Javeri Fiscal Services Ltd.

Company Overview

Sansera Engineering Private Limited (the Company) was incorporated on 15 December 1981 under

the provisions of the Companies Act, 1956 with its registered office in Bangalore, Karnataka.

The Company is involved in the business of manufacture of auto components such as rocker arms, connecting rods, gear shifters, crank shafts, and aerospace components. It is also involved in providing services such as forging and other related services.

1. Significant Accounting Policies

The accounting policies set out below have been applied consistently to the periods presented in these financial statements.

a) Basis for preparation of financial statements

The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting and comply with the accounting principles generally accepted in India (GAAP). GAAP comprises mandatory accounting standards specified under Section 133 of the Companies Act, 2013 (Act) read with relevant rules thereunder, the provisions of the Act, and other pronouncements of the Institute of Chartered Accountants of India (ICAI). The financial statements are prepared in Rupees in millions unless otherwise stated.

All assets and liabilities have been classified as current or noncurrent as per the Companys operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products and services and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current noncurrent classification of assets and liabilities.

b) Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles in India (Indian GAAP) requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as at the date of the financial statements. Actual results could differ from these estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

c) Property plant and equipment and Depreciation.

Property plant and equipment are stated at the cost (or revalued amounts, as the case may be) of acquisition or construction, less accumulated depreciation. All costs incurred in bringing the assets to its working condition for intended use have been capitalised.

The cost of an item of property plant and equipment comprises its purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.

Advances paid towards the acquisition of property plant and equipment, outstanding at each balance sheet date are shown under capital advances. The cost of property plant and equipment not ready for its intended use on such date, is disclosed under capital work-in progress.

Borrowing costs directly attributable to the acquisition/ construction of the qualifying asset are capitalized as part of the cost of that asset. Other borrowing costs are recognized as an expense in the statement of profit and loss in the period in which they are incurred.

Depreciation is calculated on the straight line method at the rates prescribed in part C of Schedule II of Companies Act, 2013. Management considers the rates specified in Schedule II to reflect the estimated useful life of the assets.

Class of assets
Useful lives (In years)
Plant and machinery
15
Buildings
30
Furniture and fixtures
10
Electrical installations
10
Office equipment
5
Vehicles
10
Computers and software
3 - 6
Assets taken on lease (Plant and machinery)
Over the lease period or useful life
whichever is shorter.

Freehold land is not depreciated. Leasehold land is depreciated over the period of lease.

d) Intangible assets and amortisation

Intangible assets that are acquired by the Company are measured initially at cost. After initial recognition, an intangible asset is carried at its cost less any accumulated amortization and any accumulated impairment loss.

Subsequent expenditure is capitalized only when it increases the future economic benefits from the specific asset to which it relates.

Intangible assets are amortized in the statement of profit and loss over their estimated useful lives on a straight-line basis.

e) Inventories

(i) Inventories are carried at the lower of cost and net realisable value.

(ii) Cost of inventories comprises purchase price and all incidental expenses incurred in bringing the inventory to its present location and condition. The method of determination of cost is as follows:

Raw materials - on a weighted average basis.

Stores and spares - on a weighted average basis.

Work-in-progress - includes costs of conversion.

Finished goods - includes costs of conversion.

Goods in transit - at purchase cost.

(iii) Fixed production overheads are allocated on the basis of normal capacity of production facilities.

(iv) The comparison of cost and net realisable value is made on an item-by-item basis.

(v) The net realisable value of work -in-progress is determined with reference to the net realisable value of related finished goods. Raw materials and other supplies held for use in production of inventories are not written down below cost except in cases where material prices have declined, and it is estimated that the cost of the finished products will exceed their net realisable value.

(vi) The provision for inventory obsolescence is assessed periodically and is provided as considered necessary.

f) Retirement benefits

(i) Defined contribution plan

Provident fund

A defined contribution plan is a post-employment benefit plan under which an entity makes specified monthly contribution towards Employee Provident Fund to Government administered Provident Fund Scheme which is a defined contribution plan. The Companys contribution is recognized as an expense in the statement of profit and loss during the period in which the employee renders the related service.

(ii) Defined benefit plans

Gratuity

The Companys gratuity plan is a defined benefit plan. The present value of gratuity obligation under such defined benefit plans is determined based on actuarial valuation carried out by an independent actuary using the Projected Unit Credit Method. The obligation is measured at the present value of estimated future cash flows. The discount rates used for determining the present value of obligation under defined benefit plans, is based on the market yields on Government securities as at the balance sheet date, having maturity periods approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the statement of profit and loss and on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs.

The gratuity scheme is administered through a trust with the State Bank of India and the provision for the same is determined on the basis of actuarial valuation carried out as at the year end. Provision is made for the shortfall, if any, between the amounts required to be contributed to meet the accrued liability for gratuity as determined by actuarial valuation and the available corpus of the funds.

Compensated absences

The employees of the Company are entitled to compensated absence. The employees can carry- forward a portion of the unutilized accumulating compensated absence and utilize it in future periods or receive cash compensation at retirement or termination of employment. The Company records an obligation for compensated absences in the period in which the employee renders the services that increases this entitlement. The Company measures the expected cost of compensated absence as the additional amount that the Company expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date.

The calculation of the Company's obligation is performed annually by an independent actuary using the projected unit credit method as at the reporting date. Non-accumulating compensated absences arc recognized in the period in which the absences occur. The Company recognizes actuarial gains and losses immediately in the statement of profit and loss.

g) Investments

Long-term investments are valued at cost less any other-than-temporary diminution in value, determined on the specific identification basis.

Investment are either classified as current or long-term based on Managements intention at the

time of purchase.

Investment that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments.

Current investments are carried at lower of cost and fair value determined on an individual investment basis.

h) Impairment of assets

The Company periodically assesses whether there is any indication that an asset or a group of assets comprising a cash generating unit may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. For an asset or group of assets that does not generate largely independent cash inflows, the recoverable amount is determined for the cash- generating unit to which the asset belongs. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the statement of profit and loss. If at the balance sheet date, there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost. An impairment loss is reversed only to the extent that the carrying amount of asset does not exceed the net book value that would have been determined; if no impairment loss had been recognised.

i) Revenue recognition

Revenue from sale of goods (including sale of scrap) is recognised on transfer of all significant risks and rewards of ownership to the customers. The amount recognised as sale is exclusive of sales tax and trade and quantity discounts. Revenue from sale of goods has been presented both gross and net of excise duty.

Service income earned from rendering services is recognised as and when the services are performed.

Export incentives are recognised in the statement of profit and loss account when the right to receive credit as per the terms of the entitlement is established in respect of exports made.

Interest income on deployment of surplus fund is recognised using the time proportion method, based on underlying interest rates.

Dividend income is accounted when the right to receive the payments is established.

j) Foreign exchange transactions and balances

Transactions in foreign currency are recognized at the rate of exchange prevailing on the date of the transaction. Exchange difference arising on foreign exchange transactions settled during the year is recognized in the statement of profit and loss for the year.

All monetary assets and liabilities denominated in foreign currency are restated at the rates existing at the year end and the exchange gains / losses arising from the restatement is recognized in the statement of profit and loss.

The Company is exposed to foreign currency fluctuations on foreign currency transactions. With a view to minimize the volatility arising from fluctuations in currency rates, the Company enters into foreign exchange forward contracts.

k) Derivative instruments

Forward exchange contracts and other similar instruments that are not in respect of forecasted transactions are accounted for using the guidance in Accounting Standard (AS) 11, The effects of changes in foreign exchange rates. For such forward exchange contracts and other similar instruments covered by AS 11, based on the nature and purpose of the contract, either the contracts are recorded based on the forward rate/ fair value at the reporting date, or based on the spot exchange rate on the reporting date. For contracts recorded at the spot exchange rates, the premium or discount at the inception is amortized as income or expense over the life of the contract.

l) Taxation

Income-tax expense comprises current tax (i.e. amount of tax for the year determined in accordance with the income-tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the year). The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax asset/ liability as at the balance sheet date resulting from timing differences between book profit and tax profit are not considered to the extent that such asset/ liability is expected to get reversed in the future years within the tax holiday period. Deferred tax assets are recognized only to the extent that there is reasonable certainty that the assets can be realized in future; however, where there is unabsorbed depreciation or carry forward of losses, deferred tax assets are recognized only if there is virtual certainty of realization of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably/ virtually certain (as the case may be) to be realized.

Minimum Alternate Tax (MAT) paid in accordance with the laws, which gives rise to future economic benefits in the form of tax credit against future income tax liability, is recognized as an asset in the balance sheet if there is convincing evidence that the Company will pay normal tax in the near future.

The Company offsets, on a year on year basis, the current tax assets and liabilities where it has a legally enforceable right and where it intends to settle such assets and liabilities on a net basis.

m) Provisions and contingent liabilities

The Company recognizes a provision when there is a present obligation as a result of past (or obligating) event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation that the likelihood of outflow of resources is remote, no provision or disclosure is made.

Provisions for onerous contracts, i.e. contracts where the expected unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it, are recognized when it is probable that an outflow of resources embodying economic benefits will be required to settle a present obligation as a result of an obligating event, based on a reliable estimate of such obligation.

n) Lease

Lease under which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Such assets acquired are capitalised at fair value of the asset or present value of the minimum lease payments at the inception of the lease, whichever is lower.

Lease in which a significant portion of risks and rewards of ownership is retained by the lessor is classified as operating lease. Payments made under operating lease are charged to the statement of profit and loss on a straight line basis over the period of the lease.

o) Cash and cash equivalents

Cash and cash equivalents in the cash flow statement comprise cash and balances with banks. The Company considers all short-term highly liquid investments with a remaining maturity at the date of purchase of 3 months or less and that is readily convertible to known amounts of cash or cash equivalents.

p) Earnings per share

Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders 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 for the period attributable to equity shareholders and weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.

q) Cash flow statement

Cash flows are reported using indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated.

r) Stock based compensation

The Company accounts for stock based compensation based on intrinsic value method as required by the Guidance Note on "Accounting for Employee Share-based Payments" issued by Institute of Chartered Accountants of India ('ICAI'). Accordingly, intrinsic value of each option on the grant date is amortised over the vesting period.

RISK DISCLOSURES ON DERIVATIVES