(a) SYSTEM OF ACCOUNTING
 
 The Company follows the accrual system of accounting.
 
 (b) OVERALL VALUATION POLICY
 
 The accounts have been prepared under the historical cost convention.
 
 (c) REVENUE RECOGNITION
 
 Revenue on sale of goods is recognized on transfer of significant risks
 & rewards of ownership to the buyer and on reasonable certainty of the
 ultimate collection. Sales are net off sales tax, trade discounts and
 sales returns.
 
 Interest Income is recognized on time proportion basis taking into
 account the amount outstanding and the rate applicable.
 
 (d) VALUATION OF INVENTORY
 
 Inventories are valued at lower of cost and net realisable value.
 
 The cost in respect of raw materials, store and spares and packing
 material is determined under the Specific Identification of cost 
 method. Cost are net of credit under CENVAT scheme, wherever
 applicable.
 
 The cost in respect of work-in-progress and finished goods is
 determined using the weighted average cost method and includes direct
 materials and labour and a proportion of manufacturing overheads based
 on normal operating capacity.
 
 Waste is valued at estimated net realisable value.
 
 (e) FIXED ASSETS
 
 All fixed assets are stated at original cost less depreciation. Cost
 includes freight, duties (net of CENVAT), taxes and other incidental
 expenses relating to acquisition and installation.
 
 (f) DEPRECIATION
 
 Depreciation has been provided on straight-line method in accordance
 with the rates prescribed under Schedule XIV to the Companies Act,
 1956. On the basis of technical advice, the Company has treated its
 spinning Process Plant as a Continuous Process Plant and has provided
 depreciation accordingly.
 
 (g) FOREIGN CURRENCY TRANSACTIONS
 
 Transactions in foreign currency are accounted for at the exchange
 rates prevailing on the date of transaction. All monetary items
 denominated in foreign currency are translated at year end rates.
 Exchange differences arising on such transactions and also exchange
 differences arising on the settlement of such transactions are adjusted
 in the profit and loss account.
 
 In case of forward contracts the premium or discount on all such
 contracts arising at the inception of each contract is recognized /
 amortised as income or expense over the life of the contract. Any
 profit or loss arising on the cancellation or renewal of such contract
 is recognized as income or expense for the period.
 
 (h) EMPLOYEE BENEFITS
 
 i.  Defined Contribution Plan
 
 The company''s contributions to recognized Provident Fund and Labour
 Welfare Fund are charged to profit and loss account on accrual basis.
 
 ii.  Defined Benefit Plan
 
 Gratuity - The Gratuity plan, a defined benefit plan, provides a lump
 sum payment to vested employees, at the retirement or termination of
 employment, an amount based on the respective employees'' last drawn
 salary and the years of employment with the Company. The liability with
 regard to Gratuity plan is accrued based on the actuarial valuation at
 the balance sheet date, carried out by an independent actuary.
 Actuarial gain or loss is recognised immediately in the statement of
 profit and loss as income or expense. The Company has employees''
 Gratuity fund managed by Life Insurance Corporation of India (LIC).
 
 Compensated Absences - The Company provides for the encashment of
 absence or absences with pay based on policy of the Company in this
 regard. The employees are entitled to accumulate such absences subject
 to certain limits, for the future encashment or absence. The Company
 records an obligation for compensated absences in the period in which
 the employee renders the services that increases this entitlement. The
 Company measured the expected cost of compensated absences as the
 additional amount that the Company expects to pay as a result of the
 unused entitlement that has accumulated at the Balance Sheet date on
 the basis of an independent actuarial valuation.
 
 (i) INVESTMENTS
 
 Investments that are readily realizable and intended to be held for not
 more than a year are classified as current investments. All other
 investments are classified as long term investments. Current
 investments are carried at lower of cost and fair value determined on
 an individual investment basis. Long-term investments are carried at
 cost. However, provision for diminution in value is made to recognize a
 decline other than temporary in the value of investments.
 
 (j) BORROWING COST
 
 Borrowing costs that are directly attributable to acquisition,
 construction or production of a qualifying asset are capitalised as a
 part of the cost of that asset. Other borrowing costs are recognised as
 expense in the period in which they are incurred.
 
 (k) LEASES
 
 The company has taken premises on lease. Lease rental in respect of
 operating lease arrangement are charged to Profit and Loss Account.
 
 (l) TAXES ON INCOME
 
 Tax expense for the year, comprising current tax and deferred tax is
 included in determining the net profit/(loss) for the year.
 
 A provision is made for the current tax based on tax liability computed
 in accordance with the relevant tax rates and tax laws. Deferred tax
 assets are recognized for all deductible timing differences and carried
 forward to the extent it is reasonably certain that future taxable
 profit will be available against which such deferred tax assets can be
 realized.
 
 Deferred tax assets and liabilities are measured at the tax rates that
 have been enacted or substantively enacted by the Balance Sheet date.
 
 (m) IMPAIRMENT OF ASSETS
 
 At each Balance Sheet date, the carrying amount of assets is tested for
 impairment so as to determine:
 
 a) the provision for impairment, if any, required; or
 
 b) the reversal, if any, required of impairment loss recognised in
 previous period.
 
 Impairment loss is recognised when the carrying amount of an asset
 exceeds its recoverable amount.  
 
 Recoverable amount is determined
 
 a) In the case of an individual asset, on the higher of the net selling
 price and the value in use.
 
 b) In the case of a cash-generating unit, on the higher of the cash
 generating units net selling price and value in use.
 
 (Value in use is determined on the present value of estimated future
 cash flows from the continuing use of an asset and from its disposal at
 the end of its useful life)
 
 (n) GOVERNMENT GRANT
 
 Government grants of the nature of promoter''s contribution are credited
 to capital reserve and treated as part of shareholder''s funds.
 
 (o) PROVISIONS AND CONTINGENCIES
 
 The company creates a provision when there is present obligation as a
 result of past event that probably requires an outflow of resources and
 a reliable estimate can be made of the amount of obligation. A
 disclosure for a contingent liability is made when there is possible
 obligation or a present obligation that probably will not require an
 outflow of resources or where a reliable estimate of the obligation
 cannot be made.