1.1 Basis of preparation of financial statements
The financial statements have been prepared and presented under the
historical cost convention on the accrual basis of accounting and
comply with the Accounting Standards (AS) issued by the Companies
(Accounting Standard) Rules , 2006 and the relevant provisions of the
Companies Act, 1956, to the extent applicable. The financial statements
are presented in Indian rupees rounded off to the nearest lacs.
This is the first year of application of the revised Schedule VI to the
Companies Act, 1956 for the preparation of the financial statements of
the company. The revised Schedule VI introduces some significant
conceptual changes as well as new disclosures. These include
classification of all assets and liabilities into current and
non-current. The previous year figures have also undergone a major
reclassification to comply with the requirements of the revised
1.2 Accounting estimates
The preparation of financial statements in conformity with the
generally accepted accounting principles in India (Indian GAAP)
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent liabilities on the date of the financial statements. Actual
results could differ from those estimates. Any revision to accounting
estimates is prospectively recognised in current and future periods.
1.3 Current-non-current classification
All assets and liabilities are classified into current and non-current.
An asset is classified as current when it satisfies any of the
(a) it is expected to be realised in, or is intended for sale or
consumption in, the company's normal operating cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is expected to be realised within 12 months after the reporting
(d) it is cash or cash equivalent unless it is restricted from being
exchanged or used to settle a liability for at least 12 months after
the reporting date.
Current assets include the current portion of non-current financial
assets. All other assets are classified as non-current
A liability is classified as current when it satisfies any of
the following criteria:
(a) it is expected to be settled in the company's normal operating
(b) it is held primarily for the purpose of being traded;
(c) it is due to be settled within 12 months after the reporting date;
(d) the company does not have an unconditional right to defer
settlement of the liability for at least 12 months after the reporting
date. Terms of a liability that could, at the option of the
counterparty, result in its settlement by the issue of equity
instruments do not affect its classification.
Current liabilities include current portion of non-current financial
liabilities. All other liabilities are classified as non-current.
Operating cycle is the time between the acquisition of assets for
processing and their realization in cash or cash equivalents. The
Company's operating cycle is less than 12 months.
1.4 Fixed assets and depreciation
Fixed assets are stated at cost less accumulated depreciation. The cost
of fixed assets includes non refundable taxes and duties, freight and
other incidental expenses related to the acquisition and installation
of the respective assets. Depreciation on fixed assets is provided on
the straight line method, in the manner and as per the rates specified
in Schedule XIV to the Companies Act, 1956 or estimated useful life of
an asset whichever is higher, except for assets costing Rs. 5,000 or
less, which are depreciated fully in the year of purchase. Leasehold
land is amortised over the remaining period of the lease. Rates of
depreciation are as follows:
1.5 Intangible assets and amortization
Intangible assets are recognized when the asset is identifiable, is
within the control of the Company, it is probable that the future
economic benefits that are attributable to the asset will flow to the
Company and cost of the asset can be reliably measured. Intangible
assets are recorded at their acquisition price and are amortised over
their estimated useful lives on a straight line basis, commencing from
the date the assets are available for use. The useful life of the
intangible assets is reviewed by the management at each Balance Sheet
date. Rates of depreciation are as follows:
1.6 Impairment of assets
In accordance with AS 28-lmpairment of Assets, the carrying amounts of
the Company's assets including intangible assets are reviewed at each
Balance Sheet date to determine whether there is any indication of
impairment. If any such indication exists, the assets recoverable
amount is estimated, as the higher of the net selling price and the
value in use. An impairment loss is recognized whenever the carrying
amount of an asset exceeds its recoverable amount. If at the Balance
Sheet date, there is an indication that a previously assessed
impairment loss no longer exists, the recoverable amount is reassessed
and the asset is assessed at the recoverable amount subject to a
maximum of depreciable historical cost.
Investments that are readily realizable and intended to be held for not
more than twelve months are classified as current investments. All
other investments are classified as long term investments. However,
that part of long term investments which is expected to be realized
within 12 months after the reporting date is also presented under
'current assets' as current portion of long term investments in
consonance with the current-non-current classification scheme of
revised Schedule VI.
Long term investments (including current portion thereof) are stated at
cost less any other- than- temporary diminution in value, determined
separately for each individual investment. Current investments are
carried at lower of cost and fair value. The comparison of cost and
fair value is done separately in respect of each category of
Inventories are stated at lower of cost and net realizable value.
The cost is determined on the basis of Weighted Average method and
includes expenditure in acquiring the inventories and bringing them to
their existing location and condition. Materials-in-transit are stated
at purchase cost.
In the case of manufactured inventories, cost includes an appropriate
share of production overheads. Finished goods inventory includes excise
Net realizable value is the estimated net sales realization in the
ordinary course of business. The comparison of cost and net realizable
value is made on an item-by-item basis.
The net realizable value of work-in-progress is determined with
reference to the net sales realization of related finished goods.
Raw materials and other supplies held for use in production of finished
goods are not written down below cost, except in cases where the
material prices have declined and it is estimated that the cost of the
finished goods will exceed their net realizable value. In such cases,
the materials are valued at the lower of replacement cost or ultimate
net realizable value.
1.9 Revenue recognition
Revenue from sale of goods is recognised on transfer of all significant
risks and rewards of ownership to the buyer which is at the point of
shipment or dispatch of goods. Sales are accounted net of amounts
recovered towards sales tax and trade discounts.
Export incentives receivable are accrued for when the right to receive
the credit is established and there is no significant uncertainty
regarding the ultimate collection of export proceeds.
Interest income is recognised on a time proportion basis. Dividend
income from investments is recognised when an unconditional right to
receive payment is established.
1.10 Employee benefits
(a) Short term employee benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short term employee benefits and are
recognised in the period in which the employee renders the related
(b) Post-employment benefits
(i) Defined contribution plans: The Company's superannuation scheme and
state governed provident fund scheme are defined contribution plans.
The contribution paid/payable under the schemes is recognized during
the period in which the employee renders the related service.
(ii) Defined Benefit Plans: The employees' gratuity fund scheme and
cash rewards at the time of retirement are the Company's defined
benefit plans. The present value of the obligation under each defined
benefit plan is determined based on actuarial valuation at each Balance
Sheet date using the Projected Unit Credit Method, which recognises
each period of service as giving rise to additional unit of employee
benefit entitlement and measures each unit separately to build up the
The obligation is measured at the present value of the estimated future
cash flows. The discount rate used for determining the present value of
the obligation under defined benefit plans are based on the market
yields on Government securities as at the Balance Sheet date, having
maturity periods approximating to the terms of related obligations.
Gains or losses on the curtailment or settlement of any defined benefit
plan are recognised when the curtailment or settlement occurs. Past
service cost is recognised as expense on a straight-line basis over the
average period until the benefits become vested. To the extent the
benefits vests immediately, the expense is recognized immediately in
the Statement of Profit and Loss. Actuarial gains and losses are
recognised immediately in the Statement of Profit and Loss.
(c) Long term employee benefits
The obligation for long term employee benefits such as long term
compensated absences, long service awards etc. is recognised in the
same manner as in the case of defined benefit plans as mentioned in (b)
When the benefits of a plan are improved, the portion of increased
benefit relating to past service by employees is recognized immediately
in the Statement of Profit and Loss.
1.11 Foreign exchange transactions
Foreign currency transactions are recorded at the rate of exchange
prevailing on the date of the transaction. Monetary foreign currency
assets and liabilities remaining unsettled at the Balance Sheet date
are translated at the rates of exchange prevailing on that date. Gains
/ losses arising on account of such translation and subsequent
realization/settlement of foreign exchange transactions are recognized
in the Statement of Profit and Loss.
Aforeign currency monetary item is classified as long-term if it has
original maturity of one year or more.
1.12 Taxes on Income
Income tax expense comprises current tax (i.e. amount of tax for the
period determined in accordance with the income-tax law) and deferred
tax charge or credit (reflecting the tax effects of timing differences
between accounting income and taxable income for the period).
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the Balance Sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that the assets can be realised in future; however, where
there is unabsorbed depreciation or carried forward losses under
taxation laws, deferred tax assets are recognised only if there is a
virtual certainty of realisation of such assets. Deferred tax assets
are reviewed at each Balance Sheet date and written down or written-up
to reflect the amount that is reasonably/virtually certain (as the case
may be) to be realized.
1.13 Earnings per Share ('EPS')
The basic EPS is computed by dividing the net profit attributable to
the equity shareholders for the year by the weighted average number of
equity shares outstanding during the year.
Diluted EPS is computed using the weighted average number of equity and
dilutive equity equivalent shares outstanding during the year except
where the results would be anti dilutive.
1.14 Provisions and Contingencies
A provision is recognised when there is 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. These are reviewed at each Balance
Sheet date and adjusted to reflect the current best estimate. The
provisions are measured on an undiscounted basis.
Provision in respect of loss contingencies relating to claims,
litigation, assessment, fines, penalties, etc. are recognised when it
is probable that a liability has been incurred, and the amount can be
1.15 Contingent Liabilities and Contingent Assets
A contingent liability exists when there is a possible but not probable
obligation, or a present obligation that may, but probably will not,
require an outflow of resources, or a present obligation whose amount
cannot be estimated reliably. Contingent liabilities do not warrant
provisions, but are disclosed unless the possibility of outflow of
resources is remote. Contingent assets are neither recognised nor
disclosed in the financial statements. However, contingent assets are
assessed continually and if it is virtually certain that an inflow of
economic benefits will arise, the asset and related income are
recognised in the period in which the change occurs.
Leases of assets under which all the risks and rewards of ownership are
effectively retained by the lessor are classified as operating leases.
Lease payments under operating lease are recognised as an expense in
the Statement of Profit and Loss on a straight- line basis over the
lease term. Lease income under operating lease is recognised in the
Statement of Profit and Loss on a straight- line basis over the lease