Basis of preparation
 
 These financial statements have been prepared in accordance with the
 generally accepted accounting principles in India under the historical
 cost convention on accrual basis. These financial statements have been
 prepared to comply in all material aspects with the accounting
 standards notified under Section 211(3C) [Companies (Accounting
 Standards) Rules, 2006, as amended] and the other relevant provisions
 of the Companies Act, 1956.
 
 All assets and liabilities have been classified as current or
 non-current as per the Company''s normal operating cycle and other
 criteria set out in the Revised Schedule VI to the Companies Act, 1956.
 Based on the nature of products and the time between the acquisition of
 assets for processing and their realization in cash and cash
 equivalents, the Company has ascertained its operating cycle as 12
 months for the purpose of current - non current classification of
 assets and liabilities.
 
 1] SYSTEM OF ACCOUNTING :
 
 i) The Company generally follows the mercantile system of accounting
 and recognizes income and expenditure on an accrual basis except those
 with significant uncertainties.
 
 ii) Financial statements are based on historical cost. These costs are
 not adjusted to reflect the impact of the changing value in the
 purchasing power of money.
 
 iii) The preparation of financial statements in conformity with
 generally accepted accounting principles requires management to make
 estimates and assumption that affect the reported amounts of assets,
 liabilities, revenue and expenses and disclosure of contingent assets
 and liabilities. The estimates and assumptions used in the accompanying
 financial statements are based upon management''s evaluation of the
 relevant facts and circumstances as of the date of the financial
 statements. Actual results may differ from the estimates and
 assumptions used in preparing the accompanying financial statements.
 Any reservations to accounting estimates are recognized prospectively
 in current and future periods.
 
 2] FIXED ASSETS AND DEPRECIATION :
 
 A.  FIXED ASSETS :
 
 Fixed Assets are carried at cost of acquisition (including cost of
 specific borrowings up to date of installation) or construction, less
 accumulated depreciation (except freehold land) and amortization (of
 cost of acquisition). In respect of projects implemented by the
 Company, fixed assets include all duties, non-refundable taxes, levies
 and costs incurred (which are directly attributable) for bringing
 assets into working condition for its intended use, including expenses
 during construction period, trial period etc.
 
 B.  DEPRECIATION :
 
 a) LEASEHOLD LAND AND POWER LINE :
 
 Cost of leasehold land is amortized over the period of lease and
 expenditures on power line is amortized over a period of ten years.
 
 b) OTHER FIXED ASSETS :
 
 Depreciation on additions to assets up to 31st August, 1987 is being
 provided on Straight Line Method pursuant to Circular No.1/1/1986-CLB
 No.15(50)84 CL-VI dt. 21.5.86 issued by the Department of Company
 Affairs in accordance with the provisions of Section 205(2)(b) of the
 Companies Act, 1956, at the rates (inclusive of multiple shift
 allowance) applicable under the Income Tax Rules in force at the time
 of acquisition / installation of the assets and depreciation on
 additions on and after 1st September, 1987 is provided on Straight
 Line Method in accordance with Schedule XIV to the Companies Act, 1956
 as amended from time to time, from the beginning of the month in which
 addition is made except if the life of any asset is less than that
 computed with reference to the rates prescribed under Schedule XIV of
 the Companies Act, 1956, the same is written off over the economic life
 of the asset.
 
 c) Depreciation on sale / deduction from Fixed Assets is provided for
 upto the month of sale, deduction, discernment as the case may be.
 
 3] FOREIGN CURRENCY TRANSACTIONS :
 
 Foreign Currency transactions are initially recorded at exchange rates
 prevailing on transaction dates. All foreign currency loans, current
 assets and current liabilities outstanding on the date of Balance Sheet
 are converted at the appropriate rates of exchange prevailing on the
 date of the Balance Sheet except those covered by forward contracts if
 any, which are accounted for at the contracted rate representing the
 amount required to meet the liability. Exchange difference arising from
 foreign currency fluctuations are dealt with in the Statement of Profit
 and Loss.
 
 Derivative instrument to hedge foreign exchange exposures are simulated
 for maturity / closure at the close of the year. Losses arising on such
 simulation on account of fluctuations in exchange rates during the
 reporting period are recognized in the Statement of Profit and Loss.
 Gains, if any, are postponed for a reorganization on final
 determination.
 
 4] TECHNICAL KNOW-HOW :
 
 Expenditure on technical know-how in connection with production
 facilities is capitalized to the cost of the plant whereas process
 know-how is amortized over a period of six years in equal installments.
 
 5] INVESTMENTS :
 
 Investments are valued at cost of acquisition less diminution in the
 value, if determined to be of a permanent nature in respect of long
 term investments. Current investments are valued at cost of acquisition
 less diminution in the value at the close of the year, if realizable
 value is lower than carrying cost.
 
 6] INVENTORY VALUATION :
 
 Costs of inventories have been computed to include all costs of
 purchase, costs of conversion and other costs incurred in bringing the
 inventories to their present location and condition.
 
 A.  Finished goods and materials in process :
 
 a) Finished goods and materials in process are stated at their cost or
 market / realizable value, whichever is lower.
 
 b) Cost of finished goods (including trial run product) includes all
 allocable overheads and excise duties but excludes interest.
 
 B.  Raw Materials :
 
 Raw materials are stated at their historical costs computed at the
 weighted average price.
 
 C.  Stores & Spares :
 
 Stores and spares are valued at their weighted average prices.
 
 D.  Scrap is valued at estimated realizable value.
 
 E.  Raw Material in transit is stated at actual cost up to the date of
 Balance Sheet.
 
 7] DEBENTURE / SHARE ISSUE EXPENSES :
 
 a) Debenture Issue Expenses :
 
 Debenture issue expenses incurred in respect of debentures raised by
 the Company will be written off against the balance in the Securities
 Premium Account in accordance with Section 78 of the Companies Act,
 1956 and in the event of inadequacy of balance in Securities Premium
 Account the same will be written off against the profits of the
 Company in equal annual installments over period of ten years or over
 the tenure of the Debenture whichever is less, from the date of
 commencement of commercial production of the concerned project for
 which they have been raised.
 
 b) Share Issue Expenses :
 
 Share Issue Expenses incurred in respect of shares raised by the
 Company will be written off from the date of allotment against the
 balance in the Securities Premium Account in accordance with Section
 78 of the Companies Act, 1956 and in the event of inadequacy of balance
 in Securities Premium Account the same will be written off in ten
 equal annual installments against the profits of the respective years.
 
 8] PREMIUM ON REDEMPTION OF DEBENTURES :
 
 From the year ended 31st March, 1992 onwards, premium payable on
 redemption of debentures will be provided for against balance lying in
 the Securities Premium Account on the date of redemption in
 accordance with Section 78 of the Companies Act, 1956. In the event of
 inadequacy of balance in the Securities Premium Account, the same
 will be provided for against the profits equally over the tenure of the
 debentures.
 
 9] A. SALES :
 
 i) Domestic sales are accounted for when dispatched from the point of
 sale, consequent to property in goods being transferred.
 
 ii) Export sales for exports are accounted on the basis of date of Bill
 of Lading.
 
 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 are fulfilled.
 
 C.  Interest is accrued over the period of loan / investment.
 
 D.  Dividend is accrued in the year in which it is declared, whereby
 right to receive is established.
 
 E.  Profit / Loss on sale of investment are recognized on contract
 date.
 
 10] EMPLOYEE BENEFITS :
 
 a) Provident Fund :
 
 Benefits in the form of Provident Fund and Pension Schemes whether in
 pursuance of law or otherwise which are defined contributions is
 accounted on accrual basis and charged to the Statement of Profit and
 Loss of the year. Provident Fund Contributions are made to the
 Company''s Provident Fund Trust. Deficits, if any, of the fund as
 compared to actuarial liability is to be additionally contributed by
 the company and hence recognized as a liability.
 
 b) Gratuity :
 
 Payment for present liability of future payment of gratuity is being
 made to approved gratuity funds which fully covers the same under Cash
 Accumulation Policy of the Life Insurance Corporation of India. The
 employee''s gratuity is a defined benefit plan is determined based on
 the actuarial valuation using the Projected Unit Credit Method as at
 the date of the Balance Sheet and the shortfall in the fair value of
 the plan assets is recognized as obligation.
 
 c) Superannuation :
 
 Defined contributions to Life Insurance Corporation of India for
 employees covered under superannuation scheme are accounted at the rate
 of 15% of such employee''s annual salary.
 
 d) Privilege Leave Benefits :
 
 Privilege leave benefits or compensated absences are considered as long
 term unfunded benefit and is recognized on the basis of an actuarial
 valuation using the Projected Unit Credit Method determined by an
 appointed Actuary.
 
 e) Termination Benefits :
 
 Termination benefits such as compensation under voluntary retirement
 scheme are recognized as a liability in the year of termination.
 
 11] RESEARCH AND DEVELOPMENT EXPENDITURE :
 
 Research and Development expenditure is charged to revenue under the
 natural heads of account in the year in which it is incurred. 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.
 
 12] STRATEGIC ALLIANCE AT GINIGERA :
 
 The expenses incurred by the Joint Venture Company viz. Hospet Steels
 Limited, formed with the specific purpose of managing and operating the
 composite Steel manufacturing facility at Ginigera, in the course of
 carrying out its objectives are, as agreed upon, to be shared by the
 alliance components in the pre-determined mutually agreed ''sharing
 ratio''. Such expenses billed for reimbursement by Hospet Steels Limited
 have been booked into their natural heads of accounts and presented as
 such in the accounts.
 
 13] BORROWING COST :
 
 Borrowing costs are recognized in the Statement of Profit and Loss
 except interest incurred on borrowings, specifically raised for
 projects are capitalized to the cost of the asset until such time that
 the asset is ready to be put to use for its intended purpose.
 
 14] TAXATION :
 
 Provision for Taxation is made on the basis of the taxable profits
 computed for the current accounting period in accordance with the
 Income Tax Act, 1961. Deferred tax resulting from timing difference
 between book profits and tax profits is accounted for at the applicable
 rate of tax to the extent the timing differences are expected to
 crystallize, in case of deferred tax liabilities with reasonable
 certainty and in case of deferred tax assets with virtual certainty
 that there would be adequate future taxable income against which
 deferred tax assets can be realized.
 
 15] IMPAIRMENT OF ASSETS :
 
 The Company tests for impairments at the close of the accounting period
 if and only if there are indicators that suggest a possible reduction
 in the recoverable value of an asset. If the recoverable value of
 asset, i.e. the net realizable value or the economic value in use of a
 cash generating unit is lower than the carrying amount of the asset,
 the difference is provided for as impairment. However, if subsequently
 the position reverses and the recoverable amount becomes higher than
 the then carrying value, the provision to the extent of the then
 difference is reversed, but not higher than the amount provided for.
 
 16] PROVISIONS :
 
 Necessary provisions are made for present obligations that arise out of
 past events prior to the Balance Sheet date entailing future outflow of
 economic resources. Such provisions reflect best estimates based on
 available information.