Notes forming part of the Financial Statement s for the year ended 31st March, 2016

1. Significant Accounting Policies :

(A) Basis of Accounting :

The financial statements of the Company have been brpared in accordance with the generally accepted accounting principles in India (Indian GAAP) and comply with the Accounting Standards brscribed under Section 133 of the Companies Act, 2013.

(B) Tangible Assets :

(a) (i) Tangible assets are carried at cost less debrciation except as stated in (ii) below. Cost includes financing cost relating to borrowed funds attributable to the construction or acquisition of qualifying tangible assets upto the date the assets are ready for use. Where the acquisition of debrciable tangible assets are financed through long term foreign currency loans (having a term of 12 months or more at the time of their origination) the exchange differences on such loans are added to or subtracted from the cost of such debrciable tangible assets.

When an asset is scrapped or otherwise disposed off, the cost and related debrciation are removed from the books of account and resultant profit (including capital profit) or loss, if any, is reflected in the Statement of Profit and Loss.

(ii) Land and Buildings, had been revalued as at 31st October, 1984 at debrciated replacement values on the basis of a valuation made by a firm of Chartered Surveyors and Valuers. The indices, if any, used are not stated in the valuation.

(b) (i) Leasehold land is amortised over the period of the lease.

(ii) Debrciation is calculated on Straight Line method over the estimated useful life of all assets. These lives are in accordance with Schedule II to the Companies Act, 2013, other than the following asset classes based on the Company's expected usage pattern supported by technical assessment :

(a) Certain items of Plant and Equipment - 2 years, 3 years, 5 years, 7 years, 10 years, 20 years and 25 years as the case may be.

(b) Buildings (Roads) - 15 years.

(c) Vehicles - 5 years.

(C) Intangible Assets :

I ntangible assets are carried at cost and amortised on a Straight Line Basis so as to reflect the pattern in which the asset's economic benefits are consumed.

(a) Technical Knowhow :

The expenditure incurred is amortised over the estimated period of benefit, not exceeding six years commencing with the year of purchase of the technology.

(b) Development Expenditure :

The expenditure incurred on technical services and other project/product related expenses are amortised over the estimated period of benefit, not exceeding five years.

(c) Software Expenditure :

The expenditure incurred is amortised over three financial years equally commencing from the year in which the expenditure is incurred.

(d) Others :

The expenditure incurred is amortised over the estimated period of benefit, not exceeding ten years.

(D) Impairment of Assets :

The carrying value of assets/cash generating units at each balance sheet date are reviewed for impairment. If any indication of impairment exists, the recoverable amount of such assets is estimated and impairment is recognised, if the carrying amount of these assets exceeds their recoverable amount. The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life to their brsent value based on an appropriate discount factor. When there is indication that an impairment loss recognised for an asset in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss, except in case of revalued assets.

(E) Investments :

Long term investments are valued at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of investments. Current investments are valued at the lower of cost and fair value, determined by category of investment.

(F) Inventories :

I nventories comprise all costs of purchase, conversion and other costs incurred in bringing the inventories to their brsent location and condition.

Raw materials and bought out components are valued at the lower of cost or net realisable value. Cost is determined on the basis of the weighted average method.

Finished goods produced and purchased for sale, manufactured components and work-in-progress are carried at cost or net realisable value whichever is lower. Excise duty is included in the value of finished goods inventory.

Stores, spares and tools other than obsolete and slow moving items are carried at cost. Obsolete and slow moving items are valued at cost or estimated net realisable value, whichever is lower.

(G) Foreign Exchange Transactions :

Transactions in foreign currencies (other than firm commitments and highly probable forecast transactions) are recorded at the exchange rates brvailing on the date of transaction. Monetary items are translated at the year-end rates. The exchange difference between the rate brvailing on the date of transaction and on the date of settlement as also on translation of monetary items at the end of the year (other than those relating to long term foreign currency monetary items) is recognised as income or expense, as the case may be.

Exchange differences relating to long term foreign currency monetary items, to the extent they are used for financing the acquisition of debrciable assets are added to, or subtracted from, the cost of such debrciable assets and the balance accumulated in 'Foreign Currency Monetary Item Translation Difference Account', under Reserves and Surplus, and amortised over the balance term of the long term monetary item.

Any brmium or discount arising at the inception of a forward exchange contract is recognised as income or expense over the life of the contract, except where the contract is designated as a cash flow hedge.

(H) Derivative Instruments and Hedge Accounting :

The Company uses foreign currency forward contracts and currency options to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and highly probable forecast transactions. The Company does not hold derivative financial instruments for speculative purposes. The Company has applied to such contracts the hedge accounting principles set out in Accounting Standard 30 'Financial Instruments : Recognition and Measurement' (AS 30) by marking them to market at each reporting date.

Changes in the fair value of the contracts that are designated and effective as hedges of future cash flows are recognised directly in Hedging Reserve Account and the ineffective portion is recognised in the Statement of Profit and Loss.

(I) Revenue Recognition :

Sale of products and services including export benefits thereon are recognised when the products are shipped or services rendered. Excise duty recovered on sales is included in "Revenue from Operations".

Dividend from investments are recognised in the Statement of Profit and Loss when the right to receive payment is established.

(J) Government Grants :

The Company, directly or indirectly through a consortium of Mahindra Group Companies, is entitled to various incentives from government authorities in respect of manufacturing units located in developing regions. The Company accounts for its entitlement as income on accrual basis.

(K) Employee Benefits :

In respect of Defined Contribution Plans/Defined Benefit Plans/Long term Compensated Absences :

Company's contributions paid/payable during the year to Superannuation Fund, ESIC and Labour Welfare Fund are recognised in the Statement of Profit and Loss.

Contributions to Provident Fund are made to a Trust administered by the Company/Regional Provident Fund Commissioner and are charged to Statement of Profit and Loss as incurred. The Company is liable for the contribution and any shortfall in interest between the amount of interest realised by the investments and the interest payable to members at the rate declared by the Government of India in respect of the Trust administered by the Company.

Company's liability towards gratuity, long term compensated absences, post retirement medical benefit and post retirement housing allowance schemes are determined by independent actuaries, using the projected unit credit method. Past services are recognised on a straight line basis over the average period until the benefits become vested. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss as income or expense. Obligation is measured at the brsent value of estimated future cash flows using a discounted rate that is determined by reference to the market yields at the Balance Sheet date on Government Bonds where the currency and terms of the Government Bonds are consistent with the currency and estimated terms of the defined benefit obligation.

In respect of Employee Stock Option Scheme :

The compensation cost of stock options granted to employees is measured by the Intrinsic Value Method. The intrinsic value, which is the excess of the market price of the underlying equity shares as of the date of the grant over the exercise price of the option, is recognised and amortised on straight line basis over the vesting period.

(L) Borrowing Costs :

All borrowing costs are charged to the Statement of Profit and Loss except :

(i) Borrowing costs that are attributable to the acquisition or construction of qualifying tangible and intangible assets that necessarily take a substantial period of time to get ready for their intended use, which are capitalised as part of the cost of such assets.

(ii) Expenses incurred on raising long term borrowings are amortised over the period of borrowings. On early buyback, conversion or repayment of borrowings, any unamortised expenditure is fully written off in that year.

(M) Product Warranty :

I n respect of warranties given by the Company on sale of certain products, the estimated costs of these warranties are accrued at the time of sale. The estimates for accounting of warranties are reviewed and revisions are made as required.

(N) Leases :

The Company's significant leasing arrangements are in respect of operating leases for brmises (residential, office, stores, godowns, computer hardware etc.). The leasing arrangements, which are not non-cancellable, range between eleven months and five years generally, and are usually renewable by mutual consent on agreed terms. The aggregate lease rentals payable are charged as rent.

(O) Taxes on Income :

Current tax is determined as the amount of tax payable in respect of taxable income for the year. Deferred tax is recognised, subject to consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets arising on account of unabsorbed debrciation or carry forward of tax losses are recognised only to the extent that there is virtual certainty supported by convincing evidence that sufficient future tax income will be available against which such deferred tax assets can be realised.

Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax against which the MAT paid will be adjusted.

(P) Segment Reporting :

Segments are identified having regard to the dominant source and nature of risks and returns and internal organisation and management structure.

Revenues and expenses have been identified to the segment based on their relationship to the business activity of the segment.

I ncome/Expenses relating to the enterprise as a whole and not allocable on a reasonable basis to business segments are reflected as unallocated corporate income/expenses. Inter-segment transfers are at prices which are generally market led.

2. Interest capitalised during the year on qualifying assets Rs. 35.25 crores (2015 : Rs. 26.12 crores).

3. Research and Development expenditure :

(a) In recognised Research and Development units :

(i) Debited to the Statement of Profit and Loss, including certain expenditure based on allocations made by the Company, aggregate Rs. 730.93 crores (2015 : Rs. 702.76 crores) [excluding debrciation and amortisation of Rs. 287.02 crores (2015 : Rs. 206.98 crores)].

(ii) Development expenditure incurred during the year Rs. 905.41 crores (2015 : Rs. 634.25 crores).

(iii) Capitalisation of assets Rs. 104.65 crores (2015 : Rs. 162.29 crores).

(b) In other units :

(i) Debited to the Statement of Profit and Loss, including certain expenditure based on allocations made by the Company, aggregate Rs. 68.27 crores (2015 : Rs. 45.28 crores) [excluding debrciation and amortisation of Rs. 9.78 crores (2015 : Rs. 39.77 crores)].

(ii) Development expenditure incurred during the year Rs. 106.22 crores (2015 : Rs. 41.64 crores).

(iii) Capitalisation of assets Rs. 22.38 crores (2015 : Rs. 0.91 crores).

4. The net difference in foreign exchange loss debited to the Statement of Profit and Loss is a loss of Rs. 109.01 crores (2015 : Rs. 45.99 crores).

5. The Board of Directors of the Company during the year ended 31st March, 2014, approved entering into a transaction in the Auto Components business with CIE Automotive S.A., Spain (CIE). The transaction was to be completed in parts with the first part being completed in the financial year ended 31st March, 2014. During the year ended 31st March, 2015, the second (and final) part of the transaction involving the merger through a scheme of arrangement of Mahindra Ugine Steel Company Limited (MUSCO), Mahindra Gears International Limited (MGIL), Mahindra Investments (India) Private Limited (MIIPL), Mahindra Hinoday Industries Limited, Mahindra Composites Limited and a CIE subsidiary with Mahindra CIE Automotive Limited (MCIE) was approved by the High Court of Bombay and became operative from the appointed date of 1st October, 2013 and came into effect (effective date) from 10th December, 2014. In terms of the scheme the company has received shares in MCIE which has been accounted for in accordance with AS 13 - Accounting for Investments. Having regard to the substance of the transaction, the excess of the fair value of MCIE Shares received and carrying cost of investment in MUSCO, MIIPL and MGIL of Rs. 267.47 crores, has been credited to the Investment Fluctuation Reserve to offset the losses recognised in the year ended 31st March, 2015.

6. During the year ended 31st March, 2015, the Scheme of Arrangement (Scheme) between the Company's subsidiary Mahindra Engineering Services Limited (MESL) with Tech Mahindra Limited (TML), an associate of the Company, was approved by the High Court of Bombay. The scheme was operative from the appointed date of 1st April, 2013 and had come into effect (effective date) from 8th December, 2014. Consequently, during the year ended 31st March, 2015, MESL along with its subsidiaries Mahindra Engineering Services (Europe) Limited, Mahindra Engineering GmbH, Mahindra Technologies Services Inc. ceased to be subsidiaries of the Company. In accordance with AS 13 - Accounting for Investments, Rs. 299.34 crores, being the excess of fair value of TML shares received in terms of the scheme over the carrying cost of investments in MESL had been recorded as an exceptional item during the year ended 31st March, 2015.

7. Exceptional items of Rs. 68.74 crores (2015 : Rs. 335.72 crores) comprise of :

(a) profit on sale of certain long term investments Rs. 68.74 crores (2015 : Rs. 36.38 crores). This includes Rs. 62.75 crores (net of Rs. 61.48 crores credited to Investment Fluctuation Reserve) on transfer of the Company's entire investments in certain subsidiaries and associate engaged in domestic automotive manufacturing and support business at fair values to Mahindra Vehicle Manufacturers Limited, a wholly owned subsidiary.

(b) due to scheme of arrangement as referred to in Note 38 Rs. Nil crores (2015 : Rs. 299.34 crores)

8. The outstanding derivative instruments and unhedged foreign currency exposures as on 31st March, 2016 :

The Company has outstanding foreign exchange forward contracts to sell US $ 9.90 crores (2015 : US $ 13.30 crores), EURO 0.60 crores (2015 : EURO 0.50 crores), AUD 0.90 crores (2015 : Nil crores) & ZAR 16.00 crores (2015 : Nil crores). In addition, the Company has also taken foreign exchange forward contract for US $ 1.71 crores to buy US $ (2015 : Nil crores)

The foreign currency exposures not hedged by derivative instruments or otherwise as on 31st March, 2016 are - Receivables of ZAR 11.80 crores, US $ 4.68 crores, KRW 5.12 crores, AUD 0.72 crores, GBP 0.20 crores, EURO 0.12 crores and Payables (excluding Borrowings, covered in the paragraph below) of JPY 16.22 crores, SEK 0.01 crores and CHF * crores (2015 : Receivables of US $ 8.83 crores, AUD 0.58 crores, GBP 0.25 crores and Payables (excluding Borrowings, covered in the paragraph below) of JPY 33.46 crores, KRW 7.42 crores, EURO 0.46 crores, ZAR 0.15 crores, SEK 0.04 crores and CHF * crores).

The Company has outstanding foreign currency borrowings of US $ 15.50 crores (2015 : US $ 31.70 crores). Currency risk on US $ liability of US $ 5.50 crores has been hedged by way of forward contracts (2015 : US $ 1.70 crores). The US $ interest rate risk on borrowings worth US $ 15.00 crores has been hedged using interest rate swaps.

* denotes amounts less than 50,000 of respective currency.

9. Previous year's figures have been regrouped/restated wherever necessary.

Signatures to Notes 1 to 50

Anand G. Mahindra Chairman & Managing Director

Dr. Pawan Goenka Executive Director & Group President (Auto and Farm Sector)

V. S. Parthasarathy Group Chief Financial Officer, Group CIO & President (Group Finance and M&A)

Narayan Shankar Company Secretary

Deepak S. Parekh Directors

Nadir B. Godrej Directors

M. M. Murugappan Directors

R. K. Kulkarni Directors

Anupam Puri Directors

Vishakha N. Desai Directors

Vikram Singh Mehta Directors

S. B. Mainak Directors

Mumbai, 30th May, 2016