NOTES FORMING PART OF THE FINANCIAL STATEMENTS

for the 15 months period ended March 31, 2016

Company information:

Clariant Chemicals (India) Limited (the 'Company') is a public limited Company domiciled in India and is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The company is engaged interalia, in manufacturing and selling of Specialty Chemicals. The Company has its own manufacturing sites in the State of Maharashtra, Tamil Nadu and Gujarat.

1. Significant accounting policies

(a) Basis of brparation of financial statements

These financial statements have been brpared in accordance with the generally accepted accounting principles in India under the historical cost convention on accrual basis. Pursuant to Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014, till the standards of accounting or any addendum thereto are brscribed by Central Government in consultation and recommendation of the National Financial Reporting Authority, the existing Accounting Standards notified under the Companies Act, 1956 shall continue to apply. Consequently, these financial statements have been brpared to comply in all material aspects with the accounting standards notified under Section 211(3C) of the Companies Act, 1956 [Companies (Accounting Standards) Rules, 2006, as amended] and other relevant provisions of the Companies Act, 2013.

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

The accounting year of the company has been changed from January-December to April-March with effect from the current year. Consequently, the current year's financial statement are for the 15 months from 1st January, 2015 to 31st March, 2016.

(b) Revenue recognition

The Company recognises sale of goods on transfer of significant risks and rewards of ownership of the goods to the buyer as per the terms of contract. Sales are net of excise duty, sales tax and trade discounts, wherever applicable.

Income from services rendered is recognised based on agreements/ arrangements with the customers as the service is performed using the proportionate completion method and is recognised net of service tax, as applicable.

Interest Income is accounted on time proportion basis taking into account the amounts invested and the rate of interest. Dividend income on investments is accounted for when the right to receive the dividend is established.

Income from export incentives such as duty drawback etc. are recognised on accrual basis to the extent the ultimate realisation is reasonably certain.

Indenting commission is recognised based on the terms of agreement, when the right to receive the commission is established.

Rental income is recognised on accrual basis.

(c) Excise duty

Excise duty payable on products is accounted for at the time of dispatch of goods from the factories and is accrued for stocks held at the period end.

Excise Duty related to the difference between the closing stock and opening stock of finished goods has been recognised separately in Note 28 "Other expenses".

(d) Employee benefits

(i) Post employment benefits and other long term employee benefits:

Defined contribution plans :

Company's contribution to provident fund, superannuation fund, employee state insurance and other funds are determined under the relevant schemes and / or statute and charged to the Statement of Profit and Loss. The Company has no further obligation under such plans.

Defined benefit plans and compensated absences : In respect of certain employees, provident fund contributions are made to a trust administered by the company. The interest rate payable to the members of the trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, shall be made good by the Company. The liability in respect of the shortfall of interest earnings of the Fund is determined on the basis of an actuarial valuation. The Company's liability towards gratuity, ex-gratia gratuity and compensated absences are actuarially determined at each balance sheet date using the projected unit credit method. Actuarial gains and losses are recognised in the Statement of Profit and Loss.The classification of the company's net obligation into current and non- current is as per the actuarial valuation report.

(ii) Voluntary retirement scheme:

Expenditure incurred on voluntary retirement scheme is charged to the Statement of Profit and Loss in the period in which it is incurred.

(e) Tangible assets

(i) All tangible assets are stated at acquisition cost net of accumulated debrciation and impairment losses, if any.

(ii) Subsequent expenditures related to an item of fixed asset are added to its book value only if they increase the future benefits from the existing asset beyond its brviously assessed standard of performance.

(iii) Items of tangible assets that have been retired from active use and are held for disposal are stated at the lower of their net book value and net realisable value and are shown separately in the financial statements under "Other Current Assets". Any expected loss is recognised immediately in the Statement ofProfit and Loss.

(iv) Losses arising from the retirement of, and gains or losses from disposal of fixed assets which are carried at cost are recognised in the Statement of Profit and Loss.

(v) Leasehold improvements are amortised on a straight line basis over the useful life of the assets or over the lease period, whichever is lower

(vi) Debrciation is provided on a pro-rata basis on the straight-line method over the estimated useful lives of the assets which are in line with the rates brscribed under Schedule II to the Companies Act, 2013 except in case of certain assets, wherein based on technical evaluation, a different useful life has been considered. The estimates of useful lives of assets is as under [Further also refer note 11(4)]:

Asset Estimated

Useful life

Building

-Factory building 30 Years

-Officebuilding 60 Years

-Roads 10 Years

Plant and equipment 10 Years

Furniture and fixture 10 Years

Office equipment

-Computers 3 Years

-Hardware mainframes and Servers 5 Years

-Other office equipment 5 years

Vehicles 5 Years

Tangible assets individually costingX 5,000/- or less are debrciated fully in the period of purchase.

(f) Intangible assets:

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

Goodwill 10 Years

Trademarks 10 Years

Non-compete fees 3 Years

(g) Impairment of assets

The carrying amounts of assets are reviewed at each Balance Sheet date to assess whether there is any indication of impairment based on internal / external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its estimated recoverable amount. The recoverable amount is greater of the asset's net selling price and value in use. In assessing the value in use, the estimated future cash flows are discounted to the brsent value using the weighted average cost of capital. Previously recognised impairment loss is further provided or reversed depending on changes in circumstances.

(h) Inventories

Inventories are valued at the lower of cost and net realisable value. Cost is computed on a weighted average basis. The net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and estimated costs necessary to make the sale. Finished goods and work-in-progress include all costs of purchases, conversion costs and other costs incurred in bringing the inventories to their brsent location and condition.

(i) Trade receivables / loans and advances

Trade receivables and loans and advances are stated after making adequate provision for doubtful debts / advances.

( j) Investments

Investments that are readily realisable and are intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as non-current investments. Non-current investments are stated at cost less provision for diminution in value, other than temporary. Current investments are stated at the lower of cost and fair value.

(k) Operating leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. The company is both a lessee and a lessor under such arrangements. Payments and receipts under such leases are charged or credited to the Statement of Profit and Loss on a systematic basis over the primary period of the lease.

(l) Foreign currency translations

(i) Foreign currency transactions are accounted at the rate brvailing on the date of the transaction. Monetary items denominated in foreign currency outstanding as at period end are translated at the exchange rate brvailing on the last day of the accounting period. In respect of items covered by forward contracts, the brmium or discount arising at the inception of such a forward exchange contract is amortised as expense or income over the life of the contract. Any profit or loss arising on cancellation of such a forward exchange contract is recognised as income or expense for the period.

(ii) Non monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of transaction.

(iii) Gain or loss arising out of settlement of such transactions or from translation/conversion is taken credit for or charged to the Statement of Profit and Loss.

(m) Income tax

Income-tax expense comprises current tax and deferred tax charge or credit. The current tax is determined as the amount of tax payable in respect of the estimated taxable income for the period. The deferred tax charge or credit is recognised using brvailing enacted or substantively enacted tax rates at the Balance Sheet date. Where there is unabsorbed debrciation or carry forward losses, deferred tax assets are recognised only if there is virtual certainty of realization. Other deferred tax assets are recognised only to the extent there is reasonable certainty of realisation in future. The carrying amount of deferred tax assets/liabilities are reviewed at each Balance Sheet date for any writedown or reversal, as considered appropriate.

(n) Provisions and contingent liabilities

Provisions are recognised when there is 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 there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the brsent obligation at the balance sheet date and are not discounted to its brsent value. These are reviewed at each period end date and adjusted to reflect the best current estimate.

Contingent liabilities are disclosed when there is a possible obligation arising from past events, 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 a brsent obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made.

(o) Cash and cash equivalents

In the cash flow statement, cash and cash equivalents include cash in hand, term deposits with banks and other short-term highly liquid investments with original maturities of three months or less.

(p) Earnings per share

Basic earnings per share is calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period and for all periods brsented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.

(q) Use of estimates

The brsentation of the financial statements in conformity with the generally accepted accounting principles requires that the management makes certain estimates and assumptions. These estimates and assumptions 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 period. Difference between the actual results and estimates if any, is recognised in the period in which the results are known / materialised

2 Segment Information :

(As required by Accounting Standard (AS) -17 Segment Reporting) :

(a) The Company is organised into two primary business segments as follows:

(i) Pigments and Colors :

Includes pigments, pigment brparations, additives and masterbatches.

(ii) Dyes and Specialty Chemicals :

Includes dyestuff, synthetic resins, binder materials, functional effects and coating, auxiliaries and chemicals.

(b) The secondary segments of the Company are geographical segments mainly:

(i) India

(ii) Outside India

(c) Segments have been identified and reported taking into account the nature of products and services, the differing risks and returns, the organisation structure, and the internal financial reporting system.

(d) (i) Segment revenue and results :

Segment revenue and expenses are directly attributable to segments. It does not include interest income, interest expense and income tax. Revenue and expenses which relate to the company as a whole and are not allocable to segments on a reasonable basis have been included under "Unallocated corporate expenses (Net)".

(ii) Segment assets and liabilities :

Segment assets include all operating assets used by the business segments and consist principally of fixed assets, trade receivable and inventories. Segment liabilities primarily include trade payables and other current and non-current liabilities.

Assets and liabilities that cannot be allocated among the segments are shown as a part of unallocable corporate assets and liabilities respectively.

3 The Company after obtaining necessary approvals from the Board of Directors, vide an agreement dated March 31, 2015, acquired the "Carbon Black Business" from Lanxess India Private Limited (Lanxess) effective close of business hours on March 31, 2015, comprising the Carbon Black Dispersion plant located at Nagda, India, together with its respective assets, liabilities and employees as a going concern on a slump sale basis for a lump sum consideration of Rs.1346 Lakhs (including non compete fees) after working capital adjustment, as at March 31, 2015. The excess of consideration paid to Lanxess over the fair value of net assets acquired is considered as goodwill.

4 Pursuant to the sale of Industrial and Consumer Specialties business in the current period and sale of Leather Services business in the brvious year (Refer note 42), acquisition of Carbon Black business in current period (Refer note 43) and change in accounting year of the company [Refer note 1 (a)], the figures of the current period are not comparable with those of the brvious year. Figures for the brvious year have been regrouped / reclassified wherever necessary to correspond with the current period's classification / disclosure.

In terms of our report attached

For Price Waterhouse

Chartered Accountants LLP

Firm Registration Number: 012754N / N500016

Arvind Daga

Partner

Membership No. 108290

For and on behalf of the Board,

K. Handa Chairman DIN00056826

D. Parikh Vice- Chairman & Managing Director DIN6504537

S. Talukdar Director DIN920608

I. Shahani Director DIN112289

R. Kamdar Chief Financial Officer

A. Joshi Company Secretary

Navi Mumbai, 20th May, 2016