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Accounting Policies of Mahindra CIE Automotive Ltd. Company

Dec 31, 2016

1. General information

1.1 Mahindra CIE Automotive Limited and activities

Mahindra CIE Automotive Limited (MCIE) is a Company incorporated in India having its registered office in Mumbai. MCIE is engaged in the business of production and sale of automotive components to original equipment manufacturers and other customers (including leading suppliers of components) in India and overseas.

The Company has manufacturing facilities in various locations across the country in India, MCIE has an established presence in each of these locations and supply automotive components to its customers based there and export products to customers based in other countries as well. MClE’s manufacturing locations are generally located close to major automotive manufacturing hubs in order to facilitate supplies to the customers.

MCIE is a subsidiary of CIE Automotive Group based in Spain. The Mahindra Group based in India is a significant shareholder in MCIE. Pursuant to a global alliance between the two Groups Mahindra’s automotive components businesses across various products in India and Europe were brought together.

Investments in 100% subsidiaries are detailed in Note 9B(i) &9c and these are accounted for at cost.

These standalone financial statements for the year ended 31st December, 2016 were approved for issue by the Board of Directors in accordance with their resolution dated 23rd February, 2017.

1.2 Change in Financial Year

Until 31st March, 2015, the financial year followed by MCIE was for a period of 12 months from 1st April to 31st March each year. Thereafter, MCIE changed its financial year to be for a period from 1st January to 31st December of the same calendar year. Accordingly, MCIE prepared its previous financial statements for a nine-month period from 1st April, 2015 to 31st December, 2015.The current period standalone financial statements are for the period from 1st January, 2016 to 31st December, 2016.

2. Summary of significant accounting policies

2.1 Basis of presentation

The standalone financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015. For all periods up to and including the year ended 31st December, 2015, the Company prepared its financial statements in accordance with accounting standards specified under the section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 and The Companies (Accounting Standards) Rules, 2006 (Collectively previous GAAP). These financial statements for the year ended 31st December, 2016 are the first the Company has prepared in accordance with Ind AS (refer to note 6 for information on how the Company has adopted Ind AS). The financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments).

The financial statements are presented in '' and all values are rounded to the nearest Million in single digit, except where otherwise indicated.

2.2 Segment information

Operating segments are reported consistently with the internal reporting provided to the Chief Executive Officer. The highest decision-making executive is responsible for allocating resources to and assessing the performance of the operating segments. The highest decision-making body is the Chief Executive Officer.

2.3 Current and non-current classification

The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current when it is:

- Expected to be realized or intended to be sold or consumed in normal operating cycle

- Held primarily for the purpose of trading

- Expected to be realized within twelve months after the reporting period, or

- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is current when:

- It is expected to be settled in normal operating cycle

- It is held primarily for the purpose of trading

- It is due to be settled within twelve months after the reporting period, or

- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Company classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets or liabilities.

The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The Company has identified twelve months as its operating cycle.

2.4 Foreign currencies

Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. Realized gains and losses and also exchange differences arising on translation at year end exchange rates of monetary assets and monetary liabilities outstanding at the end of the year are recognized in the statement of Income Statement.

Exchange differences are recognized as an income or expense in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or expiry of such forward exchange contract is recognized as income or expense for the period.

Exchange differences arising on a monetary item, forming part of a net investment in a Non Integral Foreign Operation is accumulated in Foreign Currency Translation Reserve.

2.5 Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government. The company has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as it has pricing latitude and is also exposed to inventory and credit risks.

Based on the Educational Material on Ind AS 18 issued by the ICAI, the Company has assumed that recovery of excise duty flows to the Company on its own account. This is for the reason that it is a liability of the manufacturer which forms part of the cost of production, irrespective of whether the goods are sold or not. Since the recovery of excise duty flows to the Company on its own account, revenue includes excise duty.

However, sales tax/ value added tax (VAT) is not received by the Company on its own account. Rather, it is tax collected on value added to the commodity by the seller on behalf of the government. Accordingly, it is excluded from revenue.

The specific recognition criteria described below must also be met before revenue is recognized.

Sale of goods

Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.

Interest income

For all debt instruments measured either at amortized cost or at fair value through other comprehensive income, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortized cost of a financial liability. 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. Interest income is included in finance income in the statement of profit and loss.

Dividends

Revenue is recognized when the Company’s right to receive the payment is established, which is generally when shareholders approve the dividend.

2.6 Government grants

Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognized as income in equal amounts over the expected useful life of the related asset.

When the Company receives grants of non-monetary assets, the asset and the grant are recorded at fair value amounts and released to profit or loss over the expected useful life in a pattern of consumption of the benefit of the underlying asset i.e. by equal annual installments. When loans or similar assistance are provided by governments or related institutions, with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as a government grant. The loan or assistance is initially recognized and measured at fair value and the government grant is measured as the difference between the initial carrying value of the loan and the proceeds received. The loan is subsequently measured as per accounting policy applicable to financial liabilities.

2.7 Taxes Current income tax

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in India where it generates taxable income.

Current income tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred tax

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax liabilities are recognized for all taxable temporary differences.

Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except:

- When deferred tax assets relating to deductible temporary difference arise from initial recognition of assets and liability in transaction that is not business combination and, at time of transaction affects neither the accounting profit or taxable profit or loss.

- In respect of deductible temporary difference associated with investment in subsidiaries, associate and interest in joint venture, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will available against which the temporary difference can be utilized.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity.

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

Sales/ Value added tax paid on acquisition of assets or on incurring expenses

Expenses and assets recognized net of amount of sales / value added tax paid, except

- When tax incurred on purchase of assets or services is not recoverable for taxation authority, in which case tax paid is recognized as part of the cost of acquisition of asset or as a part of the expense item, as applicable

- When receivable and payable are stated with amount of tax included

The net amount of tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in balance sheet.

2.8 Property, plant and equipment

Freehold land carrying at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of items.

Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All others repairs and maintenance are charged to profit and loss during the reporting period in which they are incurred.

Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:

- Building 15to50 years

- Plant and equipment 2 to 24 years

The Company, based on technical assessment made by technical expert and management estimate, depreciates certain item building, property, plant and equipment overestimated useful lives which are different from useful life prescribed in schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of period over which assets are likely to be used.

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognized.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

2.9 Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses. Internally generated intangibles, excluding capitalized development costs, are not capitalized and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit or loss when the asset is derecognized.

2.10 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.

2.11 Inventories

Inventories are valued at the lower of cost and net realizable value.

Costs incurred in bringing each product to its present location and conditions are accounted for as follows:

- Raw materials: cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on first in, first out basis.

- Finished goods and work in progress: cost includes cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity, but excluding borrowing costs. Cost is determined on first in, first out basis.

- Traded goods: cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.

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

2.12 Provisions General

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.

Restructuring provisions

Restructuring provisions are recognized only when the Company has a constructive obligation, which is when a detailed formal plan identifies the business or part of the business concerned, the location and number of employees affected, a detailed estimate of the associated costs, and an appropriate time-line, and the employees affected have been notified of the plan’s main features.

2.13 Retirement and other employee benefits

Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.

The Company operates a defined benefit gratuity plan in India, which requires contributions to be made to a separately administered fund.

The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method.

Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.

Past service costs are recognized in profit or loss on the earlier of:

- The date of the plan amendment or curtailment, and

- The date that the Company recognizes related restructuring costs

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognizes the following changes in the net defined benefit obligation as an expense in the consolidated statement of profit and loss:

- Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and

- Net interest expense or income

2.14 Share based payments

Share based compensation benefits are provided to employees via the Employee Stock Options Scheme.

The fair value of options granted under the above scheme is recognized as an employee benefits expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted:

- Including any market performance conditions;

- Excluding the impact of any service vesting conditions (for example, remaining an employee of the entity over a specified time period)

Non-market performance and service conditions are included in the assumptions about the number of options that are expected to vest. The total expense is recognized over the vesting period, which is the period during which all the specified vesting conditions are to be satisfied.

At the end of each reporting period, the Company revised the estimates of the number of options that are expected. It recognizes the impact of the revision of original estimates, if any, in the income statement, with corresponding adjustment to equity.

The total cost of the services rendered by the beneficiaries is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied (continued service at the Company).

2.15 Financial Assets and Financial liabilities

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial assets Initial recognition and measurement

All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.

Subsequent measurement

For purposes of subsequent measurement, financial assets are measured in four categories:

- Debt instruments at amortized cost

- Debt instruments at fair value through other comprehensive income (FVTOCI)

- Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL)

- Equity instruments measured at fair value through other comprehensive income (FVTOCI)

Impairment of Financial assets

In accordance with Ind AS 109, the company applies expected credit loss model for measurement and recognition of impairment loss on the financial assets and credit risk exposure.

Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Company’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments.

Subsequent measurement

The measurement of financial liabilities depends on their classification, as described below:

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognized in the profit or loss.

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risks are recognized in OCI. These gains/ loss are not subsequently transferred to P&L. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognized in the statement of profit or loss. The Company has not designated any financial liability as at fair value through profit and loss.

Loans and borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit and loss.

2.16 Share Capital

Ordinary equity shares are classified as equity.

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

2.17 Cash and cash equivalents

Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.

For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Company’s cash management.

2.18 Cash dividend distribution to equity holders of the Company

The Company recognizes a liability to make cash or non-cash distributions to equity holders of the parent when the distribution is authorized and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorized when it is approved by the shareholders. A corresponding amount is recognized directly in equity.

2.19 Trade receivables

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is due in one year or less they are classified as current assets.

Commercial receivables are recognized initially at fair value and subsequently measured at amortized cost using the original effective interest method, less provision for impairment. A provision for impairment of trade receivables is recognized when there is objective evidence that the Company will not be able to collect all amounts due under the original terms of the receivables. Indications of impairment are deemed to exist when the debtor is in serious financial difficulty; it is probable that the borrower will enter bankruptcy of other financial reorganization, and in the event of payment of default or delinquency. When a receivable is deemed uncollectible it is written off against the provision for receivables. Any subsequent recovery of previously written-off amounts is recognized in the income statement.

Financing through the discounting of bills of exchange is not written off from trade receivables until they are collected and is reflected as bank financing.

Financing by means of non- recourse factoring or the sale of trade receivables triggers the de-recognition of the receivable as all associated risks are transferred to the financial institution in question.

2.20 Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less.

Trade payables are recognized initially at fair value and subsequently measured at amortised cost using the effective interest method.

2.21 Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest rate method.

Borrowings are classified as current liabilities unless the Company has an unconditional right to defer their settlement for at least

12 months after the end of the reporting period.

Fees paid on for availing the loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facilities will be drawn down. In this case, the fees are deferred until the draw- down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a prepayment for liquidity services and amortized over the period of the facility to which it relates.

2.22 Environmental disclosures

Costs incurred by the Company as part of its business activities that are intended to protect the environment and/ or improve its environmental records are expensed currently. These costs are capitalized when the expenses represent additions to items of property, plant equipment intended to make them more environment- friendly and minimize their impact on the environment.

2.23 Seasonal nature of business and business volume

The Automotive segment does not show any seasonal nature so its sales are distributed uniformly throughout the year.

3. Financial risk management

3.1 Financial risk factors

The Company activities expose it to a variety of financial risks viz. market risk credit risk and liquidity risk. The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance.

a. Market risk

The company’s exports and imports is not very significant. There are no borrowings in foreign currency. Therefore currency risk for the company is not very significant.

Short term borrowings are at variable interest rates and the same is managed by the group by constantly monitoring the trend and expectations.

Temporary surplus investments are made in debt instruments and risk is managed by adequately diversifying the portfolio.

b. Liquidity risk

The prudent management of liquidity risk entails maintaining enough cash and available financing through sufficient credit facilities. In this respect, the MCIE strategy, articulated by its Treasury Department, is to maintain the necessary financing flexibility through the availability of committed credit lines. Additionally, and on the basis of its liquidity needs, the Company uses liquidity facilities (non-recourse factoring and the sale offinancial assets representing receivable debts, transferring the related risks and rewards).Management monitors the Company’s forecast liquidity requirements together with the trend in net debt. The calculation of liquidity and net debt at 31st December, 2016 and 31st December, 2015 is calculated as follow:

The Company believes that the on-going initiatives and arrangements will prevent liquidity shortfalls.

The Company’s Management monitors the forecast liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining enough headroom on its undrawn committed borrowing facilities at all times so that the Company does not breach borrowing limits or covenants on any of its borrowing facilities.

Noteworthy is the existence at 31st December, 2016 of Rs. 1,399.5 Million in unused loans and credit lines (31st December, 2015: Rs. 577.8 Million).

One of the Company’s strategies is to ensure the optimisation and maximum saturation of the resources assigned to the business. The Company therefore pays special attention to the net operating working capital invested in the business. In this regard, as in previous years, considerable work has been performed to control and reduce collection periods for trade and other receivables, as well as to optimise accounts payable with the support of banking arrangements to mobilise funds and minimise inventories through logistic and industrial management, allowing JIT (just in time) supplies to our customers.

As a result of the above, it may be confirmed that there are no liquidity risks at the Company.

c. Credit Risk

Credit risk from cash and cash equivalents, derivative financial instruments and bank deposits is considered immaterial in view of the creditworthiness of the banks the company works with.

The Company has specific policies for managing customer credit risk; these policies factor in the customers’ financial position, past experience and other customer specific factors.

The Company continues to consider the credit quality of outstanding balances to be strong. Based on past trends, expected credit loss is provided. Details of such provision and analysis of the age of assets that are past due but are not impaired is provided in Note 16.

d. Raw material price risk

The Company does not have significant risk in raw material variations. In case of any variation in price same is passed on to customers through appropriate adjustments to selling prices.

3.2 Fair Value estimation Fair value measurement

The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

- In the principal market for the asset or liability, or

- In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

- Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities

- Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

- Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognized in the financial statements on a recurring basis, the company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

3.3 Capital risk management

The Company objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits for the other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company can adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistent with others in the industry the Company monitors capital on the basis of the leverage ratio. This ratio is calculated as net debt divided by total capital employed. Net debt is calculated as total borrowings plus current financial liabilities less cash, cash equivalents and current financial assets, all of which are shown in the annual accounts. Total capital employed is calculated as ‘equity’, as shown in the annual accounts, plus net debt.

4. Accounting estimates and judgments

The preparation of financial statements requires management to make judgments, estimates and assumptions affecting the application of accounting policies and the amounts presented under assets and liabilities, income and expenses. Actual results may differ from these estimates.

a. Income tax

Income tax expense for the period ended 31st December, 2016 has been estimated based on profit before taxes, as adjusted for any permanent and/or temporary differences envisaged in tax legislation governing the corporate income tax base calculation. The tax is recognized in the income statement, except insofar as it relates to items recognized directly in equity, in which case, it is also recognized in equity.

Tax credits and deductions and the tax effect of applying tax-loss carry forward that have not been capitalized are treated as a reduction in the corporate income tax expense for the year in which they are applied or offset.

The calculation of income tax expense did not require the use of significant estimates except in tax credits recognized in the year, which was at all times consistent with the annual financial statements.

Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated annual accounts. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred taxes on temporary differences are recognized except in those cases where the Company can control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future.

Deferred tax assets deriving from the carry forward of unused tax credits and unused tax losses are recognized to the extent that it is probable that future taxable profit will be available against which the tax assets can be utilized. In the case of investment tax credits the counterpart of the amounts recognized is the deferred income account. The tax credit is accrued as a decrease in expense over the period during which the items of property, plant and equipment that generated the tax credit are depreciated, recognizing the right with a credit to deferred income.

b. Pension benefits

The present value of the Company pension obligations depends on a series of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of pension obligations.

The Company determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the Company considers the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension obligation. Other key assumptions for employee benefits are based in part on current market conditions.

5. Segment information

Mr. Ander Alvarez, the Chief Executive Officer (CEO) of Mahindra CIE Automotive Ltd is the company’s decision making executive. The CEO reviews the company’s internal financial information for the purpose of evaluating performance and assigning resources to segments. The company has determined the operating segment based on structure of reports reviewed by CEO. Operation of company comprises a single business and geographical segment i.e. automotive component manufactured in India.

6. First time adoption Ind AS

These financial statements, for the period from 1st January, 2016 to 31st December, 2016, are the first financial statements prepared by the Company in accordance with Ind AS. For periods up to and including the period ended 31st December, 2015, the Company prepared its financial statements in accordance with accounting standards specified under Companies (Accounting Standards) Rules, 2006 as amended (‘previous GAAP’).

Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on or after 31st December, 2016, together with the comparative period data as at and for the 9 month period ended 31st December, 2015, as described in the summary of significant accounting policies. In preparing these financial statements, the Company’s opening balance sheet was prepared as at 1st April, 2015, the Company’s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Previous GAAP financial statements, including the balance sheet as at 1st April, 2015 and the financial statements as at and for the period ended 31st December, 2015 to Ind AS.

Exemptions applied

Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS.

The Company has applied the following exemptions:

1. Property, Plant and Equipment, other than investment property, were carried in the statement of financial position prepared in accordance with previous GAAP on 31st March, 2015. The Company has elected to regard carrying values as at 31st March, 2015 as deemed cost at the date of transition. The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at 1st April, 2015, the date of transition to Ind AS and as of 31st December, 2015.

2. A first-time adopter is encouraged, but not required, to apply Ind AS 102 Share-based payment to equity instruments that vested before date of transition to Ind AS. The Company has granted equity settled stock options and has followed intrinsic value method for accounting. As at 1st April, 2015 certain options are outstanding and certain option have vested but have not exercised. The Company has decided to apply Ind AS 102 prospectively.

3. An entity is required to account for its investment in subsidiary, joint ventures associates either:

a. At cost or

b. Inaccordancewith Ind AS 109

Such cost shall be cost as per Ind AS 27 or deemed cost. The deemed cost such an investment shall be its fair value on the date of transition to Ind As or previous GAAP carrying amount at that date. The company has elected to measure its investment in subsidiary at cost determined in accordance with Ind AS 27 i.e. Original cost of investment in subsidiaries.

Effect of Ind AS adoption for Balance Sheet

The effect of the Company’s transition to Ind AS is summarized in this note as follows:

(i) Transition elections;

(ii) Reconciliation of equity and P&L as previously reported under Indian GAAP to Ind AS;

(iii) Adjustments to the statement of cash flows.

(i) Transition elections

Share-based payment transactions

Afirst-time adopter is encouraged, but not required, to apply Ind AS 102 Share-based payment to equity instruments that vested before date of transition to Ind AS. The Company has granted equity settled stock options and has

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followed intrinsic value method for accounting. As at 1st April, 2015 certain options are outstanding and certain option have vested but have not exercised.

The Company has decided to apply Ind AS 102 prospectively.

Investments in subsidiaries, joint ventures and associates

When an entity prepares separate financial statements, Ind AS 27 requires it to account for its investments in subsidiaries, joint ventures and associates either:

a) at cost; or

b) in accordance with Ind AS 109.

If a first-time adopter measures such an investment at cost in accordance with Ind AS 27, it shall measure that investment at one of the following amounts in its separate opening Ind AS Balance Sheet:

a) cost determined in accordance with Ind AS 27; or

b) deemed cost. The deemed cost of such an investment shall be its:

i. fair value at the entity’s date of transition to Ind AS in its separate financial statements; or

ii. previous GAAP carrying amount at that date.

MCIE has elected to account for investments in subsidiaries at cost in accordance with Ind AS 27 and will measure the investments at deemed cost i.e. previous GAAP carrying amounts as at the date of transition.

Equity shares are non-monetary items and non-monetary items are measured in terms of historical cost in a foreign currency shall be translated using the exchange rate at the date of the transaction (accordingly these are not required to be translated at year-end rates).

Nature and purpose of Reserves Securities premium reserve

Securities premium reserve is used to record the premium on issue of shares. The reserve is utilized in accordance with the provisions of the law.

Equities settled employees’ benefits reserve

The Equities settled employees benefits reserve is used to recognize the grant date fair value of options issued to employees under the MCIE Stock Options Scheme.

Capital reserve

Capital reserve is reserves generated out of merger under The Integrated Scheme of Amalgamation and the Composite Scheme of Amalgamation (Sections 391-395 of the Companies Act, 1956) for the merger of Mahindra Ugine Steel Group Limited (MUSCO), Mahindra Hinoday Industries Limited ( MHIL),Mahindra Gears International Limited (MGIL), Mahindra Investment India Private Limited (MIIPL), ParticipacionesInternacionales S.L.(PIA3) and Mahindra Composites Limited (MCL). The merger was approved by the Honorable High Court of Judicature at Bombay on 31st October, 2014. The Schemes came into effect on 10th December, 2014, the day on which the orderwas delivered to the Registrar of Companies. The reserve is capital in nature and is not available for distribution as dividend.

General reserve

General reserve is revenue reserve created by virtue of merger of Mahindra Stokes Holding Company Limited (MSHCL), Mahindra Forgings Overseas Limited(MFOL) and Mahindra Forgings Mauritius Limited into the Company vide High Court Order dated 27th December, 2007 and is reserve available fordistribution as dividend.

Capital redemption reserve

Capital redemption reserve is transferred by virtue of the merger referred to above which was in the books of Mahindra Ugine Steel Company Limited(MUSCO) and was created to redeem preference shares issued by MUSCO before merger. These shares have since been redeemed and this reserve is available for distribution.

Other reserves - Investment currency translation reserve

Exchange differences arising on translation of the investment in the redeemable preference capital in the Company’s subsidiary are recognized as a Reserve are accumulated in a separate reserve with equity with suitable adjustments in the value of the investment. The cumulative amount will be reclassified to profit or loss when the net investment is redeemed.

Other reserves - actuarial gain / loss reserve

Change in liability of defined benefit plans for the employees due to change in actuarial assumptions is debited or credited to this reserve account.

Secured borrowings and assets pledged as security

(a) Terms loans from banks comprised of loans pertaining to the castings and magnetic product divisions (erstwhile Mahindra Hinoday Industries Limited) of the company and the composites division (erstwhile Mahindra Composites Limited) acquired in amalgamation. During the year ended 31st December, 2015 the Company has repaid the loans.

(b) Current borrowings are secured by way of a pari passu charge on the trade receivables and inventory and second charge on the fixed assets of the Chakan plant.


Mar 31, 2015

1 Method of Accounting

The financial statements are prepared under the historical cost convention and on the accrual basis of accounting in accordance with generally accepted accounting principles in India, and the accounting standards applicable under the Sec 133 of the Companies Act, 2013 ("the Act") read with paragraph 7 of the Companies Accounts Rules, 2014 (as amended) and the relevant provisions of the Act as applicable.

All assets & liabilities have been classified as current & non - current as per the Company''s normal operating cycle and other criteria set out in the Revised Schedule III of the Act.

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

2 Use of Estimates

The preparation of financial statements in conformity with the Generally Accepted Accounting Principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of financial statements and the reported amounts of revenues and expenses during the reported period. Differences between the actual results and estimates are recognised in the period in which the results are known / materialise.

3 Fixed Assets and Depreciation

a) All Fixed Assets are stated at cost less depreciation. Cost of acquisition is inclusive of purchase price, levies and any directly attributable cost of bringing the assets to its working condition for the intended use.

b) When an asset is scrapped or otherwise disposed off, the cost and related depreciation are removed from the books of accounts and resultant profit (including capital profit) or loss, if any, is reflected in the statement of Profit and Loss.

c) Free hold land is stated at cost.

d) Depreciation on assets is calculated on Straight Line Method as per Sch II of the Companies Act, 2013 except for certain items of plant and machinery, where the estimated useful life of assets has been taken based on technical assessment of the lives of such assets.

4 Intangible Assets

a) Intangible Assets except software are initially measured at cost and amortised so as to reflect the pattern in which the asset''s economic benefits are consumed.

b) Software expenditure incurred is amortised over three Financial Years, equally, commencing from the year in which the software is installed.

5 Investments

Investments held as long-term investments are stated at cost comprising of acquisition and incidental expenses less other than temporary diminution in value thereof, if any.

Investments other than long-term investments are classified as current investments and valued at lower of cost or net realizable value.

6 Inventories

Inventories of finished goods and work in progress and dies are valued at cost or net realizable value, whichever is lower. Raw material, stores & spares are valued on moving weighted average method.

In case of Work in Process & Finished Goods, cost includes material cost, labour, and appropriate manufacturing overheads & excise duty in the case of finished goods.

7 Foreign Currency Transactions

a) Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. Realised gains and losses and also exchange differences arising on translation at year end exchange rates of monetary assets and monetary liabilities outstanding at the end of the year are recognized in the statement of Profit and Loss.

b) Exchange difference arising on payment of liabilities for purchase of fixed assets from outside India and year end conversion of such liabilities are charged / credited to the statement of Profit and Loss.

c) In case of forward exchange contracts entered as hedge transactions, the premium or discount arising at the inception of forward exchange contract is amortized as income or expense over the life of the contract. Exchange differences are recognized as an income or expense in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or expiry of such forward exchange contract is recognized as income or expense for the period.

d) Exchange differences arising on a monetary item, forming part of a net investment in a Non Integral Foreign Operation is accumulated in Foreign Currency Translation Reserve.

8 Revenue Recognition

Sales of products and services are recognised when the products are dispatched or services rendered which coincide with transfer of risk and rewards. Sales are exclusive of sales tax and net of sales return and trade discounts.

Interest income is accounted on an accrual / time proportionate basis at contractual rates.

Dividend Income is recognized when the right to receive the same is established.

Export Incentives are recognised on accrual basis and to the extent of certainty of realisation of ultimate collection.

9 Retirement Benefits

Retirement Benefits in respect of gratuity and leave encashment at retirement / cessation are provided for based on actuarial valuations, as at the Balance Sheet date, made by independent actuaries.

a) Defined Contribution Plans-

Company''s contribution paid / payable during the year to Provident Fund and Labour Welfare Fund are recognised in the statement of Profit and loss.

b) Defined Benefit Plan -

Company''s liabilities towards gratuity, leave encashment are determined using the Projected Unit credit Method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. Past service cost are recognised on straight line basis over the average period until the amended benefits become vested. Actuarial gain and losses are recognised immediately in the Statement of Profit and loss as income or expense. Obligation is measured at the present value of estimated future cash flow using a discount rate that is determined by reference to market yields at the Balance Sheet date on government bonds where the currency and terms of the government bonds are consistent with the currency and estimated terms of the defined benefit obligation. Company''s liability towards gratuity is funded by way of Group Gratuity cum assurance policy with Life Insurance Corporation of India.

c) Expenses incurred towards voluntary retirement scheme are charged off in the statement of profit and loss.

10 Borrowing Costs

Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised up to the date when such qualifying assets are ready for intended use. Other borrowing costs are recognised as expense in the period in which they are incurred.

11 Taxation

Current tax is determined as the amount of tax payable in respect of taxable income for the year.

Deferred tax assets and liabilities are recognized for future tax consequences attributable to the timing differences between taxable income and accounting income that are capable of reversal in one or more subsequent periods and are measured using the tax rates enacted or substantively enacted as at the Balance Sheet date. Deferred Tax assets are not recognised unless in the management judgment, there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized except in case of deferred tax assets arising from brought forward tax losses wherein deferred tax assets is only recognized when there is virtual certainty.

12 Impairment of Assets

The carrying amount of cash generating units / assets is reviewed at the Balance Sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, is recognized whenever carrying amount exceeds the recoverable amount.

13 Provisions and Contingent Liabilities

Provisions are recognised in accounts in respect of present probable obligations, the amount of which can be reliably estimated. Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company


Mar 31, 2014

1. Method of Accounting

The financial statements are prepared under the historical cost convention and on accrual basis in accordance with generally accepted accounting principles in India, in accordance with the accounting standards notified under the Companies Act, 1956.

All assets & liabilities have been classified as current and non – current as per the Company''s normal operating cycle and other criteria set out in the Revised Schedule VI of the Companies Act, 1956.

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

2. Use of Estimates

The preparation of financial statements in conformity with the Generally Accepted Accounting Principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of financial statements and the reported amounts of revenues and expenses during the reported period. Differences between the actual results and estimates are recognised in the period in which the results are known / materialise.

3. Fixed Assets and Depreciation

(a) All Fixed Assets are stated at cost less depreciation. Cost of acquisition is inclusive of purchase price, levies and any directly attributable cost of bringing the assets to its working condition for the intended use.

(b) When an asset is scrapped or otherwise disposed off, the cost and related depreciation are removed from the books of accounts and resultant profit (including capital profit) or loss, if any, is reflected in the statement of Profit and Loss.

(c) Free hold land is stated at cost.

(d) Depreciation on assets is calculated on Straight Line Method at estimated useful lives which are as per the rates prescribed in Schedule XIV to the Companies Act, 1956.

4. Intangible Assets :

(a) Intangible Assets except software are initially measured at cost and amortised so as to reflect the pattern in which the asset''s economic benefits are consumed.

(b) Software expenditure incurred is amortised over three financial years, equally, commencing from the year in which the software is installed.

5. Investments

Investments held as long-term investments are stated at cost comprising of acquisition and incidental expenses less other than temporary diminution in value thereof, if any.

Investments other than long-term investments are classified as current investments and valued at lower of net realisable value.

6. Inventories

Inventories of finished goods and work in progress and dies are valued at cost or net realisable value, whichever is lower.

Raw material, stores & spares are valued on moving weighted average method.

In case of Work in Process & Finished Goods, cost includes material cost, labour, where appropriate, manufacturing overheads & excise duty.

7. Foreign Currency Transactions

(a) Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. Realised gains and losses and also exchange differences arising on translation at year end exchange rates of monetary assets and monetary liabilities outstanding at the end of the year are recognised in the statement of Profit and Loss.

(b) Exchange difference arising on payment of liabilities for purchase of fixed assets from outside India and year end conversion of such liabilities are charged/credited to the statement of Profit and Loss.

(c) In case of forward exchange contracts entered as hedge transactions, the premium or discount arising at the inception of forward exchange contract is amortised as income or expense over the life of the contract. Exchange differences are recognised

as an income or expense in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or expiry of such forward exchange contract is recognised as income or expense for the period.

(d) Exchange differences arising on a monetary item, forming part of a net investment in a Non Integral Foreign Operation is accumulated in Foreign Currency Translation Reserve.

8. Revenue Recognition

Sales of products and services are recognised when the products are dispatched or services rendered which coincide with transfer of risk and rewards. Sales are exclusive of sales tax and net of sales return and trade discounts.

Revenue from sale of tools which are manufactured on specific requirement of the customers is recognised to the extent of surplus over the cost of manufacturing of such tools.

Interest income is accounted on an accrual /time proportionate basis at contractual rates.

Dividend Income is recognised when the right to receive the same is established.

Export Incentives are recognised on accrual basis and to the extent of certainty of realisation of ultimate collection. .

9. Retirement Benefits

Retirement Benefits in respect of gratuity and leave encashment at retirement/cessation are provided for based on actuarial valuations, as at the Balance Sheet date, made by independent actuaries.

(a) Defined Contribution Plans- Company''s contribution paid/payable during the year to Provident Fund and Labour Welfare Fund are recognised in the statement of Profit and loss.

(b) Defined Benefit Plan –

Company''s liabilities towards gratuity, leave encashment are determined using the Projected Unit credit Method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. Past service cost are recognised on straight line basis over the average period until the amended benefits become vested. Actuarial gain and losses are recognised immediately in the Statement of Profit and loss as income or expense .Obligation is measured at the present value of estimated future cash flow using a discount rate that is determined by reference to market yields at the Balance Sheet date on government bonds where the currency and terms of the government bonds are consistent with the currency and estimated terms of the defined benefit obligation. Company''s liability towards gratuity is funded by way of Group Gratuity cum assurance policy with Life Insurance Corporation of India.

10. Borrowing Costs

Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised up to the date when such qualifying assets are ready for intended use. Other borrowing costs are recognised as expense in the period in which they are incurred

11. Taxation

Current tax is determined as the amount of tax payable in respect of taxable income for the year.

Deferred tax assets and liabilities are recognised for future tax consequences attributable to the timing differences between taxable income and accounting income that are capable of reversal in one or more subsequent periods and are measured using the tax rates enacted or substantively enacted as at the Balance Sheet date. Deferred Tax assets are not recognised unless in the management judgment, there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised except in case of deferred tax assets arising from brought forward tax losses wherein deferred tax assets is only recognised when there is virtual certainty.

12. Impairment of Assets:

The carrying amount of cash generating units/ assets is reviewed at the Balance Sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, is recognised whenever carrying amount exceeds the recoverable amount.

13. Provisions and Contingent Liabilities:

Provisions are recognised in accounts in respect of present probable obligations, the amount of which can be reliably estimated.

Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company.


Mar 31, 2013

1. Method of Accounting

The financial statements are prepared under the historical cost convention as a going concern and on accrual basis in accordance with Generally Accepted Accounting Principles in India, the Accounting Standards notified under the Companies Act, 1956 and the relevant provisions of the said Act.

All assets & liabilities have been classified as current & non - current as per the Company''s normal operating cycle and other criteria set out in the Schedule VI of the Companies Act, 1956. Based on the nature of activities undertaken by the Company and their realisation in cash and cash equivalents, the company has ascertained its operating cycle as 12 months for the purpose of current - non- current classification of assets & liabilities.

2. se of Estimates

The preparation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of financial statements and the reported amounts of revenues and expenses during the reported period. Differences between the actual results and estimates are recognised in the period in which the results are known materialise.

3. Fixed Assets and Depreciation

(a) All Fixed Assets are stated at cost less depreciation. Cost of acquisition is inclusive of purchase price, levies and any directly attributable cost of bringing the assets to its working condition for the intended use.

(b) When an asset is scrapped or otherwise disposed off, the cost and related depreciation are removed from the books of accounts and resultant profit (including capital profit) or loss, if any, is re ected in the Profit and Loss Statement.

(c) Free hold land is stated at cost.

(d) Depreciation on assets is calculated on Straight Line Method at the rates and in the manner prescribed in Schedule IV to the Companies Act, 1956.

4. Intangible Assets

(a) Intangible Assets except software are initially measured at cost and amortised so as to re ect the pattern in which the asset''s economic benefits are consumed.

(b) Software expenditure incurred is amortised over three financial years, equally, commencing from the year in which the software is installed.

5. Investments

Investments held as long-term investments are stated at cost comprising of acquisition and incidental expenses less permanent diminution in value, if any.

Investments other than long-term investments are classified as current investments and valued at cost or fair value whichever is less.

6. Inventories

Raw material, stores & spares are valued on moving weighted average method

Inventories of finished goods, work in progress and dies are valued at cost or net reali able value, whichever is lower.

In case of Work in Process, Finished Goods and Dies , cost includes material cost, labour, where appropriate, manufacturing overheads & excise duty.

7. Foreign Currency Transactions

(a) Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. Realised gains and losses and also exchange differences arising on translation at year end exchange rates of monetary assets and monetary liabilities outstanding at the end of the year are recogni ed in the Profit and Loss Statement.

(b) Exchange difference arising on payment of liabilities for purchase of fixed assets from outside India and year end conversion of such liabilities are charged credited to the Profit and Loss Statement.

(c) In case of forward exchange contracts entered as hedge transactions, the premium or discount arising at the inception of forward exchange contract is amorti ed as income or expense over the life of the contract. Exchange differences are recogni ed as an income or expense in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or expiry of such forward exchange contract is recogni ed as income or expense for the period.

(d) Exchange differences arising on a monetary item, forming part of a net investment in a Non Integral Foreign Operation is accumulated in Foreign Currency Translation Reserve.

8. Revenue recognition

Sales of products and services are recognised when the products are dispatched or services rendered which coincide with transfer of risk and rewards. Sales are exclusive of sales tax and net of sales return and trade discounts.

Revenue from sale of tools which are manufactured on specific requirement of the customers is recogni ed to the extent of surplus over the cost of manufacturing of such tools.

Interest income is accounted on an accrual time proportionate basis at contractual rates.

Dividend Income is recogni ed when the right to receive the same is established.

Export Incentives are recognised on accrual basis and to the extent of certainty of realisation of ultimate collection.

9. Retirement Benefits

Retirement Benefits in respect of gratuity and leave encashment at retirement cessation are provided for based on actuarial valuations, as at the Balance Sheet date, made by independent actuaries.

(a) Defined Contribution Plans -

Company''s contribution paid payable during the year to Provident Fund and Labour Welfare fund are recognised in the Profit and Loss Statement.

(b) Defined Benefit Plan -

Company''s liabilities towards gratuity, leave encashment are determined using the pro ected unit credit method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. Past service cost are recognised on straight line basis over the average period until the amended benefits become vested. Actuarial gain and losses are recognised immediately in the Statement of Profit and loss as income or expense .Obligation is measured at the present value of estimated future cash ow using a discount rate that is determined by reference to market yields at the Balance Sheet date on government bonds where the currency and terms of the government bonds are consistent with the currency and estimated terms of the defined benefit obligation. Company''s liability towards gratuity is funded by way of Group Gratuity cum assurance policy with Life Insurance Corporation of India.

10. Borrowing Costs

Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised up to the date when such qualifying assets are ready for intended use. Other borrowing costs are recognised as expense in the period in which they are incurred

11. Taxation

Current tax is determined as the amount of tax payable in respect of taxable income for the year. Deferred tax is recognised, sub ect to consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred Tax assets arising on account of unabsorbed depreciation or carry forward of tax losses are recogni ed only to the extent that there is virtual certainty supported by convincing evidence that sufficient future tax income will be available against which such deferred tax assets can be reali ed.

12. Impairment of Assets

The carrying amount of cash generating units assets is reviewed at the Balance Sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, is recogni ed whenever carrying amount exceeds the recoverable amount.

13. Provisions and Contingent Liabilities

Provisions are recognised in accounts in respect of present probable obligations, the amount of which can be reliably estimated.

Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company.


Mar 31, 2012

1. Method of Accounting

The financial statements are prepared under the historical cost convention as a going concern and on accrual basis in accordance with Generally Accepted Accounting Principles in India, the Accounting Standards notified under the Companies Act, 1956 and the relevant provisions of the said Act.

All assets & liabilities have been classified as current & non - current as per the Company's normal operating cycle and other criteria set out in the Schedule VI of the Companies Act, 1956. Based on the nature of activities undertaken by the Company and their realisation in cash and cash equivalents, the company has ascertained its operating cycle as 12 months for the purpose of current and non-current classification of assets & liabilities.

2. Use of Estimates

The preparation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of financial statements and the reported amounts of revenues and expenses during the reported period. Differences between the actual results and estimates are recognised in the period in which the results are known / materialise.

3. Fixed Assets and Depreciation

(a) All Fixed Assets are stated at cost less depreciation. Cost of acquisition is inclusive of purchase price, levies and any directly attributable cost of bringing the assets to its working condition for the intended use.

(b) When an asset is scrapped or otherwise disposed off, the cost and related depreciation are removed from the books of accounts and resultant profit (including capital profit) or loss, if any, is reflected in the Profit and Loss Statement.

(c) Free hold land is stated at cost.

(d) Depreciation on assets is calculated on Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.

4. Intangible Assets

(a) Intangible Assets except software are initially measured at cost and amortised so as to reflect the pattern in which the asset's economic benefits are consumed.

(b) Software expenditure incurred is amortised over three financial years, equally, commencing from the year in which the software is installed.

5. Investments

Investments held as long-term investments are stated at cost comprising of acquisition and incidental expenses less permanent diminution in value, if any.

Investments other than long-term investments are classified as current investments and valued at cost or fair value whichever is less.

6. Inventories

Inventories of finished goods and work-in-progress are valued at cost or net realizable value, whichever is lower.

Raw Material, Stores & spares are valued on moving weighted average method.

In case of Work-in-process & Finished Goods, cost includes material cost, labour, where appropriate, manufacturing overheads & excise duty.

7. Foreign Currency Transactions

(a) Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. Realised gains and losses and also exchange differences arising on translation at year end exchange rates of monetary assets and monetary liabilities outstanding at the end of the year are recognized in the Profit and Loss Statement.

(b) Exchange difference arising on payment of liabilities for purchase of fixed assets from outside India and year end conversion of such liabilities are charged/credited to the Profit and Loss Statement.

(c) In case of forward exchange contracts entered as hedge transactions, the premium or discount arising at the inception of forward exchange contract is amortized as income or expense over the life of the contract. Exchange differences are recognized as an income or expense in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or expiry of such forward exchange contract is recognized as income or expense for the period.

(d) Exchange differences arising on a monetary item, forming part of a net investment in a Non Integral Foreign Operation is accumulated in Foreign Currency Translation Reserve.

8. Revenue recognition

Sales of products and services are recognised when the products are dispatched or services rendered which coincide with transfer of risk and rewards. Sales are exclusive of sales tax and net of sales return and trade discounts.

Revenue from sale of tools which are manufactured on specific requirement of the customers is recognized to the extent of surplus over the cost of manufacturing of such tools.

Interest income is accounted on an accrual / time proportionate basis at contractual rates.

Dividend income is recognized when the right to receive the same is established.

Export incentives are recognised on accrual basis and to the extent of certainty of realisation of ultimate collection.

9. Retirement Benefits

Retirement benefits in respect of gratuity and leave encashment at retirement/cessation are provided for based on actuarial valuations, as at the Balance Sheet date, made by independent actuaries.

(a) Defined Contribution Plans -

Company's contribution paid/payable during the year to Provident Fund and Lab our Welfare fund are recognised in the Profit and loss Statement

(b) Defined Benefit Plan -

Company's liabilities towards gratuity, leave encashment are determined using the projected unit credit method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. Past service cost are recognised on straight line basis over the average period until the amended benefits become vested. Actuarial gain and losses are recognised immediately in the Statement of Profit and loss as income or expense. Obligation is measured at this present value of estimated future cash flow using a discount rate that is determined by reference to market yields at the. Balance Sheet date on government bonds where the currency and terms of the government bonds are consistent with the currency and estimated terms of the defined benefit obligation. Company's liability towards gratuity is funded by way of Group Gratuity cum assurance policy with Life Insurance Corporation of India.

10. Borrowing Costs

Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised up to the date when such qualifying assets are ready for intended use. Other borrowing costs are recognised as expense in the period in which they are incurred.

11. Taxation

Current tax is determined as the amount of tax payable in respect of taxable income for the year. Deferred tax is recognised, subject to consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets arising on account of unabsorbed depreciation or carry forward of tax losses are recognized only to the extent that there is virtual certainty supported by convincing evidence that sufficient future tax income will be available against which such deferred tax assets can be realized.

12. Impairment of Assets

The carrying amount of cash generating units / assets is reviewed at the Balance Sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, is recognized whenever carrying amount exceeds the recoverable amount.

13. Provisions and Contingent Liabilities

Provisions are recognised in accounts in respect of present probable obligations, the amount of which can be reliably estimated.

Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company.


Mar 31, 2011

I. Method of Accounting:

The financial statements are prepared under the historical cost convention as a going concern and on accrual basis in accordance with Generally Accepted Accounting Principles in India, the Accounting Standards notifed under the Companies Act, 1956 and the relevant provisions of the said Act.

ii. Use of Estimates:

The preparation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of financial statements and the reported amounts of revenues and expenses during the reported period. Differences between the actual results and estimates are recognised in the period in which the results are known / materialise.

iii. Fixed Assets and Depreciation:

(a) All Fixed Assets are stated at cost less depreciation. Cost of acquisition is inclusive of purchase price, levies and any directly attributable cost of bringing the assets to its working condition for the intended use.

(b) When an asset is scrapped or otherwise disposed off, the cost and related depreciation are removed from the books of accounts and resultant profit (including capital profit) or loss, if any, is refected in the profit and Loss Account.

(c) Freehold land is stated at cost.

(d) Depreciation on assets is calculated on Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.

iv. Intangible Assets:

(a) Intangible Assets except software are initially measured at cost and amortised so as to refect the pattern in which the assets economic benefits are consumed.

(b) Software expenditure incurred is amortised over three financial years, equally, commencing from the year in which the software is installed.

v. Investments:

Investments held as long-term investments are stated at cost comprising of acquisition and incidental expenses less permanent diminution in value, if any.

Investments other than long-term investments are classifed as current investments and valued at cost or fair value whichever is less.

vi. Inventories:

Inventories of fnished goods and work in progress are valued at cost or net realizable value, whichever is lower.

Raw Material, Stores & spares are valued on moving weighted average method.

In case of Work in Process & Finished Goods, cost includes material cost, labour, where appropriate, manufacturing overheads & excise duty.

vii. Foreign Currency Transactions:

(a) Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. Realised gains and losses and also exchange differences arising on translation at year end exchange rates of monetary assets and monetary liabilities outstanding at the end of the year are recognised in the profit and Loss Account.

(b) Exchange difference arising on payment of liabilities for purchase of fixed assets from outside India and year end conversion of such liabilities are charged/credited to the profit and Loss Account.

(c) Forward exchange contracts are entered as hedge transactions. The premium or discount arising at the inception of forward exchange contract is amortized as income or expense over the life of the contract. Exchange differences are recognised as an income or expense in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or expiry of such forward exchange contract is recognised as income or expense for the period.

(d) Exchange differences arising on a monetary item, forming part of a net investment in a Non Integral Foreign Operation is accumulated in Foreign Currency Translation Reserve.

viii. Revenue recognition:

Sales of products and services are recognised when the products are dispatched or services rendered which coincide with transfer of risk and rewards. Sales are exclusive of sales tax and net of sales return and trade discounts.

Revenue from sale of tools which are manufactured on specifc requirement of the customers is recognized to the extent of surplus over the cost of manufacturing of such tools.

Interest income is accounted on an accrual/time proportionate basis at contractual rates.

Dividend Income is recognised when the right to receive the same is established.

Export Incentives are recognised on accrual basis and to the extent of certainty of realisation of ultimate collection.

ix. Retirement benefits:

Retirement benefits in respect of gratuity and leave encashable at retirement/cessation are provided for based on actuarial valuations, as at the Balance Sheet date, made by independent actuaries.

(a) Defned Contribution Plans- Companys contribution paid/payable during the year to Provident Fund and Labour Welfare fund are recognised in the profit and loss Account.

(b) Defned benefit Plan –

Companys liabilities towards gratuity, leave encashment are determined using the projected unit credit method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the fnal obligation. Past service cost are recognised on straight line basis over the average period until the amended benefits become vested. Actuarial gain and losses are recognised immediately in the Statement of profit and loss as income or expense. Obligation is measured at the present value of estimated future cash flow using a discount rate that is determined by reference to market yields at the Balance Sheet date on government bonds where the currency and terms of the government bonds are consistent with the currency and estimated terms of the defned benefit obligation.

x. Taxation:

Current tax is determined as the amount of tax payable in respect of taxable income for the year. Deferred tax is recognised, subject to consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred Tax assets arising on account of unabsorbed depreciation or carry forward of tax losses are recognised only to the extent that there is virtual certainty supported by convincing evidence that suffcient future tax income will be available against which such deferred tax assets can be realized.

xi. Impairment of Assets:

The carrying amount of cash generating units/ assets is reviewed at the Balance Sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, is recognised whenever carrying amount exceeds the recoverable amount.

xii. Provisions and Contingent Liabilities:

Provisions are recognised in accounts in respect of present probable obligations, the amount of which can be reliably estimated.

Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confrmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company.


Mar 31, 2010

I. Method of Accounting :

The financial statements are prepared under the historical cost convention as a going concern and on accrual basis in accordance with Generally Accepted Accounting Principles in India, the Accounting Standards issued by The Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 1956.

ii. Use of Estimates :

The preparation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of financial statements and the reported amounts of revenues and expenses during the reported period. Differences between the actual results and estimates are recognised in the period in which the results are known / materialise.

iii. Fixed Assets and Depreciation :

(a) All Fixed Assets are stated at cost less depreciation. Cost of acquisition is inclusive of purchase price, levies and any directly attributable cost of bringing the assets to its working condition for the intended use. Exchange difference arising on payment of liabilities for purchase of fixed assets from outside India and year end conversion of such liabilities are charged/credited to the Profit and Loss Account.

(b) When an asset is scrapped or otherwise disposed off, the cost and related depreciation are removed from the books of accounts and resultant profit (including capital profit) or loss, if any, is reflected in the Profit and Loss Account.

(c) Free hold land is stated at cost.

(d) The carrying amount of cash generating units/ assets is reviewed at the Balance Sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, is recognized whenever carrying amount exceeds the recoverable amount.

(e) Depreciation on assets is calculated on Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.

iv. Intangible Assets :

(a) Intangible Assets except software are initially measured at cost and amortised so as to reflect the pattern in which the assets economic benefits are consumed.

(b) Software expenditure incurred is amortised over three financial years, equally, commencing from the year in which the software is installed.

v. Investments :

Investments held as long-term investments are stated at cost comprising of acquisition and incidental expenses less permanent diminution in value, if any.

Investments other than long-term investments are classified as current investments and valued at cost or fair value whichever is less.

vi. Inventories :

Inventories are stated at cost or net realizable value, whichever is lower.

Raw Material, Stores & spares are valued on moving weighted average method.

In case of Work in Process & Finished Goods, cost includes material cost, labour, where appropriate, manufacturing overheads & excise duty.

vii. Revenue recognition :

Sales of products and services are recognised when the products are dispatched or services rendered which coincide with transfer of risk and rewards. Sales are exclusive of sales tax and net of sales return and trade discounts.

Revenue from sale of tools which are manufactured on specific requirement of the customers is recognized to the extent of surplus over the cost of manufacturing of such tools.

Interest income is accounted on an accrual basis/time proportionate basis on contractual rates.

Dividend Income is recognized when the right to receive the same is established.

viii. Export Benefits :

Export Incentives are recognised as and when accrued.

ix. Retirement Benefits :

Retirement Benefits in respect of gratuity and leave encashable at retirement/cessation are provided for based on actuarial valuations, as at the Balance Sheet date, made by independent actuaries.

(a) Defined Contribution Plans- Companys contribution paid/payable during the year to Provident Fund and Labour Welfare fund are recognised in the Profit and loss Account

(b) Defined Benefit Plan -

Companys liabilities towards gratuity, leave encashment are determined using the projected unit credit method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. Past service cost are recognised on straight line basis over the average period until the amended benefits become vested. Actuarial gain and losses are recognised immediately in the Statement of Profit and loss as income or expense. Obligation is measured at the present value of estimated future cash flow using a discount rate that is determined by reference to market yields at the Balance Sheet date on government bonds where the currency and terms of the government bonds are consistent with the currency and estimated terms of the defined benefit obligation

x. Taxation :

Current tax is determined as the amount of tax payable in respect of taxable income for the year. Deferred tax is recognised, subject to consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred Tax assets arising on account of unabsorbed depreciation or carry forward of tax losses are recognized only to the extent that there is virtual certainty supported by convincing evidence that sufficient future tax income will be available against which such deferred tax assets can be realized.

xi. Impairment of Assets :

Management periodically assesses using external and internal sources, whether there is an indication that an asset / a cash generating unit (CGU) may be impaired. Impairment occurs where the carrying value exceeds the present value of future cash-flows expected to arise from the continuing use of the asset and its eventual disposal. The impairment loss to be expensed is determined as the excess of carrying amount over the higher of the assets net sales price or present value as determined above.

xii. Provisions and Contingent Liabilities :

Provisions are recognised in accounts in respect of present probable obligations, the amount of which can be reliably estimated.

Contingent liabilities are disclosed in respect of possible obligations that arise from past events buttheir existence is confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company.

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