1. SIGNIFICANT ACCOUNTING POLICIES
 
 The financial statements have been prepared in accordance with
 applicable Accounting Standards and relevant presentational
 requirements of the Companies Act, 1956 and are based on the historical
 cost convention. The significant accounting policies followed are
 stated below:
 
 (a) Fixed assets:
 
 Fixed assets are stated at cost of acquisition/construction less
 accumulated depreciation. The cost includes all pre-operative expenses
 relating to construction period in the case of new projects and
 expansion of existing factories.
 
 (b) Depreciation:
 
 (i) The Company follows the straight-line method of depreciation (SLM).
 
 (ii) The rates of depreciation charged on all fixed assets are those
 specified in Schedule XIV to the Companies Act, 1956.
 
 (iii) On assets sold/discarded during the year, depreciation is
 provided up to the date of sale/discard.
 
 (iv) Depreciation is calculated on a pro-rata basis from the date of
 acquisition/installation of the asset and in case of assets costing up
 to Rs.5,000 each such asset is fully depreciated in the year of
 purchase.
 
 (c) Investments:
 
 Investments are stated at cost.
 
 (d) Inventories;
 
 Stores and spares are valued at lower of cost or under.
 
 Raw materials, components, work-in-progress and finished goods are
 valued at lower of cost or net realisable value.
 
 Cost of inventory is ascertained on the `weighted average basis.
 Further, in respect of process stocks and finished goods, an
 appropriate share of manufacturing expenses is included on absorption
 costing basis including excise duty.
 
 (e) Revenue recognition:
 
 Sale of goods is recognised at the point of despatch of finished goods
 to customers. Sales are inclusive of excise duty and exclusive of sales
 tax.
 
 (f) Research and development expenditure:
 
 Revenue expenditure on research and development is expensed out under
 the respective heads of account in the year in which it is incurred.
 
 (g) Retirement benefits:
 
 Pursuant to the Scheme of Arrangement, the Company has presently
 continued with the various schemes of retirement benefits of undivided
 Siel Limited such as provident fund, superannuation fund, gratuity fund
 and leave encashment. The Companys contribution to these funds
 recognised by the income-tax authorities and provision for employees
 leave encashment determined on an actuarial basis at the year end are
 charged against revenue every year. Contributions to provident fund,
 superannuation fund and gratuity fund have been made to the trusts of
 undivided Siel Limited except that contribution to the gratuity fund of
 Rs.18.14 Millions relating to employees of the Company upto March 31,
 2003 and Rs. 37.52 millions upto September 30, 2006 (Previous year upto
 September 30, 2005 Rs.19.22 Millions) though provided for in the books
 of account have not yet been funded by undivided Siel Limited and the
 Company respectively.
 
 (h) Income-tax:
 
 Income-tax is ascertained in accordance with the provisions of the
 Income-tax Act, 1961.
 
 Deferred tax is recognised, subject to the consideration of prudence,
 on timing differences, being the differences between taxable income and
 accounting income that originate in one period and are capable of being
 reversed in one or more subsequent periods.
 
 (i) Foreign exchange transactions:
 
 Transactions in foreign currency are recorded on initial recognition at
 the exchange rates prevailing at the time of the transaction.
 
 Monetary items (i.e receivables, payables, loans etc) denominated in
 foreign currency are reported using the closing exchange rate on each
 balance sheet date.
 
 The exchange differences arising on the settlement of monetary items or
 on reporting these items at rates different from rates at which these
 were initially recorded/reported in previous financial statements are
 recognised as income/expense in the year in which they arise except
 where the foreign currency liabilities have been incurred in connection
 with fixed assets acquired up to September 30, 2004 and subsequent
 thereto in case of fixed assets acquired from a country outside India,
 where the exchange differences are adjusted in the carrying amount of
 concerned fixed assets.
 
 (j) Write-off of miscellaneous expenditure:
 
 Deferred revenue expenditure representing amounts paid to employees
 under voluntary retirement scheme is written off over a period of three
 years.
 
 (k) Share issue expenses are written off against share premium account.
 
 (l) Pre-operative expenses:
 
 Pro-operative expenses, pending allocation represents indirect
 expenditure incurred during the construction period which will be
 allocated to capital/revenue on commissioning of the project.