1.  CONVENTION
 
 The Financial Statements are prepared to comply in all material aspects
 with all the applicable accounting principles in India, the applicable
 accounting standards notified under section 211(3C) of the Companies
 Act, 1956 and the relevant provisions of the Companies Act,1956.  The
 Company follows the mercantile system of accounting and recognizes
 income and expenditure on accrual basis.
 
 2.  FIXED ASSETS AND DEPRECIATION
 
 FIXED ASSETS
 
 i) The fixed assets except as stated in (ii) below are stated at cost
 less accumulated depreciation. Cost of acquisition or construction is
 inclusive of inward freight, duties and taxes and other incidental
 expenses.
 
 ii) The fixed assets of the Component Division of erstwhile Motherson
 Auto Components Engineering Limited (MACE) have been stated at an
 amount inclusive of appreciation arising on revaluation of the assets
 by an approved valuer on December 31, 1998. The method adopted for
 revaluation of the assets are as under:
 
 a) Land: Prevailing market rate of land as on the date of revaluation.
 
 b) Buildings, Indigenous Plant and Machinery, Furniture and Fixtures,
 Moulds and Dies: Replacement value.
 
 The Company charges assets costing less than Rs.5,000 each to expense,
 which could otherwise have been included as Fixed Asset, because the
 amount is not material in accordance with Accounting Standard 10
 -‘Accounting for Fixed Assets''.
 
 DEPRECIATION
 
 i) Depreciation on fixed assets, except as stated in (ii) below, is
 provided from the month the asset is ready for commercial production,
 on a pro-rata basis at the SLM rates prescribed in schedule XIV to the
 Companies Act, 1956 or based on useful life, whichever is higher.
 
 3.  INVESTMENTS
 
 Investments are classified into long term and current investments.
 Long-term investments are stated at cost. A provision for diminution is
 made to recognize a decline, other than temporary, in the value of long
 term investments.
 
 Current investments are carried at lower of cost and fair value. Fair
 value in the case of quoted investments refers to the market value of
 the investments arrived at on the basis of last traded prices as at the
 year-end.
 
 4.  INVENTORIES
 
 Stores and spares, loose tools are valued at cost or net realizable
 value, whichever is lower.
 
 Raw materials, components, finished goods and work in progress are
 valued at cost or net realizable value, whichever is lower. The basis
 of determining cost for various categories of inventories is as
 follows:
 
 i) Stores and Spares, Raw Materials and Components First in First Out
 (FIFO) method
 
 ii) Work in Progress and Finished Goods Material cost plus appropriate
 share of labour and production overheads.
 
 iii) Tools Cost less amortization based on useful life of the items
 ascertained on a technical estimate by the management
 
 5.  EMPLOYEE BENEFITS
 
 The Company makes regular contributions to the State administered
 Provident Fund which is charged against revenue. The Company provides
 for long term defined benefit schemes of gratuity and compensated
 absences on the basis of actuarial valuation on the balance sheet date
 based on the Projected Unit Credit Method. In respect of gratuity, the
 Company funds the benefits through annual contributions to Life
 Insurance Corporation of India (LIC) under its Group Gratuity Scheme.
 The actuarial valuation of the liability towards the defined benefits of
 the employees is made on the basis of assumptions with respect to the
 variable elements affecting the computations including estimation of
 interest rate of earnings on contributions to LIC. The Company
 recognizes the actuarial gains and losses in the profit and loss
 account in the period in which they occur.
 
 6.  REVENUE RECOGNITION
 
 Sales are recognised upon the transfer of significant risks and rewards
 of ownership to the customers.
 
 Revenue from services is recognized as per the terms of the agreement,
 as the services are rendered and no significant uncertainty exists
 regarding the amount of consideration.
 
 Interest Income is recognized on a proportion of time basis taking into
 account the principal outstanding and the rate applicable.
 
 7.  foreign exchange transactions
 
 Transactions involving foreign currencies are recorded at the exchange
 rate prevailing on the transaction date. Foreign currency monetary
 items are translated at the exchange rate prevailing at the balance
 sheet date and the gain/loss arising on such translation is charged to
 the profit and loss account. Premium or discount arising at the
 inception of a forward exchange contract is amortized as expense or
 income over the life of contract.
 
 8.  borrowing costs
 
 The borrowing costs on funds other than those directly attributable to
 the acquisition of a qualifying asset i.e. an asset that necessarily
 takes a substantial period of time to get ready for its intended use,
 is charged to revenue in the period in which they are incurred.
 
 The borrowing costs that are directly attributable to the acquisition,
 construction or production of qualifying assets are capitalized as part
 of the cost of that asset.
 
 9.  Leases
 
 Lease rental in respect of operating lease arrangements are charged to
 expense when due as per the terms of the related agreement on a
 straight-line basis over the lease period.
 
 Lease rentals in respect of finance lease transactions entered into
 prior to March 31, 2001 are charged to expense when due as per the
 terms of the related agreement. Finance lease transactions entered into
 after this date are considered as financing arrangements and the leased
 asset is capitalized at an amount equal to the present value of future
 lease payments and a corresponding amount is recognized as a liability.
 The lease payments made are apportioned between finance charge and
 reduction of outstanding liability in relation to leased asset.
 
 10.  taxation
 
 current tax
 
 Current tax is provided on the basis of tax payable on estimated
 taxable income computed in accordance with the applicable provisions of
 Income tax Act, 1961 after considering the benefits available under the
 said Act.
 
 deferred taxes
 
 In accordance with Accounting Standard 22 - Accounting for Taxes on
 Income, issued by the Institute of Chartered Accountants of India, the
 deferred tax for timing differences between the book and tax profits
 for the year is accounted for using the tax rates and laws that have
 been enacted or substantively enacted as of the balance sheet date.
 
 Deferred tax assets are recognized only to the extent there is
 reasonable certainty that the assets can be realized in the future;
 however, where there is unabsorbed depreciation or carried forward loss
 under taxation laws, deferred tax assets are recognized only if there
 is virtual certainty of realization of such assets.
 
 11.  earnings per share (eps)
 
 The earnings considered in ascertaining the Company''s EPS comprises the
 net profit after tax (and includes the post tax effect of any extra
 ordinary items) attributable to equity shareholders. The number of
 shares used in computing Basic EPS is the weighted average number of
 shares outstanding during the year. The diluted EPS is calculated on
 the same basis as basic EPS, after adjusting for the effect of potential
 dilutive equity shares.
 
 12.  Impairment of assets
 
 Impairment loss, if any, is provided to the extent, the carrying amount
 of assets exceeds their recoverable amount. Recoverable amount is
 higher of an asset''s net selling price, and its value in use. Value in
 use is the present value of estimated future cash flows expected to
 arise from the continuing use of an asset and from its disposal at the
 end of its useful life.
 
 13.  Provisions and contingent Liabilities
 
 A provision is recognized when there is a present obligation as a
 result of a past event, it is probable that an outflow of resources
 will be required to settle the obligation and in respect of which
 reliable estimate can be made. A disclosure of a contingent liability
 is made when there is a possible obligation or a present obligation
 that may, but probably will not, require an outflow of resources. Where
 there is a possible obligation or a present obligation in respect of
 which the likelihood of outflow of resources is remote, no provision or
 disclosure is made.
 
 14.  use of estimates
 
 In the preparation of the financial statements, the management of the
 Company makes estimates and assumptions in conformity with the
 applicable accounting principles in India that affect the reported
 balances of assets and liabilities and disclosures relating to
 contingent assets and liabilities as at the date of the financial
 statements and reported amounts of income and expenses during the
 period. Examples of such estimates include provisions for doubtful
 debts, future obligations under employee retirement benefit plans,
 income taxes, the useful lives of fixed assets and intangible assets and
 estimates for recognizing impairment losses.
 
 These estimates could change from period to period and also the actual
 results could vary from the estimates. Appropriate changes are made to
 the estimates as the management becomes aware of changes in
 circumstances surrounding these estimates. The changes in estimates are
 reffected in the financial statements in the period in which changes are
 made and, if material, their effects are disclosed in the notes to the
 financial statements.