SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

Corporate Information:

Avantel Limited is a public limited company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed in one stock exchange in India. The company is engaged in manufacturing of Telecom Products and rendering related customer support/other services. The company caters to both domestic and international markets. The company is having in-house Research & Development (R & D) facility at Visakhapatnam.

I. 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) under the historical cost conversion on accrual basis. GAAP comprises mandatory accounting standards as brscribed under Section 133 of the Companies Act, 2013 ('the Act') read with rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notified) and guidelines issued by the Securities Exchange Board of India (SEBI).

b) Use of Estimates:

The brparation of Financial Statements is in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities at the end of the reporting period. Although these estimates are based on the management's best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.

c) Fixed Assets:

Fixed Assets are stated at cost, less accumulated debrciation and impairment if any. Direct costs are capitalized until fixed assets are ready for use.

d) Debrciation:

Debrciation on all assets is provided on the "Straight Line Method" over the useful lives of the assets estimated by the Management. Debrciation for assets purchased/sold during the period is proportionately charged. Individual low cost assets (acquired for Rs. 5,000/- or less) are debrciated at 100 % in the year of acquisition/ purchase. The Management estimates the useful lives for fixed assets as follows:

(i) Buildings - 20 Years

(ii) Computers - 3 Years

(iii) Furniture & Fixtures - 5 Years

(iv) Plant & Machinery - 4 Years

(v) Vehicles - 4 Years

e) Inventories:

Inventories are valued at lower of cost or net realizable value. Basis of determination of cost remain as follows:

(i) Raw Materials, Packing materials, Stores & Spares: - On FIFO basis.

(ii) Work-in-process: At cost of inputs plus overheads up to the stage of completion.

(iii) Finished goods are valued at lower of cost or net realizable value.

f) Revenue recognition:

Revenue is recognized to the extent that is possible that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized:

(i) Sale of Goods:

Revenue from sale of goods is recognized when all the significant risks and rewards of ownership of the goods have been passed to the buyer on delivery of the goods. The Company collects sales taxes and value added taxes (VAT) on behalf of the Government and therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.

(ii) Income from Services:

Revenues from maintenance contracts are recognized pro-rata over the period of the contract as and when services are rendered.

(iii) Interest:

Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.

g) Foreign Currency transactions:

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 at the date of the transaction.

Conversion:

Foreign currency monetary items are reported at the rate brvailing on the balance sheet date.

Exchange Differences:

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

h) Research & Development:

All expenses incurred for Research & Development are charged to revenue as incurred. Capital Expenditure incurred during the year on Research & Development is shown as additions to Fixed Assets.

i) Retirement Benefits:

Short Term Employee Benefits:

All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, performance incentives, etc., are recognized as an expense at the undiscounted amount in the Profit and Loss Account of the year in which the employee renders the related service.

Post Employment benefits:

(i) Defined Contribution Plans:

Payments made to a defined contribution plan such as provident Fund are charged as an expense in the Profit and Loss Account as they fall due.

(ii) Defined Benefit Plans:

Company's liability towards gratuity to past employees is determined using the projected unit credit method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. Past services are recognized on a straight-line basis over the average period until the amended benefits become vested. Actuarial gain and losses are recognized immediately in the statement of profit and loss Account 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 market yields at the Balance Sheet date on Government Securities where the currency and terms of the Government Securities are consistent with the currency and estimate terms of the defined benefit obligations.

j) Impairment of Assets:

The Management assesses using external and internal sources whether there is any indication that an asset may be impaired. Impairment of an asset occurs where the carrying value exceeds the brsent value of cash flow expected to arise from the continuing use of the asset and its eventual disposal. The provision for impartment loss is made when recoverable amount of the asset is lower than the carrying amount.

k) 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 and based on expected outcome of assessments/ appeals.

Deferred tax is recognized on timing differences between the accounting income and taxable income for the year and quantified using the tax rates and laws enacted or substantially enacted as on the Balance Sheet date.

Deferred Tax assets are recognized and carried forward to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

l) Segment Accounting:

The company is considered to be a single segment company engaged in the manufacture of telecom products and providing related customer support services. Consequently, the company has in its primary segment only one reportable business segment as brscribed in Accounting Standard 17 (AS-17) "Segment Reporting" issued by ICAI.

m) Provisions :

A provision is recognized if, as a result of past event, the company has a brsent legal obligation that can be estimated reliably, and it is possible that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by the best estimate of the outflow of the economic benefits required to settle the obligation at the reporting date.

Warranty Provisions:

Provisions for Warranty related costs are recognized when the product is sold or service is provided. Provision is based on historical experience. The estimate of such warranty related costs is revised annually.

n) Contingent Liabilities & Contingent Assets:

Where no reliable estimate can be made, a disclosure is made as contingent liability. A disclosure for a contingent liability is also made when there is a possible obligation or a brsent obligation that may, but probably will not, require outflow of resources. Where there is a possible obligation or a brsent obligation in respect of which the likelyhood of outflow of resources is remote, no provision or disclosure is made. A contingent asset is neither recognized nor disclosed in the financial statements.

o) Cash and Cash equivalents :

Cash and Cash equivalents for the purpose of Cash flow statement comprise of Cash in Hand, Cash at Bank and Shot Term Margin Money/ deposits with original maturity of less than one year.

p) Cash Flow Statement:

Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non -cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.

q) Earning per Share:

Basic earning per share is computed by dividing the net profit after tax by weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares considered for deriving basic earnings per share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. The diluted potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value which is the average market value of the outstanding shares. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. Dilutive potential equity shares are determined independently for each period brsented.

2.. NOTES ON ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2016

The Financial Statements have been brpared in the format brscribed by the Revised Schedule VI to the Companies Act, I956. Previous year figures have been recast / restated to confirm to the classification of the current year. Amounts in the financial statements are brsented in Rupees. All the figures have been rounded to nearest rupee.

2.1 Current Tax

Current Tax for the brvious year rebrsents the Minimum Alternative Tax (MAT) payable by the company on the book profits for the year. However, the company is not recognising the MAT credit entitlement determined under section II5JAA(2A) of the Income Tax Act, I96I during the current year and earlier years as possiblility of paying the Income Tax under the normal provisions of the Income Tax, I96I in future is uncertain because the company claims weighted deduction under section 35(2AB) of the Income Tax Act, I96I.

2.2 Segmental Reporting as per Accounting Standard - 17:

The entire operations of the company relate to only one segment viz., Electronics & Communication and hence segmental reporting as per AS-17 is not given.

2.3 Sundry Creditors includes Rs. 8,96,582/-(brvious year Rs. 29,47,392/-) due to Small Scale & Ancillary undertakings. There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days at the Balance Sheet date. The above information has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.

2.4 In the opinion of the Board of Directors and to the best of their knowledge and belief, the value on realization of Current Assets, Loans and Advances in the ordinary course of business will not be less than the amount at which they are stated in the balance sheet.

2.5 Balances of Sundry Debtors, Sundry Creditors, and Loans and Advances are subject to confirmation.

2.6 Previous year figures are regrouped/recast/reclassified where ever necessary.

As per our report of even date

for RAMANATHAM & RAO

Chartered Accountants

Firm Registration No. 002934S

Sd/- (CA K. SREENIVASAN)

Partner

ICAI Membership No. 206421

For and on behalf of Avantel Limited

Sd/- A. VIDYASAGAR Managing Director

Sd/- N. NAVEEN Director

Sd/- LOKESH AGARWAL Company Secretary

Sd/- A Sarada Chief Financial Officer

Place : Hyderabad

Date : 11.05.2016