Significant Accounting Policies

(a) Accounting Convention

The financial statements are brpared under the historical cost convention and on the basis of going concern. Accumulated losses have resulted in erosion of net worth of the Company. The financial statements have been brpared on a going concern basis on the strength of continued support of the promoters, financial institutions and banks. The final installment of OTS amount under the OTS scheme had fallen due on 1st April, 2015. The Company informed the IDBI Bank Limited, the lead bank, that the Board of Directors of PSIDC, the promoters had approved the conversion of entire balance debt of Rs.4286 lacs into equity shares at a share price as per SEBI formula applicable on the date of freezing/accepting the proposal on certain terms and conditions. The matter was discussed in the Joint Lenders Meeting held on 13th April, 2015. The Lenders agreed to take up the proposal with their respective sanctioning authorities. The Company is optimistic of a favourable decision in the matter. The Board of Directors, considering the future plan for operations and support of the promoters, lenders, business associates and workmen is hopeful of improved profitability leading to improvement in its financial position. All expenses and incomes to the extent considered payable and receivable respectively, unless stated otherwise, have been accounted for on mercantile basis.

(b) Fixed Assets

Fixed Assets are stated at values determined by the valuer less debrciation. Machinery Spares have been capitalised as and when procured. Direct costs are captalised till the assets are ready to be put to use. These costs also includes financing cost (including exchange rate fluctuations) relating to specific borrowing attributable to Fixed Assets. When an asset is scrapped or otherwise disposed off, the cost and related debrciation are taken out from books of accounts and resultant profit (including capital profit) or loss, if any, is reflected in Profit and Loss Statement.

(c) Debrciation

The Company has revised debrciation rates on Fixed Assets as per the useful life specified in Part 'C of Schedule II of the Companies Act, 2013. The carrying amount of assets, where the remaining useful life is nil as at 1st April, 2014, has been recognised in the opening balance of profit & loss statement. The carrying amount of assets amounting to Rs.17.96 lacs, where the remaining useful life is nil as at 1st April, 2014, has been recognised in the opening balance of profit & loss statement. Fixed Assets individually costing upto Rs.5,000/- are debrciated 100% in the year of purchase. Debrciation on Foreign Exchange adjustments arising from foreign exchange variations is charged on residual useful life of asset.

(d) Valuation of Inventories

The items of inventories are valued at lower of cost or estimated net realisable value. Cost of raw material, building material and stores & spares is determined (net of cenvat) at monthlyweighted average basis. Material in transit is taken at cost price. Stock in process is valued at cost of raw material added. Cost of finished goods includes material cost and appropriate portion of production and administrative overheads and excludes interest and marketing expenses. The value of finished goods stock is inclusive of excise duty. Scrap, if any, at the year end does not form part of closing inventory.

(e) Revenue Recognition

Sale of goods is recognised at the point of dispatch to the Customer. Sales include excise duty applicable.

(f) Foreign Exchange Transactions

Transactions denominated in foreign currencies are normally recorded at the exchange rate brvailing at the time of the transaction. Monetary items denominated in foreign currencies at the year end and not

covered by forward exchange contracts are translated at year end rates and those covered by forward exchange contracts are translated at the rate ruling at the date of transaction as increased or decreased by the proportionate difference between the forward rate and exchange rate on the date of transaction, such difference having been recognised over the life of the contract. Any income or expense on account of exchange difference either on settlement or on translation is recognised in the profit and loss statement except in cases where they relate to acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets.

(g) Employee Benefits

i) Defined Contribution Plan

The Company's Contribution paid/payable during the year towards Provident Fund Scheme and Superannuation Scheme are recognised as expense in the Profits Loss Statement.

ii) Defined Benefit Plan

The Company's liabilities towards leave encashment and gratuity are determined by an independent actuary and LIC's actuarial valuation respectively, using the Projected Unit Credit Method. 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 is consistent with the currency and estimated terms of the defined benefit obligations. Actuarial gains and losses are recognised immediately in the Profits Loss Statement as income or expense.

iii) Gratuity liability has been covered by master policy of Life Insurance Corporation of India under irrevocable trust.

(h) Earnings Per Share

The Basic Earnings/ (Loss) per Share is computed on the basis of weighted average number of Equity Shares outstanding during the financial year. The Diluted Earnings/(Loss) per Share is computed on the basis of weighted average number of Equity Shares outstanding during the year and the Potential Equity Shares.

(i) GovernmentGrants

Investment Incentive from State Government has been credited to Investment Incentive Account and is being recognised as income on a systematic and rational basis over the useful life of the assets, in the proportion in which the debrciation on these assets is charged.

(j) Taxes on Income

Tax on income for the current period is determined on the basis of taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961.

Deferred tax is recognised on timing difference between the accounting income and the taxable income for the year, and quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date.

Deferred tax assets are recognised to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

However, in view of the loss during the financial year 2014-15, the Company has not recognised the Deferred Tax Assets in respect of the loss during the financial year 2014-15.

(k) Accounting policies not specifically referred above are consistent with generally accepted accounting practices.

Sd/- (AJAY PAL SINGH)

General Manager (Finance)

Sd/- (PRADEEP NAUHARIA)

Company Secretary & Sr. General Manager (Co. Affairs)

Sd/- (D.C. MEHENDRU)

Director

Sd/-(S.S. BAINS)

Managing Director

As per our separate report of even date

For A.K. SOOD & ASSOCIATES

Chartered Accountants

Firm Registration No. 000072N

Sd/-(GAURAV SOOD)

Partner Membership No. 507583

For S.TANDON & ASSOCIATES

Chartered Accountants

Firm Registration No. 006388N

Sd/-(H.S. KHURANA)

Partner Membership No. 86331

Place: Chandigarh

Date: May26,2015