Accounting Policies of Sanghvi Forging & Engineering Ltd. Company

Mar 31, 2018

1. Significant Accounting Policies To Financial Statements:

1.1 Basis for preparation of financial accounting

(i) Statement of Compliance

The financial statement of the Company have been prepared in accordance with the Indian Accounting Standards (Ind AS) notified pursuant to Section 133 of the Companies Act, 2013 (‘the Act’), read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 as amended and other relevant provisions of the Act.

For all period up to and including the year ended March 31, 2017, the Company prepared its financial statement in accordance with the accounting standards notified under Section 133 of the Act, read together with paragraph. 7 of the Companies (Accounts) Rules, 2014 (Previous GAAP). These financial statements of the year ended March 31, 2018 are first financial statements, the Company has prepared in accordance with Ind AS. The transition date is 01 April, 2016. Refer Note 41 for information on first time adoption of Ind AS and how the transition from Previous GAAP to Ind AS has affected the Company’s financial position, financial performance and cash flows.

(ii) Historical cost conversion

The Financial Statements have been prepared on historical cost conventions basis, except for the following:

- Certain financial instruments that are measured at fair value at the end of each reporting period;

- Defined benefit plans - plan assets measured at fair value.

(iii) Current and Non-Current classification

Based on the nature of activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as twelve months for the purpose of classifications of its assets and liabilities as current and non-current.

(iv) Rounding of amounts

All amounts disclosed in the financial statement and notes have been rounded off to the nearest thousands as per the required of Schedule III, unless otherwise stated.

1.2 Use of estimates and assumptions

The preparation of the financial statements in conformity with Ind AS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of financial statements and reported amounts of revenues and expenses during the period. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of circumstances surrounding the estimates. Changes in estimates are reflected in the financial statement in the period in which changes are made and if material, their effects are disclosed in the notes to the financial statement

The company has consistently applied following accounting policies to all the period presented in these financial statements.

a) Property, plant and equipment

For transition to Ind AS, the Company has elected to continue with the carrying value of all of its tangible and intangible assets recognized as of April 1, 2016(transition date) measured as per the previous GAAP and use that carrying value as its deemed cost of the transition date.

Leasehold land having lease of 99 years or more is treated as free hold land which is carried at cost. All other items of Property, Plant and Equipment are recorded at their cost of acquisition, net of taxes, less accumulated depreciation and impairment losses, if any. The cost thereof comprises of its purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost for bringing the asset to its working condition for its intended use.

Borrowing costs on Property, Plant and Equipment’s are capitalised when the relevant recognition criteria specified in Ind AS 23 Borrowing Costs is met.

Significant spares which have a usage period in excess of one year are also considered as part of Property, Plant and Equipment and are depreciated over their useful life.

Decommissioning costs, if any, on Property, Plant and Equipment are estimated at their present value and capitalised as part of such assets.

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.

The residual values and useful lives of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

Subsequent cost is included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset, is derecognized when replaced. All other repairs and maintenance are charged to the Statement of Profit and Loss during the reporting period in which they are incurred.

Depreciation:

The Company depreciated its property, plant and equipment over the useful life in the manner prescribed in Schedule II of the Companies Act 2013 for the proportionate period of use during the year. The depreciation on assets is provided on the straight-line method considering the useful life and residual value of respective asset. The residual values are not more than 5% of the original cost of the asset. Depreciation on assets purchased /installed during the year is calculated on a pro-rata basis from the date of such purchase /installation.

The useful life considered for calculation of depreciation for various asset classes are as follows:

*Based on an internal technical evaluation made by the company and on past experience, estimated useful life of Plant and machinery listed above best represent the period over which the management expects to use these assets. However, the useful lives for these assets are different from that prescribed in schedule II of the Act.

b) Intangibles

Intangible assets that are acquired by the Company and that have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses, if any. Subsequent expenditures are capitalised only when they increase the future economic benefits embodied in the specific asset to which they relate.

De-recognition of intangible assets

Intangible assets are de-recognised either on their disposal or where no future economic benefits are expected from their use. Gain or loss arising on such de-recognition is recognised in profit or loss and are measured as the difference between the net disposal proceeds, if any, and the carrying amount of respective intangible assets as on the date of de-recognition.

c) Inventories

Inventories are stated at cost or net realizable value, whichever is lower. Cost Comprise all cost of purchases, cost of conversion and other costs incurred in bringing the inventories to their present location and condition.

Raw Materials are valued at the lower of cost and net realizable value. Cost is ascertained on a moving weighted average basis.

Work-in-progress, finished goods and traded goods are carried at the lower of cost and net realizable value. Cost is determined on a weighted average basis. In case of work-in-progress and manufactured finished goods, cost includes material, labour and production overheads. Fixed production overheads are allocated on the basis of normal capacity of production facilities.

d) Impairment of non-financial assets

Assets subject to amortisation are tested for impairment provided that an event or change in circumstances indicates that their carrying amount might not be recoverable. These are treated as impaired when the carrying cost thereof exceeds its recoverable value. Recoverable value is higher of the asset’s net selling price or value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Net selling price is the amount receivable from the sale of an asset in an arm’s length transaction between knowledgeable, willing parties, less the cost of disposal. An impairment loss is charged for when an asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

e) Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and taxes, revenue from sale of goods is recognized on transfer of significant risk and rewards of ownership of products to the customers, which is generally on dispatch of goods.

Revenue from job charges is recognized on completion of job work. Interest incomes are recognised on time proportion basis.

Dividend

Dividend income is recognised when the Company’s right to receive the payment is established, which is generally when shareholders approve the dividend.

Interest income

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

f) 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 noncash 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.

g) Leases

A lease that transfers substantially all the risks and rewards incidental to ownership to the lessee is classified as a finance lease. All other leases are classified as operating leases.

Company as a lessee-

Finance leases are capitalised at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in profit or loss as finance costs, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Company’s general policy on the borrowing costs. Contingent rentals are recognised as expenses in the periods in which they are incurred.

Operating lease payments are generally recognised as an expense in the profit or loss on a straight-line basis over the lease term. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the lessor’s expected inflationary cost increases, such increases are recognised in the year in which such benefits accrue. Contingent rentals arising under operating leases are also recognised as expenses in the periods in which they are incurred.

Company as a lessor-

Rental income from operating lease is generally recognised on a straight-line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the Company’s expected inflationary cost increases, such increases are recognised in the year in which such benefits accrue. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.

Amounts due from lessees under finance leases are recorded as receivables at the Company’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Company’s net investment outstanding in respect of the leases.

h) Foreign Currency Transactions

On initial recognition, transactions in currencies other than the Company’s functional currency (foreign currencies) are translated at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the exchange rate at that date Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous period are recognised in profit or loss in the period in which they arise.

Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

i) Taxation

Current Income Taxes:

The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred Tax

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the standalone financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss).

Deferred

income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

MAT Credit:

Minimum Alternate Tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The Company recognises MAT credit available as a deferred tax asset only to the extent that there is reasonable certainty that the Company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. The MAT credit to the extent there is reasonable certainty that the Company will utilise the credit is recognised in the Statement of profit and loss and corresponding debit is done to the Deferred Tax Asset as unused tax credit.

j) Employee Benefits Short term employee benefits:

Employee benefits payable wholly within twelve months of rendering the service the service are classified as short-term employee benefits and are recognized in the period in which the employee renders the related service.

Post-Employment benefits:

Defined benefit plans: All employees are covered under Employees’ Gratuity Scheme, which is a defined benefit plan. The Company contributes to a fund maintained with Life Insurance Corporation of India (LIC) on the basis of the year-end liability determined based on actuarial valuation using the Projected Unit Cost Method. Re-measurement of the net defined benefit liability, which comprise actuarial gains/losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest) are recognized in Other Comprehensive Income. Net interest expense and other expenses related to defined benefit plans are recognized in the Statement of Profit and Loss.

Defined contribution plans: All employees are covered under contributory provident fund benefit of a contribution of 12% of basic salary. Contributions to defined contribution scheme is charges to the Statement of Profit and Loss of the year, on due basis. There are no obligations other than the contributions payable to the respective funds.

Long-term employee benefits: Provision for longterm employee benefits comprise of compensated absences. There are measured on the basis of year-end actuarial valuation in line with the Company’s rules for compensated absences. Re-measurement gains or losses are recognized in profit or loss in the period in which they arise.

k) Borrowing Costs

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are considered as a part of cost of such assets less interest earned on the temporary investment. A qualifying asset is one that necessarily takes substantial period of time to get ready for the intended use. All other borrowing costs are charged to Statement of Profit & Loss in the year in which they are incurred.

l) Provisions and contingent liabilities Provisions:

The Company recognizes a provision when: it has a present legal or constructive obligation as a result of past events; it is likely that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognized for future operating losses. Provisions are reviewed at each balance sheet and adjusted to reflect the current best estimates.

Contingent Liability and Contingent Assets:

A contingent liability recognised in a business combination is initially measured at its fair value. Subsequently, it is measured at the higher of the amount that would be recognised in accordance with the requirements for provisions above or the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with the requirements for revenue recognition.

A contingent asset is not recognised unless it becomes virtually certain that an inflow of economic benefits will arise. When an inflow of economic benefits is probable, contingent assets are disclosed in the financial statements. Contingent liabilities and contingent assets are reviewed at each balance sheet date.

Onerous Contract:

A provision for onerous contracts is measured at the present value of the lower expected costs of terminating the contract and the expected cost of continuing with the contract. Before a provision is established, the Company recognizes impairment on the assets with the contract.

m) Earnings Per Share (EPS)

Basic earnings per Share are computed by dividing the net profit or loss for the year attributable to equity share holders, by the weighted average number of equity share outstanding during the period.

Diluted earning per share is computed by dividing the net profit or loss for the year attributable to equity shareholders, by the weighted number of equity and equivalent diluted equity shares outstanding during the year except where the results would be antidilutive.

n) Government Grants

The Company recognizes government grants only when there is reasonable assurance that the conditions attached to them will be complied with, and the grants will be received. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed.

When the grant relates to an asset, it is recognised as deferred revenue in the balance sheet and transferred to profit or loss on a systematic basis over the expected useful life of the related asset.

o) Cash and cash equivalents

Cash and cash equivalents include cash at bank and deposit with banks having original maturity of not more than three months. Bank deposit with original maturity period of more than three months but less than twelve months are classified as other bank balances.

For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and fixed deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Company’s cash management.

p) Investments in the nature of equity in subsidiaries, joint venture and associates

The Company has elected to recognise its investments in equity instruments in subsidiaries, joint venture and associates at cost in the separate financial statements in accordance with the option available in Ind AS 27, ‘Separate Financial Statements’.

q) Financial Instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial assets

Initial recognition and measurement-

All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Financial assets are classified, at initial recognition, as financial assets measured at fair value or as financial assets measured at amortized cost.

Subsequent measurement-

For purposes of subsequent measurement, financial assets are classified in Three categories:

i. Financial assets measured at amortised cost

ii. Financial assets measured at fair value through other comprehensive income (FVTOCI)

iii. Financial assets measured at fair value through profit or loss (FVTPL)

i. A financial asset that meets the following two conditions is measured at amortized cost.

- Business Model test: The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and

- Cash flow characteristics test: Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.

ii. A financial asset that meets the following two conditions is measured at fair value through OCI:-

- Business Model test: The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and

- Cash flow characteristics test: The contractual terms of the instrument give rise on specified dates to cash flows that are SPPI on the principal amount outstanding.

iii. All other financial assets are measured at fair value through profit and loss.

Equity instruments

All equity instruments in scope of Ind AS 109 - [-] are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present subsequent changes in the fair value in OCI. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.

If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, including foreign exchange gain or loss and excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to profit or loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.

Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the profit or loss.

Derecognition-

A financial asset is primarily derecognised (i.e. removed from the Company’s balance sheet) when:

- The contractual rights to receive cash flows from the asset have expired, or

- The Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in OCI and accumulated in equity is recognised in profit or loss if such gain or loss would have otherwise been recognised in profit or loss on disposal of that financial asset.

Impairment of financial assets-

In accordance with Ind AS 109, The company assesses impairment based on expected credit losses (ECL) model at an amount equal to:-

- 12 months expected credit losses, or

- Lifetime expected credit losses depending upon whether there has been a significant increase in credit risk since initial recognition.

The Company follows ‘simplified approach’ for recognition of impairment loss allowance on trade receivables or any contractual right to receive cash or another financial asset.

The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.

Financial liabilities- initial recognition and measurement-

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

Subsequent measurement-

All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL.

Financial liabilities at fair value through profit or loss-

Financial liabilities are classified as at FVTPL when the financial liability is held for trading or is designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred principally for the purpose of repurchasing in the near term or on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking. This category also includes derivative entered into by the Company that are not designated and effective as hedging instruments in hedge relationships as defined by Ind AS 109. Gains or losses on liabilities held for trading are recognised in the profit or loss.

Derecognition-

A financial liability is de recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference between the carrying amount of the financial liability de recognised and the consideration paid and payable is recognised in profit or loss.

Derivative financial instruments-

Initial recognition and subsequent measurement

The Company uses derivative financial instruments, such as forward currency contracts, full currency swap, options and interest rate swaps to hedge its foreign currency risks and interest rate risks respectively. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value at the end of each reporting period. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss

Offsetting of financial instruments-

Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.

r) Fair Value Measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/ or disclosure purposes in these financial statements is determined on such a basis, except for leasing transactions that are within the scope of Ind AS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 or value in use in Ind AS 36.

In addition, for financial reporting purposes, fair value measurements are categorised into level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

- Level 3 inputs are unobservable inputs for the asset or liability.

The Company has consistently applied the following accounting policies to all periods presented in these financial statements.

s) Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker of the Company is responsible for allocating resources and assessing performance of the operating segments and accordingly is identified as the chief operating decision maker.

t) Recent Accounting pronouncements Standards issued but not yet effective

The amendments to standards that are issued, but not yet effective, up to the date of issuance of the Company’s financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective.

The Ministry of Corporate Affairs (MCA) has issued the Companies (Indian Accounting Standards) Amendment Rules, 2017 and Companies (Indian Accounting Standards) Amendment Rules, 2018 amending the following standard:

Ind AS 115 Revenue from Contracts with Customers

On March 28, 2018, Ministry of Corporate Affairs has notified the Ind AS115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Specifically, the standard introduces a 5-step approach to revenue recognition:

- Step 1: Identify the contract(s) with a customer

- Step 2: Identify the performance obligation in contract

- Step 3: Determine the transaction price

- Step 4: Allocate the transaction price to the performance obligations in the contract

- Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation

Under Ind AS 115, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers.

The standard permits two possible methods of transition:

- Retrospective approach

Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8-Accounting Policies, Changes in Accounting Estimates and Errors

- Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach).The effective date for adoption of Ind AS 115 is financial periods beginning on or after April 1, 2018.

The Company will adopt the standard on April 1, 2018 by using the cumulative catch-up transition method and accordingly comparatives for the year ending or ended March 31, 2018 will not be retrospectively adjusted. The effect on adoption of Ind AS 115 is expected to be insignificant.

Appendix B to Ind AS 21, Foreign currency transactions and advance consideration:

On March 28, 2018, MCA has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. This amendment will come into force from April 1, 2018. The Company expects the impact of this on the financial statements to be insignificant.

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Mar 31, 2016

Notes Annexed to and forming part of the Financial Statements

As on March 31, 2016

Corporate Information:

Sanghvi Forging & Engineering Limited (SFEL) is an ISO9001:2008 Certified Indian Company engaged in the manufacturer of open and closed die forging products for the oil & gas, defense, ship building, power & other sectors. It also exports products to various foreign countries over the last two decades.

The Company is having capacity of 18600 MTPA which includes 15000 MTPA Heavy Forging Division (with single piece forging up to 40 MT) to manufacture proof machined products viz. stepped shafts, bars & hollows, blocks, flanged shafts, gear blanks, shells, tube sheets, forging items etc.

1. SIGNIFICANT ACCOUNTING POLICIES TO FINANCIAL STATEMENTS

I. Basis for preparation of financial accounting

The financial statement of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provision of the Companies Act, 2013 ("the 2013 Act'')/Companies Act, 1956 ("the 1956 Act"), as applicable.

These Financial statements are prepared under historical cost conventions on accrual.

II. Use of Estimates

The presentation of financial statements in conformity with Indian GAAP, which requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities on the date of financial statements and the reported amount of revenues and expenses during the year. Difference between the actual result and estimates are recognized in the period in which reason are known / materialized.

III. Fixed Assets and Depreciation /Amortization

A. Tangible Assets

Tangible Fixed Assets are stated at historical cost including borrowing costs expenditure directly attributable to the acquisition of the asset and fluctuation arising from exchange rate variations attributable to the assets less accumulated depreciation there on and impairment losses if any. Leasehold land having lease of 99 years or more are treated as free hold land only and other leases are amortized over the period of lease.

Subsequent expenditure related to an item of tangible assets are added to its book value only if they increase the future benefits from the existing assets beyond its previously assessed standard of performance.

B. Intangible Assets

Intangible assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortized on a straight line basis over their estimated useful lives.

C. Capital Work in Progress

Cost of fixed assets not ready for use before the balance sheet date is disclosed as capital work in progress.

IV. Inventories

Cost of Inventories have been computed to include all cost of Purchases, Cost of Conversion and other costs incurred in bringing the inventories to their present location and condition.

Inventories are valued at lower of cost or net realizable value using the First in First out (FIFO) basis.

V. Revenue Recognition

1. Sales of products and services are recognized when risk and rewards of ownership at of the products are passed on to the customers, which is generally on dispatch of goods. Sales are inclusive of Excise Duty but excluding sales tax / Value Added Tax and export incentives. Interest incomes are recognized on time proportion basis.

2. Revenue from sale of power is recognized when delivered and measured based on rates as per bilateral contractual agreements with buyers / at rate arrived at based on the principles laid down under the relevant Tariff Regulations as notified by the regulatory bodies, as applicable.

3. Export incentives are accounted on accrual basis. Revenue from job charges is recognized completion of job work.

VI. Cash flow statement

Cash flows are reported using the indirect method whereby profit before tax is adjusted for the effects of the transactions of a non cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating; financing and investing activities of the company are segregated.

VII. Leases

Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged against profits on straight line basis over the lease period.

VIII. Foreign Currency Transactions

(a) Transactions denominated in foreign currencies are recorded at the rate prevailing on date of transaction

(b) In respect of monetary items denominated in foreign currency at the year-end are translated at the year-end rates.

(c) Any income or expenses on account of exchange differences either on settlement or on transactions are recognized in the Profit and Loss Account.

(d) Exchange difference relating to long term foreign currency monetary item to the extent they are used for financing the acquisition of fixed assets are adjusted from the cost of such fixed assets.

(e) Financial statements of foreign operations are treated as integral operations and translated for Assets and liabilities at rates prevailing at the end of the year and Net revenues at the average rate for the year.

(f) Exchange differences arising on such translation are recognized as income or expense of the period in which they arise.

(g) Forward contracts, other than those entered into to hedge foreign currency risk on unexecuted firm commitments or highly probable forecast transactions, are treated as foreign currency transactions and accounted accordingly as per Accounting Standard (AS) 11 The Effects of Changes in Foreign Exchange Rates. Exchange differences arising on such contracts are recognized in the period in which they arise.

IX. Taxes on Income

Provision for taxation comprises of Current Tax and Deferred Tax .Current tax provision has been made after considering reliefs and deduction available under Income Tax Act, 1961. Deferred tax resulting from "timing differences" between taxable and accounting income is accounted for using the tax rates and laws that are enacted or substantively enacted as on the balance sheet date. The deferred tax assets is recognized and carried forward only to the extent the assets can be realized in future. However, where there is unabsorbed depreciation or carry forward losses under taxation laws, deferred tax assets are recognized only if there is virtual certainty of realization of such assets. Deferred tax assets are reviewed as at each Balance sheet date.

Minimum Alternate Tax (MAT) Credit: MAT credit is recognized, as an Asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified year. In the year in which the Minimum Alternative tax (MAT) credit becomes eligible to be recognized as an asset in accordance with the recommendation contained in Guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the statement of profit and loss and shown as MAT Credit Entitlement. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that Company will pay normal Income Tax during the specified period.

X. Employee Benefits

(a) The Company''s contribution in respect of provident fund is charged to Profit and Loss Account each year on accrual basis.

(b) Short term compensated absences are provided based on past experience.

(c) With respect to gratuity liability, Company contributes to Life Insurance Corporation of India (LIC) under LIC''s Group Gratuity policy. Gratuity liability as determined on actuarial basis by the independent valuer. Actuarial gain/loss is charged to Profit and Loss Account.

XI. Borrowing Costs

(a) Borrowing Cost attributable to acquisition and construction of qualifying assets are capitalized as part of the cost of such assets up to the date when such assets are ready for intended use.

(b) Other borrowing cost is charged to Profit and Loss Account.

XII. Provisions, Contingent Liabilities and Contingent Assets

Provision is recognized only when there is a present obligation as a result of past events and when reliable estimates of the amount of the obligation can be made. Contingent liability is disclosed for:-

(a) Possible Obligations which will be confirmed only by future events not wholly within the control of the company or

(b) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or reliable estimates of the amount of the obligation cannot be made. Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

XIII. Impairment of Assets

The Company assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Profit and Loss Account. If at the Balance Sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount.

XIV. Application of Securities Premium Account

Share issue expenses are charged first against available balance in Securities Premium Account.

XV. Earning Per Share

The Company reports basic and diluted earnings per share in accordance with the Accounting Standard - 20- ''Earning per Share'' prescribed by the Companies (Accounting Standard) Rules 2006. Basic Earning per Share is computed by dividing the net profit or loss for the year by the weighted average number of Equity Share outstanding during the year. Diluted earning per share is computed by dividing the net profit or loss for the year by the weighted number of equity shares outstanding during the year as adjusted for the effects of all dilutive potential equity share.

XVI. Investments

Current Investments are carried at lower of cost and Market Value. Non Current (Long Term) investments are stated at cost. Provision for diminution in the value of Non Current investments is made only if such a decline is other than temporary.

XVII. Government Grant:

Grant from the government are recognized when there is reasonable assurance that;

I. The Company will comply with the conditions attached to them and

II. The grant will be received.

Government grants related to revenue are recognized on systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs which they are intended to compensate. Such grants are deducted in reporting the related expenses.

When company receives non-monetary grants, the asset is accounted for on the basis of its acquisition cost. In case non-monetary asset is given free of cost it is recognized at a nominal value.

(i) Right to vote, dividend and restriction attached to each class of issued capital to be disclosed.

All the Shareholders whose name is entered in the Register of Members of the Company shall enjoy the same voting right and be subject to the same liabilities as all other shareholders of the same class.

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Mar 31, 2015

I. Basis for preparation of financial accounting

The financial statement of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provision of the Companies Act, 2013 ("the 2013 Act') / Companies Act, 1956 ("the 1956 Act"), as applicable.

These Financial statements are prepared under historical cost conventions on accrual.

II. Use of Estimates

The presentation of financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities on the date of financial statements and the reported amount of revenues and expenses during the year. Difference between the actual result and estimates are recognised in the period in which reason are known / materialized.

III. Fixed Assets and Depreciation /Amortization

A. Tangible Assets

Tangible Fixed Assets are stated at historical cost including borrowing costs expenditure directly attributable to the acquisition of the asset and net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the assets less accumulated depreciation there on and impairment losses if any. Leasehold land having lease of 99 years or more are treated as free hold land only and other leases are amortized over the period of lease.

Subsequent expenditure related to an item of tangible assets are added to its book value only if they increase the future benefits from the existing assets beyond its previously assessed standard of performance.

B. Intangible Assets

Intangible assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortised on a straight line basis over their estimated useful lives.

C. Capital Work in Progress

Cost of fixed assets not ready for use before the balance sheet date is disclosed as capital work in progress.

Depreciation:

The depreciation during the year has been provided on straight line basis as per Schedule II of the Companies act 2013 since the acquisition of respective fixed assets. In earlier years depreciation was provided as per the Schedule XIV of Companies Act 1956. The depreciation on fixed assets is provided on the straight line method considering the useful life and residual value of respective fixed asset.

1 SIGNIFICANT ACCOUNTING POLICIES TO FINANCIAL STATEMENTS

The useful life of assets as adopted by the company as per Old Schedule XIV and New Schedule II of the Companies Act is listed as under:

Perticulars Previous Useful Revised Useful Life Life Leasehold Land 20 20

Building (Factory) 30 30

Building (Residential) 20 60

Building (Fences, Wells, etc) 30 5

Road 30 5 to 10

Plant and Machinery 20 15

Plant and Machinery (Heavy 20 20 to 25* Forging Process Machinery)

Electrically Operated Vehicles 20 8

Electrical Installations 20 10

Laboratory Equipment 20 10

Windmill 20 22

Computers, Server & Networking 6 3 Device

Furniture 15 10

Office equipment 20 5

Vehicles - Four Wheeler 10 8

Vehicles - Two Wheeler 10 10

* Based on an internal technical evaluation made by the company and on past experience , estimated useful life of Plant and machinery listed above best represent the period over which the management expects to use these assets . However the useful lives for these asset is different from that prescribed in schedule II of the Act.

IV. Inventories

Cost of Inventories have been computed to include all cost of Purchases, Cost of Conversion and other costs incurred in bringing the inventories to their present location and condition.

Inventories are valued at lower of cost or net realizable value using the First in First out (FIFO) basis.

V. Revenue Recognition

Sales of products and services are recognised when risk and rewards of ownership at of the products are passed on to the customers, which is generally on dispatch of goods. Sales are inclusive of Excise Duty but excluding sales tax / Value Added Tax and export incentives. Export incentives are accounted on accrual basis. Revenue from job charges is recognised completion of job work. Interest incomes are recognised on time proportion basis.

VI. Cash flow statement

Cash flows are reported using the indirect method whereby profit before tax is adjusted for the effects of the transactions of a non cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating; financing and investing activities of the company are segregated.

VII. Leases

Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged against profits on straight line basis over the lease period.

VIII. Foreign Currency Transactions, Foriegn Operations and Forward Contracts and Derivatives

(a) Transactions denominated in foreign currencies are recorded at the rate prevailing on date of transaction

(b) In respect of monetary items denominated in foreign currency at the year-end are translated at the year-end rates.

(c) Any income or expenses on account of exchange differences either on settlement or on transactions are recognised in the Profit and Loss Account.

(d) Exchange difference relating to long term foreign currency monetary item to the extent they are used for financing the acquisition of fixed assets are adjusted from the cost of such fixed assets.

(e) Financial statements of foreign operations are treated as integral operations and translated for Assets and liabilities at rates prevailing at the end of the year and Net revenues at the average rate for the year.

(f) Exchange differences arising on such translation are recognised as income or expense of the period in which they arise.

(g) Forward contracts, other than those entered into to hedge foreign currency risk on unexecuted firm commitments or highly probable forecast transactions, are treated as foreign currency transactions and accounted accordingly as per Accounting Standard (AS) 11 The Effects of Changes in Foreign Exchange Rates. Exchange differences arising on such contracts are recognised in the period in which they arise.

IX. Taxes on Income

Provision for taxation comprises of Current Tax and Deferred Tax. Current tax provision has been made after considering reliefs and deduction available under Income Tax Act, 1961. Deferred tax resulting from "timing differences" between taxable and accounting income is accounted for using the tax rates and laws that are enacted or substantively enacted as on the balance sheet date. The deferred tax assets is recognised and carried forward only to the extent the assets can be realized in future. However, where there is unabsorbed depreciation or carry forward losses under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realization of such assets. Deferred tax assets are reviewed as at each Balance sheet date.

Minimum Alternate Tax (MAT) Credit: MAT credit is recognised, as an Asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified year. In the year in which the Minimum Alternative tax (MAT) credit becomes eligible to be recognised as an asset in accordance with the recommendation contained in Guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the statement of profit and loss and shown as MAT Credit Entitlement. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that Company will pay normal Income Tax during the specified period.

X. Employee Benefits

(a) The Company's contribution in respect of provident fund is charged to Profit and Loss Account each year on accrual basis.

(b) Short term compensated absences are provided based on past experience.

(c) With respect to gratuity liability, Company contributes to Life Insurance Corporation of India (LIC) under LIC's Group Gratuity policy. Gratuity liability as determined on actuarial basis by the independent valuer. Actuarial gain/ loss is charged to Profit and Loss Account.

XI. Borrowing Costs

(a) Borrowing Cost attributable to acquisition and construction of qualifying assets are capitalized as part of the cost of such assets up to the date when such assets are ready for intended use.

(b) Other borrowing cost is charged to Profit and Loss Account.

XII. Provisions, Contingent Liabilities and Contingent Assets

Provision is recognised only when there is a present obligation as a result of past events and when reliable estimates of the amount of the obligation can be made. Contingent liability is disclosed for:-

(a) Possible Obligations which will be confirmed only by future events not wholly within the control of the company or

(b) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or reliable estimates of the amount of the obligation cannot be made. Contingent Assets are not recognised in the financial statements since this may result in the recognition of income that may never be realized.

XIII. Impairment of Assets

The Company assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Profit and Loss Account. If at the Balance Sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount.

XIV. Application of Securities Premium Account

Share issue expenses are charged first against available balance in Securities Premium Account.

XV. Earning Per Share

The Company reports basic and diluted earnings per share in accordance with the Accounting Standard - 20- 'Earning per Share' prescribed by the Companies (Accounting Standard) Rules 2006. Basic Earning per Share is computed by dividing the net profit or loss for the year by the weighted average number of Equity Share outstanding during the year. Diluted earning per share is computed by dividing the net profit or loss for the year by the weighted number of equity shares outstanding during the year as adjusted for the effects of all dilutive potential equity share.

XVI. Investments

Current Investments are carried to lower of cost and Market Value. Non Current(Long Term) investments are stated at cost. Provision for diminution in the value of Non Current investments is made only if such a decline is other than temporary.

(a) Right to vote , dividend and restriction attached to each class of issued capital to be disclosed.

All the Shareholders whose name is entered in the Registered of Members of the Company shall enjoy the same voting rights and be subject to the same liabilities as all other shareholder of the same class.

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Mar 31, 2014

I. Basis of Accounting

These Financial statements are prepared under historical cost conventions on accrual basis in accordance with the Generally Accepted Accounting principles in India and Accounting Standard (AS) as notified under Companies (Accounting Standard) Rules, 2006 (as amended).

II. Use of Estimates

The presentation of Financial Statements in conformity with the generally accepted principles requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of financial statements and the reported amount of revenues and expenses during the year. Difference between the actual result and estimates are recognised in the period in which reason are known / materialised.

III. Fixed Assets and Depreciation / Amortisation

A. Tangible Assets

Tangible Fixed Assets are stated at historical cost including expenditure directly attributable to the acquisition of the asset. Borrowing costs directly attributable to the construction or manufacturing of qualifying assets are capitalised as part of the cost less accumulated depreciation there on and impairment losses if any. Depreciation on tangible assets is provided on Straight Line Method at the rates specified in Schedule XIV the Companies Act, 1956 except Residential building, which is depreciated at 5% of Straight Line Basis. Leasehold land

having lease of 99 years or more are treated as free hold land only and other leases are amortised over the period of lease.

B. Intangible Assets

Intangible assets are stated at the consideration paid for the acquisition less accumulated amortisation. The same are amortised at rate of 16.25% of Straight Line Basis.

C. Capital Work in Progress

Cost of fixed assets not ready for use before the balance sheet date is disclosed as capital work in progress. Advances paid towards the acquisition of fixed assets outstanding as of each balance sheet date is disclosed as capital advance.

IV. Leases

Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged against profits on straight line basis over the lease period.

V. Inventories

Cost of Inventories have been computed to include all cost of Purchases, Cost of Conversion and other costs incurred in bringing the inventories to their present location and condition.

Inventories are valued at lower of cost or net realisable value using the First in First out (FIFO) basis.

VI. Revenue Recognition

Sales of products and services are recognised when risk and rewards of ownership at of the products are passed on to the customers, which is generally on dispatch of goods. Sales are inclusive of Excise Duty but excluding sales tax / Value Added Tax and export incentives. Export incentives are accounted on accrual basis. Revenue from job charges is recognised on dispatch of material and in accordance with terms of job work. Interest incomes are recognised on time proportion basis.

VII. Foreign Currency Transactions

(a) Transactions denominated in foreign currencies are recorded at the rate prevailing on date of transaction.

(b) In respect of monetary items denominated in foreign currency at the year-end are translated at the year-end rates.

(c) Any income or expenses on account of exchange differences either on settlement or on transactions are recognised in the Profit and Loss Account.

(d) Exchange difference relating to long term foreign currency monetary item to the extent they are used for financing the acquisition of fixed assets are added to or subtracted from the cost of such fixed assets.

VIII. Taxes on Income

Provision for taxation comprises of Current Tax and Deferred Tax .Current tax has provision has been made after considering reliefs and deduction available under Income Tax Act, 1961. Deferred tax resulting from "timing differences" between taxable and accounting income is accounted for using the tax rates and laws that are enacted or substantively enacted as on the balance sheet date. The deferred tax assets is recognised and carried forward only to the extent the assets can be realised in future. However, where there is unabsorbed depreciation or carry forward losses under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each Balance sheet date.

Minimum Alternate Tax (MAT) Credit: MAT credit is recognised, as an Asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified year. In the year in which the Minimum Alternative tax (MAT) credit becomes eligible to be recognised as an asset in accordance with the recommendation contained in Guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the statement of profit and loss and shown as MAT Credit Entitlement. The Company reviews the same at each balance sheet date

and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that Company will pay normal Income Tax during the specified period.

IX. Employee Benefits

(a) The Company''s contribution in respect of provident fund is charged to Profit and Loss Account each year on accrual basis.

(b) Short term compensated absences are provided based on past experience.

(c) With respect to gratuity liability, Company contributes to Life Insurance Corporation of India (LIC) under LIC''s Group Gratuity policy. Gratuity liability as determined on actuarial basis by the independent valuer. Actuarial gain/loss is charged to Profit and Loss Account.

X. Borrowing Costs

(a) Borrowing Cost attributable to acquisition and construction of qualifying assets are capitalised as part of the cost of such assets up to the date when such assets are ready for intended use. The borrowing cost eligible for capitalisation is being netted off against any income arising on the temporary investment of those borrowings.

(b) Other borrowing cost is charged to Profit and Loss Account.

XI. Provisions, Contingent Liabilities and Contingent Assets

Provision is recognised only when there is a present obligation as a result of past events and when reliable estimates of the amount of the obligation can be made. Contingent liability is disclosed for:-

(a) Possible Obligations which will be confirmed only by future events not wholly within the control of the company or

(b) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or reliable estimates of the amount of the obligation cannot be made. Contingent Assets are not recognised in

the financial statements since this may result in the recognition of income that may never be realised.

XII. Impairment of Assets

The Company assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Profit and Loss Account. If at the Balance Sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount.

XIII. Application of Securities Premium Account

Share issue expenses are charged first against available balance in Securities Premium Account.

XIV. Project Development Expense Pending Adjustment

Expenditure incurred during developmental and preliminary stages of the Company''s new project are charged to Capital Work in progress. Advance paid for the Project development are charged to Capital Advances.

XV. Earning Per Share

The Company reports basic and diluted earnings per share in accordance with the Accounting Standard - 20-'' Earning per Share'' prescribed by the Companies (Accounting Standard) Rules 2006.Basic Earning per Share is computed by dividing the net profit or loss for the year by the weighted average number of Equity Share outstanding during the year. Diluted earning per share is computed by dividing the net profit or loss for the year by the weighted number of equity shares outstanding during the year as adjusted for the effects of all dilutive potential equity share.

XVI. Cash flow statement

Cash flows are reported using the indirect method whereby profit before tax is adjusted for the effects of the transactions of a non cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating; financing and investing activities of the company are segregated.

(a) Right to vote , dividend and restriction attached to each class of issued capital to be disclosed.

All the Shareholders whose name is entered in the Registered of Members of the Company shall enjoy the same voting rights and be subject to the same liabilities as all other shareholder of the same class.

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Mar 31, 2012

I. Basis of Accounting

These Financial statements are prepared under historical cost conventions on accrual basis in accordance with the Generally Accepted Accounting principles in India and Accounting Standard (AS) as notified under Companies (Accounting Standard) Rules, 2006 (as amended), Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI).

ii. Use of Estimates

The presentation of Financial Statements in conformity with the generally accepted principles requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of financial statements and the reported amount of revenues and expenses during the year. Difference between the actual result and estimates are recognised in the period in which reason are known/materialised.

iii. Fixed Assets and Depreciation/Amortisation

a. Tangible Assets

Tangible Fixed Assets are stated at historical cost including expenditure directly attributable to the acquisition of the asset. Borrowing costs directly attributable to the construction or manufacturing of qualified assets are capitalised as part of the cost less accumulated depreciation there on and impairment losses if any. Depreciation on tangible assets is provided on Straight Line Method at the rates specified in Schedule XIV the Companies Act, 1956. Except Residential building, which is depreciated at 5% of Straight line basis. Leasehold land having lease of 99 years or more are treated as free hold land only and other leases are amortised over the period of lease.

b. Intangible Assets

Intangible assets are stated at the consideration paid for the acquisition less accumulated amortisation

c. Capital Work in Progress

Cost of fixed assets not ready for use before the balance sheet date is disclosed as capital work in progress. Advances paid towards the acquisition of fixed assets outstanding as of each balance sheet date is disclosed as capital advance.

iv. Leases

Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lesser are charged against profits as per the terms of the lease agreement over the lease period.

v. Inventories

Cost of Inventories have been computed to include all cost of Purchases, Cost of Conversion and other costs incurred in bringing the inventories to their present location and condition.

i. Raw materials and components, stores and spares and packing material are valued at lower of cost or Net realisable value. The costs are ascertained using the First in First out (FIFO) basis.

ii. Work-in-progress and finished goods are valued at the lower of cost or Net Realisable Value.

iii. Scrap is valued at Net Realisable Value.

vi. Revenue Recognition

Sales of products and services are recognised when risk and rewards of ownership of the products are passed on to the customers, which is generally on dispatch of goods. Sales are inclusive of Excise Duty but excluding sales tax/Value Added Tax and export incentives. Export incentives are accounted on accrual basis. Revenue from job charges is recognised on dispatch of material and in accordance with terms of job work. Interest incomes are recognised on time proportion basis.

vii. Foreign Currency Transactions

Transactions denominated in foreign currencies are recorded at the rate prevailing on date of transaction. In respect of Monetary items denominated in foreign currency at the year end are translated at the year end rates. The exchange differences arising on settlement/translation are recognised in the Profit and Loss Account.

viii. Taxes on Income

Provision for taxation comprises of Current Tax and Deferred Tax .Current tax has provision has been made the basis of reliefs and deduction available under Income Tax Act, 1961.Deferred tax resulting from "timing differences" between taxable and accounting income is accounted for using the tax rates and laws that are enacted or substantively enacted as on the balance sheet date. The deferred tax assets is recognised and carried forward only to the extent the assets can be realised in future. However, where there is unabsorbed depreciation or carry forward losses under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each Balance sheet date.

ix. Employee Benefits

(a) The Company's contribution in respect of provident fund is charged to Profit and Loss Account each year

(b) With respect to gratuity liability, Company contributes to Life Insurance Corporation of India (LIC) under LIC's Group Gratuity policy. Gratuity liability as determined on actuarial basis by the independent valuer is charged to Profit and Loss Account.

x. Borrowing Costs

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised. Other borrowing costs are recognised as an expense in the period which they are incurred.

xi. Provisions, Contingent Liabilities and Contingent Assets

Provision is recognised only when there is a present obligation as a result of past events and when reliable estimates of the amount of the obligation can be made. Contingent liability is disclosed for:-

(i) Possible Obligations which will be confirmed only by future events not wholly within the control of the Company or

(ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or reliable estimates of the amount of the obligation cannot be made. Contingent Assets are not recognised in the financial statements since this may result in the recognition of income that may never be realised.

xii. Impairment of Asset

The Company assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Profit and Loss Account. If at the Balance Sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount.

xiii. Investments

Long Term Investments are valued at cost of acquisition. No provision for diminution in value, if any, has been made as these are long-term investments and in the opinion of the management any decline is temporary.

xiv. Government Grants/Subsidy

The Government Grants/Subsidy is recognised on accrual basis.

xv. Application of Securities Premium Account

Share issue expenses are charged first against available balance in Securities Premium Account.

xvi. Project Development Expense Pending Adjustment

Expenditure incurred during developmental and preliminary stages of the Company's new project are charged to Capital Work in progress. Advance paid for the Project development are charged to Capital Advances.

xvii. Earnings Per Share

The Company reports basic and diluted earnings per share in accordance with the Accounting Standard - 20-' Earning per Share' prescribed by the Companies (Accounting Standard) Rules 2006. Basic Earnings per Share is computed by dividing the net profit or loss for the year by the weighted average number of Equity Share outstanding during the year. Diluted earnings per share is computed by dividing the net profit or loss for the year by the weighted number of equity shares outstanding during the year as adjusted for the effects of all dilutive potential equity share.

xviii.Cash flow statement

Cash flows are reported using the indirect method whereby profit before tax is adjusted for the effects of the transactions of a non cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating; financing and investing activities of the Company are segregated.