Notes to financial statements

NOTE - 1 SIGNIFICANT ACCOUNTING POLICIES

1.1 The financial statements have been brpared under historical cost convention (except for certain fixed assets which were revalued) on accrual basis in compliance with applicable Accounting Standards as brscribed under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and relevant provisions of the Companies Act, 2013.

1.2 Fixed assets are stated at cost adjusted by revaluation of certain assets.

1.3 Expenditure during construction / erection period is included under capital work-in-progress and is allocated to the respective fixed assets on completion of construction / erection.

1.4 Debrciation on fixed assets has been provided using Straight Line Method over their useful lives and in the manner brscribed under Schedule II of the Companies Act, 2013. Continuous process plants as defined in Schedule II have been considered on technical evaluation. However, in respect of certain assets, debrciation is provided as per their useful lives as assessed by the valuer ranging from 15 to 43 years for plant and machinery and 18 to 80 years for buildings. Accelerated debrciation in respect of a production accessory is provided over 6 years.

Leasehold land is being amortised over the lease period.

1.5 Lease is classified as Operating Lease when substantial risks & rewards of ownership are not transferred - rentals thereon are recognised as expense over the lease term.

1.6 Foreign currency transactions are recorded at exchange rates brvailing on the date of transaction. Monetary assets and liabilities in foreign currencies as at the Balance Sheet date are translated at exchange rate brvailing at the year end. Premium in respect of forward contracts is recognised over the life of contract. Exchange differences arising on actual payments / realisations and year end translations including on forward contracts are dealt with in Profit and Loss Statement except exchange differences arising on Long term foreign currency monetary items, related to acquisition of debrciable capital assets, which are adjusted to cost of such assets and debrciated over their balance life pursuant to the option in Notification No.G.S.R 914(E) dated 29th December, 2011 issued by Ministry of Corporate Affairs. Non Monetary Foreign Currency items are stated at cost.

1.7 Long Term Investments are stated at cost. Provision for diminution in the value of long term Investments is made only if, such a decline is other than temporary. The Current Investments are stated at lower of cost or quoted / fair value computed category-wise.

1.8 Inventories are valued at lower of cost and net realisable value. The cost is computed on weighted average basis. Finished Goods and Process Stock include cost of conversion and other costs incurred in bringing the inventories to their brsent location and condition.

1.9 Revenue Expenditure on Research and Development is charged to Profit & Loss Statement and Capital Expenditure is added to Fixed Assets.

1.10 Borrowing Cost is charged to Profit & Loss Statement except meant for acquisition of qualifying assets, which is capitalised till the date of commercial use.

1.11 The carrying amount of Assets are reviewed at each Balance Sheet date to assess impairment, if any based on internal / external factors. An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value being higher of value in use and net selling price. An impairment loss is recognised as an expense in the Profit & Loss Statement in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting period is reversed, if there has been an improvement in recoverable amount.

1.12 Employee Benefits:

a) Defined-contribution plans:

Contributions to the Employees' Regional Provident Fund, Superannuation Fund and Employees Pension Scheme are recognised as defined contribution plan and charged as expenses during the period in which the employees perform the services.

b) Defined-benefit plans:

Retirement benefits in the form of Gratuity and Leave Encashment are considered as defined benefit plan and determined on actuarial valuation using the Projected Unit Credit Method at the balance sheet date. Actuarial Gains and Losses are recognised immediately in the Profit & Loss Statement.

The Provident Fund Contribution other than contribution to Employees' Regional Provident Fund, is made to trust administered by the trustees. The interest rate to the members of the trust shall not be lower than the statutory rate declared by the Central Government under Employees' Provident Fund and Miscellaneous Provision Act, 1952. The Employer shall make good deficiency, if any.

c) Short term employee benefits:

Short term benefits are charged off at the undiscounted amount in the year in which the related service is rendered.

1.13 Revenue is recognised when significant risks and rewards of ownership have been passed to buyer.

1.14 Grants and subsidies from the Government are recognised when there is reasonable certainty that the grant / subsidy will be received and all attaching conditions will be complied with. Revenue Grants are recognised in the Profit & Loss Statement. Capital Grants relating to specific fixed assets are reduced from the gross value of respective fixed assets. Other Capital Grants are credited to Capital Reserve.

Export incentives are recognised in the Profit & Loss Statement.

1.15 Current Tax is the amount of tax payable on the estimated taxable income for the current year as per the provisions of Income Tax Act, 1961. Deferred Tax is recognised for timing differences. However, Deferred Tax Asset is recognised on the basis of reasonable / virtual certainty that sufficient future taxable income will be available against which the same can be realised.

1.16 Intangible Assets are being recognised, if the future economic benefits attributable to the assets are expected to flow to the company and cost of the asset can be measured reliably. The same are being amortised over the expected duration of benefits.

NOTE - 2

Estimated amount of contracts remaining to be executed on capital account H470.44 crores (Previous year: H603.54 crores).

NOTE - 3

Contingent liabilities in respect of claims not accepted and not provided for Rs.40.84 crores (Previous year: Rs.41.89 crores) pertain to Excise & Customs duty matters in appeal Rs.8.41 crores, Service tax matters Rs.0.04 crore, Sales Tax matters in appeal Rs.2.14 crores,Income tax matters in appeal Rs.2.97 crores & other matters Rs.27.28 crores (Previous year: Rs.8.60 crores, Rs.0.04 crore, Rs.3.40 crores,Rs.2.97 crores & Rs.26.88 crores respectively).

NOTE - 4

Bills discounted with Banks outstanding H8.06 crores (Previous year: H14.09 crores).

NOTE - 5

Excise Duty liability on account of valuation of Finished Goods is disputed and is yet to be determined. Without brjudice to the Company's stand in this behalf, as per Government's desire an adhoc amount of H5.45 crores was paid under protest in earlier years and debited to "Advances Recoverable' and an equivalent amount was provided in Profit and Loss Statement. On Writ Petition filed by the Company in the Hon'ble Delhi High Court, the said Court directed the Excise Authorities to determine the valuation of finished goods in accordance with law and observations made in the order.

NOTE - 6

Capital work in progress includes Machinery in stock / transit, construction / erection materials, cost paid for land and the following br-operative expenses pending allocation:

NOTE - 7

Debts over six months / Advances include Rs.3.92 crores (Previous year: Rs.3.28 crores) for which legal and other necessary action has been taken. In the opinion of the Management, these debts are recoverable and the same have been classified as good.

NOTE - 8

In respect of certain disallowances and additions made by the Income Tax Authorities, appeals are pending before the Appellate Authorities and adjustment, if any, will be made after the same are finally determined.

NOTE - 9

The Company has taken certain specified Plant & Machinery on operating lease basis, which is cancellable at the option of lessee.

NOTE - 10

The Company has worked out reversal of Modvat Credit availed on exports under Value Based Advance Licence in earlier years and reversed the same in accounts. Pursuant to special scheme announced by the Government, the Company has also paid interest on such reversals. Further, the Excise department has issued certain basis for reversal of Modvat, which is disputed and has been contested by the Company in a Writ Petition before the Hon'ble Delhi High Court and directions have been issued to treat the reversal already made by the Company as provisional.

NOTE - 11

a. Forward Contracts for hedging Receivables - US $ 24 Million (Previous year: Nil) and for hedging Payables - Nil (Previous year: US $ 41.60 Million and Euro 0.79 Million) are outstanding as at 31.03.2015.

b. Foreign currency exposure unhedged net payable is Rs.997.28 crores - US $ 159.34 Million (Previous year: Rs.158.18 crores - US $ 26.32 Million) as at 31.03.2015.

NOTE-12

The details of amounts outstanding under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) to the extent of information available with the Company are as under:

(i) Principal & Interest amount due and remaining unpaid as at 31.03.2015: Nil (Previous year: Nil), (ii) Payment made beyond the appointed day during the year: Nil (Previous year: Nil) and (iii) Interest Accrued and unpaid as at 31.03.2015: Nil (Previous year: Nil).

NOTE - 13

The Company has not provided diminution in the value of certain long term strategic investments, since in the opinion of the Board, such diminution in their value is temporary in nature, considering the inherent value, nature of investments, the investees' assets and expected future cash flow from such investments.

NOTE - 14

Pursuant to adoption of Schedule II to the Companies Act, 2013, the debrciation charge for the year is lower by Rs.31.72 crores

NOTE - 15

Miscellaneous expenses include contribution to Satya Electoral Trust Rs.0.75 crore (Previous Year: Nil) for political purpose.

NOTE - 16

Exceptional items include net impact of unfavourable Foreign Exchange Rate fluctuation Rs.7.24 crores (Previous Year: Rs.70.94 crores), net gain on sale of certain assets Rs.0.36 crore (Previous Year: Rs.1.19 crores), and expenditure on VRS for the employees Rs.2.55 crores (Previous Year: Rs.6.08 crores).

NOTE - 17

Figures less than Rs.50000 have been shown at actual in bracket.

NOTE - 18

Previous year figures have been reclassified / regrouped / recast, wherever necessary.

As per our report of even date

For LODHA & CO.

Chartered Accountants

N. K. LODHA

Partner

A. K. KINRA Chief Financial Officer

P. K. RUSTAGI Company Secretary

Dr. Raghupati Singhania Chairman & Managing Director

Bharat Hari Singhania Managing Director

Vikrampati Singhania Swaroop Chand Sethi Arun Kumar Bajoria Om Prakash Khaitan Arvind Singh Mewar Bakul Jain Vimal Bhandari Smt. Sunanda Singhania Kalpataru Tripathy Directors

New Delhi, the 14th May, 2015