(i) Accounting convention
 
 The financial statements are prepared under the historical cost
 convention, as modified to include the revaluation of certain fixed
 assets, and in accordance with applicable accounting standards and
 relevant presentational requirements of the Companies Act, 1956.
 
 (ii) Fixed assets
 
 Fixed assets are stated at cost less accumulated depreciation, except
 for land, buildings and plant and machinery acquired upto March 31,
 1997, which were revalued as at December 31, 1997 and are, therefore,
 stated at their net revalued amounts. Cost of acquisition or
 construction is inclusive of freight, duties, taxes, incidental charges
 and interest on loans taken and funds borrowed for the acquisition of
 the assets upto the date of commissioning of the assets.
 
 (iii) Depreciation
 
 a) On buildings and plant and machinery acquired upto March 31, 1997
 (which were revalued as at December 31,1997), depreciation has been
 provided on a pro-rata basis on the Straight Line Method (SLM) at rates
 arrived at on the basis of the balance useful life of the relevant
 assets as determined by the valuer, or at the SLM rates and manner
 specified in schedule XIV to the Companies Act, 1956, whichever is
 higher.
 
 b) Depreciation on buildings and plant and machinery acquired on or
 after April 1, 1997 has been provided on a pro-rata basis on the SLM
 method, at rates prescribed in Schedule XIV to the Companies Act, 1956,
 except for the foreign exchange fluctuation on translation of foreign
 currency liabilities for acqusition of fixed assets which are
 depreciated over the remaining useful lives of the respective assets.
 
 c) In respect of other assets, depreciation is charged on a pro-rata
 basis at the Written Down Value Method at rates prescribed in Schedule
 XIV to the Companies Act, 1956.
 
 d) Leasehold land is not being amortised as the lease is a long lease.
 
 (iv) Inventories
 
 Stores and spares are valued at cost or under. Other items of
 inventories (other than scrap) are valued at the lower of cost and net
 realisable value. Scrap (included under raw materials) is valued at net
 realisable value. The basis for determining cost for different
 categories of inventory are as follows :
 
 Stores, spares, raw materials and
 packing materials                     Monthly weighted average cost.
 
 Work in progress and finished goods
 
 Monthly weighted average material cost, labour and appropriate share of
 manufacturing and administrative overheads.
 
 (v) Investments
 
 Investments are stated at cost.
 
 (vi) Sales
 
 Sates are accounted for on despatch of goods from the factory to the
 customers. Sales are net of returns and include excise duty but exclude
 sales taxes.
 
 (vii) Customs duty
 
 Customs duty and countervailing duty on plant and machinery, raw
 materials, stores and spare parts are accounted for on clearance of
 goods from the customs warehouses.
 
 (viii) Retirement benefits
 
 The contribution to the superannuation, gratuity and provident funds
 are charged against revenue each year.
 
 (ix) Leave entitlement
 
 Provision for leave entitlement is made in accordance with the rules of
 the Company on arithmetical basis and not on an actuarial basis.
 
 (x) Foreign currency transactions
 
 Liabilities incurred for the acquisition of fixed assets are translated
 at the exchange rate prevailing at the end of the year and the
 gain/loss, on such translation is adjusted in the carrying cost of the
 related fixed assets.
 
 (xi) Research and development
 
 Revenue expenditure is charged as an expense in the year in which it is
 incurred. Capital expenditure is included in fixed assets.
 
 (xii) Capital based grants
 
 Subsidies or grants received in respect of fixed assets are treated as
 a capital receipt and credited to capital reserve. Subsidies or grants
 so received are not apportioned to the profit and loss account over the
 life of the fixed assets in respect of which they have been received.
 
 (xiii) Miscellaneous expenditure
 
 Expenditure incurred in connection with restructuring of long term
 loans represents the premium charged by financial institutions for
 reducing the interest rates on restructuring loans, which is being
 written off over the period to be benefited by the reduced interest
 rates.