1.  A. BASIS OF ACCOUNTING 
 
 The financial statements are prepared on historical cost convention,
 with the exception of certain fixed assets which were re-valued, based
 on accrual method of accounting and in accordance with the accounting
 principles generally accepted in India.  They comply with the mandatory
 accounting standards notified by the Central Government of India and
 with the relevant provisions of the Companies Act, 1956.
 
 B. USE OF ESTIMATES
 
 The preparation of financial statements requires the management to make
 estimates and assumptions considered in the reported amounts of assets
 and liabilities, including the disclosure of contingent liabilities as
 of the date of the financial statements and the reported income and
 expenses during the reporting period like provision for employee
 benefits, provision for doubtful debts/advances, allowance for slow and
 non-moving inventories, useful lives of fixed assets, provision for
 warranty and sales related obligations and provision for taxation etc.
 Management believes that the estimates used in preparation of the
 financial statements are prudent and reasonable. Actual results could
 vary from these estimates. Any revision to accounting estimates is
 recognized in the period in which the results are known/materialized.
 
 2.  FIXED ASSETS
 
 (a) Fixed assets are stated at cost ,as adjusted by revaluation of
 certain land, buildings, plant and machineries based on the then
 replacement cost as determined by approved independent valuer in 1986
 and 1987, less depreciation.
 
 (b) All costs relating to the acquisition and installation of fixed
 assets (net of Cenvat /VAT credits wherever applicable) are capitalized
 and include finance cost on borrowed funds attributable to acquisition
 of qualifying fixed assets for the period up to the date when the asset
 is ready for its intended use, and adjustments arising from foreign
 exchange differences arising on foreign currency borrowings to the
 extent they are regarded as an adjustment to interest costs.(Also refer
 accounting policy No. 4 on Borrowing Costs.) Other incidental
 expenditure attributable to bringing the fixed assets to their working
 condition for intended use are capitalized.
 
 (c) Fixed assets taken on finance lease are capitalized and
 depreciation is provided on such assets, while the interest is charged
 to the profit and loss account.
 
 3.  DEPRECIATION Depreciation on fixed assets is provided using
 straight line method at the rates specified in Schedule XIV of the
 Companies Act 1956, except for certain vehicles and other equipments
 for which the depreciation is provided at 30% and 16.67% respectively.
 Certain plant and machinery are classified as continuous process plants
 based on technical evaluation by the management and are depreciated at
 the applicable rates.
 
 Additional depreciation consequent to the enhancement in the value of
 fixed assets on the revaluation is adjusted in the fixed assets
 revaluation reserve account.
 
 Leasehold land/Improvements thereon are amortized over the primary
 period of lease.
 
 In respect of fixed assets whose useful life has been revised, the
 unamortized depreciable amount is charged over the revised remaining
 useful life.
 
 4.  BORROWING COSTS Borrowing costs are capitalized as a part of the
 cost of qualifying asset when it is possible that they will result in
 future economic benefits and the cost can be measured reliably. Other
 borrowing costs are recognized as an expense in the period in which
 they are incurred.
 
 5.  IMPAIRMENT OF ASSETS The carrying amounts of assets are reviewed at
 each balance sheet date if there is any indication of impairment based
 on internal/external factors. An impairment loss is recognized wherever
 the carrying amount of an asset exceeds its recoverable amount. The
 recoverable amount is the greater of the assets net selling price and
 its value in use. In assessing value in use, the estimated future cash
 flows are discounted to their present value at the pre tax weighted
 average cost of capital.
 
 6.  INTANGIBLE ASSETS The expenditure incurred by the Company on
 acquisition and implementation of software systems/development costs up
 to the stage when the new product reaches technical feasibility, has
 been recognized as an intangible asset and is amortized over a period
 of five years based on its estimated useful life.
 
 7.  INVESTMENTS Long term investments are stated at cost and provision
 for diminution is made if the decline in value is other than temporary
 in nature. Current investments are stated at lower of cost and fair
 value determined on the basis of each category of investments.
 
 8.  INVENTORIES
 
 Inventories are valued at the lower of cost and estimated net
 realizable value (net of allowances). The cost comprises of cost of
 purchase, cost of conversion and other costs including appropriate
 production overheads in the case of finished goods and work in process,
 incurred in bringing such inventories to their present location and
 condition.  In case of raw materials, stores & spares and traded goods,
 cost (net of CENVAT/VAT credits wherever applicable) is determined on a
 moving weighted average basis, and, in case of work in process and
 finished goods, cost is determined on a First In First Out basis.
 
 9.  FOREIGN CURRENCY TRANSACTIONS
 
 Foreign currency transactions are recorded at rates of exchange
 prevailing on the date of transaction. Monetary assets and liabilities
 denominated in foreign currencies as at the balance sheet date are
 translated at the rate of exchange prevailing at the year-end. Exchange
 differences arising on actual payments/realizations and year-end
 restatements are dealt with in the profit & loss account.
 
 The Company enters into forward exchange contracts and other
 instruments that are in substance a forward exchange contract to hedge
 its risks associated with foreign currency fluctuations. The premium or
 discount arising at the inception of a forward exchange contract (other
 than for a firm commitment or a highly probable forecast) or similar
 instrument is amortized as expense or income over the life of the
 contract. Exchange difference on such contracts is recognized in the
 profit and loss account in the year in which the exchange rates change.
 
 Exchange difference arising on a monetary item that, in substance,
 forms part of the Companys net investment in a non-integral foreign
 operation has been accumulated in a foreign currency translation
 reserve in the Companys financial statements until the disposal of net
 investment, at which time they would be recognized as income or as
 expense.
 
 10.  REVENUE RECOGNITION
 
 Revenue is recognized when the significant risks and rewards of
 ownership of goods have been passed to the buyer.
 
 Gross sales are inclusive of excise duty and are net of trade
 discounts/sales returns/VAT.
 
 Dividend income on investments is accounted for when the right to
 receive the payment is established.
 
 Interest Income is recognized on time proportion basis.
 
 11.  EXPORT INCENTIVES
 
 Export Incentives in the form of advance licences/credits earned under
 duty entitlement pass book scheme are treated as income in the year of
 export at the estimated realizable value/actual credit earned on
 exports made during the year and are credited to the raw material
 consumption account.
 
 12.  EMPLOYEE BENEFITS
 
 Liability for gratuity to employees determined on the basis of
 actuarial valuation as on balance sheet date is funded with the Life
 Insurance Corporation of India and is recognized as an expense in the
 year incurred.
 
 Liability for short term compensated absences is recognized as expense
 based on the estimated cost of eligible leave to the credit of the
 employees as at the balance sheet date on undiscounted basis. Liability
 for long term compensated absences is determined on the basis of
 actuarial valuation as on the balance sheet date.
 
 Contributions to defined contribution schemes such as provident fund,
 employees pension fund and superannuation fund and cost of other
 benefits are recognized as an expense in the year incurred.
 
 Actuarial gains and losses arising from experience adjustments and
 effects of changes in actuarial assumptions are immediately recognized
 in the profit & loss account as income or expense.
 
 Phantom Stock Plan
 
 Accounting value of stock appreciation rights (Phantom stock units)
 granted to employees under the Cash-settled Employee Share-based
 Payment Plan (Phantom Stock Plan) is recognized based on intrinsic
 value method. Intrinsic value of the phantom stock unit is determined
 as excess of closing market price on the reporting date over the
 exercise price of the unit and is charged as employee benefit over the
 vesting period in accordance with Guidance Note on Accounting for
 Employee Share-based payments issued by Institute of Chartered
 Accountants of India.
 
 13.  TAXES ON INCOME
 
 Current tax is determined on the income for the year chargeable to tax
 in accordance with the Income Tax Act, 1961.  Deferred tax is
 recognized on timing differences between the accounting income and the
 taxable income for the year, and quantified using the tax rates and
 laws enacted or substantially enacted as on the balance sheet date.
 Deferred tax assets are recognized only to the extent there is a
 reasonable certainty that assets can be realized in future.  However,
 where there is unabsorbed depreciation or carry forward of losses,
 deferred tax assets are recognized only if there is a virtual certainty
 of realization of such assets.
 
 14.  MAT CREDIT ENTITLEMENT
 
 MAT Credit is recognized as an asset only when and to the extent there
 is convincing evidence that the Company will pay normal income tax
 during the specified period. The Company reviews the same at each
 Balance Sheet date and writes down the carrying amount of MAT credit
 entitlement to the extent that there is no longer convincing evidence
 to the effect that Company will pay normal income tax during the
 specified period.
 
 15.  OPERATING LEASES
 
 Leases where the lessor effectively retains substantially all the risks
 and benefits of ownership of the leased assets are classified as
 operating leases. Operating Lease payments are recognized as an expense
 in the revenue account as per the lease terms.
 
 16.  PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
 
 A provision is recognized when the Company has a present obligation as
 a result of past events; it is probable that an outflow of resources
 will be required to settle the obligation, in respect of which a
 reliable estimate can be made.  Provisions are not discounted to their
 present value and are determined based on best estimates required to
 settle the obligation at the balance sheet date. These are reviewed at
 each balance sheet date and adjusted to reflect the current best
 estimates.
 
 Contingent liability is disclosed for (i) Possible obligation which
 will be confirmed only by 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 cannot be made. Contingent assets are not recognized in the
 financial statements since this may result in the recognition of income
 that may never be realized.