1. SIGNIFICANT ACCOUNTING POLICIES

a) Basis of accounting

The books of accounts are maintained on accrual basis as a going concern.

b) Valuation of Inventories

Inventories other than Finished Goods are valued at cost on Weighted average basis. Finished goods are valued at cost or net realisable value whichever is lower. Work-in-progress is valued at raw material cost plus cost of conversion excluding interest.

c) Cash flow statement

Cash Flow Statement has been brpared under “Indirect Method”.

d) Debrciation

Debrciation has been charged on Useful Life of assets basis at the rates brscribed under Schedule II to the Companies Act, 2013.

e) Revenue recognition

The sales include sale of products manufactured, bought out components and scrap sales but are net of trade discounts and exclusive of sales tax / VAT where applicable. Interest income is recognised on a time proportion basis. Insurance claims are recognised on certainty of realisation.

f) Fixed assets

Fixed assets are stated at cost less debrciation. All costs relating to the acquisition and installation of fixed assets are capitalized. Interest on loans availed for acquiring fixed assets is capitalized only upto the date the assets are put to use.

g) Foreign currency transactions

Foreign currency transactions are accounted at the exchange rates brvailing on the date of the transaction.

Transactions in foreign exchange, which are covered by forward contracts, if any, are accounted at the contracted rate., Foreign exchange transactions, which are outstanding as at the year-end are translated at the year-end exchange rate. Exchange gains and losses arising on account of differences in actual realisation and year end translation are reflected in the profit and loss statement.

h) Derivatives

The losses / gains, if any, arising under the forward contracts, if any, taken which are not closed as of the year-end, are recognized in the accounts based on Accounting Standards AS-1, AS-11 and AS-30 as well as the brss note issued by the Institute of Chartered Accountants of India.

i) Investments

Investments are accounted at cost.

j) Retirement benefits

Company’s contribution to provident fund, superannuation fund and gratuity fund are made to the respective Trusts and charged to the profit and loss statement. Provision for leave salary in respect of encashable leave has been provided for according to the service rules of the Company based on actuarial valuation. The necessary disclosures as per Revised AS 15 have been made as part of Notes on Accounts.

k) Borrowing cost

Borrowing cost has been treated in accordance with the Accounting Standard on Borrowing Cost (AS – 16) issued by the Institute of Chartered Accountants of India.

l) Excise duty

Excise duty in respect of closing inventory of finished goods is included as part of inventory. The amount of CENVAT credits in respect of materials consumed is deducted from the cost of materials consumed.

m) Segment reporting

The operations of the Company relate only to one segment viz., friction materials which is covered in this report.

n) Related party transactions

The information on related party transactions is compiled based on the guidelines issued by The Institute of Chartered Accountants of India under Accounting Standard on Related Party Transactions (AS –18).

o) Leases

The Company has entered into a lease agreement for acquiring land which is exempt from the coverage of Accounting Standard 19 on Lease.

p) Taxes on income

Provision for income tax is made on the basis of estimated taxable income for the year. Deferred tax resulting from timing differences between the book and the tax profits is accounted at the current rate of tax to the extent that the time differences are expected to crystallise. Deferred tax asset and liability are set off and net amount is shown in the Balance Sheet. Provision for Income Tax made in earlier years net of payment are retained even after favourable appeal orders if there is uncertainty of final outcome of disputed issues pending in further appeals.

2. Figures for the brvious year have been regrouped wherever necessary to conform to this year's classification.

K MAHESH Chairman

T KANNAN Director

ASHOK V CHOWGULE Director

As per our Report Annexed

for SUNDARAM & SRINIVASAN

Chartered Accountants

(FRN 004207 S)

P MENAKSHI SUNDARAM

Partner

Membership No.217914

K S RANGANATHAN Director

K S D SAMBASIVAM Director

KRISHNA MAHESH Managing Director

S RAMABADRAN Chief Financial Officer & Company Secretary

Place : Chennai

Date : May 24, 2016