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Accounting Policies of Welspun India Ltd. Company

Mar 31, 2015

1.1 Basis of preparation

These financial statements have been prepared in accordance with the generally accepted accounting principles in India under the historical cost convention on accrual basis. Pursuant to section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014, till the standards of accounting or any addendum thereto are prescribed by Central Government in consultation and recommendation of the National Financial Reporting Authority, the existing Accounting Standards notified under the Companies Act, 1956 shall continue to apply.

Consequently, these financial statements have been prepared to comply in all material aspects with the accounting standards notified under Section 211(3C) [Companies (Accounting Standards) Rules, 2006, as amended] and other relevant provisions of the Companies Act, 2013, and Accounting Standard 30, Financial Instruments: Recognition and Measurement issued by the Institute of Chartered Accountants of India to the extent it does not contradict any other accounting standard referred to in sub-section (3C) of Section 211 of the Act.

All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.

2.2 Tangible Assets

Tangible Assets except land are stated at cost (net of cenvat credit, wherever applicable) less accumulated depreciation and impairment losses, if any.

Subsequent expenditures related to an item of fixed asset are added to its book value only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance.

Losses arising from the retirement of, and gains or losses arising from disposal of fixed assets which are carried at cost are recognised in the Statement of Profit and Loss.

Depreciation on tangible assets, other than plant and machinery (except electrical installations) is provided on a pro-rata basis on the straight-line method over the estimated useful lives.

Consequent to the enactment of the Companies Act, 2013 (the Act) and its applicability for accounting periods commencing from April 1, 2014, the Company has, wherever required, to reflect the actual usage of above mentioned assets, realigned the remaining useful lives of few assets in accordance with the provisions prescribed under Schedule II to the Act. Also refer Note 14.1.

Depreciation on additions/ deletions to fixed assets is calculated pro-rata from/ up to the date of such additions/ deletions.

Plant and Machinery (except electrical installations) is depreciated on written down value method over the useful life ranging between 7.5 years to 18 years which is equal to or lower than the life prescribed under Schedule II to the Companies Act, 2013 in order to reflect the actual usage of the assets.

Leasehold improvements are amortised on straight-line basis over the primary period of lease.

2.3 Intangible Assets

Intangible Assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets comprise of computer software which is amortised on the straight-line method over a period of five years. Cost of software includes license fees and implementation/ integration expenses.

2.4 Borrowing Costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in Statement of Profit and Loss in the period in which they are incurred.

2.5 Investments

Investments that are readily realisable and are intended to be held for not more than one year from the date, on which such investments are made, are classified as current investments. All other investments are classified as long term investments. Current investments are carried at cost or fair value, whichever is lower. Long-term investments are carried at cost. However, provision for diminution is made to recognise a decline, other than temporary, in the value of the investments, such reduction being determined and made for each investment individually.

2.6 Inventories

(a) Inventories are stated at lower of cost and net realisable value.

(b) Cost of raw materials (includes packing material) and stores and spares is determined on weighted average basis. Cost of traded goods is determined on first-in-first-out basis. Cost of work-in-progress and finished goods comprises of raw material, direct labor, other direct costs and related production overheads. Net realisable value is the estimate of the selling price in the ordinary course of the business, less the estimated costs of completion and the estimated costs necessary to make the sale.

2.7 Current Tax and Deferred Tax

Tax expense for the period, comprising current tax and deferred tax, are included in the determination of the net profit or loss for the period. Current tax is measured at the amount expected to be paid to the tax authorities in accordance with the taxation laws prevailing in the respective jurisdictions.

Deferred tax is recognised for all the timing differences, subject to the consideration of prudence in respect of deferred tax assets. Deferred tax assets are recognised and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. At each Balance Sheet date, the group reassesses unrecognised deferred tax assets, if any.

Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities representing current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws.

Minimum Alternative Tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period.

2.8 Employee Benefits

Provident Fund

The Contribution towards provident fund for certain employees is made to the regulatory authorities, where the Company has no further obligations. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made on a monthly basis.

Superannuation Fund

Contribution towards superannuation fund for certain employees is made to SBI Life Insurance Company where the Company has no further obligations. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from contribution made on monthly basis.

Gratuity

The Company provides for gratuity, a defined benefit plan (the "Gratuity Plan") covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee's salary and the tenure of employment. The Company's liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses/gains are recognised in the statement of Profit and Loss in the year in which they arise.

Gratuity Fund is recognised by the income tax authorities and is administered through trustees. The Employee's Gratuity Trust takes group gratuity policies with insurance companies.

Compensated Absences

Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year end are treated as short term employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end.

Accumulated compensated absences, which are expected to be availed or encashed beyond 12 months from the end of the year end are treated as other long term employee benefits. The Company's liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses/ gains are recognised in the Statement of Profit and Loss in the year in which they arise.

2.9 Foreign Currency Translation Initial Recognition

On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

Subsequent Recognition

As at the reporting date, non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. All non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined. All monetary assets and liabilities in foreign currency are restated at the end of accounting period.

Exchange differences on restatement of all other monetary items are recognised in the Statement of Profit and Loss.

Forward Exchange Contracts and Swaps

In respect of forward exchange contracts, other than forward exchange contracts in respect of firm commitments and highly probable forecast transactions, the premium or discount arising at the inception of forward exchange contract, is amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the Statement of Profit and Loss in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such a forward exchange contract is recognised as income or as expense for the period.

In respect of forward exchange contracts taken to hedge the risks associated with foreign currency fluctuations relating to firm commitments and highly probable forecast transactions and interest rate swaps, the Company has adopted Accounting Standard 30 'Financial Instruments: Recognition and Measurement". Accordingly, forward exchange contracts relating to firm commitments and highly probable forecast transactions and interest rate swaps are fair valued at each reporting date.

Changes in the fair value of these hedging instruments that are designated and considered as effective hedges of highly probable forecasted transactions are recognised directly in shareholders' funds under 'Hedging Reserve Account' to be recognised in the Statement of Profit and Loss when the underlying transaction occurs. Changes in the fair value of the hedging instruments that do not qualify for hedge accounting are recognised in the Statement of Profit and Loss as they arise.

Forward exchange contracts outstanding as at the year end on account of firm commitment / highly probable forecast transactions are marked to market and the losses, if any, are recognised in the Statement of Profit and Loss and gains are ignored in accordance with the Announcement of Institute of Chartered Accountants of India on 'Accounting for Derivatives' issued in March 2008.

2.10 Revenue Recognition

(a) Sales are recognised when the substantial risks and rewards of ownership in the goods are transferred to the buyer as per the terms of the contract and are recognised net of trade discounts, rebates, sales taxes and excise duties. Domestic sales are recognised on dispatch to customers. Export sales are recognised on the date of cargo receipts, bill of lading or other relevant documents, in accordance with the terms and conditions for sales.

(b) In case of sale made by the Company as Support Manufacturer, export benefits arising from Duty Entitlement Pass Book (DEPB), Duty Drawback scheme and Focus Market Scheme are recognised on export of such goods in accordance with the agreed terms and conditions with customers. In case of direct exports made by the Company, export benefits arising from DEPB, Duty Drawback scheme and Focus Market Scheme are recognised on shipment of direct exports.

2.11 Other Income

Interest: Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

Dividend: Dividend income is recognised when the right to receive dividend is established.

2.12 Government Grants

Government grants are accounted for when it is reasonably certain that ultimate collection will be made. Capital grants relating to specific assets granted under the Technology Upgradation Fund Scheme (TUFS) are reduced from the gross value of the Fixed Assets. Revenue grants, in the nature of interest subsidy are adjusted against interest expense. Revenue grants, in the nature of Sales Tax benefits are recognized in the Statement of Profit and Loss on a systematic/ appropriate basis.

Impairment

Assessment is done at each Balance Sheet date as to whether there is any indication that an asset (tangible and intangible) may be impaired. For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets, is considered as a cash generating unit. If any such indication exists, an estimate of the recoverable amount of the asset/cash generating unit is made. Assets whose carrying value exceeds their recoverable amount are written down to the recoverable amount. Recoverable amount is higher of an asset's or cash generating unit's net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Assessment is also done at each Balance Sheet date as to whether there is any indication that an impairment loss recognised for an asset in prior accounting periods may no longer exist or may have decreased.

2.13 Provisions and Contingent Liabilities

Provisions: Provisions are recognised when there is a present obligation 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 there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance sheet date and are not discounted to its present value.

Contingent Liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.

2.14 Employees Stock Option Schemes

Equity settled stock options granted under "Employee Stock Option Schemes" are accounted for as per the accounting treatment prescribed by Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999, issued by Securities and Exchange Board of India and the Guidance Note on Employee Share-based Payments issued by the Institute of Chartered Accountants of India.

2.15 Leases As a lessee:

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the Statement of Profit and Loss on a straight-line basis over the period of the lease.

As a lessor:

The Company has leased certain tangible assets and such leases where the Company has substantially retained all the risks and rewards of ownership are classified as operating leases. Lease income on such operating leases are recognised in the Statement of Profit and Loss on a straight line basis over the lease term which is representative of the time pattern in which benefit derived from the use of the leased asset is diminished. Initial direct costs are recognised as an expense in the Statement of Profit and Loss in the period in which they are incurred.

2.16 Cash and Cash Equivalents

In the cash flow statement, cash and cash equivalents includes cash in hand, demand deposits with banks and other short-term highly liquid investments with original maturities of three months or less.

2.17 Earnings Per Share

Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Earnings considered in ascertaining the Company's earnings per share is the net profit for the period after deducting preference dividends and any attributable tax thereto for the period, if any. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.


Mar 31, 2014

1 Basis of preparation

These financial statements have been prepared in accordance with the generally accepted accounting principles in India under the historical cost convention on accrual basis. Pursuant to circular 15/2013 dated 13.9.2013 read with circular 08/2014 dated 04.04.2014, till the Standard of Accounting or any addendum thereto are prescribed by Central Government in consultation and recommendation of the National Financial Reporting Authority, the existing Accounting Standards notified under the Companies Act, 1956 shall continue to apply. Consequently, these financial statements have been prepared to comply in all material aspects with the accounting standards notified under Section 211(3C) [Companies (Accounting Standards) Rules, 2006, as amended] and the other relevant provisions of the Companies Act, 1956, and Accounting Standard 30, Financial Instruments: Recognition and Measurement issued by the Institute of Chartered Accountants of India to the extent it does not contradict any other accounting standard referred to in sub-section (3C) of Section 211 of the Act.

All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in the Revised Schedule VI to the Companies Act, 1956. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.

2. Tangible Assets

Tangible Assets except land are stated at cost (net of cenvat credit, wherever applicable) less accumulated depreciation and impairment losses, if any.

Subsequent expenditures related to an item of fixed asset are added to its book value only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance.

Losses arising from the retirement of, and gains or losses arising from disposal of fixed assets which are carried at cost are recognised in the Statement of Profit and Loss.

Depreciation on Tangible assets, other than plant and machinery (except electrical installations), leasehold improvements, office equipments and vehicles, is provided on straight-line method at the rates and in the manner prescribed under Schedule XIV to the Act. Depreciation on additions/ deletions to fixed assets is calculated pro-rata from/ up to the date of such additions/ deletions.

With effect from July 1, 2013, depreciation on plant and machinery (except electrical installations) is provided on written-down value method at the rates and in the manner prescribed under Schedule XIV to the Act as against the earlier method of providing depreciation on straight-line method (Refer Note 37).

Assets individually costing Rs. 5,000 or less are fully depreciated in the year of purchase.

Office equipments are depreciated on straight-line method over a period often years.

Vehicles are depreciated on straight-line method over a period of five years.

Leasehold improvements are amortised on straight-line basis over the primary period of lease.

3 Intangible Assets

Intangible Assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets comprise of computer software which is amortised on the straight-line method over a period of five years. Cost of software includes license fees and implementation/ integration expenses.

4 Borrowing Costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in Statement of Profit and Loss in the period in which they are incurred.

5 Investments

Investments that are readily realisable and are intended to be held for not more than one year from the date, on which such investments are made, are classified as current investments. All other investments are classified as long term investments. Current investments are carried at cost or fair value, whichever is lower. Long-term investments are carried at cost. However, provision for diminution is made to recognise a decline, other than temporary, in the value of the investments, such reduction being determined and made for each investment individually.

6 Inventories

(a) Inventories are stated at lower of cost and net realisable value.

(b) Cost of raw materials (includes packing material) and stores and spares is determined on weighted average basis. Cost of traded goods is determined on first-in-first-out basis. Cost of work-in-progress and finished goods comprises of raw material, direct labor, other direct costs and related production overheads. Net realisable value is the estimate of the selling price in the ordinary course of the business, less the estimated costs of completion and the estimated costs necessary to make the sale.

7 Current Tax and Deferred Tax

Tax expense for the period, comprising current tax and deferred tax, are included in the determination of the net profit or loss for the period. Current tax is measured at the amount expected to be paid to the tax authorities in accordance with the taxation laws prevailing in the respective jurisdictions.

Deferred tax is recognised for all the timing differences, subject to the consideration of prudence in respect of deferred tax assets. Deferred tax assets are recognised and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. At each Balance Sheet date, the group reassesses unrecognised deferred tax assets, if any.

Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities representing current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws.

Minimum Alternative Tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the specified period.

Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period.

8 Employee Benefits

Provident Fund

The Contribution towards provident fund for certain employees is made to the regulatory authorities, where the Company has no further obligations. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made on a monthly basis.

Superannuation Fund

Contribution towards superannuation fund for certain employees is made to SBI Life Insurance Company where the Company has no further obligations. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from contribution made on monthly basis.

Gratuity

The Company provides for gratuity, a defined benefit plan (the "Gratuity Plan") covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee''s salary and the tenure of employment. The Company''s liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses/gains are recognised in the statement of Profit and Loss in the year in which they arise.

Gratuity Fund is recognised by the income tax authorities and is administered through trustees. The Employee''s Gratuity Trust takes group gratuity policies with insurance companies.

Compensated Absences

Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year end are treated as short term employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end.

Accumulated compensated absences, which are expected to be availed or encashed beyond 12 months from the end of the year end are treated as other long term employee benefits. The Company''s liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses/ gains are recognised in the Statement of Profit and Loss in the year in which they arise.

9 Foreign Currency Translation Initial Recognition

On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

Subsequent Recognition

As at the reporting date, non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. All non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined. All monetary assets and liabilities in foreign currency are restated at the end of accounting period.

Exchange differences on restatement of all other monetary items are recognised in the Statement of Profit and Loss. Translation of foreign operations Foreign operations are classified as either ''integral'' or ''non-integral'' operation. Exchange differences arising on a monetary item that, in substance, forms part of an enterprise''s net investment in a non-integral foreign operation are accumulated in the Foreign Currency Translation Reserve until the disposal of the net investment, at which time they are recognised as income or as expenses.

Forward Exchange Contracts and Swaps

In respect of forward exchange contracts, other than forward exchange contracts in respect of firm commitments and highly probable forecast transactions, the premium or discount arising at the inception of forward exchange contract, is amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the Statement of Profit and Loss in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such a forward exchange contract is recognised as income or as expense for the period.

In respect of forward exchange contracts taken to hedge the risks associated with foreign currency fluctuations relating to firm commitments and highly probable forecast transactions, the Company has adopted Accounting Standard 30 "Financial Instruments: Recognition and Measurement". Accordingly, forward exchange contracts relating to firm commitments and highly probable forecast transactions are fair valued at each reporting date.

Changes in the fair value of these hedging instruments that are designated and considered as effective hedges of highly probable forecasted transactions are recognised directly in shareholders'' funds under ''Hedging Reserve Account'' to be recognised in the Statement of Profit and Loss when the underlying transaction occurs. Changes in the fair value of the hedging instruments that do not qualify for hedge accounting are recognised in the Statement of Profit and Loss as they arise.

Swaps are fair valued at each reporting date and the changes in the fair value are recognised in the Statement of Profit and Loss.

10 Revenue Recognition

(a) Sales are recognised when the substantial risks and rewards of ownership in the goods are transferred to the buyer as per the terms of the contract and are recognised net of trade discounts, rebates, sales taxes and excise duties. Domestic sales are recognised on dispatch to customers. Export sales are recognised on the date of cargo receipts, bill of lading or other relevant documents, in accordance with the terms and conditions for sales.

(b) In case of sale made by the Company as Support Manufacturer, export benefits arising from Duty Entitlement Pass Book (DEPB), Duty Drawback scheme and Focus Market Scheme are recognised on export of such goods in accordance with the agreed terms and conditions with customers. In case of direct exports made by the Company, export benefits arising from DEPB, Duty Drawback scheme and Focus Market Scheme are recognised on shipment of direct exports.

11 Other Income

Interest: Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

Dividend : Dividend income is recognised when the right to receive dividend is established.

12 Government Grants

Government grants are accounted for when it is reasonably certain that ultimate collection will be made. Capital grants relating to specific assets granted under the Technology Upgradation Fund Scheme (TUFS) are reduced from the gross value of the Fixed Assets. Revenue grants, in the nature of interest subsidy under the Technology Upgradation Fund Scheme (TUFS) are adjusted against ''Interest on Long term borrowings''. Revenue grants, in the nature of interest subsidy under the Interest Subvention Scheme are adjusted against ''Interest on Short term borrowings''. Revenue grants, in the nature of Sales Tax benefits are recognized in the Statement of Profit and Loss on a systematic/ appropriate basis.

Impairment

Assessment is done at each Balance Sheet date as to whether there is any indication that an asset (tangible and intangible) may be impaired. For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets, is considered as a cash generating unit. If any such indication exists, an estimate of the recoverable amount of the asset/cash generating unit is made. Assets whose carrying value exceeds their recoverable amount are written down to the recoverable amount. Recoverable amount is higher of an asset''s or cash generating unit''s net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Assessment is also done at each Balance Sheet date as to whether there is any indication that an impairment loss recognised for an asset in prior accounting periods may no longer exist or may have decreased.

13 Provisions and Contingent Liabilities

Provisions: Provisions are recognised when there is a present obligation 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 there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance sheet date and are not discounted to its present value.

Contingent Liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.

14 Employees Stock Option Schemes

Equity settled stock options granted under "Employee Stock Option Schemes" are accounted for as per the accounting treatment prescribed by Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999, issued by Securities and Exchange Board of India and the Guidance Note on Employee Share-based Payments issued by the Institute of Chartered Accountants of India.

15 Leases

As a lessee:

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the Statement of Profit and Loss on a straight- line basis over the period of the lease.

As a lessor:

The Company has leased certain tangible assets and such leases where the Company has substantially retained all the risks and rewards of ownership are classified as operating leases. Lease income on such operating leases are recognised in the Statement of Profit and Loss on a straight line basis over the lease term which is representative of the time pattern in which benefit derived from the use of the leased asset is diminished. Initial direct costs are recognised as an expense in the Statement of Profit and Loss in the period in which they are incurred.

16 Cash and Cash Equivalents

In the cash flow statement, cash and cash equivalents includes cash in hand, demand deposits with banks and other short-term highly liquid investments with original maturities of three months or less.

17 Earnings Per Share

Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Earnings considered in ascertaining the Company''s earnings per share is the net profit for the period after deducting preference dividends and any attributable tax thereto for the period, if any. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.

18 Amalgamation in the nature of purchase

The company accounts for all amalgamations in nature of purchase using the ''purchase method'' as prescribed in AS 14: Accounting for Amalgamations. Assets and liabilities acquired of the transferor company have been recognised at their book values at the date of amalgamation. The difference between the amount recorded as share capital issued (plus any additional consideration in the form of cash or other assets) and the book value of net assets of the transferor company is recorded as capital reserve/goodwill as the case may be.


Mar 31, 2013

1.1 Basis of preparaton

These fnancial statements have been prepared in accordance with the generally accepted accountng principles in India under the historical cost conventon on accrual basis. These fnancial statements have been prepared to comply in all material aspects with the accountng standards notfed under Secton 211(3C) [Companies (Accountng Standards) Rules, 2006, as amended] and the other relevant provisions of the Companies Act, 1956.

All assets and liabilites have been classifed as current or non-current as per the Company''s normal operatng cycle and other criteria set out in the Revised Schedule VI to the Companies Act, 1956. Based on the nature of products and the tme between the acquisiton of assets for processing and their realisaton in cash and cash equivalents, the Company has ascertained its operatng cycle as 12 months for the purpose of current – non current classifcaton of assets and liabilites.

1.2 Tangible Assets

Tangible Assets except land are stated at cost (net of cenvat credit, wherever applicable) less accumulated depreciaton and impairment losses, if any.

Subsequent expenditures related to an item of fxed asset are added to its book value only if they increase the future benefts from the existng asset beyond its previously assessed standard of performance.

Losses arising from the retrement of, and gains or losses arising from disposal of fxed assets which are carried at cost are recognised in the Statement of Proft and Loss.

Depreciaton on Tangible assets, other than leasehold improvements, ofce equipments and vehicles, is provided on straight- line method at the rates and in the manner prescribed under Schedule XIV to the Act. Depreciaton on additons/ deletons to fxed assets is calculated pro-rata from/ up to the date of such additons/ deletons.

Assets individually costng Rs. 5,000 or less are fully depreciated in the year of purchase.

Ofce equipments are depreciated on straight-line method over a period of ten years.

Vehicles are depreciated on straight-line method over a period of fve years.

Leasehold improvements are amortsed on straight-line basis over the primary period of lease.

1.3 Intangible Assets

Intangible Assets are stated at acquisiton cost, net of accumulated amortzaton and accumulated impairment losses, if any. Intangible assets comprise of computer sofware which is amortsed on the straight-line method over a period of fve years. Cost of sofware includes license fees and implementaton/ integraton expenses.

1.4 Borrowing Costs

General and specifc borrowing costs directly atributable to the acquisiton, constructon or producton of qualifying assets, which are assets that necessarily take a substantal period of tme to get ready for their intended use or sale, are added to the cost of those assets, untl such tme as the assets are substantally ready for their intended use or sale. All other borrowing costs are recognised in Statement of Proft and Loss in the period in which they are incurred.

1.5 Investments

Investments that are readily realisable and are intended to be held for not more than one year from the date, on which such investments are made, are classifed as current investments. All other investments are classifed as long term investments. Current investments are carried at cost or fair value, whichever is lower. Long-term investments are carried at cost. However, provision for diminuton is made to recognise a decline, other than temporary, in the value of the investments, such reducton being determined and made for each investment individually.

1.6 Inventories

(a) Inventories are stated at lower of cost and net realisable value.

(b) Cost of raw materials (includes packing material) and stores and spares is determined on weighted average basis. Cost of traded goods is determined on frst-in-frst-out basis. Cost of work-in-progress and fnished goods comprises of raw material, direct labour, other direct costs and related producton overheads. Net realisable value is the estmate of the selling price in the ordinary course of the business, less the estmated costs of completon and the estmated costs necessary to make the sale.

1.7 Current Tax and Deferred Tax

Tax expense for the period, comprising current tax and deferred tax, are included in the determinaton of the net proft or loss for the period. Current tax is measured at the amount expected to be paid to the tax authorites in accordance with the taxaton laws prevailing in the respectve jurisdictons.

Deferred tax is recognised for all the tming diferences, subject to the consideraton of prudence in respect of deferred tax assets. Deferred tax assets are recognised and carried forward only to the extent that there is a reasonable certainty that sufcient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets and liabilites are measured using the tax rates and tax laws that have been enacted or substantvely enacted by the Balance Sheet date. At each Balance Sheet date, the group reassesses unrecognised deferred tax assets, if any.

Current tax assets and current tax liabilites are ofset when there is a legally enforceable right to set of the recognised amounts and there is an intenton to setle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilites are ofset when there is a legally enforceable right to set of assets against liabilites representng current tax and where the deferred tax assets and the deferred tax liabilites relate to taxes on income levied by the same governing taxaton laws.

Minimum Alternatve Tax credit is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the specifed period. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is writen down to the extent there is no longer a convincing evidence to the efect that the Company will pay normal income tax during the specifed period.

1.8 Employee Benefts

Provident Fund

The Contributon towards provident fund for certain employees is made to the regulatory authorites, where the Company has no further obligatons. Such benefts are classifed as Defned Contributon Schemes as the Company does not carry any further obligatons, apart from the contributons made on a monthly basis.

Superannuaton Fund

Contributon towards superannuaton fund for certain employees is made to SBI Life Insurance Company where the Company has no further obligatons. Such benefts are classifed as Defned Contributon Schemes as the Company does not carry any further obligatons, apart from contributon made on monthly basis.

Gratuity

The Company provides for gratuity, a defned beneft plan (the "Gratuity Plan") covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retrement, death, incapacitaton or terminaton of employment, of an amount based on the respectve employee''s salary and the tenure of employment. The Company''s liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses/gains are recognised in the statement of Proft and Loss in the year in which they arise.

Gratuity Fund is recognised by the income tax authorites and is administered through trustees. The Employee''s Gratuity Trust takes group gratuity policies with insurance companies.

Compensated Absences

Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year end are treated as short term employee benefts. The obligaton towards the same is measured at the expected cost of accumulatng compensated absences as the additonal amount expected to be paid as a result of the unused enttlement as at the year end.

Accumulated compensated absences, which are expected to be availed or encashed beyond 12 months from the end of the year end are treated as other long term employee benefts. The Company''s liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses/ gains are recognised in the Statement of Proft and Loss in the year in which they arise.

1.9 Foreign Currency Translaton

Inital Recogniton

On inital recogniton, all foreign currency transactons are recorded by applying to the foreign currency amount the exchange rate between the reportng currency and the foreign currency at the date of the transacton.

Subsequent Recogniton

As at the reportng date, non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transacton. All non-monetary items which are carried at fair value or other similar valuaton denominated in a foreign currency are reported using the exchange rates that existed when the values were determined. All monetary assets and liabilites in foreign currency are restated at the end of accountng period.

Exchange diferences on restatement of all other monetary items are recognised in the Statement of Proft and Loss.

Translaton of foreign operatons

Foreign operatons are classifed as either ''integral'' or ''non-integral'' operaton. Exchange diferences arising on a monetary item that, in substance, forms part of an enterprise''s net investment in a non-integral foreign operaton are accumulated in the Foreign Currency Translaton Reserve untl the disposal of the net investment, at which tme they are recognised as income or as expenses.

Forward Exchange Contracts and Swaps

In respect of forward exchange contracts, other than forward exchange contracts in respect of frm commitments and highly probable forecast transactons, the premium or discount arising at the incepton of forward exchange contract, is amortsed as expense or income over the life of the contract. Exchange diferences on such contracts are recognised in the Statement of Proft and Loss in the reportng period in which the exchange rates change. Any proft or loss arising on cancellaton or renewal of such a forward exchange contract is recognised as income or as expense for the period.

In respect of forward exchange contracts taken to hedge the risks associated with foreign currency fuctuatons relatng to frm commitments and highly probable forecast transactons, the Company has adopted Accountng Standard 30 ''Financial Instruments: Recogniton and Measurement". Accordingly, forward exchange contracts relatng to frm commitments and highly probable forecast transactons are fair valued at each reportng date.

Changes in the fair value of these hedging instruments that are designated and considered as efectve hedges of highly probable forecasted transactons are recognised directly in shareholders'' funds under ''Hedging Reserve Account'' to be recognised in the Statement of Proft and Loss when the underlying transacton occurs. Changes in the fair value of the hedging instruments that do not qualify for hedge accountng are recognised in the Statement of Proft and Loss as they arise.

Swaps are fair valued at each reportng date and the changes in the fair value are recognised in the Statement of Proft and Loss.

1.10 Revenue Recogniton

(a) Sales are recognised when the substantal risks and rewards of ownership in the goods are transferred to the buyer as per the terms of the contract and are recognised net of trade discounts, rebates, sales taxes and excise dutes. Domestc sales are recognised on dispatch to customers. Export sales are recognised on the date of cargo receipts, bill of lading or other relevant documents, in accordance with the terms and conditons for sales.

(b) In case of sale made by the Company as Support Manufacturer, export benefts arising from Duty Enttlement Pass Book (DEPB), Duty Drawback scheme and Focus Market Scheme are recognised on export of such goods in accordance with the agreed terms and conditons with customers. In case of direct exports made by the Company export benefts arising from DEPB, Duty Drawback scheme and Focus Market Scheme are recognised on shipment of direct exports.

1.11 Other Income

Interest : Interest income is recognised on a tme proporton basis taking into account the amount outstanding and the rate applicable.

Dividend : Dividend income is recognised when the right to receive dividend is established.

1.12 Government Grants

Government grants are accounted for when it is reasonably certain that ultmate collecton will be made. Capital grants relatng to specifc assets granted under the Technology Upgradaton Fund Scheme (TUFS) are reduced from the gross value of the Fixed Assets. Revenue grants, in the nature of interest subsidy under the Technology Upgradaton Fund Scheme (TUFS) are adjusted against ''Interest on Long term borrowings''. Revenue grants, in the nature of Sales Tax benefts are recognized in the Statement of Proft and Loss on a systematc/ appropriate basis.

1.13 Impairment

Assessment is done at each Balance Sheet date as to whether there is any indicaton that an asset (tangible and intangible) may be impaired. For the purpose of assessing impairment, the smallest identfable group of assets that generates cash infows from contnuing use that are largely independent of the cash infows from other assets or groups of assets, is considered as a cash generatng unit. If any such indicaton exists, an estmate of the recoverable amount of the asset/cash generatng unit is made. Assets whose carrying value exceeds their recoverable amount are writen down to the recoverable amount. Recoverable amount is higher of an asset''s or cash generatng unit''s net selling price and its value in use. Value in use is the present value of estmated future cash fows expected to arise from the contnuing use of an asset and from its disposal at the end of its useful life. Assessment is also done at each Balance Sheet date as to whether there is any indicaton that an impairment loss recognised for an asset in prior accountng periods may no longer exist or may have decreased.

1.14 Provisions and Contngent Liabilites

Provisions : Provisions are recognised when there is a present obligaton as a result of a past event, it is probable that an outlow of resources embodying economic benefts will be required to setle the obligaton and there is a reliable estmate of the amount of the obligaton. Provisions are measured at the best estmate of the expenditure required to setle the present obligaton at the Balance sheet date and are not discounted to its present value.

Contngent Liabilites: Contngent liabilites are disclosed when there is a possible obligaton arising from past events, the existence of which will be confrmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the company or a present obligaton that arises from past events where it is either not probable that an outlow of resources will be required to setle or a reliable estmate of the amount cannot be made.

1.15 Employees Stock Opton Schemes

Equity setled stock optons granted under "Employee Stock Opton Schemes" are accounted for as per the accountng treatment prescribed by Employee Stock Opton Scheme and Employee Stock Purchase Guidelines, 1999, issued by Securites and Exchange Board of India and the Guidance Note on Employee Share-based Payments issued by the Insttute of Chartered Accountants of India.

1.16 Leases

As a lessee :

Leases in which a signifcant porton of the risks and rewards of ownership are retained by the lessor are classifed as operatng leases. Payments made under operatng leases are charged to the Statement of Proft and Loss on a straight-line basis over the period of the lease.

As a lessor :

The Company has leased certain tangible assets and such leases where the Company has substantally retained all the risks and rewards of ownership are classifed as operatng leases. Lease income on such operatng leases are recognised in the Statement of Proft and Loss on a straight line basis over the lease term which is representatve of the tme patern in which beneft derived from the use of the leased asset is diminished. Inital direct costs are recognised as an expense in the Statement of Proft and Loss in the period in which they are incurred.

1.17 Cash and Cash Equivalents

In the cash fow statement, cash and cash equivalents includes cash in hand, demand deposits with banks and other short- term highly liquid investments with original maturites of three months or less.

1.18 Earnings Per Share

Basic earnings per share is calculated by dividing the net proft or loss for the period atributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Earnings considered in ascertaining the Company''s earnings per share is the net proft for the period afer deductng preference dividends and any atributable tax thereto for the period, if any. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potental equity shares, that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculatng diluted earnings per share, the net proft or loss for the period atributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the efects of all dilutve potental equity shares.

1.19 Amalgamaton in the nature of purchase

The company accounts for all amalgamatons in nature of purchase using the ''purchase method'' as prescribed in AS 14 : Accountng for Amalgamatons. Assets and liabilites acquired of the transferor company have been recognised at their book values at the date of amalgamaton. The diference between the amount recorded as share capital issued (plus any additonal consideraton in the form of cash or other assets) and the book value of net assets of the transferor company is recorded as capital reserve/goodwill as the case may be.


Mar 31, 2011

(i) Accounting Convention

The Financial Statements are prepared to comply in all material aspects with all the applicable accounting principles in India, the applicable accounting standards notified under sub-section (3C) of Section 211 of the Companies Act, 1956 (the "Act") and the other relevant provisions of the Act.

(ii) Fixed Assets

Fixed Assets are stated at cost (net of cenvat credit, wherever applicable) less accumulated depreciation and impairment loss, if any. The cost includes cost of acquisition, construction, erection, installation etc., preoperative expenses (including trial run) and borrowing costs incurred during pre-operational period. Cost of software includes license fees and implementation/ integration expenses.

(iii) Incidental Expenditure Pending Capitalisation/Allocaton

Incidental expenditure pending capitalisation/allocation represents expenses incurred during setting-up of manufacturing facility including preoperative expenses for trial runs and borrowing cost incurred prior to the date of commencement of commercial production. These expenses are net of sales during trial run and other income accrued prior to the commencement of commercial production.

(iv) Borrowing Costs

Borrowing costs directly attributable to the acquisition/ construction of fixed assets are apportioned to the cost of the fixed assets up to the date on which the asset is put to use/ commissioned.

(v) Depreciaton

(a) Depreciaton on fixed assets, other than leasehold improvements and computer software, is provided on straight-line method at the rates and in the manner prescribed under Schedule XIV to the Act. Depreciation on additons/ deletions to fixed assets is calculated pro-rata from/ up to the date of such additons/ deletons.

(b) Leasehold improvements are amortised on straight-line basis over the primary period of lease.

(c) Computer software is amortised on the straight-line method over a period of five years.

(d) Assets individually costing Rs. 5,000 or less are fully depreciated in the year of purchase.

(vi) Investments

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

(vii) Inventories

(a) Inventories are valued at lower of cost and net realisable value.

(b) Cost of raw materials, stores and spares and traded goods is determined on first-in-first-out basis. Cost of work-in-process and finished goods comprises of raw material, direct labor, other direct costs and related overheads but exclude interest expense. Net realisable value is the estimate of the selling price in the ordinary course of the business, less the estimated costs of completion and estimated selling expenses.

(viii) Accounting for Taxes on Income/ Minimum Alternate Tax Credit

(a) Current Taxaton

The current tax is determined as the amount of tax payable in respect of taxable income for the year as per The Income Tax Act, 1961, of India.

(b) Deferred Taxaton

- Deferred tax resultng from timing differences between book and tax profits is accounted for under the liability method, at the current/substantially enacted rate of tax to the extent that the timing differences are expected to crystallise.

- Deferred tax assets arising in situations where there are brought forward losses and unabsorbed depreciaton as per the Income Tax Act, 1961, of India to the extent deferred tax amount exceeds net deferred tax liabilites, are recognised only when there is a virtual certainty supported by convincing evidence that such assets will be realised.

(c) Minimum Alternate Tax Credit

Minimum Alternate Tax (MAT) paid in accordance with tax laws, which give rise to future economic benefits in the form of adjustment of future tax liability, is recognised as an asset only when, based on convincing evidence, it is probable that the future economic benefits associated with it will flow to the Company and the assets can be measured reliably.

(ix) Employee Benefits

(a) Defined Contribution Plans

The Company contributes on a defined contribution basis to Employee's Provident Fund, Employee's State Insurance Fund and Employee's Pension Scheme towards post employment benefits, all of which are administered by the respective Government authorities, and has no further obligation beyond making its contribution, which is expensed in the year to which it pertains.

(b) Defined Benefit Plans

The Company has a Defined Benefit Plan namely Gratuity for all its employees. The liability for the defined benefit plan of Gratuity is determined on the basis of an actuarial valuation, calculated using projected unit credit method, by an independent actuary at the year end.

Gratuity Fund is recognised by the income tax authorities and is administered through trustees. The Employee's Gratuity Trust takes group gratuity policies with insurance companies.

Actuarial gains and losses which comprise experience adjustments and the effect of changes in actuarial assumptions are recognised in the Profit and Loss Account.

(c) Employee Leave Entitlement

The employees of the Company are entitled to leave as per the leave policy of the Company. The liability in respect of unutlised leave balances is provided based on an actuarial valuation carried out by an independent actuary as at the year end and charged to the Profit and Loss Account.

(x) Foreign Currency Transactions, Derivative Instruments and Hedge Accounting

(a) Foreign currency transactions are recorded at the exchange rates prevailing on the date of such transactions. Monetary assets and liabilities as at the Balance Sheet date are translated at the rates of exchange prevailing at the date of the Balance Sheet. Gains and losses arising on account of diferences in foreign exchange rates on settlement/ translation of monetary assets and liabilities are recognised in the Profit and Loss Account except for monetary items that in substance forms part of Company's net investment in a non-integral foreign operation are recognised in Foreign Exchange Translation Reserve. Non-monetary foreign currency items are carried at cost.

(b) In respect of forward contracts, other than forward contracts in respect of firm commitments and highly probable forecast transactions, the premium or discount arising at the inception of forward exchange contract, is amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the Profit and Loss Account in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such a forward exchange contract is recognised as income or as expense for the period.

(c) In respect of forward contracts and currency options taken to hedge the risks associated with foreign currency fluctuations relating to firm commitments and highly probable forecast transactions, the Company has adopted Accounting Standard 30 ‘Financial Instruments: Recognition and Measurement". Accordingly, foreign currency fluctuations relating to firm commitments and highly probable forecast transactions are fair valued at each reporting date.

Changes in the fair value of these hedging instruments that are designated and considered as efective hedges of highly probable forecasted transactions are recognised directly in shareholders' funds under ‘Hedging Reserve Account' to be recognised in the Profit and Loss Account when the underlying transaction occurs. Changes in the fair value of the hedging instruments that do not qualify for hedge accounting are recognised in the Profit and Loss Account as they arise.

(xi) Revenue Recognition

(a) Sales revenue is recognised on transfer of significant risks and rewards of ownership of the goods to the buyer. Domestic sales are recognised on dispatch to customers. Export sales are recognised on the date of cargo receipts, bill of lading or other relevant documents, in accordance with the terms and conditions for sales. Realised exchange differences on export debtors are included in sales.

(b) In case of sales made by the Company as Support Manufacturer, export benefits arising from Duty Entitlement Pass Book(DEPB) are recognised on export of such goods in accordance with the agreed terms and conditions with customers. In case of direct exports made by the Company export benefits arising from DEPB, Duty Drawback scheme and Focus Market Scheme are recognised on shipment of direct exports.

(c) Dividends are accounted for when the right to receive dividend is established.

(xii) Government Grants

Government grants are accounted for when it is reasonably certain that ultimate collection will be made. Capital grants relating to specific assets are reduced from the gross value of the Fixed Assets. Revenue grants, in the nature of interest subsidy under the Technology Upgradation Fund Scheme (TUFS) are adjusted against ‘Interest on Fixed Loans'.

(xiii) Impairment of Assets

The Company assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Profit and Loss Account. If at the Balance Sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is refected at the recoverable amount.

(xiv) Provisions and Contingent Liabilities

The Company recognises a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a 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 but the likelihood of outflow of resources is remote, no provision or disclosure is made as specified in Accounting Standard 29 – " Provisions, Contingent Liabilities and Contingent Assets", notified under Section 211(3C) of the Act.

(xv) Employees Stock Option Schemes

Stock options granted to employees under Employee Stock Option Schemes are accounted as per the accounting treatment prescribed in the Guidance Note on Accounting for Employee Share-based Payments issued by the Institute of Chartered Accountants of India.

(xvi) Accounting Estimates

The preparation of financial statements 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 revenue and expenses during the reporting period. Difference between the actual results and the estimates are recognised in the period in which the results are known/ materialised.


Mar 31, 2010

(i) Accounting Convention

The Financial Statements are prepared to comply in all material aspects with all the applicable accounting principles in India, the applicable accounting standards notified under sub-section (3C) of Section 211 of the Companies Act, 1956 (the "Act") and the other relevant provisions of the Act.

(ii) Fixed Assets

Fixed Assets are stated at cost (net of cenvat credit, wherever applicable) less accumulated depreciation and impairment loss, if any. The cost includes cost of acquisition, construction, erection, installation etc., preoperative expenses (including trial run) and borrowing costs incurred during pre-operational period. Cost of software includes license fees and implementation/ integration expenses.

(iii) Incidental Expenditure Pending Capitalisation/ Allocation

Incidental expenditure pending capitalisation/ allocation represents expenses incurred during setting-up of manufacturing facility including preoperative expenses for trial runs and borrowing cost incurred prior to the date of commencement of commercial production. These expenses are net of sales during trial run and other income accrued prior to the commencement of commercial production.

(iv) Borrowing Costs

Borrowing costs directly attributable to the acquisition/ construction of fixed assets are apportioned to the cost of the fixed assets up to the date on which the asset is put to use/ commissioned.

(v) Depreciation

(a) Depreciation on fixed assets, other than leasehold improvements, is provided on straight-line method at the rates and in the manner prescribed under Schedule XIV to the Act. Depreciation on additions/ deletions to fixed assets is calculated pro-rata from/ up to the date of such additions/ deletions.

(b) Leasehold improvements are amortised on straight-line basis over the primary period of lease.

(c) Computer software is amortised on the straight-line method over a period of five years.

(d) Assets individually costing Rs. 5,000 or less are fully depreciated in the year of purchase. (vi) Investments

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

(vii) Inventories

(a) Inventories are valued at lower of cost and net realisable value.

(b) Cost of raw materials and stores and spares is determined on weighted average basis. Cost of traded goods is determined on first-in-first-out basis. Cost of work-in-process and finished goods comprises of raw material, direct labor, other direct costs and related overheads but exclude interest expense. Net realisable value is the estimate of the selling price in the ordinary course of the business, less the estimated costs of completion and estimated selling expenses.

(viii) Accounting for Taxes on Income/ Minimum Alternate Tax Credit

(a) Current Taxation

The current tax is determined as the amount of tax payable in respect of taxable income for the year as per The Income Tax Act, 1961, of India.

(b) Deferred Taxation

- Deferred tax resulting from timing differences between book and tax profits is accounted for under the liability method, at the current/ substantially enacted rate of tax to the extent that the timing differences are expected to crystallise.

- Deferred tax assets arising in situations where there are brought forward losses and unabsorbed depreciation as per the Income Tax Act, 1961, of India, are recognised only when there is a virtual certainty supported by convincing evidence that such assets will be realised.

(c) Minimum Alternate Tax Credit

Minimum Alternate Tax (MAT) paid in accordance with tax laws, which give rise to future economic benefits in the form of adjustment of future tax liability, is recognized as an asset only when, based on convincing evidence, it is probable that the future economic benefits associated with it will flow to the Company and the assets can be measured reliably.

(ix) Employee Benefits

(a) Defined Contribution Plans

The Company contributes on a defined contribution basis to Employees Provident Fund, Employees State Insurance Fund and Employees Pension Scheme towards post employment benefits, all of which are administered by the respective Government authorities, and has no further obligation beyond making its contribution, which is expensed in the year to which it pertains.

(b) Defined Benefit Plans

The Company has a Defined Benefit Plan namely Gratuity for all its employees. The liability for the defined benefit plan of Gratuity is determined on the basis of an actuarial valuation, calculated using projected unit credit method, by an independent actuary at the year end.

Gratuity Fund is recognized by the income tax authorities and is administered through trustees. The Employees Gratuity Trust takes group gratuity policies with insurance companies.

Actuarial gains and losses which comprise experience adjustments and the effect of changes in actuarial assumptions are recognised in the Profit and Loss Account.

(c) Employee Leave Entitlement

The employees of the Company are entitled to leave as per the leave policy of the Company. The liability in respect of unutilised leave balances is provided based on an actuarial valuation carried out by an independent actuary as at the year end and charged to the Profit and Loss Account.

(x) Foreign Currency Transactions, Derivative Instruments and Hedge Accounting

(a) Foreign currency transactions are recorded at the exchange rates prevailing on the date of such transactions. Monetary assets and liabilities as at the Balance Sheet date are translated at the rates of exchange prevailing at the date of the Balance Sheet. Gains and losses arising on account of differences in foreign exchange rates on settlement/ translation of monetary assets and liabilities are recognised in the Profit and Loss Account except for monetary items that are in substance forms part of Companys net investment in a non-integral foreign operation are recognised in Foreign Exchange Translation Reserve. Non-monetary foreign currency items are carried at cost.

(b) In respect of forward contracts, other than forward contracts in respect of firm commitments and highly probable forecast transactions, the premium or discount arising at the inception of forward exchange contract, is amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the Profit and Loss Account in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such a forward exchange contract is recognised as income or as expense for the period.

(c) In respect of forward contracts and currency options taken to hedge the risks associated with foreign currency fluctuations relating to firm commitments and highly probable forecast transactions, the Company has adopted AS 30 Financial Instruments: Recognition and Measurement", Accordingly, foreign currency fluctuations relating to firm commitments and highly probable forecast transactions are fair valued at each reporting date. Changes in the fair value of these hedging instruments that are designated and considered as effective hedges of highly probable forecasted transactions are recognised directly in shareholders funds under Hedging Reserve Account to be recognised in the Profit and Loss Account when the underlying transaction occurs. Changes in the fair value of the hedging instruments that do not qualify for hedge accounting are recognised in the Profit and Loss Account as they arise.

(xi) Revenue Recognition

(a) Sales revenue is recognized on transfer of significant risks and rewards of ownership of the goods to the buyer. Domestic sales are recognized on dispatch to customers. Export sales are recognised on the date of cargo receipts, bill of lading or other relevant documents, in accordance with the terms and conditions for sales. Realized exchange differences on export debtors are included in sales.

(b) In case of sales made by the Company as Support Manufacturer, export benefits arising from Duty Entitlement Pass Book (DEPB) are recognised on export of such goods in accordance with the agreed terms and conditions with customers. In case of direct exports made by the Company export benefits arising from Duty Drawback scheme and Focus Market Scheme are recognized on shipment of direct exports.

(c) Dividends are accounted for when the right to receive dividend is established.

(xii) Government Grants

Government grants are accounted for when it is reasonably certain that ultimate collection will be made. Capital grants relating to specific assets are reduced from the gross value of the Fixed Assets. Revenue grants, in the nature of interest subsidy under the Technology Upgradation Fund Scheme (TUFS) are adjusted against Interest on Fixed Loans.

(xiii) Impairment of Assets

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Profit and Loss Account. If at the Balance Sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount.

(xiv) Provisions and Contingent Liabilities

The Company recognizes a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a 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 but the likelihood of outflow of resources is remote, no provision or disclosure as specified in Accounting Standard 29 " Provisions, Contingent Liabilities and Contingent Assets", issued by the Institute of Chartered Accountants of India is made.

(xv) Employees Stock Option Schemes

Stock options granted to employees under Employee Stock Option Schemes are accounted as per the accounting treatment prescribed in the Guidance Note on Accounting for Employee Share-based Payments issued by the Institute of Chartered Accountants of India.

(xvi) Accounting Estimates

The preparation of financial statements 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 revenue and expenses during the reporting period. Difference between the actual results and the estimates are recognized in the period in which the results are known/ materialised.