1.  Method of Accounting:
 
 The Company maintains its accounts under the historical cost convention
 on an accrual basis and complies in all material respects with
 generally accepted accounting principles in India and relevant
 provisions of Companies Act, 1956.
 
 2.  Use of Estimates:
 
 The presentation of the financial statements in conformity with the
 generally accepted accounting principles requires the management to
 make estimates and assumptions that affect the reported amounts of
 assets and liabilities, revenues and expenses and disclosure of
 contingent liabilities. Such estimates and assumptions are based on
 management''s evaluation of relevant facts and circumstances as on the
 date of financial statements. The actual outcome may diverge from these
 estimates.
 
 3.  Revenue Recognition:
 
 Income is recognised on accrual basis, except where mentioned
 otherwise, in particular:
 
 (i) Domestic sales of manufactured items are recognised on dispatch and
 are stated net of returns.
 
 (ii) Export sales are recognized on date of bill of lading/ airway bill
 and initially recorded at the relevant exchange rates prevailing on the
 date of transaction.
 
 (iii) Income on items delivered directly by suppliers/sub-contractors
 to the client is recognised on dispatch and receipt of
 suppliers''/sub-contractors'' invoices.
 
 (iv) Income from project site activities is recognised on acceptances
 by the client on the basis of the work performed.  
 
 (v) Income on account of price variation is recognised on acceptance of
 the claim by the client and on certainty of its realization.
 
 (vi) Revenue from long term projects of Special Products Division
 involving dispatch, commissioning and erection is recognized on the
 basis of milestone specified in the contracts after matching costs and
 revenue at each stage.
 
 (vii) Dividend is accrued in the year in which it is declared whereby
 the right to receive is established.
 
 4.  Fixed Assets:
 
 Fixed Assets are stated at cost, net of tax/duty credits availed less
 depreciation/amortization to date and impairment, if any, except in the
 case of certain items of land, buildings, plant and machinery and
 roads, water works, drainage, which are stated on the basis of the
 revalued cost, less depreciation/amortization to date and impairment if
 any.
 
 5.  Depreciation/Amortisation:
 
 (i) The depreciation is computed on the Straight-Line Method on certain
 Buildings, Plant & Machinery and Furniture and Fixtures of Heavy
 Engineering Division and of Foundry Division and all the fixed assets
 of Tiwac Division in the manner prescribed in Schedule XIV to the
 Companies Act,1956.
 
 The depreciation on all other fixed assets is computed on the Written
 Down Value method in the manner prescribed in Schedule XIV to the
 Companies Act, 1956.
 
 In respect of a branch, which is an integral part of foreign
 operations, depreciation is provided in the manner prescribed by local
 laws so as to write off the assets over their useful life.
 
 (ii) Depreciation on Patents is provided on the basis of life of
 Patents as specified in the Patent Documents.  (iii) Technical know-how
 is depreciated on Straight Line Basis in six equal installments.  (iv)
 Computer software included in intangible assets is amortized over a
 period of three years.  (v) Depreciation on additions to/deletions from
 the fixed assets during the year is calculated on pro-rata basis from
 the date of addition/deletion.
 
 6.  Capital Work-in-Progress:
 
 Projects under commissioning and other Capital Work-in-Progress are
 carried at cost, comprising direct cost and related incidental
 expenses.
 
 7.  Impairment of Assets:
 
 Impairment is ascertained at each balance sheet date in respect of Cash
 Generating Units. An impairment loss is recognised whenever the
 carrying amount of an asset exceeds its recoverable amount. The
 recoverable amount is the greater of the net selling price and value in
 use. In assessing value in use, the estimated future cash flows are
 discounted to their present value based on an appropriate discount
 factor.
 
 8.  Investments:
 
 Investments of long term nature are stated at cost less permanent
 diminution in value, if any. Current Investments are stated at lower of
 cost or fair value.
 
 9.  Employee Benefits:
 
 (i) Short term employee benefits are those which are payable within
 twelve months of rendering service and are recognized as expense at the
 period in which the employee renders the related service.  
 
 (ii) Contributions to the Provident Fund and Superannuation Fund, ESIC
 and Labour Welfare Fund which are defined contribution schemes are
 recognized as an expense in the Profit and Loss Account in the period
 in which the contribution is due.
 
 (iii) Gratuity liability is a defined benefit obligation and is
 provided for on the basis of its'' actuarial valuation using the
 projected unit credit method at the end of each financial year.
 Actuarial gains and losses are recognized immediately in the Profit and
 Loss Account.
 
 (iv) Long term compensated absences including leave encashment are
 provided for on the basis of actuarial valuation.
 
 10.  Taxes on Income:
 
 Tax expenses comprise current and deferred tax.
 
 Tax on income for the current period is determined on the basis of
 taxable income and tax credits computed in accordance with the
 provisions of the Income Tax Act, 1961.
 
 Deferred tax is recognized on timing differences between the accounting
 income and taxable income that originate in one period and are capable
 of reversal in one or more subsequent periods and is quantified using
 the tax rates and tax laws enacted or substantively enacted as on the
 balance sheet date.
 
 Deferred tax assets (representing unabsorbed depreciation and carried
 forward losses) are recognized to the extent that there is a virtual
 certainty that sufficient future taxable income will be available
 against which such deferred tax assets can be realized.
 
 11.  Borrowing Costs:
 
 Borrowing costs attributable to acquisition, construction or production
 of qualifying assets are capitalized as part of such asset till the
 time the asset is ready for its intended use or sale. All other
 borrowing costs are recognised as an expense in the period in which
 they are incurred.
 
 12.  Inventories:
 
 Inventories are valued after providing for obsolescence, if any, as
 under: -
 
 (a) Raw materials, Components, Stores and Spares at lower of cost or
 net realizable value. The cost includes freight inward, direct
 expenses, duties and taxes other than those subsequently recoverable.
 In case of Heavy Engineering Division, it is arrived at on FIFO
 Method and for others on Weighted Average Method.
 
 (b) Dies, Jigs, Tools, Mould Boxes and patterns at lower of cost or net
 realizable value arrived at after providing for suitable diminution.
 
 (c) Goods in transit at cost incurred till date.
 
 (d) Work in Progress at lower of cost or net realizable value. The cost
 includes direct material, direct labour, and appropriate overheads
 booked on normal level of activity. The expenditure on uncompleted
 contracts is amortised over the period of contract on the basis of
 sales booked.
 
 (e) Finished Goods at lower of cost or net realisable value. Cost
 includes related overheads and wherever applicable excise duty.
 
 13.  Foreign Currency Transactions:
 
 Foreign Currency Transactions on initial recognition are accounted at
 the rates prevailing on the date of transaction. At each balance sheet
 date, foreign currency monetary items are reported using the closing
 rate. Non monetary items which are carried at historical cost
 denominated in a foreign currency are reported using the exchange rate
 at the date of the transaction. The resulting exchange differences are
 
 (a) adjusted in the cost of fixed assets specifically financed by
 borrowings to which the exchange differences relate,
 
 (b) adjusted in the cost of fixed assets specifically financed by
 borrowings contracted after April 1, 2004 and to which the exchange
 differences relate provided the assets are acquired from outside India.
 
 (c) recognized as income or expense in the profit and loss account for
 the year in cases other than (a) and (b) above.
 
 In respect of branches, which are integral foreign operations, all
 transactions are translated at the rates prevailing on the date of
 transaction. Branch monetary Assets and Liabilities are restated at the
 yearend rates, except for fixed assets and depreciation thereon which
 are restated at historical cost.  Premium or discount on forward
 exchange contracts is recognized in the profit and loss account over
 the period of contract.
 
 14.  Provisions, Contingent Liabilities and Contingent Assets:
 
 Provisions are recognised for liabilities that can be measured only by
 using a substantial degree of estimation, if:
 
 (a) the Company has a present obligation as a result of past event;
 
 (b) a probable outflow of resources is expected to settle the
 obligation, and
 
 (c) the amount of the obligation can be reliably estimated.  Contingent
 Assets are neither recognised, nor disclosed.
 
 Contingent Liabilities are not recognised, but are disclosed in Notes
 to Accounts.
 
 Provisions, Contingent Liabilities and Contingent Assets are reviewed
 at each Balance Sheet date.
 
 15.  Leases:
 
 Assets acquired under leases where the significant portion of the risks
 and rewards of ownership are retained by the lessor are classified as
 operating leases and lease rentals are charged to the profit & loss
 account on accrual basis.
 
 Assets leased out under operating lease are capitalized. Rental Income
 is recognised on accrual basis over the lease term.
 
 16.  Segment accounting policy: (Refer C).
 
 C.  SEGMENT REPORTING:
 
 Information given in accordance with the requirements of Accounting
 Standard 17, on Segment Reporting issued by The Institute of Chartered
 Accountants of India.
 
 The Company has identified business segments as the primary and
 Geographic segment as secondary segment. Segments have been identified
 after taking into account the nature of the products, differential
 risks and returns, the organizational structure and internal reporting
 system.
 
 The Company''s Primary business segments are organised on product lines
 as follows:
 
 Heavy Engineering (also known as Industrial Machinery Division) –
 engaged in engineering, fabrication and manufacturing of Machinery for
 Sugar Plants, Cement Plants, Boilers & Power Plants, Industrial &
 Marine Gears, Mineral Processing & EPC, Petro Chemicals and Space,
 Defence and Nuclear Power Business.
 
 Foundry & Machine Shop – Manufacturing of Grey & Ductile Iron Castings
 required by various Industries and machining of components.
 
 Others – Non reportable segment, includes units manufacturing Precision
 Instruments such as pressure and temperature gauges and Infotech
 Services.
 
 Segment Reporting:
 
 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.