a. Basis of preparation
These financial statements have been prepared in accordance with
generally accepted accounting principles in India (Indian GAAP) under
the historical cost convention on accrual basis to comply in all
material respects with the notified Accounting Standards by the
Companies Accounting Standards Rules, 2006 (as amended), other
pronouncements of the Institute of Chartered Accountants of India and
the relevant provisions of the Companies Act, 1956. The accounting
policies have been consistently applied by the Company and are
consistent with those used in the previous year, except for the change
in accounting policy explained below.
b. Change in accounting policy
Presentation and disclosure of financial statements
During the year ended March 31, 2012, the revised Schedule VI notified
under the Companies Act, 1956 has become applicable to the Company, for
preparation and presentation of its financial statements. The adoption
of revised Schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements. However,
it has significant impact on presentation and disclosures made in the
financial statements. The Company has also reclassified the previous
year figures in accordance with the requirements applicable in the
c. Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires management to make estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and liabilities and
disclosure of contingent liabilities at the date of the financial
statements and the results of operations during the reporting year.
Although these estimates are based upon management''s best knowledge
of current events and actions, actual results could differ from these
d. Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
Revenue from sale of goods is recognized on dispatch (in respect of
exports on the date of the bill of lading or airway bill) which
coincides with transfer of significant risks and rewards to customer
and is inclusive of excise duty and net of trade discounts, sales
returns and sales tax, where applicable.
Revenue from sale of dossiers/licenses/services is recognized in
accordance with the terms of the relevant agreements as generally
accepted and agreed with the customers.
Interest is recognized on a time proportion basis taking into account
the amount outstanding and the rate applicable.
Dividend is recognized as and when the Company''s right to receive
payment is established by the reporting date.
e. Fixed assets and depreciation
Fixed assets are stated at cost less accumulated depreciation,
impairment losses and specific grant/ subsidies, if any. Cost comprise
of purchase price, freight, non refundable taxes and duties and any
attributable cost of bringing the asset to its working condition for
its intended use. Borrowing costs relating to acquisition of fixed
assets which take substantial period of time to get ready for use are
included to the extent they relate to the period till such assets are
ready for intended use. All other borrowing costs are expensed in the
period they occur.
Expenditure directly relating to construction activity is capitalized.
Indirect expenditure is capitalized to the extent those relate to the
construction activity or is incidental thereto. Income earned during
construction period is deducted from the total expenditure relating to
Assets retired from active use and held for disposal are stated at
their estimated net realizable values or net book values, whichever is
Assets under finance leases, where there is no reasonable certainty
that the Company will obtain the ownership by the end of the lease term
are capitalized and are depreciated over the lease term or estimated
useful life of the asset or useful life envisaged in Schedule XIV of
the Companies Act, 1956, whichever is shorter.
Premium paid on leasehold land is amortized over the lease term.
Depreciation is provided on the straight-line method, based on the
useful life of the assets as estimated by the management which
generally coincides with rates prescribed under Schedule XIV to the
Companies Act, 1956 except assets acquired at the Bhiwadi unit in
Rajasthan for which depreciation is provided on a straight-line basis,
at the rates that are higher than those specified in Schedule
XIV to the Companies Act, 1956 and are based on useful lives as
estimated by management. In these cases the rates are as under:
Leasehold buildings : 5%
Plant & machinery : 20%
Assets costing below Rs5,000 are depreciated fully in the year of
Cost relating to licenses, which are acquired, are capitalized and
amortized on a straight-line basis over their useful life not exceeding
g. Impairment of tangible and intangible 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 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 using a pre-tax discount rate that reflects
current market assessments of the time value of money and risks
specific to the asset.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
h. Government grants and subsidies
Grants and subsidies are recognized when there is a reasonable
assurance that the grant or subsidy will be received and that all
underlying conditions thereto will be complied with. When the grant or
subsidy relates to an asset, its value is deducted in arriving at the
carrying amount of the related asset.
Investments that are readily realizable and intended to be held for not
more than one year from the date on which such investments are made,
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 individual investment basis.
Long-term investments are carried at cost. However, diminution in value
is provided to recognise a decline, other than temporary, in the value
of the investments.
Raw materials, packing materials, stores, spares and consumables are
valued at lower of cost, calculated on First-in-First out basis, and
net realizable value. Items held for use in the production of
inventories are not written down below cost if the finished product in
which these will be incorporated are expected to be sold at or above
Finished goods and work-in-progress are valued at lower of cost and net
realizable value. Cost includes materials, labour and a proportion of
appropriate overheads based on normal operating capacity. Cost of
finished goods includes excise duty. Cost is determined on a weighted
Trading goods are valued at lower of cost and net realizable value.
Net realizable value is the estimated selling price in the ordinary
course of business, reduced by the estimated costs of completion and
costs to effect the sale.
k. Employee benefits
Employee benefit in the form of provident fund is a defined
contribution scheme and the contributions are charged to the Statement
of Profit and Loss of the year when the contributions to the respective
funds are due. There are no other obligations other than the
contribution payable to the respective authorities.
Gratuity is a defined benefit obligation and is provided for on the
basis of an actuarial valuation on project unit credit method made at
the end of each financial year.
Short term compensated absences are provided for based on estimates.
Long term compensated absences are provided for based on actuarial
valuation. The actuarial valuation is done as per projected unit credit
method at the end of each financial year.
Actuarial gains/losses are immediately taken to Statement of Profit and
Loss and are not deferred.
The Company presents the entire leave as a current liability in the
balance sheet, since it does not have an unconditional right to defer
its settlement for 12 months after the reporting date.
l. Income taxes
Tax expense comprises of current and deferred tax. Current income tax
is measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act, 1961. Deferred income taxes
reflect the impact of current year timing differences between taxable
income and accounting income for the year and reversal of timing
differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. In situations
where the Company has unabsorbed depreciation or carry forward tax
losses, all deferred tax assets are recognized only if there is virtual
certainty supported by convincing evidence that they can be realized
against future taxable profits.
In the situations where the Company is entitled to tax holiday under
Income Tax Act, 1961 no deferred tax is recognized in respect of timing
differences which reverse during the tax holiday period, to the extent
Company''s gross total income is subject to the deduction during the tax
holiday period. Deferred tax in respect of timing differences which
reverse after the tax holiday period is recognized in the year in which
timing difference originate.
Unrecognized deferred tax assets of earlier years are re- assessed and
recognized to the extent that it has become reasonably certain or
virtually certain, as the case may be that future taxable income will
be available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
m. Foreign exchange transactions
Initial recognition: Foreign currency transactions are recorded in the
reporting currency, by applying to the foreign currency amount the
exchange rate between the reporting currency and foreign currency at
the date of the transaction.
Conversion: Foreign currency monetary items are reported at year-end
rates. Non-monetary items which are carried in terms of historical cost
denominated in foreign currency are reported using the exchange rate at
the date of the transaction.
Exchange differences: exchange differences arising on the settlement of
monetary items or on reporting monetary items of Company at rates
different from those at which they were initially recorded during the
year, or reported in previous financial statements, are recognized as
income or as expenses in the year in which they arise.
Forward exchange contracts not intended for trading purposes: In case
of forward exchange contracts, difference between the forward rate and
the exchange rate on the date of transaction is recognized as expense
or income over the life of the contract. Exchange differences on such
contracts are recognized in the statement of profit and loss in the
year in which the exchange rates change. Any profit or loss arising on
cancellation or renewal of forward exchange contract is recognized as
income or as expense for the year.
n. Export benefits, incentives and licenses
Export benefits on account of duty drawback and export promotion
schemes are accrued and accounted in the year of export, and are
included in other operating revenue. Other benefits in the form of
advance authorization for imports are accounted for on purchase of
Where the Company is lessee
Finance leases, where the substantial risks and benefits incidental to
ownership of the leased items are transferred to the Company, are
capitalized at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are charged directly against income. Lease
management fees, legal charges and other initial direct costs are
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item are classified as
operating leases. Operating lease payments are recognized as an expense
in the Statement of Profit and Loss on a straight-line basis over the
p. Earnings Per Share
Basic earnings per share is calculated by dividing the net
profit or loss for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of equity shares outstanding during the year
are adjusted for the effects of all dilutive potential equity shares.
A provision is recognized when the Company has a present obligation as
a result of past event 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 are not discounted to its
present value and are determined based on best estimate 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
r. Cash and cash equivalents
Cash and cash equivalents in the cash flow statements comprise cash at
bank and in hand and short-term investments with an original maturity
of three months or less.
s. Employee Stock Compensation Cost
Measurement and disclosure of the employee share-based payment plans is
done in accordance with SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
Accounting for Employee Share Based Payments Plans, issued by the
Institute of Chartered Accountants of India. The Company measures
compensation cost relating to employee stock options using the
intrinsic value method. Compensation expense, if any, is amortized over
the vesting period of the option on a straight line basis.
t. Contingent liabilities
A contingent liability is possible obligation that arises from past
events whose existence will be confirmed by the occurrence or non
occurrence of one or more uncertain future events beyond the control of
Company or a present obligation that is not recognized because it is
not probable that an outflow of resources will be required to settle
the obligation. A contingent liability also arises in extremely rare
cases where there is a liability that cannot be recognized because it
cannot be measured reliably. The Company does not recognize the
contingent liability but discloses its existence in the financial
u. Borrowing cost
Borrowing cost includes interest incurred in connection with the
arrangement of borrowings and exchange differences arising from foreign
currency borrowings to the extent they are regarded as an adjustment to
the interest cost.