(a) Basis of Accounting
 
 The financial statements are prepared under the historical cost
 convention and comply in all material aspects with the applicable
 accounting principles in India, the accounting standards notified under
 sub-section (3C) of Section 211 of the Companies Act, 1956 and the
 other relevant provisions of the Companies Act, 1956.
 
 (b) Fixed Assets and Depreciation
 
 Fixed assets are stated at cost of acquisition, including any
 attributable cost for bringing the asset to its working condition for
 its intended use, less accumulated depreciation. Interest on borrowings
 attributable to new projects is capitalised and included in the cost of
 fixed assets as appropriate.
 
 Depreciation is provided on the straight-line method over the useful
 life of the assets as under:
 
 Buildings 29 years
 
 Plant and Machinery other than Gas Installations 10 years
 
 Gas Installations 6 years
 
 Personal Computers and Laptops 3 years
 
 Other Computer Equipment 4 years
 
 Furniture and Fittings 10 years
 
 Vehicles 4 years
 
 Depreciation on capital projects of Rs.100 lakhs or more is provided
 pro-rata for the number of months availability for use and for other
 assets for the full year. Depreciation on sale / disposal of assets is
 provided pro-rata up to the end of the month of sale / disposal.
 
 An asset purchased on or after 1st April, 1993 and where the actual
 cost does not exceed Rs. 5,000 (other than on turnkey contracts) is
 depreciated at the rate of 100%.
 
 Leasehold land is not amortised.
 
 Leasehold improvements are amortised over the period of the lease.
 
 Assets identified and evaluated technically as obsolete and held for
 disposal are stated at lower of book value and estimated net realisable
 value / salvage value.
 
 (c) Investments
 
 Long term investments are stated at cost, except where there is a
 diminution in value other than temporary in which case the carrying
 value is reduced to recognise the decline. Current investments are
 stated at lower of cost and fair value. The premium on account of
 investments in debentures / bonds and Government of India Securities
 held as long-term investments is recognised over the life of the
 security.
 
 (d) Inventories
 
 Inventories are valued at lower of cost and net realisable value. Cost
 is determined on first-in first-out (FIFO) basis. The cost of
 work-in-progress (other than those lying at third party manufacturing
 sites which is valued at material cost) and finished goods comprises of
 raw materials, direct labour, other direct costs and related production
 overheads, but excludes interest expense. Net realisable value is the
 estimate of the selling price in the ordinary course of business, less
 the costs of completion and selling expenses.
 
 (e) Revenue Recognition
 
 Sales are recognised upon delivery of products and are recorded
 inclusive of excise duty but are net of trade discounts and sales tax.
 
 (f) Foreign Currency Transactions
 
 Foreign currency transactions are accounted at the exchange rates
 prevailing at the date of the transaction. Gains and losses resulting
 from the settlement of such transactions and from the translation of
 monetary assets and liabilities denominated in foreign currencies, are
 recognised in the Profit and Loss Account. Premium in respect of
 forward contracts is accounted over the period of the contract.
 
 (g) Proposed Dividend
 
 Dividend proposed by the Board of Directors is provided for in the
 books of account pending approval at the Annual General Meeting.
 
 (h) Research and Development
 
 Revenue expenditure on research and development is recognised as
 expense in the year in which it is incurred and the expenditure on
 capital assets is depreciated over the useful lives of the assets.
 
 (i) Excise Duty
 
 The excise duty in respect of closing inventory of finished goods is
 included as part of inventory. The amount of Central Value Added Tax
 (CENVAT) credits in respect of materials consumed for sales is deducted
 from cost of materials consumed.
 
 (j) Long-term Incentive
 
 In terms of a long-term incentive plan, the eligible members of the
 senior management are entitled to receive an incentive payment at the
 end of a three year ''restricted period'', provided they remain in
 continuous employment with the Company for the aforesaid period. The
 value of such incentive is based on the price of shares of
 GlaxoSmithKline plc, U.K. An amount equal to one-third of the aggregate
 approximate value of the incentive is recognised as expense each year
 based on the fair value of such shares.
 
 (k) Taxes on Income
 
 Current tax is determined as the amount of tax payable in respect of
 taxable income for the period. Deferred tax is recognised, subject to
 the consideration of prudence in respect of deferred tax assets, on
 timing differences, being the difference between taxable income and
 accounting income that originate in one period and are capable of
 reversal in one or more subsequent periods.
 
 (l) Employee Benefits
 
 (a) Long-term Employee Benefits
 
 In case of Defined Contribution plans, the Company''s contributions to
 these plans are charged to the Profit and Loss Account as incurred.
 Liability for Defined Benefit plans is provided on the basis of
 valuations, as at the Balance Sheet date, carried out by an independent
 actuary. The actuarial valuation method used for measuring the
 liability for Gratuity and Post Retirement Medical is Projected Unit
 Credit method. The obligations for Gratuity and Post Retirement Medical
 are measured as the present value of estimated future cash flows
 discounted at rates reflecting the prevailing market yields of Indian
 Government securities as at the Balance Sheet date for the estimated
 term of the obligations. The estimate of future salary increases
 considered takes into account the inflation, seniority, promotion and
 other relevant factors. The expected rate of return of plan assets is
 the Company''s expectation of the average long term rate of return
 expected on investments of the fund during the estimated term of the
 obligations. Plan assets are measured at fair value as at the Balance
 Sheet date. The actuarial valuation method, carried out by an
 independent actuary, used for measuring the liability for Provident
 Fund is Projected Accrued Benefit method. This approach determines the
 present value of the interest rate guarantee under three interest rate
 scenarios: base case scenario, rising interest rate scenario and
 falling interest rate scenario. The Defined Benefit Obligation of the
 interest rate guarantee is set equal to the average of the present
 values determined under these scenarios in respect of accumulated
 provident fund contributions as at the valuation date. The liability
 for leave encashment and compensated absences is provided on the basis
 of valuation, as at Balance Sheet date, carried out by an independent
 actuary.
 
 (b) The expenditure on voluntary retirement schemes is charged to the
 Profit and Loss Account in the year in which it is incurred.
 
 (c) Actuarial gains and losses comprise experience adjustments and the
 effects of changes in actuarial assumptions and are recognised in the
 Profit and Loss Account in the year in which they arise.