SCHEDULE - I - Accounting Policies for ESOS - SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999

SCHEDULE I (Clause 13.1) Accounting Policies for ESOS: (a) In respect of options granted during any accounting period, the accounting value of the options shall be treated as another form of employee compensation in the financial statements of the company. [1] [(b) The accounting value of options shall be equal to the aggregate, over all employee stock options granted during the accounting period, of the intrinsic value of the option or, if the company so chooses, the fair value of the option.] [2] [(c) Where the accounting value is accounted for as employee compensation in accordance with clause (b), the amount shall be amortised as under : (i) Where the scheme does not provide for graded vesting, the amount shall be amortised on a straight-line basis over the vesting period. (ii) Where the scheme provides for graded vesting - (1) the vesting period shall be determined separately for each separate vesting portion of the option, as if the option was, in substance, multiple option and the amount of employee compensation cost shall be accounted for and amortised accordingly on a straight-line basis over the vesting period; or (2) the amount of employee compensation cost shall be accounted for and amortised on a straight-line basis over the aggregate vesting period of the entire option (that is, over the vesting period of the last separately vesting portion of the option): Provided that the amount of employee compensation cost recognized at any date at least equals the fair value or the intrinsic value, as the case may be, of the vested portion of the option at that date. ] (d) When an unvested option lapses by virtue of the employee not conforming to the vesting conditions after the accounting value of the option has already been accounted for as employee compensation, this accounting treatment shall be reversed by a credit to employee compensation expense equal to the amortized portion of the accounting value of the lapsed options and a credit to deferred employee compensation expense equal to the unamortized portion. (e) When a vested option lapses on expiry of the exercise period, after the fair value of the option has already been accounted for as employee compensation, this accounting treatment shall be reversed by a credit to employee compensation expense. (f) The accounting treatment specified above can be illustrated by the following numerical example: Suppose a company grants 500 options on 1/4/1999 at Rs. 40 when the market price is Rs. 160, the vesting period is two and a half years, the maximum exercise period is one year. Also suppose that 150 unvested options lapse on 1/5/2001, 300 options are exercised on 30/6/2002 and 50 vested options lapse at the end of the exercise period. The accounting value of the option being: 500 x (160-40) = 500 x 120 = 60,000 The accounting entries would be as follows: 1/4/1999 Deferred Employee Compensation 60000 Expense Employee Stock Options Outstanding 60000 (Grant of 500 options at a discount of Rs. 120 each) 31/3/2000 Employee Compensation Expense 24000 Deferred Employee Compensation Expense 24000 (Amortisation of the deferred compensation over two and a half years on straight-line basis) 31/3/2001 Employee Compensation Expense 24000 Deferred Employee Compensation Expenses 24000 (Amortisation of the deferred compensation over two and a half years on straight-line basis) 1/5/2001 Employee Stock Options Outstanding 18000 Employee Compensation Expense 14400 Deferred Employee Compensation Expense 3600 (Reversal of compensation accounting on lapse of 150 unvested options) 31/3/2002 Employee Compensation Expense 8400 Deferred Employee Compensation Expense 8400 (Amortisation of the deferred compensation over two and a half years on straight-line basis) 30/6/2002 Cash 12000 Employee Stock Options Outstanding 36000 Paid Up Equity Capital 3000 Share Premium Account 45000 (Exercise of 300 options at an exercise price of Rs. 40 each and an accounting value of Rs. 120 each) 1/10/2002 Employee Stock Options Outstanding 6000 Employee Compensation Expense 6000 (Reversal of compensation accounting on lapse of 50 vested options at the end of exercise period) The T-Accounts for Employee Stock Options Outstanding and Deferred Employee Compensation Expense would be as follows: Employee Stock Options Outstanding Account Date Particulars Amount (Rs.) Date Particulars Amount (Rs.) 1/5/2001 Employee Compensation/ Deferred Compensation 18000 1/4/1999 Deferred Compensation 60000 30/6/2002 Paid Up Capital/ Share Premium 36000 1/10/2002 Employee Compensation 6000 60000 60000 Deferred Employee Compensation Expense Account Date Particulars Amount (Rs.) Date Particulars Amount (Rs.) 1/4/1999 ESOS Outstanding 60000 31/3/2000 Employee Compensation 24000 31/3/2001 Employee Compensation 24000 1/5/2001 ESOS Outstanding 3600 31/3/2002 Employee Compensation 8400 60000 60000 Employee Stock Options Outstanding will appear in the Balance Sheet as part of Net Worth or Shareholders Equity. Deferred Employee Compensation will appear in the Balance Sheet as a negative item as part of Net Worth or Shareholders Equity. ********* [1] Substituted vide circular no. SEBI/PMD/MBD/ESOP/2/2003/30/06 dated June 30, 2003, w. e. f. June 30, 2003. Prior to its substitution, Schedule I (b) read as under: (b) The accounting value of options shall be equal to the aggregate, over all employee stock options granted during the accounting period, of the fair value of the option. For this purpose: 1. Fair value means the option discount or, if the company so chooses, the value of the option using the Black Scholes formula or other similar valuation method. 2. Option discount means the excess of the market price of the share at the date of grant of the option under ESOS over the exercise price of the option (including up-front payment, if any). [2] Substituted vide circular no. SEBI/CFD/DIL/ESOP/4/2008/04/08 dated August 4, 2008, w. e. f. August 4, 2008. Prior to its substitution, omission, Schedule I (c) read as under: (c) Where the accounting value is accounted for as employee compensation in accordance with b , the amount shall be amortised on a straight-line basis over the vesting period.