I.   Accounting Convention
 
 The financial statements have been prepared in accordance with
 applicable accounting standards in India notified under Section 211
 (3C) of the Companies Act, 1956. Financial statements have also been
 prepared in accordance with relevant presentation requirements of the
 Companies Act, 1956 of India
 
 II.  Basis of Accounting :
 
 The financial statements are prepared under the historical cost
 convention on an accrual basis.
 
 III.  Use of Estimates :
 
 The preparation of financial statements in conformity with generally
 accepted accounting principles (GAAP) requires management to make
 estimates and assumptions that affect the reported amounts of assets
 and liabilities and the disclosure of contingent liabilities at the
 date of the financial statements and the reported amounts of revenues
 and expenses during the year. Actual results could differ from those
 estimates. Any revision to accounting estimates is recognised
 prospectively in current and future periods
 
 IV.  Fixed Assets and Depreciation :
 
 Fixed Assets are stated at cost of acquisition or construction less
 accumulated depreciation. Cost comprises of the purchase price,
 incidental expenses, erection/commissioning expenses and financial
 charges upto the date the fixed asset is ready for its intended use
 
 The Company provides depreciation on fixed assets on the straight-line
 method at the rates specified in Schedule XIV to the Companies Act,
 1956 on a pro-rata basis from the month in which the asset is put to
 use, except as stated below.
 
 - Leasehold improvements are depreciated at the rate of 20% per annum
 or over the period of lease if less than five years
 
 - Assets situated at employees residence are depreciated at the rate
 of 33.33% per annum
 
 - Vehicles are depreciated at the rate of 12% per annum from April,
 2003
 
 An asset is treated as impaired when the carrying cost of assets
 exceeds its recoverable value. An impairment loss is charged to the
 Profit & Loss Account in the year in which an asset is identified as
 impaired. The impairment loss recognised in prior accounting period is
 reversed if there has been a change in the estimate of recoverable
 amount.
 
 V.  Intangible Assets and Amortization thereof :
 
 intangible assets comprise new product development expenses and
 computer software and are stated at cost less accumulated amortization
 and impairment losses, if any.
 
 Product development costs incurred including technical fees paid to
 collaborator for the development of new products for which letters of
 intent have been received from customers are accumulated and recognised
 as intangible assets (included under fixed assets) and are amortised
 over a period of six years. Un-amortized products development fee in
 respect of models discontinued during the year is fully charged off in
 Profit & Loss Account.
 
 Software, which is not an integral part of the related computer
 hardware is classified as an intangible asset and is being amortised
 over a period of 72 months, being the estimated useful life.
 
 Amortization expenses is charged on a pro-rata basis for assets
 purchased during the year. The appropriateness of the amortization
 period and the amortization method is reviewed at each financial year
 end.
 
 VI.  Leases :
 
 Operating Lease :
 
 Lease arrangements, where the risks and rewards incidental to ownership
 of an asset substantially vest with the lessor, are recognised as
 operating lease.
 
 Operating lease payments are recognised as an expense in the Profit &
 Loss Account on a straight line basis over the lease term.
 
 VII.  Investments :
 
 Long term investments are valued at their acquisition cost. Provision
 for diminution, other than temporary, is made wherever necessary.
 
 VIII.  Inventory Valuation :
 
 a) Stores and spare parts are valued at lower of weighted average cost
 and net realisable value
 
 b) All tools (including loose tools) are written off over their useful
 life and un-issued tools are valued at lower of weighted average cost
 and market value
 
 c) Raw materials, Components and Work-in-Process are valued at lower of
 weighted average cost and net realisable value
 
 d) Finished Goods are valued at lower of weighted average cost and net
 realisable value
 
 Finished Goods and Work in Process include costs of conversion and
 other costs incurred in bringing the inventories to their present
 location and condition
 
 IX.  Foreign Currency Transactions :
 
 Foreign currency transactions are recorded on the basis of average of
 the exchange rates in force during the relevant week of each month.
 Gains and losses resulting from the settlement of such transactions and
 from the translation of monetary assets and liabilities denominated in
 foreign currencies are recognised in the Profit & Loss Account. In case
 of transaction covered by forward contracts, the difference between the
 contract rate and exchange rate prevailing on the date of transaction
 is charged to Profit & Loss Account, proportionately over the contract
 period All assets and liabilities denominated in foreign currency are
 restated at relevant year end rates
 
 X.  Excise :
 
 Excise duty on finished goods manufactured is accounted on the basis of
 production of goods XI .  Research & Development :
 
 a) Capital Expenditure for Research & Development is capitalised in the
 year of installation
 
 b) Revenue expenses incurred for Research & Development for existing
 products are charged to Profit & Loss Account of the year.
 
 XII.  Income :
 
 1) Revenue recognition - Revenue from domestic and export sales are
 recognised on transfer of all significant risks and rewards or
 ownership to the buyer, which generally coincides with dispatch of
 goods from factory / port respectively.
 
 2) Price escalation claims from customers and discounts from suppliers
 are accounted in the year under audit, only if they are settled with
 the customers and suppliers respectively up to the date of finalisation
 of accounts.
 
 3) Dividend on investment is accounted in the year in which it is
 declared
 
 4) All export benefits are recognised as income when there is
 substantial certainty as to their realisability e.g.
 
 a) DEPB license and FPS are recognized as income on the relevant
 application being filed
 
 b) Duty draw back is accounted in the year of export.
 
 XIII.  Expenses :
 
 a) Discounts to customers and price escalation to suppliers to the
 extent not settled at the Balance Sheet date are accounted on the basis
 of reasonable estimates made after considering negotiations with
 vendors/customers.
 
 b) Jigs and fixtures costing less than Rs. 5,000/- each are written off
 in the year of purchase
 
 c) Goods received are accounted as purchases on satisfactory completion
 of inspection.
 
 XIV.  Borrowing Cost :
 
 Borrowing costs on loans relatable to qualifying assets are capitalized
 to the extent incurred prior to these assets being put to use. Other
 borrowing costs are written off in the year to which they pertain.
 
 XV.  Employees Benefits :
 
 Provident Fund
 
 Contributions to defined contribution schemes such as Provident Fund,
 etc. are charged to the Profit & Loss account as incurred. In respect
 of certain employees, Provident Fund contributions are made to a Trust
 administered by the Company. The interest rate payable to the members
 of the Trust shall not be lower than the statutory rate of interest
 declared by the Central Government under the Employees Provident Funds
 and Miscellaneous Provisions Act, 1952 and shortfall, if any, shall be
 made good by the Company. The remaining contributions are made to a
 government administered Provident Fund towards which the Company has no
 further obligations beyond its monthly contributions.
 
 Gratuity
 
 The Company has an obligation towards gratuity, a defined benefit
 retirement plan covering eligible employees.  The Company has an
 Employee Gratuity Fund managed by LIC. The Company accounts for the
 liability of Gratuity Benefits payable in future based on an
 independent actuarial valuation
 
 Leave Encashment
 
 The Company provides for the encashment of leave with pay subject to
 certain rules for certain grade of employees.  The eligible employees
 are entitled to accumulate leave subject to certain limits, for future
 encashment/availment.  The liability is provided based on the number of
 days of unutilized leave at each balance sheet date on the basis of an
 independent actuarial valuation
 
 Termination Benefits
 
 Termination benefits are recognised as an expense as and when incurred
 or only when the obligation can be reliably estimated
 
 XVI.  Taxation :
 
 Taxes on income for the current year are determined on the basis of
 provisions of Income Tax Act, 1961
 
 Deferred Tax is recognised on timing differences between the accounting
 income and the taxable income for the year and quantified using the tax
 rates and laws enacted or substantively enacted as on the Balance Sheet
 date
 
 Deferred Tax assets are recognised and carried forward to the extent
 that there is a virtual certainity that sufficient future taxable
 income will be available against which such deferred tax asset can be
 realised
 
 XVII.  Contingencies :
 
 Loss contingencies arising from claims, litigations, assessments,
 fines, penalties, etc., are recorded when it is probable that a
 liability will be incurred, and the amount can be reasonably estimated
 
 Warranty cost is provided on the basis of cost of warranty claims
 received from the customers and a reasonable estimate for future claims
 is made based on empirical data
 
 XVIII.  Earning Per Share :
 
 Annualised basic earning per equity share is arrived at based on net
 profit/(loss) after taxation to the basic/ weighted average number of
 equity shares.