Note 1: Accounting Policies

1.1 Accounting Concepts:

Financial statements are brpared and brsented in accor­dance with the Generally Accepted Accounting Principles (GAAP) in India under historical cost convention on accrual basis and comply all material aspects with the Accounting Standards and the relevant provisions brscribed in the Companies Act, 2013, besides the pronouncements/ guide­lines of the Institute of Chartered Accountants of India and the Securities and Exchange Board of India.

1.2 Use of Estimates:

The brparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial state­ments and reported amount of revenues and expenses dur­ing the reporting period. Although these estimates are based on the management's best knowledge of current events and actions, the actual outcome may be different from the esti­mates. Difference between actual results and estimates are recognized in the period in which the results are known or materialize.

1.3 Fixed Assets:

a. Fixed assets are stated at cost less accumulated debrcia­tion. Cost of acquisition of fixed assets is net of CENVAT / Input VAT Credit and inclusive of freight, duties, taxes, inci­dental expenses including interest on specific borrowings as apportioned.

b. Expenditure during construction/erection period is included under Capital Work-in-Progress and allocated to the respec­tive fixed assets on completion of construction/erection.

1.4 Classification of Assets and Liabilities as Current and Non-Current:

All assets and liabilities are classified as current and non-current as per the Company's normal operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. Based on the nature of products and the time be­tween the acquisition of assets for processing and their realisation in cash and cash equivalents, 12 months has been considered by the Company for the purpose of current - non-cur­rent classification of assets and liabilities.

1.5 Investments:

Investments are stated at cost, inclusive of all expenses relating to acquisition. Provision for diminution in the mar­ket value of long-term investments is made, if in the opinion of the Management such diminution is permanent in na­ture.

1.6 Inventories:

Inventories are valued at the lower of the cost (net of CENVAT / Input VAT Credit) or net realisable value (except by-products, waste and scrap which are valued at estimated net realisable value). Cost is computed on monthly weighted average basis. Finished Goods and Process Stock include cost of conversion and other costs incurred in bringing the inventories to their brsent condition and location.

1.7 Borrowing Costs:

Borrowing cost is charged to Statement of Profit and Loss except cost of specific borrowing for acquisition of qualify­ing assets which is capitalised till date of commercial use of the said asset.

1.8 Sales:

Sales are inclusive of Excise Duty and net of rebates and Sales Tax.

1.9 Employee Benefits:

(i) Defined Contribution Plans

Employee Benefits in the form of Employee Provident Pen­sion Funds are considered as Defined Contribution plans and the contributions are charged to the Statement of Profit & Loss of the year when the contributions to the said fund are due.

(ii) Defined Benefit Plans

Retirement Benefit in the form of Gratuity, is considered as Defined Benefit Obligation and is provided for on the basis of an actuarial valuation using the projected unit credit method as at the date of Balance Sheet.

(iii) Other Long-Term Benefits

Long-Term Compensated Absences are provided on the ba­sis of an actuarial valuation using the Projected Unit Credit Method as at the date of Balance Sheet. Actuarial gains / losses, if any, are immediately recognised in the Statement of Profit & Loss.

1.10 Debrciation:

Debrciation on buildings and plant and machinery is charged under straight-line method and on the remaining assets under written down value method at the rates speci­fied in Schedule II of the Companies Act, 2013.

1.11 Foreign Currency Transactions:

Transactions on account of foreign currency are accounted for at the rates brvailing on the date of the transaction. Foreign Currency assets and liabilities are restated at the rates brvailing as on the date of Balance Sheet. Exchange rate differences are dealt with in the Statement of Profit and Loss. Premium or discount on forward exchange contracts are amortised and recognised in the Statement of Profit & Loss over the period of the contract.

Note 2.1:

Consequent to schedule II of the Companies Act, 2013 becoming applicable w. e. f., 1.4.2014, debrciation for the year ended 31st March, 2015 has been provided on the basis of the useful life of all the assets as brscribed under Schedule II of the Act. Accordingly the debrciation charge for the year is lower by Rs.407.30 lakhs, when compared to brvious year. Further in respect of the assets whose revised useful life has exhausted before 1.4.2014, the carrying amount of the said assets of Rs.211.39 lakhs net of deferred tax of Rs.101.53 lakhs has been adjusted to the retained earnings.

Note 2.2:

Consequent to the fire accident occured in Hindustan Petroleum Corporation Ltd. (HPCL), Refinery at Visakhapatnam on 23rd August, 2013, the Company's claim under “Loss of Profits Insurance Policy with extended fire risk coverage at Supplier Premises" is under process with the insurers. Pending admittance of Company’s claim by its insurer, the said claim has not been recognised in the books of account for the year under report.

Note 2.3: Segment information:

The Company operates only in one business segment being the manufacture of Oxo-Alcohols and there are no geographical segments to be reported.

Note 2.4: According to an internal technical assessment carried out by the Company, there is no impairment in the carrying cost of cash generating units of the Company in terms of AS – 28 issued by Companies (Accounting Standards) Rules, 2006 (amended)

Note 2.5: Previous year’s figures have been regrouped and rearranged wherever necessary to make them comparable with the current year figures

 Per our report of even date

For Brahmayya & Co.,

Chartered Accountants

C V Ramana Rao

Partner

Membership No.018545

Place: Visakhapatnam

Date : 22.05.2015

For and on behalf of the Board

M R B Punja Chairman

Dr. B B Ramaiah Managing Director

A A Krishnan Director

P Ratna Rao General Manager (Finance)

K Raghu Ram Manager (Finance) & Asst. Company Secretary

Visakhapatnam

22.05.2015