1.1 GENERAL INFORMATION
The Company is primarily in the business of manufacturing, purchase and
sale of motor vehicles and spare parts (automobiles). The other
activities of the Company comprise facilitation of Pre-Owned Car sales,
Fleet Management and Car Financing. The Company is a public company
listed on the Bombay Stock Exchange (BSE) and the National Stock
1.2 BASIS FOR PREPARATION OF FINANCIAL STATEMENTS
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India under the historical
cost convention on an accrual basis. These financial statements have
been prepared to comply in all material respects with all the
applicable accounting principles in India, the applicable accounting
standards notified under Section 211(3C) of the Companies Act, 1956,
Accounting Standard 30, Financial Instruments: Recognition and
Measurement issued by the Institute of Chartered Accountants of India
to the extent it does not contradict with any other accounting standard
referred to Section 211 (3C) of the Act, other recognised accounting
practices and policies and the relevant provisions of the Companies
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 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 realisation 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.
1.3 REVENUE RECOGNITION
Domestic and export sales are recognised on transfer of significant
risks and rewards to the customer which takes place on dispatch of
goods from the factory / stockyard / storage area and port
1.4 FIXED ASSETS
a) Fixed assets (except freehold land which is carried at cost) are
carried at cost of acquisition or construction or at manufacturing cost
(in case of own manufactured assets) in the year of capitalisation less
b) Assets acquired under finance leases are capitalised at the lower of
their fair value and the present value of minimum lease payments.
1.5 BORROWING COSTS
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying assets are capitalised till
the month in which each asset is put to use as part of the cost of that
1.6 DEPRECIATION / AMORTISATION
a) Fixed assets except leasehold land are depreciated on the straight
line method on a pro-rata basis from the month in which each asset is
put to use.
Depreciation has been provided at the rates prescribed in Schedule XIV
to the Companies Act, 1956 except for certain fixed assets where, based
on the management''s estimate of the useful lives of the assets, higher
depreciation has been provided on the straight line method over the
following useful lives:
Plant and Machinery 8 - 11 Years
Dies and Jigs 4 Years
Electronic Data Processing Equipment 3 Years
In respect of assets whose useful lives has been revised, the
unamortised depreciable amount is charged over the revised remaining
useful lives of the assets.
b) Leasehold land is amortised over the period of lease.
c) All assets, the individual written down value of which at the
beginning of the year is Rs. 5,000 or less, are depreciated at the rate
of 100 per cent. Assets purchased during the year costing Rs. 5,000 or
less are depreciated at the rate of 100 per cent.
d) Lump sum royalty is amortised on a straight line basis over 4 years
from the start of production of the related model.
a) Inventories are valued at the lower of cost, determined on the
weighted average basis, and net realisable value.
b) Tools are written off over a period of three years except for tools
valued at Rs. 5,000 or less individually which are charged to revenue in
the year of purchase.
c) Machinery spares (other than those supplied along with main plant
and machinery, which are capitalised and depreciated accordingly) are
charged to revenue on consumption except those valued at Rs. 5,000 or
less individually, which are charged to revenue in the year of
Current investments are valued at the lower of cost and fair value.
Long-term investments are valued at cost except in the case of a
decline in value other than temporary, in which case the necessary
provision is made.
1.9 RESEARCH AND DEVELOPMENT
Revenue expenditure on Research and Development is charged against the
profit for the year in which it is incurred. Capital expenditure on
Research and Development is shown as an addition to fixed assets and
1.10 FOREIGN CURRENCY TRANSLATIONS AND DERIVATIVE INSTRUMENTS
a) Foreign currency transactions are recorded at the exchange rates
prevailing at the date of the transactions. Exchange differences
arising on settlement of transactions are recognised as income or
expense in the year in which they arise.
b) At the balance sheet date, all monetary assets and liabilities
denominated in foreign currency are reported at the exchange rates
prevailing at the balance sheet date by recognising the exchange
difference in profit and loss account. However, the exchange difference
arising on foreign currency monetary items that qualify and are
designated as hedge instruments in a cash flow hedge is initially
recognised in ''hedge reserve'' and subsequently transferred to the
statement of profit & loss on occurrence of the underlying hedged
c) Effective 1st April, 2008, the Company adopted Accounting Standard
-30, Financial Instruments: Recognition and Measurement issued by
The Institute of Chartered Accountants of India to the extent the
adoption does not contradict with the accounting standards notified
under Section 211(3C) of the Companies Act, 1956 and other regulatory
d) All derivative contracts (except for forward foreign exchange
contracts where underlying assets or liabilities exist) are fair valued
at each reporting date. For derivative contracts designated in a
hedging relationship, the Company records the gain or loss on effective
hedges, if any, in a hedge reserve, until the transaction is complete.
On completion, the gain or loss is transferred to the statement of
profit and loss of that period. Changes in fair value relating to the
ineffective portion of the hedges and derivatives not qualifying or not
designated as hedges are recognised in the statement of profit and loss
in the accounting period in which they arise.
e) In the case of forward foreign exchange contracts where an
underlying asset or liability exists, the difference between the
forward rate and the exchange rate at the inception of the contract is
recognised as income or expense over the life of the contract. Profit
or loss arising on cancellation or renewal of a forward contract is
recognised as income or expense in the year in which such cancellation
or renewal is made.
1.11 EMPLOYEE BENEFIT COSTS
Short - Term Employee Benefits:
Recognised as an expense at the undiscounted amount in the statement of
profit and loss for the year in which the related service is rendered.
Post Employment and Other Long Term Employee Benefits :
(i) The Company has Defined Contribution Plans for post employment
benefit namely the Superannuation Fund which is recognised by the
income tax authorities. This Fund is administered through a Trust set
up by the Company and the Company''s contribution thereto is charged to
revenue every year. The Company also maintains an insurance policy to
fund a post-employment medical assistance scheme, which is a Defined
Contribution Plan administered by The New India Insurance Company
Limited. The Company''s contribution to State Plans namely Employees''
State Insurance Fund and Employees'' Pension Scheme are charged to
statement of profit and loss every year.
(ii) The Company has Defined Benefit Plans namely Gratuity, Provident
Fund and Retirement Allowance for employees and Other Long Term
Employee Benefits i.e. Leave Encashment / Compensated Absences, the
liability for which is determined on the basis of an actuarial
valuation at the end of the year based on Projected Unit Credit Method
and any shortfall in the size of the fund maintained by the Trust is
additionally provided for in the statement of profit and loss. The
Gratuity Fund and Provident Fund are recognised by the income tax
authorities and is administered through Trusts set up by the Company.
Termination benefits are immediately recognised as an expense.
Gains and losses arising out of actuarial valuations are recognised
immediately in the statement of profit and loss as income or expense.
1.12 CUSTOMS DUTY
Custom duty available as drawback is initially recognised as purchase
cost and is credited to consumption of materials on exported vehicles.
1.13 GOVERNMENT GRANTS
Government grants are recognised in the statement of profit and loss in
accordance with the related schemes and in the period in which these
Tax expense for the year, comprising current tax and deferred tax, is
included in determining the net profit/ (loss) for the year.
Current tax is recognised based on assessable profit computed in
accordance with the Income Tax Act and at the prevailing tax rate.
Deferred tax is recognised for all timing differences. Deferred tax
assets are carried forward to the extent it is reasonably / virtually
certain that future taxable profit will be available against which such
deferred tax assets can be realised.
Minimum Alternative Tax credit is recognised as an asset only when and
to the extent there is convincing evidence that the Company will pay
normal income tax during the specified period.
Deferred tax assets / Minimum Alternative Tax credit are reviewed at
each balance sheet date and written down/ written up to reflect the
amount that is reasonably/ virtually certain (as the case may be) to be
Deferred tax assets and liabilities are measured at the tax rates that
have been enacted or substantively enacted at the balance sheet date.
1.15 DIVIDEND INCOME
Dividend from investments is recognised when the right to receive the
payment is established and when no significant uncertainty as to
measurability or collectability exits.
1.16 INTEREST INCOME
Interest income is recognised on the time basis determined by the
amount outstanding and the rate applicable and where no significant
uncertainty as to measurability or collectability exists.
1.17 IMPAIRMENT OF ASSETS
At each balance sheet date, the Company assesses whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount. If the carrying
amount of the asset exceeds its recoverable amount, an impairment loss
is recognised in the statement of profit and loss to the extent the
carrying amount exceeds the recoverable amount.
a) The Company pays / accrues for royalty in accordance with the
relevant agreements with the technical know-how providers.
b) The lump sum royalty incurred towards obtaining technical assistance
/ technical know how to manufacture a new model/ car, ownership of
which rests with the technical know how provider, is recognised as an
intangible asset in accordance with the requirements of Accounting
Standard-26 Intangible Assets. Royalty payable on sale of products
i.e. running royalty is charged to profit and loss account as and when
1.19 PROVISIONS AND CONTINGENCIES
Provisions: Provisions are recognised when there is a present
obligation as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the balance
sheet date and are not discounted to its present value.
Contingent Liabilities: Contingent liabilities are disclosed when there
is a possible obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non occurrence of one
or more uncertain future events not wholly within the control of the
Company or a present obligation that arises from past events where it
is either not probable that an outflow of resources will be required to
settle or a reliable estimate of the amount cannot be made, is termed
as a contingent liability.
1.20 CASH AND CASH EQUIVALENTS
In the cash flow statement, cash and cash equivalents includes cash in
hand, demand deposits with banks, other short-term highly liquid
investments with original maturities of three months or less.