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Accounting Policies of Castrol India Ltd. Company

Dec 31, 2014

1. Corporate information

Castrol India Limited (the ''Company'') is a public limited company domiciled in India and incorporated under the provisions of the Companies Act, 1956. The Company is engaged in the business of manufacturing & marketing of Automotive, Non-Automotive Lubricants and related services.

1.1. Basis of preparation of accounts:

The Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in India, mandatory accounting standards notified under the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956 read with General Circular 8/2014 dated April 4, 2014, issued by the Ministry of Corporate Affairs. The Financial Statements have been prepared under the historical cost convention on an accrual basis, except in case of assets for which provision for impairment is made and derivative financial instruments which have been measured at fair value. The accounting policies applied by the Company are consistent with those used in the previous year.

All the assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in Revised Schedule vI to the Companies Act, 1956 read with General Circular 8/2014 dated April 4, 2014, issued by the Ministry of Corporate Affairs. Based on the nature of products and time between the acquisition of assets for processing and their realisation in cash or cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current/non-current classification of assets and liabilities.

2. Significant accounting policies

a. Use of estimates

The preparation of Financial Statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the Financial Statements and the results of operations during the reporting period. Although these estimates are based upon management''s best knowledge of current events and actions, actual results could differ from these estimates.

b. Tangible fixed assets

Tangible fixed assets are stated at cost less accumulated depreciation and impairment provision. The cost comprises of the purchase price (net of Cenvat and vAT credit wherever applicable) and any attributable cost of bringing the assets to its working condition for its intended use.

c. Intangible assets

I ntangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any.

d. Depreciation and amortisation

Depreciation is provided pro-rata to the period of use on straight-line method based on the estimated useful lives of the assets, which have been determined by management, as stated below. These rates of depreciation are higher than the rates specified under Schedule XIV of the Companies Act, 1956.

(i) Workshop equipments provided against sales agreements are depreciated over the standard period of agreement.

(ii) Lease-hold land and lease-hold improvements are being amortised on a straight-line basis over the period of lease.

(iii) Assets individually costing less than Rs. 5,000/- are fully depreciated in the year of acquisition.

e. Impairment of tangible and intangible assets

The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of an asset''s or cash generating unit''s net selling price and its value in use. 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 risks specific to the asset.

After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

f. Leases

where the Company is lessee Operating lease

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets, are classified as operating leases. Operating lease payments are recognised as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term.

g. Inventories

(i) Raw materials, packages, traded items and finished goods are valued at lower of weighted average cost and net realisable value. Cost of finished goods includes material and packaging cost, proportion of manufacturing overheads based on normal operating capacity and excise duty. Custom duty on stock lying in bonded warehouses is included in cost. Cost of traded items includes cost of purchase and other cost incurred in bringing the inventories to the present location and condition.

(ii) Stores and consumables are valued at cost.

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

(iv) Due allowances are made in respect of slow moving, non moving and obsolete inventory based on estimates made by Management.

h. Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

Sale of goods

Sales are recognised when goods are supplied and are recorded net of rebates and Sales Tax/value Added Taxes (vAT) and inclusive of excise duty. The Company collects Sales Tax /vAT on behalf of the Government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue.

Income from services

Income from services is recognised based on the terms of the agreements as and when the services are rendered and are net of service tax (wherever applicable).

Interest

Interest is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

i. Cash and cash equivalents

Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in hand, fixed deposits with banks which are short term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

j. Retirement and other employee benefits Long term employee benefits Defined contribution plans

Company''s contributions paid/payable during the year to Company''s Pension Fund, ESIC and Labour Welfare Fund, Medical Insurance Benefits, Post Retiral Medical Benefit Scheme and Sharematch are recognised in the Statement of Profit and Loss, when an employee rendered the related service.

If the contribution payable to the scheme for service received before the Balance Sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognised as a liability after deducting the contribution already paid.

If the contribution already paid exceeds the contribution due for services received before the Balance Sheet date, then excess is recognised as an asset to the extent that the pre payment will lead to, for example, a reduction in future payment or a cash refund.

Defined benefit plans

Company''s liabilities towards gratuity, survivor protection (death benefit), pension benefit to past employees are actuarially determined using the projected unit credit method, at each year-end, which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. Past services in relation to benefits mentioned above are recognised on a straight-line basis over the average period until the amended benefits become vested. Actuarial gain and losses are recognised immediately in the Statement of Profit and Loss as income or expense. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to market yields at the Balance Sheet date on Government Securities where the currency and terms of the Government Securities are consistent with the currency and estimated terms of the defined benefit obligation.

Provident Fund

The Company administers employees provident fund benefits through a trust, whereby amounts determined at a fixed percentage of basic salaries of the employees are deposited to the trust every month. The benefit vests upon commencement of the employment. The interest rate payable by the trust to the beneficiaries every year is notified by the government and the Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate. The Company has obtained actuarial valuation to determine the shortfall, if any, as at the Balance Sheet date.

Retirement and other employee benefits

Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the Statement of Profit and Loss and are not deferred.

Short term employee benefits are recognised as an expense at the undiscounted amount in the Statement of Profit and Loss of the year in which the related service is rendered. voluntary Retirement Scheme expenses are fully charged to the Statement of Profit and Loss in the year in which they accrue.

k. Foreign currency transactions

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. All monetary assets and liabilities as at the Balance Sheet date, are reinstated at the applicable exchange rates prevailing on that date. All exchange differences arising on transactions, are charged to Statement of Profit and Loss. Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction.

l. Derivative instruments

The Company uses foreign exchange forward contracts for exposure to movement in foreign exchange rates. The Company has adopted the principles of Accounting Standard 30, Financial Instruments: Recognition and Measurement (AS-30) issued by ICAI to the extent the adoption of AS-30 does not conflict with existing accounting standards prescribed by Companies (Accounting Standards) Rules, 2006 and other authoritative pronouncements. AS-30 is applied on those contracts which are not covered under AS-11.

In accordance with the recognition and measurement principles set out in AS-30, gains/losses on mark to market of derivative financial instruments are recognised in the Statement of Profit and Loss. Gains and losses arising on account of rollover/cancellation of forward contracts are recognised as income/expense of the period in which such rollover/ cancellation takes place.

m. Income taxes

Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, 1961.

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax is recognised at the Balance Sheet date, subject to the considerations of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

The tax year for the Company being the year ending March 31, the provision for taxation for the year is aggregate of the provision made for the three months ended on March 31, 2014 and the provision for the remaining period of nine months ending on December 31, 2014. The provision for the remaining period of nine months has been arrived at by applying the effective tax rate of the financial year 2014-15 to Profit Before Tax of the said period.

At each reporting date, the Company re-assesses unrecognised deferred tax assets. It recognises unrecognised deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realised.

n. Provisions

A provision is recognised when the Company has a present obligation as a result of 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. Provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.

o. Segment reporting

The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the Financial Statements of the Company as a whole. The Company''s operating businesses are organised and managed separately according to the nature of products and services provided. The analysis of geographical segments is based on the areas in which major operating divisions of the Company operate. Revenues and expenses directly attributable to segments are reported under each reportable segment. Revenue and expenses, which relate to the Company as a whole and are not allocable to segments on a reasonable basis, have been included under "unallocable".

p. Earning per share

Basic earning per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split (consolidation of shares). For the purpose of calculating diluted earning per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

q. 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 recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. The Company does not recognise a contingent liability but discloses its existence in the Financial Statements.

r. Measurement of EBITDA

As permitted by the Guidance Note on the Revised Schedule vI to the Companies Act, 1956, the Company has elected to present earnings before interest expense, tax, depreciation and amortisation (EBITDA) as a separate line item on the face of the Statement of the Profit and Loss. In its measurement, the Company doesn''t include depreciation, impairment and amortisation expenses, finance costs, interest income and tax expenses.


Dec 31, 2013

1.1. Basis of preparation of accounts:

The Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in ndia, mandatory accounting standards notified under the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956 read with General Circular 15/2013 dated September 13 2013 issued bv the Ministry of Corporate Affairs, in respect of Section 133 of the Companies Act, 2013. The Financial Statements ‘have been prepared under the historical cost convention on an accrual basis, except in case of assets for which provision for impairment is made and derivative financial instruments which have been measured at fair value. The accounting policies applied by the Company are consistent with those used in the previous year.

All the assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in Revised Schedule VI to the Companies Act, 1956. Based on the nature of products and time between the acquisition of assets for processing and their realisation in cash or cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current/non-current classification of assets and liabilities.

a. Use of estimates

The preparation of Financial Statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the Financial Statements and the results of operations during the reporting period. Although these estimates are based upon management''s best knowledge of current events and actions, actual results could differ from these estimates.

b. Tangible fixed assets

Tangible fixed assets are stated at cost less accumulated depreciation and impairment provision. The cost comprises of the purchase price (net of Convert and VAT credit wherever applicable) and any attributable cost of bringing the assets to its working condition for its intended use.

c. Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any.

d. Depreciation and amortisation

Depreciation is provided pro-rata to the period of use on straight-line method based on the estimated useful lives of the assets, which have been determined by management, as stated below. These rates of depreciation are higher than the rates specified under Schedule XIV of the Companies Act, 1956.

i) Workshop equipments provided against sales agreements are depreciated over the standard period of agreement ii) Lease-hold land and lease-hold improvements are being amortised on a straight line basis over the period of lease (in) Assets individually costing less than Rs. 5,000/- are fully depreciated in the year of acquisition

e. Impairment of tangible and intangible assets

The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of an asset''s or cash generating unit''s (CGU) net selling price and its value in use. 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 risks specific to the asset.

After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

f. Leases

Where the Company is lessee

Operating lease

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets, are classified as operating leases. Operating lease payments are recognised as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term.

g. Inventories

(i) Raw materials, packages, traded items and finished goods are valued at lower of real time weighted average cost and net realisable value. Cost of finished goods includes material and packaging cost, proportion of manufacturing overheads based on normal operating capacity and excise duty. Custom duty on stock lying in bonded warehouses is included in cost. Cost of traded items includes cost of purchase and other cost incurred in bringing the inventories to the present location and condition.

(ii) Stores and consumables are valued at cost.

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

h. Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

Sale of goods

Sales are recognised when goods are supplied and are recorded net of rebates and Sales Tax/VAT and inclusive of excise duty. The Company collects Sales Tax/VAT on behalf of the Government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue.

Income from services

Income from services is recognised based on the terms of the agreements as and when the services are rendered and are net of service tax (wherever applicable).

Interest

Interest is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

i. Cash and cash equivalents

Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in hand, fixed deposits with banks which are short term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

j. Retirement and other employee benefits

Defined contribution plans

Company''s contributions paid/payable during the year to Company''s Pension Fund, ESIC and Labor Welfare Fund Medical insurance Benefits, Post Retiral Medical Benefit Scheme and Sharematch are recognised in the Statement of Profit and Loss, when an employee rendered the related service.

If the contribution payable to the scheme for service received before the Balance Sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognised as a liability after deducting the contribution already paid If the contribution already paid exceeds the contribution due for services received before the Balance Sheet date then excess is recognised as an asset to the extent that the pre payment will lead to, for example, a reduction in future payment or a cash refund. ''

Defined benefit plans

Company''s liabilities towards gratuity, survivor protection (death benefit), pension benefit to past employees are actuarially determined using the projected unit credit method, at each year end, which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation Past services in relation to benefits mentioned above are recognised on a straight-line basis over the average period until the amended benefits become vested. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss as income or expense. Obligation is measured at the present value of estimated future cash flows using a discount rate that is determined by reference to market yields at the Balance Sheet date on Government Securities where the currency and terms of the Government Securities are consistent with the currency and estimated terms of the defined benefit obligation. Provident. Fund

The Company administers employees provident fund benefits through a trust, whereby amounts determined at a fixed percentage of basic salaries of the employees are deposited to the trust every month. The benefit vests upon commencement of the employment. The interest rate payable by the trust to the beneficiaries every year is notified by the government and the Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate. The Company has obtained actuarial valuation to determine the shortfall, if any, as at the Balance Sheet date.

Retirement and other employee benefits

Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method at the year end. Actuarial gains/losses are immediately taken to the Statement of Profit and Loss and are not deferred.

Short term employee benefits are recognised as an expense at the undiscounted amount in the Statement of Profit and Loss of the year in which the related service is rendered.

Voluntary Retirement Scheme expenses are fully charged to the Statement of Profit and Loss in the year in which they accrue.

k. Foreign currency transactions

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. All monetary assets and liabilities as at the Balance Sheet date, are reinstated at the applicable exchange rates prevailing on that date. All exchange differences arising on transactions, are charged to Statement of Profit and Loss. Non-monetary-items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction.

I. Derivative instruments

The Company uses foreign exchange forward contracts for exposure to movement in foreign exchange rates The Company has adopted the principles of Accounting Standard 30, Financial Instruments: Recognition and Measurement (AS-30) issued by ICAI to the extent the adoption of AS-30 does not conflict with existing accounting standards prescribed by Companies (Accounting Standards) Rules, 2006 and other authoritative pronouncements. AS-30 is applied on those contracts which are not covered under AS-11.

In accordance with the recognition and measurement principles set out in AS-30, gains/losses on mark to market of derivative financial instruments are recognised in the Statement of Profit and Loss. Gains and losses arising on account of rollover/cancellation of forward contracts are recognised as income/expense of the period in which such rollover/ cancellation takes place.

m. Income taxes

Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, 1961.

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax is recognised at the Balance Sheet date, subject to the considerations of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

The tax year for the Company being the year ending March 31, the provision for taxation for the year is aggregate of the provision made for the three months ended on March 31, 2013 and the provision for the remaining period of nine months ending on December 31, 2013. The provision for the remaining period of nine months has been arrived at by applying the effective tax rate of the financial year 2013-14 to Profit Before Tax of the said period.

At each reporting date, the Company re-assesses unrecognised deferred tax assets. It recognises unrecognised deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realised.

n. Provisions

A provision is recognised when the Company has a present obligation as a result of 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. Provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.

o. Segment reporting

The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the Financial Statements of the Company as a whole. The Company''s operating businesses are organised and managed separately according to the nature of products and services provided. The analysis of geographical segments is based on the areas in which major operating divisions of the Company operate. Revenues and expenses directly attributable to segments are reported under each reportable segment. Revenue and expenses, which relate to the Company as a whole and are not allocable to segments on a reasonable basis, have been included under "Unallowable".

p. Earning per share

Basic earning per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split (consolidation of shares). For the purpose of calculating diluted earning per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

q. 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 recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. The Company does not recognise a contingent liability but discloses its existence in the Financial Statements.

r. Measurement of EBITDA

As permitted by the Guidance Note on the Revised Schedule VI to the Companies Act, 1956, the Company has elected to present earnings before interest, tax, depreciation and amortisation (EBITDA) as a separate line item on the face of the Statement of the Profit and Loss. In its measurement, the Company doesn''t include depreciation, impairment and amortisation expenses, finance costs, interest income and tax expenses.

b. Terms/rights attached to equity shares:

The Company has only one class of equity shares having par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to the approvals of the shareholders in the ensuing Annual General Meeting. The Company declares and pays dividend in Indian Rupees.

During the year ended December 31, 2013, the amount of per share interim dividend recognised as distribution to equity shareholders was Rs. 3.50 (2012 : Rs. 7.00). The amount of interim dividend distributed to equity shareholders is Rs. 173.10 crores (2012 : Rs. 173.10 crores). In addition, the Company has also proposed a per share final dividend recognised as distribution to equity shareholders of Rs. 3.50 (2012 : Rs. 3.50). The amount of final proposed dividend distributed to equity shareholders is Rs. 173.10 crores (2012 : Rs. 173.10 crores). Both dividends aggregating to Rs. 7.00 per share (2012 : Rs. 10.50 per share).

In the event of the Company being liquidated, since the equity shares of the Company are fully paid-up, there would be no additional liability on the shareholders of the Company. However, post settlement of the liabilities of the Company, the surplus, if any, would be distributed amongst the shareholders in proportion to the number of shares held by each one of them.

f. Pursuant to the scheme of reduction of share capital u/s 100 to 105 of the Companies Act, 1956 as approved by the shareholders and the Hon''ble High Court of Bombay, the Company will reduce the fully paid-up face value of equity shares from Rs. 10 per share to Rs. 5 per share effective from January 20, 2014. Consequently, the Company will pay Rs. 5 per share to the shareholders in the due course of time.


Dec 31, 2012

A. Change in presentation and disclosure of Financial Statements

This is the frst year of application of the revised Schedule VI to the Companies Act, 1956 for the preparation of the Financial Statements of the Company. The revised Schedule VI introduces some signifcant conceptual changes as well as new disclosures. These include classifcation of all assets and liabilities into current and non-current. The previous year fgures have also undergone a reclassifcation to comply with the requirements of revised Schedule VI. pursuant to revised Schedule VI, there is no effect on the recognition and measurement principles followed for preparation of Financial Statements.

b. Use of estimates

The preparation of Financial Statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the Financial Statements and the results of operations during the reporting period. Although these estimates are based upon management''s best knowledge of current events and actions, actual results could differ from these estimates.

c. Tangible fxed assets

Tangible Fixed Assets are stated at cost less accumulated depreciation and impairment provision. The cost comprises the purchase price (net of Cenvat and VAT wherever applicable) and any attributable cost of bringing the assets to its working condition for its intended use.

d. Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any.

e. Depreciation and amortisation

Depreciation is provided pro-rata to the period of use on straight-line method based on the estimated useful lives of the assets, which have been determined by management, as stated below. These rates of depreciation are higher than the rates specifed under Schedule XIV of the Companies Act, 1956.

(i) workshop equipments provided against sales agreements are depreciated over the standard period of agreement.

(ii) Lease-hold land and lease-hold improvements are being amortised on a straight line basis over the period of lease.

(iii) Assets individually costing less than Rs. 5,000/- are fully depreciated in the year of acquisition.

f. Impairment of tangible and intangible assets

The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset''s net selling price and value in use. In assessing value in use, the estimated future cash fows are discounted to their present value using a pre-tax discount rate that refects current market assessments of the time value of money and risks specifc to the asset.

After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

g. Leases

where the Company is lessee

Operating lease

Leases where the lessor effectively retains substantially all the risks and benefts of ownership of the leased assets during the lease term, are classifed as operating leases. Operating lease payments are recognised as an expense in the Statement of proft and Loss on a straight-line basis over the lease term.

h. Inventories

(i) Raw materials, packages, traded items and fnished goods are valued at lower of real time weighted average cost and net realisable value. Cost of fnished goods includes material and packaging cost, proportion of manufacturing overheads based on normal operating capacity and excise duty. Custom duty on stock lying in bonded warehouses is included in cost.

(ii) Stores and consumables are valued at cost.

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

i. Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefts will fow to the Company and the revenue can be reliably measured.

Sale of goods

Sales are recognised when goods are supplied and are recorded net of rebates and sales tax/VAT and inclusive of excise duty.

Income from services

Income from service rendered is recognised based on the terms of the agreements as and when services are rendered and are net of service tax (wherever applicable).

Interest

Interest is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

j. Cash and cash equivalents

Cash and cash equivalents for the purposes of cash fow statement comprise cash at bank and in hand, fxed deposits with banks which are short term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignifcant risk of changes in value.

k. Retirement and other employee benefts

Long term employee benefts

Defned contribution plans

Company''s contributions paid/payable during the year to Company''s pension Fund, ESIC and Labour welfare Fund, Medical Insurance Benefts, post Retrial Medical Beneft Scheme and sharematch are recognised in the Statement of proft and Loss.

Defned beneft plans

Company''s liabilities towards gratuity, provident fund, survivor protection (death beneft), pension beneft to past employees are actuarially determined using the projected unit credit method which considers each period of service as giving rise to an additional unit of beneft entitlement and measures each unit separately to build up the fnal obligation. past services in relation to benefts mentioned above are recognised on a straight line basis over the average period until the amended benefts become vested. Actuarial gains and losses are recognised immediately in the Statement of proft and Loss as an income or expense. Obligation is measured at the present value of estimated future cash fows using a discounted rate that is determined by reference to market yields at the Balance Sheet date on Government Securities where the currency and terms of the Government Securities are consistent with the currency and estimated terms of the defned beneft obligation.

Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method.

Short term employee benefts are recognised as an expense at the undiscounted amount in the Statement of proft and Loss of the year in which the related service is rendered.

Voluntary Retirement Scheme expenses are fully charged to the Statement of proft and Loss in the year in which they accrue. Refer note 23 for disclosure as per revised AS 15.

l. Foreign currency transactions

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. All monetary assets and liabilities as at the Balance Sheet date, are reinstated at the applicable exchange rates prevailing on that date. All exchange differences arising on transactions, are charged to Statement of proft and Loss. All non-monetary assets and liabilities are reported using the exchange rate prevailing at the date of the transaction.

m. Income taxes

Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, 1961.

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax is recognised at the Balance Sheet date, subject to the considerations of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

Deferred tax assets are recognised only to the extent that there is reasonable certainty that suffcient future taxable income will be available against which such deferred tax assets can be realised.

The tax year for the Company being the year ending March 31, the provision for taxation for the year is aggregate of the provision made for the three months ended on March 31, 2012 and the provision for the remaining period of nine months ending on December 31, 2012. The provision for the remaining period of nine months has been arrived at by applying the effective tax rate of the fnancial year 2012-13 to proft Before Tax of the said period.

n. Provisions

The provision is recognised when an enterprise has a present obligation as a result of past event and it is probable that an outfow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to refect the current best estimates.

o. Segment reporting

The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the Financial Statements of the Company as a whole. The Company''s operating businesses are organised and managed separately according to the nature of products and services provided. The analysis of geographical segments is based on the areas in which major operating divisions of the Company operate. Revenues and expenses directly attributable to segments are reported under each reportable segment. Revenue and expenses, which relate to the Company as a whole and are not allocable to segments on a reasonable basis, have been included under "Unallocable".

p. Earning per share

Basic earning per share is calculated by dividing the net proft or loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split (consolidation of shares). For the purpose of calculating diluted earning per share, the net proft or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

q. Contingent liabilities

A contingent liability is a possible obligation that arises from past events whose existence will be confrmed 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 recognised because it is not probable that an outfow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. The Company does not recognise a contingent liability but discloses its existence in the Financial Statements.

r. measurement of EBITDA

As permitted by the Guidance Note on the revised Schedule VI to the Companies Act, 1956, the Company has elected to present earnings before interest expense, tax, depreciation and amortisation (EBITDA) as a separate line item on the face of the Statement of the proft and Loss. In its measurement, the Company doesn''t include depreciation and amortisation expenses, fnance costs and tax expenses.


Dec 31, 2010

(a) Basis of Preparation of Accounts :

The Financial Statements have been prepared to comply in all material aspects with applicable accounting principles in India, mandatory Accounting Standards notified by the Companies (Accounting Standards) Rule, 2006 (as amended) and the relevant provisions of the Companies Act, 1956. The Financial Statements have been prepared under the historical cost convention on an accrual basis except in case of assets for which provision for impairment is made and revaluation is carried out. The accounting policies applied by the Company are consistent with those used in the previous year, except for the changes in accounting policy, if any.

(b) Use of estimates :

The preparation of Financial Statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period. Although these estimates are based upon managements best knowledge of current events and actions, actual results could differ from these estimates.

(c) Fixed Assets and Depreciation :

Fixed Assets (including Plant & Machinery Intangibles) are stated at cost less accumulated depreciation and impairment provision. Cost comprises the purchase price (Net of Cenvat and VAT wherever applicable) and any attributable cost of bringing the assets to its working condition for its intended use. Lease-hold Land and Lease-hold Improvements are being amortised on a straight-line basis over the period of lease.

(d) Impairment of Assets :

(i) The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

(ii) After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.

(iii) A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

(e) Valuation of Investments :

Long term Investments are stated at cost less provision, if any, for diminution which is other than temporary in nature. Current Investments are valued at lower of cost and net realisable value determined on individual investment basis.

(f) Valuation of Inventories :

Raw Materials, Packages, Traded Items and Finished Goods are valued at lower of real time weighted average cost and net realisable value. Cost of Finished Goods includes material and packaging cost, proportion of manufacturing overheads based on normal operating capacity and Excise Duty. Custom Duty on stock lying in Bonded Warehouses is included in cost. Stores and Consumables are valued at cost.

(g) Employee Benefits :

(i) Defined Contribution Plan

Companys contributions paid/payable during the year to Companys Pension Fund, ESIC and Labour Welfare Fund, Medical Insurance Benefits, Post Retiral Medical Benefit scheme and share match are recognised in the Profit and Loss Account.

(ii) Defined Benefit Plan

Companys liabilities towards gratuity, provident fund, survivor protection (death benefit), pension benefit to past employees are actuarially determined using the projected unit credit method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. Past services in relation to benefits mentioned above are recognised on a straight line basis over the average period until the amended benefits become vested. Actuarial gain and losses are recognised immediately in the statement of Profit and Loss Account as income or expense. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to market yields at the Balance Sheet date on Government Securities where the currency and terms of the Government Securities are consistent with the currency and estimated terms of the defined benefit obligation.

(iii) Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method.

(iv) Short term employee benefits are recognised as an expense at the undiscounted amount in the Profit and Loss Account of the year in which the related service is rendered.

(v) Voluntary Retirement Scheme Expenses are fully charged to the Profit and Loss Account in the year in which they accrue. Please refer note 8 for disclosure as per revised AS 15.

(h) Recognition of Income and Expenditure :

Sales are recognised when goods are supplied and are recorded net of rebates and Sales TaxA/AT and inclusive of Excise Duty. Interest income is recognised on time proportion basis. Expenses are accounted for on accrual basis and provision is made for all known losses and expenses. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

(i) Foreign Currency Transactions :

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. Premium on forward cover contracts, if any, in respect of import of raw materials is charged to Profit and Loss Account over the period of contract. All monetary assets and liabilities as at the Balance Sheet date, not covered by forward contracts are reinstated at the applicable exchange rates prevailing on that date. All exchange differences arising on transactions, not covered by forward contracts, are charged to Profit and Loss Account.

(j) Provision :

A provision is recognized when an enterprise has a present obligation as a result of 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. Provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.

(k) Taxation :

(i) Tax expense comprises of Current, Deferred and Fringe Benefit Tax. Current Income Tax and Fringe Benefit Tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, 1961.

(ii) Deferred Tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred Tax is recognised at the Balance Sheet date, subject to the considerations of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

Deferred Tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such Deferred Tax assets can be realised.

(iii) The tax year for the Company being the year ending 31st March, the provision for taxation for the year is the aggregate of the provision made for the three months ended on 31st March, 2010 and the provision for the remaining period of nine months ending on 31st December, 2010. The provision for the remaining period of nine months has been arrived at by applying the effective tax rate of the financial year 2010-11 to Profit Before Tax of the said period.

(I) Earning Per Share :

Basic earning per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split (consolidation of shares). For the purpose of calculating diluted earning per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

(m) Leases :

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the Profit and Loss Account on a straight-line basis over the lease term.

(n) Cash and Cash Equivalents :

Cash and cash equivalents in the cash flow statement comprise cash at bank and in hand, fixed deposits and short-term investments which are readily convertible into known amounts of cash.

(o) Segment Reporting Policies :

The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the Financial Statements of the company as a whole. The Companys operating businesses are organized and managed separately according to the nature of products and services provided. The analysis of geographical segments is based on the areas in which major operating divisions of the Company operate. Revenues and expenses directly attributable to segments are reported under each reportable segment. Revenues and expenses, which relate to the Company as a whole and are not allocable to segments on a reasonable basis, have been included under "Unallocable".


Dec 31, 2009

(a) Basis of Preparation of Accounts :

The accounts have been prepared to comply in all material aspects with applicable accounting principles in India, mandatory Accounting Standards notified by the companies (Accounting Standards) Rule, 2006 and the relevant provisions ot the Companies Act, 1956. The Financial Statements have been prepared under the historical cost convention on an accrual basis except in case of assets for which provision for impairment is made and revaluation is carried out. The accounting policies applied by the Company are consistent with those used in the previous year, except for the changes in accounting policy, if any.

(b) Use of estimates :

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period. Although these estimates are based upon managements best knowledge of current events and actions, actual results could differ from these estimates.

(c) Fixed Assets and Depreciation :

Fixed Assets (Including Plant & Machinery Intangibles) are stated at cost (Net of Cenvat and VAT wherever applicable) less accumulated depreciation and impairment loss. Lease-hold land and Lease-hold Improvements are being amortised on a straight line basis over the period of lease.

Depreciation is provided pro-rata to the period of use on straight-line method based on the estimated useful lives of the assets, which have been determined by management, as stated below: These rates of depreciation are higher than the rates specified under Schedule XIV of the Companies Act, 1956.

(d) Impairment of Assets :

(i) The carrying amounts of assets are reviewed at each Balance Sheet date for indicators of impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

(ii) After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.

(iii) A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

(e) Valuation of Investments :

Long term Investments are stated at cost less provision, if any, for diminution which is other than temporary in nature. Current Investments are valued at lower of cost and net realisable value.

(f) Valuation of Inventories :

Raw Materials, Packages, Traded Items and Finished Goods are valued at lower of real time weighted average cost and net realisable value. Cost of Finished Goods includes material and packaging cost, overheads and Excise Duty. Custom Duty on stock lying in Bonded Warehouses is included in cost. Stores and Consumables are valued at cost.

Pursuant to the implementation of an upgraded version of ERP system, during the year, the Company has changed its cost formula from monthly weighted average to real time weighted average for Raw Materials, Packages, Traded Items and Finished Goods, the impact of which is not material.

(g) Employee Benefits :

(i) Defined Contribution Plan

Companys contributions paid/payable during the year to Companys Pension Fund, ESIC and Labour Welfare Fund, Medical Insurance Benefits, Post Retiral Medical Benefit Scheme and Share Match are recognised in the Profit and Loss Account.

(ii) Defined Benefit Plan

Companys liabilities towards gratuity, provident fund, survivor protection (death benefit), pension benefit to past employees are actuarially determined using the projected unit credit method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. Past services are recognised on a straight line basis over the average period until the amended benefits become vested. Actuarial gain and losses are recognised immediately in the statement of Profit and Loss Account as income or expense. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to market yields at the Balance Sheet date on Government Securities where the currency and terms of the Government Securities are consistent with the currency and estimated terms of the defined benefit obligation.

(iii) Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method.

(iv) Short term employee benefits are recognised as an expense at the undiscounted amount in the Profit and Loss Account of the year in which the related service is rendered.

(v) Voluntary Retirement Scheme Expenses are fully written off to the Profit and Loss Account in the year in which they accrue. Please refer note 8 for disclosure as per revised AS 15.

(h) Recognition of Income and Expenditure :

Sales are recognised when goods are supplied and are recorded net of rebates and Sales Tax / VAT and inclusive of Excise Duty. Expenses are accounted for on accrual basis and provision is made for all known losses and expenses. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

(i) Foreign Currency Transactions :

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. Premium on forward cover contracts, if any, in respect of import of raw materials is charged to Profit & Loss Account over the period of contract. All monetary assets and liabilities as at the Balance Sheet date, not covered by forward contracts are reinstated at the applicable exchange rates prevailing on that date. All exchange differences arising on transactions, not covered by forward contracts, are charged to Profit and Loss Account.

j) Provision :

A provision is recognised when an enterprise has a present obligation as a result of 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. Provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.

(k) Taxation :

(i) Tax expense comprises of Current, Deferred and Fringe Benefit Tax. Current Income Tax and Fringe Benefit Tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, 1961.

(ii) Deferred Tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred Tax is recognised at the Balance Sheet date, subject to the considerations of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

(iii) The tax year for the Company, being the year ending 31st March, the provision for taxation for the year is the aggregate of the provision made for the three months ended on 31st March, 2009 and the provision for the remaining period of nine months ending on 31st December, 2009. The provision for the remaining period of nine months has been arrived at by applying the effective tax rate of the financial year 2009-10 to Profit Before Tax of the said period.

(l) Earning Per Share :

Basic earning per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split (consolidation of shares). For the purpose of calculating diluted earning per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

(m) Leases :

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognised as an expense in the Profit and Loss account on a straight-line basis over the lease term.

(n) Cash and Cash Equivalents :

Cash and Cash Equivalents in the Balance Sheet comprise cash at bank and in hand, fixed deposits and short-term investments which are readily convertible into known amounts of cash.

 
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