Notes forming part of the financial statements

1 Company Overview

Products:

The Company is engaged in the business of manufacture of different types of power driven pumps and industrial valves. Castings are mainly produced for captive consumption.

Operations:

The Company has factories at the following places:-

A) Irrigation and Process Pumps Division (I.P.D.) at Pimpri

Manufacturing of submersible pumps, vertical and horizontal pumps, series and non-series pumps, Multistage pumps, chemical process pumps, non-clog pumps and water pumps.

B) Power Projects Division (P.P.D.) at Chinchwad

Manufacturing of primary heat transfer pumps, moderator pumps, main boiler feed pumps and multistage condense extraction pumps, re-heater drain pumps and auxiliary boiler feed pumps.

C) Foundry Division at Vambhori

Manufacturing of steel & iron castings including for captive consumption.

D) Coimbatore Unit

Manufacturing of valves (Globe, Gate, Check, Butterfly & Ball valves).

E) Nasik Unit (Sinnar)

Established in 1995, this unit is engaged in the manufacture of high brssure and submersible pumps.

2 Significant accounting policies

2.1 Fixed assets and debrciation/amortisation:

(a) Fixed assets are stated at cost of acquisition or construction less debrciation/amortisation. Cost comprises the purchase price and other attributable costs on making the asset ready for its intended use.

(b) Debrciation/amortisation on fixed assets:

i) Debrciation is provided on the Straight Line Method (SLM)/Written down value (WDV) method over the useful lives of the assets which has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, maintenance support, etc. Taking into account these factors, the Company has decided to retain the useful life hitherto adopted for various categories of fixed assets, which are different from those brscribed in Schedule II to the Companies Act, 2013 (Act) except for server and networking (SLM), electrical installation (SLM) and furniture and fixtures (WDV) which are same as brscribed in Schedule II to the Act. Estimated useful lives of assets are as follows -

Buildings - 43 to 90 years (WDV)

Plant and Machinery - 09 to 21 years (SLM)

Vehicles - 05 to 11 years (WDV)

Office Equipments - 10 years (SLM)

Computer Equipments - 06 years (SLM)

Leasehold land and assets taken on lease are amortised over the period of the lease.

ii) Intangible assets are amortised on the straight line method as follows:

Rights, techniques, Process and Know how - 7 to 10 years

Software - 3 years

2.2 Investments

Long-term Investments are valued at cost of acquisition and related expenses. Provision is made for other than temporary diminution, if any, in the value of such investments.

2.3 Inventories

Inventories are stated at the lower of cost and net realisable value. In determining the cost of raw materials, components, stores, spares and loose tools the weighted average method is used.

Costs of work-in-progress and manufactured finished products include material costs, labour and factory overheads on the basis of full absorption costing.

2.4 Trade receivables and advances

Specific debts and advances identified as irrecoverable or doubtful are written-off or provided for, respectively.

2.5 Foreign currency transactions and translations

Transactions in foreign currencies are recorded at the exchange rates brvailing on the date of the transaction.

Realised gains and losses as also exchange differences arising on translation at year end exchange rates of monetary assets and liabilities outstanding at the end of the year are recognised in the Statement of Profit and Loss. Premium/Discount in respect of Forward Contracts is accounted for over the period of contract.

2.6 Revenue Recognition

(i) Sales of goods is recognised when all significant risks and rewards of ownership have been transferred to the buyers.

(ii) Dividend income from investments is recognised when the owner’s right to receive the payment is established.

(iii) Income from services rendered is accounted for when the work is performed.

2.7 Employee Benefits

Employee benefits includes gratuity, superannuation and provident fund and leave encashment benefits under the approved schemes of the Company.

In respect of defined contribution plans, the contribution payable for the year is charged to the Statement of Profit and Loss.

In respect of defined benefit plans and other long term employee benefits, the employee benefit costs is accounted for based on an actuarial valuation during the year.

2.8 Product Warranty

Cost of product warranties is disclosed under the head:

(i) ‘raw materials and components consumed’ as consists of free replacement of spares.

(ii) ‘miscellaneous expenses’ which includes provision for warranties.

2.9 Taxes on Income

Tax expense for the year is included in the determination of the net profit for the year.

Deferred tax is recognised on all timing differences, subject to consideration of prudence in respect of deferred tax assets. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date.

2.10 Leases

Assets acquired under finance leases are recognised at the lower of the fair value of the leased assets at inception of the lease and the brsent value of minimum lease payments. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to periods during the lease term at a constant periodic rate of interest on the remaining balance of the liability.

Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease rentals under operating leases are recognised in the Statement of Profit and Loss on a straight-line basis.

2.11 Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. Other borrowing costs are recognised as an expense in the year in which they are incurred.

2.12 Cash Flow Statement

The Cash Flow statement is brpared by the indirect method and brsents cash flows by operating, investing and financing activities of the Company.

2.13 Use of Estimates

The brparation of the financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting year. Difference between the actual result and estimates are recognized in the year in which the results are known/materialized.

2.14 Provisions, Contingent Liabilities and Contingent Assets

The Company recognizes provisions only when it has a brsent obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

No provision is recognised for:

(i) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or

(ii) Any brsent obligation that arises from past events but is not recognized because -

- It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

- A reliable estimate of the amount of obligation cannot be made.

Such obligations are recorded as Contingent Liabilities. These are assessed continually and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can 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.

2.15 Earnings per share

Basic earnings per share is computed by dividing the profit attributable to equity shareholders for the year by the weighted average number of Equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit attributable to equity shareholders for the year as adjusted for dividend, interest and other charges to expenses or income (net of taxes) relating to the diluted potential equity shares, by the weighted average number of equity shares outstanding during the year as adjusted for the effects of all diluted potential equity shares except where the results are anti-dilutive.

Note 3

a) Principal amount payable to Micro and Small Enterprises (to the extent identified by the Company from available information) as at 31/12/2015 is Rs. 0.47 million (brvious year – Rs.1.75 Million) including unpaid amounts of Rs. Nil (brvious year – Rs.Nil) outstanding for more than 45 days. Estimated interest due thereon is Rs. Nil (brvious year - Rs. Nil).

b) Amount of payments made to suppliers beyond 45 days during the year is Rs. 3.93 Million (brvious year – Rs.5.43 Million). Interest paid thereon is Rs. Nil (Previous Year – Nil) and the estimated interest due and payable thereon is Rs. 0.09 Million (brvious year - Rs. 0.15 Million).

c) The amount of estimated interest accrued and remaining unpaid as at 31/12/2015 is Rs. 1.97 Million (brvious year – Rs. 1.88 Million).

d) The amount of estimated interest due and payable for the period from 01/01/2016 to actual date of payment or 30/01/2016 (whichever is earlier) is Rs. Nil. Note 33 - Research and Development expenditure debited to the Statement of Profit and Loss aggregating Rs. 2.94 Million (brvious year - Rs. 4.16 Million) has been incurred by the Company and disclosed under Miscelleneous expenses (Refer Note 25).

Note 4 -

The net exchange differences arising during the year recognised appropriately in the Statement of Profit and Loss - net loss- Rs. 20.88 Million (brvious year - net loss - Rs. 50.71 Million). Note 37 - Where a financial report contains both consolidated financial statements and separate financial statement for the parent, segment information needs to be brsented only in case of consolidated financial statements. Accordingly, segment information has been provided only in the consolidated financial statements. Note 39 - Earnings per Share

(a) The amount used as the numerator in calculating basic and diluted earnings per share is the Profit for the year attributable to the equity shareholders disclosed in the Statement of Profit and Loss.

(b) The weighted average number of equity shares used as the denominator in calculating both basic and diluted earnings per share is 34,807,844.

Note 5 -

 Repairs to machinery include Rs. 36.06 Million (brvious year - Rs. 36.12 Million) spares consumed.

Note 6-

Provision for taxation for the year is an aggregate of the provision made for the year ended 31st March, 2015 as reduced by the provision for 9 months up to 31st December, 2014 and the provision based on the figures for the remaining 9 months up to 31st December, 2015. However, the ultimate tax liability for the remaining 9 months up to 31st December, 2015 will be determined based on the results for the year 1st April, 2015 to 31st March, 2016.

Note 7 -

The brscribed Corporate Social Responsibility (CSR) expenditure required to be spent in for year 2015 as per Section 135 of the Companies Act, 2013 is Rs. 18.30 Million. The Company has spent Rs. 18.30 million towards CSR. No amount has been spent on construction/acquisition of an asset of the Company.

Note 8 -

Previous year’s figures have been regrouped/reclassified wherever necessary to correspond with the current year’s classification/disclosure.

In terms of our report attached

For Deloitte Haskins & Sells LLP

Chartered Accountants

Hemant M. Joshi

 (Partner)

G. Swarup Chairman

Verghese Oommen Director Finance

R. Narasimhan Company Secretary

W. Spiegel Managing Director

A. R. Broacha Directors

D. N. Damania Directors

N. N. Kampani Directors

Pradip Shah Directors

Dr. Stephan Bross Directors

V. K. Viswanathan Directors

S. F. Motwani Directors

W. Stegmuller Directors

Pune, 18th February, 2016

Mumbai, 18th February, 2016