Notes on Accounts

A Significant Accounting Policies:

i) General:

The financial statements have been brpared on the historical cost convention in accordance with generally accepted accounting principles.

ii) Fixed Assets and Debrciation:

a) Fixed assets are stated at historical cost net of CENVAT and VAT credits as reduced by accumulated debrciation.

b) debrciation on fixed assets has been provided under the straight Line Method , in accordance with Schedules II of Companies Act, 2013 .

c) Leasehold land:

Premium paid on leasehold land is amortised over the lease period.

d) The cost of software relating to ERP is amortised over the estimated useful life viz. 5 years. The cost of other intangible assets are amortised over the estimated useful life viz. 3 years.

e) (i) The expenditure during construction period relating to the new projects till the commencement of commercial production is capitalised and allocated to fixed assets.

(ii) In accordance with AS 16 - Borrowing costs issued by the ICAI, the borrowing costs attributable to the new projects are capitalised till the commencement of commercial production and included in expenditure during construction period and allocated to fixed assets and other borrowing costs are recognised in the year in which it is incurred.

f) Grants received from Government based on Investment in Fixed assets are reduced from the cost of Fixed assets.

iii) Investments:

a) Long term investments are stated at cost less provision for diminution other than temporary if any, in value of such investments.

b) Current investments are stated at the lower of cost and fair value.

iv) Inventories:

The stock of raw materials, stores, loose tools and goods in transit are valued at cost (net of CENVAT and VAT credits on weighted average basis). The stock of finished goods and work-in-process are valued at cost (net of CENVAT and VAT credits including appropriate overheads) or market value whichever is lower.

v) Revenue recognition

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership have been transferred. Service revenues are recognised when services are rendered. Interest income is recognised on time proportion basis. dividend income is recognised when rights to receive payment is established

vi) Staff terminal benefits:

a) Provident Fund:

Eligible employees receive benefits from Provident Fund which is defined contribution plan. Both, the employees and the Company make monthly contributions to the regional provident fund authorities/ Company's Employees Provident Fund Trust, equal to specified percentage of eligible covered employees salary. The Company has no other obligations than the monthly contributions.

b) Gratuity:

The gratuity plan provides for a lump sum payment to vested employees eligible for gratuity at the time of retirement, death, incapacity or termination of employment. Liabilities with regard to the gratuity plan are determined by actuarial valuation as at the Balance Sheet date based upon which the Company contributes all the ascertained liabilities to LIC, who is the administrator of the plan.

c) Superannuation:

Eligible employees receive benefit from Superannuation at the time of retirement, death or leaving the services. The Company makes an annual contribution to LIC of India, equal to a specific percentage of the eligible employee's basic salary. Apart from this, the Company has no other obligation under this head.

d) Unencashed Leave Salary:

Unencashed leave salary is accounted on actuarial valuation and the Company contributes part of the ascertained liabilities to SBI Life Insurance Company Limited, who is the administrator of the plan.

vii) Research & Development expenses:

Revenue expenditure on Research & Development is charged to profit & loss account in the year in which it is incurred.

viii) Foreign Currency Transactions:

The exchange differences arising on reporting of Long Term Foreign Currency Monetary Items at rates different from those at which the transactions were initially recorded during the financial year, in so far as they relate to debrciable capital assets are added to or deducted from the cost of the asset and are debrciated over the balance life of the asset and in other cases are accumulated in Foreign Currency Monetary Item Translation Difference Account and amortized over the balance period of such long term asset / liability but not beyond 31st March, 2020.

Foreign currency transactions other than the above items outstanding at the year end are accounted for at year end rates and the profit / loss so determined and also the realised exchange gains / losses are recognised in the Profit and Loss statement. In respect of Forward Exchange contracts, the difference between the forward rate and the exchange rate at the date of inception of the contract is recognised as income or expense over the period of the contract. Any profit or loss arising on cancellation or renewal

of such forward exchange contracts is recognised as income or expense for the year.

ix) Export Incentives:

Export incentives are recognised as revenue as and when exports are made.

x) Derivative Contracts:

The profit/loss arising on derivative contracts is accounted for as income/expenditure on the date of settlement of the contract.

The outstanding derivative contracts are revalued at the end of the year and while the net loss arising there from is debited to profit and loss account, the net unrealised gain is ignored, except in case where they relate to borrowing costs that are attributable to the acquisition of Fixed Assets, in which case they are adjusted to the carrying cost of such fixed assets.

xi) Operating Leases:

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets are classified as operating leases. Operating lease payments are recognised as an expense in the revenue account as per the lease terms.

xii) Earnings per share:

Earnings Per Share (EPS) is computed by dividing the net profit / (loss) after tax for the year attributable to the equity shareholders by weighted average number of equity shares outstanding during the year.

xiii) Taxes on Income:

Current tax is the amount of tax payable on the taxable income for the year and is determined in accordance with the provisions of the Income Tax Act, 1961.

Deferred tax is recognised on timing differences; being the differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

Deferred tax assets in respect of unabsorbed debrciation and carry forward of losses are recognised only if there is virtual certainty that there will be sufficient future taxable income available to realise such assets. Other deferred tax assets are recognised if there is reasonable certainty that there will be sufficient future taxable income available to realise such assets.

xiv) Provisions and Contingencies:

The Company creates a provision when there is a brsent obligation as a result of past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of obligations. A disclosure of contingent liability is made when there is a possible obligation or a brsent obligation that will probably not require outflow of resources or where a reliable estimate of the obligation cannot be made.

Notes on Accounts

1TERMS OF REPAYMENT OF TERM LOANS AND OTHER LOANS

The term loans and other loans are repayable over a period of 1 to 5 years as per the terms of agreement entered into with the Banks / others.

2 The Company opted for accounting the exchange differences arising on reporting Foreign Currency Monetary Items in line with the Companies (Accounting Standards) Amendment Rules, 2009 on AS11 notification dated 31st March, 2009 read with Notification dated 11th May, 2011 and Notification dated 29th December 2011 issued by the Ministry of Corporate Affairs.

Consequently, Exchange differences relating to Long Term Foreign Currency Monetary Items (other than Fixed assets) amounting to Rs.0.14 Crores gain {net of amortization Rs. 0.25 Crores} [Previous year Rs. 0.01 Crores loss {net of amortization Rs.0.16 Crores}] are adjusted to Foreign currency Monetary ItemTranslation Difference Account.

3 In the opinion of the management the Long term Investment in Equity shares of Sundaram Hydraulics Limited is considered as strategic in nature and the diminution in the value of the said investment is considered as temporary in nature in view of the long term business outlook and future growth plans. Hence no provision is considered necessary. However the provision made in the brvious year amounting to Rs. 1.00 crore is retained.

4 Derivative instruments

Foreign Currency exposures that are not hedged by a derivative instrument or otherwise Rs.101.45 crores (Previous year - Rs.8.43 crores)

5 Previous year's figures have been regrouped wherever necessary to conform to this year's classification.

S RAM Chairman

S SRIVATHSAN Chief Financial Officer & Secretary

SRIVATS RAM Managing Director

S PRASAD Director

As per our report attached

For SUNDARAM & SRINIVASAN

Chartered Accountants (Registration No.:004207S)

 K SRINIVASAN

Partner

Membership No.5809

Chennai

25th May, 2016