SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER EXPLANATORY INFORMATION FOR THE YEAR ENDED 31ST MARCH, 2016

Note 1 - Background of the Company

Incorporated in 1951, Ador Welding Limited (AWL) is one of India's leading player in the field of Welding Products, Technologies and Services. The Company is also engaged in providing customized solutions for multi-disciplinary projects and contracts related to refineries, oil and gas, petrochemicals, fertilizers, steel plants, pharma, water, other chemical process industries.

Note 2 - Statements of significant accounting policies and practices

Basis of brparation of financial statements:-

The financial statements which have been brpared under historical cost convention on the accrual basis of accounting, are in accordance with the applicable requirements of the Companies Act, 2013 (the "Act") and comply in all material aspects with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended).

All assets and liabilities have been classified as current or non-current as per the Company's 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 the 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.

Use of estimates:-

The brparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as at the date of financial statements and the reported amounts of revenues and expenses during the reporting year. Key estimates include estimate of useful lives of fixed assets, income taxes and future obligations under employee retirement benefit plans. Although these estimates are based upon management's knowledge of current events and actions, actual results could differ from those estimates. Any revisions to accounting estimates are recognised prospectively in the current and future periods.

Inventories:-

Inventories are stated at lower of cost and net realisable value. Cost is determined using the 'average cost' method. The cost of finished goods and work in progress comprises raw material, packing materials, direct labour, other direct costs and related production overheads. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

Recognition of income and expenditure:-

1. Sale of goods is recognised on transfer of significant risks and rewards of ownership to the buyer, which is generally on the dispatch of goods by the Company and are recognised net of trade discounts, sales tax and excise duty.

2. Service income is recognised on transfer of significant risks and rewards of ownership to the buyer and is accounted based on terms of contract entered into with the respective parties.

3. Benefit on account of entitlement to import duty - free materials under Duty Entitlement Passbook (DEPB) Scheme or duty drawback are accounted in the year of export as export incentives.

4. Other revenue / income and cost / expenditure are generally accounted on accrual as they are earned or incurred.

5. Sale of Services: In contract involving rendering of services revenue is recognised using the proportionate completion method in line with agreements / arrangements with concerned parties and is net of service tax.

6. Revenue from contracts: Revenue from fixed price contracts is recognised using the percentage of completion method. Percentage of completion is determined as a proportion of the cost incurred up to the reporting date of the total estimated contract costs. Proportionate completion is measured based upon the efforts incurred to date in relation to the total estimated efforts to complete the contract. The Company monitors estimates of total contract revenue and costs on a regular basis throughout the delivery period. The cumulative impact of any change in estimates of the contract value or cost is reflected in the period in which the changes become known. In the event that a loss is anticipated on a particular contract, provision is made for the estimated loss.

7. Interest: Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

8. Dividend: Dividend income is recognised when the right to receive dividend is established.

Fixed assets:-

1. Tangible assets are stated at acquisition cost, net of accumulated debrciation and accumulated impairment losses, if any.

2. 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.

3. Items of fixed 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. Any expected loss is recognised immediately in the statement of profit and loss.

4. Losses arising from the retirement of, and gains or losses arising from disposal of fixed assets which are carried at cost are recognised in the statement of profit and loss.

5. Debrciation is provided on a pro-rata basis on the straight-line method based on useful life as estimated by the management and aligned to Schedule II to the Companies Act, 2013 in order to reflect the actual usage of assets. Debrciation on assets acquired under finance lease is sbrad over the lease period or useful life, whichever is shorter.

6. 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. The amortisation period and the amortisation method are reviewed at least at each financial year end. If the expected useful life of the asset is significantly different from brvious estimates, the amortisation period is changed accordingly.

7. Software and implementation costs including users license fees of the Enterprise Resource Planning (ERP) system and other application software costs are amortised over a period of three years.

8. Individual assets costing less than Rs. 5,000 are debrciated in full in the year of purchase.

9. Cost of fixed assets not ready for intended use before such date is disclosed under Capital Work-in-Progress.

Change in accounting policy:-

10. The Company had revised its policy of providing debrciation on fixed assets effective 1 April 2014. The debrciation is now provided on Straight Line Method (SLM) based on useful life as estimated by the Management and aligned to Schedule II to the Companies Act, 2013, as against Written Down

Value (WDV) method followed earlier. As a result of this change, the effect relating to the period prior to 1 April 2014, is a net credit of Rs.2,604 Lacs (excluding deferred tax) which has been shown as an 'exceptional item' in the financial result for the year ended 31 March 2015. Further, based on the transitional provision of Schedule II to the Companies Act 2013, an amount of Rs.108 Lacs (net of deferred tax) has been adjusted to retained earnings.

Foreign currency translation:-

Initial recognition:- Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the date of the transaction.

Conversion:- Monetary assets and liabilities denominated in foreign currency are converted at the rate of exchange brvailing on the date of the balance sheet.

Exchange differences:- Exchange differences arising on the settlement of monetary items or on reporting the Company's monetary items at rates different from those at which they were initially recorded during the year, or reported in brvious financial statements, are recognised as income or as expenses in the year in which they arise.

Translation of foreign operations:-

Foreign operations are classified as either 'integral' or 'non-integral' operation. Exchange differences arising on a monetary item that, in substance, forms part of an enterprise's net investment in a non-integral foreign operation are accumulated in the Foreign Currency Translation Reserve until the disposal of the net investment, at which time they are recognised as income or as expenses. The financial statements of an integral foreign operation are translated using the principles and procedures as if the transactions of the foreign operation are those of the Company itself.

Forward exchange contracts:-

Forward contracts are entered into to hedge the foreign currency risk. The brmium or discount on all such contracts arising at the inception of each contract is amortised as income or expense over the life of the contract. Any profit or loss arising on maturity, cancellation or renewal of forward contracts is recognised as income or as expense for the year.

The brmium on option contract is recognised as an expense over the life of the contract. 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 long term investments.

On initial recognition, all investments are measured at cost. 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 fair value. Non-current investments are carried at cost and provisions recorded to recognise any decline, other than temporary, in the carrying value of each investment.

Profit or loss on sale of investments is recorded on transfer of title from the Company and is determined as the difference between the sales price and the carrying value of the investment.

Employee benefits:-

provident fund: Contribution towards provident fund for certain employees is made to the regulatory authorities, where the Company has no further obligations. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made on a monthly basis.

In respect of certain employees, provident fund contributions are made to Ador Welding Employees Provident Fund Trust administered by the Company. The Company's liability is actuarially determined (using the Projected Unit Credit method) at the end of the year. Actuarial losses / gains are recognised in the statement of profit and loss in the year in which they arise.

The contributions made to the Trust are recognised as plan assets. The defined benefit obligation recognised in the balance sheet rebrsents the brsent value of the defined benefit obligation as reduced by the fair value of plan assets.

superannuation Fund: Contribution towards superannuation fund for certain employees is made to the Ador Welding Employees Superannuation Fund Trust, administered by the Company. The benefit is classified as Defined Contribution Scheme as the Company does not carry any further obligation, apart from the contribution made on a monthly basis.

employees state Insurance scheme: The Company makes contribution to state plans namely Employees State Insurance Scheme and has no further obligation beyond making the payment to them.

Gratuity: The Company provides for gratuity, a defined benefit plan (the "Gratuity Plan") covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee's salary and the tenure of employment. The Company's liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses / gains are recognised in the statement of profit and loss in the year in which they arise.

Compensated Absences: Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year end are treated as short term employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end.

Accumulated compensated absences, which are expected to be availed or encashed beyond 12 months from the end of the year end are treated as other long term employee benefits. The Company's liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses/ gains are recognised in the statement of profit and loss in the year in which they arise.

termination Benefits: Termination benefits in the nature of voluntary retirement benefits are recognised in the Statement of Profit and Loss as and when incurred.

Borrowing Costs:-

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in statement of profit and loss in the period in which they are incurred.

segment Reporting:-

The accounting policies adopted for segment reporting are in conformity with the accounting policies adopted for the Company. Further, inter-segment revenue have been accounted for based on the transaction price agreed to between segments which is primarily market based. Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment. 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 / income".

Leases:-

As a Lessee:

Leases in which a significant portion of the risks and rewards of ownership are retained by the Lessor are classified as operating leases. Payments made under operating leases are charged to the statement of profit and loss on a straight-line basis over the period of the lease.

The Company leases certain tangible assets and such leases where the Company has substantially all the risks and rewards of ownership are classified as finance leases.

Assets held under finance leases are recognised as assets of the Company at their fair value at the date of acquisition. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation under secured borrowings. Finance costs, which rebrsent the difference between the total leasing commitments and the fair value of the assets acquired, are charged to the statement of profit and loss over the term of the relevant lease, so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

As a Lessor:

The Company has leased certain tangible assets and such leases where the Company has substantially retained all the risks and rewards of ownership are classified as operating leases. Lease income on such operating leases are recognised in the statement of profit and loss on a straight-line basis over the lease term which is rebrsentative of the time pattern in which benefit derived from the use of the leased asset is diminished. Initial direct costs are recognised as an expense in the statement of Profit & Loss in the period in which they are incurred.

earnings per share:-

Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Earnings considered in ascertaining the Company's earnings per share is the net profit for the period after deducting brference dividends and any attributable tax thereto for the period. For the purpose of calculating diluted earnings per share, the net profit or loss 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.

taxes on income:-

Current tax:

Current tax is computed and provided for in accordance with the applicable provisions of the Income Tax Act, 1961.

Minimum Alternate tax:

Minimum Alternate Tax (MAT) paid in accordance with the tax laws gives rise to future economic benefits in the form of adjustments of future income tax liability. The same is considered as an asset if there is convincing evidence that the Company will pay normal income tax after the specified period. Accordingly, MAT credit is recognised as an asset in the Balance Sheet when it is probable that the future economic benefits associated with it will flow to the Company and the asset can be measured reliably.

Deferred tax:

Deferred tax assets and liabilities are recognised for the future tax consequences attributable to timing differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax assets are recognised only 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. If the Company has unabsorbed debrciation or carry forward losses under taxation laws, deferred tax assets are recognised only if there is a virtual certainty supported by convincing evidence that such deferred tax assets can be realised against future taxable profits.

At each Balance Sheet date, the Company re-assesses unrecognised deferred tax assets. It recognises unrecognised deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realised.

Impairment of Assets:-

The carrying amounts of the Company's assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal / external factors. An impairment loss is recognised whenever the carrying amount of an asset or a cash generating unit exceeds its recoverable amount. The recoverable amount of the assets (or where applicable, that of the cash generating unit to which the asset belongs) is estimated as the higher of its net selling price and its value in use. Impairment loss is recognised in the statement of profit and loss or against revaluation surplus, where applicable.

After impairment, debrciation / amortisation is priovided on the revised carrying amount of the asset over its remaining useful life.

A brviously recognised impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have brvailed by charging usual debrciation / amortisation if there were no impairment.

Provisions and Contingent Liabilities:-

Provisions: Provisions are recognised when the Company has 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, in respect of which a reliable estimate can be made. Provisions are not discounted to its brsent value and are determined based on management estimate required to settle the obligation at the Balance Sheet date.

Contingent liabilities: Contingent liabilities are disclosed in respect of possible obligations or brsent obligations that arise from past events, whose existence would be confirmed by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company. When there is a possible obligation or brsent obligation in respect of which the likelihood of outflow of resources is remote, no provisions or disclosure is made.

provision for Warranty:-

Warranty costs are provided based on a technical estimate of the costs required to be incurred for repairs, replacement, material cost, servicing on the basis of the past experience of the Company. It is expected that this expenditure will be incurred over the contractual warranty period.

Research and Development:-

1. Revenue expenditure on research and development (including overheads) are charged out as expense through the natural heads of account in the year in which they are incurred.

2. Expenditure of a capital nature on research and development is debited to respective fixed assets and debrciation is provided on such assets as are debrciable.

Cash and cash equivalents:-

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

Note 3 - Balances of certain debtors, advances and creditors are subject to confirmation / reconciliation, if any. In the opinion of the Management such adjustment are not likely to be material.

Note 4- Amounts below Rs. 0.49 Lac have been rounded off as per the rounding off norms of the Company.

Note 5 - Financial statements for the brvious year ended were audited by another firm of Chartered Accountants.

Note 6 - The figures for the brvious year are regrouped / re-arranged, wherever necessary.

For and on behalf of the Board of Directors

For Walker Chandiok & Co LLP

(formerly Walker, Chandiok & Co)

Chartered Accountants

Per Sudhir N. Pillai

Partner

A.B.Advani Executive Chairman DIN: 00029256

V.M.Bhide Head - Corporate Administration and Company secretary

Girish Patkar Chief Financial officer

S.M.Bhat Managing Director DIN: 05168265

Place: Mumbai

Date: 10 May 2016