(A) Basis of Accounting :
 
 The financial statements are prepared in accordance with the generally
 accepted accounting principles in India and comply with the Accounting
 Standards notified under sub-section (3C) of Section 211 of the
 Companies Act, 1956 and the relevant provisions thereof.
 
 (B) Tangible Assets :
 
 (a) (i) Tangible assets are carried at cost less depreciation except as
 stated in 
 
 (ii) below. Cost includes financing cost relating to borrowed funds
 attributable to the construction or acquisition of qualifying tangible
 assets upto the date the assets are ready for use. Where the
 acquisition of depreciable tangible assets are financed through long
 term foreign currency loans (having a term of 12 months or more at the
 time of their origination) the exchange differences on such loans are
 added to or subtracted from the cost of such depreciable tangible
 assets.
 
 When an asset is scrapped or otherwise disposed off, the cost and
 related depreciation are removed from the books of account and
 resultant profit (including capital profit) or loss, if any, is
 reflected in the Statement of Profit and Loss.
 
 (ii) Land and Buildings, had been revalued as at 31st October, 1984 at
 depreciated replacement values on the basis of a valuation made by a
 firm of Chartered Surveyors and Valuers. The indices, if any, used are
 not stated in the valuation.
 
 (b) (i) Leasehold land is amortised over the period of the lease.
 
 (ii) Depreciation on assets is calculated on Straight Line Method at
 the rates and in the manner prescribed in Schedule XIV to the Companies
 Act, 1956, except for :
 
 (1) Certain items of Plant and Machinery individually costing more than
 Rs. 5,000 - over their useful lives (2 years, 3 years, 5 years or 7
 years, as the case may be) as determined by the Company.
 
 (2) Cars and Vehicles - at 15% of cost.
 
 (iii) Depreciation charge for each year is after deducting the amount
 representing the depreciation on the increase due to revaluation of
 Land and Buildings, transferred from the Revaluation Reserve.
 
 (C) Intangible Assets :
 
 Intangible assets are initially measured at cost and amortised so as to
 reflect the pattern in which the asset''s economic benefits are
 consumed.
 
 (a) Technical Knowhow :
 
 The expenditure incurred is amortised over the estimated period of
 benefit, not exceeding six years commencing with the year of purchase
 of the technology.
 
 (b) Development Expenditure :
 
 The expenditure incurred on technical services and other
 project/product related expenses are amortised over the estimated
 period of benefit, not exceeding five years.
 
 (c) Software Expenditure :
 
 The expenditure incurred is amortised over three financial years
 equally commencing from the year in which the expenditure is incurred.
 
 (D) Impairment of Assets :
 
 The carrying value of assets/cash generating units at each balance
 sheet date are reviewed for impairment. If any indication of impairment
 exists, the recoverable amount of such assets is estimated and
 impairment is recognised, if the carrying amount of these assets
 exceeds their recoverable amount. The recoverable amount is the greater
 of the net selling price and their value in use. Value in use is
 arrived at by discounting the future cash flows to their present value
 based on an appropriate discount factor. When there is indication that
 an impairment loss recognised for an asset in earlier accounting
 periods no longer exists or may have decreased, such reversal of
 impairment loss is recognised in the Statement of Profit and Loss,
 except in case of revalued assets.
 
 (E) Investments :
 
 Long term investments (excluding investment property) are valued at
 cost. However, provision for diminution in value is made to recognise a
 decline other than temporary in the value of investments. Current
 investments are valued at the lower of cost and fair value, determined
 by category of investment.
 
 Investment properties are capitalised and depreciated (where
 applicable) in accordance with the policy stated for tangible assets.
 
 Investment properties are carried individually at cost less accumulated
 depreciation and impairment, if any.
 
 (F) Inventories :
 
 Inventories comprise all costs of purchase, conversion and other costs
 incurred in bringing the inventories to their present location and
 condition.
 
 Raw materials and bought out components are valued at the lower of cost
 or net realisable value. Cost is determined on the basis of the
 weighted average method.
 
 Finished goods produced and purchased for sale, manufactured components
 and work-in-progress are carried at cost or net realisable value
 whichever is lower. Excise duty is included in the value of finished
 goods inventory.
 
 Stores, spares and tools other than obsolete and slow moving items are
 carried at cost. Obsolete and slow moving items are valued at cost or
 estimated net realisable value, whichever is lower.
 
 (G) Foreign Exchange Transactions :
 
 Transactions in foreign currencies (other than firm commitments and
 highly probable forecast transactions) are recorded at the exchange
 rates prevailing on the date of transaction. Monetary items are
 translated at the year-end rates. The exchange difference between the
 rate prevailing on the date of transaction and on the date of
 settlement as also on translation of monetary items at the end of the
 year (other than those relating to long term foreign currency monetary
 items) is recognised as income or expense, as the case may be.
 
 Exchange differences relating to long term foreign currency monetary
 items, to the extent they are used for financing the acquisition of
 depreciable tangible assets are added to or subtracted from the cost of
 such depreciable tangible assets and the balance accumulated in
 ''Foreign Currency Monetary Item Translation Difference Account'' and
 amortised over the balance term of the long term monetary item.
 
 Any premium or discount arising at the inception of a forward exchange
 contract is recognised as income or expense over the life of the
 contract, except where the contract is designated as a cash flow hedge.
 
 (H) Derivative Instruments and Hedge Accounting :
 
 The Company uses foreign currency forward contracts and currency
 options to hedge its risks associated with foreign currency
 fluctuations relating to certain firm commitments and highly probable
 forecast transactions. The Company does not hold derivative financial
 instruments for speculative purposes. The Company has applied to such
 contracts the hedge accounting principles set out in Accounting
 Standard 30 ''Financial Instruments : Recognition and Measurement'' (AS
 30) by marking them to market at each reporting date.
 
 Changes in the fair value of the contracts that are designated and
 effective as hedges of future cash flows are recognised directly in
 Hedging Reserve Account and the ineffective portion is recognised in
 the Statement of Profit and Loss.
 
 (I) Revenue Recognition :
 
 Sales of products and services are recognised when the products are
 shipped or services rendered including export benefits thereon.
 Dividend from investments are recognised in the Statement of Profit and
 Loss when the right to receive payment is established.
 
 (J) Government Grants :
 
 The Company, directly or indirectly through a consortium of Mahindra
 Group Companies, is entitled to various incentives from government
 authorities in respect of manufacturing units located in developing
 regions. The Company accounts for its entitlement as income on accrual
 basis.
 
 (K) Employee Benefits :
 
 Defined Contribution Plan/Defined Benefit Plan/Long term Compensated
 Absences :
 
 Company''s contributions paid/payable during the year to Superannuation
 Fund, ESIC and Labour Welfare Fund are recognised in the Statement of
 Profit and Loss.
 
 Contributions to Provident Fund are made to a Trust administered by the
 Company and are charged to Statement of Profit and Loss as incurred.
 The Company is liable for the contribution and any shortfall in
 interest between the amount of interest realised by the investments and
 the interest payable to members at the rate declared by the Government
 of India.
 
 Company''s liability towards gratuity, long term compensated absences,
 post retirement medical benefit and post retirement housing allowance
 schemes are determined by independent actuaries, using the projected
 unit credit method. Past services are recognised on a straight line
 basis over the average period until the benefits become vested.
 Actuarial gains and losses are recognised immediately in the Statement
 of Profit and Loss as income or expense. Obligation is measured at the
 present value of estimated future cash flows using a discounted rate
 that is determined by reference to the market yields at the Balance
 Sheet date on Government Bonds where the currency and terms of the
 Government Bonds are consistent with the currency and estimated terms
 of the defined benefit obligation.
 
 (L) Borrowing Costs :
 
 All borrowing costs are charged to the Statement of Profit and Loss
 except :
 
 (i) Borrowing costs that are attributable to the acquisition or
 construction of assets that necessarily take a substantial period of
 time to get ready for their intended use, which are capitalised as part
 of the cost of such assets.
 
 (ii) Expenses incurred on raising long term borrowings are amortised
 over the period of borrowings. On early buyback, conversion or
 repayment of borrowings, any unamortised expenditure is fully written
 off in that year.
 
 (M) Product Warranty :
 
 In respect of warranties given by the Company on sale of certain
 products, the estimated costs of these warranties are accrued at the
 time of sale. The estimates for accounting of warranties are reviewed
 and revisions are made as required.
 
 (N) Leases :
 
 The Company''s significant leasing arrangements are in respect of
 operating leases for premises (residential, office, stores, godowns,
 computer hardware etc.). The leasing arrangements, which are not
 non-cancellable, range between eleven months and five years generally,
 and are usually renewable by mutual consent on agreed terms. The
 aggregate lease rentals payable are charged as rent.
 
 (O) Taxes on Income :
 
 Current tax is determined as the amount of tax payable in respect of
 taxable income for the year. Deferred tax is recognised, subject to
 consideration of prudence, 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.
 Deferred tax assets arising on account of unabsorbed depreciation or
 carry forward of tax losses are recognised only to the extent that
 there is virtual certainty supported by convincing evidence that
 sufficient future tax income will be available against which such
 deferred tax assets can be realised.
 
 Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
 gives future economic benefits in the form of adjustment to future
 income tax liability, is considered as an asset if there is convincing
 evidence that the Company will pay normal income tax against which the
 MAT paid will be adjusted.
 
 (P) Excise duty recovered on sales is included in Revenue from
 Operations. Excise duty in respect of Finished Goods manufactured is
 shown separately as an item under other expenses and included in
 valuation of Finished Goods produced.
 
 (J) The Guidance Note on Accounting for Employee Share-based Payments
 issued by The Institute of Chartered Accountants of India requires that
 shares allotted to a trust but not transferred to employees be reduced
 from Share Capital and Reserve and Surplus. Accordingly, the Company
 has reduced the Share Capital by Rs. 11.07 crores (2011 : Rs. 11.51
 crores) and Securities Premium Account by Rs. 78.25 crores (2011 : Rs.
 80.39 crores) for the 2,21,49,114 shares of Rs. 5 each (2011 :
 2,30,23,013 shares of Rs. 5 each) held by the trust pending transfer to
 the eligible employees.
 
 The Share Capital of the Company has also been reduced and the General
 Reserve increased by Rs. 1.40 crores (2011 : Rs. 1.84 crores) for the
 27,96,080 bonus shares of Rs. 5 each (2011 : 36,69,979 bonus shares of
 Rs. 5 each) issued by the Company in September, 2005 to the trust but
 not yet transferred by the trust to the employees. The above monies
 which are treated as advance received from it, is included under Other
 Current Liabilities and Other Long Term Liabilities.
 
 (K) Consequent to the announcement issued by The Institute of Chartered
 Accountants of India dated 29th March, 2008 in respect of forward
 exchange contracts and currency and interest rate swaps, the Company
 has applied the Hedge Accounting principles set out in the Accounting
 Standard (AS) 30 ''Financial Instruments : Recognition and Measurement''.
 Accordingly, such contracts are marked to market and the loss
 aggregating Rs. 37.96 crores (Net of Tax of Rs. 18.24 crores) [2011 :
 Rs. 3.58 crores (Net of Tax of Rs. 1.71 crores)] arising consequently
 on contracts that were designated and effective as hedges of future
 cash flows has been recognised directly in the Hedging Reserve Account.