1.1 BASIS OF ACCOUNTING AND PREPARATION OF FINANCIAL STATEMENTS
 
 The financial statements of the Company have been prepared in
 accordance with the Generally Accepted Accounting Principles in India
 (Indian GAAP) to comply with the Accounting Standards notified under
 the Companies (Accounting Standards) Rules, 2006 (as amended) and the
 relevant provisions of the Companies Act, 1956. The financial
 statements have been prepared on accrual basis under the historical
 cost convention with the exception of certain fixed assets, that are
 carried at revalued amounts. The accounting policies adopted in the
 preparation of the financial statements are consistent with
 those followed in the previous year.
 
 1.2 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, other 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.
 
 1.3 INVENTORIES
 
 Inventories are valued at the lower of cost and estimated net
 realizable value (net of allowances) after providing for obsolescence
 and other losses, where considered necessary. 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.
 
 1.4 CASH AND CASH EQUIVALENTS
 
 Cash comprises cash on hand and demand deposits with banks. Cash
 equivalents are short-term balances (with an original maturity of three
 months or less from the date of acquisition), highly liquid investments
 that are readily convertible into known amounts of cash and which are
 subject to insignificant risk of changes in value.
 
 1.5 CASHFLOW STATEMENT
 
 Cash flows are reported using the indirect method, whereby profit/
 (loss) before extraordinary items and tax is adjusted for the effects
 of transactions of non-cash nature and any deferrals or accruals of
 past or future cash receipts or payments. The cash flows from
 operating, investing and financing activities of the Company are
 segregated based on the available information.
 
 1.6 DEPRECIATION AND AMORTISATION
 
 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 amortised over the primary period of lease. In respect of
 fixed assets whose useful life has been revised, the unamortised
 depreciable amount is charged over the revised remaining useful life.
 The estimated useful life of the intangible assets and the amortisation
 period are reviewed at the end of each financial year and the
 amortisation method is revised to reflect the changed pattern.
 
 1.7 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.
 
 1.8 OTHER INCOME
 
 Interest income is accounted on accrual basis. Dividend income on
 investments is accounted for when the right to receive the payment is
 established. Royalty income is accounted when the right to receive the
 same is established.
 
 1.9 TANGIBLE FIXED ASSETS
 
 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. 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. Other incidental expenditure attributable
 to bringing the fixed assets to their working condition for intended
 use are capitalized.  Subsequent expenditure relating to fixed assets
 is capitalised only if such expenditure results in an increase in the
 future benefits from such asset beyond its previously assessed standard
 of performance. 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. Fixed assets retired from active use
 and held for sale are stated at the lower of their net book value and
 net realisable value and are disclosed separately in the Balance Sheet.
 Capital work-in-progress: Projects under which assets are not ready for
 their intended use and other capital work-in-progress are carried at
 cost, comprising direct cost, related incidental expenses and
 attributable interest.
 
 1.10 FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONS
 
 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 ora highly probable forecast) or similar instrument, which
 are not intended for trading or speculation purposes, 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 Company''s net
 investment in a non-integral foreign operation has been accumulated in
 a foreign currency translation reserve in the Company''s financial
 statements until the disposal of net investment, at which time they
 would be recognized as income or as expense.
 
 1.11 GOVERNMENT GRANTS, SUBSIDIESAND EXPORT INCENTIVES
 
 Government grants and subsidies are recognised when there is reasonable
 assurance that the Company will comply with the conditions attached to
 them and the grants / subsidy will be received. Government grants whose
 primary condition is that the Company should purchase, construct or
 otherwise acquire capital assets are presented by deducting them from
 the carrying value of the assets. The grant is recognised as income
 over the life of a depreciable asset by way of a reduced depreciation
 charge. 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 Government grants in the nature of
 promoters'' contribution like investment subsidy, where no repayment is
 ordinarily expected in respect thereof, are treated as capital reserve.
 
 1.12 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.
 
 1.13 EMPLOYEE BENEFITS
 
 Employee benefits include provident fund, superannuation fund, gratuity
 fund and compensated absences. 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, 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.
 
 1.14 EMPLOYEE SHARE BASED PAYMENTS
 
 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.
 
 1.15 BORROWING COSTS
 
 Borrowing costs include interest, amortisation of ancillary costs
 incurred and exchange differences arising from foreign currency
 borrowings to the extent they are regarded as an adjustment to the
 interest cost. 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.
 
 1.16 SEGMENT REPORTING
 
 The Company''s operations comprise of only one business
 segment-Automobile Tyres, Automobile Tubes & Automobile Flaps in the
 context of reporting business/geographical segment as required under
 mandatory accounting standards AS- 17 Segment Reporting. The
 accounting policies adopted for segment reporting are in line with the
 accounting policies of the Company. Segment revenue, segment expenses,
 segment assets and segment liabilities have been identified to segments
 on the basis of their relationship to the operating activities of the
 segment.
 
 1.17 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. Assets leased by the
 Company in its capacity as lessee where substantially all the risks and
 rewards of ownership vest in the Company are classified as finance
 leases. Such leases are capitalised at the inception of the lease at
 the lower of the fair value and the present value of the minimum lease
 payments and a liability is created for an equivalent amount. Each
 lease rental paid is allocated between the liability and the interest
 cost so as to obtain a constant periodic rate of interest on the
 outstanding liability for each year.
 
 1.18 EARNINGS PERSHARE
 
 Basic earnings per share is computed by dividing the profit / (loss)
 After tax (including the post tax effect of extraordinary items, if any)
 by the weighted average number of equity shares outstanding during the
 year. Diluted earnings per share is computed by dividing the profit /
 (loss) after tax (including the post tax effect of extraordinary items,
 if any) as adjusted for dividend, interest and other charges to expense
 or income relating to the dilutive potential equity shares, by the
 weighted average number of equity shares considered for deriving basic
 earnings per share and the weighted average number of equity shares
 which could have been issued on the conversion of all dilutive
 potential equity shares.
 
 1.19 TAXES ON INCOME
 
 Current tax is the amount of tax payable on the taxable income for the
 year as determined in accordance with the provisions of the Income Tax
 Act, 1961. Minimum Alternate Tax (MAT) paid in accordance with the tax
 laws, which gives future economic benefits in the form of adjustment to
 future income tax liability, is considered as an asset if there is
 convincing evidence that the Company will pay normal income tax.
 Accordingly, MAT is recognised as an asset in the Balance Sheet when it
 is probable that future economic benefit associated with it will flow
 to the Company. 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.
 
 1.20 INTANGIBLE ASSETS
 
 Intangible assets are carried at cost less accumulated amortisation and
 impairment losses, if any. The cost of an intangible asset comprises
 its purchase price, including any import duties and other taxes (other
 than those subsequently recoverable from the taxing authorities), and
 any directly attributable expenditure on making the asset ready for its
 intended use and net of any trade discounts and rebates. Subsequent
 expenditure on an intangible asset after its purchase / completion is
 recognised as an expense when incurred unless it is probable that such
 expenditure will enable the asset to generate future economic benefits
 in excess of its originally assessed standards of performance and such
 expenditure can be measured and attributed to the asset reliably, in
 which case such expenditure is added to the cost of the asset.
 
 1.21 RESEARCH AND DEVELOPMENT EXPENSES
 
 Revenue expenditure pertaining to research is charged to the Statement
 of Profit and Loss. Development costs of products are also charged to
 the Statement of Profit and Loss unless a product''s technological
 feasibility has been established, in which case such expenditure is
 capitalised. The amount capitalised comprises expenditure that can be
 directly attributed or allocated on a reasonable and consistent basis
 to creating, producing and making the asset ready for its intended use.
 Fixed assets utilised for research and development are capitalised and
 depreciated in accordance with the policies stated for Tangible Fixed
 Assets and Intangible Assets.
 
 1.22 IMPAIRMENT OF ASSETS
 
 The carrying amounts of assets/ cash generating units 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 asset''s 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.
 
 1.23 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
 
 A provision is recognized when the Company has a present obligation as
 a result of past events and 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 (excluding retirement
 benefits) 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.
 
 1.24 PROVISION FOR SALES RELATED OBLIGATIONS
 
 The estimated liability for sales related obligations is recorded when
 products are sold. These estimates are established using historical
 information on the nature, frequency and average cost of obligations
 and management estimates regarding possible future incidence. The
 timing of outflows will vary as and when the obligation will arise -
 being typically upto three years.
 
 1.25 DERIVATIVE CONTRACTS
 
 The Company enters into derivative contracts in the nature of foreign
 currency swaps, currency options, forward contracts with an intention
 to hedge its existing assets and liabilities, firm commitments and
 highly probable transactions.  Derivative contracts which are closely
 linked to the existing assets and liabilities are accounted as per the
 policy stated for Foreign Currency Transactions and Translations. All
 other derivative contracts are marked-to-market and losses are
 recognised in the Statement of Profit and Loss. Gains arising on the
 same are not recognised, until realised, on grounds of prudence.
 
 1.26 INSURANCE CLAIMS
 
 Insurance claims are accounted for on the basis of claims admitted/
 expected to be admitted and to the extent that there is no uncertainty
 in receiving the claims.
 
 1.27 SERVICE TAX INPUT CREDITS
 
 Service tax input credit is accounted for in the books in the period in
 which the underlying service received is accounted and when there is no
 uncertainty in availing / utilising the credits.
 
 (e) The rights, preferences and restrictions attached to equity shares
 of the Company:
 
 The Company has only one class of shares referred to as equity shares
 having a par value of Re. 1 each. The holder of equity shares are
 entitled to one vote per share.
 
 The Company declares and pays dividends in Indian Rupees. The dividends
 proposed by the Board of Directors is subject to the approval of the
 shareholders in the ensuing Annual General Meeting.
 
 (f) In the event of liquidation of the Company, the holders of equity
 shares will be entitled to receive remaining assets of the Company,
 after distribution of all preferential amounts. The distribution will
 be in proportion to the number of equity shares held by the
 shareholders.