a. Property, Plant and Equipment
Property, Plant and Equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Cost comprises of purchase price inclusive of taxes, commissioning expenses, etc. upto the date the asset is ready for its intended use.
Expenditure directly attributable to expansion projects is capitalised. Administrative, general overheads and other indirect expenditure (including borrowing costs) incurred during the project period which are not related to the project nor are incidental thereto, are expensed.
Depreciation / Amortization is calculated on a straight-line basis over the estimated useful lives of the assets as follows:
Based on technical assessment done by experts and management’s estimate,
(i) the useful life of factory buildings, other buildings, moulds and vehicles are lower than those indicated in Schedule II to the Companies Act, 2013,
(ii) residual value of plant & machinery, moulds and computers has been considered to be 2% of the cost as against 5% specified in Schedule II of the Companies Act, 2013. For buildings, office equipment, furniture & fittings and vehicles, residual value has been estimated at 5% of the cost.
The management believes that these estimated useful lives and residual values are realistic and reflect fair approximation of the period over which the assets are likely to be used.
Gain or loss arising on disposal of an asset is treated as income or expense.
The carrying amounts of assets are reviewed at each Balance Sheet date to determine if there is any indication of impairment based on external or internal factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount which represents the greater of the net selling price of assets and their ‘value in use’ The estimated future cash flows are discounted to their present value using pre-tax discount rates and risks specific to the asset.
Refer Notes 2 and 33 to the Financial Statements.
b. Intangible assets
Acquired intangible assets are initially measured at cost and subsequently at cost less accumulated amortisation and accumulated impairment loss, if any.
Intangible assets are amortised over their respective useful economic lives and assessed for impairment whenever there is an impairment indicator, except goodwill which is tested for impairment annually whether or not impairment conditions exist. The amortisation expense and the gain or loss on disposal, is recognised in the Statement of Profit and Loss. Intangible assets with infinite useful lives are tested for impairment annually.
The amortisation policies applied to the Company’s intangible assets are as follows:
Research costs are expensed as incurred.
Refer Notes 3 and 33 to the Financial Statements.
c. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of 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. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
Refer Notes 2, 22 and 32 to the Financial Statements.
Investments in subsidiaries are measured at cost as per Ind AS 27: Separate Financial Statements. Investment in other equity shares / units are measured at fair value. The fair value changes, excluding dividends, are recognized in OCI. There is no recycling of the amounts from OCI to Statement of Profit and Loss, even on sale of an investment. Investments in units of mutual funds are accounted for at fair value and the changes in fair value are recognised in the Statement of Profit and Loss.
Refer Notes 4 and 9 to the Financial Statements.
e. Impairment of financial assets
I n accordance with Ind AS 109: Financial Instruments, the Company recognizes impairment loss allowance on trade receivables based on historically observed default rates. Impairment loss allowance recognized during the year is charged to Statement of Profit and Loss.
Refer Note 10 to the Financial Statements.
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
(i) Raw materials, Components, Stores and Spares: These are valued at lower of cost and net realisable value. However, material and other items held for use in production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
(ii) Finished goods and work-in-progress: These are valued at lower of cost and net realisable value. Cost includes cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity. Cost of finished goods also includes excise duty. Cost is determined on weighted average basis.
(iii) Traded goods: These are valued at lower of cost and net realisable value. Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs to completion and the estimated costs necessary to sell them.
Refer Note 8 to the Financial Statements.
g. Cash and cash equivalents
Cash and cash equivalents in the Balance Sheet comprise of cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above.
Refer Note 11 to the Financial Statements.
Provisions are recognised when the Company has a present obligation as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made.
Provision for product related warranty/ guarantee costs is based on the claims received upto the year end, as well as management estimates of further liability to be incurred in this regard during the warranty period, computed on the basis of past trend of such claims.
Refer Notes 20 and 26 to the Financial Statements.
i. Retirement and other employee benefits
Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service.
The Company operates
(a) Defined benefit gratuity plan, which requires contributions to be made to a separately administered fund and
(b) Post-retirement medical benefit plan which is unfunded.
Gratuity and Post-Retirement Medical Benefit liability are provided for on the basis of actuarial valuation, using the projected unit credit method, made at the end of each financial year.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the Statement of Profit and Loss:
(i) Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
(ii) Net interest expense or income
Long term compensated absences are provided for based on an actuarial valuation done at the end of each financial year.
Pension liability is split into a defined benefit portion and a defined contribution portion. The part of the liability towards pension plan upto March 31, 2003 for employees as on that date is in the nature of defined benefit plan. From April 1, 2003, the pension remains as a defined contribution liability. The Defined benefit portion is provided for on the basis of an actuarial valuation done at the end of each financial year. The contributions towards defined contribution are charged to Statement of Profit and Loss of the year when the employee renders the service.
The current and non-current bifurcation is done as per Actuarial report.
Refer Notes 20, 26, 31 and 37 to the Financial Statements.
j. Foreign Currency
Transactions in foreign currencies are initially recorded in reporting currency by the Company at spot rates at the date of transaction. The Company’s functional currency and reporting currency is the same i.e. Indian Rupees.
Foreign currency monetary items are reported using the closing rate. Foreign currency non-monetary items measured at historical cost are translated using the exchange rates at the dates of the initial transactions. Exchange differences arising on settlement or translation of monetary items are recognised in Statement of Profit and Loss.
k. Revenue Recognition Sale of goods
Revenue is recognised to the extent that it is probable that economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment for them is made. Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, in accordance with the Sale of Goods Act, 1930. Revenue is measured at the fair value of the consideration received or receivable excluding taxes or duties collected on behalf of the government.
Excise duty is a liability of the manufacturer irrespective of whether the goods are sold or not. Hence, the recovery of excise duty flows to the Company on its own account and accordingly revenue includes excise duty. However, Sales tax/ value added tax (VAT) are collected on behalf of the government and accordingly, it is excluded from revenue.
The Company operates customer incentive programmes, which allows dealers to accumulate points when they purchase products from the Company and which can be redeemed for free products or gifts.
Consideration received by the Company on sale of goods is allocated between the products sold and the points issued based on their fair values. Fair value of the points is determined by applying past trend and management’s estimate of the value of the products / gifts proposed to be issued against such points. The fair value of the points issued is deferred and recognised as revenue when the points are redeemed by the dealers.
Refer Note 27 to the Financial Statements.
Revenue is recognised when the Company’s right to receive the payment is established, which is generally when shareholders approve the dividend.
Refer Note 28 to the Financial Statements.
Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with Indian Income Tax Act. Management periodically evaluates positions taken in the tax returns vis-a-vis positions taken in books of account, which are subject to interpretation, and creates provisions where appropriate.
Deferred tax is recognised on temporary differences between the tax bases and accounting bases of assets and liabilities at the tax rates and laws that have been enacted or substantively enacted at the Balance Sheet date.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each Balance Sheet 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.
For items recognised in OCI or equity, deferred / current tax is also recognised in OCI or equity.
Refer Notes 7 and 21 to the Financial Statements.
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. All other leases are operating lease. Operating lease payments, as per terms of the agreement, are recognised as an expense in the Statement of Profit and Loss on a straight line basis.
Refer Notes 2 and 34 to the Financial Statements.
n. Earning per share
Earnings per share is calculated by dividing the net profit or loss before OCI for the year by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or loss before OCI for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
Refer Note 35 to the Financial Statements.
o. Segment reporting
The Company has identified two operating segments viz, Automotive and Industrial. As per Ind AS - 108: Operating Segments, due to similar nature of products, production process, customer types, etc., the two operating segments have been aggregated as single operating segment of “storage batteries and allied products” during the year. The analysis of geographical segments is based on the areas in which customers of the Company are located.
Refer Note 41 to the Financial Statements.
p. Contingent Liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
Refer Note 38 to the Financial Statements.
q. Measurement of EBITDA
The Company has elected to present earnings before interest, tax expenses, depreciation and amortization expenses (EBITDA) as a separate line item on the face of the Statement of Profit or Loss.
r. Standards Issued but not yet Effective
In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, ‘Statement of cash flows’. These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, ‘Statement of cash flows’. The amendments are applicable from April 1, 2017.
Amendment to Ind AS 7:
The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the Balance Sheet for liabilities arising from financing activities, to meet the disclosure requirement.
The company is evaluating the requirements of the amendment and their effect on the financial statements.