognized immediately
in the statement of profit and loss as past service cost.
Compensated absences:
The employees of the Company are entitled to compensate
absences. The employees can carry-forward a portion of the
unutilized accrued compensated absence and utilize it in
future periods or receive cash compensation at retirement
or termination of employment for the unutilized accrued
compensated absence. The Company records an obligation for
compensated absences in the period in which the employee
renders the services that increase this entitlement. The Company
measures the expected cost of compensated absence based on
actuarial valuation made by an independent actuary as at the
balance sheet date on projected unit credit method.
Share based payments
The Company recognizes compensation expense relating
to share based payments in the statement of profit and loss,
using fair value in accordance with Ind AS 102, Share based
payments.
The Stock options are measured at the fair value of the equity
instruments at the grant date, based on option valuation model
(Black Scholes model). The fair value determined at the grant date
of the stock options is expensed on a straight-line basis over the
vesting period, based on the Company's estimate of the equity
instruments that will eventually vest, with a corresponding
increase in share-based payments reserve in equity.
At the end of each reporting period, the Company revises its
estimate of the number of equity instruments expected to vest.
The impact of the original estimates, if any, is recognised in
statement of profit and loss such that the cumulative expense
reflects the revised estimate, with a corresponding adjustment
to the share-based payments reserve in equity. The equity
settlement component is not remeasured at each reporting
date. The cash settlement component is remeasured at each
reporting date and at settlement date based on the fair value
of the liability with any changes in the fair value recognised in
the statement of profit and loss.
Other short-term employee benefits
Other short-term employee benefits and performance
incentives expected to be paid in exchange for the services
rendered by employees are recognized during the period
when the employee renders service.
2.15 Financial instruments
a) Initial recognition:
Financial assets and financial liabilities are recognized when a
Company entity becomes a party to the contractual provisions
of the instruments.
Financial assets and financial liabilities are initially measured
at fair value except trade receivable. Transaction costs that
are directly attributable to the acquisition or issue of financial
assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added
to or deducted from the fair value of the financial assets or
financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of
financial assets or financial liabilities at fair value through
profit or loss are recognized immediately in profit or loss.
Trade receivables that do not contain a significant financing
component or for which the Company has applied the practical
expedient are measured at the transaction price determined
under Ind AS 115. Refer to the accounting policies in section
2.12 Revenue recognition.
b) Subsequent Measurement:
(i) Financial assets
All regular way purchases or sales of financial assets are
recognized and derecognized on a trade date basis. Regular way
purchases or sales are purchases or sales of financial assets that
require delivery of assets within the time frame established by
regulation or convention in the marketplace.
All recognized financial assets are subsequently measured in
their entirety at either amortized cost or fair value, depending
on the classification of the financial assets.
Classification of financial assets:
Financial assets carried at amortized cost:
A financial asset is subsequently 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.
Financial assets at fair value through other
comprehensive income:
A financial asset is subsequently measured at fair value
through other comprehensive income 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. The Company
has made an irrevocable election for its investments which
are classified as equity instruments to present the subsequent
changes in fair value in other comprehensive income based on
its business model.
Financial assets at fair value through profit or loss:
A financial asset which is not classified in any of the above
categories are subsequently fair valued through profit or loss.
(ii) Financial liability:
All financial liabilities are subsequently measured 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.
Financial Liability subsequently measured at
amortized cost
Financial liabilities that are not held-for-trading and are not
designated as at FVTPL are measured at amortized cost at the
end of subsequent accounting periods. The carrying amounts
of financial liabilities that are subsequently measured at
amortized cost are determined based on the effective interest
method. Interest expense that is not capitalized as part of costs
of an asset is included in the 'Finance costs' line item.
c) Foreign exchange gains and losses:
For foreign currency denominated financial assets measured
at amortized cost and FVTPL, the exchange differences
are recognized in profit or loss except for those which are
designated as hedging instruments in a hedging relationship.
Changes in the carrying amount of investments in equity
instruments at FVTOCI relating to changes in foreign currency
rates are recognized in other comprehensive income.
For the purposes of recognizing foreign exchange gains and
losses, FVTOCI debt instruments are treated as financial assets
measured at amortized cost. Thus, the exchange differences
on the amortized cost are recognized in profit or loss and
other changes in the fair value of FVTOCI financial assets are
recognized in other comprehensive income.
For financial liabilities that are denominated in a foreign
currency and are measured at amortized cost at the end of
each reporting period, the foreign exchange gains and losses
are determined based on the amortized cost of the instruments
and are recognized in 'Other income'
The fair value of financial liabilities denominated in a foreign
currency is determined in that foreign currency and translated
at the spot rate at the end of the reporting period. For financial
liabilities that are measured as at FVTPL, the foreign exchange
component forms part of the fair value gains or losses and is
recognized in profit or loss.
d) De-recognition of financial assets and liabilities:
Financial assets
The Company derecognizes a financial asset when the
contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the
risks and rewards of ownership of the asset to another party.
If the Company retains substantially all the risk and rewards
of ownership of a transferred financial asset, the Company
continues to recognize the financial asset and also recognizes
a collateralized borrowing for the proceeds received.
On de-recognition of a financial asset in its entirety, the
difference between the asset's carrying amount and the sum of
the consideration received and receivable and the cumulative
gain or loss that had been recognized in other comprehensive
income and accumulated in equity is recognized in profit or
loss if such gain or loss would have otherwise been recognized
in profit or loss on disposal of that financial asset.
Financial liabilities
The Company derecognizes financial liabilities when, and only
when, the Company's obligations are discharged, cancelled or
have expired. The difference between the carrying amount of
the financial liability derecognized and the consideration paid
and payable is recognized in statement of profit and loss.
2.16 Determination of fair values
In determining the fair value of its financial instruments, the
Company uses a variety of methods and assumptions that
are based on market conditions and risks existing at each
reporting date. The methods used to determine fair value
include discounted cash flow analysis, available quoted market
prices and dealer quotes. All methods of assessing fair value
result in general approximation of value, and such value may
never actually be realized.
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, regardless of
whether that price is directly observable or estimated using
another valuation technique. In estimating the fair value of an
asset or a liability, the Company considers the characteristics of
asset or liability of market participants when pricing the asset
or liability at the measurement date.
Fair value for measurement and/or disclosure purposes in
these Standalone Financial statements is determined on such
a basis, except for share-based payment transactions that are
within the scope of Ind AS 102, leasing transactions that are
within the scope of Ind AS 116, and measurements that have
some similarities to fair value but are not fair value, such as net
realizable value in Ind AS 2 or value in use in Ind AS 36.
In addition, for financial reporting purposes, fair value
measurements are categorized into Level 1, 2, or 3 based on
the degree to which the inputs to the fair value measurements
are observable and the significance of the inputs to the fair
value measurement in its entirety, which are described as
follows:
• Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity can
access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices
included within Level 1, that are observable for the asset
or liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or
liability.
2.17 Impairment of assets
Financial assets
The Company recognizes loss allowances using the expected
credit loss (ECL) model for the financial assets which are not fair
valued through statement of profit and loss. Loss allowance for
trade receivables with no significant financing component is
measured at an amount equal to lifetime ECL. For all other
financial assets, expected credit losses are measured at an
amount equal to the 12-month ECL, unless there has been
a significant increase in credit risk from initial recognition in
which case those are measured at lifetime ECL. The amount
of expected credit losses (or reversal) that is required to adjust
the loss allowance at the reporting date to the amount that is
required to be recognised as an impairment gain or loss in the
statement of profit and loss.
For trade receivables, the Company applies the simplified
approach permitted by Ind AS 109 Financial Instruments,
which requires expected lifetime losses to be recognized from
initial recognition of the receivables. As a practical expedient,
the Company uses a provision matrix to determine impairment
loss of its trade receivables. The provision matrix is based on
its historically observed default rates over the expected life
of the trade receivable and is adjusted for forward looking
estimates. The ECL loss allowance (or reversal) during the year
is recognized in the statement of profit and loss.
Non-financial assets
Intangible assets, property, plant and equipment and 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 CGU to
which the asset belongs. Intangible assets under development
are tested for impairment annually. The Company bases its
impairment calculation on detailed budgets and forecast
calculations, which are prepared separately for each of the
Company's CGUs to which the individual assets are allocated.
If such assets are considered to be impaired, the impairment to
be recognized in the statement of profit and loss is measured by
the amount by which the carrying value of the assets exceeds
the estimated recoverable amount of the asset. An impairment
loss is reversed in the statement of profit and loss if there
has been a change in the estimates used to determine the
recoverable amount. The carrying amount of the asset is
increased to its revised recoverable amount, provided that
this amount does not exceed the carrying amount that would
have been determined (net of any accumulated amortization
or depreciation) had no impairment loss been recognized for
the asset in prior years.
2.18 Earnings per share:
The Company presents basic and diluted earnings per share
("EPS") data for its ordinary shares. Basic EPS is calculated by
dividing the profit or loss attributable to ordinary shareholders
of the Company by the weighted average number of ordinary
shares outstanding during the year. Diluted EPS is determined
by adjusting the profit or loss attributable to ordinary
shareholders and the weighted average number of ordinary
shares outstanding for the effects of all dilutive potential
ordinary shares.
2.19 New and amended standards
The Company applied for the first time certain standards and
amendments, which are effective for annual periods beginning
on or after 1 April 2024. The Company has not early adopted
any standard, interpretation or amendment that has been
issued but is not yet effective.
(i) Ind AS 117 Insurance Contracts
The MCA notified Ind AS 117, Insurance Contracts, on
August 12, 2024, replacing Ind AS 104 and effective
from April 1, 2024. The standard has no impact on the
Group's financial statements, as it has not entered into
any contracts in the nature of insurance contracts.
(ii) Amendments to Ind AS 116 Leases
The MCA amended Ind AS 116 via the Companies (Indian
Accounting Standards) Second Amendment Rules,
2024, to clarify lease liability measurement in sale and
leaseback transactions. The amendment has no material
impact on the Group's financial statements.
2.20 Standards notified but not yet effective
There are no standards that are notified and not yet effective
as on the date.
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