Notes to Accounts of The Hi-Tech Gears Ltd.

Mar 31, 2018

1. Nature of operations

The Hi Tech Gears Limited (‘the Company’) is an auto component manufacturer (a Tier 1 supplier). The Company is domiciled in India and its corporate office is situated at 14th Floor, Tower-B, Millennium Plaza, Sushant Lok-I, Sector-27, Gurgaon-122002, Haryana, India.

2. General information and compliance with Ind AS These financial statements of the Company have been prepared in accordance with the Indian Accounting Standards (hereinafter referred to as the ‘Ind AS’) as notified by Ministry of Corporate Affairs (‘MCA’) under section 133 of the Companies Act, 2013 (‘Act’) read with the Companies (Indian Accounting Standards) Rules, 2015, as amended and other relevant provisions of the Act. The Company has uniformly applied the accounting policies for the periods presented.

The financial statements for the year ended 31 March 2018 are the first financial statements which the Company has prepared in accordance with Ind AS. For all periods up to and including the year ended 31 March 2017, the Company had prepared its financial statements in accordance with accounting standards notified under section 133 of the Act, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Previous GAAP), which have been adjusted for the differences in the accounting principles adopted by the Company on transition to Ind AS. For the purpose of comparatives, financial statements for the year ended 31 March 2017 and opening balance sheet as at 1 April 2016 are also prepared and presented as per Ind AS.

The financial statements for the year ended 31 March 2018 along with the comparative financial information were authorized and approved for issue by the Board of Directors on 21 May 2018. The revisions to the financial statements is permitted by the Board of Directors after obtaining necessary approvals or at the instance of regulatory authorities as per provisions of the Act.

3. Basis of preparation

The financial statements have been prepared on going concern basis in accordance with generally accepted accounting principles in India. Further, the financial statements have been prepared on a historical cost basis except for following items:

Items Measurement basis

Certain financial assets Fair value and liabilities

Net defined benefits Fair value of plan assets (assets)/liability less present value of defined benefits bligations.

4. Recent accounting pronouncement

In March 2018, the Ministry of Corporate Affairs issued the Companies (Indian Accounting

Standards) (Amendments) Rules, 2018, notifying amendments to Ind AS 12, ‘Income taxes’, Ind AS 21, ‘The effects of changes in foreign exchange rates and also introduced new revenue recognition standard Ind AS 115 ‘Revenue from contracts with customers’. These amendments rules are applicable to the Company from 1 April 2018.

Ind AS 115 ‘Revenue from Contracts with Customers’ (Ind AS 115)

Ministry of Corporate Affairs (‘MCA’) has notified new standard for revenue recognition which overhauls the existing revenue recognition guidance and supersedes Ind AS 18 - Revenue and Ind AS 11 -Construction contracts. The new standard provides a control-based revenue recognition model and provides a five step application principle to be followed for revenue recognition:

1. Identification of the contracts with the customer

2. Identification of the performance obligations in the contract

3. Determination of the transaction price

4. Allocation of transaction price to the performance obligations in the contract (as identified in step ii)

5. Recognition of revenue when performance obligation is satisfied.

The management is yet to assess the impact of this new standard on the Company’s financial statements.

Amendment to Ind AS 12

The amendment to Ind AS 12 requires the entities to consider restriction in tax laws in sources of taxable profit against which entity may make deductions on reversal of deductible temporary difference (may or may not have arisen from same source) and also consider probable future taxable profit. The Company is evaluating the requirements of the amendment and its impact on the financial statements.

Amendment to Ind AS 21

The amendment to Ind AS 21 requires the entities to consider exchange rate on the date of initial recognition of advance consideration (asset/liability), for recognising related expense/income on the settlement of said asset/liability. The Company is evaluating the requirements of the amendment and its impact on the financial statements.

*During previous year, the Company incorporated a Wholly Owned Subsidiary Company in Canada viz. 2545887 Ontario Inc. (“254”). “254” has in turn acquired the 100% shares of 2504584 Ontario Inc., Canada (“250”) and Teutech Industries Inc., Canada (“Teutech”) effective from 01 March 2017. Both “250” and “Teutech” have some existing Subsidiary Companies in Canada and USA respectively. Pursuant to the provisions of the Companies Act, 2013, all such Companies have become the step down subsidiary companies of the Company.

**Amount showing investment made in Neo- Tech Auto System, Inc., USA of $ 10,000, for which allotment has been made on 21 September 2017.

***During the year 750 Equity shares of State Bank of Bikaner and Jaipur has been converted into 2100 Equity shares of State bank of India.

iv Rights, preferences and restrictions attached to equity shares

The Company has one class of equity shares with paid up value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share on all resolutions submitted to shareholders. They have right to participate in the profits of the company, if declared by the Board as interim dividend and recommended by the Board and declared by the members as final dividend. They are also entitled to bonus/right issue, as declared by Company from time to time. They have right to receive annual report of the Company, beside other rights available under the Companies Act and Listing Regulations.

In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the Company, beside other rights available under the Companies Act.

The distribution will be in proportion to the number of equity shares held by the shareholders.

vi Aggregate number and class of shares allotted as fully paid up pursuant to contract(s) without payment being received in cash, by way of bonus shares and shares bought back for the period of 5 years immediately preceding the balance sheet date

The Company has not issued any shares pursuant to contract(s) without payment being received in cash.

No bonus shares have been issued in preceding 5 years.

The Company has not undertaken any buy back of shares.

Note - 4*

Other equity

(i) Nature and purpose of other reserves General reserve

General reserve is created out of the accumulated profits of the Company as per the provisions of Companies Act. Retained earnings

All the profits made by the Company are transferred to retained earnings from statement of profit and loss.

Other comprehensive income

Other comprehensive income represents balance arising on account of changes in fair value of equity instruments carried at fair value through other comprehensive income and gain/(loss) booked on re-measurement of defined benefit plans.

*Refer Part B (Other equity) of standalone statement of changes in equity as at 31 March 2018.

Note - 5A

Financial instruments

(i) Fair values hierarchy

Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three Levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:

Level 1: Quoted prices (unadjusted) in active markets for financial instruments.

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data rely as little as possible on entity specific estimates.

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

(ii) Financial instruments by category

For amortised cost instruments, carrying value represents the best estimate of fair value.

‘Investment in subsidiary is measured at cost and hence are not required to be disclosed as per Ind AS 107 “Financial Instruments Disclosures”. Hence, the same have been excluded from the above table..

(iii) Financial assets measured at fair value - recurring fair value measurements

The following table shows the levels within the hierarchy of financial assets measured at fair value on a recurring basis at 31 March 2018 and 31 March 2017 :

The management assessed that cash and cash equivalents, trade receivables, other receivables, trade payables and other current financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:

(I ) The fair values of the Company’s interest-bearing borrowings, loans and receivables are determined by applying discounted cash flows (‘DCF’) method, using discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period. The own non-performance risk as at 31 March 2018 was assessed to be insignificant.

Note - 5 B

Financial risk management

The Company’s activities expose it to credit risk, liquidity risk and market risk. The Company’s board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the related impact in the financial statements.

(A) Credit risk

Credit risk is the risk that a counterparty fails to discharge its obligation to the Company. The Company’s exposure to credit risk is influenced mainly by cash and cash equivalents, trade receivables and financial assets measured at amortised cost. The Company continuously monitors defaults of customers and other counterparties and incorporates this information into its credit risk controls.

a) Credit risk management

i) Credit risk rating

The Company assesses and manages credit risk of financial assets based on following categories arrived on the basis of assumptions, inputs and factors specific to the class of financial assets. The Company assigns the following credit ratings to each class of financial assets based on the assumptions, inputs and factors specific to the class of financial assets.

A: Low B: Medium C: High

Life time expected credit loss is provided for trade receivables.

Based on business environment in which the Company operates, a default on a financial asset is considered when the counter party fails to make payments within the agreed time period as per contract. Loss rates reflecting defaults are based on actual credit loss experience and considering differences between current and historical economic conditions.

Assets are written off when there is no reasonable expectation of recovery, such as a debtor declaring bankruptcy or a litigation decided against the Company. The Company continues to engage with parties whose balances are written off and attempts to enforce repayment. Recoveries made are recognised in statement of profit and loss.

(B) Liquidity risk

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

Management monitors rolling forecasts of the Company’s liquidity position and cash and cash equivalents on the basis of expected cash flows. The Company takes into account the liquidity of the market in which the entity operates.

Maturities of financial liabilities

The tables below analyse the Company’s financial liabilities into relevant maturity groupings based on their contractual maturities.

(C) Market risk

(i) Foreign exchange risk

The Group has international transactions and is exposed to foreign exchange risk arising from foreign currency transactions (imports and exports). Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Company’s functional currency. The Company does not hedge its foreign exchange receivables/payables.

(ii) Derivative financial instrument

The Company uses derivative instruments as part of its management of exposure to fluctuations in foreign currency exchange rates. The Company does not acquire or issue derivative financial instruments for trading or speculative purposes. The Company does not enter into complex derivative transactions to manage the risks. The derivative transactions are normally in the form of forward contracts and these are subject to the Company guidelines and policies.

The fair values of all derivatives are separately recorded in the balance sheet within current financial assets. Derivatives that are designated as hedges are classified as current depending on the maturity of the derivative. The use of derivatives can give rise to credit and market risk. The Company tries to control credit risk as far as possible by only entering into contracts with reputable banks and financial institutions. The use of derivative instruments is subject to limits, authorities and regular monitoring by appropriate levels of management. The limits, authorities and monitoring systems are periodically reviewed by management and the Board. The market risk on derivatives is mitigated by changes in the valuation of the underlying assets, liabilities or transactions, as derivatives are used only for risk management purposes.”

a) Fair value hedge

The fair value hedges relate to forward covers taken to hedge currency exposure risks.

The Company uses foreign exchange contracts from time to time to optimize currency risk exposure on its foreign currency transactions. Fair value changes on such forward contracts are recognized in profit or loss.

b) Non-qualifying/economic hedge

The Company enters into derivative contracts which are not designated as hedges for accounting purposes, but provide an economic hedge of a particular transaction risk or a risk component of a transaction. Fair value changes on such derivative instruments are recognized in profit or loss.

ii) Interest rate risk

The Company’s fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.

The Company’s variable rate borrowing is subject to interest rate. Below is the overall exposure of the borrowing:

(iii) Price risk

The Company’s exposure to price risk arises from investments held and classified as FVOCI/ FVTPL. To manage the price risk arising from investments, the Company diversifies its portfolio of assets.

Sensitivity analysis

Profit or loss and equity is sensitive to higher/lower prices of instruments on the Company’s profit for the year -

Note - 6

Related party disclosures

List of related parties and relationships

i) Parties where control exists:

Subsidiary Company:

(a) 2545887 Ontario Inc., Canada Step down subsidiaries:

( i ) Teutech Industries Inc., Canada

(ii) Teutech Holding Corporation, USA

(iii) Teutech LLC, USA

(iv) Teutech Leasing Corporation, USA

(v) 2504584 Ontario Inc., Canada

(vi) 2323532 Ontario Inc., Canada

(b) Neo Tech Auto Systems Inc., USA

Key Management Personnel (KMP) and their relatives

( i ) Mr. Deep Kapuria (Executive Chairman and Whole Time Director)

(ii) Mr. Pranav Kapuria (Managing Director)

Director)

(iii) Mr. Anuj Kapuria (Whole Time Director)

(iv) Mr. Sandeep Dinodia (Independent Director)

(v) Mr. Anil Kumar Khanna (Independent Director)

(vi) Mr. Krishna Chandra Verma (Independent Director)

(vii) Ms. Malini Sud (Independent Director)

(viii) Mr. Prosad Dasgupta (Independent Director)

(ix) Mr. Vinit Taneja (Independent Director)

(x) Mr. Ramesh Chandra Jain (Non Executive Director)

(xi) Mr. Bidadi Anjani Kumar (Non Executive Director)

(xii) Mr. Vijay Mathur (Chief Financial Officer)

(xiii) Mr. Shital Kumar Khatri (Company Secretary)

Enterprises over which key management personnel and relatives of such personnel exercise significant influence with whom transactions has been undertaken:-

( i ) Aquarian Fibrecement Private Limited

(ii) Vulcan Electro Controls Limited

(iii) The Hi-Tech Robotic Systemz Limited

(iv) The Hi-Tech Engineering Systems Private Limited

Note - 38

Capital management

The Company’s objectives when managing capital are to:

- To ensure Company’s ability to continue as a going concern, and

- To provide adequate return to shareholders

Management assesses the capital requirements in order to maintain an efficient overall financing structure. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. The Company manages its capital requirements by overseeing the following ratios -

*Net debt = non-current borrowings current borrowings current maturities of non-current borrowings interest accrued -cash and cash equivalents

Note - 7

Contingent liabilities and commitments (to the extent not provided for)

A Contingent liabilities

1) Details of bank guarantees are as under:-

3. There are five legal cases filed by past employees against the Company for re-instatement/settlement of their dues/remuneration related matters. Out of the aforesaid five cases, four cases are pending at various stages at Camp Court, Bhiwadi, Rajasthan and one case is pending at District Court, Gurgaon, Haryana. The financial impact of these cases, if any, is not identifiable and hence the same has not been provided in the financial statements of the Company.

B Commitments (net of advance):

Estimated amount of contracts remaining to be executed on capital accounts Rs. 1019.21 lakhs after adjusting advances (previous years: 31 March 2017: Rs. 601.78 lakhs and 1 April 2016 Rs. 241.66 lakhs).

Note - 8

Dividends

A The Board of directors at their meeting held on 21 May 2018 has proposed a final dividend of Rs. 2 per share for financial year 31 March 2018 (previous year: Rs. 1.50 per share) subject to approval of shareholders in annual general meeting. The above is in addition to an interim dividend of Rs. 1.5 per share for financial year 31 March 2018 (previous year Rs. 1.25 per share) declared and already paid.

Note - 9

Leases disclosure as lessee Operating leases

The Company has leased facilities under operating leases. Rentals are expensed with reference to lease terms and other considerations. The future lease payments in respect of these leases are as at under:

Finance leases

The Company had taken solar power plant on finance lease. The Company’s obligations under finance leases are secured by the lessor’s title to the leased assets. Future minimum lease payments under finance lease are, as follows:

Note - 10

Segment information

In line with the provisions of Ind AS 108 - operating segments, the operations of the Company fall primarily under manufacturing of gears and transmissions , which is considered to be the only reportable segment by the management.

Since all the manufacturing activity is done at India, therefore segregation of expenses/result/assets/liabilities to each of the geographic location is not practicable. The geographic segments individually contributing 10 percent or more of the Company’s revenues are given below:

Mortality rates inclusive of provision for disability -100% of IALM (2006 - 08)

*This provision reflects the amount that could be payable on account of foreign exchange adjustment on export.

Note - 11

Research and development expenditure includes employee benefits expenses amounting to Rs. 151.18 lakhs (31 March 2017: Rs. 136.51 lakhs), material consumed amounting to Rs. 9.85 Lakhs (31 March 2017: Rs. 7.87 lakhs) and stores and spares consumed of Rs. 60.24 lakhs (31 March 2017: Rs. 138.23 lakhs).

Note - 12 Other matters

(i ) In the opinion of the Board of Directors, the current assets, loans and advances are having the value at which they are stated in the balance sheet, if realised in the ordinary course of business.

(ii) Claims received against shortage/damage of materials which are not of significant values are not being shown separately. The same are accounted for on receipt basis.

B First time adoption of Ind AS

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

The accounting policies have been applied in preparing the financial statements for the year ended 31 March 2018, the comparative information presented in these financial statements for the year ended 31 March 2017 and in the preparation of an opening Ind AS balance sheet at 1 April 2016 (the Company’s date of transition). An explanation of how the transition from previous GAAP to Ind AS has affected the Company’s financial position, financial performance and cash flows is set out in the following tables and notes.

C Ind AS optional exemptions

1 Deemed cost for property, plant and equipment and intangible assets

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

2 Designation of previously recognised financial instruments

Ind AS 101 allows an entity to designate investments in equity instruments at FVOCI on the basis of the facts and circumstances at the date of transition to Ind AS. The Company has elected to apply this exemption for its investment in equity investments.

3 Long term foreign currency monetary items

Ind AS 101 permits A first-time adopter may continue the policy adopted for accounting for exchange differences arising from translation of long-term foreign currency monetary items recognized in the financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period as per the previous GAAP.

D Ind AS mandatory exceptions 1 Estimates

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

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

a) Investment in equity instruments carried at FVTPL or FVOCI

b) Impairment of financial assets based on expected credit loss model.

2 Classification and measurement of financial assets and liabilities

The classification and measurement of financial assets will be made considering whether the conditions as per Ind AS 109 are met based on facts and circumstances existing at the date of transition.

Financial assets can be measured using effective interest method by assessing its contractual cash flow characteristics only on the basis of facts and circumstances existing at the date of transition and if it is impracticable to assess elements of modified time value of money i.e. the use of effective interest method, fair value of financial asset at the date of transition shall be the new carrying amount of that asset. The measurement exemption applies for financial liabilities as well. Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so. It is impracticable to apply the changes retrospectively if:

a) The effects of the retrospective application or retrospective restatement are not determinable;

b) The retrospective application or restatement requires assumptions about what management’s intent would have been in that period;

The retrospective application or retrospective restatement requires significant estimates of amounts and it is impossible to distinguish objectively information about those estimates that existed at that time.

3 De-recognition of financial assets and liabilities

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

The Company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS.

E Other reconciliations between previous GAAP and Ind AS

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

Notes to first time adoption

1 Borrowings

Ind AS 109 requires transaction costs incurred towards origination of borrowings to be deducted from the carrying amount of borrowings on initial recognition. These costs are recognised in the profit or loss over the tenure of the borrowing as part of the interest expense by applying the effective interest rate method. Under previous GAAP, these transaction costs were shown as prepaid expense under non-current/ current assets as and when incurred. Accordingly, borrowings have been reduced with a corresponding adjustment to prepaid expense head in non-current/ current asset respectively.

2 Fair valuation of investment

Under previous GAAP, investments are shown at cost. Under Ind AS, such instruments are too be evaluated under Ind AS 109 which requires the Company to account for such instruments either at amortised cost or fair value. Ind AS requires the Company to record the fair value gains or (losses) on FVOCI equity instruments in case of fair value instrument. Accordingly as at 31 March 2017 ‘Investments’ has been increased with a corresponding adjustment to other comprehensive income.

3 Impairment allowance on trade receivables using provision matrix approach

Under previous GAAP, provision for trade receivables is recognised on specific identification method based on management assessment of recoverability of trade receivables. As per Ind AS 109, the Company is required to apply expected credit loss model (provision matrix approach) for recognising the allowance for doubtful receivables.

4 Prior period errors

Under Ind AS, prior period errors need to be restated retrospectively and such restatement is made in the earliest comparative period presented and the amount of the adjustment is made in the opening balance of retained earnings of earliest year presented. As a result of this change, the profit for the year ended 31 March 2017 increased. There is no impact on the total equity as at 31 March 2017.

5 Government assistance

Under Ind AS, government grants shall be recognised in statement of profit and loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grants are intended to compensate.

6 Proposed dividend

Under the previous GAAP, dividends proposed by the board of directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly, proposed dividend was recognised as a liability. Under Ind AS, such dividends are recognised when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend has been reversed with corresponding adjustment to retained earnings. As a result of this change, there is no impact on the profit for the year ended 31 March 2017.

7 Remeasurement of post-employment benefit obligations

Under Ind AS, actuarial gains and losses on defined benefit plan liabilities and plan assets are recognised in other comprehensive income instead of profit or loss. Under the previous GAAP, such measurements were charged to profit or loss for the respective year. As a result of this change, the profit for the year ended 31 March 2017 decreased. There is no impact on the total equity as at 31 March 2017.

8 Forward contracts

Under Ind AS 109, derivatives are fair valued and all fair value gains/losses recognised in statement of profit or loss. Alternatively, hedge accounting allows portion of the gain or loss on the hedging instrument that is determined to be an effective hedge to be recognised in other comprehensive income any remaining gain or loss on the hedging instrument that represents hedge ineffectiveness is recognised in statement of profit or loss. Management has decided not to opt hedge accounting and fair value gains/(losses) are recognised in statement of profit or loss. As a result of this change, the profit for the year ended 31 March 2017 increased. There is no impact on the total equity as at 31 March 2017.

9 Tax impact on adjustments

Retained earnings and statement of profit and loss has been adjusted consequent to the Ind AS transition adjustments with corresponding impact to deferred tax, wherever applicable.

10 Retained earnings

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

11 Excise duty

Under Previous GAAP, revenue from sale of goods was presented net of excise duty whereas under Ind AS the revenue from sale of goods is presented inclusive of excise duty. The excise duty is presented on the face of the Statement of profit and loss as part of expenses.

12 Other comprehensive income

Under Ind AS, all items of income and expense recognised in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognised in profit or loss but are shown in the statement of profit and loss as ‘other comprehensive income’ includes re-measurements of defined benefit plans and fair value gains or (losses) on FVOCI equity instruments and their corresponding income tax effects. The concept of other comprehensive income did not exist under previous GAAP.

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Mar 31, 2016

1 Basis of Preparation of Financial Statements

The Financial Statements are prepared under the historical cost convention on accrual basis and in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013.

Accounting Policies not specifically referred to otherwise are consistent and in accordance with generally accepted accounting principles.

2 Use of Estimates

In preparing Company''s financial statements in conformity with accounting principles generally accepted in India, the Management is required to make estimates & assumptions that affect the reported amount of Assets & Liabilities and the disclosure of Contingent Liabilities at the date of the Financial Statements and the reported amount of revenues & expenses during the reporting period. Actual results could differ from those estimates. Any revision to accounting estimates is recognized in the period the same is determined.

3 Inventories

The basis of valuation for various categories of inventories is as follows:-

Stores, Spares and : At cost or Net realizable

Toose Toofs and value, whichever is tower

Raw Materials (FIFO)

Work in progress : At material cost plus conversion cost on the basis of absorption costing or Net realizable value, whichever is tower

Finished Goods : At material cost plus conversion cost on the basis of absorption costing or Net realizable value, whichever is tower (Inclusive of excise duty payable)

Scrap : At realizable value.

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

4 Provisions, Contingent Liabilities and Contingent Assets

The Company makes a provision when there is a present obligation as a result of a past event where the outflow of economic resources is probable & a reliable estimate of the amount of obligation can be made.

The disclosure is made for possible or present obligation that may require outflow of resources as contingent liability in the financial statements. Depending on the facts of each case and after due evaluation of relevant legal aspects, claims against the Company not acknowledged as debts are disclosed as contingent liabilities. In respect of the statutory matters, contingent liabilities are disclosed only for those demand(s) that are contested by the Company.

Contingent assets are neither recognized nor disclosed in the financial statements.

5 Revenue Recognition

The revenue from Sale of Goods is recognized on transfer of all significant risk & rewards of ownership to the buyer. Sale value is inclusive of excise duty. Price revisions of goods sold are accounted for at the time of billing except in the case where reasonable certainty has been measured up to the date of Balance Sheet.

Export Sale is accounted for at exchange rate notified by Central Govt. under Custom Law. Bills outstanding on the Balance Sheet date are reinstated with the exchange rate on that date and the difference on this account is booked in the Profit & Toss Account.

Interest income is recognized on time proportion basis taking into account the amount outstanding and rate applicable. Dividend income is recognized, when right to receive is established.

Export incentives are accounted for on export of goods if the entitlements can be estimated with reasonable accuracy and conditions precedent to claim is fulfilled.

Revenue from services is recognized in accordance with specific terms of contract on performance.

6 Fixed Assets and Depreciation

All Tangible & Intangible Assets are stated at cost(net of taxes/duties which are eligible for credit) less accumulated depreciation and impairment of Toss, if any. Depreciation on Buildings and Plant and Equipment is charged on pro-rata basis on Straight Line Method based on the life assigned to each asset in accordance with Schedule II of Companies Act, 2013. Intangible assets are amortized over their respective individual estimated useful life on written down value basis commencing from the date, the asset is available to the company for its use. Depreciation on rest of the fixed assets has been provided on Written Down Value basis based on the life assigned to each asset in accordance with Schedule II of Companies Act, 2013.

7 Employee Benefits

(i) Short term employee benefits

Employee benefits payable wholly within twelve months of receiving employee services are classified as short-term employee benefits. These benefits include salaries and wages, bonus and ex-gratia. The undiscounted amount of short term employee benefits to be paid in exchange for employee services are recognized as an expense as the related service is rendered by employees’.

(ii) Defined Contribution Plan

Payments to defined contribution retirement benefit schemes (such as Provident Fund, Employee’s State Insurance Corporation) are charged to the statement of profit and toss of the year in which contribution to such schemes becomes due.

(iii) Defined Benefit Plan

For defined benefit schemes, the cost of providing benefits is determined using Projected Unit Credit Method, with actuarial valuation being carried out at each balance sheet date. Actuarial gain & tosses are recognized in full in the statement of profit and toss for the period in which they occur.

The retirement benefit obligation recognized in the Balance Sheet represents the present value of the defined benefit obligations as adjusted for unrecognized past service cost, and as reduced by the fair value of scheme assets.

The Company makes annual contribution to the Employee’s Group Gratuity-cum-Life Assurance scheme of the Life Insurance Corporation of India, a funded defined benefit plan for qualifying employees’. The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of 6 months. Vesting occurs upon completion of 5 years of continued service.

The Company provides the liability for the leave encashment benefit of the employees at each balance sheet date on the basis of actuarial valuation, the amount of provision & paid during the year is charged to the statement of profit and toss.

8 Foreign Currency Transactions

(i) Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of transaction.

(ii) Foreign currency monetary assets and liabilities such as cash, receivables, payables, etc. are translated at year end exchange rates.

(iii) Exchange differences arising on settlement of transactions are recognized as income or expense in the year in which they arise, but pursuant to the notification of the Companies (Accounting Standards) Amended Rules 2009 issued on 31^st March 2009, exchange differences relating to tong term monetary items, arising during the year, in so far as they relate to the acquisition of a depreciable capital asset are added to / deducted from the cost of the asset w.e.f.1^st April 2007 and depreciated over the balance life of the asset.

(iv) Derivative Instruments and Hedge accounting:

The Company uses foreign exchange forward contracts and options to hedge its exposure to movements in foreign exchange rates. These foreign exchange forward contracts and options are not used for trading or speculation purposes.

For unexpired forward contracts or options that are designated as effective cash flow hedges the gain or loss from the effective portion of the hedge is recorded and reported directly in the shareholders'' fund ( under the head “Hedging Reserve) and will be transferred to Profit and Loss account upon the occurrence of the events when the contracts get transacted.

The Company recognizes gains or losses from forward contracts and options that are not designated as effective cash flow hedges for accounting purposes in the profit and loss account in the period in which they occur.

9 Investments

Tong term investments are carried at cost. However provision for diminution, if any, is made to recognize a decline, other than temporary, in the value of investments.

Cost of an investment includes acquisition charges such as brokerage, fees and duties.

10 Borrowing Cost

Borrowing costs that are attributable to the acquisition, construction or production of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are charged as expense to the statement of profit and toss in the period for which they relate to.

11 Earnings Per Share

Basic earnings per share are calculated by dividing the net profit or toss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, the net profit or toss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

12 Provision for Current & Deferred Taxes

Tax expenses comprise current and deferred taxes. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961 and other applicable tax laws. Deferred income taxes reflects the impact of current period timing difference between taxable and accounting income for the period and reversal of timing differences of earlier years. Deferred taxes is measured based on the tax rates and the tax laws enacted or substantively enacted as at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty and sufficient future taxable income will be available against which such deferred tax assets can be realized. Deferred tax assets are recognized on carry forward of unabsorbed depreciation and tax tosses only if there is virtual certainty that such deferred tax assets can be realized against future taxable profit. Excess/short provisions and interest thereon are recognized only on completion of assessment or where adjustments made by the Assessing Officer are disputed, on receiving the ‘Order Giving Effect ‘to the tax determined by the CIT (Appeals) and thereafter on final settlement of further disputes.

13 Research and Development Costs

Revenue expenditure incurred on research and development has been charged to the statement of profit and toss for the year in which it is incurred. Capital expenditure is included in respective heads under fixed assets.

14 Impairment of Assets

At each Balance Sheet date, the Company reviews whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount. If the carrying amount of the asset exceeds its recoverable amount, an impairment toss is recognized in the Profit & Toss Account to the extent the carrying amount exceeds the recoverable amount.

15 Leases

Leases where the lesser effectively retains substantially all the risk and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and toss on a straight line basis over the lease term.

16 Cash and Cash Equivalents

Cash and Cash Equivalents for the purpose of cash ftow statement comprise cash at bank and in hand and short term investments with an original maturity of three months or less.

17 Cash Flow Statement

Cash flow statements are reported using the indirect method, whereby profit/ (loss) before extra-ordinary items/exceptional items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipt or payments. The cash flows from operating, investing and financing activities of the Group are segregated based on available information including taxes paid relating to these activities.

18 Prior period and extra ordinary items and changes in accounting policies having material impact on the financial affairs of the Company are disclosed appropriately.

19 Material events occurring after the Balance Sheet date are taken into cognizance and disclosed appropriately.

Company opted for the option to follow principles of notification of the Companies (Accounting Standards) Amendment Rules 2009 issued on 31^st March 2009. Thereby exchange differences relating to tong-term monetary items, arising during the year, in so far as they relate to the acquisition of a depreciable capital asset are added to/ deducted from the cost of the asset under the head “Addition / Deletion” of Note 11 and depreciated over the balance life of the asset.

Accordingly, Rs.6,771,412/-(Previous Year Rs.4,531,803/-) on account of foreign exchange fluctuation, have been included to the cost of fixed assets and profit for the year is higher by Rs.6,771,412/-(Previous Year profit for the year was higher by Rs.4,531,803/-)

NOTE ‘20'' - DISCTOSURE PURSUANT TO ACCOUNTING STANDARD-15 ON “EMPTOYEE BENEFITS”

The following tables set out the funded and unfunded status of the gratuity plan and leave encashment amounts recognized in the Company''s financial statements as at 31^stMarch, 2016:

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

NOTE ‘21’ - SEGMENT INFORMATION (AS-17)

The Company is primarily engaged in the business of Gears and transmission components. Inherent nature of both the activities is governed by the same set of risk and returns; these have been grouped as a single segment in the above disclosures. Hi-Tech (E-Soft) is a division of the Company engaged in the business of engineering software solutions. But, its total revenue does not exceed 10% of total revenue. Hence, Hi-Tech (E-Soft) cannot be a primary segment for disclosure under AS-17 and therefore, Geographical segment can be considered as the primary segment. Geographical revenues are allocated based on the location of the customers. Geographic segments of the Company are America, India and Others.

Since all the manufacturing activity is done at India, therefore segregation of expenses/result/assets/liabilities to each of the geographic location is not practicable. The geographic segments individually contributing 10 percent or more of the Company''s revenues are given below:

NOTE ‘22’ - RELATED PARTY DISCTOSURES AS REQUIRED BY ACCOUNTING STANDARD -18

(a) Related parties where control exists -NIL

(b) Name of the related parties and their relationship

Description of relationship Names of related parties

(i) Individuals controlling voting power/exercising significant Mr. Deep Kapuria influence and their relatives: Mr. Pranav Kapuria

Mr. Anuj Kapuria

(ii) Key management personnel and their relatives: Included in ‘(i)'' above

(iii) Enterprises over which anyone in (i) and (ii) exercises M/s Aquarian Fibrecement Pvt. Ltd. significant influence: M/s. Vulcan Electro Controls Ltd.

The Hi-Tech Robotic Systemz Ltd.

The Hi-Tech Engineering System Pvt. Ltd.

Note: Related parties have been identified by the Management.

Note:- Figures in brackets relates to the previous year

(4) There are five legal cases filed by past employees against the Company for re-instatement/settlement of their dues/ remuneration related matters. Out of the aforesaid five cases, four cases are pending at various stages at Camp Court, Bhiwadi, Rajasthan and one case is pending at District Court, Gurgaon, Haryana. The financial impact of these cases, if any, is not identifiable and hence the same has not been provided in the financial statements of the Company.

NOTE ‘23’ - CORPORATE SOCIAL RESPONSIBILITY (CSR) EXPENDITURE

The Company was required to spend Rs. 47,86,711/- for the current financial year on CSR activities, i.e. 2% of its average net profits of the last three previous financial years, according to the provision of Section 135 of Companies Act, 2013 and rules made there under.

(a) Gross amount required to be spent during the Year Rs. 47,86,711/-

NOTE ‘24’

Enactment of the payment of Bonus (amendment) Act 2015 having come into force effective 1st day of April 2014, the company has made additional provision for Bonus as follows:

(i) A sum of Rs 18,163,746/- pertaining to the period from 1st April, 2015 to 31st March, 2016 is included in Employee benefit expenses.

(ii) (ii) A sum of Rs 6,655,287/- pertaining to the period from 1st April, 2014 to 31st March, 2015 is disclosed as an Exceptional item.

NOTE ‘25’

In the opinion of the Board of Directors, the Current Assets, Toans and Advances are having the value at which they are stated in the Balance Sheet, if realized in the ordinary course of business.

NOTE ‘26’

Claims received against shortage / damage of materials which are not of significant values are not being shown separately. The same are accounted for on receipt basis.

NOTE ‘27’

The figures have been rounded off to the nearest rupee.

NOTE ‘28’ - PREVIOUS YEAR FIGURES

Previous year figures have been regrouped/ reclassified wherever necessary to correspond with the current year classifications/ disclosures.

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Mar 31, 2015

NOTE 1 – FUNDED STATUS OF GRATUITY PLAN & LEAVE ENCASHMENT

The following tables set out the funded and unfunded status of the gratuity plan and leave encashment amounts recognized in the Company's financial statements as at 31st March, 2015:

NOTE 2. – CONTINGENT LIABILITIES & COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR)

A. Commitments:

Estimated amount of contracts remaining to be executed on capital accounts Rs.62,206,931/- after adjusting advances (Previous year Rs. 924,080/-)

B. Contingent Liabilities:

1) Haryana State Industrial & Infrastructure Development Corporation Ltd ('HSIIDC') had demanded an enhanced amount from the industrial plot owners in Manesar, Haryana, based on the Hon'ble Supreme Court's order. The Company, being a plot owner, received a demand notice of Rs. 3,552/- per sq mtr on it total plot of 12150 mtrs., totaling to Rs.4,31,56,800/-, including interest. Out of above, Rs.1,20,76,614/- was paid in previous years, at the time of registration of conveyance deed. The calculation method of demand raised by HSIIDC was contested by the Company through the Manesar Industries Welfare Association at the Hon'ble High Court at Chandigarh. The Court, while staying the calculation made by HSIIDC, has asked the plot owners to deposit five installments, as per new schedule, till further orders. The company paid Rs.3,20,70,471/- up to 2013-14 (including payments at the time of registration, as aforesaid) and Rs. 67,50,000/- in 2014-15. The Hon'ble court has pleased to reduce the demand to Rs. 3,313/- per sq mtrs.in its order dt. Nov 11, 2014, totaling to Rs. 4,02,52,950/- together with interest. The Company has not received the final demand notice from HSIIDC after adjustment for the balance enhanced amount payable. Any additional compensation, if payable, will have the effect of enhancing the asset value of the land.

(5) There are four separate legal cases filed by past employees against the Company for re-instatement/settlement of their remuneration matters, which are currently running in the Camp Court, Bhiwadi, Rajasthan. The financial impact of these cases, if any, is not identifiable and hence the same has not been provided in the financial statements.

(6) The Company has disputed entry tax liability being levied by the Rajasthan Government from the financial year 2007-08 onwards. The Hon'ble Supreme Court of India vide order dated 13.03.2015, has granted stay to the Company on this matter and has given direction to deposit 50% of the entry tax arrears, remaining 50% balance in the form of bank guarantee and full payment of future payments, subject to the outcome of the case, which is still pending before the Hon'ble Supreme Court of India. Accordingly, the company has deposited a sum of Rs. 64,36,111/- to the credit of the Rajasthan State Government up to the current year ended 31.03.2015. The Company has made provision in its books of accounts for the balance also.

NOTE '3 – LEASEHOLD PROPERTY

The company owns 9 flats on leasehold basis allotted by Ashiana Group in Bhiwadi. Flats are not registered in name of company in view of applicability of local laws.

NOTE 4 – CORPORATE SOCIAL RESPONSIBILITY (CSR) EXPENDITURE

The Company was required to spend Rs.7,214,067/- for the current financial year on CSR activities, i.e. 2% of its average net profits of the last three previous financial years, according to the provision of Section 135 of Companies Act, 2013 and rules made hereunder.

NOTE 5

In the opinion of the Board of Directors, the Current Assets, Loans and Advances are having the value at which they are stated in the Balance Sheet, if realized in the ordinary course of business.

NOTE 6

Claims received against shortage / damage of materials which are not of significant values are not being shown separately. The same are accounted for on receipt basis.

NOTE 7

The figures have been rounded off to the nearest rupee.

NOTE 8 – PREVIOUS YEAR FIGURES

Previous year figures have been regrouped/ reclassified wherever found necessary to correspond with the current year classification/ disclosure.

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Mar 31, 2014

NOTE ''1'' - SEGMENT INFORMATION (AS-17)

The Company is primarily engaged in the business of Gears and transmission components. Inherent nature of both the activities is governed by the same set of risk and returns; these have been grouped as a single segment in the above disclosures. Hi-Tech (E- Soft) is a division of the Company engaged in the business of engineering software solutions. But, its total revenue does not exceed 10% of total revenue. Hence, Hi-Tech (E-Soft) cannot be a primarily segment for disclosure under AS-17 and Geographical segment can be considered as the primary segment. Geographical revenues are allocated based on the location of the customer. Geographic segments of the Company are America, India and Others.

NOTE ''2'' - CONTINGENT LIABILITIES & PROVISIONS

A. Contingent Liabilities not provided for:

1) Estimated amount of contracts remaining to be executed on capital accounts Rs.924,080/- after adjusting advances (Previous year Rs. 30,334,709)

2) Haryana State Industrial & Infrastructure Development Corporation Ltd (''HSIIDC'') had demanded an enhanced amount from the industrial plot owners in Manesar, Haryana, based on the Hon''ble Supreme Court''s order. The Company, being a plot owner, received a demand notice of Rs.4,31,56,800/-, including interest. Out of above, Rs.1,20,76,614/- was paid in previous years, at the time of registration of conveyance deed. The calculation method of demand raised by HSIIDC is being contested by the Company through the Manesar Industries Welfare Association at the Hon''ble High Court at Chandigarh. The Court, while staying the calculation made by HSIIDC, has asked the plot owners to deposit three installments, as per new schedule, till further orders. Accordingly, the company deposited the first installment of Rs.62,50,000/- in 2012-13. The second and third installments of Rs.70,32,537/- & Rs.67,11,320/- were paid as per court schedule in 2013-14. In view of above, till March 31, 2014, the company has paid Rs.3,20,70,471/- and balance demand of Rs. 1,10,86,329/- is considered as contingent liability, which is subjudice. Any additional compensation, if payable, will have the effect of enhancing the asset value of the land.

NOTE ''3'' - FINANCIAL INSTRUMENTS: RECOGNITION & MEASUREMENT

Company is following the principles of Accounting Standard (''AS'') 30 "Financial Instruments: Recognition and Measurement" in respect of its derivative financial instruments.

Derivative financial instruments, which qualify for cash flow hedge accounting and where the Company has met all the conditions of effective Cash Flow hedge accounting, are fair valued at March 31, 2014. Consequently Hedging Reserve/Fair Valuation Loss on Derivative balances is decreased to Rs NIL as on 31.03.2014 (Previous Year Rs NIL).

Details on derivatives instruments and un-hedged foreign currency exposures

I. The following derivative positions are open as at 31 March, 2014. These transactions have been undertaken to act as economic hedges for the Company''s exposures to various risks in foreign exchange markets and may / may not qualify or be designated as hedging instruments.

(a) Forward exchange contracts and options [being derivative instruments], which are not intended for trading or speculative purposes but for hedge purposes to establish the amount of reporting currency required or available at the settlement date of certain payables and receivables.

(i) Outstanding forward exchange contracts entered into by the Company as on 31 March, 2014: NIL (Previous Year Nil)

(ii) Outstanding option contracts entered into by the Company as on 31 March, 2014: NIL

NOTE ''4''

In the opinion of the Board of Directors, the Current Assets, Loans and Advances are having the value at which they are stated in the Balance Sheet, if realized in the ordinary course of business.

NOTE ''5''

Claims received against shortage / damage of materials which are not of significant values are not being shown separately. The same are accounted for on receipt basis.

NOTE ''6''

The figures have been rounded off to the nearest rupee.

NOTE ''7'' - PREVIOUS YEAR FIGURES

Previous year figures have been regrouped and rearranged wherever found necessary.

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Mar 31, 2013

NOTE ''1'' – SEGMENT INFORMATION (AS-17)

The Company is primarily engaged in the business of Gears and transmission components. Inherent nature of both the activities is governed by the same set of risk and returns; these have been grouped as a single segment in the above disclosures. Hi-Tech (E-Soft) is a division of the Company engaged in the business of engineering software solutions. But, its total revenue does not exceed 10% of total revenue. Hence Hi-Tech (E-Soft) cannot be a primarily segment for discloser under AS-17 and Geographical segment can be considered as the primary segment. Geographical revenues are allocated based on the location of the customer. Geographic segments of the Company are Americas, Europe, India and Others.

Since all the manufacturing activity is done at India, therefore segregation of expenses/result/assets/liabilities to each of the geographic location is not practicable. The geographic segments individually contributing 10 percent or more of the Company''s revenues are given below:

NOTE ''2'' – RELATED PARTY DISCLOSURES (AS-18)

(a) Enterprise in which company has control -NIL

(b) Key Management Personnel

1 Sh. Deep Kapuria Executive Chairman

2 Sh. Pranav Kapuria Managing Director

3 Sh. Anuj Kapuria Whole Time Director

(c) Details of related parties:

NOTE ''3'' – CONTINGENT LIABILITIES & PROVISIONS

A. Contingent Liabilities not provided for:

1) Estimated amount of contracts remaining to be executed on capital accounts Rs.30,334,709 after adjusting advances (Previous year Rs. 23,232,458)

2) Haryana State Industrial & Infrastructure Development Corporation Ltd (''HSIIDC'') has demanded an enhanced amount from the industrial plot owners in Manesar, Haryana, based on the Hon''ble Supreme Court''s order. The Company received a demand notice of Rs. 4,31,56,800/-, including interest. Out of above, Rs. 1,20,76,614/- was paid in previous year. The calculation method of demand raised by HSIIDC is being contested by the Company through the Manesar Industries Welfare Association in the Hon''ble High Court at Chandigarh. The Court, while staying the calculation made by HSIIDC, has asked the plot owners to deposit two installments, one in March, 2013 and second in June 2013, till further orders. Accordingly, the company has deposited the first installment of Rs. 62,50,000/- during the year after due adjustments. The second installment will be paid separately in financial year 2013 - 14. Any additional compensation, if payable, will have the effect of enhancing the asset value of the land. In view of above, till March 31, 2013, the company has paid Rs. 1,83,26,614/- and balance demand of Rs. 2,48,30,186/- is considered as contingent liability, which is subjudice, as explained above.

NOTE ''4'' – FINANCIAL INSTRUMENTS: RECOGNITION & MEASUREMENT:

Company is following the principles of Accounting Standard (''AS'') 30 "Financial Instruments: Recognition and Measurement" in respect of its derivative financial instruments.

Derivative financial instruments, which qualify for cash flow hedge accounting and where the Company has met all the conditions of effective Cash Flow hedge accounting, are fair valued at March 31, 2013. Consequently Hedging Reserve/Fair Valuation Loss on Derivative balances is decreased to Rs NIL as on 31.03.2013(Previous Year Rs 1,837,837).

Details on derivatives instruments and un-hedged foreign currency exposures

I. The following derivative positions are open as at 31 March, 2013. These transactions have been undertaken to act as economic hedges for the Company''s exposures to various risks in foreign exchange markets and may / may not qualify or be designated as hedging instruments.

(a) Forward exchange contracts and options [being derivative instruments], which are not intended for trading or speculative purposes but for hedge purposes to establish the amount of reporting currency required or available at the settlement date of certain payables and receivables.

(i) Outstanding forward exchange contracts entered into by the Company as on 31 March, 2013 : NIL (Previous Year Nil)

NOTE ''5''

In the opinion of the Board of Directors, the Current Assets, Loans and Advances are having the value at which they are stated in the Balance Sheet, if realized in the ordinary course of business.

NOTE ''6''

Claims received against shortage / damage of materials which are not of significant values are not being shown separately. The same are accounted for on receipt basis.

NOTE ''7''

The figures have been rounded off to the nearest rupee.

NOTE ''8'' – PREVIOUS YEAR FIGURES:

Previous year figures have been regrouped and rearranged wherever found necessary.

NOTE ''9'' – PRIOR PERIOD EXPENSES:

Other Expenses includes Prior Period Expenses of Rs. 255,841 (Refer Note:- 24), details of which are as under:-

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Mar 31, 2012

NOTE '1' - CONTINGENT LIABILITIES & PROVISIONS

A. Contingent Liabilities not provided for:

1) Estimated amount of contracts remaining to be executed on capital accounts Rs. 23,232,458 after adjusting advances (Previous year Rs. 106,830,418)

2) Bank Guarantees issued in favour of Asst./Dy. Commissioners of Customs for Export Obligation isRs. 5,654,224 (Previous year Rs. 5,554,000)

NOTE '2'- FINANCIAL INSTRUMENTS: RECOGNITION & MEASUREMENT:

Company is following the principles of Accounting Standard ('AS') 30 "Financial Instruments: Recognition and Measurement" in respect of its derivative financial instruments.

Derivative financial instruments, which qualify for cash flow hedge accounting and where the Company has met all the conditions of effective Cash Flow hedge accounting, are fairvalued at March 31,2012 Consequently Hedging Reserve/ Fair Valuation Loss on Derivative balances is increased to Rs 1,837,837.(Previous Year Rs 1,444,208)

Details on derivatives instruments and un-hedged foreign currency exposures

I. The following derivative positions are open as at 31 March, 2012. These transactions have been undertaken to act as economic hedges for the Company's exposures to various risks in foreign exchange markets and may / may not qualify or be designated as hedging instruments.

(a) Forward exchange contracts and options [being derivative instruments], which are not intended for trading or speculative purposes but for hedge purposes to establish the amount of reporting currency required or available at the settlement date of certain payables and receivables.

(i) Outstanding forward exchange contracts entered into bythe Company as on 31 March, 2012 : NIL

NOTE '3'- LEASEHOLD PROPERTY:

The company owns 9 flats on leasehold basis allotted by Ashiana Group in Bhiwadi. Flats are not registered in name of company in view of applicability of local laws.

NOTE '4'

In the opinion of the Board of Directors, the Current Assets, Loans and Advances are having the value at which they are stated in the Balance Sheet, if realized in the ordinary course of business.

NOTE '5'

Claims received against shortage/damage of materials which are not of significant values are not being shown separately. The same are accounted for on receipt basis.

NOTE '6'

The figures have been rounded off to the nearest rupee.

NOTE '7' - PREVIOUS YEAR FIGURES:

During the year 31 March 2012 the revised Schedule VI notified under the Company Act 1956, has become applicable to the Company. The Company has reclassified previous year figures to conform to this year's classification. The Revised Schedule VI does not require presentation of a reconciliation explaining the impact of the reclassification of the previous year figures in the financial statements.

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Mar 31, 2011

1. Contingent Liabilities

Depending on the facts of each case and after due evaluation of relevant legal aspects, claims against the Company not acknowledged as debts are disclosed as contingent liabilities. In respect of the statutory matters, contingent liabilities are disclosed only for those demand(s) that are contested by the Company.

Contingent Liabilities not provided for :

A. Estimated amount of contracts remaining to be executed on capital accounts Rs. 106,830,418 after adjusting advances (Previous year Rs. 117,700,000)

B. Bank Guarantees issued in favour of Asst./ Dy. Commissioners of Customs, Mumbai & New Delhi for Export Obligation is Rs. 5,554,000 (Previous year Rs. 12,132,980)

Opening Released during Year Fresh Guarantees Closing during the Year

Rs. 12,131,980 Rs. 6,578,980 Nil Rs.5,554,000

C. Disputed statutory demands in appeals before Rajasthan High Court:

Rajasthan Tax on Entry of Goods into Local Area Act 1999 , Rs1,716,840/- & Rs1,351,717/- for FY 2007-08 & 2008-09 respectively.

3. In the opinion of the Board of Directors, the Current Assets, Loans and Advances are having the value at which they are stated in the Balance Sheet, if realized in the ordinary course of business.

4. Claims received against shortage / damage of materials which are not of significant value are not being shown separately. The same are accounted for on receipt basis.

5. In pursuance of Micro, Small & Medium Enterprises Development Act, 2006, the names of the Enterprises to whom the Company owes any sum which is outstanding at the year end are as follows:-

b) We have make payment to MSME within permissible time limit under Micro, Small & Medium Enterprises Development Act, 2006 during FY 2010-2011 so there is no interest due on MSME.

c) There is no interest due & payable to MSME as on 31.03.2011.

6. Title of HSIDC plot no. 24, 25, 26, sector 7 IMT Manesar Gurgaon has not been registered in the name of the Company. HSIDC had allotted the land in the name of the Company vide its letter of allotment no. HSIIDC 1441 dated 10.07.2003.

7. Company opted for the option to follow principles of notification of the Companies (Accounting Standards) Amendment Rules 2006 on 31st March 2009. Thereby exchange differences relating to long-term monetary items, arising during the year, in so far as they relate to the acquisition of a depreciable capital asset are added to/ deducted from the cost of the asset under the head “Addition” of Schedule 4 and depreciated over the balance life of the asset.

Accordingly, Rs. 197,661 have been deducted from the cost of fixed assets and the profit for the year is lower by Rs. 197,661.

8. The Company is primarily engaged in the business of gears and transmission components. Inherent nature of both the activities is governed by the same set of risk and returns, these have been grouped as a single segment in the above disclosures. Hi-Tech (E-Soft) is a division of the Company engaged in the business of engineering software solutions. Since this business is not required to be reported as per AS-17 on Segment Reporting, separate figures of the software division are not reported.

9. During the year the company has allotted 9,384,000 Bonus equity shares of Rs.10/- each fully paid up in the ratio of 1:1, out of General Reserve.

10. A part of Land owned by Company situated at Village Sihi, Gurgaon was acquired during the year by the Government of Haryana and amount of Rs. 35,20,396 was received as compensation against 3 Kanal and 8 Marla land. Revaluation Reserve amounting to Rs. 1,56,57,846 pertaining to the acquired part of the land has been reversed.

11. Company is following the principles of Accounting Standard ('AS') 30 “Financial Instruments: Recognition and Measurement” in respect of its derivative financial instruments.

Derivative financial instruments, which qualify for cash flow hedge accounting and where the Company has met all the conditions of effective Cash Flow hedge accounting, are fair valued at March 31, 2011 Consequently Hedging Reserve/Fair Valuation Loss on Derivative balances is reduced to Rs 1,444,208.(Previous Year Rs 6,715,728 )

12. Related Party Disclosures (AS-18)

(a) Enterprise in which company has control-Nil

(b) Key Management Personnel

1 Sh. Deep Kapuria Chairman&Whole Time Director

2 Sh. Pranav Kapuria Managing Director

3 Sh. Anuj Kapuria Whole Time Director

(c) Transactions with the related parties during the year are as per Annexure attached.

13. Funded status of Gratuity Plan & Leave Encashment

The following tables set out the funded and unfunded status of the gratuity plan and leave encashment amounts recognized in the Company's financial statements as at 31March, 2011:

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Mar 31, 2010

1. Contingent Liabilities

Depending on the facts of each case and after due evaluation of relevant legal aspects, claims against the Company not acknowledged as debts are disclosed as contingent liabilities. In respect of the statutory matters, contin gent liabilities are disclosed only for those demand(s) that are contested by the Company.

Contingent Liabilities not provided for:

(Amount Rs. in Lacs)

A As on 31sMarch 2009 As on 31sMarch 2010

Rs 623.46 Rs 1,173.00

(Amount Rs. in Lacs)

Opening Released during the Year Fresh Guarantees During the Year Closing

B. Rs 68.87 Rs4.58 Rs 57.04 Rs. 121.32

2. In the opinion of the Board of Directors, the Current Assets, Loans and Advances are having the value at which they are stated in the Balance Sheet, if realized in the ordinary course of business.

3. Claims received against shortage/ damage of materials which are not of significant value are not being shown separately. The same are accounted for on receipt basis.

4. Title of HSIDC plot no. 24,25,26, sector 7 IMTManesarGurgaon has not been registered in the name of the Company. HSIDC had allotted the land in the name of the Company vide its letter of allotment no. HSIIDC 1441 dated 10.07.2003.

5. Last year Company opted for the option to follow principles of notification of the Companies (Accounting Standards) Amendment Rules 2006 on 31st March 2009. Thereby exchange differences relating to long-term monetary items, arising during the year, in so far as they relate to the acquisition of a depreciable capital asset are added to/ deducted from the cost of the asset under the head "Addition"of Schedule 4 and depreciated over the balance life of the asset.

Accordingly, Rs.106.56 Lacs have been deducted from the cost of fixed assets and the profit for the year is lower by Rs.106.56 Lacs.

6. The Company is primarily engaged in the business of gears and transmissioncomponents. Inherent nature of both the activities is governed by the same set of risk and returns, these have been grouped as a single segment in the above disclosures. Hi-Tech (E-Soft) is a division of the Company engaged in the business of engineering software solutions. Since this business is not required to be reported as per AS-17 on Segment Reporting, separate figures of the software division are not reported.

7. Company is following the principles of Accounting Standard (AS) 30 "Financial Instruments: Recognition and Measure- ment" in respect of its derivative financial instruments.

Derivative financial instruments, which qualify for cash flow hedge accounting and where the Company has met all the condi- tions of effective Cash Flow hedge accounting, are fair valued at March 31, 2010 .Consequently Hedging Reserve/Fair Valua- tion Loss on Derivative balances is reduced to Rs67.15 lacs.(PreviousYear Rs920.71 lacs)

8 The figures have been rounded off to the nearest rupee.

9 Previous year figures have been regrouped and rearranged wherever found necessary.

10 Schedule 1 to 17 form an integral part of Balance Sheet and Profit and Loss Account.