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Accounting Policies of KCP Ltd. Company

Mar 31, 2016

1. GENERAL

The financial statements of the company have been prepared in accordance with generally accepted accounting principles in India
(Indian GAAP). The company has prepared these financial statements to comply in all material respects with the accounting
standards notified under the Companies (Accounting Standards) Rules, 2006, and the relevant provisions of the Companies Act,
2013.

2. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

2.1 FIXED ASSETS

Fixed assets are stated at cost, less accumulated depreciation. Cost of acquisition of fixed assets is inclusive of freight,
duties, and taxes, incidental expenses relating thereto, interest on direct borrowals up to commissioning, wherever applicable,
and the cost of installation/erection, as applicable. CEN VAT availed, if any, on Fixed Assets, is deducted from the cost of such
Fixed Assets capitalized.

2.2 LEASED ASSETS :

(A) ASSETS UNDER FINANCE LEASE:

Assets acquired under finance lease arrangement on or after 01.04.2001 are recognized separately among the fixed assets, at the
inception of the lease at lower of their fair value or the present value of minimum lease payments in respect thereof.
Depreciation and lease charges on such assets are accounted for, in accordance with the Accounting Standard-19 – "Accounting for
Leases" issued by The Institute of Chartered Accountants of India .

(B) ASSETS UNDER OPERATING LEASE :

Assets used by the Company as a lessee under operating lease agreement are not recognized in the Company''s accounts. Lease
payments under operating lease are charged to the Profit and loss account on a systematic basis representative of the pattern of
the benefit accruing to the Company from the use of the asset under operating lease.

2.3. INVESTMENTS

Investments (Long Term) are stated at cost less provision for diminution in value other than temporary, if any. Short term
investments are valued at Cost or Fair value whichever is lower.

(a) Finished goods are valued at cost or market value, whichever is lower.

(b) Stock of scrap –

i. In respect of Engineering Unit, purchased scrap and internally generated scrap for use in production are both valued at
average cost of purchased scrap.

ii. In respect of other scrap, the stock of scrap is not valued and adjusted. Sales, as and when

made, are adjusted.

(c) Work-in-Progress, raw materials, stores, spares, material in transit, are valued at cost except where the net realizable
value of the finished goods they are used in is less than the cost of finished goods and in such an event, if the replacement
cost of such materials etc., is less than their book values, they are valued at replacement cost.

2.5. SALES AND OTHER EARNINGS

(a) Sales and service earnings are inclusive of excise duty, service tax, freight, insurance etc. recovered thereon.

(b) Dispatches from Engineering Unit are in completely knocked down condition and are invoiced at the appropriate technically
evaluated values, which are matched with contracted sale prices.

(c) Electricity generated by the power units of the company, sold to its other units is accounted at the tariff rates charged by
the State Electricity Boards. Such earnings are adjusted to the power charges.

(d) The revenue from sale of Renewable Energy credit is recognized on delivery thereof or sale of right therein, as the case may
be, in terms of the contract with the respective buyers.

(e) The revenue from sale of thermal power is recognized based on actual billing to the State Board at the end of each billing
cycle .

(f) Dividend income is accounted as and when the right to receive arises.

(g) Other income – Revenue in respect of other incomes are recognized when there is a reasonable certainty as to its realization.

2.6. FOREIGN EXCHANGE TRANSACTIONS

A) Transactions in foreign currency are initially accounted at the exchange rate prevailing on the date of the transaction, and
adjusted appropriately with the


difference in the rate of exchange arising on actual receipt/payment during the year.

B) At each Balance Sheet date

- foreign currency monetary items are reported using the rate of exchange on that date

- foreign currency non-monetary items are reported using the exchange rate at which they were initially recognized

C) In respect of forward exchange contracts in the nature of hedges

- Premium or discount on the contract is amortized over the term of the contract,

- Exchange differences on the contract are recognized as Profit or loss in the period in which they arise

2.7. ACCOUNTING FOR DERIVATIVES

The company uses derivative instruments to hedge its exposure to movements in foreign exchange rates. The objective of these
derivative instruments is only to reduce the risk or cost to the company and is not intended for trading or speculation purposes.

2.8. EMPLOYEE BENEFITS

a) Short Term Employee Benefits are recognized as an expense at the undiscounted amount in the Profit and Loss account of the
year in which the related service is rendered.

b) Long Term Employee Benefits i.e. such benefits which do not fall due wholly within twelve months after the end of the period
in which the employees render the related service, are recognized as follows

- Expense is arrived at as per actuarial valuation and is recognized and charged to the Profit and Loss Account in the year in
which employee has rendered services in lieu of such leave.

- Liability as at the date of each Balance Sheet is arrived at and recognized therein as per actuarial valuation.

c) Post Employment Benefits:

(i) Defined Contribution plans:

The company''s employees are covered under superannuation schemes, state governed provident fund scheme, employee state insurance
scheme and employee pension scheme, which are in the nature of Defined Contribution Plans. The contributions paid/payable under
the schemes are recognized during the period in which the employee renders the related service.

(ii) Defined Benefit plans:

The company''s liability to gratuity on retirement of its eligible employees is funded under a Defined Benefit Plan with the Life
Insurance Corporation of India. The present value of the obligation under such defined benefit plan is determined based on
actuarial valuation using the Projected Unit Credit Method by Consulting Actuary. The incremental expense thereon for each year
is arrived at as per actuarial valuation and is recognized and charged to the Profit and Loss account in the year in which the
employee has rendered service.

The fair value of the plan assets and the gross plan obligation, under the said plan, are recognized in each Balance Sheet on net
basis.

d) Actuarial Gains/losses are charged to the Profit and Loss account immediately in each year.

2.9. DEPRECIATION

Depreciation is provided in accordance with the useful life and rules prescribed under Schedule II to the Companies Act, 2013, as
follows:--

i. In respect of assets existing as on 30-6-1988, under the written down value method: and

ii. In respect of assets acquired on or after 1-7-1988, under the straight line method.

Useful life for parts of Assets having significant cost, has been assessed based on technical estimate which is different from
the life given under the Schedule II to the Companies Act, 2013 as given below.


2.10. IMPAIRMENT OF ASSETS:

The carrying amount of assets are reviewed at each Balance sheet date to assess, if there is any indication of impairment based
on internal/external factors. An impairment loss is recognized wherever that carrying amount of the assets exceeds its
recoverable amounts. The recoverable amount is the greater of the assets net selling price and value in use. The impairment loss
recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

2.11. WARRANTY CLAIMS

Company''s liability for Warranty claims and Guarantee claims are accounted on accrual basis as per contracts, after adjusting the
claims no longer required.

2.12. DIVIDENDS

Provision is made in the accounts for the dividends paid / payable by the Company as recommended by the Board of Directors,
pending approval of the shareholders at the Annual General Meeting. Income Tax on dividend payable is provided for in the year to
which such dividends relate.

2.13. BORROWING COST

Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are
capitalized as part of the cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time
to get ready for its intended use. All other borrowing costs are charged to revenue in the period in which they are incurred.

2.14. EXPENDITURE DURING CONSTRUCTION PERIOD

All identifiable revenue expenses including interest on term loans incurred in respect of various projects/ expansions are
allocated to capital cost of respective assets/ capital work in progress.

2.15 EXPENDITURE ON APPROVED RESEARCH AND DEVELOPMENT PROGRAMME

In respect of approved Research and Development Programme, expenditure of capital nature is included in the fixed assets and
other expenditure is charged off to revenue in the year in which such expenditure is incurred.

2.16. TAXATION

Provision is made for income tax liability estimated to arise on the results for the year at the current rate of tax in
accordance with the Income Tax Act, 1961.

- Deferred tax resulting from timing differences between taxable and accounting income is

accounted for using the tax rates and laws that are enacted or substantively enacted as on the balance sheet date.

- Deferred tax assets arising on account of brought forward losses and unabsorbed depreciation are recognized only when there is
virtual certainty supported by convincing evidence that such assets will be realized. Deferred tax assets arising on other
temporary timing differences are recognized only if there is a reasonable certainty of realization

- MAT Credit Entitlement as per the provisions of Income Tax Act, 1961, is treated as an asset by credit to the Profit and loss

2.17. EARNINGS PER SHARE (EPS)

The earnings considered in ascertaining the company''s Basic EPS is the attributable net Profit or loss to the equity shareholders
as per AS-20 "Earnings Per Share". The number of shares used in computing Basic EPS is the weighted average number of shares
outstanding during the period. The Diluted EPS is calculated on the same basis as Basic EPS, after adjusting for the effects of
potential dilutive equity shares unless the effect of the potential dilutive equity shares is anti-dilutive.

2.18. PROVISIONS/ CONTINGENT LIABILITIES AND ASSETS

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a
result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized,
but are disclosed in the notes on accounts. Contingent assets are neither recognized nor disclosed in the financial statements.

2.19 GOVERNMENT GRANTS

(i) Grants from government are recognized when there is reasonable assurance that the grant will be received and all attaching
conditions will be complied with.

(ii) Government grant relating to Specific fixed assets is shown as deduction from the gross value of the asset concerned in
arriving at its book value.

(iii) Grants related to revenue items are presented under general heading such as "Other Operating Revenue" or they are deducted
in reporting the related expense.


3.1) Details of shareholders holding more than 5% share in the company:

1. M/s. V. Ramakrishna Sons Pvt Ltd - 3,89,56,326 (3,89,56,326) Equity shares of Re.1/- each fully paid - 30.22% (30.22%)

2. M/s. V.R.K. Grandsons Investments Pvt Ltd - 95,78,330 (95,78,330) Equity shares of Re.1/- each fully paid- 7.43% (7.43%)

3 SBI Emerging Business Fund - 34,35,000 (92,93,792) Equity shares of Re.1/- each fully paid up 2.66% (7.21%)


5.4) a ) Term loans from banks for Cement plant at Muktyala are Secured by Paripassu First Charge on the Fixed Assets, paripassu
Second charge on the current assets and charge on the leasehold rights of the leased Lands of the Muktyala Cement Plant. The rate
of interest of the above said loan ranges between Base Rate plus margin 2%to 3%.


b) The long Terms loans obtained for Cement Plant at Muktyala are repayable in 28 Quarterly Installments of Rs.7.26 crores each
with effect from 30th June 2011.

5.5) a) Term loan obtained for Hotel project at Hyderabad is secured by First charge on the land, building and other

assets of the company at Somajiguda Hyderabad. The rate of interest of the above said loan is Base Rate plus margin 2%

b) The long term loan obtained for Hotel project is repayable in 28 quarterly installments of Rs. 1.61 crores with last
instilment being Rs.1.53 crores with holiday period of 39 months which includes construction period of 15 months and 24 months of
gestation period.

c) Additional Term loan of Rs.14.73 crores obtained for Hotel Project is repayable in 28 quarterly installments of Rs.0.53 crores
after holiday period of 18 months.

d) First installment of repayment for Hotel project commenced in May 2015.

5.6) a) Term Loan obtained for the Captive Power Plant Muktyala is secured by the First Charge on the fixed Assets

of the Captive Power Plant Muktyala. The rate of interest of the above said loan is Base Rate plus margin 1.75%.

b) The long Terms loans obtained for the Captive Power Plant Muktyala are repayable in 32 Quarterly Installments of Rs 2.49
crores with the last instilment being Rs 2.45 crores each with an initial moratorium period of two years from the date of first
disbursement. First installment of Repayment commenced in March''2015.

5.7) a) Term Loan obtained for the Cement Plant Macherla is secured by the First Charge on the fixed Assets (both

present and proposed out of the loan) and second charge on the current assets of the Cement Division at Macherla. The rate of
interest of the above said loan is Base Rate plus margin 2%.

b) The long Terms loans obtained for Cement Plant at Macherla are repayable in 28 Quarterly Installments of Rs 0.75 crores each
with an initial moratorium period of two years from the date of first disbursement. Repayments started from November 2014.

5.8) a) Term Loan of Rs.12 crores obtained for working capital and business operations is secured by Equitable

Mortgage on properties at Visakhapatnam, Mumbai and Hyderabad. The rate of interest of this loan is Base Rate plus margin 2%.

b) During the year, the Company has pre-paid Rs.10 crores of loan amount ahead of repayment schedule.

c) The balance loan is repayable in 4 equal half yearly installments of Rs.0.50 crores from June, 2015.

5.9) a) Term Loan of Rs.56 crores obtained for shoring up working capital is secured by Exclusive charge on land

near Chennai. The rate of interest of the above said loan is Base Rate plus margin 2%

b) This loan is repayable in 20 quarterly installments of Rs.2.80 crores after 2 years moratorium. First Installment of Repayment
falls due in June, 2016.

5.10) a) Term Loan of Rs.40 crores obtained for shoring up working capital is secured by Exclusive charge on Hydel

Division assets and property at Chennai. The rate of interest of the above said loan is Base Rate plus margin 2.25%

b) This loan is repayable in 20 quarterly installments of Rs.2 crores after 2 years moratorium. First instilment falls due in May
2017.

c) During the year, the Company has pre-paid Rs.8 crores of loan amount ahead of repayment schedule.


A). List of Related parties

Subsidiary Company KCP Vietnam Industries Limited

Joint Venture Company Fives Cail KCP Limited

Key Managerial Personnel Dr. VL. Dutt - Chairman and Managing Director

Smt. VL. Indira Dutt - Joint Managing Director Smt. Kavitha D Chitturi - Executive Director Sri V.Gandhi - Technical Director
Sri. G. N. Murty - Chief Financial Officer Sri. Y. Vijaya Kumar - Company Secretary

Relatives of Key Managerial Personnel Dr. V.L. Dutt -

Smt. Rajeswary Ramakrishanan - Sister

Smt. V.L. Indira Dutt -

Smt. S.R.V Rajyalakshmamma - Mother Sri. V Chandra Kumar - Brother Smt. Uma S Vallabhaneni - Sister Smt.V Rama Kumari - Sister

Smt. Kavitha D Chitturi -

Kum.Shivani Dutt Chitturi - Daughter Sri. Ravi Chitturi - Husband

Sri. V.Gandhi -

Smt. V Kamala Devi - Wife Sri. V Praveen Kumar - Son Smt. V Anupama - Daughter

Companies/Trusts controlled by Key KCP Technologies Limited

Managerial Personnel/Relatives V. Ramakrishna Sons Private Limited

The Jeypore Sugar Company Ltd. VRK Grandsons Investment (P) Limited BGE Engineering (India) Private Limited V Ramakrishna
Charitable Trust A Trust in the name of Bala Tripurasundari Ammavaru Fives Combustion Systems Pvt.Ltd


Mar 31, 2014

1.1 FIXED ASSETS

Fixed assets are stated at cost, less accumulated depreciation. Cost of acquisition of fi xed assets is inclusive of freight, duties, and taxes, incidental expenses relating thereto, interest on direct borrowals upto commissioning, wherever applicable, and the cost of installation/erection, as applicable. CENVAT availed, if any, on Fixed Assets, is not included in the Cost of such Fixed Assets capitalised.

1.2 LEASED ASSETS :

(A) ASSETS UNDER FINANCE LEASE:

Assets acquired under finance lease arrangement on or after 01.04.2001 are recognised separately among the fixed assets, at the inception of the lease at lower of their fair value or the present value of minimum lease payments in respect thereof. Depreciation and lease charges on such assets are accounted for, in accordance with the Accounting Standard-19 – "Accounting for Leases" issued by The Institute of Chartered Accountants of India .

(B) ASSETS UNDER OPERATING LEASE :

Assets used by the Company as a lessee under operating lease agreement are not recognised in the Company''s accounts. Lease payments under operating lease are charged to the profi t and loss account on a systematic basis representative of the pattern of the benefi t accruing to the Company from the use of the asset under operating lease.

1.3. INVESTMENTS

Investments (Long Term) are stated at cost less provision for diminution in value other than temporary, if any. Short term investments are valued at Cost or Fair value whichever is lower.

1.4. INVENTORIES

(a) Finished goods are valued at cost or market value, whichever is lower.

(b) Stock of scrap –

i. In respect of Engineering Unit, purchased scrap and internally generated scrap for use in production are both valued at average cost of purchased scrap.

ii. In respect of other scrap, the stock of scrap is not valued and adjusted. Sales, as and when made, are adjusted.

(c) Work-in-Progress, raw materials, stores, spares, material in transit, are valued at cost except where the net realisable value of the fi nished goods they are used in is less than the cost of fi nished goods and in such an event, if the replacement cost of such materials etc., is less than their book values, they are valued at replacement cost.

1.5. SALES AND OTHER EARNINGS

(a) Sales and service earnings are inclusive of excise duty, service tax, freight, insurance etc. recovered thereon.

(b) Despatches from Engineering Unit are in completely knocked down condition and are invoiced at the appropriate technically evaluated values, which are matched with contracted sale prices.

(c) Electricity generated by the power units of the company, sold to its other units is accounted at the tariff rates charged by the State Electricity Boards. Such earnings are adjusted to the power charges.

(d) The revenue from sale of Renewable Energy credit is recognised on delivery thereof or sale of right therein, as the case may be, in terms of the contract with the respective buyers.

(e) Dividend income is accounted as and when the right to receive arises.

(f) Other income – Revenue in respect of other incomes are recognised when there is a reasonable certainty as to its realisation.

1.6. FOREIGN EXCHANGE TRANSACTIONS

A) Transactions in foreign currency are initially accounted at the exchange rate prevailing on the date of the transaction, and adjusted appropriately with the difference in the rate of exchange arising on actual receipt/payment during the year.

B) At each Balance Sheet date

- foreign currency monetary items are reported using the rate of exchange on that date

- foreign currency non-monetary items are reported using the exchange rate at which they were initially recognized

C) In respect of forward exchange contracts in the nature of hedges

- Premium or discount on the contract is amortised over the term of the contract,

- Exchange differences on the contract are recognized as profi t or loss in the period in which they arise

1.7. ACCOUNTING FOR DERIVATIVES

The company uses derivative instruments to hedge its exposure to movements in foreign exchange rates, interest rates and currency risks. The objective of these derivative instruments is only to reduce the risk or cost to the company and is not intended for trading or speculation purposes.

1.8. EMPLOYEE BENEFITS

a) Short Term Employee Benefits are recognized as an expense at the undiscounted amount in the Profit and Loss account of the year in which the related service is rendered.

b) Long Term Employee Benefits i.e. such benefi ts which do not fall due wholly within twelve months after the end of the period in which the employees render the related service, are recognized as follows

- Expense is arrived at as per actuarial valuation and is recognized and charged to the Profi t and Loss Account in the year in which employee has rendered services in lieu of such leave.

- Liability as at the date of each Balance Sheet is arrived at and recognized therein as per actuarial valuation.

c) Post Employment Benefits:

(i) Defined Contribution plans:

The company''s employees are covered under superannuation schemes, state governed provident fund scheme, employee state insurance scheme and employee pension scheme, which are in the nature of Defined Contribution Plans. The contributions paid/ payable under the schemes are recognized during the period in which the employee renders the related service.

(ii) Defi ned Benefit plans:

The company''s liability to gratuity on retirement of its eligible employees is funded under a Defined Benefit Plan with the Life Insurance Corporation of India. The present value of the obligation under such defi ned benefit plan is determined based on actuarial valuation using the Projected Unit Credit Method. The incremental expense thereon for each year is arrived at as per actuarial valuation and is recognized and charged to the Profit and Loss account in the year in which the employee has rendered service.

The fair value of the plan assets and the gross plan obligation, under the said plan, are recognized in each Balance Sheet on net basis.

d) Actuarial Gains/losses are charged to the Profit and Loss account immediately in each year.

1.9. DEPRECIATION

Depreciation is provided in accordance with the rates and rules prescribed under Schedule XIV to the Companies Act, 1956, as follows:--

i. In respect of assets existing as on 30-6-1988, under the written down value method: and

ii. In respect of assets acquired on or after 1-7- 1988, under the straight line method.

1.10. IMPAIRMENT OF ASSETS:

The carrying amount of assets are reviewed at each Balance sheet date to assess, if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever that carrying amount of the assets exceeds its recoverable amounts. The recoverable amount is the greater of the assets net selling price and value in use. The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

1.11. WARRANTY CLAIMS

Company''s liability for Warranty claims and Guarantee claims are accounted on acrual basis as per contracts, after adjusting the claims no longer required.

1.12. DIVIDENDS

Provision is made in the accounts for the dividends paid / payable by the Company as recommended by the Board of Directors, pending approval of the shareholders at the Annual General Meeting. Income Tax on dividend payable is provided for in the year to which such dividends relate.

1.13. BORROWING COST

Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use. All other borrowing costs are charged to revenue in the period in which they are incurred.

1.14. EXPENDITURE DURING CONSTRUCTION PERIOD:

All identifi able revenue expenses including interest on term loans incurred in respect of various projects/ expansions are allocated to capital cost of respective assets/ capital work in progress.

1.15. EXPENDITURE ON APPROVED RESEARCH AND DEVELOPMENT PROGRAMME

In respect of approved Research and Development Programme, expenditure of capital nature is included in the fi xed assets and other expenditure is charged off to revenue in the year in which such expenditure is incurred.

1.16. TAXATION

Provision is made for income tax liability estimated to arise on the results for the year at the current rate of tax in accordance with the Income Tax Act, 1961.

- Deferred tax resulting from timing differences between taxable and accounting income is accounted for using the tax rates and laws that are enacted or substantively enacted as on the balance sheet date.

- Deferred tax assets arising on account of brought forward losses and unabsorbed depreciation are recognised only when there is virtual certainty supported by convincing evidence that such assets will be realised. Deferred tax assets arising on other temporary timing differences are recognised only if there is a reasonable certainty of realisation.

- MAT Credit Entitlement as per the provisions of Income Tax Act, 1961, is treated as an asset by credit to the Profit and loss account.

1.17. EARNINGS PER SHARE (EPS)

The earnings considered in ascertaining the company''s Basic EPS is the attributable net profi t or loss to the equity shareholders as per AS-20 "Earnings Per Share". The number of shares used in computing Basic EPS is the weighted average number of shares outstanding during the period. The Diluted EPS is calculated on the same basis as Basic EPS, after adjusting for the effects of potential dilutive equity shares unless the effect of the potential dilutive equity shares is anti-dilutive.

1.18. PROVISIONS/ CONTINGENT LIABILITIES AND ASSETS

Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outfl ow of resources. Contingent liabilities are not recognised, but are disclosed in the notes on accounts. Contingent assets are neither recognised nor disclosed in the fi nancial statements.

1.19 GOVERNMENT GRANTS

(i). Grants from government are recognised when there is reasonable assurance that the grant will be received and all attaching conditions will complied with.

(ii) Government grants relating to Specifi c fi xed assets is shown as deduction from the gross value of the asset concerned in arriving at its book value.

(iii) Grants related to revenue items are presented under general heading such as "Other Income" or they are deducted in reporting the related expense.


Mar 31, 2013

1.1 FIXED ASSETS

Fixed assets are stated at cost, less accumu- lated depreciation. Cost of acquisition of fi xed assets is inclusive of freight, duties, and taxes, incidental expenses relating thereto, interest on direct borrowals upto commissioning, wherever applicable, and the cost of installation/erection, as applicable. CENVAT availed, if any, on Fixed Assets, is not included in the Cost of such Fixed Assets capitalised.

1.2 LEASED ASSETS :

(A) ASSETS UNDER FINANCE LEASE:

Assets acquired under fi nance lease arrange- ment on or after 01.04.2001 are recognised separately among the fi xed assets, at the incep- tion of the lease at lower of their fair value or the present value of minimum lease payments in respect thereof. Depreciation and lease charges on such assets are accounted for, in accordance with the Accounting Standard-19 – "Accounting for Leases" issued by The Institute of Chartered Accountants of India .

(B) ASSETS UNDER OPERATING LEASE :

Assets used by the Company as a lessee under operating lease agreement are not recognised in the Company''s accounts. Lease payments under operating lease are charged to the Statement of Profi t and Loss on a systematic basis representa- tive of the pattern of the benefi t accruing to the Company from the use of the asset under operat- ing lease.

1.3. INVESTMENTS

Investments (Long Term) are stated at cost less provision for diminution in value other than tem- porary, if any. Short term investments are valued at Cost or Fair value whichever is lower.

1.4. INVENTORIES

(a) Finished goods are valued at cost or market value, whichever is lower.

(b) Stock of scrap –

i. In respect of Engineering Unit, purchased scrap and internally generated scrap for use in production are both valued at average cost of purchased scrap.

ii. In respect of other scrap, the stock of scrap is not valued and adjusted. Sales, as and when made, are adjusted.

(c) Work-in-Progress, raw materials, stores, spares, material in transit, are valued at cost except where the net realisable value of the fi nished goods they are used in is less than the cost of fi nished goods and in such an event, if the replacement cost of such materials etc., is less than their book values, they are valued at replacement cost.

1.5. SALES AND OTHER EARNINGS

(a) Sales and service earnings are inclusive of excise duty, service tax, freight, insurance etc. recovered thereon.

(b) Despatches from Engineering Unit are in completely knocked down condition and are invoiced at the appropriate technically evaluated values, which are matched with contracted sale prices.

(c) Electricity generated by the power units of the Company, sold to its other units is accounted at the tariff rates charged by the State Electricity Boards. Such earnings are adjusted to the power charges.

(d) Dividend income is accounted as and when the right to receive arises.

(e) Other income - Revenue in respect of other incomes are recognised when there is a reasonable certainty as to its realisation.

1.6. FOREIGN EXCHANGE TRANSACTIONS

A) Transactions in foreign currency are initially accounted at the exchange rate prevailing on the date of the transaction, and adjusted appropriately with the difference in the rate of exchange arising on actual receipt/payment during the year.

B) At each Balance Sheet date

- foreign currency monetary items are reported using the rate of exchange on that date

- foreign currency non-monetary items are reported using the exchange rate at which they were initially recognized

C) In respect of forward exchange contracts in the nature of hedges

- Premium or discount on the contract is amortised over the term of the contract,

- Exchange differences on the contract are recognized as profi t or loss in the period in which they arise

1.7. ACCOUNTING FOR DERIVATIVES

The Company uses derivative instruments to hedge its exposure to movements in foreign exchange rates, interest rates and currency risks. The objective of these derivative instruments is only to reduce the risk or cost to the company and is not intended for trading or speculation purposes.

1.8. EMPLOYEE BENEFITS

a) Short Term Employee Benefi ts are recognized as an expense at the undiscounted amount in the Statement of Profi t and Loss of the year in which the related service is rendered.

b) Long Term Employee Benefi ts i.e. such benefi ts which do not fall due wholly within twelve months after the end of the period in which the employees render the related service, are recognized as follows

- Expense is arrived at as per actuarial valuation and is recognized and charged to the Statement of Profi t and Loss in the year in which employee has rendered services in lieu of such leave.

- Liability as at the date of each Balance Sheet is arrived at and recognized therein as per actuarial valuation.

c) Post Employment Benefi ts:

(i) Defi ned Contribution plans:

The company''s employees are covered under Superannuation Schemes, state governed Provident Fund Scheme, Employee State Insurance Scheme and Employee Pension Scheme, which are in the nature of Defi ned Contribution Plans. The contributions paid/ payable under the Schemes are recognized during the period in which the employee renders the related service.

(ii) Defi ned Benefi t plans:

The company''s liability to gratuity on retirement of its eligible employees is funded under a Defi ned Benefi t Plan with the Life Insurance Corporation of India. The present value of the obligation under such defi ned benefi t plan is determined based on actuarial valuation using the Projected Unit Credit Method. The incremental expense thereon for each year is arrived at as per actuarial valuation and is recognized and charged to the Statement of Profi t and Loss in the year in which the employee has rendered service.

The fair value of the plan assets and the gross plan obligation, under the said plan, are recognized in each Balance Sheet on net basis.

d) Actuarial Gains/Losses are charged to the Statement of Profi t and Loss immediately in each year.

1.9. DEPRECIATION

Depreciation is provided in accordance with the rates and rules prescribed under Schedule XIV to the Companies Act, 1956, as follows:--

i. In respect of assets existing as on 30-6-1988, under the written down value method: and

ii. In respect of assets acquired on or after 1-7-1988, under the straight line method.

1.10. IMPAIRMENT OF ASSETS:

The carrying amount of assets are reviewed at each Balance sheet date to assess, if there is any indication of impairment based on inter- nal/external factors. An impairment loss is rec- ognised wherever that carrying amount of the assets exceeds its recoverable amounts. The recoverable amount is the greater of the assets net selling price and value in use. The impair- ment loss recognised in prior accounting period is reversed if there has been a change in the esti- mate of recoverable amount.

1.11. WARRANTY CLAIMS

Company''s liability for Warranty claims and Guarantee claims are accounted on acrual basis as per contracts, after adjusting the claims no lon- ger required.

1.12. DIVIDENDS

Provision is made in the accounts for the dividends paid / payable by the Company as recommended by the Board of Directors, pending approval of the Shareholders at the Annual General Meeting. Income Tax on dividend payable is provided for in the year to which such dividends relate.

1.13. BORROWING COST

Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use. All other borrow- ing costs are charged to revenue in the period in which they are incurred.

1.14. EXPENDITURE DURING CONSTRUCTION PERIOD:

All identifi able revenue expenses including inter- est on term loans incurred in respect of various projects/ expansions are allocated to capital cost of respective assets/ capital work in progress.

1.15. EXPENDITURE ON APPROVED RESEARCH AND DEVELOPMENT PROGRAMME

In respect of approved Research and Development Programme, expenditure of capi- tal nature is included in the fi xed assets and other expenditure is charged off to revenue in the year in which such expenditure is incurred.

1.16. TAXATION

Provision is made for income tax liability esti- mated to arise on the results for the year at the current rate of tax in accordance with the Income Tax Act, 1961.

- Deferred tax resulting from timing differences between taxable and accounting income is accounted for using the tax rates and laws that are enacted or substantively enacted as on the balance sheet date.

- Deferred tax assets arising on account of brought forward losses and unabsorbed depreciation are recognised only when there is virtual certainty supported by convincing evidence that such assets will be realised. Deferred tax assets arising on other temporary timing differences are recognised only if there is a reasonable certainty of realisation.

- MAT Credit Entitlement as per the provisions of Income Tax Act, 1961, is treated as an asset by credit to the Statement of Profi t and Loss.

1.17. EARNINGS PER SHARE (EPS)

The earnings considered in ascertaining the Company''s Basic EPS is the attributable net profi t or loss to the Equity Shareholders as per AS-20 "Earnings Per Share". The number of shares used in computing Basic EPS is the weighted average number of shares outstanding during the period. The Diluted EPS is calculated on the same basis as Basic EPS, after adjusting for the effects of potential dilutive Equity Shares unless the effect of the potential dilutive Equity Shares is anti-dilutive.

1.18. PROVISIONS/ CONTINGENT LIABILITIES AND ASSETS

Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outfl ow of resources. Contingent Liabilities are not recognised, but are disclosed in the notes on accounts. Contingent Assets are neither recognised nor disclosed in the fi nancial statements.

1.19 GOVERNMENT GRANTS

(i). Grants from Government are recognised when there is reasonable assurance that the grant will be received and all attaching conditions will complied with.

(ii) Government grants relating to Specifi c fi xed assets is shown as deduction from the gross value of the asset concerned in arriving at its book value.

(iii) Grants related to revenue items are presented under general heading such as "Other Income" or they are deducted in reporting the related expense.


Mar 31, 2012

1.1 FIXED ASSETS

Fixed assets are stated at cost, less accumulated depreciation. Cost of acquisition of fixed assets is inclusive of freight, duties, and taxes, incidental expenses relating thereto, interest on direct borrowals up to commissioning, wherever applicable, and the cost of installation/erection, as applicable. CENVAT availed, if any, on Fixed Assets, is not included in the Cost of such Fixed Assets capitalised.

1.2 LEASED ASSETS :

(A) ASSETS UNDER FINANCE LEASE:

Assets acquired under finance lease arrangement on or after 01.04.2001 are recognised separately among the fixed assets, at the inception of the lease at lower of their fair value or the present value of minimum lease payments in respect thereof. Depreciation and lease charges on such assets are accounted for, in accordance with the Accounting Standard-19 - "Accounting for Leases" issued by The Institute of Chartered Accountants of India .

(B) ASSETS UNDER OPERATING LEASE :

Assets used by the Company as a lessee under operating lease agreement are not recognised in the Company's accounts. Lease payments under operating lease are charged to the profit and loss account on a systematic basis representative of the pattern of the benefit accruing to the Company from the use of the asset under operating lease.

1.3. INVESTMENTS

Investments (Long Term) are stated at cost less provision for diminution in value other than temporary, if any. Short term investments are valued at Cost or Fair value whichever is lower.

1.4. INVENTORIES

(a) Finished goods are valued at cost or market value, whichever is lower.

(b) Stock of scrap -

i. In respect of Engineering Unit, purchased scrap and internally generated scrap for use in production are both valued at average cost of purchased scrap.

ii. In respect of other scrap, the stock of scrap is not valued and adjusted. Sales, as and when made, are adjusted.

(c) Work-in-Progress, raw materials, stores, spares, material in transit, are valued at cost except where the net realisable value of the finished goods they are used in, is less than the cost of finished goods and in such an event, if the replacement cost of such materials etc., is less than their book values, they are valued at replacement cost.

1.5. SALES AND OTHER EARNINGS

(a) Sales and service earnings are inclusive of excise duty, service tax, freight, insurance etc. recovered thereon.

(b) Despatches from Engineering Unit are in completely knocked down condition and are invoiced at the appropriate technically evaluated values, which are matched with contracted sale prices.

(c) Electricity generated by the power units of the company, sold to its other units is accounted at the tariff rates charged by the State Electricity Boards. Such earnings are adjusted to the power charges.

(d) Dividend income is accounted as and when the right to receive arises.

(e) Other income - Revenue in respect of other incomes are recognised when there is a reasonable certainty as to its realisation.

1.6. FOREIGN EXCHANGE TRANSACTIONS

A) Transactions in foreign currency are initially accounted at the exchange rate prevailing on the date of the transaction, and adjusted appropriately with the difference in the rate of exchange arising on actual receipt/payment during the year.

B) At each Balance Sheet date

- foreign currency monetary items are reported using the rate of exchange on that date

- foreign currency non-monetary items are reported using the exchange rate at which they were initially recognized

C) In respect of forward exchange contracts in the nature of hedges

- Premium or discount on the contract is amortised over the term of the contract,

- Exchange differences on the contract are recognized as profit or loss in the period in which they arise

1.7. ACCOUNTING FOR DERIVATIVES

The company uses derivative instruments to hedge its exposure to movements in foreign exchange rates, interest rates and currency risks. The objective of these derivative instruments is only to reduce the risk or cost to the company and is not intended for trading or speculation purposes.

1.8. EMPLOYEE BENEFITS

a) Short Term Employee Benefits are recognized as an expense at the undiscounted amount in the Profit and Loss account of the year in which the related service is rendered.

b) Long Term Employee Benefits i.e. such benefits which do not fall due wholly within twelve months after the end of the period in which the employees render the related service, are recognized as follows

- Expense is arrived at as per actuarial valuation and is recognized and charged to the Profit and Loss Account in the year in which employee has rendered services in lieu of such leave.

- Liability as at the date of each Balance Sheet is arrived at and recognized therein as per actuarial valuation.

c) Post Employment Benefits:

(i) Defined Contribution plans:

The company's employees are covered under superannuation schemes, state governed provident fund scheme, employee state insurance scheme and employee pension scheme, which are in the nature of Defined Contribution Plans. The contributions paid/ payable under the schemes are recognized during the period in which the employee renders the related service.

(ii) Defined Benefit plans:

The company's liability to gratuity on retirement of its eligible employees is funded under a Defined Benefit Plan with the Life Insurance Corporation of India. The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Unit Credit Method. The incremental expense thereon for each year is arrived at as per actuarial valuation and is recognized and charged to the Profit and Loss account in the year in which the employee has rendered service.

The fair value of the plan assets and the gross plan obligation, under the said plan, are recognized in each Balance Sheet on net basis.

d) Actuarial Gains/losses are charged to the Profit and Loss account immediately in each year.

1.9. DEPRECIATION

Depreciation is provided in accordance with the rates and rules prescribed under Schedule XIV to the Companies Act, 1956, as follows:--

i. In respect of assets existing as on 30-6-1988, under the written down value method: and

ii. In respect of assets acquired on or after 1-7- 1988, under the straight line method.

1.10. IMPAIRMENT OF ASSETS:

The carrying amount of assets are reviewed at each Balance sheet date to assess, if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever that carrying amount of the assets exceeds its recoverable amounts.

The recoverable amount is the greater of the assets net selling price and value in use. The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

1.11. WARRANTY CLAIMS

Company's liability for Warranty claims and Guarantee claims are accounted on acrual basis as per contracts, after adjusting the claims no longer required.

1.12. DIVIDENDS

Provision is made in the accounts for the dividends paid / payable by the Company as recommended by the Board of Directors, pending approval of the shareholders at the Annual General Meeting. Income Tax on dividend payable is provided for in the year to which such dividends relate.

1.13. BORROWING COST

Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use. All other borrowing costs are charged to revenue in the period in which they are incurred.

1.14. EXPENDITURE DURING CONSTRUCTION PERIOD:

All identifiable revenue expenses including interest on term loans incurred in respect of various projects/ expansions are allocated to capital cost of respective assets/ capital work in progress.

1.15. EXPENDITURE ON APPROVED RESEARCH AND DEVELOPMENT PROGRAMME

In respect of approved Research and Development Programme, expenditure of capital nature is included in the fixed assets and other expenditure is charged off to revenue in the year in which such expenditure is incurred.

1.16. TAXATION

Provision is made for income tax liability estimated to arise on the results for the year at the current rate of tax in accordance with the Income Tax Act, 1961.

- Deferred tax resulting from timing differences between taxable and accounting income is accounted for using the tax rates and laws that are enacted or substantively enacted as on the balance sheet date.

- Deferred tax assets arising on account of brought forward losses and unabsorbed depreciation are recognised only when there is virtual certainty supported by convincing evidence that such assets will be realised. Deferred tax assets arising on other temporary timing differences are recognised only if there is a reasonable certainty of realisation.

- MAT Credit Entitlement as per the provisions of Income Tax Act, 1961, is treated as an asset by credit to the Profit and loss account.

1.17. EARNINGS PER SHARE (EPS)

The earnings considered in ascertaining the company's Basic EPS is the attributable net profit or loss to the equity shareholders as per AS-20 "Earnings Per Share". The number of shares used in computing Basic EPS is the weighted average number of shares outstanding during the period. The Diluted EPS is calculated on the same basis as Basic EPS, after adjusting for the effects of potential dilutive equity shares unless the effect of the potential dilutive equity shares is anti-dilutive.

1.18. PROVISIONS/ CONTINGENT LIABILITIES AND ASSETS

Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognised, but are disclosed in the notes on accounts. Contingent assets are neither recognised nor disclosed in the financial statements.

1.19 GOVERNMENT GRANTS

(i). Grants from government are recognised when there is reasonable assurance that the grant will be received and all attaching conditions will be complied with.

(ii) Government grants relating to assets are recognised in the proportion in which the amortisation of such assets is charged and are netted off against the amortisation on such assets

(iii) Grants related to depreciable assets are treated and disclosed as deferred income which is recognised in Statement of Profit and loss over the periods and in the proportion in which depreciation on related asset is charged


Mar 31, 2011

1. GENERAL

Financial statements are prepared under the historical cost convention and in accordance with generally accepted accounting practices.

2. FIXED ASSETS

Fixed assets are stated at cost, less accumulated depreciation. Cost of acquisition of fi xed assets is inclusive of freight, duties, and taxes, incidental expenses relating thereto, interest on direct borrowals upto commissioning, wherever applicable, and the cost of installation/erection, as applicable. CENVAT availed, if any, on Fixed Assets, is not included in the Cost of such Fixed Assets capitalised.

3. LEASED ASSETS

(A) ASSETS UNDER FINANCE LEASE:

Assets acquired under fi nance lease arrangement on or after 01.04.2001 are recognised separately among the fi xed assets, at the inception of the lease at lower of their fair value or the present value of minimum lease payments in respect thereof. Depreciation and lease charges on such assets are accounted for, in accordance with the Accounting Standard-19 – "Accounting for Leases" issued by The Institute of Chartered Accountants of India.

(B) ASSETS UNDER OPERATING LEASE:

Assets used by the Company as a lessee under operating lease agreement are not recognised in the Companys accounts. Lease payments under operating lease are charged to the Profit and loss account on a systematic basis representative of the pattern of the benefit accruing to the Company from the use of the asset under operating lease.

4. INVESTMENTS

Investments (Long Term) are stated at cost less provision for diminution in value other than temporary, if any. Short term investments are valued at Cost or Fair value whichever is lower.

5 INVENTORIES

(a) Finished goods are valued at cost or market value, whichever is lower.

(b) Stock of scrap -

i. In respect of Engineering Unit, purchased scrap and internally generated scrap for use in production are both valued at average cost of purchased scrap.

ii. In respect of other scrap, the stock of scrap is not valued and adjusted. Sales, as and when made, are adjusted.

(c) Work-in-Progress, raw materials, stores, spares, material in transit, are valued at cost except where the net realisable value of the fi nished goods they are used in is less than the cost of fi nished goods and in such an event, if the replacement cost of such materials etc., is less than their book values, they are valued at replacement cost.

6. SALES AND OTHER EARNINGS

(a) Sales and service earnings are inclusive of excise duty, service tax, freight, insurance etc. recovered thereon.

(b) Despatches from Engineering Unit are in completely knocked down condition and are invoiced at the appropriate technically evaluated values, which are matched with contracted sale prices.

(c) Electricity generated by the power units of the company, sold to its other units is accounted at the tariff rates charged by the State Electricity Boards. Such earnings are adjusted to the power charges.

(d) Dividend income is accounted as and when the right to receive arises.

(e) Other income - Revenue in respect of other incomes are recognised when there is a reasonable certainty as to its realisation.

7. FOREIGN EXCHANGE TRANSACTIONS

A) Transactions in foreign currency are initially accounted at the exchange rate prevailing on the date of the transaction, and adjusted appropriately with the difference in the rate of exchange arising on actual receipt/payment during the year.

B) At each Balance Sheet date

- foreign currency monetary items are reported using the rate of exchange on that date

- foreign currency non-monetary items are reported using the exchange rate at which they were initially recognized

C) In respect of forward exchange contracts in the nature of hedges

- Premium or discount on the contract is amortised over the term of the contract,

- Exchange differences on the contract are recognized as Profit or loss in the period in which they arise

8. ACCOUNTING FOR DERIVATIVES

The company uses derivative instruments to hedge its exposure to movements in foreign exchange rates, interest rates and currency risks. The objective of these derivative instruments is only to reduce the risk or cost to the company and is not intended for trading or speculation purposes.

9. EMPLOYEE BENEFITS

a) Short Term Employee benefits are recognized as an expense at the undiscounted amount in the Profit and Loss account of the year in which the related service is rendered.

b) Long Term Employee benefits i.e. such benefits which do not fall due wholly within twelve months after the end of the period in which the employees render the related service, are recognized as follows

- Expense is arrived at as per actuarial valuation and is recognized and charged to the Profit and Loss Account in the year in which employee has rendered services in lieu of such leave.

- Liability as at the date of each Balance Sheet is arrived at and recognized therein as per actuarial valuation.

c) Post-Employment benefits:

(i) Defined Contribution plans: The

companys employees are covered under superannuation schemes, state governed provident fund scheme, employee state insurance scheme and employee pension scheme, which are in the nature of Defined Contribution Plans. The contributions paid/ payable under the schemes are recognized during the period in which the employee renders the related service.

(ii) Defined benefit plans:

The companys liability to gratuity on retirement of its eligible employees is funded under a Defined benefit Plan with the Life Insurance Corporation of India. The present value of the obligation under such Defined benefit plan is determined based on actuarial valuation using the Projected Unit Credit Method. The incremental expense thereon for each year is arrived at as per actuarial valuation and is recognized and charged to the Profit and Loss account in the year in which the employee has rendered service.

The fair value of the plan assets and the gross plan obligation, under the said plan, are recognized in each Balance Sheet on net basis.

d) Actuarial Gains/losses are charged to the Profit and Loss account immediately in each year.

10. DEPRECIATION

Depreciation is provided in accordance with the rates and rules prescribed under Schedule XIV to the Companies Act, 1956, as follows:--

i. In respect of assets existing as on 30-6-1988, under the written down value method: and

ii. In respect of assets acquired on or after 1-7- 1988, under the straight line method.

11. IMPAIRMENT OF ASSETS

The carrying amount of assets are reviewed at each Balance sheet date to assess, if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever that carrying amount of the assets exceeds its recoverable amounts. The recoverable amount is the greater of the assets net selling price and value in use. The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

12. WARRANTY CLAIMS

Companys liability for Warranty claims and Guarantee claims are accounted on acrual basis as per contracts, after adjusting the claims no longer required.

13. DIVIDENDS

Provision is made in the accounts for the dividends paid / payable by the Company as recommended by the Board of Directors, pending approval of the shareholders at the Annual General Meeting. Income Tax on dividend payable is provided for in the year to which such dividends relate.

14. BORROWING COSTS

Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use. All other borrowing costs are charged to revenue in the period in which they are incurred.

15. EXPENDITURE DURING CONSTRUCTION PERIOD

All identifi able revenue expenses including interest on term loans incurred in respect of various projects/ expansions are allocated to capital cost of respective assets/ capital work in progress.

16. EXPENDITURE ON APPROVED RESEARCH AND DEVELOPMENT PROGRAMME

In respect of approved Research and Development Programme, expenditure of capital nature is included in the fi xed assets and other expenditure is charged off to revenue in the year in which such expenditure is incurred.

17. TAXATION

Provision is made for income tax liability estimated to arise on the results for the year at the current rate of tax in accordance with the Income Tax Act, 1961.

- Deferred tax resulting from timing differences between taxable and accounting income is

accounted for using the tax rates and laws that are enacted or substantively enacted as on the balance sheet date.

- Deferred tax assets arising on account of brought forward losses and unabsorbed depreciation are recognised only when there is virtual certainty supported by convincing evidence that such assets will be realised. Deferred tax assets arising on other temporary timing differences are recognised only if there is a reasonable certainty of realisation.

- MAT Credit Entitlement as per the provisions of Income Tax Act, 1961, is treated as an asset by credit to the Profit and loss account.

18. EARNINGS PER SHARE (EPS)

The earnings considered in ascertaining the companys Basic EPS is the attributable net Profit or loss to the equity shareholders as per AS-20 "Earnings Per Share". The number of shares used in computing Basic EPS is the weighted average number of shares outstanding during the period. The Diluted EPS is calculated on the same basis as Basic EPS, after adjusting for the effects of potential dilutive equity shares unless the effect of the potential dilutive equity shares is anti-dilutive.

19. PROVISIONS/ CONTINGENT LIABILITIES AND ASSETS

Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outfl ow of resources. Contingent liabilities are not recognised, but are disclosed in the notes on accounts. Contingent assets are neither recognised nor disclosed in the financial statements.


Mar 31, 2010

1. GENERAL

Financial statements are prepared under the historical cost convention and in accordance with generally accepted accounting practices.

2. FIXED ASSETS

Fixed assets are stated at cost, less accumulated depreciation. Cost of acquisition of fixed assets is inclusive of freight, duties, and taxes, incidental expenses relating thereto, interest on direct borrowals upto commissioning, wherever applicable, and the cost of installation/erection, as applicable. CENVAT availed, if any, on Fixed Assets, is not included in the Cost of such Fixed Assets capitalised.

3. LEASED ASSETS

(A) ASSETS UNDER FINANCE LEASE:

Assets acquired under finance lease arrangement on or after 01.04.2001 are recognised separately among the fixed assets, at the inception of the lease at lower of their fair value or the present value of minimum lease payments in respect thereof. Depreciation and lease charges on such assets are accounted for, in accordance with the Accounting Standard-19 - "Accounting for Leases" issued by The Institute of Chartered Accountants of India.

(B) ASSETS UNDER OPERATING LEASE:

Assets used by the Company as a lessee under operating lease agreement are not recognised in the Companys accounts. Lease payments under operating lease are charged to the profit and loss account on a systematic basis representative of the pattern of the benefit accruing to the Company from the use of the asset under operating lease.

4. INVESTMENTS

Investments (Long Term) are stated at cost less provision for diminution in value other than temporary, if any. Short term investments are valued at Cost or Fair value whichever is lower.

5 INVENTORIES

(a) Finished goods are valued at cost or market value, whichever is lower.

(b) Stock of scrap -

i. In respect of Engineering Unit, purchased scrap and internally generated scrap for use in production are both valued at average cost of purchased scrap.

ii. In respect of other scrap, the stock of scrap is not valued and adjusted. Sales, as and when made, are adjusted.

(c) Work-in-Progress, raw materials, stores, spares, material in transit, are valued at cost except where the net realisable value of the finished goods they are used in is less than the cost of finished goods and in such an event, if the replacement cost of such materials etc., is less than their book values, they are valued at replacement cost.

6. SALES AND OTHER EARNINGS

(a) Sales and service earnings are inclusive of excise duty, service tax, freight, insurance etc. recovered thereon.

(b) Despatches from Engineering Unit are in completely knocked down condition and are invoiced at the appropriate technically evaluated values, which are matched with contracted sale prices.

(c) Electricity generated by the Power generation units of the Company sold to its other units is accounted at the tariff rates charged by the State Electricity Board. Such earnings are adjusted to the power charges.

(d) Dividend income is accounted as and when the right to receive arises.

(e) Other income - Revenue in respect of other incomes are recognised when there is a reasonable certainty as to its realisazation.

7. FOREIGN EXCHANGE TRANSACTIONS

A) Transactions in foreign currency are initially accounted at the exchange rate prevailing on the date of the transaction, and adjusted appropriately with the difference in the rate of exchange arising on actual receipt/payment during the year.

B) At each Balance Sheet date

- foreign currency monetary items are reported using the rate of exchange on that date

- foreign currency non-monetary items are reported using the exchange rate at which they were initially recognized

C) In respect of forward exchange contracts in the nature of hedges

- Premium or discount on the contract is amortised over the term of the contract,

- Exchange differences on the contract are recognized as profit or loss in the period in which they arise

8. ACCOUNTING FOR DERIVATIVES

The company uses derivative instruments to hedge its exposure to movements in foreign exchange rates, interest rates and currency risks. The objective of these derivative instruments is only to reduce the risk or cost to the company and is not intended for trading or speculation purposes.

9. EMPLOYEE BENEFITS

a) Short Term Employee Benefits are recognized as an expense at the undiscounted amount in the Profit and Loss account of the year in which the related service is rendered.

b) Long Term Employee Benefits i.e. such benefits which do not fall due wholly within twelve months after the end of the period in which the employees render the related service, are recognized as follows

- Expense is arrived at as per actuarial valuation and is recognized and charged to the Profit and Loss Account in the year in which employee has rendered services in lieu of such leave.

- Liability as ai the date of each Balance Sheet is arrived at and recognized therein as per actuarial valuation.

c) Post-Employment Benefits:

(i) Defined Contribution plans: The companys employees are covered under superannuation schemes, state governed provident fund scheme, employee state insurance scheme and employee pension scheme, which are in the nature of Defined Contribution Plans. The contributions paid/payable under the schemes are recognized during the period in which the employee renders the related service.

(ii) Defined Benefit plans:

The companys liability to gratuity on retirement of its eligible employees is funded under a Defined Benefit Plan with the Life Insurance Corporation of India. The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Unit Credit Method. The incremental expense thereon for each year is arrived at as per actuarial valuation and is recognized and charged to the Profit and Loss account in the year in which the employee has rendered service.

The fair value of the plan assets and the gross plan obligation, under the said plan, are recognized in each Balance Sheet on net basis.

d) Actuarial Gains/losses are charged to the Profit and Loss account immediately in each year.

10. DEPRECIATION

Depreciation is provided in accordance with the rates and rules prescribed under Schedule XIV to the Companies Act, 1956, as follows:--

i. In respect of assets existing as on 30-6-1988, under the written down value method: and

ii. In respect of assets acquired on or after 1-7- 1988, under the straight line method.

11. IMPAIRMENT OF ASSETS

The carrying amount of assets are reviewed at each Balance sheet date to assess, if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever that carrying amount of the assets exceeds its recoverable amounts. The recoverable amount is the greater of the assets net selling price and value in use. The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

12. WARRANTY CLAIMS

Companys liability for Warranty claims and Guarantee claims are accounted on acrual basis as per contracts, after adjusting the claims no longer required.

13. DIVIDENDS

Provision is made in the accounts for the dividends paid / payable by the Company as recommended by the Board of Directors, pending approval of the shareholders at the Annual General Meeting.

Income Tax on dividend payable is provided for in the year to which such dividends relate.

14. BORROWING COSTS

Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use. All other borrowing costs are charged to revenue in the period in which they are incurred.

15. EXPENDITURE DURING CONSTRUCTION PERIOD

All identifiable revenue expenses including interest on term loans incurred in respect of various projects/ expansions are allocated to capital cost of respective assets/ capital work in progress.

16. EXPENDITURE ON APPROVED RESEARCH AND DEVELOPMENT PROGRAMME

In respect of approved Research and Development Programme, expenditure of capital nature is included in the fixed assets and other expenditure is charged off to revenue in the year in which such expenditure is incurred.

17. TAXATION

Provision is made for income tax liability estimated to arise on the results for the year at the current rate of tax in accordance with the Income Tax Act, 1961.

- Deferred tax resulting from timing differences between taxable and accounting income is accounted for using the tax rates and laws that are enacted or substantively enacted as on the balance sheet date.

- Deferred tax assets arising on account of brought forward losses and unabsorbed depreciation are recognised only when there is virtual certainty supported by convincing evidence that such assets will be realised. Deferred tax assets arising on other temporary timing differences are recognised only if there is a reasonable certainty of realisation.

- MAT Credit Entitlement as per the provisions of Income Tax Act, 1961, is treated as an asset by credit to the Profit and loss account.

18. EARNINGS PER SHARE (EPS)

The earnings considered in ascertaining the companys Basic EPS is the attributable net profit or loss to the equity shareholders as per AS-20 "Earnings Per Share". The number of shares used in computing Basic EPS is the weighted average number of shares outstanding during the period. The Diluted EPS is calculated on the same basis as Basic EPS, after adjusting for the effects of potential dilutive equity shares unless the effect of the potential dilutive equity shares is anti-dilutive.

19. PROVISIONS/ CONTINGENT LIABILITIES AND ASSETS

Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognised, but are disclosed in the notes on accounts. Contingent assets are neither recognised nor disclosed in the financial statements.

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