1 BASIS FOR PREPARATION OF ACCOUNTS

The Financial Statements have been prepared under historical cost convention on accrual basis in accordance with generally accepted accounting principles and applicable Accounting Standards as notified under Companies (Accounting Standard) Rules, 2006 and the provisions of Companies Act,1956.

2 USE OF ESTIMATES

The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual result and estimates are recognised in the period in which the results are known/materialised.

3 FIXED ASSETS

Fixed Assets are stated at Cost, net of VAT/ MODVAT/ CENVAT, less accumulated depreciation. All costs including borrowing costs till commencement of commercial production and adjustment arising from exchange rate variations relating to long term borrowings/monetary items attributable to the depreciable fixed assets are capitalized. Capital expenditure on assets incurred by the Company is reflected in capital work in progress account till these are commercially commissioned and thereafter in the fixed assets. Machinery spares that can be used only in connection with an item of fixed asset and their use is expected to be irregular are capitalized. Replacement of such spares is charged to revenue.

4 INTANGIBLE ASSETS

In accordance with the Accounting Standard (AS) 26 relating to intangible assets, all costs incurred on technical know-how / license fee relating to production process are charged to revenue in the year of incurrence. Costs incurred on technical know-how / license fee relating to process design / plants / facilities are capitalized at the time of capitalization of the said plant / facility and amortized on pro-rata basis over a period of five years. Computer software is capitalised on the date of installation and is amortised over a period of five years.

5 IMPAIRMENT OF ASSETS

Carrying amount of cash generating units / assets is reviewed for impairment. Impairment, if any, is recognized where the carrying amount exceeds the recoverable amount being the higher of net realizable price and value in use.

6 EXPENDITURE ON NEW PROJECTS AND SUBSTANTIAL EXPANSION

Expenditure directly relating to construction activity including trial run production expenses (net of income, if any) is capitalized. Indirect expenditure incurred during construction period is capitalized as part of the indirect construction cost to the extent to which the expenditure is indirectly related to construction or is incidental thereto. Other indirect expenditure (including borrowing costs) incurred during the construction period which is not related to the construction activity nor is incidental thereto, is charged to the Profit & Loss Account.

7 DEPRECIATION

Depreciation on fixed assets is provided on straight line method at the rates and in the manner prescribed in Schedule-XIV to the Companies Act, 1956.

On incremental / decremental cost arising on account of translation of foreign currency liabilities for acquisition of fixed assets, depreciation has been provided as aforesaid over the residual life of the respective plants.

Premium of leasehold land is amortised over the period of lease except leasehold land acquired on lease of ninety years or more.

Depreciation on fixed assets costing upto Rs. 5,000/- is charged @ 100% on pro-rata basis.

Assets not owned by the Company are amortized on pro-rata basis over a period of five years from the year in which such assets are commissioned.

8 FOREIGN CURRENCY TRANSACTIONS

Transactions denominated in foreign currencies are normally recorded at the exchange rates prevailing at the date of the transactions. Monetary items denominated in foreign currencies outstanding at the year-end are translated at the exchange rate applicable as on that date. Non monetary items are valued at the exchange rate prevailing on the date of transaction.

Pursuant to the notification of the Companies (Accounting Standards) Amendment Rules 2006 on 31 March 2009, which amended Accounting Standard 11 on The Effects of Changes in Foreign Exchange Rates, exchange differences relating to long-term monetary items are dealt with in the following manner:

1. 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 assets are added to/deducted from the cost of asset and depreciated over the balance life of the asset.
2. In other cases such differences are accumulated in a “Foreign Currency Monetary Item Translation Difference Account” and amortized to the profit & loss account over the balance life of the long-term monetary item, however that the period of amortization does not extend beyond 31 March 2011.

Exchange differences relating to long-term monetary items that have been recognized in the profit and loss account in the previous year have been reversed from General Reserve and accounted for accordance with (i) and (ii) above.

All other exchange differences are dealt with in the profit and loss account.

9 INVESTMENTS

Investments are classified into current and long-term investments. Current investments are stated at the lower of cost and quoted/ fair value. Long term investments are stated at cost less any provision for permanent diminution in value.

10 DIVIDEND INCOME

Dividend on investments is accounted for as and when right to receive is established.

11 SALES

Sales are inclusive of trial run sales, excise duty and net of sales tax/ vat.

12 INVENTORY VALUATION

Inventories are valued at lower of cost or net realizable value except scrap which is valued at net realizable value. The cost is determined by using first-in-first-out (FIFO) method. Finished goods and work-in progress include costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Excise duty on closing stock of finished goods and scrap are accounted for on the basis of payments made in respect of goods cleared as also provision made for goods lying in the factory and included in the value of such stocks.

13 INCOME TAX

Provision for current income tax is made after taking credit for allowances and exemptions. In case of matters under appeal, due to disallowance or otherwise, provision is made when the said liabilities are accepted by the Company.

In accordance with the Accounting Standard 22-Accounting for Taxes on income as notified under Companies (Accounting Standard) Rules, 2006, the deferred tax for timing differences between the book & tax profit for the period is accounted for using the tax rates and the tax laws that have been enacted or substantively enacted as of the Balance Sheet date.

Deferred tax assets arising from temporary timing difference are recognized to the extent there is virtual certainty that the asset will be realized in future. Provision for fringe benefit tax is made on fringe benefits taxable under the Income Tax Act, 1961.

14 BORROWING COST

Borrowing costs that are attributable to the acquisition or the construction of qualifying assets are capitalized as part of cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.

15 MODVAT / CENVAT / VAT

Modvat/ Cenvat/ VAT claimed on capital assets is credited to assets / capital work in progress account. Modvat/Cenvat/ VAT on purchase of raw materials and other materials are deducted from the cost of such materials.

16 CLAIMS

Claims receivable are accounted for depending on the certainty of receipt and claims payable are accounted at the time of acceptance.

17 PROPOSED DIVIDEND

Dividend as proposed by the Board of Directors is provided for in the books of account, pending approval at the Annual General Meeting.

18 RETIREMENT/POST RETIREMENT BENEFITS

i. Short term employee benefits are recognized as an expense at the undiscounted amount in the year in which related service is rendered.

ii. The Company has defined contribution plan for post retirement benefits, namely Employees Provident Fund scheme administered through provident fund commissioner. The Company’s contribution is charged to revenue every year.

iii. Company’s contribution to state plans namely Employees State Insurance Fund is charged to revenue every year.

iv. The Company has defined benefits plans namely Leave encashment/ Compensated absence and Gratuity, the liability for which is determined on the basis of Actuarial valuation at the end of the year. Gratuity Trust is administered through “Life Insurance Corporation of India”.

v. Termination benefits are recognized as an expense immediately.

vi. Gain or Loss arising out of actuarial valuation are recognized in the profit and loss account as income or expense.

19 PROVISIONS AND CONTINGENT LIABILITIES

Show cause notices issued by various government authorities are not considered as obligation. When the demand notice are raised against such show cause notice and are disputed by the Company then these are classified as possible obligations.

Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but are disclosed in notes.

20 FINANCIAL DERIVATIVE TRANSACTION

In respect of the Financial derivative contracts the premium /interest paid and profit/ loss on settlement is charged to Profit & Loss account. The contracts entered into are marked to market at year end and the resultant profit/ loss is charged to profit & loss account except where these relate to fixed assets in which case it is adjusted to the cost of fixed assets.