Notes to Accounts of Honda India Power Products Ltd.

Mar 31, 2018

Notes to the financial statements for the year ended March 31, 2018

viii) Revenue recognition Sale of goods

Timing of recognition: The Company recognizes revenue when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing effective control over, or managerial involvement with the goods and the amount of revenue can be estimated reliably.

The timing of transfers of risks and rewards varies depending on the terms of sale. For sale of goods to domestic customers, such transfer occurs when the products are delivered to dealers/and for export sales when delivered to a carrier at the port of the seller.

Measurement of revenue: Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are inclusive of excise duty and net of returns, trade allowances, rebates, value added taxes, goods and services tax (GST) and amounts collected on behalf of third parties.

The Company accounts for volume discounts and pricing incentives to customers as a reduction of revenue. The discounts/incentives are assessed based on its estimate of the customer''s anticipated annual purchases. The Company recognizes changes in the estimated amount of obligations for discounts/incentives in the period in which the change occurs. The discounts/incentives are passed on to the customer as a reduction of payments due from the customer, on actual basis.

Sale of services

Timing of recognition: Revenue from services is recognized under the proportionate completion method provided the consideration is reliably determinable and no significant uncertainty exists regarding the collection of the consideration. The stage of completion is assessed based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided (percentage of completion method).

Measurement of revenue: The amount recognized as revenue is exclusive of sales tax, value added taxes (VAT) GST, and service tax, and is net of returns, trade discounts and volume rebates.

Sale of goods - service coupons (deferred revenue)

Timing of recognition: In arrangements for sale of goods, the Company provides after-sales service coupons to the end customers which entitle them to avail free of cost maintenance services. When two or more revenue generating activities or deliverables are provided under a single arrangement, each deliverable that is considered to be a separate unit of account is accounted for separately. The arrangements generally meet the criteria for considering sale of goods and related services as separately identifiable components. Revenue related to the service coupons is deferred and recognized when the coupons are redeemed or expired whichever is earlier.

Measurement of revenue: The amount of service coupon revenue is based on the number of coupons redeemed or expired relative to the total number of coupons expected to be redeemed or expired.

Other income

Interest income is recognized using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.

Export benefits under various schemes notified by the government are recognized on accrual basis when no significant uncertainties as to the amount of consideration that would be derived and as to its ultimate collection exist.

ix) Financial assets Classification

The Company classifies its financial assets in the following measurement categories:

- those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and

- those measured at amortized cost.

The classification depends on the entity''s business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.

The Company reclassifies debt investments when and only when its business model for managing those assets changes.

Measurement

At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in statement of profit and loss.

Debt instruments

Subsequent measurement of debt instruments depends on the Company''s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:

Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. A gain or loss on a debt investment that is subsequently measured at Amortized cost and is not part of a hedging relationship is recognized in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.

Fair value through other comprehensive income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the asset''s cash flow represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognized in profit and loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized in other income. Interest income from these financial assets is included in other income using the effective interest rate method. Foreign exchange gains and losses are presented in other income and impairment expenses in other expenses.

Fair value through profit or loss: Assets that do not meet the criteria for Amortized cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss and presented net in the statement of profit and loss within other income in the period in which it arises. Interest income from these financial assets is included in other income.

Equity instruments

The Company subsequently measures all equity investments at fair value. Where the management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments are recognized in profit or loss as other income when the Company''s right to receive payments is established.

Changes in the fair value of financial assets at fair value through profit or loss are recognized in other income in the statement of profit and loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.

Impairment of financial assets

The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at Amortized cost and FVOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 26 details how the Company determines whether there has been a significant increase in credit risk.

For trade receivables only, the Company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognized from initial recognition of the receivables.

Derecognition of financial assets

A financial asset is derecognized only when:

- The Company has transferred the rights to receive cash flows from the financial asset or

- retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.

Where the Company has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognized. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognized.

Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognized if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognized to the extent of continuing involvement in the financial asset.

x) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counter party.

xi) Trade and other payables

These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at their fair value and subsequently measured at Amortized cost using the effective interest method.

xii) Trade receivables

Trade receivables are recognized initially at fair value and subsequently measured at Amortized cost using the effective interest method, less provision for impairment.

xiii) Foreign currency translation

Functional and presentation currency

Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency''). The financial statements are presented in Indian rupee (INR), which is the Company''s functional and presentation currency.

Transaction and balances

Transactions in foreign currency are translated into the functional currency using the exchange rates prevailing at the date of the transaction. Exchange differences arising on foreign currency transactions settled during the year are recognized in the Statement of Profit and Loss for the year on a net basis.

Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated into the functional currency at the closing exchange rates on that date. The resultant exchange differences are recognized in the Statement of Profit and Loss on a net basis.

xiv) Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation, it is probable that an outflow of economic benefits will be required to settle the obligation and the amount can be estimated reliably.

Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognized as interest expense.

Warranty costs

Warranty costs are estimated on the basis of a technical evaluation and past experience. Provision is made for estimated liability in respect of warranty costs in the year of sale of goods.

xv) Contingent liabilities and contingent assets

A contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote. Contingent assets are neither recognized nor disclosed in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognized in the period in which the change occurs.

xvi) Income Taxes

The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses, if any.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of reporting period in India where the Company operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss). Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred tax assets are recognized for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

Current and deferred tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.

xvii) Leases

As a lessee

Leases of property, plant and equipment where the Company, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the lease''s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in borrowings or other financial liabilities as appropriate. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the less or) are charged to profit or loss on a straight-line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the less or’s expected inflationary cost increases.

xviii) Cash and cash equivalents

Cash and cash equivalents include cash on hand, demand deposits with banks, other short term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

xix) Segment reporting

Operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision maker. The Chief Executive Officer has been identified as being the chief operating decision maker assess the financial performance and position of the Company and make strategic decisions. The Company is primarily engaged in the business of “manufacturing and marketing of portable genets, water pumps, general purpose engines, lawn mowers, brush cutters and tillers”. However, in the context of Indian Accounting Standard 108 - Operating Segments, these are considered to constitute single reportable segment.

xx) Earnings per share

Basic earnings per share are calculated by dividing the profit for the year attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the financial year.

Diluted earnings per share adjusts the figures used in determination of basic earnings per share to take into account:

The after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares, except where the results would be anti-dilutive.

xxi) Contributed equity

Equity shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

xxii) Dividends

Provision is made for the amount of any dividend declared, being appropriately authorized and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.

xxiii) Royalty

The Company pays / accrues for royalty in accordance with the relevant license agreement.

xxiv) Rounding of amounts

All amounts in Indian Rupees disclosed in the financial statements and notes thereof have been rounded off to the nearest lakhs as per the requirement of Schedule III, unless otherwise stated.

2a. Critical estimates and judgments

The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgment in applying the Company''s accounting policies.

This note provides an overview of the areas that involved a higher degree of judgment or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgments is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.

Critical estimates and judgments

The areas involving critical estimates or judgments are:

- Estimated useful life of property, plant and equipment and intangible asset -The annual depreciation and amortisation charge is sensitive to the estimated lives allocated to each type of asset. Assets lives are assessed annually and changed where necessary to reflect current circumstances in light of technological change and physical conditions of the assets concerned.

- Revenue recognition - In revenue arrangements where more than one good or service is provided to the customer, customer consideration is allocated between the goods and services using fair value principles. The fair values determined for deliverables may impact the timing of the recognition of revenue. The Company generally determines the fair value of individual elements based on a cost plus a reasonable margin. Revision to the estimates of these fair values may significantly affect the allocation of total arrangement consideration among the individual elements.

- Estimation of defined benefit obligation - Note 24

- Estimation of provision for warranty claims - Note 13

- Estimation of provision for inventory obsolescence - Note 9

Estimates and judgments are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances.

2b. Standards issued but not yet effective

The Ministry of Corporate Affairs (MCA) notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 (the ‘Rules'') on 28 March 2018. The rules shall be effective from reporting periods beginning on or after 1 April 2018 and cannot be early adopted.

(a) Ind AS 115, Revenue from Contracts with Customers

Ind AS 115, establishes a comprehensive framework for determining whether, how much and when revenue should be recognized. It replaces existing revenue recognition guidance, including Ind AS 18 Revenue, Ind AS 11 Construction Contracts and Guidance Note on Accounting for Real Estate Transactions.

Ind AS 115, Revenue from contracts with customers deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity''s contracts with customers. Revenue is recognized when a customer obtains control of a promised good or service and thus has the ability to direct the use and obtain the benefits from the good or service in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new standard will come into effect for the annual reporting periods beginning on or after 1 April 2018. The standard permits either a full retrospective or a modified retrospective approach for the adoption. The Company is in the process of evaluating the impact of the new standard on the financial statements.

(b) Appendix B to Ind AS 21 Foreign currency transactions and advance consideration

As per the amendment issued, the Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency.

The Company is in the process of assessing the impact of this pronouncement on the financial statements.

(c ) Amendments to Ind AS 40 Investment property - Transfers of investment property

The amendment clarifies that transfers to, or from, investment property can only be made if there has been a change in use that is supported by evidence. A change in use occurs when the property meets, or ceases to meet, the definition of investment property. A change in intention alone is not sufficient to support a transfer. The list of evidence for a change of use in the standard was re-characterized as a non-exhaustive list of examples and scope of these examples have been expanded to include assets under construction/development and not only transfer of completed properties.

The amendment provides two transition options. Entities can choose to apply the amendment:

- Retrospectively without the use of hindsight; or

- Prospectively to changes in use that occur on or after the date of initial application (i.e. 1 April 2018 for entities with March year-end). At that date, an entity shall reassess the classification of properties held at that date and, if applicable, reclassify properties to reflect the conditions that exist as at that date.

Management has assessed the effect of the amendment and concluded that there will be no impact required in the financial statements.

(d) Amendments to Ind AS 12 Income taxes regarding recognition of deferred tax assets on unrealised losses

The amendments clarify the accounting for deferred taxes where an asset is measured at fair value and that fair value is below the asset''s tax base.

The Company is in the process of assessing the impact of this pronouncement on the financial statements.

Terms and rights attached to equity shares

The Company has a single class of equity shares. Accordingly, all equity shares rank equally with regard to dividends and share in the company''s residual assets. The voting rights of an equity shareholder on a poll (not on show of hands) are in proportion to its share of the paid-up equity capital of the company. Voting rights cannot be exercised in respect of shares on which any call or other sums presently payable have not been paid.

On winding up of the company, the holders of equity shares will be entitled to receive the residual assets of the company, remaining after distribution of all preferential amounts in proportion to the number of equity shares held.

Nature and purpose of other reserves Securities premium reserve

Securities premium reserve represents the amount received in excess of par value of securities (equity shares). The reserve is utilized in accordance with the provisions of the Companies Act, 2013.

General reserve

The General Reserve is created from time to time on transfer of profits from retained earnings. General reserve is created by transfer from one component of equity to another and is not an item of other comprehensive income, items included in general reserves will not be subsequently reclassified to profit and loss.

Retained earnings

Retained earnings represent the undistributed profits of the Company.

During the year a dividend of Rs 7.50 per share , total dividend Rs. 761 lakhs (Previous Year Rs 6 per share, total dividend 609 lakhs) was paid to equity shareholders. The board of directors recommended the final dividend of Rs 9 per share (Nominal value of Rs. 10/share) for the financial year 2017-18. The dividend is subject to approval of shareholders in the AGM scheduled on August 13, 2018.

(i) Fair value hierarchy

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices (for example, listed equity instruments, traded bonds and mutual funds that have quoted price). There are no financial instruments measured using Level 1 valuation technique.

Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds, over-the-counter derivatives) is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

(ii) Valuation technique used to determine fair value

Specific valuation techniques used to value financial instruments include:

(a) The management assessed that the cash and cash equivalents, trade receivables, trade payables, other bank balances, security deposits, fixed deposits with banks and its interest accrued and other financial assets and liabilities approximate the carrying value due to their short term maturities of these instruments. The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in forced or liquidation sale.

(b) the fair value of the remaining financial instruments is determined using discounted cash flow analysis, unless the carrying value is considered to approximate to fair value.

(iii) Valuation processes

The finance department of the Company includes a team that performs the valuations of financial assets and liabilities required for financial reporting purposes, including level 3 fair values. This team reports directly to the Chief Financial Officer (CFO). Discussions of valuation processes and results are held between the CFO and the valuation team at least once every three months, in line with the Company''s quarterly reporting periods.

(iv) Fair value of financial assets and liabilities measured at Amortized cost

The following summarizes the financial instruments at fair value and classification of financial instruments into the three levels prescribed under the Accounting Standards:

There are no financial assets and financial liabilities in a category measured at fair value-recurring fair value measurements.

The carrying amounts of trade receivables, cash and cash equivalents, other bank balances, trade payables, employee benefits payables, interest accrued, unpaid dividends, capital creditors, deferred service revenue and security deposits received are considered to be the same as their fair values, due to their short-term nature.

The fair values for security deposits given and long - term deposits with banks with remaining maturity period more than 12 months were calculated based on cash flows discounted using a current lending rate. Security deposits is classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs, including counter party credit risk and long term deposits with banks with remaining maturity period more than 12 months is classified as level 2 for values in the fair value hierarchy due to the inclusion of observable inputs including current market lending rate. The carrying amount is considered to approximate the same to fair value as at the reporting date.

The Company''s senior management oversees the management of these risks. The Company''s risk management policies are established to identify and analyse the risks faced by the Company to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company''s activities.

(A) Credit risk

Credit risk arises from cash and cash equivalents, financial assets carried at Amortized cost and deposits with banks, as well as credit exposures to customers, including outstanding receivables.

(i) Credit risk management

Trade receivables and other financial assets

A default is when the counterparty fails to make contractual payments within 30 days of when they fall due in case of trade receivables and for other financial assets as prescribed by relevant terms of the contract. This definition of default is determined considering the business environment in which the Company operates and other macro-economic factors. Assets are written-off when there is no reasonable expectation of recovery, such as a debtor declaring bankruptcy or failing to engage in a repayment plan with the Company. Where financial assets have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognized in the statement of profit and loss.

The Company extends credit to the customers considering factors such as credit track record in the market and past dealing with the Company for extension of credit to customers. The Company monitors the payment track record of the customers. The Company''s third party export customers are secured through letter of credit and majority of the Company''s export trade receivables are outstanding but not due with its related entities, which mitigates the risk to an extent.

Cash and cash equivalents and deposits with banks

Credit risk related to cash and cash equivalents and bank deposits is managed by only accepting highly rated banks and diversifying bank deposits accounts in different banks across the Country.

(ii) Provision for expected credit losses

The company provides for expected credit loss based on the following:

(a) Financial assets for which loss allowance is measured using 12 month expected credit losses

The 12-month expected credit loss is a portion of the lifetime expected credit losses which results from default events that are possible within 12 months after the reporting date. At initial recognition, financial assets are considered as having negligible credit risk. The Company monitors whether there is any significant increase in credit risk since initial recognition.

(b) Financial assets for which loss allowance is measured using life time expected credit losses

Lifetime expected credit loss are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. Management believes that the unimpaired amounts that are 6 months past due date are still collectible in full. The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forwarding-looking information. Considering the above factors the trade receivables continue to have a negligible credit risk on initial recognition and thereafter on each reporting date. During the period, the Company has made no write-off''s of the trade receivables.

Significant estimates and judgments

Impairment of financial assets

The impairment provisions for financial assets disclosed above are based on assumptions about risk of default and expected loss rates. The Company uses judgment in making these assumptions and selecting the inputs to the impairment calculation, based on the Company past history, existing market conditions as well as forward looking estimates at the end of each reporting period.

(B) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash. The Company''s approach to managing liquidity is to ensure, that it will have sufficient liquidity to meet its liabilities when they are due.

The Company aims to maintain the level of its cash and cash equivalents and other highly marketable debt investments at an amount in excess of expected cash outflows on financial liabilities.

Notes:

(i) In respect of the matters above, the amount represents the demands received under the respective demand/ show cause notices/ legal claims, wherever applicable.

(ii) Pending resolution of the respective proceedings, it is not practicable for the Company to estimate the timings of cash outflows, if any, in respect of the above as it is determinable only on receipt of judgments/decisions pending with various forums/authorities.

(iii) The Company does not expect any reimbursements in respect of the above contingent liabilities.

(b) Operating leases

a) General description of the Company''s operating lease arrangements:

The Company enters into operating lease arrangements for offices, residential premises for its employees and equipment for generating power for captive consumption. Some of the significant terms and conditions of the arrangements are:

- certain agreements for premises may generally be terminated by the lessee or either party by serving one to three month''s notice or by paying the notice period rent in lieu thereof.

- certain agreements for premises where the lock in period ranges from 6 to 36 months.

- the lease arrangements are generally renewable on the expiry of lease period subject to mutual agreement.

(d) The Company has sub-leased one of its leasehold premises. The sub-lease agreement is cancellable by either party by serving three months notice period. The rent received during the year amounting to INR 8 lakhs (March 31, 2017: INR 7 lakhs) has been netted off with rent expense.

Note 32: Events occurring after the reporting period

(i) Refer to note 27(b) for the final dividend recommended by the directors which is subject to the approval of shareholders in the ensuing annual general meeting.

Note 35: First-time adoption of Ind AS Transition to Ind AS

These are the Company''s first financial statements prepared in accordance with Ind AS.

The accounting policies set out in note 2 have been applied in preparing the financial statements for the year ended March 31, 2018, the comparative information presented in these financial statements for the year ended March 31, 2017 and in the preparation of an opening Ind AS balance sheet at April 1, 2016 (the Company''s date of transition). In preparing its opening Ind AS balance sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of theAct (previous GAAP or Indian GAAP). An explanation of how the transition from previous GAAP to Ind AS has affected the Company''s financial position, financial performance and cash flows is set out in the following tables and notes.

A. Exemptions and exceptions availed

Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS. A.1 Ind AS optional exemptions A.1.1 Deemed cost

Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognized in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets.

Accordingly, the Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value.

A.1.2 Leases

Appendix C to Ind AS 17 requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. Ind AS 101 provides an option to make this assessment on the basis of facts and circumstances existing at the date of transition to Ind AS, except where the effect is expected to be not material. The Company has elected to apply this exemption for such contracts / arrangements.

Notes forming part of financial statements for the year ended March 31, 2018

(All amounts in INR lakhs, unless otherwise stated)

A.2 Ind AS mandatory exceptions A.2.1 Estimates

An entity''s estimates in accordance with Ind AS''s at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.

Ind AS estimates as at April 1, 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP. The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:

- Determination of the discounted value for financial instruments carried at Amortized cost.

A.2.2 De-recognition of financial assets and liabilities

Ind AS 101 requires a first-time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows a first-time adopter to apply the de-recognition requirement in Ind AS 109 retrospectively from a date of the entity''s choosing, provided that the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognized as a result of past transactions was obtained at the time of initially accounting for those transactions. The Company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS.

A.2.3 Classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification and measurement of financial assets on the basis of the facts and circumstances that exist at the date of transition to Ind AS.

The Company has applied the above requirement on transition date.

B. Reconciliations between previous GAAP and Ind AS

Ind AS 101 requires an entity to reconcile equity, total comprehensive income and cash flows for prior periods. The following tables represent the reconciliations from previous GAAP to Ind As.

Note 1: Proposed dividend

Under the previous GAAP, dividends proposed by the board of directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly, provision for proposed dividend was recognized as a liability. Under Ind AS, such dividends are recognized when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend of INR Nil as at March 31, 2017 (April 1, 2016: INR 609 lakhs) and dividend distribution tax thereon of INR Nil as at March 31, 2017 (April 1, 2016: INR 124 lakhs) included under provisions have been reversed with corresponding adjustment to retained earnings. Consequently, the total equity increased by an equivalent amount.

Note 2: Excise duty

Under the previous GAAP, revenue from sale of products was presented exclusive of excise duty. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty. The excise duty paid is presented on the face of the statement of profit and loss as part of expenses. This change has resulted in an increase in total revenue and total expenses for the year ended March 2017 by INR 3,432 lakhs. There is no impact on the total equity and profit.

Note 3: Remeasurements of post-employment benefit obligations

Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognized in other comprehensive income instead of profit or loss. Under the previous GAAP, these remeasurements were forming part of the profit or loss for the year. As a result of this change, the profit for the year ended March 31, 2017 increased by INR 96 lakhs. There is no impact on the total equity as at March 31, 2017.

Note 4: Deferred revenue - Service coupon

The Company operates a customer service coupon program for the domestic end customers. The coupons allows the end customer to get free inspection and service for the product purchased by them from the dealers or distributors within the validity of the coupon period. The free inspection and service is provided by the Company''s customer i.e. the dealers or distributors. The Coupons are redeemed for cash by the dealer or distributor from the Company. Under the previous GAAP, the Company created a provision towards its liability under the programme.

Under Ind AS, sales consideration received has been allocated between the products sold and the service coupon issued. The consideration allocated to the service coupon has been deferred and is recognized as revenue when the coupons are lapsed. Accordingly, the Company has recognized deferred revenue to the extent of INR 98 lakhs as at March 31, 2017 (April 1, 2016: INR 91 lakhs) with corresponding adjustment to retained earnings. The provision created under previous GAAP amounting to INR 167 lakhs as at March 31, 2017 (April 1, 2016: INR 151 lakhs) has been reversed with a credit to retained earnings.

Consequent to the above, the profits for the year and total equity as at March 31, 2017 increased by INR 9 lakhs and 69 lakhs (April 1, 2016: INR 60 lakhs) respectively.

Note 5: Revenue recognition

Under previous GAAP, revenue from sale of goods to domestic customers were recognized at the time of dispatch of goods from the premises of the Company based on the contractual delivery terms with the customer. Under Ind AS, revenue from sale of goods is recognized when risk and rewards is transferred to the customer including there is no continuing managerial involvement retained by the company associated usually with ownership or effective control over the goods sold.

Under Ind AS, the risk and rewards is transferred by the Company on delivery of goods to the customer, consequently revenue from sale of goods to domestic customers is recognized when goods are delivered by the Company.

Consequent to the above, the profits for the year and total equity as at March 31, 2017 decreased by INR 11 lakhs and 255 lakhs (April 1, 2016: INR 244 lakhs) respectively.

Refer Reconciliation of total equity as at March 31, 2017 and April 1, 2016 and Reconciliation of total comprehensive income for the year ended March 31, 2017

Note 6: Lease arrangement

Under previous GAAP, arrangements that did not take the legal form of lease were accounted for based on the legal form of such arrangements

e.g. job work arrangement. Under Ind AS, any arrangement (even if not legally structured as lease) which conveys a right to use an asset in return for a payment or series of payments are identified as leases provided certain conditions are met. In case such arrangements are determined to be in the nature of leases, such arrangements are required to be classified into finance or operating leases as per the requirements of Ind AS 17, Leases.

The Company has entered into certain job work arrangements which have been identified to be in the nature of of lease and have been classified as finance lease arrangements.

In previous GAAP, the Company had presented the same as advance to suppliers which were subsequently Amortized in the profit or loss over the estimated useful life of the assets. This change has resulted in capitalization of unamortized portion of job work assets as at March 31, 2017 INR 45 lakhs (April 1, 2016 of INR 44 lakhs) in property, plant and equipment. There is no impact on the total equity and profit.

Note 7: Leasehold land

Under previous GAAP, advance rent paid by the Company on the leasehold land is included under other assets which was Amortized and charged to the statement of profit and loss over the period of lease. Under Ind AS, the amount of advance rent is capitalised as part of leasehold land in property, plant and equipment and the is depreciated over the useful life of the land. There is no impact on the total equity and profit.

Note 8: Deferred tax

Under Ind AS, deferred tax has been recognized on the adjustments made on transition to Ind AS.

Note 9: Retained earnings

Retained earnings as at April 1, 2016 has been adjusted consequent to the above Ind AS transition adjustments.

Note 10: Other comprehensive income

Under Ind AS, all items of income and expense recognized in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Item of income / expense that is not recognized in profit or loss but is shown in the statement of profit and loss as ‘other comprehensive income'' includes remeasurements of defined benefit plan. The concept of other comprehensive income did not exist under the previous GAAP.

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Mar 31, 2017

1. Rights, preferences and restrictions attached to equity shares

The Company has a single class of equity shares. Accordingly, all equity shares rank equally with regard to dividends and share in the company''s residual assets. The voting rights of an equity shareholder on a poll (not on show of hands) are in proportion to its share of the paid-up equity capital of the company. Voting rights cannot be exercised in respect of shares on which any call or other sums presently payable have not been paid.

During the year ended 31 March 2017, the Company has recognized per share dividend for distribution to equity shareholders amounting to Rs. Nil (31 March 2016: Rs.6.00).

On winding up of the company, the holders of equity shares will be entitled to receive the residual assets of the company, remaining after distribution of all preferential amounts in proportion to the number of equity shares held.

2. Disclosures as per Accounting Standard (AS)-18 “Related Party Disclosures”

3. Name of related parties with whom transactions have taken place during the year

Ultimate holding company and holding company:

Honda Motor Co., Ltd., Japan Fellow Subsidiaries

Honda Philippines Inc., Philippines

Honda Del Peru S.A., Peru

Honda de Mexico, S.A. de C.V., Mexico

Honda Australia M. & P.E. Pty. Limited, Australia

Asian Honda Motor Co., Limited, Thailand

Honda Trading Corporation, Japan

Honda Manufacturing (Nigeria) Ltd., Nigeria

Honda Trading Asia Co. Limited, Thailand

PT. Honda Power Products Indonesia, Indonesia

Honda Motorcycle and Scooter India Private Limited, India

Honda Motor India Private Limited, India

Moto Honda da Amazonia Ltda., Brazil

Honda Trading (South China) Co. Limited, Hong Kong

Honda R & D Co. Limited, Japan

Honda R & D (India) Private Limited, India

Honda Motor de Argentina S.A., Argentina

Shanghai Honda Trading Co. Limited, China

Honda Atlas Power Products Pvt. Ltd., Pakistan

PT. Honda Trading Indonesia, Indonesia

Honda Trading Brasil Ltda., Brasil

Honda Canada Inc., Canada

American Honda Motor Co. Inc., USA

Honda Trading De Argentina S.A., Argentina

Honda Trading Corporation India Private Limited, India

Honda Mindong Generator Co. Ltd., China

Honda Kaihatsu Co. Ltd., Japan

Honda Trading Europe Ltd., Belgium

Honda Motor Europe Limited, U.K.

Jialing-Honda Motors Co. Ltd., China Honda Cars India Limited, India Honda Selva Del Peru S.A., Peru

Honda Trading Philippines Ecozone Corporation, Philippines

Honda Trading America Corp., America

Honda Motor Southern Africa (Pty.) Limited, South Africa

Honda Motor De Chile S.A., Chile

Taiwan Honda Trading Co. Ltd., Taiwan

Honda Kaihatsu India Hospitality Pvt. Ltd., India

Honda Vietnam Power Products Co. Ltd., Vietnam

Rajasthan Prime Steel Processing Center Private Limited

3. Disclosure in respect of operating leases under Accounting Standard (AS) - 19 “Leases”

4. General description of the Company''s operating lease arrangements:

The Company enters into operating lease arrangements for offices, residential premises for its employees and equipment for generating power for captive consumption. Some of the significant terms and conditions of the arrangements are:

- certain agreements for premises may generally be terminated by the lessee or either party by serving one to three months notice or by paying the notice period rent in lieu.

- certain agreements for premises where the lock in period ranges from 6 to 36 months.

- the lease arrangements are generally renewable on the expiry of lease period subject to mutual agreement.

5. The Board of directors have recommended a dividend of Rs.7.50 per share in their meeting held at New Delhi on 15 May 2017. Pursuant to the Companies (Accounting Standards) Amendment Rules 2016, this dividend will be recorded and remitted post the approval of shareholders in the Annual general meeting.

6. Segment information Primary Segment:

The primary reportable segment for the Company is geographical segment by location of its customers. The Company''s geographical segment comprises domestic customers and overseas customers.

The primary segments have been identified in line with AS 17, taking into account the risks and return, organization structure and internal reporting system.

Segment revenue comprises income from sales and services which are directly identifiable to the individual segment. Certain non-operating incomes such as net profit on sale of fixed assets and exceptional items do not form part of segment revenue and are included under “other non-operating income”. Direct expenses in relation to segments are categorized based on items that are individually identifiable to that segment, while the remaining costs are categorized to the segment on a reasonable basis. Certain expenses such as administrative expenses which form a significant component of total expenses are not specifically allocable to specific segments. Accordingly, these expenses are separately disclosed as “unallocated” and directly charged against total income.

Segment assets include operating assets used by a segment that are directly identifiable to that segment and consist principally of trade receivables and inventory. Segment liabilities include operating liabilities that are directly identifiable to that segment and consist principally of accrued liabilities and advances from customers. Segment liabilities exclude share capital and reserves and surplus. Assets and liabilities of the Company which cannot be identified to any of the reportable segments have not been allocated as the same are used for both segments

7. The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing regulation under sections 92-92F of the Income-tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company continuously updates its documentation for the international transactions entered into with the associated enterprises during the financial year and expects such records to be in existence latest by the due date as required under law. The management is of the opinion that its international transactions are at arm''s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

8. Previous year figures have been re-grouped / reclosed, wherever necessary to confirm to the current year’s classification.

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Mar 31, 2016

b. Rights, preferences and restrictions attached to equity shares

The Company has a single class of equity shares. Accordingly, all equity shares rank equally with regard to dividends and share
in the company''s residual assets. The voting rights of an equity shareholder on a poll (not on show of hands) are in proportion
to its share of the paid-up equity capital of the company. Voting rights cannot be exercised in respect of shares on which any
call or other sums presently payable have not been paid.

During the year ended 31 March 2016, the company has recognized per share dividend for distribution to equity shareholders
amounting to Rs. 6.00 (31 March 2015: Rs. 6.00).

On winding up of the company, the holders of equity shares will be entitled to receive the residual assets of the company,
remaining after distribution of all preferential amounts in proportion to the number of equity shares held.

As a result of management re-assessment of useful life of assets, aligning with Schedule II of the Companies Act, 2013, the
Company had recorded an additional depreciation of Rs 199.94 lakhs in the Statement of Profit and Loss in the previous year
2014-15. Further, based on a transitional provision of schedule II of the Companies Act, 2013, an amount of Rs. 34.09 lakhs (net
of deferred tax of Rs. 17.87 lakhs) had been adjusted to Reserves and Surplus in the previous year 2014-15.

b. As per Section 135 of the Companies Act, 2013, a Corporate Social Responsibility (CSR) committee has been formed by the
Company. The Company has contributed Rs. 89.09 lakhs towards Prime Minister National Relief Fund, as specified in Schedule VII
of the Companies Act, 2013.

c. The Ministry of Environment has revised rules vide notification dated 7 August 2013 for Emission Standards in respect of
production and sale of generator sets (both petrol and kerosene based models) effective 31 May 2014 and 7 August 2014
respectively. Pursuant to the new rules, the Company had recognized provision of Rs. 647.35 lakhs in the previous year ended 31
March 2014 (Rs 350.01 lakhs for non useable raw material and Rs 297.34 lakhs for onerous commitment). Out of this inventory
provision of Rs. 90.96 lakhs is outstanding as at 31 March 2016. Provision for onerous commitment of Rs 297.34 lakhs and
discontinued inventory of Rs. 91.91 lakhs had been written back in the previous year ended 31 March 2015.

d. Pursuant to change in Emission Standards, the Company had reassessed the useful life of dies used for the production of
discontinued models and charged additional accelerated depreciation of Rs 42.74 lakhs in the previous year ended 31 March 2015.

1. Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) amounts to Rs.
586.46 lakhs (31 March 2015: Rs. 370.51 lakhs).

2. Disclosures as per Accounting Standard (AS)-18 "Related Party Disclosures"

A. Name of related parties with whom transactions have taken place during the year

Ultimate holding company and holding company:

Honda Motor Co., Limited, Japan

Fellow Subsidiaries:

Honda Philippines Inc., Philippines

Honda Del Peru S.A., Peru

Honda de Mexico, S.A. de C.V., Mexico

Honda Australia M. & P.E. Pty. Limited, Australia

Asian Honda Motor Co., Limited, Thailand

Honda Trading Corporation, Japan

Honda Manufacturing (Nigeria) Ltd., Nigeria

Honda Trading Asia Co. Limited, Thailand

PT. Honda Power Products Indonesia, Indonesia

Honda Motorcycle and Scooter India Private Limited, India

Honda Motor India Private Limited, India

Moto Honda da Amazonia Ltda., Brazil

Honda Trading (South China) Co. Limited, Hong Kong

Honda R & D Co. Limited, Japan

Honda R & D (India) Private Limited, India

Honda Motor de Argentina S.A., Argentina

Shanghai Honda Trading Co. Limited, China

Honda Atlas Power Products Pvt. Ltd., Pakistan

PT. Honda Trading Indonesia, Indonesia

Honda Trading Brasil Ltda., Brasil

Honda Canada Inc., Canada

American Honda Motor Co. Inc., USA

Honda Trading De Argentina S.A., Argentina

Honda Trading Corporation India Private Limited, India

Honda Mindong Generator Co. Ltd., China

Honda Kaihatsu Co. Ltd., Japan

Honda Trading Europe Ltd., Belgium

Honda Motor Europe Limited, U.K.

Honda Cars India Limited, India

Honda Selva Del Peru S.A., Peru

Honda Trading Philippines Ecozone Corporation, Philippines

Honda Trading America Corp., America

Honda Motor Southern Africa (Pty.) Limited, South Africa

Honda Motor De Chile S.A., Chile

Notes to the financial statements for the year ended 31 March 2016

B. Name of key management personnel:

Mr. T. Hamasaki President and CEO (Up to 30 March 2015)

Mr. Yoshifumi Iida President and CEO (With effect from 1 April 2015)

Mr. Hiroyoshi Sugimizu Vice President and Whole time director

Mr. Vinay Mittal Vice President, Whole time director and CFO

d) The Company has sub-let one of its leasehold premises. The Sub-lease agreement is cancellable by either party by serving three
months notice period. The rent received during the year amounting to Rs. 9.27 lakhs (Previous year Rs. 3.0 lakhs) has been netted
off with rent expense.

* Excludes contribution to the gratuity fund and provision for leave encashment determined on an actuarial basis, as these are
determined for the Company as a whole.

3. Disclosure in respect of operating leases under Accounting Standard (AS) - 19 "Leases"

a) General description of the Company''s operating lease arrangements:

The Company enters into operating lease arrangements for offices, residential premises for its employees and equipment for
generating power for captive consumption. Some of the significant terms and conditions of the arrangements are:

certain agreements for premises may generally be terminated by the lessee or either party by serving one to three months'' notice
or by paying the notice period rent in lieu thereof.

certain agreements for premises where the lock in period ranges from 6 to 36 months.

the lease arrangements are generally renewable on the expiry of lease period subject to mutual agreement.

b) Lease rent charged to the Statement of Profit and Loss amounts to Rs. 311.13 lakhs (31 March 2015: Rs. 318.21 lakhs).

* Net of expected reimbursement of Rs. 0.46 lakhs (31 March 2015: Rs 0.33 lakhs) from suppliers of traded goods recognized and
included in loans and advances in accordance with the requirements of Accounting Standard – 29 "Provisions, Contingent
Liabilities and Contingent Assets."

The warranty provision is expected to be utilized within the normal warranty period. The provision has been created based on
management''s estimates and past trends of actual claim received.

4. Segment information

Primary segment:

The primary reportable segment for the Company is geographical segment by location of its customers. The Company''s geographical
segment comprises domestic customers and overseas customers.

The primary segments have been identified in line with AS 17, taking into account the risks and return, organization structure
and internal reporting system.

Segment revenue comprises income from sales and services which are directly identifiable to the individual segment. Certain
non-operating incomes such as net profit on sale of fixed assets and exceptional items do not form part of segment revenue and
are included under "other non-operating income". Direct expenses in relation to segments are categorized based on items that are
individually identifiable to that segment, while the remaining costs are categorized to the segment on a reasonable basis.
Certain expenses such as administrative expenses which form a significant component of total expenses are not specifically
allocable to specific segments. Accordingly, these expenses are separately disclosed as "unallocated"and directly charged against
total income.

Segment assets include operating assets used by a segment that are directly identifiable to that segment and consist principally
of trade receivables and inventory. Segment liabilities include operating liabilities that are directly identifiable to that
segment and consist principally of accrued liabilities and advances from customers. Segment liabilities exclude share capital and
reserves and surplus. Assets and liabilities of the Company which cannot be identified to any of the reportable segments have not
been allocated as the same are used for both segments.

5. The Company has established a comprehensive system of maintenance of information and documents as required by the transfer
pricing regulation under sections 92-92F of the Income-tax Act, 1961. Since the law requires existence of such information and
documentation to be contemporaneous in nature, the Company continuously updates its documentation for the international
transactions entered into with the associated enterprises during the financial year and expects such records to be in existence
latest by the due date as required under law. The management is of the opinion that its international transactions are at arm''s
length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax
expense and that of provision for taxation.

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Mar 31, 2015

1. Company overview

Honda Siel Power Products Ltd. is a public company domiciled and headquartered in India. It is incorporated under the Companies Act, 1956 and its shares are listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The Company is primarily engaged in manufacturing and marketing the portable gensets, water pumps, general purpose engines, lawn mowers, brush cutters and tillers. The Company caters to both domestic and international markets.

The financial statements for the year ended 31 March 2015 have been prepared as per the requirements of Schedule III of the Companies Act, 2013.

a. Rights, preferences and restrictions attached to equity shares

The Company has a single class of equity shares. Accordingly, all equity shares rank equally with regard to dividends and share in the company''s residual assets. The voting rights of an equity shareholder on a poll (not on show of hands) are in proportion to its share of the paid-up equity capital of the company. Voting rights cannot be exercised in respect of shares on which any call or other sums presently payable have not been paid.

During the year ended 31 March 2015, the Company has recognised per share dividend for distribution to equity shareholders amounting to Rs. 6.00 (31 March 2014: Rs. 4.00).

On winding up of the company, the holders of equity shares will be entitled to receive the residual assets of the company, remaining after distribution of all preferential amounts in proportion to the number of equity shares held.

29 a. Restructuring programme declared in the year 2013-14 for shifting manufacturing facility from Puducherry to Greater Noida, Uttar Pradesh has been completed. The Company has shifted all usable assets to Greater Noida except following tangible assets which are held for disposal:

Building - Rs. 21.07 lakhs (corresponding gross block - Rs. 51.41 lakhs) [Previous year - Rs. 22.80 lakhs (corresponding gross block - Rs. 51.41 lakhs)]

Plant and Equipments - Rs. 6.92 lakhs (corresponding gross block - Rs. 12.44 lakhs) [Previous year - Rs. 12.48 lakhs (corresponding gross block - Rs. 27.55 lakhs)]

Office equipments - Rs. Nil lakhs (corresponding gross block - Rs.0.36 lakhs) [Previous year - Rs. Nil lakhs (corresponding gross block - Rs. 0.36 lakhs)]

b. The Ministry of Environment has revised rules vide notification dated 7 August 2013 for Emission Standards in respect of production and sale of generator sets (both petrol and kerosene based models) effective 31 May 2014 and 7 August 2014 respectively. Pursuant to the new rules, the Company had recognised Provision of Rs. 647.35 lakhs in the previous year ended 31 March 2014 (Rs 350.01 lakhs for non useable raw material and Rs 297.34 lakhs for onerous commitment). Out of the provision of Rs. 350.01 lakhs, the company has written off inventory amounting to Rs. 71.60 lakhs and balance provision of Rs. 278.41 lakhs have been reassessed at Rs 186.50 lakhs. Provision of onerous commitment of Rs 297.34 lakhs has been written back in the current year as the company has decided to purchase this material for use in further production with minor modification.

c. Pursuant to change in Emission Standards, the Company had reassessed the useful life of dies used for the production of discontinued models and charged additional accelerated depreciation of Rs 42.74 lakhs . (Previous year Rs 84.35 lakhs).

d. The Company has re-evaluated useful life of assets as per Schedule II of the Companies Act, 2013. The revised useful lives along with useful lives as per earlier estimates are as below:

As a result of management re-assessment of useful life of assets, aligning with Schedule 11 of the Companies Act, 2013, the Company has recorded an additional depreciation of Rs 199.94 lakhs in the Statement of Profit and Loss. Further, based on a transitional provision provided in Note 7(b) of Schedule II of the Companies Act, 2013, an amount of Rs. 34.09 lakhs (net of deferred tax of Rs. 17.87 lakhs) has been adjusted to Reserves and Surplus.

e. As per Section 135 of the Companies Act, 2013, a Corporate Social Responsibility (CSR) committee has been formed by the Company. The areas for CSR activities are promoting health care, sanitation, safe drinking water, promoting education, gender equality and Contribution to Prime Minister''s National Relief fund. Accordingly, the Company has contributed Rs. 83 lakhs towards Prime Minister National Relief Fund, as specified in Schedule VII of the Companies Act, 2013.

2 Contingent liabilities

31 March 2015 31 March 2014 (Rs. lakhs) (Rs. lakhs)

Claims against the Company not acknowledged as debt:

Income tax matters 5,977.01 5,652.08

Excise matters 4,456.94 4,330.20

Service tax matters 749.96 700.76

Sales tax matters 240.25 251.91

Other matters 15.14 74.16

3 Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for [net of advances Rs.341.51 lakhs (31 March 2014: Rs. 777.55 lakhs)] amounts to Rs. 370.51 lakhs (31 March 2014: Rs. 1,042.47 lakhs)

4 Disclosures as per Accounting Standard (AS)-18 "Related Party Disclosures"

A. Name of related parties

Ultimate holding company and holding company:

Honda Motor Co., Limited, Japan Fellow Subsidiaries

Honda Philippines Inc., Philippines

Honda Del Peru S.A., Peru

Honda de Mexico, S.A. de C.V., Mexico

Honda Australia M. & P.E. Pty. Limited, Australia

Asian Honda Motor Co., Limited, Thailand

Honda Trading Corporation, Japan

Honda Manufacturing (Nigeria) Ltd., Nigeria

Honda Trading Asia Co. Limited, Thailand

PT Honda Power Products Indonesia, Indonesia

Honda Motorcycle and Scooter India Private Limited, India

Honda Motor India Private Limited, India

Moto Honda da Amazonia Ltda., Brazil

Honda Trading (South China) Co. Limited, Hong Kong

Honda R & D Co. Limited, Japan

Honda R & D (India) Private Limited, India

Honda Motor de Argentina S.A., Argentina

Shanghai Honda Trading Co. Limited, China

Honda Atlas Power Products Pvt. Ltd., Pakistan

PT. Honda Trading Indonesia, Indonesia

Honda Trading Brasil Ltda., Brasil

Honda Canada Inc., Canada

American Honda Motor Co. Inc., USA

Honda Trading De Argentina S.A., Argentina

Honda Trading Corporation India Private Limited, India

Honda Mindong Generator Co. Ltd., China

Honda Kaihatsu Co. Ltd., Japan

Honda Trading Europe Ltd., Belgium

Honda Motor Europe Limited, U.K.

Honda Cars India Limited, India

Honda Kaihatsu India Hospitality Pvt. Ltd., India

Honda Selva Del Peru S.A.

Honda Power Products Ltd., Japan

Honda Trading Philippines Ecozone Corporation, Philippines Honda Trading America Corp., America

B. Name of key management personnel:

Mr. T. Hamasaki President and CEO (Up to 30 March 2015)

Mr. Hiroyoshi Sugimizu Vice President and Whole time director (with effect from 1 April 2014)

Mr. Vinay Mittal Vice President, Whole time director and CFO

Mr. S. Yotsumoto Vice President and Whole time director (Upto 23 March 2014)

5 Disclosure in respect of operating leases under Accounting Standard (AS) - 19 "Leases"

a) General description of the Company''s operating lease arrangements:

The Company enters into operating lease arrangements for leasing area offices, residential premises for its employees and equipment for generating power for captive consumption. Some of the significant terms and conditions of the arrangements are:

- certain agreements for premises may generally be terminated by the lessee or either party by serving one to three months'' notice or by paying the notice period rent in lieu thereof.

- other agreements for premises cannot be terminated by either party before the expiry of one year.

- the lease arrangements are generally renewable on the expiry of lease period subject to mutual agreement.

- the Company shall not sublet, assign or part with the possession of the premises without prior written consent of the lessor.

b) Lease rent charged to the Statement of Profit and Loss amounts to Rs. 318.21 lakhs (31 March 2014: Rs.376.89 lakhs).

c) Future minimum lease payments under non-cancellable operating lease are as under:

* includes contribution to family pension fund Rs 87.76 lakhs (31 March 2014: Rs. 66.81 lakhs)

(b) The following tables summarize the components of net benefit expense recognised in the Statement of Profit and Loss and the funded status and amounts recognised in the balance sheet for the respective defined benefit plans:

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.

The discount rate is based on the prevailing market yields of Government Bonds as at the balance sheet date for the estimated term of the obligations.

* Net of expected reimbursement of Rs.0.33 lakhs (31 March 2014: Rs 0.47 lakhs) from suppliers of traded goods recognized and included in loans and advances in accordance with the requirements of Accounting Standard - 29 " Provisions, Contingent Liabilities and Contingent Assets."

The warranty provision is expected to be utilised within the normal warranty period of one year. The provision has been created based on management''s estimates and past trends.

6 Segment information Primary segment:

The primary reportable segment for the Company is geographical segment by location of its customers. The Company''s geographical segment comprises domestic customers and overseas customers.

The primary segments have been identified in line with AS 17, taking into account the risks and return, organisation structure and internal reporting system.

Segment revenue comprises income from sales and services which are directly identifiable to the individual segment. Certain non-operating incomes such as interest income on fixed deposits, net profit on sale of fixed assets and exceptional items do not form part of segment revenue and are included under "other non-operating income". Direct expenses in relation to segments are categorised based on items that are individually identifiable to that segment, while the remaining costs are categorised to the segment on a reasonable basis. Certain expenses such as administrative expenses which form a significant component of total expenses are not specifically allocable to specific segments. Accordingly, these expenses are separately disclosed as "unallocated" and directly charged against total income.

Segment assets include operating assets used by a segment that are directly identifiable to that segment and consist principally of trade receivables and inventory. Segment liabilities include operating liabilities that are directly identifiable to that segment and consist principally of accrued liabilities and advances from customers. Segment liabilities exclude share capital and reserves and surplus. Assets and liabilities of the Company which cannot be identified to any of the reportable segments have not been allocated as the same are used for both segments.

Information about primary segments - geographical segments by customer:

7 The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing regulation under sections 92-92F of the Income-tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company continuously updates its documentation for the international transactions entered into with the associated enterprises during the financial year and expects such records to be in existence latest by the due date as required under law. The management is of the opinion that its international transactions are at arm''s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

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Mar 31, 2013

1. Company overview

Honda Siel Power Products Ltd. is a public company domiciled and headquartered in India. It is incorporated under the Companies Act, 1956 and its shares are listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The Company is primarily engaged in manufacturing and marketing the portable gensets, water pumps, general purpose engines, lawn mowers, brush cutters and tillers. The Company caters to both domestic and international markets.

2 In the previous year, the Company has disposed off land (comprising freehold and leasehold) and building of the Company and other miscellaneous items of plant and machinery and furniture, fixtures and office equipment situated at Rudrapur, Uttarakhand. The resultant gain arising from the disposal of said fixed assets after adjusting the expenses related to such disposal have been disclosed as "Exceptional Items" in note 27. The Company does not have any further obligations towards the lessor, viz. Government of Uttarakhand, in respect of the leasehold land.

3 Contingent liabilities

31 March 2013 31 March 2012 (Rs. lakhs) (Rs. lakhs)

Claims against the Company not acknowledged as debt:

Income tax matters 4,500.54 3,773.96

Excise matters 4,859.63 2,877.88

Service tax matters 680.92 677.60

Sales tax matters 155.26 804.91

Other matters 55.48 27.14

4 Commitments

a. Estimated amount of contracts remaining to be executed on capital account and not provided for [net of advances Rs. 331.83 lakhs (31 March 2012: Rs. 782.88 lakhs)] amount to Rs. 614.35 lakhs (31 March 2012: Rs. 1,587.04 lakhs)

b. The Company has entered into an agreement for hiring a power generating equipment, the cancellation of which by the Company within the first 52 weeks of the agreement will entail monetary compensation on the Company equivalent to Rs. Nil lakhs (31 March 2012: Rs. 19.80 lakhs)

5 Details of contributions made to political parties

During the previous year, the Company has made contributions to political parties, viz. Rs 15 lakhs to Bhartiya Janta Party and Rs 10 lakhs to Indian National Congress Party. No such payment has been made in the current year.

6 Disclosures as per Accounting Standard (AS)-18 "Related Party Disclosures" A. Name of related parties

Ultimate holding company and holding company:

Honda Motor Co., Limited, Japan Fellow Subsidiaries

Honda Motor Southern Africa (Pty.) Limited, South Africa

Honda Philippines Inc., Philippines

Honda Del Peru S.A., Peru

Honda de Mexico, S.A. de C.V., Mexico

Honda Australia M. & P.E. Pty. Limited, Australia

Asian Honda Motor Co., Limited, Thailand

Honda Trading Corporation, Japan

Honda Manufacturing (Nigeria) Ltd., Nigeria

Honda Trading Asia Co. Limited, Thailand

PT. Honda Power Products Indonesia, Indonesia

Honda Motorcycle and Scooter India Private Limited, India

Honda Motor India Private Limited, India

Honda Express Logistics India Private Limited, India

Moto Honda da Amazonia Ltda., Brazil

Honda Trading (South China) Co. Limited, Hong Kong

Honda R&D Co. Limited, Japan

Honda R&D (India) Private Limited, India

Honda Europe NV, Belgium

Honda Motor de Argentina S.A., Argentina

Shanghai Honda Trading Co. Limited, China

Honda Atlas Power Products Pvt. Ltd., Pakistan

PT. Honda Trading Indonesia, Indonesia

Honda Trading Brazil Ltda., Brazil

Honda Trading De Argentina S.A., Argentina

Honda Trading Corporation India Private Limited, India

Honda Mindong Generator Co. Ltd., China

Honda Kaihatsu Co. Ltd., China

Honda Trading Europe Ltd., Belgium

Honda Motor Europe Limited, U.K.

Honda Canada Inc., Canada

Jialing-Honda Motors Co. Ltd., China

Honda Soltec Co. Ltd , Japan

American Honda Motor Co. Inc., USA

Honda Cars India Limited, India (previously known as "Honda Siel Cars India Limited", India)

7 Disclosure in respect of operating leases under Accounting Standard (AS)-19 "Leases"

a) General description of the Company''s operating lease arrangements:

The Company enters into operating lease arrangements for leasing area offices, residential premises for its employees and equipment for generating power for captive consumption. Some of the significant terms and conditions of the arrangements are: certain agreements for premises may generally be terminated by the lessee or either party by serving one to three months'' notice or by paying the notice period rent in lieu thereof. other agreements for premises cannot be terminated by either party before the expiry of one year. the lease arrangements are generally renewable on the expiry of lease period subject to mutual agreement. the Company shall not sublet, assign or part with the possession of the premises without prior written consent of the lessor.

b) Lease rent charged to the Statement of Profit and Loss Rs. 321.05 lakhs (31 March 2012: Rs.280.05 lakhs).

8 Segment information ,.''

Primary segment:

The primary reportable segment for the Company is geographical segment by location of customers. The Company''s geographical segment comprises domestic customers and overseas customers.

The primary segments have been identified in line with AS 17, taking into account the risks and return, organisation structure and internal reporting system.

Segment revenue comprises income from sales and services which are directly identifiable to the individual segment. Certain non-operating incomes such as interest income on fixed deposits, net profit on sale of fixed assets and exceptional items do not form part of segment revenue and are included under "other non-operating income". Direct expenses in relation to segments is categorised based on items that are individually identifiable to that segment, while the remaining costs are categorised to the segment on a reasonable basis. Certain expenses such as administrative expenses which form a significant component of total expenses are not specifically allocable to specific segments. Accordingly these expenses are separately disclosed as "unallocated" and directly charged against total income.

Segment assets include operating assets used by a segment that are directly identifiable to that segment and consist principally of debtors and inventory. Segment liabilities include operating liabilities that are directly identifiable to that segment and consist principally of accrued liabilities and advances from customers. Segment liabilities exclude share capital and reserves and surplus. Assets and liabilities of the Company which cannot be identified to any of the reportable segments have not been allocated as the same are used for both segments.

9 The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing regulation under sections 92-92F of the Income-taxAct, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company is in the process of updating the documentation for the international transactions entered into with the associated enterprises during the financial year and expects such records to be in existence before the due date of filing return of income under the Income-tax Act, 1961. The management is of the opinion that its international transactions are at arm''s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

10 Previous year figures have been regrouped/ reclassified to conform to the current year financial statements.

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Mar 31, 2012

1 Subsequent to the Rudrapur factory consolidation, the land (comprising freehold and leasehold) and building of the Company and other miscellaneous items of plant and machinery and furniture, fixtures and office equipment situated at Rudrapur, Uttarakhand, have been disposed off during the current year. The resultant gain arising from the disposal of said fixed assets after adjusting the expenses related to such disposal have been disclosed as "Exceptional Items" in note 27. The Company does not have any further obligations towards the lessor, viz. Government of Uttarakhand, in respect of the leasehold land.

2 Contingent liabilities

As at As at 31 March 2012 31 March 2011 (Rs. lakhs) (Rs. lakhs)

Claims against the Company not acknowledged as debt:

- Various income tax matters for different assessment years pending before various authorities 3,773.96 2,458.19

- Various excise matters for different years pending before various authorities 2,877.88 2,618.01

- Various service tax matters for different years pending before various authorities 677.60 675.80

- Various sales tax matters pending before various authorities 804.91 864.06

- Other matters 27.14 30.96

3 Commitments

a. Estimated amount of contracts remaining to be executed on capital account and not provided for [net of advances Rs. 782.88 lakhs (31 March 2011: Rs. 230.87 lakhs)] amount to Rs. 1,587.04 lakhs (31 March 2011: Rs. 487.64 lakhs)

b. The Company has entered into an agreement for hiring a power generating equipment, the cancellation of which by the Company within the first 52 weeks of the agreement will entail monetary compensation on the Company equivalent to Rs. 19.80 lakhs (31 March 2011: Rs. Nil).

4 Details of contributions made to political parties

During the current year, the Company has made contributions to political parties, viz. Rs. 15.00 lakhs to Bharatiya Janata Party (31 March 2011: Rs. Nil) and Rs. 10.00 lakhs to Indian National Congress Party (31 March 2011: Rs. Nil).

5 Disclosure in respect of operating leases under Accounting Standard (AS) -19 "Leases"

a) General description of the Company's operating lease arrangements:

The Company enters into operating lease arrangements for leasing area offices, residential premises for its employees and equipment for generating power for captive consumption. Some of the significant terms and conditions of the arrangements are:

- certain agreements for premises may generally be terminated by the lessee or either party by serving one to three months' notice or by paying the notice period rent in lieu thereof.

- other agreements for premises cannot be terminated by either party before the expiry of one year.

- the lease arrangements are generally renewable on the expiry of lease period subject to mutual agreement.

- the Company shall not sublet, assign or part with the possession of the premises without prior written consent of the lessor.

b) Lease rent charged to the statement of profit and loss Rs.280.05 lakhs(31 March 2011: Rs.157.81 lakhs).

c) Future minimum lease payments under non-cancellable operating lease are as under:

6 Segment information Primary segment:

The primary reportable segment for the Company is geographical segment by location of customers. The Company's geographical segment comprises domestic customers and overseas customers.

The primary segments have been identified in line with AS 17, taking into account the risks and return, organisation structure and internal reporting system. Segment revenue comprises income from sales and services which are directly identifiable to the individual segment. Certain non-operating incomes such as interest income on fixed deposits, net profit on sale of fixed assets and exceptional items do not form part of segment revenue and are included under "other non-operating income". Direct expenses in relation to segments is categorised based on items that are individually identifiable to that segment, while the remaining costs are categorised to the segment on a reasonable basis. Certain expenses such as administrative expenses which form a significant component of total expenses are not specifically allocable to specific segments. Accordingly these expenses are separately disclosed as "unallocated" and directly charged against total income.

Segment assets include operating assets used by a segment that are directly identifiable to that segment and consist principally of debtors and inventory. Segment liabilities include operating liabilities that are directly identifiable to that segment and consist principally of accrued liabilities and advances from customers. Assets and liabilities of, the Company which cannot be identified to any of the reportable segments have not been allocated as the same are used for both segments.

7 The Company has prepared these financial statements by applying the principles of Revised Schedule VI of the Companies Act, 1956, which is applicable for the accounting periods commencing on or after 1 April 2011. Accordingly, the previous year figures have been regrouped/ reclassified to make them comparable.

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Mar 31, 2011

1. The restructuring programme declared by the Company in the year 2008-2009 for shifting its factory from Rudrapur, Uttaranchal to Greater Noida, Uttar Pradesh had been completed during the previous year and all expenses related / incidental to such shifting have been included under Exceptional Items in the financial statements.

2. Contingent liabilities :

(Rs. Lakhs)

Current year Previous year

Claims against the Company not acknowledged as debts

- Various income-tax matters for different assessment years pending before various authorities 2,458.19 1,890.27

- Various excise matters for different years pending before various authorities 2,618.01 2,446.78

- Various service tax matters for different years pending before various authorities 675.80 176.58

- Various sales tax matters pending before various authorities 864.06* 233.94

- Other matters 30.96 43.75

*includes Rs. 50.47 lakhs for the years 1999-2000 and 2000-2001, for which the Honorable High Court of Kerala has accepted the plea of the company and instructed the Assessment authorities to revise the assessment. The above said order of the High Court has been submitted to the Assessing Authority and the revised order from the Assessing Authority is awaited.

Further, the Company has also received demand notices amounting to Rs. 113.30 lakhs on similar matter pertaining to subsequent years. The Company has filed above mentioned favorable order from the High Court of Kerala to the Assessing Authority in respect of these demand notices, which is pending with the Assessing Authority.

3. Estimated amount of contracts remaining to be executed on capital account and not provided for, net of advances, Rs 487.64 lakhs (Previous year Rs. 316.19 lakhs).

4. Disclosure in respect of employee benefits under Accounting Standard (AS) – 15 “Employee Benefits” prescribed by the Companies (Accounting Standards) Rules, 2006:

a) Amount of Rs. 151.38 lakhs (Previous year Rs. 121.08 lakhs) pertaining to employers contribution to provident fund, pension fund, employees state insurance fund and superannuation fund is recognised as an expense and included in "Personnel Cost" in Schedule 8.

b) The following tables sets out the status of the gratuity plan as required under the Standard:

(i) Changes in the present value of defined benefit obligation representing reconciliation of opening and closing balances thereof:

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.

The discount rate is based on the prevailing market yields of Government Bonds as at the balance sheet date for the estimated term of the obligations.

(vii) Investment details of plan assets

The gratuity trust has taken up a group policy with Life Insurance Corporation of India.

(c) Provident Fund

The Companys actuary has confirmed that as at 31 March 2011, the Company does not have any liability on account of interest shortfall between the return from the investments of the provident fund trust and the notified interest rate.

The actuary, however, has expressed an inability to provide the required information prescribed by AS-15 such as changes in present value of defined benefit obligation, fair value of plan assets, actuarial gain/loss recognised in the profit and loss account etc. Accordingly the required disclosures have not been made.

5. Out of the total leasehold land measuring 19.48 acres at Rudrapur, a lease deed had been executed for 17.92 acres. In respect of the balance leasehold land of 1.56 acres, requisite documents are yet to be executed.

6. The net exchange difference amounting to a net gain of Rs. 34.35 lakhs has been included in miscellaneous income (Previous year net gain of Rs.22.58 lakhs).

7. Segment information

Primary segment:

The primary reportable segment for the Company is geographical segment by location of customers. The Companys geographical segment comprises domestic customers and overseas customers.

The primary segments have been identified in line with AS 17, taking into account the risks and return, organisation structure and internal reporting system.

Segment revenue comprises income from sales and services which are directly identifiable to the individual segment. Certain non-operating incomes such as liabilities written back and income from export benefits do not form part of segment revenue and are included under "other non-operating income". Direct expenses in relation to segments is categorised based on items that are individually identifiable to that segment, while the remaining costs are categorised to the segment on a reasonable basis. Certain expenses such as administrative expenses which form a significant component of total expenses are not specifically allocable to specific segments. Accordingly these expenses are separately disclosed as “unallocated” and directly charged against total income.

Segment assets include operating assets used by a segment that are directly identifiable to that segment and consist principally of debtors and inventory. Segment liabilities include operating liabilities that are directly identifiable to that segment and consist principally of accrued liabilities and advances from customers. Assets and liabilities of the Company which cannot be identified to any of the reportable segments have not been allocated as the same are used for both segments.

Secondary segment:

As the Companys business activity falls within a single business segment viz. “power products and related parts”, the secondary business segment disclosure requirements of AS 17 are not applicable to the Company.

8. Disclosure in respect of operating leases under Accounting Standard (AS) - 19 “Leases”

a) General description of the Companys operating lease arrangements:

The Company enters into operating lease arrangements for leasing area offices, residential premises for its employees and vehicles. Some of the significant terms and conditions of the arrangements are:

- certain agreements for premises may generally be terminated by the lessee or either party by serving one to three months notice or by paying the notice period rent in lieu thereof.

- other agreements for premises cannot be terminated by either party before the expiry of one year.

- agreements for leasing of vehicles can generally be terminated early by payment of nominal fees.

- the lease arrangements are generally renewable on the expiry of lease period subject to mutual agreement.

- the Company shall not sublet, assign or part with the possession of the premises without prior written consent of the lessor.

b) Lease rent charged to the profit and loss account Rs.157.81 lakhs (Previous year Rs 149.37 lakhs).

* Net of expected reimbursement of Rs 1.71 lakhs (Previous year Rs 4.55 lakhs) from suppliers of traded goods, recognized and included in

loans and advances in accordance with the requirements of Accounting Standard –-29 Provisions, Contingent Liabilities and Contingent Assets.

The warranty provision is expected to be paid within the normal warranty period of one year.

9. The figures for the previous year have been regrouped / recasted wherever necessary.

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Mar 31, 2010

1. The restructuring programme declared in the previous year by the Company for shifting its factory from Rudrapur, Uttaranchal, to Greater Noida, Uttar Pradesh has been completed during the current year. The company offered a Voluntary Retirement Scheme to all the workers of Rudrapur factory. Majority of the workers have opted for the said scheme and a sum of Rs. 1,893 lakhs has been paid under the said VRS scheme and included underExceptional Itemsin the financial statements.

Pursuant to the above agreement, the Company has been able to shift its entire inventory and the required plant and machinery from Rudrapur factory to Greater Noida factory. The remaining fixed assets not transferred to Greater Noida factory are currently being held for disposal. The expenses on such shifting have been included underExceptional itemsin the financial statements.

2. Contingent liabilities:

(Rs. Lakhs) Currentyear Previous year

Claims against the Company not acknowledged as debts

- Various income-tax matters for different assessment years pending before various authorities 1,890.27 1,022.36

- Various excise matters for different years pending before various authorities 2,446.78 3,639.15

- Various service tax matters for different years pending before various authorities 176.58 168.38

- Various sales tax matters pending before various authorities 233.94 427.84

- Other matters 43.75 32.28

4. Estimated amount of contracts remaining to be executed on capital account and not provided for, net of advances, Rs 316.19 lakhs (Previous year Rs. 544.35 lakhs).

5. Disclosure in respect of employee benefits under Accounting Standard (AS) - 15 "Employee Benefits" prescribed by the Companies (AccountingStandards) Rules, 2006:

(vii) Investment details of plan assets

The gratuity trust has taken up a group policy with Life Insurance Corporation of India,

(c) Provident Fund

The Companys actuary has confirmed that as at 31 March 2010, the Company does not have any liability on account of interest shortfall between the return from the investments of the provident fund trust and the notified interest rate.

The actuary, however, has expressed an inability to provide the required information prescribed by AS-15 such as changes in present value of defined benefit obligation, fair value of plan assets, actuarial gain/loss recognised in the profit and loss account etc. Accordingly the required disclosures have not been made.

6. The net exchange difference amounting to a net gain of Rs. 22.58 lakhs has been included in miscellaneous income (Previous year Rs.127.89 lakhs).

7. Segment information

Primary segment:

The primary reportable segment for the Company is geographical segment by location of customers. The Companys geographical segment comprises domestic customers and overseas customers.

The primary segments have been identified in line with AS 17, taking into account the risks and return, organisation structure and internal reporting system.

Segment revenue comprises income from sales and services which are directly identifiable to the individual segment. Certain non-operating incomes such as liabilities written back and income from export benefits do not form part of segment revenue and are included under "other non-operating income". Direct expenses in relation to segments is categorised based on items that are individually identifiable to that segment, while the remaining costs are categorised to the segment on a reasonable basis. Certain expenses such as administrative expenses which form a significant component of total expenses are not specifically allocable to specific segments. Accordingly these expenses are separately disclosed as "unallocated" and directly charged against total income.

Segment assets include operating assets used by a segment that are directly identifiable to that segment and consist principally of debtors and inventory. Segment liabilities include operating liabilities that are directly identifiable to that segment and consist principally of accrued liabilities and advances from customers. Assets and liabilities of the Company which cannot be identified to any of the reportable segments

8.Contributions to political party Rs Nil (Previous year Rs 5.00 lakhs to Bhartiya Janta Party)

9.The figures for the previous year have been regrouped /recasted wherever necessary.