ಕಂಪನಿಯ ಅಕೌಂಟಿಗ್ ಪಾಲಿಸಿ Hexagon Nutrition Ltd.

2.3 Summary of material accounting policies

Significant Accounting Judgements, Estimates
and Assumptions

The preparation of the Company’s financial statements
requires management to make judgements, estimates
and assumptions that affect the reported amounts
of revenues, expenses, assets and liabilities, and the
disclosure of contingent liabilities, at the reporting
date. Uncertainty about these assumptions and
estimates could result in outcomes that require a
material adjustment to the carrying amount of the
asset or liability affected in future periods. In particular,
the Company has identified the following areas
where assumptions and estimation uncertainties are
most significant: useful lives of property, plant and
equipment and intangible assets (Refer paragraph (g)
and (h) below); actuarial assumptions for defined benefit
obligations (Refer paragraph (n) below and Note 42);
expected credit loss allowance on trade receivables
and other financial assets (Refer paragraph (c) below);
fair valuation of unquoted financial instruments (Refer
paragraph (s) below); recognition of deferred tax
assets (Refer paragraph (f) below); and assessment of
contingent liabilities and provisions (Refer paragraph
(q) below and Note 41).

a. Current versus non-current classification

The Company presents assets and liabilities in
the balance sheet based on current/ non-current
classification. An asset is treated as current when
it is: - Expected to be realised or intended to be
sold or consumed in normal operating cycle - Held
primarily for the purpose of trading - Expected
to be realised within twelve months after the
reporting period, or - Cash or cash equivalent
unless restricted from being exchanged or used
to settle a liability for at least twelve months after
the reporting period

All other assets are classified as non-current.

A liability is current when: - It is expected to
be settled in normal operating cycle - It is held
primarily for the purpose of trading - It is due to be
settled within twelve months after the reporting

period, or - There is no unconditional right to defer
the settlement of the liability for at least twelve
months after the reporting period

The Company classifies all other liabilities as non¬
current.

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

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

b. Foreign currencies

Functional and presentation currency

The financial statements are presented
in Indian Rupees (?) which is company’s
functional and presentation currency

Transactions and balances

Transactions in foreign currencies are initially
recorded by the Company at their respective
functional currency spot rates at the date
the transaction first qualifies for recognition.
However, for practical reasons, the Company
uses average rate if the average approximates
the actual rate at the date of the transaction.

Monetary assets and liabilities denominated
in a foreign currency outstanding at the
year end are restated at the year end
exchange rates.

Exchange difference arising on the settlement
of monetary items at rates different from
those at which they were initially recorded
during the year, or reported in previous
financial statements, are recognized as
income or expense in the year in which they
arise except for the following:

- Exchange differences arising on

monetary items that forms part of a
reporting entity’s net investment in a
foreign operation are recognised in
profit or loss in the separate financial
statements of the reporting entity or
the individual financial statements of
the foreign operation, as appropriate.
In the financial statements that
include the foreign operation and the
reporting, such exchange differences
are recognised initially in OCI. These
exchange differences are reclassified

(All amounts in Rupees millions, unless otherwise stated)

from equity to profit or loss on disposal
of the net investment.

- Exchange differences arising on
monetary items that are designated as
part of the hedge of the Company’s net
investment of a foreign operation. These
are recognised in OCI until the net
investment is disposed of, at which time,
the cumulative amount is reclassified to
profit or loss.

- Tax charges and credits attributable
to exchange differences on those
monetary items are also recorded
in OCI.

Non-monetary items that are measured in
terms of historical cost in a foreign currency
are translated using the exchange rates at
the dates of the initial transactions. Non¬
monetary items measured at fair value in
a foreign currency are translated using
the exchange rates at the date when the
fair value is determined. The gain or loss
arising on translation of non-monetary
items measured at fair value is treated in
line with the recognition of the gain or loss
on the change in fair value of the item (i.e.,
translation differences on items whose fair
value gain or loss is recognised in OCI or
profit or loss are also recognised in OCI or
profit or loss, respectively).

In determining the spot exchange rate to
use on initial recognition of the related
asset, expense or income (or part of it) on
the derecognition of a non-monetary asset
or non-monetary liability relating to advance
consideration, the date of the transaction
is the date on which the Company initially
recognises the non-monetary asset or non¬
monetary liability arising from the advance
consideration. If there are multiple payments
or receipts in advance, the Company
determines the transaction date for each
payment or receipt of advance consideration.

c. 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 include cash and cash
equivalents, trade receivables, unbilled
revenues, finance lease receivables,

security deposits, investments in equity
and debt securities;

- Financial liabilities include long-term
and short-term loans and borrowings,
lease liabilities, derivative financial
liabilities, bank overdrafts and
trade payables

Financial assets:

Initial recognition and measurement

Financial assets are classified, at initial
recognition, and subsequently measured at
amortised cost, fair value through OCI, or
fair value through profit or loss.

I nitially, a financial instrument is recognized
at its fair value. 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 measured on initial
recognition of financial asset or financial
liability. Subsequently, financial instruments
are measured according to the category in
which they are classified.

The Company’s business model for
managing financial assets refers to how
it manages its financial assets in order to
generate cash flows. The business model
determines whether cash flows will result
from collecting contractual cash flows,
selling the financial assets, or both. Financial
assets classified and measured at amortised
cost are held within a business model with
the objective to hold financial assets in
order to collect contractual cash flows while
financial assets classified and measured
at fair value through OCI are held within a
business model with the objective of both
holding to collect contractual cash flows
and selling.

Subsequent measurement

The subsequent measurement of financial
assets depends on their classification
as follows:

i) Financial assets at amortised cost:

A financial asset is classified as
“financial asset at amortised cost”
(amortised cost) under IND AS 109

Financial Instruments if it meets both
the following criteria:

(1) The asset is held within a business
model whose objective is to hold
the financial asset in order to collect
contractual cash flows, and

(2) The contractual terms of the financial
asset give rise to cash flows that are
solely payments of principal and interest
on the principal amount outstanding on
specified date (the ‘SPPI’ contractual
cash flow characteristics test).

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

ii) Financial assets at fair value
through other comprehensive
income (FVTOCI):

All equity investment in scope of IND AS
109 Financial Instruments are measured
at fair value. Equity instruments which
are held for trading and contingent
are classified as fair value through
profit or loss. For all other equity
instruments, the Company may make
irrevocable election to present in other
comprehensive income subsequent
changes in the fair value. The Company
makes such election on an instrument-
to-instrument basis. The classification
is made on initial recognition and
is irrevocable.

I f the Company decides to classify an
equity instrument through fair value
through other comprehensive income
(FVTOCI), then all fair value changes in
the instruments excluding dividends,
are recognised in OCI and is never
recycled to statement of profit and loss,
even on sale of the instrument.

Dividends are recognised as other
income in the statement of profit and
loss when the right of payment has
been established, except when the
Company benefits from such proceeds
as a recovery of part of the cost of the
financial asset, in which case, such
gains are recorded in OCI

iii) Financial assets at fair value
through profit or loss (FVTPL)

Financial assets at fair value through
profit or loss include financial assets held
for trading, e.g., derivative instruments,
financial assets designated upon initial
recognition at fair value through profit
or loss, e.g., debt or equity instruments,
or financial assets mandatorily required
to be measured at fair value, i.e., where
they fail the SPPI test. Financial assets
are classified as held for trading if they
are acquired for the purpose of selling
or repurchasing in the near term.
Financial assets with cash flows that do
not pass the SPPI test are required to
be classified and measured at fair value
through profit or loss, irrespective of
the business model. Notwithstanding
the criteria for debt instruments to
be classified at amortised cost or at
fair value through OCI, as described
above, debt instruments may be
designated at fair value through profit
or loss on initial recognition if doing so
eliminates, or significantly reduces, an
accounting mismatch.

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

De-recognition of financial assets

A financial asset (or, where applicable,
a part of a financial asset or part of a
company of similar financial assets) is
primarily derecognised (i.e., removed
from the Company’s statement of
financial position) when:

• The rights to receive cash flows
from the asset have expired, or

• 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
recognise the transferred asset to the
extent of its continuing involvement. In
that case, the Company also recognises
an associated liability. The transferred
asset and the associated liability are
measured on a basis that reflects the
rights and obligations that the Company
has retained.

Financial liabilities and equity

instruments:

a) Classification as debt or equity

Debt and equity instruments issued
by a Company are classified as either
financial liabilities or as equity in
accordance with the substance of the
contractual arrangements and the
definitions of a financial liability and an
equity instrument.

b) Equity instruments

An equity instrument is any contract
that evidences a residual interest in
the assets of an entity after deducting
all of its liabilities. Equity instruments
issued by the Company are recognised
at the proceeds received, net of direct
issue costs.

c) Financial liabilities

Financial liabilities are classified as
either financial liabilities at ‘FVTPL’ or
‘other financial liabilities’.

Initial recognition and measurement

Financial liabilities are classified, at initial
recognition, as financial liabilities at fair value
through profit or loss, loans and borrowings
or payables, as appropriate. All financial
liabilities are recognised initially at fair value
and, in the case of loans and borrowings
and payables, net of directly attributable
transaction costs.

Subsequent measurement

The subsequent measurement of financial
liabilities depends on their classification
as follows:

i) Financial liabilities measured at
amortized cost

After initial recognition, financial liabilities
are subsequently measured at amortized
cost using the effective interest method.
Amortised cost is calculated by taking
into account any discount or premium on
acquisition and fees or costs that are an
integral part of the EIR. The EIR amortisation
is included as finance costs in the statement
of profit and loss.

ii) Financial liabilities at fair value through
profit or loss (FVTPL)

Financial liabilities at fair value through profit
or loss include financial liabilities held for
trading. Gains or losses on liabilities held for
trading are recognized in statement of profit
and loss.

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

De-recognition of financial liabilities

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

Offsetting of financial instruments

Financial assets and financial liabilities
are offset with the net amount reported
in the balance sheet only if there is a
current enforceable legal right to offset the
recognised amounts and there is an intent to
settle on a net basis, or to realise the assets
and settle the liabilities simultaneously.

Impairment of financial assets

The company recognises an allowance
for expected credit losses (ECLs) for all
debt instruments not held at fair value
through profit or loss. ECLs are based on
the difference between the contractual
cash flows due in accordance with the
contract and all the cash flows that the
company expects to receive, discounted at
an approximation of the original effective
interest rate. The expected cash flows will
include cash flows from the sale of collateral
held or other credit enhancements that are
integral to the contractual terms.

For trade receivables, deposits and contract
assets, the company applies a simplified
approach in calculating ECLs. Therefore, the
company does not track changes in credit
risk but instead recognises a loss allowance
based on lifetime ECLs at each reporting
date. The company has established a
provision matrix that is based on its historical
credit loss experience, adjusted for forward¬
looking factors specific to the debtors and
the economic environment.

1 Borrowing costs

Borrowing costs directly attributable to the
acquisition, construction, or production of
a qualifying asset that necessarily takes a
substantial period of time to get ready for

its intended use are capitalised as part of
the cost of the asset. All other borrowing
costs are expensed in the period in which
they occur. Borrowing costs consist of
interest and other costs that an entity incurs
in connection with the borrowing of funds,
including exchange differences arising from
foreign currency borrowings to the extent
that they are regarded as an adjustment to
interest costs. Investment income earned
on the temporary investment of specific
borrowings pending their expenditure on
qualifying assets is deducted from the
borrowing costs eligible for capitalisation.

e. Revenue recognition

Revenue from sale of goods is recognized
at point in time when control is transferred
to the customer and it is probable that
consideration will be collected. Control of
goods is transferred upon the shipment of
the goods to the customer or when goods
is made available to the customer. Revenue
is measured based on the transaction
price, which is the consideration, adjusted
for variable consideration such as volume
discounts, cash discounts etc. as specified
in the contract with the customer. The
Company collects Goods and Services Tax
on behalf of the government and therefore,
these are not economic benefits flowing to
the Company. Hence, these are excluded
from the revenue. The Company has
concluded that it is the principal in all of its
revenue arrangements since it is the primary
obligor in all the revenue arrangements as it
has pricing latitude and is also exposed to
inventory and credit risks.

No element of financing is deemed present
as the majority of sales are on cash basis
and credit sales are made with normal credit
period consistent with market practice.

Income from trading sales

Revenue from sale of goods is recognised
when the Control of goods is transferred
upon the shipment of the goods to the
customer or when goods is made available
to the customer , all significant contractual
obligations have been satisfied and the
collection of the resulting receivable is
reasonably expected. Revenue is measured
at the fair value of the consideration received
or receivable. Amounts disclosed as revenue

are net of customer returns, trade allowance,
rebates, goods and services tax and amount
collected on behalf of third parties.

Historical experience, specific contractual
terms and future expectations of sales
returns are used to estimate and provide for
damage or expiry claims.

Income from sale of service

Revenue from sale of services is recognized
in accordance with the terms of the relevant
agreements and is net of goods and service
tax (GST), where applicable as accepted and
agreed with the customers.

Interest income

Interest income on financial assets at
amortised cost is recognised using the
effective interest method. Effective interest is
the rate that exactly discounts the estimated
future cash receipts over the expected life of
the financial instrument or a shorter period,
where appropriate, to the net carrying
amount of the financial asset. Interest income
is included in other income in the statement
of profit and loss.

Dividend income

Dividend income is recognised when the
Company’s right to receive the payment is
established by the reporting date.

Contract balances-
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
point (d) above.

Contract assets

A contract asset is the Company’s right
to consideration in exchange for goods or
services that the Company has transferred
to a customer when that right is conditioned
on something other than the passage of
time (for example, the Company’s future
performance). Contract assets, including
unbilled revenue, are subject to impairment
assessment in accordance with the
expected credit loss model described under
‘Impairment of financial assets’ above.

Contract assets are reclassified to trade
receivables when the right to consideration
becomes unconditional.

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).

f. Taxes

Tax expense comprises of current tax and
deferred tax.

Current income tax

Current income tax is measured at the
amount expected to be paid to or recovered
from the tax authorities in accordance with
the Income-tax Act, 1961 using the tax rates
and tax laws that have been enacted by the
balance sheet date. 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 adjusted by
changes in deferred tax assets and liabilities
attributable to temporary differences and 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 reporting period in India where
the Company operates and generates
taxable income.

Current income tax relating to items
recognised outside profit or loss is
recognised outside profit or loss (either
in other comprehensive income or in
equity). Current tax items are recognised
in correlation to the underlying transaction
either in OCI or directly in equity.

Deferred tax

Deferred tax is provided using the balance
sheet approach on temporary differences
between the tax bases of assets and
liabilities and their carrying amounts for
financial reporting purposes at the reporting
date using the tax rates and the tax laws
enacted or substantively enacted at the
reporting date.

Deferred tax liabilities are recognised for all

taxable temporary differences, except:

• When the deferred tax liability arises
from the initial recognition of goodwill
or an asset or liability in a transaction
that is not a business combination and,
at the time of the transaction, affects
neither the accounting profit nor taxable
profit or loss

• In respect of taxable temporary
differences associated with investments
in subsidiaries, when the timing of the
reversal of the temporary differences
can be controlled and it is probable
that the temporary differences will not
reverse in the foreseeable future

Deferred tax assets are recognised for
all deductible temporary differences,
the carry forward of unused tax credits
and any unused tax losses. Deferred
tax assets are recognised to the
extent that it is probable that taxable
profit will be available against which
the deductible temporary differences,
and the carry forward of unused tax
credits and unused tax losses can be
utilised, except:

• When the deferred tax asset relating
to the deductible temporary difference
arises from the initial recognition of an
asset or liability in a transaction that is
not a business combination and, at the
time of the transaction, affects neither
the accounting profit nor taxable profit
or loss

• In respect of deductible temporary
differences associated with investments
in subsidiaries, deferred tax assets are
recognised only to the extent that it is
probable that the temporary differences
will reverse in the foreseeable future and
taxable profit will be available against
which the temporary differences can
be utilised

Deferred tax assets and liabilities are
measured at the tax rates that are
expected to apply in the year when the
asset is realised, or the liability is settled,
based on tax rates (and tax laws) that
have been enacted or substantively
enacted at the reporting date.

Deferred tax relating to items recognised
outside profit or loss is recognised
outside profit or loss (either in other
comprehensive income or in equity).
Deferred tax items are recognised in
correlation to the underlying transaction
either in OCI or directly in equity.

The carrying amount of deferred tax
assets is reviewed at each reporting
date and 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 and are recognised to
the extent that it has become probable
that future taxable profits will allow the
deferred tax 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 the same taxable entity and the same
taxation authority.

g. Property, plant and equipment

Recognition and measurement

All items of property, plant and equipment
except Freehold Land are initially measured
at cost and subsequently it is measured at
cost less accumulated depreciation and
impairment losses, if any. Freehold Land
Cost is carried at cost, net of accumulated
impairment loss, if any. Cost comprises the
purchase price, taxes, duties, freight, and
any attributable cost of bringing the asset
to its working condition for its intended use.
When significant parts of property, plant
and equipment are required to be replaced
at intervals, the Company recognises such
parts as individual assets with specific useful
lives and depreciates them accordingly Any
subsequent cost incurred is recognised in the
carrying amount of the plant and equipment
as a replacement if the recognition criteria are
satisfied. All other repair and maintenance
costs are recognised in statement of profit
and loss as incurred.

Capital work in progress comprises cost of
property, plant and equipment (including
related expenses), that are not yet ready

for their intended use at the reporting date
and it is carried at cost less accumulated
impairment losses

Gains or losses arising from de-recognition of
property, plant and equipment are measured
as the difference between the net disposal
proceeds and carrying amount of the assets
and are recognised in the statement of profit
and loss when the asset is derecognised.

On transition to Ind AS, the company has
elected to continue with the carrying value
of all its property, plant and equipment
measured as per the previous GAAP and use
that carrying value as the deemed cost of the
property, plant and equipment.

Depreciation on Property, plant and
equipment

Depreciation is calculated on the written
down value basis over the estimated useful
lives of the assets. The management believes
that these estimated useful lives are realistic
and reflect fair approximation of the period
over which the assets are likely to be used.
The Company has used the following life to
provide depreciation on its property, plant
and equipment.

The rates of depreciation are equal to the
corresponding rates prescribed in Schedule
II to the Companies Act, 2013. Depreciation
on addition / disposals during the year has
been provided on pro rata.

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

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

h. Intangible Assets

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

The useful lives of intangible assets are
assessed as either finite or indefinite. On
transition to Ind AS, the company has
elected to continue with the carrying value of
all its Intangible Assets measured as per the
previous GAAP and use that carrying value
as the deemed cost of the Intangible Assets.

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

Intangible assets with indefinite useful
lives are not amortised, but are tested for
impairment annually, either individually
or at the cash-generating unit level. The

assessment of indefinite life is reviewed
annually to determine whether the indefinite
life continues to be supportable. If not, the
change in useful life from indefinite to finite is
made on a prospective basis.

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

Amortisation of intangible assets

Amortisation is calculated on the straight¬
line basis over the estimated useful lives of
the assets. The management believes that
these estimated useful lives are realistic
and reflect fair approximation of the period
over which the assets are likely to be used.
The Company has used the following life to
provide amortisation on its intangible assets.

Class of asset: Software - Useful lives
estimated by the management: 6 years

There are no intangible assets with indefinite
useful lives.

h1. Investments in Subsidiaries,
Associates and Joint Ventures

Investments in subsidiaries, associates,
and joint ventures are carried in these
separate financial statements at cost
less accumulated impairment losses, if
any, in accordance with Ind AS 27. Where
the carrying amount of such investment
exceeds its estimated recoverable
amount, the carrying amount is written
down immediately to its recoverable
amount, with the impairment loss
recognised in the statement of profit
and loss. On disposal of an investment,
the difference between the net disposal
proceeds and the carrying amount is
recognised in the statement of profit
and loss.

h2. Business combinations

Business combinations are accounted
for using the acquisition method
under Ind AS 103, except for business

combinations of entities under common
control, which are accounted for using
the pooling of interests method in
accordance with Appendix C to Ind
AS 103. Under the pooling of interests
method, the assets and liabilities of
the combining entities are reflected at
their carrying amounts, no adjustments
are made to reflect fair values or to
recognise new assets or liabilities, and
the financial statements are presented
as if the combination had occurred
from the beginning of the earliest period
presented. Refer Note 54 for details of
the Scheme of Amalgamation given
effect to during the current period.

i. Leases

The company assesses at contract inception
whether a contract is, or contains, a lease.
That is, if the contract conveys the right to
control the use of an identified asset for a
period of time in exchange for consideration.

Company as a lessee

The Company’s lease asset classes primarily
consist of leases for land & buildings,
Plant and Equipment and Computers. The
company applies a single recognition and
measurement approach for all leases, except
for short-term leases and leases of low-
value assets.

Right-of-use assets

The company recognises right-of-use assets
at the commencement date of the lease (i.e.,
the date the underlying asset is available
for use). Right-of-use assets are measured
at cost, less any accumulated depreciation
and impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost
of right-of-use assets includes the amount
of lease liabilities recognised, initial direct
costs incurred, and lease payments made
at or before the commencement date less
any lease incentives received. Right-of-use
assets are depreciated on a straight-line
basis over the shorter of the lease term and
the estimated useful lives of the assets,
as follows:

• Leasehold land - Over the shorter of
the lease term and the estimated useful
lives of the assets

• Plant and Equipment - Over the
lease term

• Computers - Over the lease term
Lease Liabilities

At the commencement date of the lease,
the company recognises lease liabilities
measured at the present value of the future
lease payments. The lease payments include
fixed payments (including in-substance
fixed payments) less any lease incentives
receivable, variable lease payments that
depend on an index or a rate, and amounts
expected to be paid under residual
value guarantees.

In calculating the present value of lease
payments, the Company uses the incremental
borrowing rate at the lease commencement
date if the interest rate implicit in the lease
is not readily determinable. After the
commencement date, the amount of lease
liabilities is increased to reflect the accretion
of interest and reduced for the lease
payments made. In addition, the carrying
amount of lease liabilities is remeasured if
there is a modification, a change in the lease
term, a change in the in-substance fixed lease
payments or a change in the assessment to
purchase the underlying asset.

Lease liability and ROU asset have been
separately presented in the Balance Sheet
and lease payments have been classified as
financing cash flows.

The right-of-use assets are also subject to
impairment. Refer to the accounting policies
in Note k Impairment of non-financial assets.

Short-term leases and leases of low-
value assets

The company applies the short-term
lease recognition exemption to its short¬
term leases (i.e., those leases that have a
lease term of 12 months or less from the
commencement date and do not contain a
purchase option). It also applies the lease
of low-value assets recognition exemption
to leases of office equipment that are
considered to be low value. Lease payments
on short-term leases and leases of low-
value assets are recognised as an operating
expense in the statement of profit and loss.

j. Inventories
Basis of valuation

Inventories other than scrap materials are
valued at lower of cost and net realizable
value. The comparison of cost and net
realizable value is made on an item-by¬
item basis.

Method of valuation

Cost of raw materials, packing materials
and traded goods are determined by using
weighted average method and comprises
all costs of purchase, duties, taxes (other
than those subsequently recoverable from
tax authorities) and all other costs incurred
in bringing the inventories to their present
location and condition.

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

k. Impairment of Non-financial assets

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

In assessing value in use, the estimated
future cash flows are discounted to their
present value using a pre-tax discount rate
that reflects current market assessments of
the time value of money and the risks specific
to the asset. In determining fair value less
costs of disposal, recent market transactions
are taken into account if available. If no
such transactions can be identified, an

appropriate valuation model is used. These
calculations are corroborated by valuation
multiples, quoted share prices for publicly
traded companies or other available fair
value indicators.

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

I mpairment losses of continuing operations
are recognised in the statement of profit
and loss.

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

l. Cumulative Compulsorily Convertible
Preference Shares (CCPSs)

Cumulative Compulsorily Convertible
Preference Shares is equity components
based on the terms of the contract.

On issuance of the convertible preference
shares, the proceeds is allocated to the
conversion option that is recognised
and included in equity since conversion
option meets Ind AS 32 criteria for fixed to
fixed classification.

The cumulative dividend attaching to the
CCPS is [contractually mandatory / entirely
at the discretion of the Company’s Board of
Directors, with no contractual obligation to
distribute]. Notwithstanding the cumulative
nature of the dividend, the Company has
assessed, in accordance with Ind AS 32,
paragraphs 15-27B, that the instrument
does not contain a liability component
requiring separation, because [state the
specific basis — e.g., the Company retains
an unconditional right to avoid delivering
cash or another financial asset to settle the
dividend obligation]. Accordingly, the entire
proceeds on issuance of the CCPS have
been classified as equity.