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CONTENT

Sl. No.DESCRIPTIONPAGE NO.

CHAPTER I INTRODUCTION3-10

CHPATER IICOMPANY PROFILE 12-20

CHPATER IIIANALYSIS OF THE STUDY 22-46

CHAPTER IVPROJECT STUDY48-61

CHAPTER VFINDINGS & SUGGESTIONS63-65

BIBILOGRAPHY67

CHAPTER 1INTRODUCTION(1.1) INTRODUCTION TO PROJECT AT ECIL

In a large Public Sector Undertakings (PUS) like ECIL there are employees representative bodies like working unions and officers associations which call for transparency in all the Management transactions. This is one of the main reasons where corporate governance has to be more effective in such organization keeping above in the mind. I felt like choosing ECIL for interesting corporate governance practices in ECIL.

ECIL is one of the premier organizations established under Department Of Atomic energy and is currently a wholly owned Government of India (GOI) enterprise, having a strong base in the field of Electronics. The recent Development and Manufacture of IDSN antenna by the ECIL has made to choose "ECIL" for my MBA Project on CORPORATE GOVERNENCE.

The history and successful performance of the organization since its inception lure me to ECIL.As I want to learn more about my project and explore my knowledge in it, I feltThe ECIL is the best platform to learn and imbibe perfectionism in my project. The strong HR, highly technical and engineering skills of the ECIL's HR and the technical competence of the organization, made me to choose ECIL. ECIL projects are given good Grades and the learning environment in ECIL Good jobs culture, climate are some of the factors which motivated me to do project in ECIL. The Zest and Zeal to develop my knowledge forced me to select a suitable organization which can improve my skills and expand the horizon of my knowledge. The live project in ECIL can help me a lot in securing a Good Employment.

(1.2) Definition of Corporate Governance.Corporate governance (CG) is one of the most talked about topics in business, indeed in society, today. A Google search revealed 513 news citations during a single week in June 2006. Most academics, business Professionals, and lay observers would agree that CG is defined as the general set of customs, regulations, Habits, and laws that determine to what end a firm should be run.

It is clear that CG exists at a complex intersection of law, morality, and economic efficiency. Less clear, however, is the extent to which current MBA education reflects that complexity. CG is usually not a distinct academic discipline, but integrated into other courses. Considering that issues of executive Compensation, financial scandals, and shareholder activism are all tied up with CG, its teaching is a topic worth investigation(1.3) NEED FOR THE STUDY:

There has been a considerable change in the attitude of the corporate management in the recent times and they are coming forward to implement good Corporate Governance practices, realizing their importance. To understand the procedure of preparing a corporate report and the role of an independent director in protecting the interest of the minority shareholders. In the past few years the stock market has experienced a perfect storm in the confluences of stock market bubbles, tax laws that favored stock based incentive compensation increased focus on quarterly earnings and short term stock market movements. A failure to address these problems could have indicated a failed system but then it corrected quickly. For the most part, the recent reforms remind us of what we have considered all along to be priorities, including accurate books and records; full and fair disclosure; duties of care; loyalty and good faith. Reforms in countries and regions as diverse as the United states, the European Union, the Russian Federation, and even India, have a remarkably similar emphasis on director independence, clarification of board and audit committee oversight responsibilities and management accountabilities for accurate disclosure.

While reforms efforts are important, as a practical matter, Corporate Governance has to be exercised by individuals within a perimeter of ambiguity and discretion that is necessary to foster entrepreneurial activities. In the final analysis, investors all over the world must rely on leading business men to conduct themselves honestly in the interest of shareholders.

How to put a check on such corporate evils and how to protect interest of common shareholders have become matters of serious concern for both the regulators and the government. According to SEBI (securities and exchange board of India) guidelines where the chairman of the board is non executive director. At least one third of the board; and in case chairman of the board is executive director, at least half of the board should consist of independent directors. This step by SEBI is considered to be an effective mechanism to reduce potential divergence between the corporate management and the shareholders. This is so because the independent directors are supposed to function to protect the interest of the minority shareholders by regulating the functioning of the board I an effective and balanced manner so that the promoters and the other majority shareholders cannot transact business unethically, Corporate Governance is today in sharp focus and the performance of companies on this front is being closely watched world over. Let the companies create and accumulate wealth legally, ethically and democratize it.

From the ashes of recent corporate failures a new and better model of Corporate Governance is arising. A wave of creativity is driven largely by board members pride and determination to do the job well. Essential for an effective board include qualities of character, independence and ability to work as a group. An important reform is the requirement for a sessions attended only by independent directors in conjunction with the each board meeting. Consequent upon adoption of policy economic liberalization all over the world leading to tumbling of trade barriers, free flow of capital, and globalization of markets, increased economic interdependencies and transnational activities in every conceivable sector, in every part of the globe Corporate Governance has become highly complex. Coping with the changes of survival and growth, calls for switching over from limited skills to new approach with new techniques on one hand and changes in the mind-set of the managing organizations on the other.

(1.4) OBJECTIVES OF THE STUDY:

1. To understand the need for Corporate Governance in the corporate and to understand the tools which are used to make it successful2. To have an understanding of the clauses 49 of listing agreement of Corporate Governance i.e. about the responsibilities of the director towards the shareholders.

3. To study the practices of Corporate Governance in ECIL.

4. To know how the corporate activities are functioning especially in the area of Corporate Governance.

(1.5) RESEARCH METHODOLOGY

Research objectives: The objective of my project is descriptive and it deals with understanding the rules and regulations which a company has to follow for making their accounts transparent for the shareholders and the people interested in the company. In the final analysis the investors should rely on leading businessman and women to conduct themselves ethically and honestly in the interest of shareholders. How to put a check on such corporate evils and how to protect interest of common shareholders have become matters of serious concern for both regulators and government of India especially in view of the government efforts to attract foreign funds and establish investors confidence. As a remedial measure more and more emphasis is being put on good Corporate Governance and corporate accountability. In this project SEBIs rules (securities and exchange board of India), revised Clause 49 of the listing agreement are listed by framing strict Corporate Governance regulations which reflects the emergence of Corporate Governance issues. SEBI too has revised clause 49 of the listing agreement by framing strict Corporate Governance regulations.

Type of Research Design: The research design is pre planned which is designed for analysis. And also the data was collected from structured and well thought out instruments.

Data: My project data consists of both primary and secondary data.

1) Primary Data: Collected from personal interview, collected under the guidance of Sri J.S.ANAND, Addl. General Manager (Finance) in ECIL2) Secondary Data: The Secondary data has been collected from

1. Annual reports of organization.

2. Internet (www.ecil.co.in).

3. Broachers.

4. House magazines of the units.

5. Other reports of the units.

6. Books(1.6) SAMPLE DESIGN:

Sample unit: Sample unit is the organization the project was completed i.e. ECIL.

Time and place: Project completed within a period of 45 days. The Company is in Hyderabad.

(1.7)LIMITATION:

1. My project data is collected only from one single company i.e. Electronics Corporation of India Limited.2. The study is limited to the information made available by organization on Corporate Governance practices which in turn is restricted by confidential nature of product lines of the organization. It may also be noted that the company is not a listed company, requiring constitution of audit committee under sec 292 (A) under companies act. However an audit committee is constituted for the company, all required practices and deliberations by the audit committee may not be in conformity with that of a listed company. This may be another important factor related to the project study.3. Analysis done for a time period of 45 days.

CHAPTER - 2COMPANY PROFILEELECTRONICS CORPORATION OF INDIA LIMITED

THE COMPANY(2.1) History Over the decades there was a speedy development in the field of Science and Technology. In early 50s an atomic energy establishment Trombay (now called

As Bhaba atomic research center) initiated the research and development in the branches of electronics. This gave the inspiration in establishing an electronics corporation, which renders its support in producing electronic goods and components needed for the production of these goods.

The time passed away with the proposals but the corporation was only on papers. In due course of time i.e. in latter 60s a Corporation fulfilling the above requirements was started by the Govt. of India. The initial idea was given by Sri.Padmabhushan.

Dr. A.S.Rao. He took the initiative of establishing this esteemed organization. Under the leadership and guidance of Dr. Homi.J.Bhaba (Chairman of BARC) Electronic Corporation of India Limited (ECIL) was established on April 11th 1967 and Dr.A.S.Rao was the first Managing Director. He was honoured as Father of Indian Electronics. The production was started and in no time the sales reached the heights and the objective of establishing E.C.I.L was a grand success. The company with a highly skilled human resource pulls of 5600 engineers and technicians and with a current turnover of more than $180 million is all set to be a national asset. The hard work and dedication of the employees made the organization one of the largest corporations in the world. This is the first biggest corporation which was established without any foreign collaboration

Over the years, ECIL pioneered the development of various complex electronic products without any external technological help and scored several firsts in these fields, prominently among them being countrys

Control and Instrumentation for Nuclear power plants.

Digital Computer.

Programmable Logic Controller.

Earth Station Antenna.

Solid state TV.

ECIL may be summarized as Ensuring Customer- centric focus across all processes by adapting to Total Quality Management principles and participating.

PRESENT ENVIRONMENT AND ECONOMIC SCENARIOECIL started with an objective of SELF-RELIANCE under the leadership of Dr.A.S.Rao and chairman of Atomic Energy D.Homi J.Bhaba.

Dr.A.S.Rao quoted while starting the company Self-Reliance is not an expediency but necessity. Self-Reliance instils self-confidence and self-respect which is essential for rapid growth in the technological development of a nation, especially in electronics. The current focus is on increasing contributions to Atomic Energy Sector, Space Defence Sector, Electronics Security Applications, Communications and networks, E-Governance Applications and Exports.

(2.2) VISION

To help the country achieve self-reliance in Strategic Electronics.

(2.2.1) MISSION

To strengthen its status as a valued technological asset to the nation in the area of strategic Electronics meeting the requirements of Atomic Energy, Defense, Space, Civil Aviation, Security and such other sectors of strategic importance.

(2.2.2) OBJECTIVES:

Started with a mission of self-reliance in electronics backed up with a strong R&D team and managed by highly professional project management groups ECIL has always been on the top taking up Technological challenges keeping pace with the times and serving a variety of customers strategy

The key word of ECIL is WHAT INDIA NEEDS MOST, WE MAKE FIRST/ WHAT INDIA NEEDS TOMORROW WHE MAKE TODAY. Flexibility to meet the specific needs and requirements of a customer has always been E.C.I.Ls strategy. E.C.I.Ls strength lies in its ability to understand those needs into total system specifications that exactly match customer requirements in terms of selected platform.

The other objectives of the organization are

To earn an adequate return on investment so that it can be ploughed back to the nation.

To develop an indigenous base in the field of electronics.

To contribute substantially to the process of technological self-reliance by producing high quality electronic goods.

Over the years the company has successfully achieved its objectives of self-reliance in many areas related to the electronics industry. The technological objectives of the company were to develop and promote indigenous technology and to blend indigenous and foreign technology to meet the customer needs due to achievement of the registered targets. Research and development is an essential part of a viable electronics industry. Since it is a field where the rate of obsolescence is extremely rapid, E.C.I.L lays constant emphasis on research and development. This effort has helped in the introduction of several new products.

(2.3) AWARDS, REWARDS AND ACHIEVEMENTS:

The Ministry of labour Govt. of India has awarded E.C.I.L the national safety award in the year 1994 for its outstanding performance in Industrial Safety and as a runner up in achieving longest accident free period and lowest Average frequency rate.

Framed an all time record of achieving high gross sales of around 450 crores during 2009-2010 registering a growth of 75% as against Rs.257 crores during 2008-09.

First prize for Excellence in R&D electronics from ministry of IT in 1997.

First prize for excellence in Industrial Electronics from ministry of IT in 1998.

Received ISO 9001/9002 certificate for all the manufacturing divisions.

Covering design operations and servicing both in hardware and software.

Quality of fuses acknowledged as matching the best in the world.

In the fast changing business environment the only tool that one has for managing completion, complexity and change are:

People: E.C.I.L has a strong work force of 5600 from reputed universities and institutes with Multi-Technological experience.

Technology: Being an R&D oriented organization E.C.I.L is always ready to absorb new technologies, blend with in house R&D and tune to the ever changing customer demands.

Synergy: Liberalization of business policies in India has opened up new challenges. E.C.I.L is agile and pragmatic to respond to this changing scenario and is geared to join the metamorphic globalization process (2.4.1) FINANCIAL TURNOVER

Initially it was started with an investment capital of 150crores and with a paid up capital of 81.25crores. It is having a steady growth with its turnover of 354crores in 94-95, 392 crores in 95-96 and 420crores in 96-97.

(2.5) PRODUCT RANGE

The unique and significant quality of the E.C.I.L is diversity in production. E.C.I.Ls products range about 450. E.C.I.L produces diversified products useful in different fields of Atomic Energy, Steel, Cement, Telecommunications, and Railways etc. The quality is of international standards. E.C.I.L is also an ISO 9001 certified company. It is the producer of the first Indian made Computer. It also makes Satellites, which are useful in Atomic Energy Corporations.

(2.6) DIFFERENT BUSINESS GROUPS IN E.C.I.L

1. Communications Division( CND)Radio communication systems comprising of HF/VHF/UHF Transceivers catering to the needs of the Army, Navy, and Air force and Air traffic control, Satellite TV receive only systems for T&B sector.

2. Antenna Products Division:

This division deals with design, manufacture and commissioning of various types of Antenna systems and Turn-key SATCOM Network projects.

3. Servo Systems Division:

It deals with Precision servo system for application in Defence and Railways.

4. Instruments and Systems Division:

Nuclear Industrial and Analytical instruments, Security systemsCompromising CCTV, Electronic Energy Meters, and Fibre Optic based systems, etc.

5. SCADA Division:

Tele- supervisory systems, Supervisory control & automation projects and industrial controls.6. Strategic Electronics Division:

Special defense products.7. Software Consultancy Division:

Software and Consultancy services.

8. Business Systems Division:

Computer Hardware products and large networking systems.

9. Telecom Division:

Telecommunications equipment like switching products, access products and telecom administration products.

10. Customer Support Division:

Supports spares and maintenance services for computers.

11. Components Group:

Hybrid Micro-circuits, Semi-conductors, Ceramic components, Printed circuit boards, Potentiometers and Thermal Batteries.12. Special Products Division:

Variable time fuzzes, Universal fuzzes and other types of fuzzes for Army and Navy.

13. Control and Automation Division:

Stimulation for Nuclear and Thermal Power Plants, Operator Information Systems, Data Acquisition Systems, Control and Instrumentation Equipment for Nuclear and Thermal Power Plants.

14. Industrial Controls and Consumer Electronics Group( ICG)

15. Computer Education Division(CED):

IT Education Services.

(2.7) COMPETITOR DETAILS: The following are some of the competitors of E.C.I.L:

Nuclear Instruments:

PLA Industries ( Mumbai) Nucleonic Private Limited ( Hyderabad) Canberra( Australia) Eli co (Hyderabad) Toshiba( Japan) Histrionics ( Japan)(2.8) Details/Type of Clients and Customers:

Sahara Airways Jet Airways Indian Airways Parliament of India Navy Defense ArmyCHAPTER 3ANALYSIS OF THE STUDY

ANALYSIS OF THE STUDY

(3.1) Definition of Corporate GovernanceGovernance can be defined as a control over each activity, which will result in overall growth, if practiced properly. Governance is a set of rules stipulated for according due weightage to foster ethical behavior which would help in enhancing the reputation. Thus the code of Governance is as applicable to corporate. As such Corporate Governance is nothing new but to stipulate boundaries by law or by regulation for the benefit of stakeholders. Corporate Governance has succeeded in attracting a good deal of public interest because of its apparent importance for the economic health of Corporations and society in general.

SEBI (securities and exchange board of India) defines Corporate Governance as a field in economics that investigates how to secure/motivate effective management of corporations by the use of intensive mechanisms, such as contracts, organizations designs and legislations. This is often limited to improving financial performance, for example, how the corporate owners can secure/motivate that the corporate managers will deliver a competitive rate of return. It is a system by which business corporations are directed and controlled. The Corporate Governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set and the means of attaining those objectives and monitoring performance. It all depends upon how the directors and the management develop a model of Governance that aligns the values of the corporate participants and then evaluate this model periodically for its effectiveness. In particular senior executives should conduct themselves honestly and ethically, especially concerning actual conflicts of interest and disclosure in financial reports.

WHY IS IT IMPORTANT?Fundamentally, there is a level of confidence that is associated with a company that is known to have good corporate governance. The presence of an active group of independent directors on the board contributes a great deal towards ensuring confidence in the market. Corporate governance is known to be one of the criteria that foreign institutionalinvestorsare increasingly depending on when deciding on which companies to invest in. It is also known to have a positive influence on the share price of the company. Having a clean image on the corporate governance front could also make it easier for companies to source capital at more reasonable costs. Unfortunately, corporate governance often becomes the centre of discussion only after the exposure of a large scam.

(3.2) Parties to corporate governance

Parties involved in corporate governance include the regulatory body (e.g. theChief Executive Officer, theboard of directors,managementand shareholders). Other stakeholders who take part include suppliers, employees, creditors, customers and the community at large.

In corporations, the shareholder delegates decision rights to the manager to act in the principal's best interests. This separation of ownership from control implies a loss of effective control by shareholders over managerial decisions. Partly as a result of this separation between the two parties, a system of corporate governance controls is implemented to assist in aligning the incentives of managers with those of shareholders. With the significant increase in equity holdings of investors, there has been an opportunity for a reversal of the separation of ownership and control problems because ownership is not so diffuse.

A board of directors often plays a key role in corporate governance. It is their responsibility to endorse the organizations strategy, develop directional policy, appoint, supervise and remunerate senior executives and to ensure accountability of the organization to its owners and authorities.

TheCompany Secretary, known as a Corporate Secretary in the US and often referred to as a Chartered Secretary if qualified by theInstitute of Chartered Secretaries and Administrators(ICSA), is a high ranking professional who is trained to uphold the highest standards of corporate governance, effective operations, compliance and administration.

All parties to corporate governance have an interest, whether direct or indirect, in the effective performance of the organization. Directors, workers and management receive salaries, benefits and reputation, while shareholders receive capital return. Customers receive goods and services; suppliers receive compensation for their goods or services. In return these individuals provide value in the form of natural, human, social and other forms of capital.

A key factor is an individual's decision to participate in an organization e.g. through providing financial capital and trust that they will receive a fair share of the organizational returns. If some parties are receiving more than their fair return then participants may choose to not continue participating leading to organizational collapse.

(3.3) What can good Corporate Governance bring to a corporate?

As stated earlier Corporate Governance is the procedure or the rules laid down by the Securities and exchange board of india for protecting the interest of the minority shareholders. Corporate Governance practice has emerged as an integrated element for doing business. The competitive environment and good Corporate Governance outcomes have been presented in the diagram in the next page. This diagram shows the internal and external environment which are affected by the decision of the board. The Board of Directors is required to take decisions according to the rules laid down by the SEBI guidelines. The independent director should make sure that all decisions are made keeping in view the interest of the minority shareholders. Good Corporate Governance can make the company' more reliable and more investors and shareholders would be interested in the company. V/hen a company's rules and regulations are practiced in a stronger manner then, the people who are actually interested in the company shares would believe in the company itself and encourage outsiders to buy those company shares. This would directly increase the companies goodwill in the market and it would fetch more number of investors. This shows that the company would be benefited both internally and externally. Some of the companies which have their vision, mission and goals to have a strong bounding with the shareholders and the people having a share in the company, can easily do so by practicing proper Corporate Governance laid by SEBI rules for the listed companies. The Corporate Governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other shareholders, and spells out the rules and procedures for making decisions on corporate affairs. . The focus is on business practices and quality of disclosure standards with respect to its equitable treatment of, and fairness to, the interest of the corporates' financial shareholders. The core principles of Corporate Governance practices are fairness, transparency, accountability and responsibility. This in turn would benefit the investors by making all the accounts transparent and increase the responsibilities of an independent director towards the minority holders as the decisions are taken keeping in view their interest. This can be understood easily by looking into the diagram given below.

The key contribution of good Corporate Governance includes:-

1. Creation and enhancement of a corporation's competitive advantage:

Competitive advantage flows naturally when a corporation or its services have advantage in creating value for its buyers. Creating competitive advantage requires both the vision to innovate and the strategy to manage the process of delivering value. An effective board should be one that is fit business environment of the opportunities and threats and to compete for the future corporations which develop their strategies by involving all levels of employees, create widespread commitment to make the strategies succeed.2. Enabling a corporation to perform effectively and preventing fraud and malpractices. The code of best practices - policies and procedures governing the behavior of individual of a corporation - form part of Corporate Governance. This enables a corporation to compete more efficiently in the business environment and prevent fraud and malpractices that can destroy business from inside. Failure in the ma' pavement of best practices' within a corporation has led to crises in many instances.3. Providing protection to shareholders interest: Corporate Governance is a set of rules that focuses on transparency of information and management accountability. It imposes fiduciary duty on management to act in the best interest of all shareholders and properly disclose operations of the corporation. This is particularly important when ownership and management of an enterprise are in different hands.4. Affecting the valuation of an enterprise: Improving management accountability and operational transparency fulfill investor's expectations and confidence on management and corporations. And in return increase the value of corporate.

Ensuring compliance with laws and regulations: With the development of the capital markets and the increasing investments by the institutional shareholders and individuals in corporations that are not controlled by particular shareholders, jurisdictions around the world have been developing comprehensive regulatory framework to protect investors.

More rules and regulations addressing Corporate Governance and compliance have been and will be released. Compliance has become a key agenda in establishing good Corporate Governance.

After all, Corporate Governance ensures the long term survival of a corporation.(3.4) TOOLS OF CORPORATE GOVERNANCE:

1. Proper functioning of the Board

2. Trust

3. Audit.

4. Professionalization

5. Communication.1) l. Functions of the Board of Directors Determination of the board policies.

Determination of the General Directions of the enterprise.

Establishment of performance standards to access the performance of the management.

Succession planning.

2) Trust

Trust is the core of Corporate Governance. Shareholders provides funds but they canto run the affair of the company and therefore leave it to the executive management to make best use of their funds and then report back on how well the task has been accomplished.

3) Disclosures

Disclosures should provide transparent and relevant data to help shareholders, creditors and other shareholders.

4) Audit

Audit can act as a self-regulation enabler. The auditor has to comment on the truth and fairness of the financial position as on a certain date and qualify his report if the laid down accounting standards and principles has not been followed. Shareholders expect auditors to detect all funds and irregularities in the course of their audit work.5) Professionalization

Imperative before the Indian companies is to professionalize their executive management. Constant renewals of the board ensure energy, vibrancy, creativity and motive the management team to aspire to become members. Fresh leadership creates discontinuity and new ambition.

6) CommunicationConsistency and continuously communicate the corporate purpose to the people in the organization, so that everyone is motivated to achieve the common aim of acceleration growth and responsible performance. That is how a company can convert every employee into a self driven entrepreneur willing to take risks, quality so essential to achieve long term success.The board has to be visibly transparent so that the employees can read its mind. This will help in development of self-regulated employees, which in turn will result in a self regulated company.(3.5) AN OVERVIEW OF RECOMMENDATIONS OF COMMITTEE SPECIALLY DR.J.J.IRANI COMMITTEE REPORT.

The securities and exchange board of India (SEBI) appointed the committee on Corporate Governance on Mays, 1999 under the chairmanship of sari. Kumar Mangalam Birla, member SEBI board to promote and raise the standards of Corporate Governance in India. Then in the year 2006 another committee was appointed Dr.J.J.Irani Expert committee to give fresh Comments on the practices of the Corporate Governance as a new clause was included to appoint an independent director who would be responsible to take decisions for the minority holders. This committee on company law submitted its report charting out the road map for a flexible, dynamic and user friendly new company law. The committee has taken a pragmatic approach keeping in view the ground realities and has sought to address the concern of all the shareholders to enable the adoption of international accepted best practices.

The expert committee has recommended that private and small companies need to be given flexibilities and freedom of operations and compliance at low cost. Companies with higher public interest which access capital from public need to be subjected to a stricter regime of Corporate Governance.

The committee terms of reference are:

To suggest suitable amendments to the listing agreement executed by the stock exchange with the companies and any other measures to improve the standards of Corporate Governance in the listed companies.

To indicate measures to improve the standards of continuous disclosures of material information, both financial and non-financial nature.

To suggest the manner and frequency of such disclosures of material information.

To indicate the responsibilities of Independent directors.

To suggest safeguards to be instituted within the companies deal with the insider information and insider trading.

To draft a code for corporate best practices.

A number of reports and codes on subject have already been published internationally-notable among them are:

1. The report of the Cadbury Committee.

2. The report of the Greenbury Committee.

3. The combines Code of the London Stock Exchange.

4. The OECD Code on Corporate Governance.

5. The Blue Ribbon Committee report on Corporate Governance (USA).

6. The CII Code on Corporate Governance (INDIA)

Dr.J.J.Irani committee has analyzed all the said reports and drew upon these documents to the extent appropriate. The primary objective of Irani committee was to shift from Government Approval Regime'' to shareholders Approval and Disclosure regime

The main recommendations in respect of Dr.J.J.Irani-l committee report are as follows:

1. Audit committee for Accounting and Financial matters which includes:

Majority of directors to be independent, if the company is required to appoint independent directors.

Chairman of the company to be independent. At least one member to have financial knowledge.

. Chairman to attend AGM and provide clarifications on matters relating to audit.2. Stakeholder relationship committee to be constituted in companies having combined shareholders/deposit holders/debenture holders base of 1000 or more.

3. Remuneration committee to comprise of non-executive directors including abreast one independent director if appointment of independent directors is required. In such a case chairman also to be independent.

4. Tracking and treasury stocks which includes the financial vehicles that tracks the performance of a particular subsidiary or a division. A key advantage of tracking stock is that it offers divisional managers a degree of decision-making authority that might otherwise be attainable. The practical effect 'would be to enhance job satisfaction for divisional managers, thus increasing the company's responsibilities to changing market conditions.

The committee has sought to bring multifarious 'visionary concepts. It encouraged the corporatizations of business and entrepreneurship, the concept of single person economic entity in the form of a one person company. This company may be registered as a private company with one member and may also have at least one director. The committee recommended that he law should provide a framework compatible to growth of small corporate entities and should unable them to achieve transparency at a low cost through simplified requirements. The definition of small companies may be based upon the gross assets comprising of fixed assets, current assets an investments not exceeding a practical limits as also the turnover of the company concerned. The committee also redefined the limited liability of partnership firms. The unlimited liability of partner has so far been the chief reason why partnership firms of professionals, have not grown in size to successfully meet the challenges posed today by international competitions; WTO. GATT etc. As a alternative corporate business vehicle that has the benefits of limited liability but allows its members to flexibility of organizing their internal structure as a traditional partnership, the commit-tee has proposed the concept of limited liability' partnership.

Though the concept of independent directors is not new, it has so been enshrined in the Corporate Governance codes of various countries. The committee has however suggested that independent directors are required to be appointed only in the respect of listed Companies or the companies which have accepted public deposits. The committee has proposed that at east one third of the board should comprise of independent directors irrespective of whether the company has an executive or non-executive chairman. Independent directors should have access to citrate, relevant and timely information in order to discharge their duties and responsibilities effectively.

The committee has identified CEO/MD and company secretary as the key managerial personnel for all companies, whose appointment and removal shall be by the Board of directors of the company concerned. Key managerial personnel should be in the whole time employment of only one company at a time.

Managerial remuneration in India has so far been restricted to certain limits in the case of public of public companies and private companies. To ensure transparency, it is recommended that directors remuneration report should form part of the annual report of the company and should contain details of remuneration package of directors including company's policy on directors' remuneration, the performance graph of the company and the remuneration of directors vis-vis the performance of the company. The shareholders have been recommended to be empowered to decide the remuneration of non-executive directors including independent directors with no government interference. This should be done on the base of their attendance and contribution and performance of the company. This maybe in the form of sitting fees for board and committee meetings attended physically or participated in electrically and profit related commissions.

To sum up Dr.J.J.Irani report on Corporate Governance represents the value artwork; the ethical framework and the moral framework under which business decisions are ken. In other words when investment take place across national borders, the investors want to be sure that not only is their capital handled effectively and adds to the creation of wealth, but the laxness decisions are also taken in a manner which is not illegal or involving moral hazard.

(3.6) CLAUSE 49 OF THE LISTING AGREEMENT ON CORPORATE GOVERNANCE:

Based on the recommendations of the committee and also with a view to promote and raise the standards of Corporate Governance. SEBI revised clause 49 of the listing agreement vide its ocular dated August 26, 2003, the implementation of which was deferred later. The securities and exchange board of India on October 29, 2004 again revised the clause 49 of the listing agreement.

However, noticing that a large number of companies were still not in the state of rareness to be fully obedient with the requirements of revised clause 49 of the listing agreement and extended the date for ensuring compliance with the revised clause 49 of the listing agreement to December 31, 2005. The company agrees to comply with the following provisions which are given in Annexure l as follows:

ANNEXURE I

I. Board of Directors-.

(A) Composition of board: the Board of Directors of the company shall have an optimum combination of executive and non-executive directors with not less than fifty percent of the Board of Directors comprising of non-executive directors. Where the chairman of the board is a non-executive director, at least one third of the board should comprise of independent directors.

(B) Non-executive Directors compensation and disclosures: All the fees and remuneration if any paid to non-executive director, including independent director, shall be fixed by the Board of Directors and shall acquire previous approval of shareholders in the general meeting.

(C) Other provisions as to board and committee: The board shall meet abreast four times a year with a minimum gap of three months between any two meetings. A director shall not be a member in more than 10 committee or act as chairman of more than five committee across all companies in which he is a director.

(D) Code of conduct: The board shall lay down a code of conduct for all board members and senior management of the company. The code of conduct shall be posted on the website of the company.

II. Audit committee

(A) Qualified and independent audit committee: The audit committee shall have a minimum three directors as members. Two-third of the audit committee shall be independent directors.

(B) Meeting of audit committee: The audit committee shall meet at least four times in a year and not more than four months shall elapse between two meetings.

(C) Powers of audit committee: It shall have the power to

To investigate any activity within its terms of reference.

To seek information from any employee.

To obtain outside legal or other professional advice.

(D) Role of audit committee: Recommending the board, the appointment, re-appointment or if required removal of the statutory auditor and the audit fees. It has the power to reviewing with the management, the quarterly financial statements before submission to the board for approval. It has the power to discuss with the internal auditors any significant findings and follow up there on.

(E) Review of information by audit committee: The audit committee shall mandatorily require the following information.

Management discussion and analysis of financial conditions and results of operations.

Statement of significant related party transactions.

Internal audit report relating to internal control weaknesses and

The appointment, removal and terms of remunerations of the chief interne auditor shall be subject to review by the audit committee.

III. Subsidiary company:

At least one independent director on the Board of Directors of the holding company shall be a director on the Board of Directors of a material non listed Indian subsidiary.

The audit committee of the listed holding company shall also review the financial statements, the investments made by the unlisted subsidiary company.

IV. Disclosures:

Basis of related party transactions.

Disclosures of accounting treatment.

Board disclosures- Risk management.

Proceeds from public issues, rights issues, preferential issues, etc.

Remunerations of the directors.

Management.

Shareholders.

V. CEO/CFO certification: The CEO, i.e. the managing director or manager appointed in terms of the companies Ac 1956 and the CFO i.e. The whole time financial Director or any other person heading the financial function discharging that function shall certify to the board that these statement do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading.

VI. Report on Corporate Governance:There shall be a separate section on Corporate with a detailed compliance report or Corporate Governance. Non- compliance Albany mandatory requirement of this clause with reasons thereof and the extent to which the non-mandatory requirement have been adopted should be specifically highlighted.

VII. ComplianceThe compliance shall obtain a certificate from either the auditor or practicing company secretary regarding compliance of conditions of Corporate Governance as stipulated in this clause and annex the certificate with the directors report, which is sent annually to all the shareholders of the company. The same certificate shall also be sent to the stock exchange along with the annual reports filed by the company.

The quarterly compliance report on Corporate Governance should be in the format given below which is considered as Annexure1B. According to SEBI rules there shall be a separate section on Corporate Governance in the annual report of company, with a detailed compliance report on Corporate Governance.

The company shall obtain a certificate from either the auditor or practicing company secretaries regarding compliance of conditions of Corporate Governance as stipulated in this clause and annex the certificate with the directors report which is sent annually to all the shareholders of the company. The same certificate shall also be sent to the stock exchange along with the annual report filed by the company.

The information to be placed before the board are given in Annexure IA which is as follows.

ANNEXURE IA

INFORMANTION TO BE PLACED BEFORE BOARD OF DIRECTORS

1. Annual operating plans and budgets and any updates.

2. Capital budgets and any updates.

3. Quarterly results for the company and its operating divisions or business segments.

4. Minutes of the meeting of the audit committee and other committee of the board.

5. The information on recruitment and remuneration of senior officers just below the board level, including appointment and removal of chief financial officers and the company secretary.

6. Show cause, demand, prosecution notices and penalty notices which are materially important.

7. Serious accidents, dangerous occurrence, any material effluent or pollution problem.

8. Any material default in financial obligations to and by the company, or substantial non- payment of goods sold by the company.

9. Any issue which involves possible public or product liability claims of substantial nature, including any judgments or order which may have negative implications on the company.

10. Details of any joint ventures.

11. Transactions which may involve substantial payment towards goodwill, brand equity or intellectual property right.

12. Significant labor problem and their proposed solutions. Any significant development in human resources/industrial relations, implementations of voluntary retirement scheme etc.

13. Sale of material nature, of investments, subsidiaries, assets, which is not in normal course of business.

14. Quarterly details of foreign exchange exposure and the steps taken by management to limit the risk of adverse exchange rate movement.

15. Non-compliance of any regulatory, statutory or listing requirements and shareholders service such as non-payment of dividend, delay in share transfer etc.

Annexure IC

1. A brief statement on company's philosophy on code of Governance.

2. Board of Directors:

Composition and category of directors for example, promoters, executive, nominee directors, non-executive, independent non-executive, which institution represented as lender or a equity investor.

Attendance of each director at the board meetings and the last AGM.

Number of other boards or board committee in which he/she is a member or a chairperson.

Number of board meetings held, dates on which held.3. Audit committee:

Brief description of terms of reference.

Composition, name of members and chairperson.

Meetings and attendance during the year.

4. Remuneration committee:

Brief description of terms of reference.

Composition, name of members and chairperson.

Attendance during the year.

Details of remuneration to all the directors, as per format in main report.

5. Shareholders committee:

Name of non-executive directors heading the committee.

Name and designation of compliance officer.

Number of shareholders complaints received so far.

Number not solved to the satisfaction of shareholders.

Number of pending complaints.

6. General body meetings:

Location and time, where last three AGMs held.

Whether any special resolutions passed in previous 3 AGMs.

Whether any special resolution passed last year through postal ballot-details of voting patterns.

Person who conducted the postal ballot exercise.

Whether any special resolution is proposed to be conducted through postal ballot.

Procedure for postal ballot.

7. Disclosures:

Disclosures on materially significant related party transactions that may have potential conflicts with the interest of company at large.

Details of non-compliance by the company, penalties, structures imposed on the company by stock exchange or SEBI during the last three years.

Whistle blowers policy and affirmation that no personnel has been denied access to the audit committee.

Details of compliance with mandatory requirements and adoption of the non- mandatory requirements of this clause.

8. Means of communication:

Quarterly results.

Newspaper where in results normally published.

Any websites, where displayed.

Whether it also displays official news releases and

The presentations made to institutional investors or to the analysis.

9. General shareholders information:

AGM; date, time and venue.

Financial year.

Date of book closure.

Dividend payment date.

Listing of stock exchanges.

Stock code.

Market price data: high, low during each month in last financial year. Performance in comparison to broad based indices such as BSE Sensex.

Registrar and transfer agents.

Share transfer system.

Distribution of shareholdings.

Dematerialization of shares and liquidity.

Plant locations.

Address for correspondence.

This list of items which are to be submitted in the Corporate Governance report are given above which is generally given as Annexure 1C

CHAPTER - 4

PROJECT STUDY

(4.1) Directors Report Corporate Governance

The Company continued to take several measures to enhance the openness and transparency of all its operations.i,e. to usher in Good Corporate GovernanceBoard of Directors (2011-2012)The Company continued to take several measures to enhance the openness and transparency of all its operations. Board of Directors In terms of Sec 617 of the Companies Act, 1956, ECIL is a Government Company. Presently, the entire paid up capital of the Company is held by the President of India, including 3 shares held by his nominees. The Board, as on date, comprises of eleven Directors - Chairman & Managing Director, three Whole-time Directors and seven Non-Executive Directors. The Board meets at regular intervals and is responsible for the proper direction and management of the Company. During the financial year ended 31.03.2011, five Board Meetings were held on 15.05.2010, 24.07.2010, 26.09.2010, 28.12.2010 and 26.03.2011. The composition of the Directors, their attendance at the Board Meetings during the financial year and at the last Annual General Meeting is as follows:

Name & Position as on 31.3.2012

Board MeetingsAttendance at last AGM held on 26.09.2011No. of other Directorships

Held during the tenureAttended

Whole-Time Directors

Shri K S Rajasekhara Rao,

Chairman & Managing Director.

Shri S Hanumantha Rao, Director

(Personnel) (appointed from 1.4.07)

Shri U Vishnumurthy, Director(Finance)

(appointed from 9.5.07)

Shri G N V Satyanarayana

Director(Technical) (up to 31.8.07)

Shri Shri Y S Mayya, Director(Technical)

(appointed from 1.9.07)

Non-Executive Directors

Shri V P Raja (up to 18.10.07)

Shri Umesh Chandra

Dr. B N Suresh

Dr. M J Zarabi

Lt.Gen. S P Sree Kumar,

PVSM, AVSM, ADC

Dr. R Sreehari Rao

(appointed from 12.04.07)

Shri V R Sadasivam

(appointed from 19.07.07)

Ms. Revathy Iyer

(appointed from 18.10.07) 5

5

5

2

3

3

5

5

5

5

5

4

25

5

5

2

3

3

5

3

4

3

4

2

2Yes

YesYes-

YesYesYes-

Yes

-

-

Yes

-Nil

Nil

Nil

Nil

Nil2

Nil

Nil

3

1

Nil

4

2

(4.2)DIRECTORS REPORT TO SHAREHOLDERS

Corporate Governance

ELECTRONIC CORPORATION OF INDIA LIMITED

PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 31st MARCH 2012

Schedule2011-122010-11

I.INCOME

Sales 80557.6586341.88

Services19336.5713891.96

Lease Rentals270.68256.31

Turnover (Gross)100164.90100590.15

Less: Excise Duty2348.944883.16

Service Tax1358.631124.97

Sales Tax2270.942791.41

Turnover (Net)94186.3991790.61

Other IncomeM4595.433355.19

98781.8295145.8

Accretion (+)/ Decretion(-) in stock of WIP & FGN -'1'-611.993355.19

Total I98169.8395145.80

II. EXPENDITURE

Material ConsumedN -'2'43153.1147446.78

Employee Remuneration and BenefitsN -'3'24236.3119295.07

Manufacturing, Admin. And other ExpensesN -'4'5562.725619.48

Selling ExpensesN -'5'3247.423619.12

Research and Development2139.693199.57

Total II78339.2579180.02

Less: Transfer to Profit and other Accounts O3574.85332.76

III. NET EXPENDITURE Total III74764.4573847.26

IVPROFIT BEFORE INTEREST & DEPRECIATIONI-III23405.3820701.77

Interest N -'6'1883.03622.08

Depreciation 1318.821203.29

VPROFIT FOR THE YEAR20203.5318876.40

(before prior period / extraordinary adjustments)

Add/ (less) prior Period Items (Net)P-68.1339.38

VIPROFIT BEFORE TAX20135.4018915.78

Less: Provision for Taxation - For the year7695.006957.29

- For earlier Years-29.93-209.79

Deferred tax asset(+) / Deferred tax Liability (-)1050.33763.99

Less: Provision for fringe Benefits Tax106.0095.23

VIIPROFIT AFTER TAX 13414.6612837.04

Add: balance brought forward from Previous Year28770.6020857.62

VIII PROFIT FOR APPROPIATIONS42185.2633694.66

Less: Proposed Dividend 3267.423097.62

Less: Dividend Tax on Proposed Dividend 555.30526.44

Less; Transfer to General Reserve1350.005172.721300.004924.06

IXBALANCE CARRIED TO BALANCE SHEET37012.5428770.60

EARNINGS PER SHARE (Rs) - BASIC821.12828.83

- DILUTED821.12821.33

Accounting Policies, Schedules A to Q form part of the Accounts As per our report of even dote attached

For and on behalf of the Board For LAXMINIWAS & JAIN

Chartered Accountants

U VISHNUMURTHY K S RAJASEKHARA RAO LAXMINIWAS SHARMA

Director (Finance) Chaiirman & Managing Director Partner (M.No. 014244)

Place : Hyderabad

Date :

ELECTRONICSCORPORATION OF INDIA LIMITED

BALANCESHEETAS AT 31sf MARCH, 2012

Schedule As atAs at

31.03.201131.03.2012

I.SOURCES OF FUNDS

1. Shareholders' FundsA 16337.1215488.12

a) Capitol .0.00849.00

b) Share Money Pending AllotmentB 39662.5455999.6630070.646407.72

c) Reserves and Surplus

2. Secured LoonsC 11329.830.00

3. Unsecured LoansD 6364.140.00

Total (I)73693.6346407.72

II. APPLICATIONOF FUNDS

1. Fixed AssetsE

a) Gross Block20361.0519858.25

b) Less: Depreciation13129.1112376.5

c) Net Block7231.947481.75

d) Fixed Assets-in-transit &F 587.117819.05205.657687.4

Capital Work-in-Progress

2. InvestmentsG 164.64164.64

3. Deferred Tax (Net Asset)2388.441338.11

4. Current Assets, Loons and Advances

A) Current Assets

a) InventoriesH6884.136855.84

b) Sundry DebtorsI127003.5998870.9

c) Cash and Bank balancesJ26794.2324511.14

B) Loans and AdvancesK24617.1714517.46

185299.12144755.3

5. Less: Current Liabilities and ProvisionsL

a) Current Liabilities96370.0288799.4

b) Provisions25607.6018738.37

6. Net Current Assets (4) - (5)63321.5037217.57

Total (II)73693.6346407.72

III.NOTESANNEXEDTOAND FORMING

PART OF ACCOUNTS

Accounting Policies, Schedules A to Q form part of the Accounts As per our report of even dote attached

For and on behalf of the Board For LAXMINIWAS & JAIN

Chartered Accountants

U VISHNUMURTHY K S RAJASEKHARA RAO LAXMINIWAS SHARMA

Director (Finance) Chaiirman & Managing Director Partner (M.No. 014244)

Place : Hyderabad

Date :

Audit Committee

A three-member Audit Committee was constituted by the Board in March, 2001 comprising of two non- Executive Directors and a whole-time Director. With regard to terms of reference, powers and functions of the Committee, the Board suggested that the provisions in Clause 49 of listing agreement prescribed by SEBI as applicable to listed Companies are to be followed as a guideline. The Audit Committee presently comprises of two Non Executive Directors, Shri Umesh Chandra, Shri V R Sadasivam and one whole-time Director (Technical) of the Company, Shri Y S Mayya. Shri Umesh Chandra is the Chairman of the Committee. During the year, four meetings of the Committee were held on 24.07.2011, 26.09.2011, 11.12.2011 and 26.03.2012. The Audit Committee reviewed the implementation of Accounting Standards and Audit Programmes. The Committee reviewed the Internal Audit Reports and also the report on the Fixed Assets Physical Verification. The Committee perused the Annual Financial Statements and interacted with the Statutory Auditors for improvement in the system for maintaining financial records as well as the data under Cost Accounts Record Rules.Investments CommitteeThe Board constituted an Investment Committee on 17.12.2003 consisting of Chairman & Managing Director, Director (Finance), General Manager (Finance) and Addl.General Manager (Finance) and a representative from Corporate Planning and Projects Monitoring Division, to consider the proposals for investment of surplus funds in nationalized banks or sound rated scheduled banks at the highest and competitive rates as per DPE guidelines.

Corporate Management Committee The Corporate Management Committee is a high level policy making body, headed by the Chairman & Managing Director. The Committee consists of all Functional Directors, Executive Directors, General Managers and Heads of Divisions. The committee meets regularly and deliberates on the major policy issues including performance of the Company. The President and General Secretary of ECEU and President and Secretary of ECOA are the special invitees.

Divisional Production Committees

The Divisional Production Committees are constituted under the Scheme of Workers Participation in Management. The Head of Division concerned is Chairman for the Committee and members are drawn from Production shops, Quality Control, Materials Planning, Personnel and Finance & Accounts Groups.

The meetings are convened periodically to discuss working plans, to realize the production targets, sales targets and sundry debts, order booking status etc.

Apex Committee

The Apex Committee is constituted under the Scheme of Workers Participation in Management. The Committee is headed by the Chairman & Managing Director and other members include Functional Directors on the Board, Executive Directors, President and General Secretary of ECEU, and President and Secretary of ECOA. The Committee meets periodically and deliberates on the issues concerning improvement of production and performance and other major policy issues for smooth functioning and maintaining harmonious industrial relations in the company and make suitable recommendations

8. Key management personnelShri G P Srivastava, Chairman & Managing Director

Shri K S Rajasekhara Rao, Chairman & Managing Director

Shri A Murugesan, Director (f) Shri R R Pandalai, Director (p)

Shri G N V Satyanarayana, Director (t)(4.3) CORPORATE GOVERNANCE PRACTICES AT ECIL ARE REFLECTED THROUGH

1) AUDITORS OBSERVATIONS & COMPANY IS REPLIES: (2010-11)

Auditors Report on the Balance sheet of ECIL as on 31.03.11 and profit and loss account for the year ended. It is responsibility of the auditors to express their opinion on the financial statement based on their audit.

Auditors in ECIL have conducted the audit in accordance with generally accepted Auditing Standards in India. Auditors should plan and perform the audit to obtain reasonable assurance, whether the financial statement are prepared in all material aspect, in accordance with the identified reporting framework and free from material misstatements.

An audit includes examining on the test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by the management as well as evaluating the overall financial statement.

The company has maintained proper records showing full particulars including quantitative details of fixed assets. The company has a phased program of the physical verification of all fixed assets.

Financial statement and Work-in-Progress have been physically verified by the management at the year end. Raw-materials, stores and spares excluding materials lying with third parties and branches have been physically verifies by the management once during the year. The valuation of stock is fair, proper and is in accordance with the normally accepted accounting principles.

The company has not taken any terms loans, secured or unsecured from companies, firms or other parties. The company has not granted any loans, secured or unsecured to companies, firms or other parties. The parties to whom the loans and advances in the nature of loans have given by the company are repaying the principle amount as stipulated and are also regular in the payment of interest wherever applicable. The internal control procedure for purchase of stores, raw materials including components and for sale of goods are adequate and the procedure including maintenance of the procedure for recording of the receipts and issues of material through out the year, in general year, and transaction in particular considering their volume needs to be thoroughly revamped and streamlined.

The company has not accepted any deposits from the public as the provision of sec 58A of the companies Act1956. The company has no by-products. The company maintained reasonable records for the sale and disposal of the scarp. The internal audit is not adequate and its scope and coverage need to be widened so as to be commensurate with the size if the company and nature of its business. The company is regular in depositing the provident fund dues with the appropriate authorities.

(4.4) ACCOUNTING POLICIES

1. RECOGNITION OF REVENUE

Sales (including taxes and duties) are set up and revenue is recognized on accrual basis alias in any of the following cases:

a. When the goods are handed over to the carrier for transmission to the buyer, even if the company undertakes the transport and insurance.

b. On transfer of items (for defense) to the bounded stores awaiting field-testing.

c. On completion of customers prior inspection and acceptance in case contract so provides, even if the goods are retained in the custody of the company at the request of the customer.

d. For service/software against completion of mile stones/acceptance/acknowledgement, where break-up values for each system/package are available in the contract or based on the technical estimates where such breakup values are not available.

e. In the case of composite contracts/long production cycles items, on the basis of line entries for supplies and services completed and accepted, or based on technical estimates, where such line entries are not available, subject to provision of anticipated looses if any on incomplete part of the contract.

2. INTERNAL CAPITALISATION AND INTER GROUP TRANSFERS

a. Internal Capitalization

Equipment manufacture for internal use is capitalized at cost.

b. Inter-group Transfers

Inter and intra group transfers are made at agreed transfer price. However, unutilized stock of such items at the year-end lying as inventory of raw material is valued at cost.

3. INVENTORY

a. Raw materials, stores and spares and components are valued at weighted average cost. Surplus materials consider useful for future use are valued and returned at 15% of their book value. Stores and spares of computer services divisor(CSD) as at the end of each year are derated at 33 1/3% on return down value. Other raw materials, stores, spares and components not moved for more than three years (that is, other than derated 33 1/3% on return down value.

b. Work in progress of products in various business group is valued at factory cost or net realizable value whichever lower.

c. Work in progress of projects is valued at factory cost or net realizable value whichever is lower based on percentage completion of each project as certified by companys technical experts.

d. Finished goods are valued at factory cost or net realizable value whichever is lower.

4. FIXED ASSETS AND DEPRECIATION OF ASSETS

Fixed assets are stated at historical cost, net of CENVAT if any.

a. Depreciation is charged on straight-line method.

b. Depreciation is charged on monthly pro-data basis for the additions/deletions during the year.

c. Cost of assets is charged in full in the year of acquisition/use, if the cost of an item is less than Rs.5000/-

d. The rates of depreciation adopted by the company are as per schedule xiv of the Companies Act, 1956, excepting in the case of computer systems acquired by computer education division and the systems sent on hire or for demonstration or for use outside the factory which are depreciated at a rate of 50% with effect form 1.04.2001.

5. PRIOR PERIOD ADJUSTMJENTS

Items of income/expenses amounting to Rs.25000/- and above relating to previous years are accounted as Prior Period Adjustments.

6. PREPAID AND OUTSTANDING INCOME/EXPENSESItems of income/expenses amounting to Rs.25000/- and above are accounted as Prepaid/outstanding liability as the case may be.

7. TECHNICAL KNOW HOW

Expenditure towards technical know how fees, software, Training of personnel etc., and payable as per the activity completed specific to any project/product is amortized over a period of 5 years or the duration of the relevant agreement, whichever is less. Expenditure on unsuccessful projects/products are written off in the year in which they are found to be commercially not viable.

8. DEMURRAGES AND WHAR FAGES

Expenditure on demurrages and wharfages on all imports, whether capital or otherwise, is charged to revenue.

9. EXCHANGE VARIATION

All foreign currency transactions/balances including foreign currency loans for financing assets outstanding on the date of Balance sheet are converted at the rate of exchange prevailing on that date.

10. EXCEPTIONS TO ACCRUAL SYSTEM OF ACCOUNTINGItems of income and expenses accounted on cash basis as exception to accrual system of accounting are those items;

a. Whose effect on profit/loss is not expected to be material or significant.

b. Of expenses, value of which cannot be estimated with a reasonable accuracy for the purpose of making provision.

c. Of income, reliability of which is uncertain either with respect to time or quantum.

d. Insurance claims are taken into books in the year in which the claims are accepted by the insurance company.

e. Warranty costs are accounted in the year of actual incurrence.

11. GOVERNMENT GRANTSGovernment grants related to specific fixed assets as a deduction from the gross value of the assets concerned and those related to revenue are deducted from the relevant expense accounts in the year in which the amounts are spent.

12. RESEARCH AND DEVELOPMENT EXPENDITUREResearch and development expenditure is charged to expenditure when incurred. Expenditure incurred on fixed assets is however capitalized.

13. PROVISION FOR DOUBTFUL DEBTS.

Provision for doubtful debts is made for the debts outstanding for more than one year, excepting those which are contractually not due as per the terms of the contract or those, which are considered realizable, based on a case to case review by a management.

14. RETIREMENT BENEFITS

Provisions for gratuity and leave encashment liability to employees are made on the basis of actuarial valuation as at the year end.

15. BORROWING COSTSBorrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalized till the month in which the asset is ready to use as part of the cost of that asset.

16. DIFFERRED TAXES

Differed income tax is provided using the liability method on all temporary timing difference at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

17. INVESTMENTLong term investments are valued at cost less any diminution in value that is other than temporary.

Our Corporate Governance philosophy is based on the following principles:

1. Satisfy the spirit of the law and not just the letter of the law. Corporate Governance standards should go beyond the law.

2. Be transparent and maintain a high degree of disclosure levels. When in doubt, disclose.

3. Make a clear distinction between personal conveniences and corporate resources.

4. Communicate externally, in a trustful manner, about how the company is run internally.

5. Comply with the laws in all the countries in which the company operates.

6. Have a simple and transparent corporate structure driven solely by business.

CHAPTER - 5FINDINGS & SUGGESTIONSFINDINGS & CONCLUSIONS: Companies that choose good Corporate Governance practices impose upon their Board of Directors, which represent the stockholders or stakeholders, the role of establishing strategies, electing the directors, overseeing and evaluating management performance, and choosing the independent auditors. It guarantees to the partners that management is transparent and accountable for resulted which is what defined as good Corporate Governance. Ultimately the system of Corporate Governance has the purpose of adding value for stockholders.

The Corporate Governance is concerned with both accountability of the Board of Directors and with the board effectiveness. The first is to strengthen the influence of the shareholders, while second is to strengthen the control exercised by the board over the companies.

Corporate Governance is exercise of power in a responsible way. The historical context of Corporate Governance lies in the separation of ownership and control, resulting in the evasion of rights of the shareholders due to defective control by the management. Aligning the interest of the management with the interest of the shareholders becomes a matter of paramount importance.

Corporate e Governance is the system, procedure and institution which ensure that the management act: in the best interest of the shareholders namely, the customers, the employees, the suppliers, creditors and the society at large. To sum up Corporate Governance represents the value framework' the ethical framework and the moral framework under which business decisions are taken.

SUGGESTIONS

The first major reform towards improving Corporate Governance should be in the area of prescribing a minimum set of topics and matters that must be mandatory reputed to the directors and discussed at board meetings. The minutes of the board meetings should record such discussions to allow for a measure of transparency with regard to the affairs of the company and help the directors in taking informal decisions and offer fact board carries.

Expand the role of non-executive directors: Non-executive directors can bring varied expertise, rich experience and a certain degree off objectivity in monitoring corporate behavior. Their roles need to be expanded to improve the quality of Corporate Governance.

Apparently if non- executive directors have to play an expanded role. A) There must be a fairly stringent limit to the number of boards on which a person can see. B) They must be compensated well for their time and effort and bulk of their compensation must be linked to well defined measure of corporate performance and. 'C) The degree of their accountability must be higher than what it currently is.

Limit the size of the board: our study suggest the hypothesis that as the size of the board increases it becomes less effective because the advantage of wider participation is outweighed by the problem of coordination. Hence it is advisable to ordinarily limit the size of board to seven or so. Any board that has more than ten twelve directors tends to become unwieldy and inefficiently.

Ensure that the board is information ally well equipped: The Board of Directors should periodically receive information about the performance of the company in all important areas. The board, well informed of long-term plans, operating plans and budgets, quarterly divisional results, competitive developments in various product market segments performance of the company and it's competitive in the capital market and so on. The power of a board to exercise the oversights function so as to influence the course of- corporate affairs lies not in legal or organizational authority but in access to the information that compels attention and demonstration the need for change.

Link managerial compensation to performance: Agency problems arise because of lack of alignment of the interest of shareholders and management. To make this interest more congruent, a signified portion of managerial compensation should be linked to the value created by the management. Further the reward to the managers may be based on relative performance, rather than absolute performance.

Quality of board deliberation: To improve their contribution towards better Corporate Governance in their companies, non-executive directors should have access to all the important and relevant information about the company. Repeatedly, some companies do not provide any information to their external directors that they cannot share with the public. The main reason for this approach may be the concern that information so provided may not remain confidential.

BIBLIOGRAPHY

BIBLIOGRAPHY

Laxminarain, republic Enterprise Managements and Privatization'' sultan Chand & company, New Delhi.

V.S.Datey, students' Guide to corporate laws & Secretarial practices, Taxman's Publication, New Delhi.

Institute of Company Secretaries of Indian Guidance note on certification Corporate Governance, New Delhi.

Websites:

Visited these websites

www.google.com www.icsi.edu www.icai.org www.sebi.gov.in www.icsi.inSOURCES OF

DATA

PRIMARY DATA

SECONDARY DATA

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