i) Basis of Preparation of Financial Statements
 
 The financial statements are prepared under the historical cost
 convention on accrual basis of accounting in accordance with the
 generally accepted accounting principles, Accounting Standards notified
 under section 211(3c) of the Companies Act, 1956 and the relevant
 provisions thereof.
 
 ii) Fixed Assets
 
 FixedAssets are stated at cost less accumulated depreciation. All
 expenses incidental to the purchase/construction/ installation and
 commissioning including borrowing costs are added to the cost of the
 fixed assets. Where any part of the cost of fixed assets is either
 recovered by way of grant or borne by any other person, the same is
 deducted from the gross value of relevant fixed assets.
 
 iii) Investments
 
 Investments in subsidiary and joint venture companies are considered as
 Long Term Investment and are stated at Cost. Provision for diminution
 in the value of long term investments is made onlyif such a decline is
 other than temporary.
 
 iv) Inventories
 
 Inventories are valued at lower of cost or net realisable value. Cost
 is arrived on weighted average basis and is inclusive of taxes and
 duties paid/incurred (other than those recovered/recoverable from the
 Taxing Authorities). Adequate provision is made in respect of
 non-standard and obsolete items based on management''s estimate.
 
 v) Revenue Recognition
 
 a) Sales are accounted on dispatch of products against orders of
 customers and stated net of trade discounts, returns and sales-tax.
 
 b) Duty Drawback Income on eligible direct exports and exports through
 other parties is recognised in the year of export/sale to other parties
 on the basis of provisional/ estimated tariff rates informed by the
 appropriate authorities.
 
 vi) Provisions, Contingent Liabilities and Contingent Assets
 
 The Company creates a provision when there is present obligation as a
 result of a past event that probably requires an outflow of resources
 and a reliable estimate can be made of the amount of the obligation. A
 disclosure for 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. When there is a possible obligation or
 a present obligation in respect of which the likelihood of outflowof
 resources is remote, no provision or disclosure is made.
 
 Provisions are reviewed at each balance sheet date and adjusted to
 reflect the current best estimate. If it is no longer probable that the
 outflow of resources would be required to settle the obligation, the
 provision is reversed.
 
 Contingent assets are neither recognized nor disclosed in the financial
 statements.  However, contingent assets are assessed continually and if
 it is virtually certain that an economic benefit will arise, the asset
 and related income are recognized in the period in which the change
 occurs.
 
 vii)Depreciation
 
 a) Leasehold land are amortised over the period of lease.
 
 b) Cost of specialised softwares is amortised in three years on
 straight-line method on prorata basis.
 
 c) Technical Know-how is amortised in six years on straight-line method
 on prorata basis.
 
 d) Product Development Cost as stated in (xi) below is amortised in six
 years on straight line method on prorata basis.
 
 e) Individual items of fixed assets costing upto five thousand rupees
 are fully depreciated in the year of purchase.
 
 f) Depreciation on other assets is provided on written down value
 method at the rates prescribed in Schedule XIVto the CompaniesAct, 1956
 on pro-rata basis.
 
 viii) Intangible Assets
 
 Intangible assets are recognized if they are separately identifiable
 and the company controls the future economic benefit arising out of
 them. All other expenses on intangible items are charged to the Profit
 & Loss Account. Intangible assets are stated at cost less accumulated
 amortization / impairment. Intangible assets include Software Licences,
 Technical Know- how, Product Development Cost etc.
 
 ix) Borrowing Cost
 
 Borrowing costs directly attributable to the acquisition or
 construction of qualifying assets are capitalized till the date on
 which the asset is ready for its intended use. Qualifying assets are
 those which take substantial period of timeto get ready for its
 intended use.
 
 Other borrowing costs are recognized as an expense in the period in
 which these are incurred.
 
 x) Employee Benefits
 
 a) Defined Contribution Plan
 
 The Company makes defined contribution to Provident Fund and
 Superannuation Scheme, which are recognized in the Profit and
 LossAccount on accrual basis.  The Company''s contribution to State
 Plan, viz. Employees'' State Insurance scheme is recognised in the
 Profit & LossAccount on accrual basis.
 
 b) Defined Benefit Plan
 
 The Company''s liabilities under Payment of Gratuity Act and compensated
 absences are determined on the basis of actuarial valuation made at the
 end of each financial year using the projected unit credit method.
 Actuarial gain and losses are recognized immediately in the Profit and
 Loss Account as income/expenses. Obligation is measured at the present
 value of estimated future cash flows using a discounted rate that is
 determined by reference to market yields at the Balance Sheet date on
 Government Bonds.
 
 Gratuity obligation is funded with the Life Insurance Corporation of
 India through a Gratuity Trust.
 
 c) ShortTerm Employee Benefits
 
 Amounts paid under Voluntary Retirement and Separation Schemes are
 charged to Profit and LossAccount in the year of payment.
 
 Other short term employee benefit obligations are measured on an
 undiscounted basis and charged to the Profit & LossAccount on accrual
 basis.
 
 xi) Research & Development
 
 Revenue expenditure on research and development are charged to Profit
 and Loss Account in the year in which these are incurred except for
 certain cost incurred on development of new products e.g.
 airconditioning systems and related products which are capitalized when
 it is probable that a development project will be a success. Capital
 expenditure on research and development are considered as an addition
 to FixedAssets.
 
 xii)Foreign Currency Translation
 
 a) Transactions in foreign currencies are recorded at the exchange
 rates prevailing on the date oftransaction.
 
 b) Assets and Liabilities receivable/payable in foreign currencies are
 translated at the year end exchange rates.
 
 c) Any income or expense on account of exchange difference either on
 settlement or on translation isrecognised in the Profit and LossAccount
 .
 
 d) In case of forward contracts, difference between forward rates and
 spot rates on the date of transaction is recognised asincome or expense
 over the life of contract. Exchange difference on such contracts. i.e.
 difference between the exchange rate at the reporting/settlement date
 and the exchange rate on the date of inception / the last reporting
 date, isrecognized as income / expenses for the period.
 
 xiii) Taxes on Income
 
 Provision for current tax is made on the basis of estimated taxable
 income under the Income Tax Act, 1961. Deferred tax on account of
 timing differences between taxable income and accounting income is
 accounted for by applying tax rates and laws enacted or substantially
 enacted on the balance sheet date.