(a) Basis of accounting and preparation of financial statements.
The financial statements are prepared as a going concern under
historical cost convention on an accrual basis and comply on all
material respects with the Generally Accepted Accounting Principles in
India and the relevant provisions of the Companies Act, 1956. The
accounting policies adopted in the preparation of the financial
statements are consistent with those followed in the previous year
except for change in the accounting policy for ''Foreign exchange
transactions'' as more fully described in Note 1. (k). (iii).
(b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Examples of such estimates include
provisions for doubtful debts, employee benefits, assessment of income
taxes, estimated cost of contracts and useful lives of fixed assets.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Difference between actual results and estimates are recognized
in the periods in which the results are known/materialized.
Raw materials, work-in- progress and finished goods are valued at lower
of cost and net realizable value on weighted average basis. Stores and
spare parts and loose tools are valued at lower of cost and net
Cost of work- in- progress and finished goods is determined on full
absorption cost basis.
(d) Cash flow statement
Cash flows are reported using the indirect method, whereby profit /
(loss) before extraordinary items and tax is adjusted for the effects
of transactions of non-cash nature and any deferrals or accruals of
past or future cash receipts or payments. The cash flows from
operating, investing and financing activities of the Company are
segregated based on the available information.
(e) Fixed assets Tangible fixed assets
Tangible fixed assets are stated at original cost net of tax/duty
credits availed, if any, less accumulated/ depreciation. Cost comprises
of the purchase price and any attributable cost of bringing the assets
to its working condition for its intended use. Interest on borrowings
during the period of construction is added to the cost of fixed assets.
Subsequent expenditure relating to fixed assets is capitalized only if
such expenditure results in an increase in the future benefits from
such asset beyond its previously assessed standard of performance.
Intangible assets are carried at cost less accumulated amortization and
impairment losses, if any. The cost of an intangible asset comprises
its purchase price, including any import duties and other taxes (other
than those subsequently recoverable from the taxing authorities), and
any directly attributable expenditure on making the asset ready for its
intended use and net of any trade discounts and rebates. Subsequent
expenditure on an intangible asset after its purchase / completion is
recognized as an expense when incurred unless it is probable that such
expenditure will enable the asset to generate future economic benefits
in excess of its originally assessed standards of performance and such
expenditure can be measured and attributed to the asset reliably, in
which case such expenditure is added to the cost of the asset.
Projects under which assets are not ready for their intended use and
other capital work-in-progress are carried at cost, comprising direct
cost, related incidental expenses and attributable interest.
(f) Depreciation and amortization
Depreciation on all tangible fixed assets is provided on straight line
basis at the rates and in the manner specified in Schedule XIV to the
Technical know-how is amortized over the estimated period of benefit,
not exceeding six years commencing from the date of purchase of the
Software expenditure is a mortised over five years commencing from the
date when the expenditure is incurred.
(g) Impairment of assets
The carrying values of assets are reviewed at each Balance Sheet date
for impairment. If any indication of impairment exists, the recoverable
amount of such assets is estimated and impairment is recognized, if the
carrying amount of these assets exceeds their recoverable amount. The
recoverable amount is the greater of the net selling price and their
value in use. Value in use is arrived at by discounting the future
cash flows to their present value based on an appropriate discount
factor. When there is indication that an impairment loss recognized
for an asset in earlier accounting periods no longer exists or may have
decreased, such reversal of impairment loss is recognized in the
Statement of Profit and Loss, except in case of revalued assets.
(h) Revenue recognition (other than contracts)
Revenue from sale of goods / rendering of services is recognized on
transfer of significant risks and rewards of ownership to the buyer.
Sales excludes sales tax collected from customers.
(i) Other income
Interest income is accounted on accrual basis. Dividend income is
accounted for when the right to receive it is established.
(j) Accounting of contracts
Revenue from long-term contracts, where the outcome can be estimated
reliably is recognized on percentage completion method by reference to
the stage of completion of the contract activity as required under
Accounting Standard 7 - Construction Contracts. The stage of completion
is determined as a proportion that contract costs incurred for work
performed up to the closing date bear to the estimated total costs of
the contract. Profit (contract revenue less contract cost) is
recognized when the outcome of the contract can be estimated reliably
and for contracts valued up to Rs.100 crores, profit is recognized when
stage of completion is 40% or more, and for contracts valued more than
Rs. 100 crores, profit is recognized either at 25% stage of completion
or an expenditure of Rs. 40 crores is incurred whichever is higher.
When it is probable that the total cost will exceed the total contract
revenue, the expected loss is recognized immediately, irrespective of
the work done. For this purpose total contract costs are ascertained on
the basis of contract costs incurred and cost to completion of
contracts which is estimated based on current technical data and
estimate of costs to be incurred in future. Contract Revenue earned in
excess of billing has been reflected under ''Other Current Assets'' and
billing in excess of contract revenue is reflected under ''Other Current
Liabilities'' in the Balance Sheet.
(k) Foreign exchange transactions
(i) Initial recognition
Transactions in foreign currencies entered into by the Company and its
integral foreign operations are accounted at the exchange rates
prevailing on the date of the transaction or at rates that closely
approximate the rate at the date of the transaction.
(ii) Measurement of foreign currency monetary items at the Balance
Foreign currency monetary items (other than derivative contracts) of
the Company and its net investment in non- integral foreign operations
outstanding at the Balance Sheet date are restated at the year-end
(iii) Treatment of exchange differences
Exchange differences arising on settlement / restatement of short-term
foreign currency monetary assets and liabilities of the Company are
recognized as income or expense in the Statement of Profit and Loss.
The exchange differences on restatement / settlement of loans to
non-integral foreign operations that are considered as net investment
in such operations are accumulated in a Foreign currency translation
reserve until disposal / recovery of the net investment.
The exchange differences arising on restatement / settlement of
long-term foreign currency monetary items are capitalized as part of
the depreciable fixed assets to which the monetary item relates and
depreciated over the remaining useful life of such assets or amortized
on settlement / over the maturity period of such items if such items do
not relate to acquisition of depreciable fixed assets. The unamortized
balance is carried in the Balance Sheet as Foreign currency monetary
item translation difference.
During the year, in line with the Notification dated 29th December,2011
issued by the Ministry of Corporate Affairs, the Company has opted for
the option given in Paragraph 46A of the Accounting Standard-11 The
Effects of Changes in Foreign Exchange Rates. Accordingly, the Company
has, with effect from April 1, 2011, amortized the foreign exchange
loss/(gain) incurred on foreign currency monetary items over the
balance period of such long term foreign currency monetary items . The
amortized portion of foreign exchange loss (net) incurred on long term
foreign currency monetary items for the year ended 31st March, 2012 is
Rs. 313.61 lakhs. The unamortized portion carried forward as on 31st
March, 2012 is Rs. 226.93 lakhs. Had the Company, followed the earlier
policy of charging the entire amount to Statement of Profit and Loss,
the profit before tax for the year would have been lower by Rs. 226.93
(l) Accounting of forward contracts
Premium / discount on forward exchange contracts, which are not
intended for trading or speculation purposes, are amortized over the
period of the contracts if such contracts relate to monetary items as
at the Balance Sheet date.
Long term investments are carried at cost and provisions are recorded
to recognize any decline, other than temporary, in the carrying value
of each investment. Current investments are carried at lower of cost
and fair value.
(n) Employee Benefits
Employee benefits include provident fund, superannuation fund, gratuity
fund and compensated absences.
Defined contribution plans
The Company''s contribution to provident fund and superannuation fund
are considered as defined contribution plans and are charged as an
expense as they fall due based on the amount of contribution required
to be made.
Defined benefit plans
For defined benefit plans in the form of gratuity fund the cost of
providing benefits is determined using the Projected Unit Credit
method, with actuarial valuations being carried out at each Balance
Sheet date. Actuarial gains and losses are recognized in the Statement
of Profit and Loss in the period in which they occur. Past service cost
is recognized immediately to the extent that the benefits are already
vested and otherwise is a mortised on a straight-line basis over the
average period until the benefits become vested. The retirement benefit
obligation recognized in the Balance Sheet represents the present value
of the defined benefit obligation as adjusted for un recognized past
service cost, as reduced by the fair value of scheme assets. Any asset
resulting from this calculation is limited to past service cost, plus
the present value of available refunds and reductions in future
contributions to the schemes. Long Service Awards are recognized as a
liability at the present value of the defined benefit obligation as at
the Balance Sheet date.
Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees are recognized
during the year when the employees render the service. These benefits
include performance incentive and compensated absences which are
expected to occur within twelve months after the end of the period in
which the employee renders the related service.
Long-term employee benefits
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related service are recognized as a liability at the present value of
the defined benefit obligation as at the Balance Sheet date less the
fair value of the plan assets out of which the obligations are expected
to be settled.
(o) Borrowing costs
Borrowing costs include interest, amortization of ancillary costs
incurred and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost. Costs in connection with the borrowing of funds to the
extent not directly related to the acquisition of qualifying assets are
charged to the Statement of Profit and Loss over the tenure of the
loan. Borrowing costs, allocated to and utilized for qualifying assets,
pertaining to the period from commencement of activities relating to
construction / development of the qualifying asset up to the date of
capitalisation of such asset is added to the cost of the assets.
(p) Segment reporting
The Company identifies primary segments based on the dominant source,
nature of risks and returns and the internal organization and
management structure. The operating segments are the segments for which
separate financial information is available and for which operating
profit/loss amounts are evaluated regularly by the Executive Management
in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identified
to segments on the basis of their relationship to the operating
activities of the segment.
Revenue, expenses, assets and liabilities which relate to the Company
as a whole and are not allocable to segments on reasonable basis have
been included under Unallocated revenue/expenses/assets/liabilities
(q) Taxes on income
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognized as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax is recognized on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantially enacted as at the reporting date. Deferred tax
liabilities are recognized for all timing differences. Deferred tax
assets in respect of unabsorbed depreciation and carry forward of
losses are recognized only if there is virtual certainty that there
will be sufficient future taxable income available to realize such
assets. Deferred tax assets are recognized for timing differences of
other items only to the extent that reasonable certainty exists that
sufficient future taxable income will be available against which these
can be realized. Deferred tax assets are reviewed at each Balance
Sheet date for their reliability.
(r) Research and development
Research and development costs (other than cost of fixed assets
acquired) are charged as an expense in the year in which they are
incurred. Fixed assets utilized for research and development are
capitalized and depreciated in accordance with the policies stated for
(s) Provisions, contingent liabilities and contingent assets
A provision is recognized when the Company has a present obligation as
a result of past event and it is probable that an outflow of resources
embodying economic benefit will be required to settle the obligation
and in respect of which a reliable estimate can be made. Provisions are
determined based on best estimates of the expenditure required to
settle the present obligation. Contingent Liabilities are not
recognized but disclosed in the notes. A disclosure for a contingent
liability is made, unless the possibility of an outflow of resources is
Provision for anticipated warranty costs is made on the basis of
technical and available cost estimates.
Contingent Assets are neither recognized nor disclosed in the Financial
The Company enters into derivative contracts in the nature of foreign
currency swaps, forward contracts with an intention to hedge its
existing assets and liabilities, firm commitments and highly probable
transactions. Derivative contracts which are closely linked to the
existing assets and liabilities are accounted as per the policy stated
for Foreign Currency Transactions and Translations.
(ii) Terms/Rights attached to Equity Shares
The company has only one class of equity shares having a par value of
Rs 10 per share. Each equity shareholder 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
by the shareholders in the ensuing Annual General Meeting.
During the year ended 31st March 2012, the amount of per share dividend
recognized as distribution to equity shareholders was Rs 4 per share
(Previous year: Rs 2 per share).
In the event of the liquidation of the company, the holders of equity
shares will be entitled to receive remaining assets of the company,
after the distribution of all preferential amounts. The distribution
will be in proportion to the number of equity shares held by the
(i) Long term loan from DBS Bank aggregating Rs. 5,746.91 lakhs
(previous year Rs. 6,090.53 lakhs) is secured by pari passu first
charge on the fixed assets of the Company.
(ii) Long term loan from Dena Bank aggregating Rs. 3,000 lakhs
(previous year Rs 3,000 lakhs) is secured by pari passu first charge on
the fixed assets and second charge on the current assets of the
(iii) Long term loan from Axis Bank aggregating Rs. 4,267.17 lakhs
(previous year Rs. nil) is secured by first pari passu first charge on
the fixed assets of the company, present and future except asset
charged exclusively to Small Industries Development Bank of India
(SIDBI), and second charge on the current assets of the Company.
Note : Details of the security for the short-term borrowings
Buyers'' line of credit, cash credit and short term loans from banks are
secured by hypothecation, ranking pari passu, of all tangible movable
assets including in particular stocks of raw materials other than those
purchased under Bill discounting (components) scheme of Small
Industries Development Bank of India (SIDBI), finished goods,
work-in-progress, consumables, spares and other movable assets and book
debts, out standings and all other receivables. Facilities from Canara
Bank and Central Bank of India aggregating Rs. 3,780.88 lakhs (previous
year Rs. 26.64 lakhs) and Rs. 4,490.55 lakhs (previous year Rs.
4,458.92 lakhs) respectively, are also secured, by hypothecation
ranking pari passu, of fixed assets, present and future, except on an
asset hypothecated to SIDBI as first charge.