a.  Basis of Accounting
 
 The accounts are prepared as per historical cost convention and on
 accrual basis and are in confirmity with mandatory Accounting Standards
 and relevant provisions of the Companies Act, 1956.
 
 b.  Fixed Assets
 
 Fixed Assets transferred upon the Scheme of Arrangement have been
 recorded at Net Book Value as appearing in the Demerged Company. Fixed
 Assets are recorded at cost of acquisition / construction less
 accumulated depreciation and impairment losses, if any. Cost comprises
 of the purchase price net of Cenvat, Service Tax and Value Added Tax
 and any attributable cost of bringing the assets to its working
 condition for its intended use.
 
 Borrowing Cost directly attributable to acquisition / construction of
 fixed asset which necessarily take a substantial period of time to get
 ready for their intended use are capitalised.
 
 c.  Depreciation / Amortisation
 
 Depreciation on Fixed Assets is provided on Straight Line Method at the
 rates specified in Schedule XIV to the Companies Act,1956
 
 Leasehold Land is amortized over the period of Lease. Depreciation on
 Research and Development Equipments acquired upto 31.03.2003 @ 100% and
 Acquired from 01.04.2003 on Straight Line Method at the rate prescribed
 in schedule XIV of the Companies Act, 1956.
 
 d.  Investments
 
 Investments are classified into Current and Long Term Investments.
 Current Investments are valued at lower of cost and fair market value.
 Long Term Investments are stated at cost less provision, if any, for
 decline other than temporary in their value.
 
 Investment in Subsidiary company are stated at cost of acquisition / or
 as appearing in the Demerged Company.
 
 e.  Inventories
 
 All Inventories are valued at lower of cost and net realisable value.
 
 Raw Materials, Stores and Spares & packing material are valued at lower
 of cost determined on weighted average basis and net realisable value.
 
 Work in process is valued at lower of cost and net realisable value.
 
 Finished Goods is valued at lower of cost including excise payable
 thereon and net realisable value.
 
 Slow moving, Raw Materials, Stores & Spares are valued at estimated net
 realizable value.
 
 f.  Sales and Income from Operations
 
 Sale of products are recognised when risk and rewards of ownership of
 the products are passed on to the customers, which is generally on the
 despatch of goods. Sales are inclusive of excise duty, but net of sales
 return, Service Tax & Value Added Tax & CST.
 
 Export sales are recognized on the date of bill of lading / Airway
 bill.
 
 Income from operations includes revenue earned, as per the terms agreed
 with the customers, from development of products and assignment of
 patent rights. Income from royalty is recognised on an accrual basis in
 accordance with the terms of the relevant agreement
 
 g.  R & D Expenses
 
 All revenue expenses related to R & D including expenses in relation to
 development of product/ processes and expenses incurred in relation to
 compliances with international regulatory authorities in obtaining of
 Abbreviated New Drug Applications (ANDA) are charged to the Profit &
 Loss Account in the year in which it is incurred.
 
 h.  Foreign Exchange Transactions
 
 Monetary assets and liabilities related to foreign currency
 transactions remaining unsettled at the end of the year are translated
 at year end exchange rates.
 
 The difference in translation of monetary assets & liabilities and
 realized gains & losses on foreign exchange transaction are recognized
 in the Profit and Loss Account.
 
 In respect of transactions covered by forward contracts, the difference
 between the contract rate and the rate on the date of the transactions
 is charged to Profit and Loss Account over the contract period.
 
 i.  Employee benefits
 
 The gratuity liability is funded through the scheme administered by the
 Life Insurance Corporation of India (LIC), and the amounts paid /
 provided under the scheme are charged to Profit and Loss Account. Upon
 the Scheme of Arrangement the said LIC Policy and the accumulated funds
 therein are in process of being transferred to the Trust created for
 the purpose.
 
 Superannuation payable as per superannuation scheme is provided by
 payment to superannuation trust fund, administered by the ICICI
 Prudential Life Insurance Co.Ltd.
 
 Accumulated leave liability as at the year end is provided as per
 actuarial valuation.
 
 j.  Taxes on Income
 
 Income tax expense comprises current tax (i.e amount of tax for the
 year determined in accordance with the Income tax law).
 
 Deferred Tax asset & liabilities are recognised as per Accounting
 Standard -22 on accounting for Taxes on Income, issued by Institute of
 Chartered Accountant of India.
 
 k.  Provisions, Contingent Liabilities and Contingent Assets
 
 Provisions are recognised only when there is a present obligation as a
 result of past events and when a reliable estimate of the amount of the
 obligation can be made. Contingent liability is disclosed for (i)
 Possible obligations which will be confirmed only by the future events
 not wholly within the control of the company or (ii) Present
 obligations arising from past events where it is not probable that an
 outflow of resources will be required to settle the obligation or a
 reliable estimate of the amount of the obligation can not be made.
 Contingent Assets are not recognised in the financial statements.