1.01 Basis of preparation of financial statements
 
 a) The financial statements have been prepared to comply in all
 material respects with the mandatory Accounting Standards notified
 under Companies (Accounting Standards) Rules, 2006 and the relevant
 provisions of the Companies Act, 1956.
 
 b) The Company follows mercantile system of accounting and recognizes
 income & expenditure on an accrual basis except those with significant
 uncertainties.
 
 c) The accounting policies applied by the Company are consistent with
 those used in the previous year.
 
 1.02 Use of estimates
 
 Estimates and assumptions used in the preparation of the financial
 statements are based on managements evaluation of the relevant facts
 and circumstances as of date of the financial statements, which may
 differ from the actual results at a subsequent date.
 
 1.03 Fixed Assets
 
 Fixed assets are stated at original cost less accumulated depreciation.
 Cost comprises the purchase price and any other attributable cost of
 bringing the asset to its working condition for its intended use.
 Financing costs relating to acquisition of qualifying fixed assets are
 also included to the extent they relate to the period till such assets
 are ready to be put to use. Cenvat / other credits availed have been
 deducted from the cost of respective assets.
 
 1.04 Depreciation and Amortisation
 
 a) Depreciation on the fixed assets of the casting division at Solapur,
 acquired under the Slump Sale Agreement entered into with Kirloskar
 Oil Engines Ltd, is provided on straight line method over the remaining
 useful life of the asset ranging from 1 year to 18 years.
 
 b) In respect of the plant and machinery acquired from Kirloskar Oil
 Engines Ltd, depreciation is provided on straight line method over the
 remaining useful life of the asset ranging from 5 years to 9 years.
 
 c) Mining Rights are amortised over 11 years being the period of lease.
 
 d) On all other fixed assets, depreciation is provided on straight line
 method in the manner and at the rates specified in Schedule-XIV to the
 Companies Act, 1956.
 
 1.05 Investments
 
 Investments that are readily realizable and intended to be held for not
 more than a year are classified as current investments. All other
 investments are classified as long term investments.
 
 a) Current Investments are carried at lower of cost and fair value
 determined on an individual investment basis.
 
 b) Long-term investments are carried at cost. However, provision for
 diminution in value is made to recognize a decline other than temporary
 in the value of investments.
 
 1.06 Inventories
 
 a) Raw Materials, Stores and Spares are valued at lower of cost and net
 realizable value. Rates are determined on Weighted Average Cost
 formula.
 
 b) Work in process and finished goods other than by-product are valued
 at lower of cost and net realizable value. Cost is arrived at by
 absorption cost method.
 
 c) By-products are valued at net realizable value.  {
 
 1.07 Foreign Currency Transactions
 
 a) Initial Recognition: Transactions denominated in foreign currencies
 are recorded at the exchange rates prevailing on the date of the
 transaction.
 
 b) Conversion: At the year end, monetary items denominated in foreign
 currencies other than those covered by forward contracts are converted
 into rupee equivalents at the year-end exchange rates.
 
 c) Forward Exchange Contracts: In respect of transactions covered by
 forward exchange contracts, the difference between the forward rate and
 the exchange rate at the date of the transaction is recognized as
 income or expense over the period of the contract.
 
 d) Exchange Differences: All exchange differences arising on
 settlement/conversion of foreign currency transactions are recognised
 in the Profit and Loss Account.
 
 1.08 Revenue Recognition
 
 Revenue from sale of goods is recognized when the significant risks and
 rewards of ownership of the goods have passed to the customer, which
 generally coincides with their delivery to customers. Sales are stated
 net of discounts, rebates and returns.
 
 1.09 Borrowing Costs
 
 Borrowing costs are charged to Profit and Loss account except in cases
 where the borrowings are directly attributable to the acquisition,
 construction or production of a asset.
 
 1.10 Excise Duty
 
 Excise Duty in respect of goods manufactured by the Company is
 accounted on accrual basis.
 
 1.11 Employee Benefits
 
 a) Short Term Employee Benefits:
 
 All employee benefits payable within twelve months of rendering of
 services are classified as short term benefits. Such benefits include
 salaries, wages, bonus, short term compensated absences, awards,
 exgratia, performance pay etc., and the same are recognized in the
 period in which the employee renders the related service.
 
 b) Post Employment Benefits:
 
 i) Defined Contribution Plan:
 
 The Companys approved Superannuation Scheme, Central Government
 Provident Fund Scheme, are defined contribution plans. The contribution
 paid / payable under the schemes are recognized during the period in
 which the employee renders the related service.
 
 ii) Defined Benefit Plans:
 
 The employees gratuity fund scheme, long term compensated absences are
 Companys defined benefit plans. The present value of the obligation
 under such defined benefit plans is determined based on the actuarial
 valuation using the Projected Unit Credit Method as at the date of the
 Balance Sheet. In case of funded plans, the fair value of plan asset is
 reduced from the gross obligation under the defined benefit plans, to
 recognize the obligation on net basis.
 
 1.12 Taxes on Income
 
 a) Deferred tax is recognized on timing differences between the
 accounting income and the taxable income for the year. The tax effect
 is calculated on the accumulated timing differences at the end of
 accounting period based on prevailing enacted or subsequently enacted
 regulations.
 
 b) Provision for current tax is made on the basis of the taxable
 profits computed for the current accounting period in accordance with
 Income Tax Act, 1961.
 
 c) Advance taxes and provisions for current Income Tax are presented in
 the Balance Sheet after
 
 off-setting advance taxes paid and Income Tax provision arising in the
 same tax jurisdiction and the Company intends to settle the assets and
 liabilities on a net basis.
 
 1.13 Research and Development Expenses
 
 Revenue expenditure on the Research and Development is charged off as
 expense in the year in which incurred. Capital expenditure is grouped
 with Fixed Assets under appropriate heads and depreciation is provided
 as per the rates applicable.
 
 1.14 Earnings Per Share
 
 Earnings per share is calculated by dividing the net profit or loss for
 the year after prior period adjustments attributable to equity
 shareholders by the weighted average number of equity shares
 outstanding during the year.