ಕಂಪನಿಯ ಅಕೌಂಟಿಗ್ ಪಾಲಿಸಿ Technocraft Ventures Ltd.

3. Summary of significant accounting policies

3.1 Overall considerations

The standalone financial statements have been prepared using the significant accounting policies and
measurement basis summarized below. These accounting policies have been used throughout all periods
presented in the standalone financial statements.

Accounting policies have been consistently applied except where a newly issued accounting standard is initially
adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in
use.

3.2 Revenue recognition

Revenue is measured at the fair value of consideration received or receivable by the Company for goods supplied
and services provided, excluding trade discounts and other applicable taxes. Revenue is recognised upon
transfer of control of promised goods or services under a contract.

Revenue is recognised when the amount can be measured reliably, it is probable that the economic benefits
associated with the transaction will flow to the Company, the costs incurred or to be incurred can be measured
reliably, and when the criteria for each of the Company''s different activities has been met.

The Company derives revenues from following types of activities:

a) Sewerage Construction Contracts, Road & Highway Construction & Maintenance, Building Construction,
Water Supply Projects and Electrical Works- The Company is engaged in execution of sewerage construction
projects, road and highway construction and maintenance contracts, building construction works, water supply
projects and electrical works under contracts entered into with government authorities .

b) Operation and maintenance contracts - Customer contracts towards operation and maintenance of
sewerage construction projects & road and highway construction.

The Company determines its performance obligations included in the contracts signed with customers. When a
customer contract includes both a construction and operation & maintenance, the performance obligations are
separately identified and revenue is recognised in accordance with the principles of Ind AS 115.

- Sewerage Construction Contracts, Road & Highway Construction & Maintenance, Building Construction,
Water Supply Projects and Electrical Works :

The Company is engaged in the execution of sewerage construction projects, road and highway construction
and maintenance contracts, building construction works, water supply projects, electrical transmission and
distribution works, and other infrastructure projects on an Engineering, Procurement and Construction (EPC)
basis.

Revenue is recognized in accordance with Ind AS 115, Revenue from Contracts with Customers. The transaction
price is generally based on contractually agreed rates and may include variable consideration such as price
escalation, incentives, variation orders, claims, liquidated damages and penalties. Variable consideration is
included in the transaction price only to the extent that it is highly probable that a significant reversal of
cumulative revenue recognized will not occur when the uncertainty associated with such consideration is
subsequently resolved.

Construction contracts generally comprise a single performance obligation involving the design, engineering,
procurement, construction, installation, testing, commissioning, maintenance and handover of infrastructure
facilities. The Company transfers control of goods and services continuously over the contract period and
therefore satisfies its performance obligations over time.

Revenue is recognized over time using the percentage of completion method, measured by reference to the
proportion of contract costs incurred up to the reporting date relative to the total contract costs of the contract
(cost-to-cost method). This method faithfully depicts the transfer of control of goods and services to the
customer.

Only those costs that reflect work performed are included in costs incurred for determining the stage of
completion.

Where the outcome of a contract cannot be measured reliably, revenue is recognized only to the extent of
contract costs incurred that are expected to be recoverable.

Contract modifications, variation orders and claims are accounted for when approved or when it is highly
probable that the customer will approve the modification and the amount can be measured reliably.

Unbilled revenue represents the Company''s right to consideration for work performed but not yet billed as well
as certified by the principal as at the reporting date and is disclosed within Trade Receivables, as appropriate.

Retention money withheld by customers as per contractual terms is recognized when the Company has an
enforceable right to receive the consideration and collection is considered probable. Long-term retention
receivables are disclosed under Other Financial Assets (Non-Current), while short-term retention receivables are
disclosed under Other Financial Assets (Current).

-Operation & Maintenance contracts

Revenue from operation and maintenance contracts relating to sewerage construction projects & road and
highway construction are recognized as the services are provided and invoiced to the customer, as per the terms
of the contract.

Other Income

Interest income is recognized on a time-proportion basis using the effective interest method.

3.3 Cost of Revenue from Operations

Cost of Revenue from Operations comprise costs including costs that are directly related to the contract,
attributable to the contract activity in general, and such costs that can be allocated to the contract and
specifically chargeable to the customer under the terms of the contracts, which is charged to the statement of
profit and loss.

3.4 Property, Plant & Equipment
Buildings and other equipment

Property, Plant & Equipment (comprising of Building, Plant & Machinery, Vehicles, Furniture & Fixtures, Office
Equipment , Computers & Other Fixed Assets ) are initially recognised at acquisition cost, including any costs
directly attributable to bringing the assets to the location and condition necessary for them to be capable of
operating in the manner intended by the Company''s management.

The cost of property, plant and equipment not ready for the intended use before reporting date is disclosed as
capital work in progress.

Subsequent expenditure incurred on an item of property, plant and equipment is added to the book value of
that asset only if this increases the future benefits from the existing asset beyond its previously assessed
standard of performance.

Depreciation methods, estimated useful lives and residual value

Depreciation on assets is provided on written down method at the rates and in the manner prescribed in
Schedule II to the Companies Act, 2013.Schedule II to the companies Act 2013 prescribes the useful lives for
various class of assets. For certain class of assets, based on technical evaluation and assessment, Management
believes that the useful lives adopted by it reflect the period over which these assets are expected to be used.
Accordingly for those assets, the useful lives estimated by the management are different from those prescribed
in the Schedule. Management''s estimates of the useful lives for various classes of fixed assets are as given
below:-

The components of assets are capitalised only if the life of the components vary significantly and whose cost is
significant in relation to the cost of respective asset.

3.5 Impairment of property, plant and equipment

For the purpose of impairment assessment, assets are grouped at the lowest levels for which there are largely
independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment
and some are tested at cash-generating unit level. Goodwill (if any) is allocated to those cash generating units
that are expected to benefit from synergies of a related business combination and represent the lowest level
within the Company at which management monitors goodwill.

All individual assets or cash-generating units are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the assets'' (or cash-generating unit''s) carrying amount
exceeds its recoverable amount, which is the higher of fair value less costs of disposal and value in-use. To
determine the value-in-use, management estimates expected future cash flows from each cash generating unit
and determines a suitable discount rate in order to calculate the present value of those cash flows. The data used
for impairment testing procedures are directly linked to the Company''s latest approved budget, adjusted as
necessary to exclude the effects of future reorganisations and asset enhancements. Discount factors are
determined individually for each cash-generating unit and reflect current market assessments of the time value
of money and assets specific risk factors.

Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that
cash-generating unit. Any remaining impairment loss is charged pro-rata to the other assets in the cash¬
generating unit.

3.6 Leases

The Company''s lease asset classes primarily consist of leases for Land. 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.

At the date of commencement of the lease, the Company recognizes a right-of-use asset ("ROU") and a
corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of
twelve 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 includes the options to extend or terminate the lease before the end of the
lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be
exercised.

The right-of-use 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. Right-of-use 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. Right of use 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. 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 right of use asset if the Company
changes its assessment if whether it will exercise an extension or a termination option. Lease liability and ROU
asset have been separately presented in the Balance Sheet and lease payments have been classified as financing
cash flows.

As told by the management of the company, the entire lease rent pertaining to the leased asset was paid in full
by the previous owner of the asset, prior to the transfer of ownership to the company. Accordingly, there is no
future lease rent liability payable by the company. Consequently, there is no recognition of lease liability (current
or non-current) in the financial statements. Since there are no future lease payments, the requirements of Ind
AS 116 with respect to recognition of lease liability and corresponding right-of-use asset and subsequent finance
cost adjustments are not applicable in this case. No adjustments related to interest (finance cost) under Ind AS
116 have been made in the financial statements. This treatment is based on the management''s representation
and the absence of enforceable future lease payment obligations.

3.7 Investments

-in Partnership Firm

The Company has invested in TESPL-LRS-TCPL (JV), in which it holds a 26% interest. The investment is carried at
cost adjusted for the Company''s share of profit or loss of the Partnership Firm.

3.8 Financial Instruments

Financial assets (other than trade receivables) and financial liabilities are recognised when the Company
becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value
adjusted for transaction costs, except for those carried at fair value through statement of profit and loss which
are measured initially at fair value.

Trade receivables are recognised at their transaction price as the same do not contain significant financing
component. Subsequent measurement of financial assets and financial liabilities are described below.

a) Classification and subsequent measurement of financial assets

For the purpose of subsequent measurement financial assets are classified and measured based on the entity''s
business model for managing the financial asset and the contractual cash flow characteristics of the financial
asset at:

a. Amortised cost

b. Fair Value Through Other Comprehensive Income (FVTOCI) or

c. Fair Value Through Profit or Loss (FVTPL)

b) Financial assets at amortised cost

A financial asset is subsequently measured at amortised cost using effective interest rate if it is held within a
business model where the objective is to hold the financial assets to collect contractual cash flows and the
contractual terms gives rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding. The Company has classified the following financial Assets at amortised
Cost as disclosed in Note 40 of the Standalone Financial Statement.

c) Financial assets at Fair Value through Other Comprehensive Income (FVTOCI)

A financial asset is subsequently measured at fair value through other comprehensive income if it is held within
a business model where the objective is both collecting contractual cash flows and selling financial assets along
with the contractual terms giving rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding. There are no assets in this category which are measured at fair
value with gains or losses recognised in Other Comprehensive income. However the actuarial loss/ gain on
remeasurement on defined benefit plan is recognised in other comprehensive income based on actuarial
valuation by a certified actuarial valuer.

d) Financial assets at Fair Value Through Profit or Loss (FVTPL)

Financial assets at FVTPL include financial assets that are designated at FVTPL upon initial recognition and
financial assets that are not measured at amortised cost or at fair value through other comprehensive income.
There are no assets in this category which are measured at fair value with gains or losses recognised in statement
of profit and loss.

Hedge Accounting

For the reporting periods under review, the Company has not designated any forward currency contracts as
hedging instruments.

e) Trade receivables

Trade receivables do not carry any interest and are stated at their normal value as reduced by appropriate
allowances for estimated irrecoverable amounts. Individual trade receivables are written off when management
deems them not to be collectible.

The Company follows ''simplified approach'' for recognition of impairment loss allowance on trade receivables
which does not require the Company to track changes in credit risk. The company has created allowance for
expected credit risk based on the management assessment

f) Derecognition

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

i. the rights to receive cash flows from the asset have expired, or

ii. 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 the Company''s
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.

g) Classification, subsequent measurement and derecognition of financial liabilities

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss or
at amortised cost. The Company''s financial liabilities include borrowings, trade payables and other financial
liabilities.

Subsequent measurement

Financial liabilities are measured subsequently at amortised cost using the effective interest method except for
derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or
losses recognised in statement of profit and loss (other than derivative financial instruments that are designated
and effective as hedging instruments).The Company has classified the following financial liabilities at amortised
Cost as disclosed in Note 40 of the Standalone Financial Statement.

Derecognition

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.

3.9 Inventories

Material at Site & Work in Progress- valued at Cost or NRV, whichever is lower.

Cost is determined using FIFO basis and includes all costs incurred in bringing the inventories to their present
location and condition.

Raw materials, stores and spares, consumables and materials at site are valued at the lower of cost and net
realizable value.

Project Work-in-Progress represents costs incurred in respect of incomplete EPC projects and comprises direct
material, direct labour, subcontracting charges and other directly attributable project costs incurred up to the
reporting date. Project Work-in-Progress is valued at the lower of cost and net realizable value.

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

3.10 Income Taxes

Tax expense recognised in statement of profit and loss comprises the sum of deferred tax and current tax not
recognised in other comprehensive income or directly in equity.

Calculation of current tax is based on tax rates in accordance with tax laws that have been enacted or
substantively enacted as at the reporting period. Deferred income taxes are calculated using the liability method
on temporary differences between tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes at reporting date.

Deferred taxes pertaining to items recognised in other comprehensive income are also disclosed under the same
head.

Deferred tax assets are recognised to the extent that it is probable that the underlying tax loss or deductible
temporary difference will be utilised against future taxable income. This is assessed based on the Company''s
forecast of future operating results, adjusted for significant non-taxable income and expenses and specific limits
on the use of any unused tax loss or credit.

Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in statement
of profit and loss, except where they relate to items that are recognised in other comprehensive income (such
as re-measurement of net defined benefit plans) or directly in equity, in which case the related deferred tax is
also recognised in other comprehensive income or equity, respectively. The company has disclosed Income Tax
and its reconciliation in Note 31 of the standalone financial statement.

3.11 Cash & Cash Equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly
liquid investments maturing within three months from the date of acquisition that are readily convertible into
known amounts of cash and which are subject to an insignificant risk of changes in value.

3.12 Equity & Reserves and Surplus

Share capital represents the nominal (par) value of shares that have been issued and paid-up.

Other components of equity include the following:

i) Retained earnings- This reserve represents undistributed accumulated earnings of the Company as on the
balance sheet date.

ii) Other comprehensive income represents actuarial loss or gain on remeasurement of defined benefits plans.

3.13 Post-employment benefits and short-term employee benefits
(i) Short term Employee Benefits

Employee benefits such as salaries, wages, short term compensated absences, bonus, ex-gratia and
performance-linked rewards falling due wholly within twelve months of rendering the service are classified as
short-term employee benefits and are expensed in the period in which the employee renders the service.

ii. Post-Employee Benefits

A. Defined contribution plan

The Company''s provident fund scheme and employee state insurance scheme are defined contribution plans.
The contribution paid / payable under the schemes is recognised as an expense during the period in which the

employee renders the service. The Company has no legal or constructive obligations to pay contributions in
addition to its fixed contributions.

a. Provident fund and Employee state insurance scheme

The Company makes contributions to the statutory provident fund and employee state insurance scheme in
accordance with Employees Provident Fund and Miscellaneous Provisions Act, 1952 and Employees'' State
Insurance Act, 1948. These contributions, paid or payable, are recognised as expenses in the period in which it
falls due.

B. Defined benefits plans

Under the Company''s defined benefit plans, the amount of benefit that an employee will receive on retirement
is defined by reference to the employee''s length of service and final salary. The legal obligation for any benefits
remains with the Company, even if plan assets for funding the defined benefit plan have been set aside. Plan
assets may include assets specifically designated to a long-term benefit fund as well as qualifying insurance
policies.

The defined benefit plans maintained by the Company are as below:

(i) Gratuity& Leave Encashment

The Company has Defined Benefit plan, namely gratuity for employees and leave encashment , the liability for
which is determined on the basis of an actuarial valuation (using the Projected Unit Credit method) at the end of
each annual reporting period. Remeasurements, comprising actuarial gains and losses, the effect of the changes
to the return on plan assets (excluding net interest), is reflected immediately in the balance sheet with a charge
or credit recognised in other comprehensive income in the period in which they occur.