1.1 Basis of preparation of financial statements
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP). The Company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under the Companies (Accounting Standards) Rules, 2006, (as amended)
and the relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on an accrual basis and under the
historical cost convention.
1.2 Presentation and disclosure of financial statements
During the year ended 31st March, 2012, the revised Schedule VI
notified under the Companies Act 1956, has become applicable to the
Company, for preparation and presentation of its financial statements.
The adoption of revised Schedule VI does not impact recognition and
measurement principles followed for preparation of financial
statements. However, it has significant impact on presentation and
disclosures made in the financial statements. The Company has also
reclassified the previous year figures in accordance with the
requirements applicable in the current year.
1.3 Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments'' estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions,
uncertainty about these assumptions and estimates could result in the
outcomes requiring a material adjustment to the carrying amounts of
assets or liabilities in future periods.
1.4 Revenue recognition
a) Contract revenue
Revenue from fixed price contracts is recognized when the outcome of
the contract can be estimated reliably by reference to the percentage
of completion of the contract on the Balance sheet date. Percentage of
completion is determined as a proportion of costs incurred-to-date to
the total estimated contract costs. In respect of process technology
and design and engineering contracts percentage of completion is
measured with reference to the milestones specified in the contract,
which in the view of the management reflects the work performed and to
the extent it is reasonably certain of recovery.
Contract costs include costs that relate directly to the specific
contract and costs that are attributable to contract activity and
allocable to the contract. Costs that cannot be attributed to contract
activity are expensed when incurred.
When the final outcome of a contract cannot be reliably estimated,
contract revenue is recognized only to the extent of costs incurred
that are expected to be recoverable. Provision for expected loss is
recognized immediately when it is probable that the total estimated
contract costs will exceed total contract revenue.
Variations, claims and incentives are recognized as a part of contract
revenue to the extent it is probable that they will result in revenue
and are capable of being reliably measured.
Determination of revenues under the percentage of completion method
necessarily involves making estimates by the Company, some of which are
of a technical nature, concerning, where relevant, the percentage of
completion, costs to completion, the expected revenues from the
project/activity and the foreseeable losses to completion.
Execution of contracts necessarily extends beyond accounting periods.
Revision in costs and revenues estimated during the course of the
contract are reflected in the accounting period in which the facts
requiring the revision become known.
b) Service revenue
Revenue from services is recognized as the related services are
c) Product sales
Revenue from sale of goods is recognized on transfer of significant
risks and rewards of ownership when goods are dispatched and the title
passes to the customers, net of discounts and rebates granted. Sales
are recorded exclusive of sales tax.
d) Interest and dividend income
Interest on deployment of surplus funds is recognized using the time
proportion method based on the underlying interest rates.
Dividend income is recognized when the right to receive payment is
e) Export benefits
Export benefits in the form of duty draw back/ DEPB claims etc. are
recognized on receipt basis.
1.5 Tangible assets
Tangible assets are stated at historical cost, net of accumulated
depreciation and accumulated impairment losses, if any. The cost
comprises purchase price, borrowing costs if capitalization criteria
are met and directly attributable cost of bringing the asset to its
working condition for the intended use. Any trade discounts and rebates
are deducted in arriving at the purchase price.
Subsequent expenditure related to an item of tangible asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing tangible assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from de-recognition of tangible assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
Depreciation on tangible assets is calculated on a straight-line basis
using the rates arrived at based on the useful lives estimated by the
management, or those prescribed under the Schedule XIV to the Companies
Act, 1956, whichever is higher.
Assets costing individually Rs 5,000 or less are depreciated at the rate
Building and other constructions on leasehold land are depreciated over
the lease term or the useful life, whichever is shorter.
1.7 Intangible assets and amortization
Intangible assets are recognized when the asset is identifiable, is
within the control of the Company, it is probable that the future
economic benefits that are attributable to the asset will flow to the
Company and cost of the asset can be reliably measured.
Acquired intangible assets consisting of technical know how, brand and
software, are recorded at acquisition cost and amortized on
straight-line basis based on the following useful lives, which in
management''s estimate represents the period during which economic
benefits will be derived from their use:
1.8 Impairment of assets
The carrying amounts of the Company''s assets including intangible
assets are reviewed at each Balance sheet date to determine whether
there is any indication of impairment. If any such indications exist,
the assets recoverable amount is estimated, as the higher of the net
selling price and the value in use. An impairment loss is recognized
whenever the carrying amount of an asset or its cash generating unit
exceeds its recoverable amount. If at the Balance sheet date, there is
an indication that a previously assessed impairment loss no longer
exists, the recoverable amount is reassessed and the asset is
reinstated at the recoverable amount subject to a maximum of
depreciable historical cost.
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
Raw materials, components, stores and spares are valued at lower of
cost and net realizable 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. Cost of raw materials, components
and stores and spares is determined on a weighted average basis.
Work-in-progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials and lab our and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty and is determined
on a weighted average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
1.11 Foreign currency transactions
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
Foreign currency monetary items are translated using the exchange rate
prevailing at the reporting date.
Non-monetary items, which are measured in terms of historical cost
denominated in a foreign currency, are reported using the exchange rate
at the date of the transaction.
The premium or discount arising at the inception of forward exchange
contract is a mortised and recognized as an expense/income over the life
of the contract. Exchange differences on such contracts, except the
contracts which are long-term foreign currency monetary items, are
recognized in the statement of profit and loss in the period in which
the exchange rates change. Any profit or loss arising on cancellation
or renewal of such forward exchange contract is also recognized as
income or as expense for the period.
Lease payment under an operating lease is recognized as an expense in
the Statement of Profit and Loss on a straight line basis over the
1.13 Employee benefits
a) Short-term employee benefits
Employee benefits payable wholly within twelve months of rendering the
service are classified as short-term employee benefits and are
recognized in the period in which the employee renders the related
b) Post employment benefits (defined benefit plans)
The employees'' gratuity scheme is a defined benefit plan. The present
value of the obligation under such defined benefit plan is determined
at each Balance sheet date based on an actuarial valuation using the
projected unit credit method. Actuarial gains and losses are recognized
immediately in the Statement of Profit and Loss.
c) Post employment benefits (defined contribution plans)
Contributions to the provident fund and superannuation fund, which are
defined contribution schemes, are recognized as an expense in the
Statement of Profit and Loss in the period in which the contribution is
d) Long-term employee benefits
Long-term employee benefits comprise of compensated absences and other
employee incentives. These are measured based on an actuarial valuation
carried out by an independent actuary at each Balance sheet date unless
they are insignificant. Actuarial gains and losses and past service
costs are recognized immediately in the Statement of Profit and Loss.
1.14 Provisions and Contingencies
Provision is recognized in the Balance sheet when, the Company has a
present obligation as a result of a past event; it is probable that an
outflow of economic benefits will be required to settle the obligation;
and a reliable estimate of the amount of the obligation can be made. A
disclosure by way 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 that the likelihood of outflow of
resources is remote, no provision or disclosure is made.
1.15 Income taxes
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date. Deferred income tax
relating to items recognised directly in equity is recognised in equity
and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognised for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realised. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognised only if there is virtual certainty supported
by convincing evidence that they can be realised against future taxable
In the situations where the Company is entitled to a tax holiday under
the Income-tax Act, 1961 enacted in India or tax laws prevailing in the
respective tax jurisdictions where it operates, no deferred tax (asset
or liability) is recognized in respect of timing differences which
reverse during the tax holiday period, to the extent the Company''s
gross total income is subject to the deduction during the tax holiday
period. Deferred tax in respect of timing differences which reverse
after the tax holiday period is recognised in the year in which the
timing differences originate. However, the company restricts
recognition of 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. For recognition of deferred taxes,
the timing differences which originate first are considered to reverse
At each reporting date, the Company re-assesses unrecognised deferred
tax assets. It recognises unrecognized deferred tax asset 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.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
Minimum Alternate Tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The Company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to
be carried forward. In the year in which the Company recognises MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternate Tax under the
Income Tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as MAT Credit Entitlement.
The Company reviews the MAT credit entitlement asset at each
reporting date and writes down the asset to the extent the Company does
not have convincing evidence that it will pay normal tax during the
1.16 Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period as
reduced by number of shares bought back, if any. The weighted average
number of equity shares outstanding during the period is adjusted for
events such as bonus issue, bonus element in a rights issue, share
split, and reverse share split (consolidation of shares) that have
changed the number of equity shares outstanding, without a
corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
1.17 Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
b) Terms/ Rights attached to equity shares:
The Company has only one class of equity shares having a par value of Rs
2 per share. Each holder of the equity shares is entitled to one vote
per share. The Company declares and pays dividend in Indian rupees.
The dividend proposed by the Board of Directors is subject to the
approval of the shareholders in the ensuing Annual General Meeting.
During the year ended 31st March, 2012, the amount of per share
dividend recognised as distributed to equity shareholders was Rs 1.62
(31st March, 2011 Rs 1.26).
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive remaining assets of the company
after distributing all preferential amounts.
c) Shares held by holding/ultimate holding company and/or their