1) System of Accounting
 
 i) The Company follows the mercantile system of accounting and
 recognises income and expenditure on an accrual basis except in case of
 significant uncertainties.
 
 ii) Financial Statements are prepared under the Historical cost
 convention. These costs are not adjusted to refect the impact of
 changing value in the purchasing power of money.
 
 iii) Estimates and Assumptions used in the preparation of the financial
 statements are based upon managements evaluation of the relevant facts
 and circumstances as of the date of the Financial Statements, which may
 differ from the actual results at a subsequent date.
 
 2) Revenue recognition:
 
 a) Sales:
 
 i) Domestic Sales are accounted for on dispatch from the point of sale.
 
 ii) Export sales are recognised on the date of the Mates
 Receipt/shipped on board and initially recorded at the relevant
 exchange rates prevailing on the date of the transaction.
 
 b) Export Incentives:
 
 Export incentives are accounted for on Export of Goods if the
 entitlements can be estimated with reasonable accuracy and conditions
 precedent to claim is fulfilled.
 
 c) Income:
 
 The Company recognises income on accrual basis. However, where the
 ultimate collection of the same lacks reasonable certainty, revenue
 recognition is postponed to the extent of uncertainty.
 
 (1) Interest income is accrued over the period of the loan/investment
 and net of amortisation of premium/discount with respect to fixed
 income securities, thereby recognising the implicit yield to maturity,
 with reference to coupon dates.  However, income is accrued only where
 interest is serviced regularly and is not in arrears, as per the
 guidelines framed by the management.
 
 (2) Dividend is accrued in the year in which it is declared whereby a
 right to receive is established.
 
 (3) Profit/loss on sale of investments is recognised on the contract
 date.
 
 (4) Benefit on account of entitlement to import goods free of duty
 under the “Duty Entitlement Pass Book Scheme” is accounted in the year
 of export if the same can be measured with reasonable accuracy.
 
 3) Fixed Assets and Depreciation
 
 (A) Fixed Assets
 
 Fixed Assets except freehold land are carried at cost of acquisition,
 construction or at manufacturing cost, as the case may be, less
 accumulated depreciation and amortisation.
 
 (B) Depreciation and Amortisation:
 
 (a) Leasehold land:
 
 Premium on leasehold land is amortised over the period of lease.
 
 (b) On Plant & Machinery given on Lease:
 
 Depreciation on Plant & Machinery and Dies and Moulds given on lease is
 being provided at the rates worked out on Straight Line Method over the
 primary period of lease as stated in the Lease Agreement or at the
 rates specified in Schedule XIV to the Companies Act, 1956 whichever is
 higher, on pro-rata basis with reference to the month of commencement
 of lease period.  These dies have been fully written of.
 
 (c) On Pressure Die Casting (PDC) Dies:
 
 Depreciation on certain PDC Dies is provided over the estimated
 economic life of the dies or at the rates specified in Schedule XIV to
 the Companies Act, 1956, whichever is higher, proportionate from the
 month they are put to use.
 
 (d) On other Fixed Assets
 
 Depreciation on all assets is provided on  Straight Line basis  in
 accordance with the provisions of Section 205 (2) (b) of the Companies
 Act 1956, in the manner and at the rates specified in Schedule XIV to
 the said Act.
 
 i.  Depreciation on additions is being provided on prorata basis from
 the month of such additions.
 
 ii.  Depreciation on assets sold, discarded or demolished during the
 year is being provided at their rates upto the month in which such
 assets are sold, discarded or demolished.
 
 4) Intangible Assets
 
 a) Technical know-how acquired
 
 Expenditure on technical know-how acquired (including Income-tax and R&
 D cess) is being amortised equally over a period of six years.
 
 b) Technical know-how developed by the company
 
 i) Expenditure incurred on know-how developed by the company, post
 research stage, is recognised as an intangible asset, if and only if
 the future economic benefits attributable are probable to flow to the
 company and the costs can be measured reliably.
 
 ii) The cost of Technical Know-how developed is amortised equally over
 its estimated life i.e. generally three years.
 
 5) Investments
 
 a) Fixed income securities remaining with the company on vesting of the
 manufacturing undertaking of erstwhile Bajaj Auto Limited, are carried
 at their fair market values as at 1 April 2007 where the carrying costs
 of such investments were higher on that date, less amortisation of
 premium/discount thereafter, as the case may be.
 
 b) Other Fixed income securities are carried at cost, less amortisation
 of premium/discount, as the case may be, and provision for diminution,
 if any, as considered necessary.
 
 c) Investments other than fixed income securities are valued at cost of
 acquisition, less provision for diminution as necessary.
 
 d) Investments made by the Company are, generally, of a long-term
 nature, hence diminutions in value of quoted and unquoted investments
 are not considered to be of a permanent nature. However, current
 investments, representing fixed income securities with a maturity less
 than 1 year and investment not intended to be held for a period more
 than 1 year, are stated at lower of cost or fair value.
 
 e) The management has laid out guidelines for the purpose of assessing
 likely impairments in investments and for making provisions based on
 given criteria. Appropriate provisions are accordingly made, which in
 the opinion of the management are considered adequate.
 
 6) Inventories
 
 Cost of inventories have been computed to include all costs of
 purchases, cost of conversion and other costs incurred in bringing the
 inventories to their present location and condition.
 
 a) Finished stocks, Auto spare parts and Work-in-progress are valued at
 cost or net realisable value whichever is lower.  Finished stocks lying
 in the factory premises, Branches, Depots are valued inclusive of
 excise duty.
 
 b) Stores and Tools are valued at cost arrived at on weighted average
 basis However, obsolete and slow moving items are valued at cost or
 estimated realisable value whichever is lower.
 
 c) Raw materials and components are valued at cost arrived at on
 weighted average basis or lower of cost and net realisable value, as
 circumstances demand. However, obsolete and slow moving items are
 valued at cost or estimated realisable value whichever is lower.
 
 d) Machinery spares and Maintenance materials are charged out as
 expense in the year of purchase. However, Machinery spares forming key
 components specific to a machinery and held as insurance spares are
 capitalized along with the cost of the Asset.
 
 e) Goods in transit are stated at actual cost incurred upto the date of
 Balance Sheet.
 
 7) Foreign Currency Transactions
 
 a) Current Assets and Liabilities in foreign currency outstanding at
 the close of financial year are revalorised at the appropriate exchange
 rates prevailing at the close of the year.
 
 b) The gain or loss on decrease/increase in reporting currency due to
 fluctuations in foreign exchange rates, in case of current assets and
 liabilities in foreign currency, are recognised in the profit and loss
 account in the manner detailed in note 5 (d) in Schedule 14 to the
 accounts.
 
 c) Fixed Assets purchased at Overseas Branches in foreign exchange are
 recorded at their historical cost computed with reference to the
 average rate of foreign exchange remitted to the Branch.
 
 d) Foreign Exchange Contracts/Derivatives:
 
 i) Profits and losses arising from either cancellation or utilization
 of contracts are recognised in the profit and loss account as detailed
 in note 5 (d) in Schedule 14 to the accounts.
 
 ii) Losses & gains of outstanding foreign exchange
 contracts/derivatives to hedge highly probable forecast transactions,
 if determined effective, as per the principles of hedge accounting,
 recognised in the “Hedge Reserve” and to ultimately flow into the
 profit and loss account when the underlying transactions occur. Losses
 on ineffective hedging instruments are recognised in the profit and
 loss account. Refer note 10 Schedule 14 to the accounts.
 
 8) Research & Development Expenditure
 
 Research & Development Expenditure is charged to revenue under the
 natural heads of account in the year in which it is incurred.  Payments
 for R&D work by contracted agency are being expensed out upto the stage
 of completion. However, expenditure incurred at development phase,
 where it is reasonably certain that outcome of research will be
 commercially exploited to yield economic benefits to the company, is
 considered as an Intangible asset and accounted in the manner specified
 in clause 4b) above.
 
 9) Employee Benefits
 
 a) Privilege Leave entitlements
 
 Privilege leave entitlements are recognised as a liability, in the
 calendar year of rendering of service, as per the rules of the company.
 As accumulated leave can be availed and/or encashed at any time during
 the tenure of employment the liability is recognised at the actuarially
 determined value by an Appointed Actuary.
 
 b) Gratuity
 
 Payment for present liability of future payment of gratuity is being
 made to approved Gratuity Fund, which fully covers the same under Cash
 Accumulation Policy of the Life Insurance Corporation of India.
 However, any deficit in Plan Assets managed by LIC as compared to the
 actuarial liability, determined by an appointed actuary, is recognised
 as a liability immediately.
 
 c) Superannuation
 
 Defined Contribution to Superannuation fund is being made as per the
 Scheme of the Company.
 
 d) Provident Fund Contributions are made to Companys Provident Fund
 Trust. Deficits, if any, of the fund as compared to aggregate liability
 is additionally contributed by the company and recognised as an
 expense.
 
 e) Defined Contribution to Employees Pension Scheme 1995 is made to
 Government Provident Fund Authority.
 
 10) Tax
 
 a) Provision for Tax is made for the current accounting period
 (reporting period) on the basis of the taxable profits computed in
 accordance with the Income Tax Act, 1961.
 
 b) Deferred Tax resulting from timing difference between book profits
 and taxable profits are accounted for to the extent deferred tax assets
 and liabilities are expected to crystalise with reasonable certainty.
 However, deferred tax assets, representing unabsorbed depreciation or
 carried forward losses, are recognised, if and only if there is virtual
 certainty that there would
 
 be adequate future taxable income against which such deferred tax
 assets can be realised. Deferred tax is recognised on adjustments to
 revenue reserves to the extent the adjustments are allowable as
 deductions in determination of taxable income and they would reverse
 out in future periods.
 
 11) Provisions and Contingent Liabilities
 
 The Company creates a provision when there is present obligation as a
 result of a past event that probably requires an outflow of resources
 and a reliable estimate can be made of the amount of the obligation. A
 disclosure for a contingent liability is made when there is a possible
 obligation or a present obligation that may, but probably will not,
 require an outflow of resources. When there is a possible obligation or
 a present obligation in respect of which the likelihood of outflow of
 resources is remote, no provision or disclosure is made.