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Accounting Policies of MEP Infrastructure Developers Ltd. Company

Mar 31, 2015

1 COMPANY OVERVIEW

MEP Infrastructure Developers Limited ('MEPIDL' or 'the Company') (formerly known as MEP Infrastructure Developers Private Limited) was incorporated on 8 August 2002 under Companies Act, 1956 ('the Act'). The Company is into the business of collection of toll as per the contracts entered with various authorities and also in providing road, repair and maintenance service to its subsidiary

The Company has undertaken following contracts for toll collection:

Rajasthan State Road Development & Construction Corporation Limited, 'RSRDC' at Gazipur & Phulwada.

Maharashtra State Road Development Corporation Limited , 'MSRDC' at Katai & Gove

Road Infrastructure Development Company of Rajasthan Limited, 'RIDCOR' at:

a) Alwar - Bhiwadi

b) Lalsot - Kota

c) Alwar - Sikandara

National Highways Authority of India, 'NHAI' at:

Toll Name

Athur Gurau (Semra-Atikabad)

Bankapur Manoharabad

Beliyad Paduna

Brijghat Palsit

Chamari Panikoli

Chirle - Karanjade Pudukottai

Dankuni Surajbari

Dasna Tendua

Dastan Tundla

The Company is a subsidiary of Ideal Toll & Infrastructure Private Limited ('the Holding Company'), a company incorporated in India.

Subsequent event

Subsequent to the year end, the Company was listed on the National Stock Exchange and Bombay Stock Exchange on 6 May 2015 pursuant to the initial Public Offering.

2.1 Basis of preparation of financial statements

These financial statements have been prepared and presented under the historical cost convention, on the accrual basis of accounting in accordance with the accounting standards specified under section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules,2014 and other accounting principles generally accepted in India ('Indian GAAP') and relevant provisions of the Companies Act, 2013 ('the Act'), to the extent notified and applicable. The financial statements are presented in Indian rupees in lakhs, rounded off to two decimal points.

2.2 Current/non-current classification

The Schedule III to the Act requires assets and liabilities to be classified as either Current or Non-current An asset is classified as current when it satisfies any of the following criteria:

(a) it is expected to be realised in, or is intended for sale or consumption in, the entity's normal operating cycle;

(b) it is held primarily for the purpose of being traded;

(c) it is expected to be realised within twelve months after the Balance Sheet date; or

(d) it is cash or a cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the Balance Sheet date.

All other assets are classified as non-current.

A liability is classified as current when it satisfies any of the following criteria:

(a) it is expected to be settled in, the entity's normal operating cycle;

(b) it is held primarily for the purpose of being traded;

(c) it is due to be settled within twelve months after the Balance Sheet date; or

(d) the Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the Balance Sheet date.

All other liabilities are classified as non-current.

Operating cycle

Based on the nature of activity and the time between the acquisition of assets 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 and liabilities.

2.3 Use of estimates

The preparation of financial statements in conformity with Indian GAAP requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that the estimates made in the preparation of the financial statements are prudent and reasonable. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

2.4 Revenue recognition

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

Toll collection

Revenue from toll collection is recognised on actual collection of revenue and in case of contractual terms with certain customers the same is recognised on an accrual basis.

Road repair and maintenance

Revenue from road repair and maintenance work is recognised upon completion of services as per contractual terms.

Interest and dividend income

Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. Dividends are recorded as and when the same is received.

2.5 Fixed assets Tangible fixed assets

Tangible assets are stated at cost less accumulated depreciation and impairment loss, if any. Cost comprises of purchase price and any attributable cost such as duties, freight, borrowing costs, erection and commissioning expenses incurred in bringing the asset to its working condition for its intended use.

Expenditure incurred on acquisition / construction of fixed assets which are not ready for their intended use as at the Balance Sheet date are disclosed under capital work -in -progress.

2.6 Depreciation

Depreciation on fixed assets up to 31 March 2014 is provided on written down value method as per the rates prescribed under schedule XIV of the Companies Act, 1956. Pursuant to the notification of Schedule II of the Companies Act,2013 by Ministry of Corporate Affairs effective 01 April 2014, the Management has reassessed the useful lives and accordingly depreciation on fixed assets for the year ended 31 March 2015 is provided on the written down value method, at useful lives prescribed in Schedule II of the Companies Act 2013. As a result of the said change, the depreciation charge for the year is higher by Rs.284.23 lakhs with a corresponding decrease in the written down value of fixed assets and profit before tax for the year. Depreciation on addition/deletion of fixed assets during the year is provided on pro-rata basis from / to the date of addition/deletion. Fixed assets costing up to Rs.5,000 individually are fully depreciated in the year of purchase.

2.7 Impairment of assets

The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. Recoverable amount is the greater of assets value in use and net selling price. After impairment if any, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. Previously recognised impairment loss is increased or reversed on changes in internal /external factors.

2.8 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 respective asset. All other borrowing costs are expensed in the period they occur. Borrowing costs consists of interest and other cost that an entity incurs in connection with the borrowing of funds.

2.9 Investments

Long term investments are valued at cost, less provision for other than temporary diminution in value, if any. Current investments are valued at the lower of cost and fair value.

2.10 Employee benefits

i) Short term employee benefits

All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages etc. and the expected cost of ex-gratia are recognized in the period in which the employee renders the related service.

ii) Post employment benefits

Defined contribution plans

Provident fund

The Company's contribution to defined contribution plans such as Provident Fund, Employee State Insurance and Maharashtra Labour Welfare Fund are recognised in the Statement of Profit and Loss on accrual basis.

Defined benefit plans

Gratuity

The Company's gratuity benefit scheme is a defined benefit plan. The Company's net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value.

The present value of the obligation under such defined benefit plan is determined based on actuarial valuation by an independent actuary, using the projected unit credit method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plan, are based on the market yields on Government securities as at the Balance Sheet date. When the calculation results in a benefit to the Company, the recognized asset is limited to the net total of any unrecognized actuarial losses and past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan. Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss.

2.11 Operating leases

Assets acquired under leases other than finance leases are classified as operating leases. The total lease rentals (including scheduled rental increases) in respect of an asset taken on operating lease are charged to the Statement of Profit and Loss on a straight line basis over the lease term unless another systematic basis is more representative of the time pattern of the benefit.

2.12 Taxation

Income tax and deferred tax

income tax expense comprises current income tax (i.e. amount of tax for the period determined in accordance with the income tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the year) and reversal of timing differences of earlier years. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future; however; where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognized only if there is a virtual certainty of realization of such assets. Deferred tax assets are reviewed at each Balance Sheet date and written down or written up to reflect the amount that is reasonably/virtually certain (as the case may be) to be realised.

Minimum alternate tax (MAT)

Minimum alternate tax (MAT) credit is recognised as an asset only when, and only to the extent there is convincing evidence that the Company will pay normal income tax during the specified period for which the MAT credit can be carried forward or set off against the normal tax liability. MAT credit entitlement is reviewed at each Balance Sheet date and written down to the extent there is no convincing evidence to the effect that the Company will pay normal income tax during the specified period.

2.13 Earnings per share (EPS)

Basic earnings per share is calculated by dividing the net profit/loss for the year attributable to the equity shareholders by the weighted average number of equity shares outstanding during the period.

Diluted EPS is computed using the weighted average number of equity and dilutive equity equivalent shares outstanding during the period except where the result would be anti dilutive.

2.14 Provisions and contingencies

The Company recognises a provision when there is a present obligation as a result of a past (or obligating) event that probably requires an outflow of resources and reliable estimate can be made of the amount of the obligation. A disclosure for the contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

(b) Rights, preferences and restrictions attached to equity shares

The Company has a single class of equity shares. Accordingly, all equity shares rank equally with regard to dividends and share in the Company's residual assets. The equity shareholders are entitled to receive dividend as declared from time to time subject to payment of dividend to preference shareholders. The voting rights of an equity shareholder on a poll (not on show of hands) are in proportion to its share of the paid-up equity capital of the Company. Voting rights cannot be exercised in respect of shares on which any call or other sums presently payable have not been paid. Failure to pay any amount called up on shares may lead to forfeiture of the shares.

I) Term loans

A) Term loan includes loan from a bank amounting to Rs. 3,749.34 lakhs (previous year : Rs. 7,495.42 lakhs) which is secured by way of first charge of hypothecation / assignment / security interest on escrow account of the projects financed and also, by pledge of 500,000 equity shares and negative lien on 250,000 equity shares of IRB Infrastructure Developers Private Limited held by the promoters of the Company

Further, the term loan is also secured by corporate guarantee given by Ideal Toll & Infrastructure Private Limited, the holding company and personal guarantee given by Mr. J.D. Mhaiskar & Mr. DP. Mhaiskar, Directors of the Company. The term loan carries an interest rate calculated on base rate of the bank plus a spread of 300 basis points. The term loan is repayable in two equal installments ofRs. 3,750.00 lakhs from 1 March 2014.

B) Term loan includes loan from a bank amounting to Rs. 16,975.00 lakhs (previous year : Rs. Nil) which is secured by a first and exclusive charge as under:

a) first exclusive charge on escrow account specifically maintained for maintenance income/receivables from the maintenance contract with MEP Infrastructure Private Limited, a subsidiary;

b) first mortgage and charge on all immovable and movable properties of the Company, (including movable plant and machinery, machinery, spares, tools and accessories, furniture, fixtures, vehicles, inventories and all other movable properties); except as specifically charged;

c) exclusive charge on specific account opened to route the proceeds from the loan and interest thereon extended to the Idea Toll & Infrastructure Private Limited, the holding company by MEP Infrastructure Private Limited, subsidiary company;

d) pledge of 15 lakhs shares of IRB Infrastructure Developers Limited, held by the promoters of the company;

e) pledge of 49% of the issued, paid up and voting equity share capital of Ideal Toll & Infrastructure Private Limited, the holding company;

f) first charge over the all bank accounts including but not limited to escrow account opened by MEP Highway Solutions Private Limited, subsidiary company;

g) corporate guarantees jointly given by Ideal Toll & Infrastructure Private Limited, the holding Company; and personal guarantee given by Mr. J.D. Mhaiskar , Director of the Company

The term loan carries an interest rate calculated on base rate of the bank plus a spread of 275 basis points. The term loan is repayable in 127 unequal monthly installments commencing from 1 September 2014.

C) Term loan includes a loan from a bank amounting to Rs. 610.00 lakhs (previous year : Rs. 850.00 lakhs ) which is secured by way of assignment / hypothecation of receivables to be generated from the Toll collection account of the projects financed.

Further, the term loan is also secured by corporate guarantee given by Ideal Toll & Infrastructure Private Limited, the holding company and personal guarantee given by Mr. J.D. Mhaiskar , Director of the Company. The term loan carries an interest rate of 13% p.a. The term loan is repayable in 35 unequal monthly installments commencing after one month from the date of first disbursement.

As at 31 March, 2015 the Company has delayed the repayment of principal amounting to Rs.. 3,749.34 lakhs which was overdue for a period of 31 days. The delayed amount has been paid subsequently

II) Vehicle loans

A) Vehicle loans from banks ofRs. 314.74 lakhs (previous year : Rs. 383.71 lakhs) carry interest rates ranging from 9.89% - 12.38% p.a. The loans are repayable in 36 monthly installments along with interest. The loans are secured by way of hypothecation of the respective vehicles.

B) Vehicle loans from various financial institutions ofRs. 28.31 lakhs (previous year : Rs. 13.58 lakhs) carry interest rate ranging from 10.83% - 12.34% p.a. The loans are repayable in 35 monthly installments along with interest. The loans are secured by way of hypothecation of the respective vehicles.

III) Unsecured loans from related parties

A) Unsecured loan from Raima Ventures Private Limited a subsidiary, of Rs. Nil (previous year : 461.32 lakhs) was taken on 31 October 2013 and is repayable in three equal installments at the end of the 8th, 9th and 10th years from the date of disbursement. However repayment can be made prior to repayment schedule and no prepayment penalty will be charged for such repayment. The loan carries an interest rate of 12.5% p.a.

B) Unsecured loan from MEP RGSL Toll Bridge Private Limited a subsidiary, of Rs. Nil (previous year : 2,244.78) was taken on 24 March 2014 and is repayable in three equal installments at the end of the 8th, 9th and 10th years from the date of disbursement. However repayment can be made prior to repayment schedule and no prepayment penatly will be charged for such repayment. The loan carries an interest rate of 9.5% p.a.

C) Unsecured loan from MEP IRDP Solapur Toll Road Private Limited, a subsidiary, ofRs. Nil (previous year : Rs. 11.23 lakhs) was taken on 2 June 2013 and is repayable in three equal installments at the end of the 8th, 9th and 10th years from the date of disbursement. However repayment can be made prior to repayment schedule and no prepayment penalty will be charged for such repayment.

Mobilisation Advance from MEP Infrastructure Private Limited (subsidiary company) Rs. 12,756.00 lakhs (previous year; Rs. Nil) pursuant to a contract for maintenance of structures, flyovers etc at five Mumbai Entry Points. ** Margin Money aggregating Rs. 594.00 lakhs (previous year;Rs. Nil) received from MEP Chennai Bypass Toll Road Private Limited (subsidiary company) for the purpose of issuing Bank guarantee to the authority.

I) Term loans

A) Term Loans from bank amounting to Rs. Nil (previous year : 236.75 lakhs) is secured as below :

a) assignment / hypothecation of receivables to be generated from the Toll collection account of the projects financed;

(b) Personal Guarantee given by Mr. J.D. Mhaiskar & Mr. D.P. Mhaiskar, directors of the Company;

(c) Corporate guarantee given by Ideal Toll and Infrastructure Private Limited, (Holding Company);

The term loan carries an interest rate of 2.35% p.a. below the Bank's Prime Lending Rate subject to minumum of 13% p.a. The loan is repayable in 12 equal monthly installments from the date of first drawdown.

B) Term Loans from bank amounting to Rs. 5,000 lakhs (previous year : Rs. Nil) is secured as below :

(a) First and pari passu charge on entire fixed/current assets of the Company which are not exclusively charged to other Banks/ Lenders.

(b) First charge / hypothecation / assignment of security interest on Escrow account of the projects financed;

(c) First charge by way of hypothecation of all the movable assets, present and future, of the projects financed.

(d) Debt Service Reserve Account (DSRA) to be maintained for an amount equivalent to the next 3 months of interest servicing.

(e) Corporate guarantee given by Ideal Toll and Infrastructure Private Limited, (Holding Company);

(f) Personal Guarantee given by Mr. J.D. Mhaiskar director of the Company;

The term loan carries an interest rate calculated on base rate of the bank plus a spread of 2.30% p.a. The loan is repayable in bullet upon release of Bid/Performance Security by the Authority of the project financed.

C) Term Loans from bank amounting toRs. 1,028.36 lakhs (previous year : Rs. Nil) is secured as below :

(a) Hypothecation / assignment of receivables to be generated from the Toll collection account of the projects financed. ;

(b) Hypothecation of other movable assets, like toll equipment and performance security deposit receivable.

(c) Corporate guarantee given by Ideal Toll and Infrastructure Private Limited, (Holding Company);

(d) Personal Guarantee given by Mr. J.D. Mhaiskar, Director of the Company;

The term loan carries an interest rate calculated on base rate of 13.% p.a. The loan is repayable in 4 equal weekly installments during 12th and last month from the date of first disbursement.

II) Loans repayable on demand

A) Loans repayable on demand include an overdraft facility from a bank amounting to Rs. 4,998.27 lakhs (previous year : Rs. 5,000.00 lakhs) which is secured as below:

(a) First charge / hypothecation / assignment of security interest on Escrow account;

(b) Personal guarantee given by Mr. J.D. Mhaiskar & Mr. D.P. Mhaiskar, directors of the Company;

(c) Corporate guarantee given by Ideal Toll and Infrastructure Private Limited, (Holding Company); Loan carries an interest rate calculated on the base rate of the bank plus a spread of 3% p.a.

B) Loans repayable on demand include an overdraft facility from a bank amounting to Rs. 6,717.22 lakhs (previous year : Rs. 4,994.60 lakhs) which is secured as below:

(a) First charge / hypothecation / assignment of security interest on Escrow account;

(b) First charge by way of hypothecation of all the movable assets, present and future, of the projects financed.

(c) First charge on receivable of the projects financed.

(d) Personal Guarantee given by Mr. J.D. Mhaiskar, director of the Company;

(e) Corporate guarantee given by Ideal Toll and Infrastructure Private Limited, (Holding Company);

(f) Loan carries an interest rate calculated on the base rate of the bank plus a spread of 2.50% p.a.

Notes

*Other bank balances includes fixed deposits with Bank of Rs. 1703.61 lakhs (previous year : Rs. Nil) which are provided as a lien for maintenance of Debt Service Reserve Account. Bank deposits ofRs. 375.00 lakhs (previous year :Rs. 250.00 lakhs) with a bank is provided as cash margin for bank overdraft. Bank deposits ofRs. 2,199.96 lakhs (previous year : Rs. 1,030.19 lakhs) with various banks are provided as a lien for bank guarantee given to authorities.

26.6 Segment reporting

The segment information has been disclosed in the consolidated financial statements of the Company in accordance with paragraph 4 of AS 17 'Segment reporting' as specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rule, 2014.


Mar 31, 2014

1. Basis of preparation offinancial statements

The financial statements are prepared under the historical cost convention, on the accrual basis of accounting in accordance with the accounting principles generally accepted in India ('Indian GAAP') and comply with the Companies (Accounting Standards) Rules, 2006 issued by the Central Government and the relevant provisions of Companies Act, 1956 ('the Act1) to the extent applicable. The financials are presented in Indian rupees, rounded off to nearest lakhs, with two decimals except earnings per share data and where mentioned otherwise. '

2.2 Current/non-current classification

An asset is classified as current when it satisfies any of the following criteria:

(a) It is expected to be realised in, or is intended for sale or consumption in, the entity's normal operating cycle;

(b) it is expected to be realised within twelve months after the Balance Sheet date; or {c- 11 IS cash or a casl1 equivalent unless tt is restricted from being exchanged or used to settle a liability for atleast twelve months after the Balance Sheet date.

AN other assets are classified as non-current.

A liability is classified as current when it satisfies any of the following criteria:

(a) it is expected to be settled in, the entity's normal operating cycle;

(b) it is due to be settled within twelve months after the Balance Sheet date; or

(c) the Company does not have an unconditional right to defer settlement of the liability for atleast twelve months after the Balance Sheet date.

All other liabilities are classified as non-current.

Operating cycle

Based on the nature of services and the time between the acquisition of assets 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 and liabilities.

2. Use of estimates

The preparation of financial statements in conformity with Indian GAAP requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Management believes that the estimates made in the preparation of the financial statements are prudent and reasonable. Actual results could dif fer from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

2.4 Revenue recognition

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

Toll collection

Revenue from toll collection is recognised on actual collection of revenue and in case of contractual terms with certain customers the same is recoumsed on an accrual basis

Road repair and maintenance

Revenue fiom toad repair and maintenance work is recognised upon completion of services as per contractual terms.

Interest income

Interest income is recognised on a lime proportion basis taking into account the amount outstanding and the rate applicable. Dividends are recorded as and when the same is received.

2.5 Fixed assets

Tangible fixed assets

Tangible assets are stated at cost less accumulated depreciation and impairment loss, if any. Cosl comprises of purchase price and any attributable cost such as duties, height, borrowing costs, erection and commissioning expenses incurred in bringing the asset to its working condition for its intended use.

Expendituie incurred on acquisition / construction of fixed assets which are not ready for their intended use as at the Balance Sheet date are disclosed under capital work -in -progress.

2.6 Depreciation

Depreciation is provided pro-rata to the period of use on the written down value method, at rates prescribed in Schedule XIV of the Act. Depreciation on addition/deletion of fixed assets during the year is provided on pro-rata basis from / to the date of addition/deletion. Fixed Asset costing up lo Rs. 5.000 individually are fully depreciated in the year of purchase. " '

2.7 Impairment of assets

I lie cai tying amounts ot assets are renewed at each Balance Sheet date if there is any indication of impairment based on imemal/external factors. An impairment loss IS lecogmscd wherever the carrying amouni of an assei exceeds its recoverable amount Recoverable amount is the greater of asseis value in use and net selling puce. Aliet impairment il any, depreciation is provided on the revised carrying amouni of the asset over its remaining useful life Previously recognised impairment loss is increased or reversed on changes in internal /external factors. "

2.8 Borrowing costs

Bonowing 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 ot sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur. Borrowing costs consists of interest and other cost that an entity incurs in connection with the bonowing of funds.

2.9 Investments

Long tenn investments are valued at cost, less provision for other than temporary diminution in value, if any. Current investments are valued at the lower of cost and fair value.

2.10 Employee benefits

Short term employee benefits

All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages elc. and the expected cost of ex-gratia are recognized in the period in which the employee renders the related service.

ii) Post employment benefits Defined contribution plans Provident fund

The Companys contribution to defined contribution plans such as Provident Fund, Employee Stale Insurance and Maharashtra Labour Welfare Fund are recognised in the Statement of Profit and Loss on accrual basis.

Defined benefit plans Gratuity

I he Company s gratuity benefit scheme is a defined benefit plan. The Company's net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan asset is deducted.

The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using (he projected unit credit method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The obligation is measured at the present value of (lie estimated future cash flows. The discount rates used for determining the present value of [lie obligation under defined benefit plan, are based on the market yields on Government securities as at the Balance Sheet date.

When the calculation results in a benefit to the Company, the recognized asset is limited to the net total of any unrecognized actuarial losses and pasl setvice costs and the present value ol any future refunds from the plan or reductions in future contributions to the plan. Actuarial gams and losses are recognized immediately in the.S'talenjent of Profit and Loss. '

2.11 Operating leases

Assets acquired under leases other than finance leases are classified as operating leases. The total lease rentals (including scheduled rental increases) in respect of an asset taken on operating lease are charged to the Statement of Profit and Loss on a straight line basis over the lease term unless another systematic basis is more representative of the time pattern of the benefit. .

2.12 Taxation

Income tax and deferred tax

Income tax expense comprises current income tax (i.e. amount of tax for the period determined in accordance with the income tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the year) and reversal of timing differences of earlier years. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future; however; where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognized only if there is a virtual certainty of realization of such assets. Deferred tax assets are reviewed at each Balance Sheet date and written down or written up to retlect the amount that is reasonably/vinually certain (as the case may be) to be realised.

Minimum alternate tax (MAT)

Minimum alternate tax (MAT) credit is recognised as an asset only when, and only to the extent there is convincing evidence that the Company will pay normal income tax during the specified period for which the MAT credit can be carried forward or set off against the normal tax liability. MAT credit entitlement is reviewed at each Balance Sheet date and written down to the extent there is no convincing evidence to the effect that the Company will pay normal income tax during the specified period.

2.13 Earning per share (EPS)

Basic earning per share is calculated by dividing the net profit/loss for the year attributable to the equity shareholders by the weighted average number of equity shares outstanding during the period.

Diluted EPS is computed using the weighted average number of equity and dilutive equity equivalent shares outstanding during the period except where the result would be anti dilutive.

2.14 Pro visions and contingen cies

The Company recognises a provision when there is present obligation as a result of a past (or obligating) event that probably requires an outflow of resources and reliable estimate can be made of the amount of the obligation. A disclosure for the contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation that the likelihood of outflow of resources is remote, no provision or disclosure is made.

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