NOTES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31st MARCH, 2015

NOTE NO.

SIGNIFICANT ACCOUNTING POLICIES AND EXPLANATORY INFORMATION / NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31st MARCH, 2015

1. Loan Funds:

(a) Term Loans:

(i) Term Loan of US$ 5.00 Million from a bank is secured by way of first pari passu charge on entire fixed assets both brsent and future (excluding residential flat at Cuffe Parade, Mumbai and office brmises situated at Nariman Point, Mumbai), Second pari passu charge on current assets of the Company (both brsent & future), unconditional and irrevocable personal guarantees from three promoter directors and non-disposal undertaking of shareholding of the Company in the subsidiary in China. The loan has been renewed during the year and is repayable in bullet in May 2016. The interest rate of the Borrowings is 6 Months' LIBOR plus 5.50% per annum.

(ii) Term Loan from another bank up to Rs. 32,500.00 Lakh is secured by way of (a) first pari passu charge on all the fixed assets of the Company, excluding specific immovable properties (b) second pari passu charge on the current assets of the Company (c) pledge of 29.99% of the shares of the Company held by the promoters (d) pledge of all the shares of the subsidiaries held by the Company (e) personal guarantees from three promoter directors and (f) exclusive charge on certain residential and commercial immovable properties owned by the Company, promoters, group companies/firms. The loan is repayable in quarterly unequated installments commencing from January 2015 and ending in October 2020. The current interest rate of the Borrowing is 13% per annum.

(b) Working Capital facilities from banks are secured by way of (i) first pari passu charge in the form of hypothecation of stocks and book debts of the Company and (ii) second pari passu charge on all the fixed assets (excluding specific fixed assets) of the Company. One of the banks has been provided personal guarantees from two directors. Two of the banks have been provided additional security over separate specific immovable properties of the Company. The interest rate of the working capital facilities ranges from 13.20% per annum to 15.50% per annum.

(c) The Interest-free Sales Tax Deferment Loan is repayable in six equal annual installments, with the last installment falling due in financial year 2018-19.

(d) Short-term unsecured loans from related parties are repayable on demand and carry interest rate of 12% per annum.

2. (a) Trade Payables include Rs. 157.40 Lakh (Rs. 117.03 Lakh as at 31/03/2014) due to Micro and Small Enterprises registered under the Micro, Small and Medium Enterprises Development Act, 2006 (MSME).

(b) No interest is paid/payable during the year to any enterprise registered under MSME.

(c) The above information has been determined to the extent such parties could be identified on the basis of the information available with the Company regarding the status of suppliers under the MSME.

3. Bonds/Undertakings given by the Company under concessional duty / exemption schemes to government authorities (net of obligations fulfilled) aggregate Rs. 2,978.77 Lakh as at the close of the year (March 31, 2014: Rs. 3,222.14 Lakh).

4. (a) During the year 2014-15, the Chairman & Managing Director (CMD) is entitled to a remuneration of Rs. 61.95 Lakh as per Schedule V to the Companies Act, 2013. However, in absence of profits, the CMD has voluntarily decided not to draw any remuneration from the Company.

(b) In the absence of profits during the financial year 2012­13, the remuneration of Rs. 289.84 Lakh for that financial year of the CMD and two Whole Time Directors (WTDs) as per their respective terms of appointments was in excess by Rs. 228.78 Lakh computed in accordance with the provisions of the Companies Act, 1956 and Schedule XIII thereto. The Company had obtained approval of the shareholders of the Company by way of postal ballot for payment of the excess remuneration and had applied to the Central Government for seeking its approval. During the year 2014-15, the Central Government has approved 50% of the remuneration paid to the CMD and the two WTDs. The CMD and the two WTDs have refunded the excess remuneration not approved by the Central Government.

5. In accordance with Accounting Standard - 17 'Segment Reporting, segment information has been given in the Consolidated Financial Statements of the Company and, therefore, no separate disclosure on Segment information is given in these financial statements.

6. The Company has an investment of Rs. 200 Lakh in 2,000,000 Equity Shares of GPT Steel Industries Private Limited (GPT). Based on the financial statements of GPT, its Net Worth has fully eroded. The Company had made an assessment during the year 2010-11 and had accordingly provided for 100% diminution in value of investments made in GPT. The position at the end of this financial year remains the same.

7. As on March 31, 2015, the Company is holding majority stake of Rs. 431.72 Lakh (Rs. 431.72 Lakh as on March 31, 2014) in its subsidiary, Calcutta Combrssion & Liquefaction Engineering Limited (CC&L). Further, the Company has loans and other receivables, aggregating Rs. 1,328.09 Lakh (Rs. 1,068.91 Lakh as at March 31, 2014) due from it. The Net Worth of CC&L has fully eroded. Provision for impairment of Rs. 431.72 Lakh towards the investment and Rs. 48.28 Lakh towards loans and receivables have been made during the year 2014-15 (Financial Year 2013-14: Nil) based on management's assessment and independent valuation of the recoverable value of the investment, loans and receivables. These provisions have been disclosed as an Exceptional Item in the Statement of Profit and Loss.

8. Since March 31, 2013, the investment in equity shares, amounting to Rs. 6,925.07 Lakh of EKC Industries (Tianjin) Company Limited, the subsidiary in China, has been considered as current investment pursuant to the decision of the Board of Directors of the Company to dispose off the investment in the subsidiary by sale of the equity shares or in any other manner most beneficial to the Company. Accordingly, the amounts recoverable as loans and advances and interest thereon aggregating to Rs. 3,950.82 Lakh as on March 31, 2015 (Rs. 7,628.67 Lakh as at March 31, 2014) have been classified as current. The Company is of the considered view based on the assessment of the relevant factors, such as, the long term nature of the investment, future business prospects in the markets in which EKC Industries (Tianjin) Company Limited operates, expected apbrciation in the fair value of the assets of EKC Industries (Tianjin) Company Limited, etc., that no provision for the diminution in the value of the Investment is required. However, on conservative basis, during the current year, an amount of Rs. 1,500 Lakhs (Rs. Nil as at March 31, 2014) has been provided towards such diminution and has been disclosed as an Exceptional Item in the Statement of Profit and Loss.

9. As on March 31, 2015, Other Current Assets include land at Gandhidham having book value Rs. 223.25 Lakh and office brmises at Mumbai having book value Rs. 1,235.68 Lakh being Fixed assets held for disposal, pursuant to the decision of the Board of Directors of the Company to dispose off the same during near future.

10. Previous year's figures have been reclassified/regrouped to conform to current year's classification/grouping.

11. Significant Accounting Policies followed by the Company are as stated in the Statement annexed to this note as Annexure I.

As per our report of even date attached

For Walker Chandiok & Co LLP

(formerly Walker, Chandiok & Co)

Chartered Accountants

Khushroo B. Panthaky

Partner

Vipin Chandok Chief Financial Officer

For and on behalf of the Board

P. K. Khurana

Chairman & Managing Director

Puneet Khurana Director

Place : Mumbai

Date : 26th May, 2015

Notes forming part of Financial Statements

Annexure I

SIGNIFICANT ACCOUNTING POLICIES: GENERAL INFORMATION

The Company is engaged in the manufacture of high brssure seamless gas cylinders and other cylinders, equipments, appliances and tanks with their parts and accessories used for containing and storage of liquefied petroleum gases and other gases, liquids and air.

A. Basis of brparation of financial statements:

The financial statements have been brpared in accordance with the Generally Accepted Accounting Principles in India under the historical cost convention on accrual basis, except for certain tangible assets which are being carried at revalued amounts. These financial statements have been brpared to comply in all material aspects with the accounting standards notified under section 133 of the Companies Act, 2013, read with Rule 7 of Companies (Accounts) Rules, 2014, (as amended) and other relevant provisions of the Companies Act, 2013. All the 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 realization in cash and cash equivalent, the Company has ascertained its operating cycle to be 12 months for the purpose of current - non-current classification of assets and liabilities.

B. Use of Estimates:

The brparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Differences between actual results and estimates are recognised in the period in which the results are known. Examples of such estimates include the useful life of fixed asset, provision for doubtful debts/advances, future obligation in respect of retirement benefit plans, provision for inventory obsolescence, impairment of investments etc.

C. Recognition of Revenue and Expenditure:

a. Revenue/Income and Cost/Expenditure are generally accounted for on accrual basis as they are earned or incurred except in case of significant uncertainties;

b. Sale of goods is recognized on transfer of significant risks and rewards of ownership. Recognition in the case of local sales is generally on the dispatch of goods. Export Sales are generally accounted for on the basis of the dates of 'On Board Bill of Lading';

c. Export Benefits are recognised in the year of export;

d. Dividend income is recognised in the year in which the right to receive dividend is established.

e. Interest income and Commission income on guarantees are recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.

D. Employee Benefits:

a. Short term employee benefits are recognized as an expense at the undiscounted amount in the Statement of Profit and Loss of the year in which the related service is rendered;

b. Post employment benefits

i. Defined contribution plans:

Company's contribution to the superannuation scheme, state governed provident fund scheme, etc. are recognised during the year in which the related service is rendered;

ii. Defined benefit plans:

The brsent value of the obligation under such plans is determined based on an actuarial valuation using the Projected Unit Credit Method. Actuarial gains and losses arising on such valuation are recognised immediately in the Statement of Profit and Loss. In the case of gratuity which is funded with the Life Insurance Corporation of India, the fair value of the plan assets is reduced from the gross obligation under the defined benefit plan to recognise the obligation on net basis;

c. Compensated Absences: Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year 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 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 recognized in the Statement of Profit and Loss in the year in which they arise.

d. Termination Benefits are recognised as an expense in the Statement of Profit and Loss of the year in which they are incurred.

E. Foreign Currency Transactions / Translations:

a. All transactions in foreign currency are recorded at the rates of exchange brvailing on the dates when the relevant transactions take place;

b. Monetary assets and liabilities in foreign currency outstanding at the close of the year are converted into Indian Currency at the appropriate rates of exchange brvailing on the date of the Balance Sheet. Resultant gain or loss is accounted for during the year;

c. In respect of forward exchange contracts entered into to hedge foreign currency risks, the difference between the forward rate and exchange rate at the inception of the contract is recognized as income or expense over the life of the contract on equated basis. Further, the exchange differences arising on such contracts are recognised as income or expense along with the exchange differences on the underlying assets/ liabilities. Profit or loss on cancellations/renewals of forward contracts is recognised during the year;

d. Till 31st March, 2010, exchange differences arising on other derivative contracts entered into to hedge foreign currency exposure on account of highly probable forecast transactions, was recognized and marked to market, in line with principles laid down in Accounting Standard 30 - Financial Instruments - Recognition and Measurement, issued by The Institute of Chartered Accountants of India, to the extent, no specific accounting treatment was brscribed under Company law or by any other regulatory authority. Accordingly, gains or losses on effective hedges were carried forward under Hedging Reserve to be recognized in the Statement of Profit and Loss only in the year in which underlying transactions were completed. In the absence of a designation as effective hedge, the gains or losses were immediately recognized in the Statement of Profit and Loss. With effect from 1st April, 2010, the Company has discontinued the aforesaid accounting treatment and is accordingly, recognizing mark to market losses in the Statement of Profit and Loss in the respective time periods.

e. Accounting of Foreign Branch (Integral Foreign Operation):

i. Monetary assets and liabilities are converted at the appropriate rate of exchange brvailing on the Balance Sheet date;

ii. Fixed assets and debrciation thereon are converted at the exchange rates brvailing on the date of the transaction.

iii. Revenue items (excluding debrciation) are converted at the rate brvailing on date of the transaction.

F. Fixed Assets and Debrciation

a. Fixed Assets:

Fixed Assets are carried at cost of acquisition/ construction or at revalued amounts less accumulated debrciation and amortisation. Cost of acquisition includes taxes/duties (net of credits availed) and other attributable costs for bringing assets to the condition required for their intended use.

b. Debrciation / Amortisation:

i. Cost of Leasehold Land is amortised over the primary period of the lease.

ii. Debrciation on the assets has been provided on the straight line method as per the useful life brscribed in Schedule II to the Companies Act, 2013, with residual value of 5%, except in respect of the following categories of the assets, in whose case the useful life of the asset has been assessed based on the technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturer's warranties and maintenance support, etc.

Plant and Machinery : 10 to 25 years

Gas Cylinders : 25 years

iii. Debrciation on additions to assets or on sale/ disposal of assets is calculated pro-rata from the date of such addition or upto the date of such sale/ disposal as the case may be.

G. Investments:

Investments are classified into Current and Long-term Investments. Current Investments are stated at lower of cost and fair value. Long-term Investments are stated at cost. A provision for diminution is made to recognise a decline other than temporary in the value of Long-term Investments.

H. Inventory Valuation:

a. Raw Materials and Components, Work in Progress, Finisa. Raw Materials and Components, Work in Progress, Finished Goods, Stock in Trade, Stores and Spares etc. are valued at Lower of Cost and Net Realisable value.

b. Goods in transit are valued at cost to date.

c. Cost' comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventory to their brsent location and condition. Cost formulae used are either 'First In First Out' or 'Weighted Average Cost' as applicable.

d. Inter-unit transfers are valued either at works or factory costs of the transferor unit.

I. Taxation:

Income-tax expense comprises Current tax and Deferred tax charge or credit.

a. Provision for current tax is made on the assessable income at the tax rate applicable to the relevant assessment year.

b. Deferred Tax is recognized on timing difference between taxable income and accounting income that originates in one period and are capable of reversal in one or more subsequent period(s). The Deferred Tax Asset and Deferred Tax Liability are calculated by applying tax rate and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred Tax Assets arising on account of brought forward losses and unabsorbed debrciation under tax laws are recognised only if there is a virtual certainty of its realisation supported by convincing evidence. Where there is no unabsorbed debrciation and/or brought forward losses, Deferred Tax assets on account of other timing differences are recognised only to the extent there is a reasonable certainty of its realisation. At each Balance Sheet date, the carrying amounts of Deferred Tax Assets are reviewed to reassess realisation.

J. Borrowing Costs:

Interest and other borrowing costs attributable to acquisition/ construction of qualifying assets are capitalised as part of the cost of such assets upto the date the assets are ready for their intended use. Other borrowing costs are charged as expense in the year in which these are incurred.

K. Impairment of Assets:

The carrying amounts of assets are reviewed at each Balance Sheet date to assess whether there is any indication that an individual asset / group of assets (constituting a Cash Generating Unit) may be impaired. If there is any indication of impairment based on internal / external factors i.e. when the carrying amount of the assets exceed the recoverable amount, an impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired. An impairment loss recognized in prior accounting periods is reversed or reduced if there has been a favourable change in the estimate of the recoverable amount. However, the carrying value after reversal is not increased beyond the carrying value that would have brvailed by charging usual debrciation if there was no impairment.

L. Provisions, Commitments, Contingent Liabilities and Contingent Assets:

Provisions involving a substantial degree of estimation in measurement are recognised when there is a brsent obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are disclosed in respect of possible 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. Contingent Assets are neither recognised nor disclosed in the financial statements.

M. Leases:

The Company has leased out 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 recognized 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 for securing lease contracts are recognized as an expense in the Statement of Profit and Loss in the period in which they are incurred.

Assets acquired on lease where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Lease rentals are charged to the statement of profit and loss on a straight line basis.

N. Earning Per Share:

Basic earnings per share are 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. Earning 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. 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 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.