As per AS 2, Stock at the valuation date to b e done on cost or NRV (Net Realisable Value )which ever is lower. In this case;
COST is INR 10,00,000 ( 25% of material is in stock)
NRV is INR 9,90,000 ( INR 11,00,000- 1,10,000 = INR 9,90,000)
Hence, company's decision to value stock at INR 10 Lacs is not correct. Hence stock to be valued at INR 9,90,000.