A.  ACCOUNTING CONVENTION
 
 i) Basis of Preparations of Financial Statements:
 
 The financial statements have been prepared and presented under the
 historical cost convention on accrual and going concern basis of
 accounting in accordance with the accounting principles generally
 accepted in India (GAAP) and comply with the Accounting Standards
 issued by the Institute of Chartered Accountants of India and with the
 relevant provisions of the Companies Act, 1956.
 
 II) Use of Estimates:
 
 The preparation of financial statements requires estimates and
 assumptions to be made that affect the reported amount of assets and
 liabilities on the date of the financial statements and the reported
 amount of revenues and expenses during the reporting period. Difference
 between the actual results and estimates are recognised in the period
 in which the results are known/materialised.
 
 B.  SALES
 
 i) Sales are inclusive of Excise duty charged to customers and net of
 discount and rebates allowed.
 
 ii) Revenue is recognised based on the nature of activity when
 consideration can be reasonably measured and there exists reasonable
 certainty of its recovery:
 
 - Sale: Revenue from sale of goods is recognised when the substantial
 risks and rewards of ownership is transferred to the buyer under the
 terms of contract.
 
 - Interest: Interest is recognised on a time proportion basis taking into
 account the amount outstanding and the rate applicable.
 
 - Other Income: Revenue in respect of other income is recognised when no
 significant uncertainty as to measurability or collectability exists.
 
 - Services: Income from services is recognised when the services are
 rendered.
 
 Dividend: Dividend Income is recognised when the right to receive
 dividend is established.
 
 C.  FIXED ASSETS
 
 Fixed assets are stated at cost of acquisition or construction, net of
 cenvat credit and depreciation / amortization. Cost includes any cost
 attributable for bringing the asset to its working condition for its
 intended use. Capital work-in- progress includes cost of assets not
 ready for their intended use and includes advances paid to acquire
 fixed assets.
 
 D.  DEPRECIATION
 
 Depreciation on fixed assets is provided on straight line method at the
 rates provided by Schedule XIV to the Companies Act, 1956.
 
 Depreciation on additions / disposal of fixed assets during the year is
 provided on pro-rata basis according to the period during which the
 assets are put to use.
 
 E.  INVENTORIES
 
 Inventories include raw materials, bought out components,
 work-in-progress and manufactured finished goods.
 
 i) Finished products produced by the company are valued at lower of
 cost and net realizable value. Cost includes direct materials, labour,
 a proportion of manufacturing overheads and Excise duty has been
 charged on finished goods.
 
 ii) Work in Progress is valued at cost of direct materials, labour and
 other manufacturing overheads up to estimated stage of process.
 
 iii) Raw materials and stores and spares are valued at lower of cost
 and net realisable value. However, materials and other items held for
 use in the production of inventories are not written down below cost if
 the finished products in which they will be incorporated are expected
 to be sold at or above cost.
 
 The cost is determined using First In First Out ( FIFO ) method.
 
 F.  RESEARCH & DEVELOPMENT
 
 Revenue expenditure pertaining to Research & Development is charged to
 revenue under respective heads of accounts in the year in which they
 are incurred. Capital Expenditure on Research & Development is shown as
 an addition to Fixed Assets.
 
 G.  EMPLOYEE BENEFITS
 
 i) Short-term employee benefits are recognised as an expense at the
 undiscounted amount in the profit and loss account of the year in which
 the related service is rendered.
 
 ii) Post employment and other long term employee benefits are
 recognised as an expense in the profit and loss account for the year in
 which the employee has rendered services. The expense is recognised at
 the present value of the amounts payable determined using actuarial
 valuation techniques. Actuarial gains and losses in respect of post
 employmentand other long term benefits are charged to the profit and
 loss account.
 
 H. INVESTMENTS
 
 Long term investments are stated at cost. Provision for diminution in
 the value of long term investments is made only if such a decline is
 otherthan temporary in nature.
 
 Investments that readily realizable and intended to be held for not
 more than one year from the date on which such investment is made are
 classified as current investment. Current Investments are stated at
 lower of cost or fair value, which is determined for each individual
 investment.
 
 I.  TRANSACTIONS IN FOREIGN CURRENCIES
 
 i) Initial Recognition: Transactions denominated in foreign currencies
 are recorded at the exchange rates prevailing on the date of the
 transaction.
 
 ii) 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.
 
 iii) 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 recognised as
 income or expense over the period of the contract.
 
 iv) Exchange Differences: All exchange differences arising on
 settlement/Conversion of foreign Currency transactions are recognised
 in the Profit and Loss Account.
 
 J.  IMPAIRMENT OF ASSETS
 
 The company assesses at each Balance Sheet date whether there is any
 indication that any asset may be impaired. If any such indications
 exist, the carrying value of such assets is reduced to its estimated
 recoverable amount and the amount of such impairment loss is charged to
 Profit and Loss Account. If at the Balance Sheet date there is an
 indication that previously assessed impairment losses no longer exist,
 than such loss is reversed and the asset is restated to that effect.
 
 K. INTANGIBLEASSET
 
 Intangible asset is stated at cost of acquisition less accumulated
 amortization. Technical know how is amortized over the period of six
 years.
 
 L.  BORROWING COST
 
 Borrowing cost attributable to the acquisition, construction or
 production of a qualifying asset is capitalized as a part bf the cost
 of that asset. Borrowing cost which are not attributable to the
 qualifying assets, are recognised as an expense in the period in which
 they are incurred.
 
 M. TAXATION
 
 Tax expense comprises of current and deferred tax. Current income tax
 is measured at the amount expected to be paid to the tax authorities in
 accordance with the Indian Income Tax Act. Deferred income taxes
 reflect the impact of the current year timing differences between
 taxable income and accounting income for the year and reversal of
 timing differences of earlier years.
 
 Deferred income tax is measured based on the income tax rate and the
 tax laws enacted or substantively enacted at the Balance Sheet date.
 Deferred tax assets are recognised only to the extent that there is
 reasonable certainty that sufficient future taxable income will be
 available against which such deferred tax assets are recognised only if
 there is virtual certainty supported by convincing evidence that such
 deferred tax assets can be realized against future taxable profits.
 
 At each balance sheet date the Company re-assesses unrecognised
 deferred tax assets, if any. It recognizes unrecognised deferred tax
 assets to the extent that it has become reasonably certain or virtually
 certain, as the case may be, that sufficient future taxable income will
 be available against which such deferred tax assets can be realized.
 
 N. LEASE
 
 Lease Payments under Operating Leases are recognised as an expense in
 the statement of profit and loss on a straight line basis over the
 lease term.
 
 O. EARNINGS PER SHARE
 
 The Company reports basic and diluted Earnings per Share (EPS) in
 accordance with Accounting Standard 20 - Earnings per Share. Basic EPS
 is computed by dividing the net profit or loss for the year by the
 weighted average number of equity shares outstanding during the year.
 
 P.  EXPENDITURE DURING CONSTRUCTION PERIOD
 
 Expenditure during construction period is included under capital
 work-in- progress and the same is allocated to the respective fixed
 assets on completion of construction.
 
 Q. PROVISION, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
 
 Provisions involving substantial degree of estimation in measurement
 are recognised when there is a present obligation as a result of past
 events and it is probable that there will be an outflow of resources.
 Contingent liabilities are recognised but are disclosed in the notes.
 Contingent assets are neither recognised nor disclosed in the financial
 statements.