1 Method of Accounting
 
 The Financial Statements have been prepared and presented under the
 historical cost convention on accrual basis of accounting in accordance
 with the accounting principles generally accepted in India and comply
 with the mandatory Accounting standards (“AS”) issued by the Institute
 of Chartered Accountants of India to the extent applicable and with the
 relevant provisions of the Companies Act, 1956.
 
 2 Revenue Recognition
 
 A.  Work Bills
 
 (I) Construction Contract Accounting & Contract-Work-in-Progress
 
 a.  Sales/Work Bills (Gross) represent running Bills raised against
 Value of the Work done either to the extent certified and paid for by
 Contractees or on completed works as per (d) below:
 
 b.  Advances against Work in Progress received from Contractees are
 presented as a reduction from the Contract Work in Progress.
 
 c.  Retention Monies on uncompleted Contracts are presented as
 Contract-Work-in-Progress.
 
 d.  Sundry Debtors include work bills and work retention receivable on
 completed contracts.
 
 (II) Construction Contracts which commenced on or after 1st April, 1999
 
 a.  Revenue arising therefrom is recognised in proportion to the stage
 of completion of work at the end of the accounting period in accordance
 with Accounting Standard-7 (revised): Accounting for Construction
 Contracts.
 
 b.  The Percentage of Completion is applied by calculating the
 proportion that contract revenue to date bears to the total contract
 value and adjustments are made to include only those costs that reflect
 work performed.
 
 c.  Contract-Work-in-Progress includes inventories against contracts at
 Factory, Laying Sites and Civil Works and represents the value of the
 work done not certified or not paid for by Contractees and are valued
 at Contract Price or at Proportionate Contract Price based on the
 equivalent stage of completion as estimated by Management inclusive of
 relevant excise duty.
 
 d.  Provision is made for future losses and estimated costs of
 post-works maintenance and warranties as per contractual terms.
 
 B.  Sales (Other than Construction Contracts)
 
 a.  Sales of Goods - mainly consist of sale of manufactured
 pipes/sleepers and sale of Air Rifles, Air Pistols and Accessories and
 Parts and Technical Knowhow.
 
 b.  Revenue from such sales is recognised on despatches of goods from
 the factory.
 
 c.  Sales are inclusive of excise duty.
 
 3 Claims
 
 Expenditure incurred in respect of additional costs/delays on contracts
 are accounted for in the year in which these are incurred. Claims made
 in respect thereof are accounted as income in the year of acceptances
 by the clients or evidence of acceptance received from the clients.
 
 4 Export/Deemed Export Benefits
 
 Cash compensatory support or export/deemed export related benefits on
 the works executed/under execution are accounted on confirmation/
 acceptance of such claims by relevant authorities and approved for
 payment.
 
 5 Accounting for Joint Venture Contracts
 
 Contracts executed in Joint Venture, since there is no deployment of
 common resources and sharing of revenue are accounted on the basis
 similar to those adopted for contracts independently executed by the
 company.
 
 6 Fixed Assets
 
 a.  Fixed Assets are stated at cost including CENVAT wherever
 applicable, less depreciation and provision for impairment of losses,
 if any.
 
 b.  Self constructed/manufactured assets are capitalised at cost
 including appropriate overheads.
 
 7 Depreciation
 
 Depreciation on the assets has been provided on Written Down Value
 Method on pro-rata basis as per the rates prescribed in Schedule XIV to
 the Companies Act, 1956.
 
 8 Impairment
 
 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 will be recognised wherever the carrying
 amount of an asset exceeds its estimated recoverable amount. The
 recoverable amount is greater of the asset’s net selling price and
 value in use. In assessing the value in use, the estimated future cash
 flows are discounted to the present value at the weighted average cost
 of capital. After impairment, depreciation is provided on the revised
 carrying amount of the assets over its remaining useful life.
 Previously recognised impairment loss is further provided or reversed
 depending on changes in circumstances.
 
 9 Research and Development
 
 Revenue expenses on research and development are charged to Profit &
 Loss Account and Capital Expenditure are included in fixed assets under
 relevant assets and depreciated on the same basis as other fixed
 assets.
 
 10 Investments
 
 Long term investments are stated at cost less provision for decline in
 the value, other than of temporary nature. Current investments are
 valued at cost or market value whichever is lower.
 
 11 Foreign Exchange Translation and Accounting of Foreign Exchange
 Transactions
 
 a) Foreign exchange transactions are converted into Indian rupees at
 the prevailing rate on the date of the transaction.
 
 b) Gains or losses arising out of remittance/translations at the
 year-end are credited/ debited to the profit and loss account for the
 year except in cases where they relate to acquisition of fixed assets,
 in which case they are adjusted to the carrying cost of such assets.
 
 c) Current assets and current liabilities are translated at the
 exchange rate prevailing on the last day of the year.
 
 12 Inventories: Stock in Trade & Work-in-Progress
 
 a.  The stock of raw materials, stores, bought outs and fuel are valued
 at cost on FIFO basis or net realisable value whichever is lower.
 
 b.  Certain items of Pipe Laying and Auxiliary Equipments are
 classified as Current Assets and 95% of their original cost is
 amortised equally over a period of five years.
 
 c.  Finished Goods including bought-out items not allocated to any
 particular contracts are valued at lower of cost on absorption method
 (inclusive of relevant estimated excise duty) or net realisable value.
 
 d.  Work-in-Progress represents work done against Long Term
 Construction Contracts commenced before 1st April, 1999 and is valued
 at lower of cost or market value in case of inventories as per
 Accounting Standard 2 - Valuation of Inventories; application of this
 policy has been discontinued as detailed in Item 2 (A) of Significant
 Accounting Policies.
 
 e.  Goods-in-process are valued at contract rates or cost whichever is
 lower.
 
 f.  Products of the National Rifle Division at Vatva are valued as
 follows:
 
 i) The Stock of Raw Materials, Stores, Bought outs and fuel are stated
 at cost on FIFO basis or net realisable value whichever is lower.
 
 ii) Finished goods are valued at lower of cost or net realisable value
 and are inclusive of relevant estimated excise duty.
 
 13 Employee Benefits
 
 i) Defined Contribution Plan
 
 Company’s Contribution paid/payable during the year to Provident Fund,
 ESIC and Labour Welfare Fund are charged to Profit & Loss Account. In
 case there is any shortfall in the fund assets based on Government
 specified minimum rate of return of Providend Fund in respect of CEPF
 which is managed by the company, the same is reimbursed and charged to
 the Profit & Loss A/c. There are no other obligations other than the
 contribution payable to the respective trusts.
 
 ii) Defined Benefit Plan
 
 a. Gratuity and leave encashment: Company’s liabilities towards
 gratuity and leave encashment are determined using the projected unit
 credit method which considers each period of service as giving rise to
 an additional unit of benefit entitlement and measures each unit
 separately to build up the final obligation. Past Services are
 recognised on a Straight Line basis over the average
 
 period until the amended benefits becomes vested. Actuarial gain and
 losses are recognised immediately in the statement of Profit & Loss
 Account as Income or Expense. Obligation is measured at the present
 value of estimated future cash flow using a discounted rate that is
 determined by the reference to market yields at the Balance Sheet date
 on Government bonds where the currency and terms of Government Bonds
 are consistent with the currency and estimated terms of the defined
 benefit obligation.
 
 b. Provident Fund: The eligible employees of the Company are entitled
 to receive benefits under the provident fund, a defined contribution
 plan, in which both employees and the company make monthly
 contributions at a specified percentage of the covered employees salary
 (currently 12% of employees salary). The contributions as specified
 under law paid to provident fund and pension fund set up as
 irrecoverable trust by the Company or to respective Regional Provident
 Fund Commissioner and the Central Provident Fund under the State
 Pension Scheme. The Company is generally liable for annual
 contributions and any shortfall in the fund assets based on government
 specified minimum rates of return of provident fund and recognises such
 contributions and shortfall, if any, as an expense in the year
 incurred.
 
 iii) Other Benefits : Compensated absences for sick leave are provided
 for based on actuarial valuation.The actuarial valuation is done as per
 projected unit credit method.
 
 14 Taxation
 
 Income Tax expenses comprise of current tax, deferred tax
 charge/credit. Current Tax is recognised on the basis of taxable income
 determined in accordance with the provision of the Income Tax Act,
 1961.
 
 The deferred tax credit/charge is recognised on all timing differences
 subject to consideration of prudence, applying the tax rates that have
 been enacted or substantively enacted by the Balance Sheet date.
 Deferred tax assets are recognised only to the extent there is
 reasonable certainty that the assets can be realised in future; however
 where there is unabsorbed depreciation or carried forward loss under
 taxation laws, deferred tax assets are recognised only if there is a
 virtual certainty of realisation of such assets. Deferred tax
 assets/liabilities are reviewed as at each balance sheet date based on
 developments during the year and available case law to re-assess
 realisation/liabilities.
 
 15 Leases
 
 Lease rentals in respect of assets acquired under operating lease are
 charged to Profit and Loss Account.
 
 16 Earning per Share
 
 In determining operating and total earnings per share, the Company
 considers the operating net profit after tax and effect of any extra
 ordinary items (net of tax). The number of shares used in the computing
 basic earning per share is the weighted average number of shares
 outstanding during the period.
 
 17 Management Estimates
 
 The Financial Statements are prepared in conformity with generally
 accepted accounting principles and applicable accounting standards,
 which may require management to make estimates and assumptions. These
 may affect the reported amount of assets and liabilities and
 disclosures of contingent liabilities on the date of the financial
 statements and the reported amount of revenues and expenses during the
 reporting periods.
 
 18 Contingencies and Provisions
 
 A provision is recognised when the Company has a present obligation as
 a result of past event and it is probable that an outflow of resources
 embodying economic benefit will be required to settle the obligation in
 respect of which a reliable estimate can be made. Provisions are not
 discounted to their present value and are determined based on the best
 estimate of the expenditure 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 estimate.
 
 A contingent liability is disclosed, unless the possibility of an
 outflow of resources embodying the economic benefit is remote.
 
 Contingent liabilities are disclosed after careful evaluation of the
 facts and legal aspects of matter involved.
 
 Contingent assets are neither recognised nor disclosed.