NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST MARCH, 2016

1. NATURE OF OPERATIONS

BIRLA ERICSSON OPTICAL LIMITED'S opérations are brdominantly classified into Wires and Cables comprising primarily Télécommunications Cables and other types of Wire and Cables.

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation:

The financial statements of the Company are brpared and brsented as a going concern basis under the historical - cost convention and comply in all material respects with accounting principles generally accepted in India, the applicable Accounting Standards as notified under the relevant provisions of the Companies Act, 2013 as amended/ changed from time to time. All income & expenditure are accounted for on accrual basis except certain insurance claims and government subsidies/incentives, which are recognised on acceptance basis, as and when the amount whereof can be ascertained with reasonable certainty.

(b) Use of Estimates:

The brparation of financial statements in conformity with generally accepted accounting principles in India requires management to make adjustments, estimates and assumptions that affect the reported amount of revenue, expenses, assets and liabilities and disclosure of contingent liabilities on the date of the Financial Statements and the results of operations during the reporting year end. Although these estimates and associated assumptions are based upon historical experiences and various other factors besides management's best knowledge of current events and actions, actual results could differ from these estimates. The estimate and underlying assumptions are reviewed on a periodic basis. Any revision in the accounting estimate is recognised in the period in which the results are known/materialize.

(c) Revenue Recognition:

Revenue recoginsed to the extent that it is probable that the economic benefits will follow to the Company and the revenue can be reliably measured.The following specific recognition criteria must also be met before revenue is recoginsed.

Revenue from the sale of products is recognised on transfer of all significant risks and rewards incidental to ownership to the customer which generally coincides with despatch of products to customers. Sale of products includes excise duty. Revenue to the extent of Price Variation disputes, if any, which are subjected to resolution through arbitration is recognized based on interim relief granted by a Court and/or after receipt of revenue in execution of the final award in favour of the Company, as the case may be.

Interest income is recognised on time proportion basis. Dividend income is recognised when the right to receive payment is established.

Export incentives, etc. are accounted for in the year of export.

(d) Fixed Assets including Intangible Assets:

Tangible Assets are stated at cost less accumulated debrciation and amortisation. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to working condition for its intended use and adjustments arising from foreign exchange currency variation on monetary items attributable to debrciable fixed assets. Expenditure for additions, improvements, renewals and insurance spares (determined on the basis of irregular use) are capitalised and expenditure for repairs and maintenance are charged to the Statement of Profit and Loss. When assets are sold or discarded their cost and accumulated debrciation are removed from the accounts and any gain or loss resulting from their disposal is included in the Statement of Profit and Loss.

Intangible Assets are recorded at consideration paid for acquisition of such assets and are carried at cost less accumulated amortisation.

(e) Debrciation and Amortisation:

Debrciation on Tangible Assets is provided on Straight Line Method based on the life of the asset specified in Schedule II of the Companies Act, 2013/useful life assessed based on technical evaluation of relevant class of assets, on pro-rata basis from the date, the assets are put to use. Debrciation on sale/disposal of assets is provided upto the month prior to the month in which the assets are sold or disposed off.

The Company has estimated the following useful life to provide debrcation on its Fixed

S.No.

Nature of Assets Useful Life Considered

1 Leasehold Land (Over the Period of Lease) 30 to 99 Years

2 Buildings (as per Schedule II) 30/60 Years

3 Plant & Equipments (as per Technical Evaluation) 4 to 10 Years

4 Furniture & Fixtures (as per Schedule II) 10 Years

5 Office Equipments (as per Technical Evaluation) 3 Years

6 Vehicles (as per Schedule II) 8 Years

An intangible asset is measured at cost and amortised so as to reflect the pattern in which the assets economic benefits are consumed. The useful life has been estimated as five years.

(f) Impairment:

The carrying amount of the fixed assets is reviewed at each Balance Sheet date for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognised in the Financial Statement when the carrying amount of fixed assets exceeds the assessed estimated recoverable amount. The recoverable amount is the greater of assets' net selling price or its value in use. An impairment loss is reversed if there has been change in recoverable amount and such loss either no longer exists or has decreased. Impairment loss/reversal thereof is adjusted to the carrying value of the respective assets.

(g) Government Grants and Subsidies:

Grants and subsidies (including industrial investment promotion incentives linked to fixed capital investment in plant and machinery) from the Government are recognised when there is reasonable assurance that the conditions attached to them will be complied and grants/subsidy will be received. Government subsidy/incentives inextricably based upon and linked to fixed capital investments in plant and machinery for setting up a new industrial undertaking or for substantial expansion/technological upgradation/diversification of an existing industrial undertaking where no repayment is stipulated, are credited to Capital Reserve.

(h) Investments:

Investments which are readily realisable and intended to be held for not more than a year from the date on which such investments are made, are classified as current investments. All other investments are classified as non-current (long-term) investments. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties. Current investments are carried in the Financial Statements at lower of cost and quoted/fair value determined on an individual investment basis. Non-current investments are stated/carried at cost. However, provision for diminution in the value of Non-current (long term) investments is made only if such decline is other than temporary. On sale of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the Statement of Profit and Loss.

(i) Leases:

Where the Company is the Lessor:

Assets subject to operating leases are included in fixed assets. Lease income is recognised in the Statement of Profit and Loss on a straight line basis over the lease term. Costs, including debrciation are recognised as an expense in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs, etc are recognised immediately in the Statement of Profit and Loss.

Where the Company is the Lessee:

Leases where the lessor effectively retains substantially all the risks and benefits of ownership are classified as operating leases. Operating lease payments are recognised as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term.

(j) Inventories:

Inventories except scrap materials are valued at lower of cost or net realisable value. Scrap materials are valued at estimated net realisable value. Cost is computed on the transaction moving weighted average basis and is net of cenvat/vat. Cost of finished goods and material under process is determined by taking direct materials, labour cost and related manufacturing overheads including debrciation based on normal operating capacity. Finished goods and scrap materials also include excise duty. Provision is made for cost of obsolescence and other anticipated losses, whenever considered necessary.

(k) Foreign Currency Transactions:

(i) Exchange différence arising on the settlement of monetary items at rates différent from those at which they were initially recorded during the year, or reported in brvious Financial Statements, are recognised as income or as expense in the year in which they arise. Any income or expense on account of exchange différence either on settlement or on translation is recognised in the Statement of Profit and Loss, except exchange differences arising on the settlement of long-term monetary items or on reporting company's long-term monetary items at rates different from those at which they were initially recorded during the year or reported in brvious financial statements, are capitalised as part of the debrciable fixed assets to which the long-term monetary items relate and debrciated over the remaining balance life of such assets and in other cases amortised over the balance period of such long-term foreign currency monetary items.

(ii) In case of forward exchange contracts, the brmium or discount arising at the inception of such contracts is amortised as income or expense over the life of contract as well as exchange difference on such contract, i.e. difference between the exchange rate at the reporting/settlement date and the exchange rate on the date of inception/the last reporting date, is accounted for as income/expense for the period.

(l) Employée Benefits:

The Company makes regular contributions to recognised Provident Fund/Family Pension Fund and also to duly constituted and approved Superannuation Fund and Gratuity Fund, which are recognised as expense in the Statement of Profit and Loss during the period in which the employee renders the related service. Gratuity, Pension and Leave Encashment benefits payable as per Company's schemes are considered defined benefit schemes and charged to the Statement of Profit and Loss on the basis of actuarial valuation made at the end of each financial year by independent actuaries using Projected Unit Cost Method. For the purpose of brsentation of defined benefit plans, the allocation between short term and long term provisions is made as determined by the independent actuaries. Actuarial gains and losses comprise experience adjustments and effects of changes in actuarial assumptions are recognised in the Statement of Profit and Loss in the year in which they arise. Ex-gratia or other amount disbursed on account of selective employees separation scheme are charged to the Statement of Profit and Loss.

(m) Borrowings Cost:

Interest and other borrowing cost directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective asset. All other interest and borrowing costs are expensed in the period they accrue and occur.

(n) Taxes on Income:

Tax expense for the relevant period comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961. Minimum Alternate Tax (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 period. In the year in which the MAT credit becomes eligible to be recognised as an asset in accordance with the recommendations 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. Deferred Tax is measured based on the tax rates and tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax is recognised, subject to consideration of prudence, on all timing differences between taxable income and accounting income that originate in one period and are capable of being reversed in one or more subsequent periods. However, deferred tax assets arising on account of brought forward losses and unabsorbed debrciation are recognised only when there is virtual certainty of realisation of such assets backed by convincing evidence. Deferred tax assets are reviewed and assessed at the Balance Sheet date to reflect the amount that is reasonably/virtually certain (as the case may be) to be realised.

(o) Provisions, Contingent Liabilities and Contingent Assets:

Provisions are recognised in the Accounts when there is a brsent obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of obligation. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates. Contingent Liabilities are not recognised but are disclosed in the Financial Statements. Contingent Assets neither recognised nor disclosed in the Financial Statements.

(p) Cash and Cash Equivalents:

Cash and Cash equivalent in the cash flow statement comprises cash at bank and in hand and short-term investments with an original maturity of three months or less.

2. Contingent Liabilities and Commitments (to the extent not provided for):

(a) Contingent Liabilities:

(i) Claims against the Company not acknowledged as debt Rs. Nil (Rs. 0.32 lac).

(ii) Disputed Sales tax claim under appeal Rs.108.58 lacs (Rs.108.58 lacs).

(iii) The Company has an ongoing process for collection and submission of the relevant declaration forms under the Sales Tax Act to the concerned authorities and the Company does not foresee any liability in this regard.

(iv) Bills of Exchange under Letter of Credit discounted with a bank and outstanding at the end of the year Rs. 830.15 lacs (Rs. 380.31 lacs).

(v) Cross Corporate Guarantee given in connection with Loan/Credit facilities aggregating to Rs.148461.00 lacs (outstanding as on 31st March, 2016, Rs. 47838.47 lacs)to a joint venture [Refer Note No.43(a)].

The future cash outflow in respect of items (i) to (ii) above is determinable only on receipt of the décisions/ judgements in the cases pending at various forums and authorities concerned.

(b) Commitments:

(i) Estimated amount of contracts remaining to be executed on Capital Account (Net of advances) and not provided for Rs. 35.79 lacs (Rs.1739.43 lacs)

(ii) Derivatives related commitments are disclosed in Note No. 35.

4. Exceptional Item for the year ended 31st March, 2016, amounting to Rs. 477.52 lacs, rebrsents settlement of claim(s) of an overseas supplier through an out of court settlement of various long standing disputes/claims pending in different courts in India and Arbitration in Japan.

5. The Company is eligible for certain incentives in respect of its investment in plant and machinery towards expansion/ technical upgradation of the OFC Unit pursuant to confirmation received under the Industrial Promotion Policy, 2014 read with Madhya Pradesh Nivesh Protsahan Yojna, 2014 of the Government of Madhya Pradesh. Accordingly, the Company is eligible, interalia, VAT and CST assistance by way of reimbursement (Net of input tax rebate on the amount of VAT and CST) effective from 27th October, 2015, for a period of 10 years, subject to compliance with certain conditions attached thereto. The same shall be appropriately dealt with in the Books of Account as and when the Company's claim for reimbursement from time to time during the eligibility period is formally approved by the designated competent authority of the State Government.

6. The Company has exercised option provided in Para - 46A of Accounting Standard - 11 on "Effects of Changes in Foreign Exchange Rates" with regard to the treatment of foreign exchange fluctuation on long term monetary liabilities relate to acquisition of fixed assets, in which case they are adjusted to the carrying cost of such assets. This has resulted in increase in profit by Rs.110.24 lacs (net of debrciation of Rs.3.64 lacs) for year ended 31st March, 2016.

7. In the opinion of the management, the decline in the market value of a quoted Non-current Investment (trade) (carrying cost Rs.1804.88 lacs) by Rs.403.78 lacs (Rs.981.56 lacs) at the year end is temporary, in view of the strategic long term nature of the investment and assets base/intrinsic worth of the investee company and hence, does not call for any provision there against.

8. During the brvious year, a fire accident occurred in the factory brmises on October 27, 2014. The Company has lodged claim with the Insurance Company towards value of raw material damaged, replacement value of damaged equipments and expenses incurred on repairing of building. The Surveyor has filed interim report with the Insurance Company. Pending settlement of final claim, during the financial year the Company has received on account payment of Rs. 500.00 lacs from the insurer. The Management is hopeful of settlement and recovery of remaining claim amount.

9. The Company has taken certain warehouses/ office brmises under operating lease agreements. The lease agreements generally have an escalation clause and are renewable or cancellable by mutual consent on mutually agreed terms. There are no restrictions imposed by lease agreements. The aggregate lease rental of Rs. 53.51 lacs (Rs. 31.46 lacs) are charged to the Statement of Profit and Loss.

In respect of an office brmise taken on operating lease by the Company, the Company had charged to the Statement of Profit and Loss Rs.10.63 lacs (Rs. 23.95 lacs). [Net of rent recovered of Rs. 85.32 lacs(Rs. 20.95 lacs)].

10. There is no Impairment of Assets during the year

45. The Company has regrouped/reclassified brvious year's figures to conform to current year's classification/disclosures. The figures in brackets are those in respect of the brvious accounting year.

As per our attached report of even date

For V. Sankar Aiyar & Co.

Chartered Accountants

ICAI Firm Registration No. 109208W

R .Raghuraman

Partner

Membership No.081350

Harsh V.Lodha (DIN: 00394094) Chairman

D.R.Bansal (DIN: 00050612) Directors

R.C.Tapuriah (DIN: 00395997) Directors

Aravind Srinivasan (DIN: 00088037) Directors

Arun Kishore (DIN: 00177831) Directors

K.Raghuraman (DIN: 00320507) Directors

Archana Capoor (DIN: 01204170) Directors

R.Sridharan Manager & CEO

Somesh Laddha DGM (Finance & Accounts) & Secretary

New Delhi, May 18, 2016