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Accounting Policies of Ceat Ltd. Company

Mar 31, 2016

1. Corporate Information

CEAT Limited is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. The Company''s principal business is manufacturing of automotive tyres, tubes and faps. The Company started operations in 1958 as CEAT Tyres of India Limited and was renamed as CEAT Limited in 1990. The Company caters to both domestic and international markets.

2. Basis of Preparation and Summary of Significant Accounting Policies

A) Basis of accounting and preparation of financial statements

The financial statements of the Company have been prepared in accordance with the generally accepted accounting principles in India ("Indian GAAP"). The Company has prepared these financial statements to comply in all material respects with the accounting standards notiifed under section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014. The financial statements have been prepared on an accrual basis and under the historical cost convention except for land, building and plant and equipments acquired before 2007 which are carried at revalued amounts and derivative financial instruments which have been measured at fair value.

The accounting policies adopted in the preparation of financial statements are consistent with those of the previous year, except for the change in accounting policy explained below.

Component Accounting

The Company has adopted component accounting as required under Schedule II to the Companies Act, 2013 from April 1, 2015. The Company was previously not identifying components of fixed asset separately for depreciation purposes; rather, a single useful life / depreciation rate was used to depreciate each item of fixed asset.

Due to application of Schedule II to the Companies Act, 2013, the Company has changed the manner of depreciation for its fixed asset. Now, the Company identifies and determines cost of each components / part of the asset separately, if the components / part has a cost which is significant to the total cost of the asset and having useful life that is materially different from that of the remaining asset. These components are depreciated over their useful lives; the remaining asset is depreciated over the life of the principal asset. The Company has used transitional provisions of Schedule II to adjust the impact of component accounting arising on its first application. If a component has zero remaining useful life on the date of component accounting becoming effective, i.e., April 1, 2015, its carrying amount, after retaining any residual value, is charged to the Statement of profit and Loss. The carrying amount of other components, i.e., components whose remaining useful life is not nil on April 1, 2015, is depreciated over their remaining useful lives.

Had the Company continued to use the earlier policy of depreciating fixed assets, its financial statements for the period would have been impacted as below:

- Depreciation for the current period would have been lower by Rs. 443.17 Lacs. profit for the current period would have been higher by Rs. 315.28 Lacs (net of tax impact of Rs. 127.90 Lacs). Fixed assets would correspondingly have been higher by Rs. 443.17 Lacs.

- On the date of component accounting becoming applicable, i.e. April 1, 2015, the amount of Rs. 560.04 Lacs (net of deferred tax Rs. 274.36 Lacs) has been directly adjusted against retained earnings on account of depreciable value as on April 1, 2015 for the components having zero remaining useful life.

B) Use of Estimates

The preparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosures of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumption and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.

C) Tangible Fixed Assets and Intangible assets

i) Tangible Assets

a) Fixed assets are stated at cost of acquisition or construction or revalued amount whichever is applicable, net of accumulated depreciation / amortization and impairment losses, if any.

b) The cost comprises cost of acquisition, borrowing cost and any attributable cost of bringing the asset to the condition for its intended use. Cost also includes direct expenses incurred up to the date of capitalisation / commissioning. Any trade discounts and rebates are deducted in arriving at the purchase price.

c) Machinery spares procured along with the plant and machinery or subsequently and whose use is expected to be irregular are capitalised separately, if cost of such spares is known and depreciated fully over the residual useful life of the related plant and machinery. If the cost of such spares is not known particularly when procured along with the mother plant, these are capitalised and depreciated along with the mother plant. The written down value (WDV) of the spares is charged as revenue expenditure in the year in which such spares are consumed. Similarly, the value of such spares, procured and consumed in a particular year is charged as revenue expenditure in that year itself.

d) Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standards of performance.

e) All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure, are charged to the Statement of profit and Loss for the period during which such expenses are incurred.

f) Replacement of any part of plant and machinery, which are of capital nature, are capitalised along with the main plant and machinery and cost of the replaced part is written off. In case the cost of replaced part is not identifable, the equal value of replacement is deducted from the existing gross block of that asset.

g) Gains and losses arising from disposal/ derecognition of fixed assets which are carried at cost are recognised in the Statement of profit and Loss.

h) Tangible assets not ready for the intended use on the date of balance sheet are disclosed as "Capital work-in-progress".

i) In case of revaluation of fxed assets, any revaluation surplus is credited to the revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognized in the Statement of profit and Loss, in which case the increase is recognized in the Statement of profit and Loss. A revaluation deficit is recognized in the Statement of profit and Loss, except to the extent that it offsets an existing surplus on the same asset recognized in the asset revaluation reserve.

j) The Company identifies and determines cost of asset significant to the total cost of the asset having useful life that is materially different from that of the remaining life.

ii) Intangible Assets

Intangible Assets are stated at cost of acquisition or construction, less accumulated amortization and impairment, if any.

Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumalated impairment losses, if any.

D) Borrowing Cost

Borrowing cost includes interest, fees and amortization of other ancillary costs incurred in connection with the arrangement of borrowings. Borrowing costs that are directly attributable to the acquisition of or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are recognized in the Statement of profit and Loss.

E) Depreciation

i) Tangible Assets

Leasehold land – amortized on a straight line basis over the period of the lease ranging from 95 years – 99 years.

Depreciation on fixed assets is calculated on a straight line basis using the rates arrived at based on the useful lives estimated by the management.

The Company has used the following rates to provide depreciation on its fixed assets. The identified components are depreciated over their useful lives, the remaining asset is depreciated over the life of the principal asset.

The management has estimated, supported by independent assessment by professional, the useful lives of the following class of assets.

- Factory buildings - 50 years (Higher than those indicated in Schedule II of the Companies Act, 2013)

- Office buildings- 60 years (Higher than those indicated in Schedule II of the Companies Act, 2013)

- Plant & Machinery – 20 years (Higher than those indicated in Schedule II of the Companies Act, 2013)

- Moulds – 6 years (Lower than those indicated in Schedule II of the Companies Act, 2013)

- Electrical Installations – 20 years (Higher than those indicated in Schedule II of the Companies Act, 2013)

- Air conditioner having capacity of > 2 tons – 15 years (Higher than those indicated in Schedule II of the Companies Act, 2013)

- Serviceable materials like trolleys, iron storage racks skids – 15 years (Higher than those indicated in Schedule II of the Companies Act, 2013)

- Batteries used in fork lifts trucks - 5 years (Lower than those indicated in Schedule II of the Companies Act, 2013)

The management believes that the depreciation rates fairly reflect its estimation of the useful lives. The management also estimates the residual values of the fixed assets.

Depreciation is not recorded on capital work-in-progress until construction and installation are complete.

ii) Intangible Assets

Intangible assets are amortized on a straight- line basis over the estimated useful economic life.

- Software expenditure is amortized over a period of three years.

- Technical know-how and brands are amortized over a period of twenty years.

The Company has acquired technical know-how and assistance for setting- up of Halol radial plant. Considering the life of the underlying plant / facility, this technical know-how, is amortized on a straight-line basis over a period of twenty years.

The Company acquired global rights of "CEAT" brand from the Italian tyre maker, Pirelli. Prior to the said acquisition, the Company was the owner of the brand in only a few Asian countries including India. With the acquisition of the brand which is renowned worldwide, new and hitherto unexplored markets are accessible to the Company. The Company will be in a position to fully exploit the export market resulting in increased volume and better price realization. Therefore, the management believes that the brand will yield significant benefits for a period of at least twenty years.

The amortization period and the amortization method are reviewed at least at each financial year-end. If the expected useful life of the asset is significantly different from previous estimates, the amortization period is changed accordingly. If there has been a significant change in the expected pattern of economic benefits from the asset, the amortization method is changed to reflect the changed pattern. Such changes are accounted for in accordance with AS-5 "Net profit or Loss for the Period", Prior Period Items and Changes in Accounting Policies.

F) Impairment of tangible and intangible assets:

The Company assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. 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. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

The Company bases its impairment calculations of detailed budgets and forecast calculations which are prepared separately for each of the Company''s cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of 5 years. For longer period, a long-term growth rate is calculated and applied to project future cash flows after the 5th year.

Impairment losses for continuing operations, including impairment on inventories, are recognised on the Statement of profit and Loss, except for the previously revalued tangible fixed asset, where the revaluation was taken to revaluation reserve. In this case, the impairment is recognised in revaluation reserve up to the amount of any previous revaluation.

An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset''s or cash- generating unit''s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the Statement of profit and Loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

G) Investments

Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments.

On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties. If an investment is acquired, or partly acquired, by the issue of shares or other securities, the acquisition cost is the fair value of the securities issued. If an investment is acquired in exchange for another asset, the acquisition is determined by reference to the fair value of the asset given up or by reference to the fair value of the investment acquired, whichever is more clearly evident.

Current investments are carried in the financial statements at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.

On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the Statement of profit and Loss.

H) Inventories

i) Raw materials, components, stores and spares are valued at lower of cost and net realizable value. However, materials and other items held for use in the 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 is determined on a weighted average basis. Cost of raw material is net of duty benefits under Duty Entitlement Exemption Certificate (DEEC) scheme.

ii) Work-in-progress and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty. Cost is determined on a weighted average basis.

iii) Stock-in-trade are valued at lower of cost and net realizable value. Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on a weighted average basis.

iv) Net realizable 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 recognized to the extent that it is probable that the economic benefits will flow to the Company and revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized.

i) Sale of Goods

Revenue from sale of goods is recognised when the significant risks and rewards of ownership are passed on to the customer. Sales taxes and Value Added Taxes (VAT) are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.

ii) Interest

Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head "other income" in the Statement of profit and Loss.

iii) Dividends

Dividend income is recognized when the Company''s right to receive dividend is established by the reporting date.

iv) Royalty and technology development fees

Royalty and technology development fees income are accounted for as per the terms of contract.

J) Government grants and export incentives

Government grants are recognised when there is reasonable assurance that the Company will comply with the conditions attached to them and the grants will be received. Government grants related to revenue are recognized on a systematic basis in the Statement of profit and Loss as a part of other operating revenues.

Export incentives such as focus market scheme, focus products scheme and special focus market scheme, etc., are recognized in the Statement of profit and Loss as a part of other operating revenues.

K) Foreign currency translation

Foreign currency transactions and balances

i) Initial recognition

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.

ii) Conversion

Foreign currency monetary items are retranslated using the exchange rate prevailing on the reporting date. 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. Non-monetary items, which are measured at fair value or other similar valuation denominated in a foreign currency, are translated using the exchange rate at the date when such value was determined.

iii) Exchange differences

All exchange gains and losses arising out of translation/restatement, are accounted for in the Statement of profit and Loss.

iv) Forward exchange contracts entered into, to hedge foreign currency exposure as at Balance Sheet date

The premium or discount arising at the inception of forward exchange contracts is amortized and recognised as income or expense over the life of the contract. Exchange differences in such contract are recognized in the Statement of profit and Loss in the period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such forward exchange contract is also recognized as income or as expense for the period.

L) Leases

Where the Company is lessee:

Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease term at the lower of the fair value of the leased property and present value of minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in the Statement of profit and Loss. Lease management fees, legal charges and other initial direct costs of lease are capitalized.

A leased asset is depreciated on a straight-line basis over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, the capitalized asset is depreciated on a straight- line basis over the estimated useful life of the asset or lease term, whichever is earlier.

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

M) Research and Development

Research costs are expensed as incurred. Development expenditure incurred on individual project is recognised as an intangible asset when the Company can demonstrate all the following:-

- The technical feasibility of completing the intangible assets so that it will be available for use or sale.

- Its intention to complete the asset.

- Its ability to use or sell the asset.

- How the asset will generate the future economic benefits.

- The availability of adequate resources to complete the development and to use or sell the asset.

- The ability to measure reliably the expenditure attributable to the intangible asset during development.

N) Employee benefits

i) Defined contribution plan

Retirement benefits in the form of provident fund, Superannuation, Employees State Insurance Contribution and Labour Welfare Fund are defined contribution schemes. The Company has no obligation, other than the contribution payable to these funds / schemes. The Company recognizes contribution payable to these funds / schemes as expenditure, when an employee renders the related service. If the contribution payable to these funds / schemes for service received before the Balance Sheet date exceeds the contribution already paid, the deficit payable to the funds / schemes are recognized 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 recognized as an asset to the extent that the pre payment will lead to, for example, a reduction in future payment or a cash refund.

ii) Defined Benefit plan

The Company provides for retirement benefits in the form of gratuity. The Company''s liability towards these benefits is determined on the basis of actuarial valuation using Projected Unit Credit Method at the date of balance sheet. Actuarial gains / losses are recognised in the Statement of profit and Loss in the period in which they occur.

iii) Compensated absences

Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit and this is shown under short-term provision in the Balance Sheet. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.

The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes and this is shown under long-term provisions in the Balance Sheet. Such long-term compensated absences are provided for based on the actuarial valuation using the 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. The Company presents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date. Where the Company has the unconditional legal and contractual right to defer the settlement for a period beyond 12 months, the same is presented as non-current liability.

iv) Termination benefits

The Company recognizes termination benefit as a liability and an expense when the Company has a present obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the termination benefit falls due for more than 12 months after the balance sheet date, they are measured at present value of the future cash flows using the discount rate determined by reference to market yields at the Balance Sheet date on Government bonds.

O) Taxes on income

i) Current tax: Current Tax is determined as the amount of tax payable on taxable income for the year as per the provisions of Income Tax Act, 1961.

Minimum alternate tax (MAT) paid in a year is charged to the Statement of profit and Loss as current tax. The Company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the Company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961, the said asset is created by way of credit to the Statement of profit and Loss and shown as "MAT Credit Entitlement." The Company reviews the "MAT Credit Entitlement" asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified period.

ii) Deferred tax: Deferred tax is recognised on timing differences between the accounting income and the taxable income for the year, and quantified using the tax rates and laws enacted or substantively enacted on the reporting date.

The carrying amount of deferred tax assets are reviewed at each reporting date. The Company writes-down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the deferred tax assets and deferred taxes relate to the same taxable entity and the same taxation authority.

P) Earnings per share

Basic earnings per share are 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. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources.

For the purpose of calculating diluted earnings per share, the net profit or loss 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.

Q) Provisions and Contingent Liabilities

A provision is recognized when the Company has a present obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.

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. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.

R) Cash and cash equivalents

Cash comprises cash in hand and demand deposit with banks. Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and cash in hand and short-term investments with an original maturity of three months or less.

S) Derivative instruments and hedge accounting

The Company uses derivative financial instruments, such as foreign currency forward contracts to hedge foreign currency risk arising from future transactions in respect of which firm commitments are made or which are highly probable forecast transactions. It also uses cross currency interest rate swaps (CCIRS) to hedge interest rate risk arising from variable rate loans and cross currency interest rate swaps to hedge both foreign currency loan and interest risk arising from foreign exchange fluctuations and variable rate loans. The Company designates these forward contracts and interest rate swaps in a hedging relationship by applying the hedge accounting principles of AS-30 "Financial Instruments: Recognition and Measurement".

For the purpose of hedge accounting, hedges are classified as:

1. Fair value hedges when hedging the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment.

2. Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognized firm commitment.

At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the Company will assess the effectiveness of changes in the hedging instrument''s fair value in offsetting the exposure to changes in the hedged item''s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.

Hedges that meet the strict criteria for hedge accounting are accounted for as described below:

Fair value hedges

The change in the fair value of a hedging derivative is recognized in the Statement of profit and Loss. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognized in the Statement of profit and Loss.

When an unrecognized firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in the Statement of profit and Loss.

Cash fow hedges

The effective portion of the gain or loss on the hedging instrument is recognized directly under shareholders fund in the hedging reserve, while any ineffective portion is recognized immediately in the Statement of profit and Loss.

The Company uses foreign currency forward contracts as hedges of its exposure to foreign currency risk in forecasted transactions and firm commitments. The ineffective portion relating to foreign currency contracts is recognized immediately in the Statement of profit and Loss.

Amounts recognized in the hedging reserve are transferred to the Statement of profit and Loss when the hedged transaction affects profit or loss, such as when the hedged income or expense is recognized or when a forecast sale occurs.

If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or loss previously recognized in the hedging reserve is transferred to the Statement of profit and Loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously recognized in the hedging reserve remains in the hedging reserve until the forecast transaction or firm commitment affects profit or loss.

Other derivatives

Derivative financial instruments which are not designated as cash fow hedge have been measured at fair value as per AS-30 and the loss / (gain) on the same is charged to the Statement of profit and Loss.

T) Provision for warranty

The estimated liability for warranty is recorded when products are sold. These estimates are established using historical information on the nature, frequency and average cost of obligations and management estimates regarding possible future incidence based on corrective actions on product failure. The timing of outflows will vary as and when the obligation will arise, being typically upto three years.

U) Segment reporting

The Company''s operations comprise of only one business segment "Automotive Tyres, Tubes & Flaps" as its primary segment. The analysis of geographical segments is based on the areas in which the Company operates. The accounting policies adopted for segment reporting are in conformity with the accounting policies of the Company.


Mar 31, 2014

A) Basis of Accounting and preparation of Financial Statements

The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting, unless stated otherwise and comply with the mandatory Accounting Standards (AS) prescribed under the Companies Act, 1956 read with the General Circular 08/2014 dated 04 April, 2014 issued by the Ministry of Corporate Affairs, and other accounting principles generally accepted in India. The accounting policies adopted in the preparation of financial statements are consistent with those of the previous year.

B) Use of Estimates

The preparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from the estimates. Management believes that the estimates used in the preparation of financial statements are prudent and reasonable. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised.

C) Tangible fixed assets and Intangible assets

Tangible Assets

a) Fixed assets are stated at cost of acquisition or construction or revalued amount whichever is applicable, net of accumulated depreciation / amortization and impairment losses, if any.

b) The cost comprises, cost of acquisition, borrowing cost and any attributable cost of bringing the asset to the condition for its intended use. Cost also includes direct expenses incurred up to the date of capitalisation / commissioning.

c) Machinery spares procured along with the plant and machinery or subsequently and whose use is expected to be irregular are capitalised separately, if cost of such spares is known and depreciated fully over the residual useful life of the related plant and machinery. If the cost of such spares is not known particularly when procured along with the mother plant, these are capitalised and depreciated along with the mother plant. The written down value (WDV) of the spares is charged as revenue expenditure in the year in which such spares are consumed. Similarly, the value of such spares, procured and consumed in a particular year is charged as revenue expenditure in that year itself.

d) Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standards of performance.

e) All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.

f) Gains and losses arising from disposal of fixed assets which are carried at cost are recognised in the Statement of Profit and Loss.

g) Tangible assets not ready for the intended use on the date of Balance Sheet are disclosed as "Capital work-in-progress".

h) In case of revaluation of fixed assets, any revaluation surplus is credited to the revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognized in the statement of profit and loss, in which case the increase is recognized in the statement of profit and loss. A revaluation deficit is recognized inthestatement of profitand loss, except to the extent that it offsets an existing surplus on the same asset recognized in the asset revaluation reserve.

Intangible Assets

Intangible Assets are stated at cost of acquisition or construction less accumulated amortization and impairment, if any.

D) Borrowing Cost

Borrowing cost includes interest, fees and other ancillary costs incurred in connection with the arrangement of borrowings. Borrowing costs that are directly attributable to the acquisition of or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are recognized in the Statement of Profit and Loss.

E) Depreciation

i) Tangible Assets

Depreciation on fixed asset is calculated on Straight Line Method (SLM) using the rates arrived at based on the useful lives estimated by the management, or those prescribed under Schedule XIV to the Companies Act, 1956, whichever is higher. The rates of depreciation considered for the major assets are as under

Asset Class Rates(SLM)

Buildings_1.63% - 3.34%

Plant & Equipments 4.75% -10.34%

Moulds16.21%

Computers Hardware 16.21%

Fu rnitu re & Fixtu res 6.33%

Office Equipments 4.75%

Motor Vehicles7.07%-11.31%

Leasehold land - amortised over the period of the lease rangingfrom 95 years - 99 years.

Depreciation is not recorded on capital work-in-progress until construction and installation are complete. Assets acquired/ purchased costing less than Rupees five thousand have been depreciated at the rate of 100%. Depreciation on revalued amount of a particular asset is calculated on straight line method over the remaining estimated useful life of the asset from the date of revaluation.

ii) Intangible Assets

Intangible assets are amortized on a straight Ii ne basis over the esti mated usef u I economic life.

- Software expenditure have been amortised over a period of three years.

- Technical Know-how and Brands are amortised over a period of twenty years.

The company has acquired technical know- how and assistance for setting up for Halol radial plant. Considering the life of the underlying plant/facility, this technical know-how, is amortised on a straight line basis over a period of twenty years

The Company has acquired global rights of "CEAT" brand from the Italian tyre maker, Pirelli. Prior to the said acquisition, the Company was the owner of the brand in only a few Asian countries including India. With the acquisition of the brand which is renowned worldwide, new and hitherto unexplored markets will be accessible to the Company. The Company will be in a position to fully exploit the export market resulting in increased volume and better price realization. Therefore, the management believes that the Brand will yield significant benefits for a period of at least twenty years

F) Impairment of tangible and intangible assets:

The Company assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. 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. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the company estimates the asset''s or cash-generating unit''s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit and loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

G) Investments

Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments.

Current Investments are carried in the financial statement at lower of cost or fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.

H) Inventories

i) Raw materials, components, stores and spares are valued at lower of cost and net realizable value. However, materials and other items held for use in the 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 is determined on a weighted average basis. Cost of raw material is net of duty benefits under Duty Entitlement Exemption Certificate (DEEC) scheme.

ii) Work-in-progress and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty. Cost is determined on a weighted average basis.

iii) Traded goods are valued at lower of cost and net realizable value. Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on a weighted average basis.

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

I) Revenue Recognition

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

i) Sale of Goods

Revenue from sale of goods is recognised when the significant risks and rewards of ownership are passed on to the customer. Sales taxes and value added taxes (VAT) are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.

ii) Interest

Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head "other income" in the statement of profit and loss.

iii) Dividends

Dividend income is recognized when the company''s right to receive dividend is established by the reporting date.

iv) Royalty and Technology Development fees

Royalty and technology development fees income are accounted for as per the terms of contract.

J) Government Grants and Export Incentives

Government grants are recognised when there is reasonable assurance that the Company will comply with the conditions attached to them and the grants will be received. Government grants related to revenue are recognized on a systematic basis in the Statement of Profit and Loss as a part of other operating revenues.

Export Incentives such as focus market scheme, Focus products scheme and special focus market scheme are recognized in the Statement of Profit and Loss as a part of other operating revenues.

K) Foreign Currency Transactions

i) Initial recognition

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.

ii) Conversion

Foreign currency monetary items are translated usingtheexchange rate prevailing at the reporting date. 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. Non-monetary items, which are measured at fair value or other similar valuation denominated in a foreign currency, are translated using the exchange rate at the date when such value was determined.

iii) Exchange differences

All exchange gains and losses arising out of translation/restatement, are accounted for in the statement of profit and loss.

iv) Forward exchange contracts entered into to hedge foreign currency risk.

Forward premium in respect of forward exchange contracts is amortised and recognised over the life of the contract. Exchange differences in such contract are recognized in the Statement of Profit and Loss in the period in which the exchange rates change.

L) Leases

Finance leases, which effectively transfer to the company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease term at the lower of the fair value of the leased property and present value of minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in the statement of profit and loss. Lease management fees, legal charges and other initial direct costs of lease are capitalized.

A leased asset is depreciated on a straight-line basis over the useful life of the asset or the useful life envisaged in Schedule XIV to the Companies Act, 1956, whichever is lower. However, if there is no reasonable certainty that the company will obtain the ownership by the end of the lease term, the capitalized asset is depreciated on a straight- line basis over the shorter of the estimated useful life of the asset, the lease term or the useful life envisaged in Schedule XIV to the Companies Act, 1956.

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

M) Research and Development

Research and development expenditure is charged to revenue under the natural heads of accounts in the year in which it is incurred. Fixed assets utilised for research and development are capitalised and depreciated in accordance with the policies stated for tangible assets and Intangible assets.

N) Employee Benefits

i) Defined Contribution plan

Retirement benefits in the form of provident fund, Superannuation, Employees State Insurance Contribution and Labour Welfare Fund are defined contribution schemes. The company has no obligation, other than the contribution payable to these funds/schemes. The company recognizes contribution payable to these funds/schemes as expenditure, when an employee renders the related service. If the contribution payable to these funds/schemes for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the funds/schemes are recognized 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 recognized as an asset to the extent that the pre payment will lead to, for example, a reduction in future payment or a cash refund.

ii) Defined Benefit plan

The Company also provides for retirement benefits in the form of gratuity. The company''s liability towards these benefits is determined on the basis of actuarial valuation using Project Unit Credit Method at the date of balance sheet. Actuarial gains/losses are recognised in the Statement of Profit and Loss in the period in which they occur.

iii) Compensated absences

Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.

The company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the Statement of Profit and Loss and are not defer red.

iv) Termination benefits

The company recognizes termination benefit as a liability and an expense when the company has a present obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

O) Taxes on Income

i) Current Tax: Current Tax is determined as the amount of tax payable on taxable income for the year as per the provisions of Income Tax Act, 1961.

Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The company recognizes MAT

credit available as an asset only to the extent that there is convincing evidence that the company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and shown as "MAT Credit Entitlement." The company reviews the "MAT credit entitlement" asset at each reporting date and writes down the asset to the extent the company does not have convincing evidence that it will pay normal tax during the specified period.

ii) Deferred Tax: Deferred tax is recognised on timing differences between the accounting income and the taxable income for the year, and quantified using the tax rates and laws enacted or substantively enacted on the balance sheet date.

Deferred tax assets are recognised and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized againstfuture taxable profits.

P) Earnings Per Share

Basic earnings per share are 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. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources.

For the purpose of calculating diluted earnings per share, the net profit or loss 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.

Q) Provisions and Contingent Liabilities

A provision is recognized when the company has a present obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.

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. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The company does not recognize a contingent liability but discloses its existence in the financial statements.

R) Cash and cash equivalents

Cash comprises cash in hand and demand deposit with banks. Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.

S) Derivative instruments and hedge accounting

The company uses derivative financial instruments, such as, foreign currency forward contracts to hedge foreign currency risk arising from future transactions in respect of which firm commitments are made or which are highly probable forecast transactions. It also uses interest rate swaps to hedge interest rate risk arising from variable rate loans. The company designates these forward contracts and interest rate swaps in a hedging relationship by applying the hedge accounting principles of AS 30 Financial Instruments: Recognition and Measurement.

For the purpose of hedge accounting, hedges are classified as, Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognized firm commitment

At the inception of a hedge relationship, the company formally designates and documents the hedge relationship to which the company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and howthe company will assess the effectiveness of changes in the hedging instrument''s fair value in offsetting the exposure to changes in the hedged item''s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.

Hedges that meet the strict criteria for hedge accounting are accounted for as described below:

Cash flow hedges

The effective portion of the gain or loss on the hedging instrument is recognized directly under shareholders fund in the hedging reserve, while any ineffective portion is recognized immediately in the statement of profit and loss.

The company uses foreign currency forward contracts as hedges of its exposure to foreign currency risk in forecasted transactions and firm

commitments. The ineffective portion relating to foreign currency contracts is recognized immediately in the statement of profit and loss.

Amounts recognized in the hedging reserve are transferred to the statement of profit and loss when the hedged transaction affects profit or loss, such as when the hedged income or expense is recognized or when a forecast sale occurs.

If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or loss previously recognized in the hedging reserve is transferred to the statement of profit and loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously recognized in the hedging reserve remains in the hedging reserve until the forecast transaction or firm commitment affects profit or loss.

T) Provision for Warranty

The estimated liability for warranty is recorded when products are sold. These estimates are established using historical information on the nature, frequency and average cost of obligations and management estimates regarding possible future incidence based on corrective actions on product failure. The timing of outflows will vary as and when the obligation will arise - being typically upto three years

U) Segment reporting

The Company''s operations comprise of only one business segment "Automotive Tyres, Tubes & Flaps" as its primary segment. The analysis of Geographical segments is based on the areas in which the Company operates. The accounting policies adopted for segment reporting are in conformity with the accounting policies of the Company.

ii) Terms and rights attached to Equity Shareholders:

The Company has only one class of equity shares having a face value of Rs, 10/- per share. Each holder of equity shares is entitled to one vote per equity share. The dividend is recommended by the Board of Directors and is subject to the approval of the members at the ensuing Annual General Meeting. The Board of Directors have a right to deduct from the dividend payable to any member any sum due from him to the Company.

In the event of winding-up, the holders of equity shares shall be entitled to receive remaining assets of the Company after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by shareholders.

The shareholders have all other rights as available to equity shareholders as per the provision of the Companies Act, 1956, read together with the Memorandum of Association and Articles of Association of the Company, as applicable.

Money received against convertible warrants

On 24th July, 2013, the Company has converted 17,12,176 warrants of face value Rs, 10/- each into equity shares issued to Instant Holdings Limited, an entity belonging to the Promoter Group of Companies at a price ofRs, 85.03 per warrant which includes a premium ofRs, 75.03 per share on preferential basis in accordance with the terms of the issue.

Note on Secured Long Term Borrowings (includes non- current portion and current maturities)

1. New Term Loan from Bank of India Rs, 100,00.00 Lacs (Previous year Rs, Nil) was disbursed on 19th March, 2014. It is secured by first pari passu charge on company''s immovable assets located at Bhandup and Nasik plants. It is repayable in 20 equal quarterly installment of Rs, 5,00.00 Lacs each starting from 17th June, 2016.

2. New Term Loan from ICICI Bank Ltd. of Rs, 70,00.00 Lacs (Previous year Rs, Nil) was disbursed on 3rd February, 2014. It is secured by first pari passu charge on Company''s immovable assets situated at Bhandup & Nasik plant. It is repayable in 20 equal quarterly installments ofRs, 3,50.00 Lacs starting from 3rd May 2016.

3. Term Loan from ICICI Bank Ltd. of Rs, 47,25.00 Lacs (Previous year Rs, 117,00.00 Lacs) is secured by first pari passu charge on movable (except current assets) both present and future and immovable properties both present & future located at Bhandup, Halol and Nasik plants and second pari passu charge on the current assets of the company both present and future. It is repayable in 10 equal semi-annual installment of Rs, 6,75.00 Lacs each starting from 12th January, 2013. During the year the Company has prepaid Rs, 50,00.00 Lacs and rescheduled the installment amount to Rs, 6,75.00 Lacs from Rs, 13,50.00 Lacs.

4. Term Loan from ICICI Bank Ltd. of Rs, 35,00.00 Lacs (Previous year Rs, 58,33.33 Lacs) is secured by first pari passu charge on immovable properties both present & future situated at Bhandup plant. It is repayable in 12 equal quarterly installments of Rs, 5,83.33 Lacs starting from 10th November, 2012.

5. Term Loanfrom Bankof India Rs, 54,13.58 Lacs (Previous year Rs, 69,13.58 Lacs) is secured by first pari passu charge on company''s movable (except current assets) both present and future and immovable properties both present & future located at Bhandup, Halol and Nasik plants and second charge over current assets both present and future. It is repayable in 20 equal quarterly installment of Rs, 5,00.00 Lacs each starting from 1st January, 2012.

6. Term Loan from IDBI Bank Ltd. of Rs, 12,56.48 Lacs (Previous year Rs, 17,59.07 Lacs) is secured by first pari passu charge on movable properties (except current assets) both present and future and immovable properties of the company both present & future situated at Bhandup, Halol and Nasik plants and second pari passu charge on current assets both present and future. It is repayable in 20 equal quarterly installments ofRs, 1,25.65 Lacs starting from 1st January, 2012.

7. The FCNR-B loan from Bank of Baroda was valid for one year and was reconverted into rupee loan on 9th October, 2013. Term Loan from Bank of Baroda of Rs, 27,50.00 Lacs (Previous year Rs, 36,05.67 Lacs) is secured by first pari passu charge on movable (except current assets) both present and future and immovable properties both present & future located at Bhandup, Halol and Nasik plant and second paripassucharge over current assets both present and future. It is repayable in 20 equal quarterly installment of Rs, 2,50.00 Lacs each starting from 1st January, 2012.

8. Term Loan in Indian rupee & in foreign currency from Export Import Bankof India ofRs, 57,44.38 lacs (Previous year Rs, 76,09.78 lacs) is secured by first pari passu charge on movable properties (except Current Assets) both present and future and immovable properties both present & future located at Bhandup, Halol and Nasik plants and second pari passu charge over current assets both present and future.

Rupee loan is repayable in 20 equal quarterly installment of Rs, 2,44.99 Lacs starting from 1st November, 2011 and foreign currency loan is also repayable in 20 equal quarterly installment of USD 5.50 lacs equivalent to Rs, 3,29.45 lacs (restated at rate of INR/USD as on 31.03.2014) starting from 1st November, 2011.

9. Term Loan from Corporation Bank Rs, Nil Lacs (Previous year Rs, 6,24.89 Lacs) was secured by first pari passu charge on immovable property of the company both present & future situated at RPG House, Mumbai. The said loan has no longer exist, since being repaid.

10. ECB loan from ICICI Bank Ltd. of Rs, 31,19.79 lacs (Previous Rs, 39,58.28 lacs) is secured by first pari passu charge on movable properties (except current assets) both present and future and immovable properties of the Company both present & future situated at Bhandup, Halol and Nasik Plants and second charge over current assets both present and future. It is repayable in 24 equal quarterly installment of USD 5.21 lacs equivalent to Rs, 3,11.78 lacs (restated at rate of INR/USD as on 31.03.2014) starting from 23rd December, 2010.

11. Buyer''s credit is secured by way of first pari passu charge on all its current assets and by way of second pari passu charge on immovable and all movable properties (excluding current assets) of the Company situated at Bhandup , Nasik, Halol plants and RPG House, Mumbai. It is repayable within 3 years from the date of draw down.

12. Loan from Ratnakar Bank Ltd. was repaid during the year on 17th August, 2013.

13. Public Deposit is repayable after 2 or 3 years from the date of acceptance of public deposit

14. Interest free Deferred Sales Tax is repayable in ten equal annual installments commencing from 26th April, 2011 and ending on 30th April, 2025.

1. Building includesRs, 0.11 Lacs (Previous YearRs, 0.11 Lacs) being value of shares held in Co-operative Housing Societies.

2. Free Hold Land includes land acquired at Halol, Gujarat vide Memorandum of Understanding (MOU) for Rs, 1.75 Lacs which is subject to registration formalities.

3. Lease Hold Land includes land acquired at Additional Ambernath Industrial Area, Ambernath, District Thane, Maharashtra from Maharashtra Industrial Development Corporation (Ml DC) vide sanction letter dated 30th October, 2009. The Company has taken physical possession of this land on 1st September, 2010 which is subject to registration formalities.

4. Gross book value includes Rs, 6,95.77 Lacs (Previous Year Rs, 6,97.06 Lacs) on account of revaluation of Land, Building and Plant and equipment in 2007 based on market values and as per report issued by independent valuer.

5. The pre-operative expenses (POE) apportioned over the Fixed Assets of Halol project.


Mar 31, 2013

A) Basis of Accounting and preparation of Financial Statements

The financial statements of the company have been prepared in accordance with Generally Accepted Accounting Principles in India (Indian GAAP) under the historical cost convention on accrual basis, except for certain tangible assets which are being carried at revalued amounts. These financial statements have been prepared to comply in all material respects with the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006, (as amended) and other relevant provisions of the Companies Act, 1956.

The accounting policies adopted in the preparation of financial statements are consistent with those used in previous year.

B) Use of Estimates

The preparation of financialstatements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from the estimates. Management believes that the estimates used in the preparation of financial statements are prudent and reasonable. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised.

C) Fixed Assets

i) Tangible Assets

Fixed Assets are stated at cost / revalued amount wherever applicable, net of accumulated depreciation and accumulated

impairment losses, if any. The cost comprises cost of acquisition, borrowing cost and any attributable cost of bringing the asset to the condition for its intended use. Cost also includes direct expenses incurred upto the date of capitalisation / commissioning.

In case of revaluation of fixed assets, any revaluation surplus is credited to the revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognized in the statement of profit and loss, in which case the increase is recognized in the statement of profit and loss. A revaluation deficit is recognized in the statement of profit and loss, except to the extent that it offsets an existing surplus on the same asset recognized in the asset revaluation reserve.

Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standards of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.

ii) Intangible Assets

Intangible Assets are reflected at the cost of acquisition of such assets and are carried at cost less accumulated amortization and impairment, if any.

D) Borrowing Cost

Borrowing cost includes interest, fees and other ancillary costs incurred in connection with the arrangement of borrowings. Borrowing costs that are directly attributable to the acquisition of or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are expensed in the period they occur.

E) Depreciation

i) Tangible Assets

Depreciation on fixed asset is calculated on Straight Line Method (SLM) using the rates arrived at based on the useful lives estimated

by the management, or those prescribed under Schedule XIV to the Companies Act, 1956, whichever is higher. The rates of depreciation considered for the major assets are as under

Leasehold land - amortised over the period of the lease ranging from 95 years - 99 years.

Depreciation is not recorded on capital work-in- progress until construction and installation are complete. Assets acquired/purchased costing less than Rupees five thousand have been depreciated at the rate of 100%. Depreciation on revalued amount of a particular asset is calculated on straight line method over the remaining estimated useful life of the asset from the date of revaluation.

ii) Intangible Assets

Intangible assets are amortized on a straight line basis over the estimated useful economic life.

Software expenditure have been amortised over a period of three years.

Technical Know-howand Brands are amortised over a period of twenty years.

The company has acquired technical know-how and assistance for setting up for Halol radial plant. Considering the life of the underlying plant/facility, this technical know-how, is amortised on a straight line basis over a period of twenty years

The Company has acquired global rights of "CEAT" brand from the Italian tyre maker, Pirelli. Prior to the said acquisition, the Company was the owner of the brand in only a few Asian countries including India. With the acquisition of the brand which is renowned worldwide, new and hitherto unexplored markets will be accessible to the Company. The

Company will be in a position to fully exploit the export market resulting in increased volume and better price realization. Therefore, the management believes that the Brand will yield significant benefits for a period of at least twenty years

The above intangible assets with an estimated useful economic life exceeding 10 years are tested for impairment annually.

F) Impairment of tangible and intangible assets:

The Company assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. 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. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the company estimates the asset''s or cash-generating unit''s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prioryears. Such reversal is recognized in the statement of profit and loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

G) Investments

Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments.

Current Investments are carried in the financial statement at lower of cost or fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.

H) Inventories

Raw materials, components, stores and spares are valued at lower of cost and net realizable value. However, materials and other items held for use in the 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 of raw materials, components and stores and spares is determined on a weighted average basis. Cost of raw material is net of duty benefits under Duty Entitlement Exemption Certificate (DEEC) scheme.

Work-in-progress and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty. Cost is determined on a weighted average basis.

Traded goods are valued at lower of cost and net realizable value. Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on a weighted average basis.

Net realizable 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 recognized to the extent that it is probable that the economic benefits will flow to the company and revenue can be reliably measured.

1. Sale of Goods

Revenue from sale of goods is recognised when the significant risks and rewards of ownership are passed on to the customer which generally coincides with delivery. Sales taxes and value added taxes (VAT) are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue

(gross) and not the entire amount of liability arising during the year.

2. Interest

Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head "other income" in the statement of profit and loss.

3. Dividends

Dividend income is recognized when the company''s right to receive dividend is established by the reporting date.

4. Royalty

Royalty income is accounted for as per the terms of contract.

J) Government Grants and Export Incentives

Government grants are recognised when there is reasonable assurance that the Company will comply with the conditions attached to them and the grants will be received. Government grants related to revenue are recognized on a systematic basis in the statement of profit and loss as a part of other operating revenues.

Export Incentives such as focus market scheme, Focus products scheme and special focus market scheme are recognized in the statement of profit and loss as a part of other operating revenues.

K) Foreign Currency Transactions

(i) Initial recognition

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.

(ii) Conversion

Foreign currency monetary items are translated using the exchange rate prevailing at the reporting date. 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. Non-monetary items, which are measured at fair value or other similar valuation denominated in a foreign currency are translated using the exchange rate at the date when such value was determined.

(iii) Exchange differences

All exchange gains and losses arising out of transaction/restatement, are accounted for in the statement of profit and loss.

tiv) Forward exchange contracts entered into, to hedge foreign currency risk

Forward premium in respect of forward exchange contracts is amortised and recognised over the life of the contract. Exchange differences in such contract are recognized in the statement of profit and loss in the period in which the exchange rates change.

L) Leases

Finance leases, which effectively transfer to the company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease term at the lower of the fair value of the leased property and present value of minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in the statement of profit and loss. Lease management fees, legal charges and other initial direct costs of lease are capitalized.

A leased asset is depreciated on a straight-line basis over the useful life of the asset or the useful life envisaged in Schedule XIV to the Companies Act, 1956, whichever is lower. However, if there is no reasonable certainty that the company will obtain the ownership by the end of the lease term, the capitalized asset is depreciated on a straight-line basis over the shorter of the estimated useful life of the asset, the lease term or the useful life envisaged in Schedule XIV to the Companies Act, 1956.

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

M) Research and Development

Research and development expenditure is charged to revenue under the natural heads of accounts in the year in which it is incurred. Fixed assets utilised for research and development are capitalised and depreciated in accordance with the policies stated for tangible assets and Intangible assets.

N) Employee Benefits

i) Defined Contribution plan

Retirement benefits in the form of provident fund, Superannuation, Employees State Insurance Contribution and Labour Welfare Fund are defined contribution schemes. The company has no obligation, other than the contribution payable to these funds/schemes. The company recognizes contribution payable to these funds/schemes as expenditure, when an employee renders the related service. If the contribution payable to these funds/schemes for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the funds/schemes are recognized 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 recognized as an asset to the extent that the pre payment will lead to, for example, a reduction in future payment or a cash refund.

ii) Defined Benefit plan

The Company also provides for retirement benefits in the form of gratuity. The company''s liability towards these benefits is determined on the basisof actuarial valuation using Project Unit Credit Method at the date of balance sheet. Actuarial gains/losses are recognised in the statement of profit and loss in the period in which they occur.

iii) Compensated absences

Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.

The company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the 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.

iv) The company recognizes termination benefit as a liability and an expense when the company has a present obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

0) Taxes on Income

a) Current Tax: Current Tax is determined as the amount of tax payable on taxable income for the year as per the provisions of Income Tax Act, 1961.

Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income- tax Act, 1961, the said asset is created byway of credit to the statement of profit and loss and shown as "MAT Credit Entitlement." The company reviews the "MAT credit entitlement" asset at each reporting date and writes down the asset to the extent the company does not have convincing evidence that it will pay normal tax during the specified period.

b) Deferred Tax: Deferred tax is recognised on timing differences between the accounting income and the taxable income for the year, and quantified using the tax rates and laws enacted or substantively enacted on the balance sheet date.

Deferred tax assets are recognised and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.

P) Earnings Per Share

Basic earnings per share are 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. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources.

For the purpose of calculating diluted earnings per share, the net profit or loss 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.

Q) Provisions and Contingent Liabilities

A provision is recognized when the company has a present obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.

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. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The company does not recognize a contingent liability but discloses its existence in the financial statements.

R) Cash and cash equivalents

Cash comprises cash in hand and demand deposit with banks. Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.

S) Hedge Accounting

The Company designates some of the new forward contracts in a cash flow hedging relationship by applying the hedge accounting principles.

These forward contracts are stated at fair value at each reporting date. Changes in the fair value of these forward contracts that are designated and effective as hedges of future cash flow are recognized directly in Cash Flow Hedge Reserve under Reserves and Surplus, net of applicable deferred income taxes and the ineffective portion is recognized immediately in the statement of profit and loss.

Amounts accumulated in Cash Flow Hedge Reserve are reclassified to profit and loss in the same periods during which the forecasted transaction affects profit and loss.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecasted transactions, any cumulative gain or loss on the hedging instrument recognized in Hedging Reserve Account is retained there until the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss recognized in Cash Flow Hedge Reserve is immediately transferred to the statement of profit and loss for the period

T) Provision for Warranty

The estimated liability for warranty is recorded when products are sold. These estimates are established using historical information on the nature, frequency and average cost of obligations and management estimates regarding possible future incidence based on corrective actions on product failure. The timing of outflows will vary as and when the obligation will arise - being typically upto three years

U) Derivative Contracts

The Company enters into derivative contracts in the nature of foreign currency swaps, currency options,

forward contracts with an intention to hedge its existing assets and liabilities, firm commitments and highly probable transactions in foreign currency. Derivative contracts which are closely linked to the existing assets and liabilities are accounted as per the policy stated for foreign currency transactions and translations.

Derivative contracts designated as a hedging instrument for highly probable forecast transactions / firm commitments are accounted as per the policy stated for Hedge Accounting.

All other derivative contracts are marked-to- market and losses are recognised in the Statement of Profit and Loss. Gains arising on the same are not recognised, until realised, on grounds of prudence.

V) Segment reporting

The Company''s operations comprise of only one business segment "Automotive Tyres, Tubes & Flaps" as its primary segment. The analysis of Geographical segments is based on the areas in which the Company operates. The accounting policies adopted for segment reporting are in conformity with the accounting policies of the Company.


Mar 31, 2012

A) BASIS OF ACCOUNTING

The Financial statements are prepared on the accrual basis of accounting and in accordance with the standard on Accounting notified by the Companies (Accounting Standard) Rules, 2006 and referred to in section 211 (3C) of the Companies Act, 1956.

B ) FIXED ASSETS

i) Tangible Assets

Fixed Assets are stated at cost / revalued cost wherever applicable. Cost comprises cost of acquisition, cost of improvements, borrowing cost and any attributable cost of bringing the asset to the condition for its intended use. Cost also includes direct expenses incurred upto the date of capitalisation / commissioning.

ii) Intangible Assets

Intangible Assets are reflected at the cost of acquisition of such Assets & are carried at Cost less accumulated amortisation & impairment, if any.

iii) Leased Assets

Leased Assets comprise assets acquired under Finance Leases which have been stated at cost of acquisition plus entire cost component amortisable over the useful life of these assets.

C) BORROWING COST

Borrowing costs include interest, fees and other charges incurred in connection with the borrowing of funds and is considered as revenue expenditure for the year in which it is incurred except for borrowing costs attributed to the acquisition / improvement of qualifying capital assets and incurred till the commencement of commercial use of the asset and which is capitalised as cost of that asset.

D) DEPRECIATION

i) Tangible Assets

Depreciation is provided on the Straight Line Method, at the rates prescribed in Schedule XIV to the Companies Act, 1956. Certain Plants have been treated as Continuous Process Plants based on technical and other evaluations.

Leasehold land is amortised over the period of the lease.

ii) Intangible Assets

Software expenditure have been amortised over a period of three years.

Technical Know-how and Brands are amortised over a period of twenty years.

E) INVESTMENTS

Investments, which are readily realisable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments.

Investments being long term are stated at cost. Provision against diminution in the value of investments is made in case diminution is considered as other than temporary, as per criteria laid down by the Board of Directors after considering that such investments are strategic in nature.

Current Investments are stated at lower of cost or fair value.

F) INVENTORIES

Raw materials, Stores and spares and Stock-in-process are valued at weighted average Cost. Finished Goods are valued at lower of cost or net realisable value. Material-in-transit is valued at cost.

G) REVENUE RECOGNITION

Gross Sales include excise duty and are net of trade discounts / sales returns / Value added tax.

Interest is accounted on an accrual basis.

Dividend is accounted when right to receive the payment is established.

H) EXPORT INCENTIVE

Export Incentives are recognised in the year of entitlement and credited to the Raw Material Consumption Account.

I) GOVERNMENT GRANTS

Grants relating to Fixed Assets are reduced from the cost of Fixed Assets and Grants related to revenue are shown separately as part of other operating Income.

J) FOREIGN CURRENCY TRANSACTIONS

Foreign currency transactions other than those covered by forward contracts are recorded at current rates.

Forward premia in respect of forward exchange contracts are recognised over the life of the contract.

Monetary Assets and Liabilities denominated in foreign currency are restated at year-end rates.

All exchange gains and losses arising out of transaction/restatement, are accounted for in the Profit and Loss Account. k) LEASE RENTALS

The cost components in respect of Finance leases is being amortised over the primary lease period or effective life of the Assets as depreciation on Leased Assets and the interest component is charged as a period cost.

Secondary Lease rentals are being charged to Profit and Loss Account.

Leases that do not transfer substantially all the risks and rewards of ownership are classified as operating leases and recognised as expenses as and when payment are made over the lease term.

L) RESEARCH AND DEVELOPMENT

Revenue expenditure on Research and Development is recognised as an expense in the year in which it is incurred.

Capital expenditure is shown as an addition to the fixed assets and are depreciated at applicable rates.

M) EMPLOYEE BENEFITS

a) Defined Contribution plan

Contribution to Defined Contribution Schemes such as Provident Fund, Superannuation, Employees State Insurance Contribution and Labour Welfare Fund are charged to the Profit and Loss account as and when incurred.

b) Defined Benefit plan

The Company also provides for retirement / post-retirement benefits in the form of gratuity and Leave encashment. Company's liability towards these benefits is determined using Project Unit Credit Method. These benefits are provided based on the Actuarial Valuation as on Balance Sheet date by an Independent actuary.

c) Short term benefits are recognised as an expense in the profit and loss account of the year in which the related service is rendered.

d) Long term leave benefits are provided as per actuarial valuation as on Balance Sheet date by an independent actuary using project unit credit method.

e) Termination benefits are recognised as an expense as and when incurred.

N) TAXES ON INCOME

a) Current Tax: Current Tax is determined as the amount of tax payable on taxable income for the year as per the provisions of Income Tax Act, 1961.

b) Deferred Tax Provision: Deferred tax is recognised on timing differences between the accounting income and the taxable income for the year, and quantified using the tax rates and laws enacted or substantively enacted on the Balance Sheet date.

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


Mar 31, 2011

A) BASIS OF ACCOUNTING

The financiall statements are prepared on the accrual basis of accounting and in accordance with the standard on Accounting notified by the Companies (Accounting Standard) Rules, 2006 and referred to in section 211 (3C) of the Companies Act, 1956

B) FIXED ASSETS

Fixed Assets are stated at cost / revalued cost wherever applicable. Cost comprises of cost of acquisition, cost of mprovements, borrowing cost and any attributable cost of bringing the asset to the condition for its intended use. Cost also ncludes direct expenses incurred upto the date of capitalisation / commissioning Leased Assets comprise of assets acquired under Finance Leases which have been stated at cost of acquisition plus entire cost component amortisable overthe useful life of these assets

C) BORROWING COST

Borrowing costs include interest, fees and othercharges incurred in connection with the borrowing of funds and is considered as revenue expenditure for the year in which it is incurred except for borrowing costs attributed to the acquisition / improvement of qualifying capital assets and incurred till the commencement of commercial use of the asset and which is capitalised as cost of that asset

D) DEPRECIATION

Depreciation is provided on the Straight Line Method, at the rates prescribed in Schedule XIV to the Companies Act, 1956 Certain Plants have been treated as Continuous Process Plants based on technical and other evaluations

Leasehold land is amortised overthe period of the lease

Software expenditure have been amortised over a period of three years

Technical Know-how and Brands are amortised over a period of twenty years

E) INVESTMENTS

nvestments being long term are stated at cost. Provision against diminution in the value of investments is made in case diminut ion is co nside red as otherthan temporary, as per criteria laid down by the Board of Directors after considering that such investments are strategic in nature

Current Investment is stated at lower of cost or fair value

F) INVENTORIES

Raw materials, Stores and spares and Stock-in-process are valued at weighted average Cost. Finished Goods are valued at ower of cost or net realisable value. Mate rial-in-transit is valued at cost

G) REVENUE RECOGNITION

Gross Sales include excise duty and are net of trade discounts / sales returns / sales tax

nterest is accounted on an accrual basis

Dividend is accounted when right to receive payment is established

H) EXPORT INCENTIVE

Export Incentives are recognised in the year of entitlement and credited to the Raw Material Consumption Account

I) GOVERNMENT GRANTS

Grants relating to Fixed Assets are reduced from the cost of Fixed Assets and Grants related to revenue are shown separately as part of Other Income

J) FOREIGN CURRENCY TRANSACTIONS

Foreign currency transactions other than those covered by forward contracts are recorded at current rates

Forward premia in respect of forward exchange contracts are recognised overthe life of the contract

Monetary Assets and Liabilities denominated in foreign currency are restated at year-end rates

All exchange gains and losses arising out of transaction/restatement, are accounted for in the Profit and Loss Account

K) LEASE RENTALS

The cost components in respect of Finance leases is being amortised overthe primary lease period or effective life of the Assets as depreciation on Leased Assets and the interest component is charged as a period cost

Secondary Lease rentals are being charged to Profit and Loss Account

Leases that do not transfer substantially all the risks and rewards of ownership are classified as operating leases and recognised as expenses as and when payments are made overthe lease term

L) RESEARCH AND DEVELOPMENT

Revenue expenditure on research and development is recognised as an expense in the year in which it is incurred

Capital expenditure is shown as an addition to the fixed assets and are depreciated at applicable rates

M) EMPLOYEE BENEFITS

a) Defined Contribution plan

Contribution to Defined Contribution Schemes such as Provident Fund, Superannuation, Employees State Insurance Contribution and Labour Welfare Fund are charged to the Profit and Loss account as and when incurred

b) Defined Benefit plan

The Company also provides for retirement / post-retirement benefits in the form of gratuity and Leave encashment Company's liability towards these benefits is determined using Project Unit Credit Method. These benefits are provided based on the Actuarial Valuation as on Balance Sheet date by an Independent actuary

c) Short term benefits are recognised asan expense inthe profit and loss account of the year in which the related service is rendered

d) Long term leave benefits are provided as per actuarial valuation as on Balance Sheet date by an independent actuary using project unit credit method

e) Termination benefits are recognised as an expense as and when incurred

N) TAXES ON INCOME

a) Current Tax:Current Tax is determined in accordance with the provisions of Income Tax Act, 1961

b) Deferred Tax Provision: Deferred tax is recognised on timing differences between the accounting income and the taxable ncome for the year, and quantified using the tax rates and llaws enacted or substantively enacted on the Balance Sheet date.


Mar 31, 2010

A) Fixed Assets

Fixed Assets are stated at cost / revalued cost wherever applicable. Cost comprises cost of acquisition, cost of improvements, borrowing cost and any attributable cost of bringing the asset to the condition for its intended use. Cost also includes direct expenses incurred upto the date of capitalisation / commissioning.

Leased Assets comprise of assets acquired under Finance Leases which have been stated at cost of acquisition plus entire cost component amortisable over the useful life of these assets.

B) Borrowing Costs

Borrowing costs include interest, fees and other charges incurred in connection with the borrowing of funds and is considered as revenue expenditure for the year in which it is incurred except for borrowing costs attributed to the acquisition / improvement of qualifying capital assets and incurred till the commencement of commercial use of the asset and which is capitalised as cost of that asset.

C) Depreciation

Depreciation is provided on the Straight Line Method, at the rates prescribed in Schedule XIV to the Companies Act, 1956. Certain Plants have been treated as Continuous Process Plants based on technical and other evaluations.

Leasehold land is amortised over the period of the lease.

Software expenditure have been amortised over a period of three years.

D) Investments

Investments being long term are stated at cost. Provision against diminution in the value of investments is made in case diminution is considered as other than temporary, as per criteria laid down by the Board of Directors after considering that such investments are strategic in nature.

Current Investment is stated at lower of cost or fair value.

E) Inventories

Raw materials, Stores and spares and Stock-in- . process are valued at weighted average Cost. Finished Goods are valued at lower of cost or net realisable value. Material-in-transit is valued at cost.

F) Revenue Recognition

Gross Sales include excise duty and are net of trade discounts / sales returns / sales tax.

Interest is accounted on an accrual basis.

Dividend is accounted when right to receive payment is established.

G) Export Incentive

Export Incentives are recognised in the year of entitlement and credited to the Raw Material Consumption Account.

H) Foreign Currency Transactions

Foreign currency transactions other than those covered by forward contracts are recorded at current rates.

Forward premia in respect of forward exchange contracts are recognised over the life of the contract.

Monetary Assets and Liabilities denominated in foreign currency are restated at year-end rates.

All exchange gains and losses arising out of transaction/restatement, are accounted for in the Profit and Loss Account.

I) Lease Rentals

The cost components in respect of Finance Leases is being amortised over the primary lease period or effective life of the Assets as depreciation on Leased Assets and the interest component is charged as a period cost.

Secondary Lease rentals are being charged to Profit and Loss Account.

Leases that do not transfer substantially all the risks and rewards of ownership are classified as operating leases and recognised as expenses as and when payments are made over the lease term.

J) Research and Development

Revenue expenditure on research and development is recognised as an expense in the year in which it is incurred.

Capital expenditure is shown as an addition to the fixed assets and are depreciated at applicable rates.

K) Employee Benefits

a) Defined Contribution plan

Contribution to Defined Contribution Schemes such as Provident Fund, Superannuation, Employees State Insurance Contribution and Labour Welfare Fund are charged to the Profit and Loss Account as and when incurred.

b) Defined Benefit plan

The Company also provides for retirement / post-retirement benefits in the form of gratuity and leave encashment. Companys liability towards these benefits is determined using Project Unit Credit Method. These benefits are provided based on the Actuarial Valuation as on Balance Sheet date by an independent Actuary.

c) Short term benefits are recognised as an expense in the Profit and Loss account of the year in which the related service is rendered.

d) Long term leave benefits are provided as per Actuarial Valuation as on Balance Sheet date by an independent Actuary using Project Unit Credit Method. .

e) Termination benefits are recognised as an expense as and when incurred.

L) Taxes on Income

a) Current Tax: Current Tax is determined in accordance with the provisions of Income Tax Act, 1961.

b) Deferred Tax Provision: Deferred tax is recognised on timing differences between the accounting income and the taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted on the Balance Sheet date. Deferred tax assets are recognised and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

 
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