The financial statements are prepared to comply in all material aspects
with the applicable accounting principles in India, the Accounting
Standards notified by the Companies (Accounting Standard) Rule 2006 and
the relevant provisions of the Companies Act, 1956. The significant
accounting policies are as follows
A. Basis of Accounting
The financial statements are prepared in accordance with the historical
B. Use of Estimates
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, disclosure of contingent amounts as at the date of the
financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates. Any revision to accounting estimates is recognized
prospectively when revised.
C. Fixed Assets / Capital Work in Progress
Expenditure, which is of capital nature, is capitalized. Such
expenditure includes purchase price, import duties, levies and
attributable cost of bringing the asset to its operating condition. The
assets acquired on Hire Purchase basis have been capitalized at the
gross value and interest thereon is charged to Statement of profit and
loss. Projects under commissioning and other Capital Work-in-Progress
are carried at costs; comprising direct cost, related incidental
expenses and interest on borrowings.
D. Depreciation / Amortization
I. Tangible Assets
Depreciation has been calculated in accordance with Section 205(2) (b)
of the Companies Act, 1956, as under:
a. The depreciation is provided from the date the assets are put to
use, on straight-line method at the rates prescribed under Schedule XIV
of the Companies Act, 1956, except following assets which are
depreciated over period of its estimated useful life:
b. The Company provides 100% depreciation on fixed assets with value
less than or equal to Rs. 0.05 lakhs as per the provisions of Schedule
XIV of the Companies Act 1956.
c. Leasehold Improvements are amortized over the primary lease period.
II. Intangible Assets
a. These are amortized over their useful life, not exceeding five
b. Deferred Revenue Expenditure is written off in the year of
III. Leasehold land, which are given by Central / State Government
authorities are not amortized in view of the long tenure of the lease.
Long term investments are stated at cost less permanent diminution in
value, if any.
F. Valuation of Inventories
Raw Materials, Stock in Process, Stores and Spares are valued at cost
and net of credits under the scheme of Cenvat Rules and VAT Rules.
Finished goods are valued at cost or Market Value / Contract Price,
whichever is less. Cost is determined on a weighted average basis.
Excise duty is included in the value of finished goods.
G. Revenue Recognition
I. Sales are inclusive of Excise Duty, Duty Drawback but net of Sales
Tax, Vat, Returns, Trade Discounts and incentives.
II. Revenue from long term contracts are recognized on the percentage
of completion method, in proportion that the contract costs incurred
for work performed up to the reporting date bear to the estimated total
contract costs. Contract revenue earned in excess of billing has been
reflected under Other Current Assets and billing in excess of
contract revenue has been reflected under Current Liabilities in
the balance sheet. Full provision is made for any loss in the year in
which it is first foreseen.
III. Dividend Income is recognized when the right to receive dividend
is established. Interest Income is recognized on time proportion basis.
H. Foreign Exchange Transactions
Foreign Currency transactions are recorded at exchange rates prevailing
on the date of respective transactions. Monetary assets and liabilities
related to foreign currency transactions remaining unsettled at the end
of the year are translated at year-end rates. Non-monitory foreign
currency items are carried at cost. The differences in translation of
monetary assets and liabilities and realized gains and losses on
foreign exchange transactions are recognized in the Statement of profit
and loss, except in case of long term liabilities, where they relate to
acquisition of fixed assets, in which case they are adjusted in
carrying cost of fixed assets.
The Company uses derivative financial instruments such as forward
exchange contracts to hedge its risks associated with foreign currency
Gain or loss on restatement of forward exchange contracts for hedging
underlying outstanding at the balance sheet date are recognized in the
statement of profit and loss for the year in which it occurs. The
premium or discount on such contracts is recognized in the statement of
profit and loss over the period of the contract.
Gain or loss on fair valuation of forward exchange contracts and
embedded derivative contracts for hedging highly forecasted transaction
are recognized in the statement of profit and loss for the year in
which it occurs.
I. Derivative instruments (Commodity derivatives)
In order to hedge its exposure to commodity price risk, the Company
enters into non speculative hedges, such as forward, option or swap
contracts and other appropriate derivative instruments. These
instruments are used only for the purpose of managing the exposure to
commodity price risk and not for speculative purposes. The premium and
gains / losses arising from settled derivative contracts, and mark to
market (MTM) losses in respect of outstanding derivative contracts as
at balance sheet date are credited for gains or charged for losses to
the raw material consumed in so far as it relates to the derivative
instruments taken to hedge risk of movement in price of Raw Material,
the net MTM gains in respect of outstanding derivatives contracts are
not recognized on conservative basis.
J. Export Obligations / Entitlements / Incentives
Benefit / (Obligation) on account of entitlement on export or deemed
export orders, to import duty-free raw materials, under the various
Exim Schemes are estimated and accounted in the year in which the
export / deemed export orders are executed.
K. Employee Benefits
Short term employee benefits are recognized as an expense at
un-discounted amount in the statement of profit and loss of the year in
which services are rendered. Provision for gratuity and other long term
employee benefits-leave, defined benefit schemes, are made on the basis
of actuarial valuations made at the end of each financial year are
charged to the statement of profit and loss during the year.
Actuarial gains and losses are recognized immediately in the statement
of profit and loss.
L. Operating Lease
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
M. Stock Based Compensation
In accordance with the Employee Stock Option Scheme (ESOS), the Company
recognizes the excess, if any, of the market price of the options
granted as on the date of the grant over the exercise price of the
options, and amortizes it on a straight-line basis over the vesting
a. Provision for Income Tax is made under the liability method after
availing exemptions and deductions at the rates applicable under the
Income Tax Act, 1961.
b. Deferred tax resulting from timing difference between book and tax
profits is accounted for using the tax rates and laws
that have been enacted as on the Balance Sheet Date.
c. Deferred tax assets arising on the temporary timing differences are
recognized only if there is reasonable certainty of realization.
O. Impairment of Assets
The carrying amount of assets is reviewed periodically for 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 value in use. In assessing value in
use, the estimated future cash flows are discounted to their present
value at the weighted average cost of capital. Post impairment,
depreciation is provided on the revised carrying value of the asset
over its remaining useful life.
P. Borrowing Costs
Interest and other costs in connection with the borrowing of the funds
to the extent related / attributed to the acquisition / construction of
qualifying fixed assets are capitalized up to the date when such assets
are ready for its intended use and other borrowing costs are charged to
the Statement of Profit and Loss.
Q. Provisions for contingencies
A provision is recognized when:
- The Company has a present obligation as a result of a past event;
- It is probable that an outflow of resources embodying economic
benefits which will be required to settle the obligation; 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. Where there is a possible
obligation or a present obligation that the likelihood of outflow of
resources is remote, no provision or disclosure is made.
The Company provides for warranty cost based on a technical estimate of
the costs required to be incurred for repairs, replacement, material
cost, servicing and past experience in respect of warranty costs. It is
expected that this expenditure will be incurred over the contractual
R. Research and Development
All revenue expenses pertaining to research are charged to the
statement of profit and loss in the year in which they are incurred and
development expenditure of capital nature is capitalized as fixed
assets and depreciated as per the Company''s policy.
In the Extra Ordinary General Meeting of the Members of the Company
held on 22nd June 2009, the members had approved the issuance of
warrants to the Promoter / Promoter Group, entitling the warrant
holders to apply from time to time for equity shares of the company in
one or more tranches on preferential basis not exceeding 63,00,000
fully paid-up equity shares of the face value of Rs. 2 each. During the
year, One of the Promoter has applied for conversion of balance Nil
(32,10,000) warrants applied in previous year into equivalent number of
equity shares and the company has allotted Nil (32,10,000) equity
shares to One of the Promoter @ Rs. Nil (Rs. 62) per shares (including
premium of Rs. Nil (Rs. 60) per share).