The Company had adopted the Hedge Accounting policy and principles set out in Accounting Standard (AS) 30 Financial Instruments: Recognition and Measurement. During the quarter ended 30^th September, 2014, the Company has carried Exchange Loss of Rs 13.70 Crore to Hedge Reserve Account and charged Exchange Loss of Rs 4.78 Crore to Statement of Profit and Loss from Hedge Reserve Account. Balance in Hedge Reserve Accounts as on 30th September, 2014 is Rs. 23.38 Crore.

The Company has exercised the option as per Para 46 A inserted in the Accounting Standard ( AS-11) for treatment of exchange difference on long term monetary liabilities, other than covered under the Hedge accounting . Accordingly during the quarter ended 30^th September, 2104, Exchange Loss capitalized is Rs. 5.06 Crore and Exchange Loss recognized in Foreign Currency Monetary Item Translation Difference Account (FCMITDA) is Rs. 1.01 Crore and Exchange Loss of Rs. 0.49 Crore transferred to Statement of Profit and Loss from FCMITDA. Balance in FCMITDA as on 30^th September, 2014 is Rs. 9.88 Crore.

Based on the advice on treatment of Amalgamation Reserve created in terms of the Scheme of Arrangement, sanctioned by the Hon'ble High Court, Bombay, the Company has adjusted depreciation of Rs.1.11 Crore and Rs. 2.22 Crore during current quarter and six months ended 30^th September, 2014 against the Amalgamation Reserve.

The Company has invested Rs.48.43 Crore in its subsidiary ISMT Enterprises, Luxembourg, which in turn holds 100 % investment in Structo Hydraulics AB, Sweden (SHAB). The company has given a corporate guarantee of Rs 7.40 Crores (USD 1.201 million balance loan amount ) for loan availed by SHAB. The net recoverable as on September, 30^th 2014 on account of supplies by the company to SHAB is Rs. 51.05 Crore. SHAB has incurred cash losses and the net worth of SHAB is eroded. The management is of the opinion that the investment made in ISMT Enterprises group is strategic and as a forward integration in the value chain of core business of the company and the diminution in value of investment is temporary in nature, as such no provision for the same and for receivables is considered necessary.

Upon petition filed by the Company regarding non implementation of Energy Banking Agreement (EBA) dated 7^th May, 2010, Maharashtra Electricity Regulatory Commission (MERC) granted partial relief to the Company by its order dated 20^th June, 2014 .The company being aggrieved by the said order has filed a Review application before MERC on 9^th July, 2014 and clarificatory petition on 6^th August,2014 to reconsider its decision on various grounds. Based on Legal advice, the Company, pending final disposal of the review application had accrued the EPA benefit aggregating to Rs. 49.97 Crores till 31^st March,2014 representing excess energy charges paid to MSEDCL on account of non availability of banking facility. There was no further accrual effective from 1^st April,2014 on account of temporary suspension of operation of power plant. .

Pending an independent ascertainment of useful life of fixed assets, the Company has reworked depreciation with reference to the useful lives of Fixed Assets prescribed by Schedule II of the Companies Act 2013, due to which there is a lower charge of depreciation of Rs. 10.88 Crore and Rs. 21.57 Crore for the current quarter and six months ended 30^th September, 2014. In respect of assets where life is already exhausted, carrying value as at April, 01, 2014 of Rs. 9 .76 Crore has been adjusted to Reserves.

Out of the outstanding MAT Entitlement as at 30^th September, 2014 of Rs. 91.44 Crore, any amount lapsing in future due to insufficient taxable profits shall be fully provided in the respective years of lapsing.

The auditors have carried out a “Limited Review’’ of the financial results for the quarter and six months ended 30^th September, 2014.