1) Basis of Preparation of Financial Statement
a) The financial statements have been prepared under the historical
cost convention on an accrual basis of accounting in accordance with
the Accounting Standard-1 Referred to in section 211 (3c) of the
Companies Act, 1956.
b) The Company follows mercantile system of accounting and recognizes
income and expenditure on accrual basis.
c) Expenditure incurred in connection with the issue of
Shares/GDRs/warrants is written off against security premium account in
the year of incurrence.
d) All the assets and liabilities have been classified as current or
non current as per the Company''s normal operating cycle and other
criteria set out in Schedule VI to the Companies Act, 1956. Based on
the nature of the products and the time between the acquisition of the
assets for processing and their realization in cash and cash
equivalent, the Company has ascertained its operating cycle to be less
than 12 months.
2) Fixed Assets
a) Fixed Assets are stated at cost net of duty credit availed less
accumulated depreciation and impairments, if any. The cost includes
cost of acquisition/construction, installation and preoperative
expenditure including trial run expenses (net of revenue) and borrowing
costs incurred during pre-operation period. Expenses incurred on
capital assets are carried forward as capital work in progress at cost
till the same are ready for use.
b) Pre-operative expenses, including interest on borrowings for the
capital goods, where applicable incurred till the capital goods are
ready for commercial production, are treated as part of the cost of
capital goods and capitalized.
c) Machinery spares which are specific to particular item of fixed
assets and whose use is irregular are capitalized as part of the cost
3) Impairment of Assets
The Company recognizes all the losses as per Accounting Standard-28 due
to the impairment of assets in the year of review of the physical
condition of the Assets and is measured by the amount by which, the
carrying amount of the Asset exceeds the Fair Value of the Asset.
Depreciation on fixed assets is provided on straight-line basis at the
rates specified under Schedule XIV of the Companies Act, 1956.
Depreciation for assets purchased/sold during the period is
5) Inventories Valuation
Raw material is valued at cost (First in First Out basis) or net
realizable value whichever is lower. Finished Goods are valued at cost
or net realizable value whichever is lower. Stock of Scrap is valued at
net realizable value. Stock of Trading Goods is valued at Cost
(Weighted Average/First in First Out basis).
6) Foreign Exchange Transactions
Foreign currency transactions are recorded at the rate of exchange
prevailing on the date of transaction. All exchange differences are
dealt within statement of profit and loss account. Current assets and
current liabilities in foreign currency outstanding at the year end are
translated at the rate of exchange prevailing at the close of the year
and resultant gains/losses are recognized in the statement of profit
and loss account of the year except in cases where they are covered by
forward foreign exchange contracts in which cases these are translated
at the contracted rates of exchange and the resultant gains/losses
recognized in statement of profit and loss account over the life of the
7) Duties & Credits
a) Excise Duty is accounted for at the time of clearance of goods
except closing stock of finished goods lying at the works.
b) Cenvat Credit, to the extent available during the year, are adjusted
towards cost of materials.
c) Duty credit on export sales has been taken on accrual basis whether
license has been issued after closing of the financial year.
8) Sales are inclusive of excise duty and after deducting the discount
and also sales tax applicable and Purchase made against Bank Guarantee,
Letter of Credit are classified in sundry creditor for raw materials.
9) Retirement Benefits
a) The company has provided for the retirement benefits as per the
actuarial valuation under the Projected Unit Credit Method.
b) Retirement benefits in the form of Provident Fund are charged to the
Profit & Loss Account of the period when the contributions to the
respective funds are due.
10) Borrowing Cost
Borrowing cost is charged to the Profit & Loss Account, except cost of
borrowing for the acquisition of qualifying assets, which is
capitalized till the date of commercial use of the assets.
11) Taxes on Income
Provision for current tax is made considering various allowances,
disallowances and benefits available to the Company under the
provisions of Income Tax Law.
In accordance with Accounting Standard-22 Accounting for Taxes on
Income issued by the Institute of Chartered Accountants of India,
deferred taxes resulting from timing differences between book and tax
profits are accounted for at tax rate substantively enacted by the
Balance Sheet date to the extent the timing differences are expected to
12) Misc. Expenditure
Misc. expenditure represents ancillary cost incurred in connection with
the incorporation and share issue expenses and brand promotion
expenditure. It has been decided to write off these expenses over the
period of five years.
13) Revenue Recognition
Sale of goods is recognized when the risk and reward of ownership are
passed on to the customers. Revenue from services is recognized when
the services are complete.
Long term investments, other than investment in Associates and
Subsidiaries, are carried at cost less provision for permanent
diminution, if any, in value of such investments. Current investments
are carried at lower of cost and fair value. Income/Loss from
investments is recognized in the year in which it is generated.
15) Provision and Contingencies
The company creates a provision when there is a present obligation as a
result of past event that 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 a present
obligation that may require an outflow of resources or where a reliable
estimate of such obligation cannot be made.
16) Cash Flow Statement
Cash flows are reported using the indirect method, whereby net profit
before tax is adjusted for the effects of transactions of a non-cash
nature, any deferrals or accruals of past or future operating cash
receipts or payments and item of income or expenses associated with
investing or financing cash flows. The cash flows from operating,
investing and financing activities of the Group are segregated.
17) Earnings per Share
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting attributable taxes) 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 loss 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.