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Notes to Accounts of Electrosteel Steels Ltd.

Mar 31, 2018

1. RELATED PARTY TRANSACTIONS

Related party disclosure as identified by the management in accordance with the Ind AS 24 on ''Related Party Disclosures'' are as follows:

Names of the related parties and description of relationships:

A Company Relationship

Electrosteel Castings Limited Promoter/Associate Company

B Key Management personnel Designation

Rama Shankar Singh Director (Ceased to be a Wholetime Director w.e.f

February 05, 2017)

Umang Kejriwal Director

Rajkumar Khanna Director

Jinendra Kumar Jain Director

Lalit Kumar Singhi Director

Naresh Pachisia Director

Sunil Vasant Diwakar Director

Jayantika Ganguly Director (appointed w.e.f December 08, 2016)

Devaprasad Mozumder Director (appointed w.e.f December 08, 2016)

Amarendra Prasad Verma Director (resigned w.e.f October 18, 2016)

Pradeep Kumar Misra Director (Resigned w.e.f. July 5, 2017)

Sunil Katial Chief Executive Officer

Ashutosh Agarwal Chief Financial Officer

C Entities where KMP or their close member have significant influence or control and with whom transaction have taken place during the year

Bose Estates Private Limited

Sree Khemisati Constructions Private Limited

Hooghly Alloy & Steels Company Private Limited

Wilcox Merchants Private Limited

Tulsi Highrise Private Limited

D Close member of key management personnel where transactions have taken place during the year Key Management personnel Relationship

Pushpa Singh Wife of Rama Shankar Singh

Radha Kinkari Kejriwal Agarwal Daughter of Umang Kejriwal

Nityangi Kejriwal Jaiswal Daughter of Umang Kejriwal

Madhav Kejriwal Son of Umang Kejriwal

Notes:

1. The above related party information isas identified by the management and relied upon bytheauditor.

2. In respect of above parties, there is no provision for doubtful debts as on March 31, 2018 and no amount has been written back or written off during the year in respect of debts due from/ to them.

3. Post-Employee benefits and other long term employee benefits have been disclosed based on retirement/resignation of services but does not include provision made on acturial basis as the same pertains to all the employees together.

4. As stated in Note no. 42, pending completion of CIRP proceeding and on appointment of Resolution Professional, the Company''s Board of Directors and significant influence etc. on the Company was suspended. The disclosure for related party as given herein above are based on the influence and control existing prior to initiation of CIRP proceedings.

5. Mr. Dhaivat Anjaria, was appointed as a Resolution Professional by the COC, as stated in Note no. 42, as an Independent Person appointed under Insolvency and Bankruptcy Code, 2016 and has substituted the Board during CIRP (Refer Note no. 35.2.1)

6. Re-appointment of Mr. Rama Shankar Singh, as a whole time director with effect from February 06, 2017 of the Company and the remuneration paid to him with effect from February 06, 2017 has not been approved by the Shareholders in the annual general meeting of the Company held on November 07, 2017 and accordingly the amount paid During the year has been recovered from him.

2. COMMITMENTS AND CONTINGENCIES

i. Operating leases:

Lease payments in respect of land taken on operating lease terms, are recognized as an expense on straight line basis over the lease term. The Company does not have the right to sub-let the said land. The company has an option to renew the said lease land after the expiry of initial period of 30 years from the date of agreement, at such rent as may then be fixed by the less or. The Company does not have an option to purchase the leased land at the expiry of the lease period.

Further to above, the Company has certain operating lease arrangements for office accommodations, transit houses, railway siding etc. with tenure extending up to 9 years. Term of certain lease arrangements include escalation clause for rent on expiry of 12 and 36 months from the commencement date of such lease and deposit/refund of security deposit etc. Expenditure incurred on account of rental payments under such leases During the year and recognized in the Profit and Loss account amounts to Rs, 182.16 lakhs (March 31, 2017: f 84.46 lakhs).

(g) There are several Civil and criminal proceedings pending against the Company, the financial liability thereof, if any, is unascertainable.

Notes:

1) The Company''s pending litigations comprises of claims against the company and proceedings pending with Statutory/ Government Authorities. The Company has reviewed all its pending litigations and proceedings and has made adequate provisions, and disclosed contingent liabilities, where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a material impact on its financial positions. Future cash flow, if any in respect of (a), (d), (e), (f) and (g) is dependent upon the outcome of judgments/decisions.

2) The Committee of Creditors in their meeting held on September 21, 2017 discussed in light of the relevant CDR and RBI circulars (CDR Master Circular dated 25th June 2015 and RBI Circular bearing no. DBOD.No.BP.BC.No.37 /21.04.132/2008-09 dated 27th August 2008 on Prudential Guidelines on Restructuring of Advances by Banks) and agreed that the Right of Recommendation cannot be claimed and thereby to undertake calculation of claim amounts on the basis of the principal and interest along with any amounts arising on account of penal interest.

(d) Off-take agreement with Electro steel Castings Limited for procurement of Iron ore at cost plus mark up During the currency of loan agreements with the lenders.

(*) In terms of notification no. 70(RE-2013)/2009-2014, issued by the Ministry of Commerce and Industry, the company has applied for extension of Export obligation for 3 years from the date of approval of CDR package which has been rejected by the DGFT-Delhi and interim stay has been granted by Honourable Delhi High Court.

C) Disclosure as given in A and B above are without giving effect to Hon''ble NCLT Order, the same being considered to be non-adjusting event, due to reasons stated in Note no. 42.

Note: Disclosure as given above are without giving effect of changes in Capital Structure in terms of Hon''ble NCLT Order, the same being considered to be non-adjusting event, due to reasons stated in Note no. 42.

3. The Company had filed application for renewal of Consent to Operate (''CTO'') on August 24, 2017 for the period of five years which was denied by Jharkhand State Pollution Control Board (''JSPCB'') on August 23, 2018. Hon''ble High Court of Jharkhand has, on August 25, 2018, granted a stay on the order of denial of CTO by JSPCB and continued their interim order to allow the operations till next hearing. Hon''ble High Court has also directed Ministry of Environment, Forests and Climate Change (MOEF & CC) to take a decision on their show cause notice of June 06, 2012 within four weeks and place the decision before the High Court by filing supplementary affidavit. Hon''ble High Court has also allowed the Company to make an application for regularization of any irregularity before MOEF & CC without prejudice to its rights and contentions. The matter is now posted for hearing on September 27, 2018.

4. The Company incurred significant amount of losses, it''s current liabilities became in excess of current assets and net worth got eroded. Interest and other terms and condition of repayment etc. as per the "Corporate Debt Restructuring package" (CDR) sanctioned on September 28, 2013 could not be complied with and lenders in terms of RBI Circular dated July 08, 2015 and September 24, 2015, invoked "Strategic Debt Restructuring” (SDR) in respect of the Company. Pending implementation of SDR, State Bank of India in it''s capacity as financial creditor filed a petition on June 27, 2017 under "Insolvency and Bankruptcy Code, 2016” (IBC) with Hon''ble National Company Law Tribunal, Kolkata Bench (NCLT). On July 21,2017, the NCLT vide it''s order of even date admitted the said petition and Corporate Insolvency Resolution Process (CIRP) has been initiated in terms of IBC and related rules and regulation issued there under.

CIRP has been completed vide NCLT order dated April 17,2018 (NCLT Order) and resolution plan submitted by one of the applicant Vedanta Limited (Vedanta) has been approved (ARP) by NCLT and thereby Board of Directors (''Board'') of the Company has been reconstituted on June 4, 2018, with nominees of Vedanta being inducted as member of the Board. Subsequent to ARP, the appeal filed before NCLAT has been dismissed by NCLAT vide it''s order dated August 10, 2018 (NCLAT Order) and NCLT Order has been upheld.

Accordingly, keeping in view the NCLT Order confirmed bythe NCLAT as above:

- The Company has restated its financial liabilities as per the claims admitted and thereby in respect of Financial Creditors reversed Interest pertaining to the period from July 22, 2017 to March 31, 2018 amounting to Rs. 74,340.29 lakhs provided earlier in accordance with the rates and terms and conditions stipulated originally as per CDR Package or otherwise stipulated/advised in this respect. Further, additional liability amounting to Rs. 40,238.39 lakhs relating to Interest as admitted has been recognized in these financial statements.

- In respect of Operational Creditors, the Company has provided for Rs.22,642.80 lakhs, representing the net differential with respect to the amount of claim admitted pursuantto CIRP process and those appearing in books of account. Pending final adjustments as given in (a) below, this has been recognized and disclosed as ''Provision for claims admitted pursuantto CIRP'' under Note no. 27.1 of the financial statements and included under Exceptional Items.

- Vedanta Star Limited (a wholly owned subsidiary of Vedanta Limited) has on June 04, 2018 deposited Rs. 532,000.00 lakh in an escrow account ("Escrow Account”) of the Company for payment to financial creditors of the entire amount of sustainable debts in terms of the ARP out of total Outstanding amount of Rs. 12,71,913.21 lakhs and the same has been remitted to them on June 21, 2018.

- 739,91,32,055 equity shares of Rs. 10 each were allotted on June 6, 2018 to financial creditors converting their balance amount of outstanding i.e. non-sustainable debt, to equity.

- On June 14, 2018, the existing 980,83,67,078 equity shares including those allotted on June 6, 2018 to financial creditors as above have been reduced from Rs. 9,80,836.71 lakhs to Rs. 19,616.73 lakhs divided into 980,83,67,078 equity shares of Re. 0.20 each fully paid-up. Simultaneously, 50 such shares of Re 0.20 each thereafter has been consolidated into 1 fully paid-up equity share of Rs. 10 each.

- The reconstituted board of directors in its meeting held on June 15, 2018 has approved allotment of 176,55,06,078 fully paid equity shares of Rs. 10 each to Vedanta Star Limited against the money deposited in Escrow Account as above, leaving the balance to be treated as loan bearing interest.

- Consequent to above allotment and consolidation of shares, equity share capital of the company as on June 15,2018 stands at Rs. 19,61,67.34 lakh divided into 196,16,73,420 equity shares of Rs.10each.

a) NCLT Order dated April 17, 2018 approving ARP has been passed subsequent to the end of the reporting period. Accordingly, the adjustments arising out of ARP has been considered to be non-adjusting event and consequential adjustments have therefore not been given effect to in these financial statements.

Other than above,

(I) Statutory liabilities and obligations, Contingent liabilities, obligations and claims against the Company including those relating to unfulfilled export obligations as shown in Note no.39 (ii)(A) and 39(ii)(B)(b) will be extinguished and accordingly no outflow of fund is expected in this respect; and

(II) Impact with reference to Income Taxes since not recognized in the financial statements for reasons stated in Note no. 44, has not been considered for disclosure as above.

b) In view of Note no. 41 above and including the Order of the Hon''ble NCLT as upheld by Hon''ble NCLAT (Note no. 42), whereby the affairs of the company has been held to be viable and steps so far taken by Vedanta and to be taken as envisaged in terms of ARP, the financial statement has been prepared on a Going Concern basis.

(*) As indicated in Note no. 42, the adjustments and disclosure above are without giving effect to Hon''ble NCLT Order, the same being considered to be non adjusting event, due to reasons stated in said note.

b) Fair Valuation Techniques

The fair values of the financial assets and liabilities are included at the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The following methods and assumptions were used to estimate the fair values:

- The fair value of cash and cash equivalents, current trade receivables and payables, current financial liabilities and assets and borrowings approximate their carrying amount largely due to the short-term nature of these instruments. The management considers that the carrying amounts of financial assets and financial liabilities recognized at nominal cost/amortized cost in the financial statements approximate their fair values.

- A substantial portion of the Company''s long-term debt has been contracted at fixed rates of interest. Fair value of variable interest rate borrowings approximates their carrying value subject to adjustments made for transaction cost. In respect of fixed interest rate borrowings, fair value is determined by using discount rates that reflects the present borrowing rate of the company. Borrowings as given above being current in nature carrying amount approximates its fair value.

5. FINANCIAL INSTRUMENTS (Contd.)

- The fair value of derivative financial instruments is determined based on observable market inputs including currency spot and forward rates, yield curves, currency volatility etc. These derivatives are estimated by using the pricing models, where the inputs to those models are based on readily observable market parameters basis contractual terms, period to maturity, maturity parameters and foreign exchange rates. These models do not contain a high level of subjectivity as the valuation techniques used do not require significant judgment, and inputs thereto are readily observable from actively quoted market prices. The said valuation has been carried out by the counter party with whom the contract has been entered with and Management has evaluated the credit and non-performance risks associated with the counterparties and believes them to be insignificant and not requiring any credit adjustments.

c) Fair value hierarchy

The following table presents fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of March 31,2018:

During the year ended March 31, 2018 and March 31, 2017, there were no transfers between Level 1, Level 2 and Level 3.

The Inputs used in fair valuation measurement are as follows:

- Fair valuation of Financial assets and liabilities not within the operating cycle of the company is amortized based on the borrowing rate of the company.

- Derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the marketplace. The inputs used for forward contracts are Forward foreign currency exchange rates and Interest rates to discount future cash flow.

d) Derivatives assets and liabilities:

The Company follows established risk management policies, including the use of derivatives to hedge its exposure to foreign currency fluctuations on foreign currency assets / liabilities. The counter party in these derivative instruments is a bank and the Company considers the risks of non-performance by the counterparty as non-material.

e) Sale of financial assets

In the normal course of business, the Company transfers its bills receivable to banks. Under the terms of the arrangements, the Company surrenders control over the financial assets and transfer is without recourse. Accordingly, such transfers are recorded as sale of financial assets. Gains and losses on sale of financial assets without recourse are recorded at the time of sale based on the carrying value of the financial assets and fair value of servicing liability. In certain cases, transfer of financial assets may be with recourse. Under arrangements with recourse, the Company is obligated to repurchase the uncollected financial assets, subject to limits specified in the agreement with the banks. Accordingly, in such cases the amounts received are recorded as borrowings in the statement of financial position and cash flows from financing activities.

During the year ended March 31, 2018 and 2017, the Company transferred and recorded as sale of financial assets of Rs. 567,34.98 lakhs and Rs. 525,50.20 lakhs respectively, under arrangements without recourse and has included the proceeds from such sale in net cash provided by operating activities. These transfers resulted in finance cost of Rs. 336.88 lakhs and Rs. 219.70 lakhs for the year ended March 31, 2018 and 2017 respectively.

f) FINANCIAL RISK MANAGEMENT

The Company''s activities are exposed to a variety of financial risks. The key financial risk includes market risk, credit risk and liquidity risk. The Company''s focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The Board of Director''s reviews and approves policies for managing these risks. The risks are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company''s policies and risk objectives.

However, as indicated in Note no. 42 entire borrowings has been restructured and has been settled for consideration and terms as stated in said note. In view of the above, the related risks have undergone significant variation leading to substantial improvement in financial position and will require reconsideration on giving effect to the above adjustments in the financial statements.

MARKET RISK

Market risk is the risk or uncertainty arising from possible market fluctuation resulting in variation in the fair value of future cash flows of a financial instrument. The major components of Market risks are currency risk, interest rate risk and other price risk. Financial instruments affected by market risk includes trade receivables, investment in fixed deposits, borrowings and trade and other payables.

Foreign Currency Risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company''s exposure to the risk of changes in foreign exchange rates relates primarily to the Company''s foreign currency denominated borrowings and trade and other payables.

The Company has adopted a comprehensive risk management review system wherein it actively hedges its foreign currency exposure with defined parameters through use of hedging instrument such as forward contracts and options. The Company periodically reviews its risk management initiatives and also takes expert advice on regular basis on hedging strategy.

Derivative financial assets and liabilities dealing with outstanding derivative contracts and unheeded foreign currency exposure has been detailed in earlier para. Unhedged foreign currency exposure is primarily on account of retention money of capital vendor for which hedge cover is taken as per the policy followed by the company depending upon the settlement of such claims.

A 5% strengthening of INR would have an equal and opposite effect on the Company''s financial statements Interest Rate Risk

The company exposure in market risk relating to change in interest rate primarily arises from floating rate borrowing with banks and financial institutions. All of the company borrowing fall under the fixed interest rates (approved under CDR schemes) hence interest rate risk due to fluctuation is neutralized.

Further there are deposits with banks which are for short-term period are exposed to interest rate fluctuation on renewal. These deposits are however generally for trade purposes and as such do not cause material implication.

CREDIT RISK

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables). To manage this, the management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The Company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends and ageing of accounts receivable. Individual risk limits are set accordingly. Further the company obtains necessary security including letter of credits and/or bank guarantee to mitigate its credit risk.

The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. Receivables from customers are reviewed/evaluated periodically by the management and appropriate provisions are made to the extent recovery there against has been considered to be remote.

The carrying amount of respective financial assets recognized in the financial statements, (net of impairment losses) represents the Company''s maximum exposure to credit risk. The concentration of credit risk is limited due to the customer base being large and unrelated. Out of the trade receivables balance at the end of the year, there is one customer having outstanding of Rs 4,991.67 lakh (March 31, 2017: Rs 494.95 lakhs) which accounts for more than 10% of the accounts receivable and 10% of revenue as at March 31, 2018 and March 31, 2017.

The Company takes collateral or other credit enhancements to secure the credit risk. The Company has also taken advances, security deposits and Letter of Credit from its customers, which mitigate the credit risk to that extent.

The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. Receivables are reviewed/evaluated periodically by the management and appropriate provisions are made to the extent recovery there against has been considered to be remote.

Financial assets that are neither past due nor impaired

Cash and cash equivalents and deposits with banks are neither past due nor impaired. Cash and cash equivalents with banks are held with reputed and credit worthy banking institutions.

Financial assets that are past due but not impaired

Trade receivables amounts which are past due at the end of the reporting period, no credit losses there against are expected to arise.

LIQUIDITY RISK

Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at a reasonable price. The Company''s objective is to maintain optimum level of liquidity to meet it''s cash and collateral requirements at all times. The company relies on internal accruals and borrowings to meet its fund requirement. Due to delay in project completion there has been liquidity crisis that has led to defaults in repayments and interest payments to the lenders. However, as stated in Note no. 42, Trade Payables and Borrowings will be settled in terms of ARP. The Company has current assets and surplus invested in cash and bank balances which should be sufficient to meet the obligation on account of liability stated herein below.

Liquidity and interest risk tables

The following tables detail the Company''s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows.

The company has current financial assets which will be realized in ordinary course of business. Further it has significant retained surplus lying invested in fixed deposits, the company ensures that it has sufficient cash on demand to meet expected operational expenses and obligations.

CAPITAL MANAGEMENT

The primary objective of the Company''s Capital Management is to ensure that it maintains a healthy capital ratio in order to support its business and maximize shareholder value. The Company''s objective when managing capital is to safeguard their ability to continue as a going concern so that they can continue to provide returns for shareholders and benefits for other stake holders. The Company is focused on keeping strong total equity base to ensure independence, security, as well as a high financial flexibility for potential future borrowings, if required without impacting the risk profile of the Company.

However, as indicated in Note no. 42, consequent to implementation of the Resolution Plan as approved by NCLT there will be significant variation in amount of Equity and liabilities ratios given herein above leading to substantial improvement thereof.

6. INCOME TAX

In assessing the readability of deferred tax assets, the Company considers the extent to which, it is probable that the deferred tax asset will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable profits during the periods in which those temporary differences and tax loss carry forwards become deductible. The Company considers the expected reversal of deferred tax liabilities and projected future taxable income in making this assessment.

Deferred tax asset in respect of unused tax losses and others (net of liabilities) amounting to Rs. 289,486.46 lakhs and Rs. 66,529.78 lakhs as of March 31, 2018 and March 31, 2017 respectively as a matter of prudence have not been recognized.

7. SEGMENT INFORMATION

In term of Ind AS 108 "Operating Segment", the Company has one business segment i.e. Iron and Steel and related products and all other activities revolve around the said business.

8. These financial statements have been approved by the Board of Directors of the Company on August 29, 2018 for issue to the shareholders for their adoption.

9. Previous Period''s figure has been regrouped/rearranged wherever necessary to comply with current year presentation.


Mar 31, 2017

1 CORPORATE INFORMATION

Electrosteel Steels Limited (“ESL” or “the Company”), promoted by Electrosteel Castings Limited is a public limited company, incorporated and domiciled in India having its registered office at, 801, Uma Shanti Apartments, Kanke Road, Ranchi - 834008. ESL has an envisaged capacity of 2.51 Million Ton Per Annum (MTPA) Greenfield Integrated Steel Plant in Bokaro District Jharkhand. ESL makes products like Pig Iron, Billets, TMT Bars, Wire Rods and Ductile Iron(DI) Pipes. It consists of a Sinter Plant, Pellet Plant, Coke Oven, Blast Furnace, Basic Oxygen Furnace, Billet Caster, Wire Rod Mill, Ductile Iron Pipe Plant, Bar Mill and Power Plant. It also manufactures Dl Pipe used for Water supply and Pressure sewerage application. The Company’s shares are listed and publically traded on the National Stock Exchange of India and Bombay Stock Exchange.

2 BASIS OF PREPARATION OF FINANCIAL STATEMENTS

i. Statement of Compliance

The Company has adopted Indian Accounting Standards (referred to as “Ind AS”) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended) read with Section 133 of the Companies Act, 2013 (“the Act”) with effect from April 1, 2016 and therefore IND Ass issued, notified and made effective till the financial statements are authorized have been considered for the purpose of preparation of these financial statements.

These are the Company’s first Ind AS Standalone Financial Statements and the date of transition to Ind AS as required has been considered to be April 1,2015.

The financial statement up to the year ended March 31, 2016, were prepared under the historical cost convention on accrual basis in accordance with the Generally Accepted Accounting Principles and Accounting Standards as prescribed under the provisions of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 then applicable (Previous GAAP) to the Company. Previous period figures inthe Financial Statements have now been restated in compliance to Ind AS.

In accordance with Ind AS 101-”First Time adoption of Indian Accounting Standards” (Ind AS 101), the Company has presented [Note No. 42(a)], a reconciliation of Shareholders’ equity as given earlier under Previous GAAP and those considered in these accounts as per Ind AS as at March 31, 2016, and April 1, 2015 and also the Net Profit as per Previous GAAP and that arrived including Other Comprehensive Income under Ind AS for the year ended March 31, 2016.The mandatory exceptions and optional exemptions availed by the Company on First-time adoption have been detailed in Note No. 42(b) of the financial statement.

ii. Recent Pronouncements

In March 2017, Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to the Ind AS 7 ‘Statement of Cash flows’ and Ind AS 102, ‘Share - Based Payment’ which are applicable w.e.f. 1st April, 2017.

The amendment to Ind AS 7 “Statement of Cash Flows” requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. The effect of this amendment on the financial statements of the Company is being evaluated.

The amendment to Ind AS 102 “Share Based Payment” provides specific guidance to measurement of cash-settled share based payment transaction and share based paymenttransaction with a net settlement feature for withholding tax obligations. As the Company has not issued any stock options plans this amendment does not have any impact on the financial statements of the Company.

3 CRITICAL ACCOUNTING JUDGMENTS, ASSUMPTIONS AND KEY SOURCES OF ESTIMATION AND UNCERTAINTY

The preparation of the financial statements in conformity with the measurement principle of Ind AS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Differences between the actual results and estimates are recognized in the year in which the results are known/materialized and, if material, their effects are disclosed in the notes to the financial statements.

Application of accounting policies that require significant areas of estimation, uncertainty and critical judgments and the use of assumptions in the financial statements have been disclosed below. The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below:

a) Determining whether an arrangement contain leases and classification of leases

The Company enters into service/hiring arrangements for various assets/services. The determination of lease and classification of the service / hiring arrangement as a finance lease or operating lease is based on an assessment of several factors, including, but not limited to, transfer of ownership of leased asset at end of lease term, lessee’s option to purchase and estimated certainty of exercise of such option, proportion of lease term to the asset’s economic life, proportion of present value of minimum lease payments to fair value of leased asset and extent of specialized nature of the leased asset.

b) Fair value as Deemed cost for PPE

The Company has used fair value of PPE as carried out by external valuer as on the date of transition i.e. 1st April 2015 as deemed costs. Such fair valuations involves higher degree of uncertainty and subjectivity.

c) Depreciation / amortisation of and impairment loss on property, plant and equipment / intangible assets.

Property, plant and equipment are depreciated and intangible assets are amortized on straight-line basis over the estimated useful lives (or lease term if shorter) in accordance with Schedule II of the Companies Act, 2013, taking into account the estimated residual value, wherever applicable. The Company reviews the estimated useful lives of the assets regularly in order to determine the amount of depreciation / amortization expense to be recorded during any reporting period. This reassessment may result in change in depreciation expense in future periods.

The company reviews its carrying value of its Tangible and Intangible Assets whenever there is objective evidence that the assets are impaired. The required level of impairment losses to be made is estimated by reference to the estimated value in use or recoverable amount.

d) Impairment loss on trade receivables

The Company evaluates whether there is any objective evidence that trade receivables are impaired and determines the amount of impairment loss as a result of the inability of the debtors to make required payments. The Company bases the estimates on the ageing of the trade receivables balance, credit-worthiness of the trade receivables and historical write-off experience. If the financial conditions of the trade receivable were to deteriorate, actual write-offs would be higher than estimated.

e) Income taxes

Significant judgment is required in determination of taxability of certain income and deductibility of certain expenses during the estimation of the provision for income taxes. The deferred tax liability consequent to fair valuation of PPE and financial instruments involving estimation for timing differences has not been recognised in these financial statements.

The Company has significant amount of unused tax credits, since availability of future taxable income is not certain, no provision for deferred tax assets has been made under IND AS 12 ‘ Income Taxes’.

f) Contingencies

Management judgement is required for estimating the possible outflow of resources, if any, in respect of contingencies/claim/litigations/Right to recompense of lenders against the Company as it is not possible to predict the outcome of pending matters with accuracy. The right to recompense to be accounted for in accordance with IND AS-109 requires management to estimate the probability of conditions in accordance with the CDR guidelines. Based on management best estimates the same does not qualify for recognition in the financial statements.

g) Insurance Claim and Liquidated damages

Insurance claims are accounted as and when admitted/settled. Liquidated damages and penalties from the vendors are accounted for in accordance with the terms of agreement for loss of opportunity/profit of the company due to delay in completion, if balances are available in the Supplier’s/Contractors Account, subsequent changes in value if any is provided .

h) Defined benefit obligation (DBO)

Critical estimate of the DBO involves a number of critical underlying assumptions such as standard rates of inflation, mortality, discount rate, anticipation of future salary increases etc. as estimated by Independent Actuary appointed for this purpose/ Management. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses.

i. The Gross Block as on the transition date i.e. April 01, 2015 given herein above represents fair value of Property, Plant and Equipment as valued by an Independent valuer and considered as “deemed cost” as per the provision of IND AS 101 “First-time Adoption of Indian Accounting Standards”- Refer Note no. 42.

ii. Gross book value of Railway siding includes Rs. 120,70.19 lakhs as on March 31, 2017 (Rs 120,70.19 as on March 31, 2016 and Rs. NIL as on April 01, 2015), incurred for construction of Railway siding ownership of which does not vest with the company.

iii. Depreciation for the year includes Rs. Nil (Previous year Rs. 646.71 lakh) transferred to Pre-operative expenses.

iv. Freehold land and Land developments includes 229.43 acres amounting to Rs. 1,615.99 lakh (As at March 31, 2016 - 222.89 acres amounting to Rs1,567.53 lakhs and as on April 1, 2015 - 185.50 acres amounting to Rs1,277.19 lakhs) is pending execution registration thereof.

v. Also Refer note. No. 18 and 21

Project Development Expenditure

The Company’s Integrated Steel & Dl Pipe Plant in the State of Jharkhand, India, is under construction & erection. A part of plant facility has commenced production and accordingly the balance proportionate expenditure related to the plant under construction & erection continues to be accounted as ‘Project Development Expenditure’ pending capitalization under ‘Capital Work-in-Progress’asdetailed below. Capital work in progress includes Rs. 1,073,82.04 lakhs, Rs. 1,025,29.14 lakhs and Rs. 4,104,47.69 lakh as on March 31, 2017, March 31,2016 and April 1, 2015 respectively, in respect of plant and equipment and other facilities to be installed and following project development expenditure.

i. The Gross Block as on the transition date i.e. April 01, 2015 given herein above represents written down value as per Previous GAAP considered as “deemed cost” as per the provision of IND AS 101 “First-time Adoption of Indian Accounting Standards”- Refer Note no. 42.

4.1 The entire carrying value of Inventory as on 31st March 2017 and 31st March 2016 is secured against facilities granted by CDRand non-CDR lenders as stated in Note No. 18 and 21.

4.2 Stores and Spares stock includes stock of Dl Pipe Mould of size 350 mm and above amounting to Rs. 1,616.02 lakhs (Rs.879.92 lakhs as on March 31, 2016 and Rs. 196.98 lakhs as on April 1, 2015) which will be amortised over a period of 3 years, upon its issue for consumption.

The Company’s Integrated Steel & Dl Pipe Plant had commenced production during the year ended March 31, 2015 and March 31, 2016 and a part is still under construction and erection, hence there does not exist any historical trend for the Company in respect of Impairment for allownaces for doubtful debt.

There is no material credit loss in earlier years. The Company however, has reviewedits account receivable based on the financial condition of the customer after considering the current economic environment on case to case basis. Based on such review, there does not exist any circumstances requiring any impairment in these financial statements.

The concentration of credit risks is limited due to customer base being backed by large number of unrelated parties

Fixed Deposits amounting to Rs. 3,670.35 lakhs (As at March 31,2016, Rs. 4,120.64 lakhs and April 1,2015, Rs. 4,314.85 lakhs) held as margin money against Letter of Credit/Bank Guarantees issued by the bank.

The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage. Cash credit/working capital facility that are repayable on demand and that form an integral part of the Company’s cash management is included as a component of cash and cash equivalents for the purpose of the cash flow statement.

(e) Rights, Preferences and Restrictions attached to shares

The Company has one class of Equity Shares having a par value of Rs. 10/-. Each Holder of Equity Shares is entitled to one vote proportionate to paid up capital. The Company declares and pays dividends in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of shareholders in the Annual General Meeting. In the event of liquidation of the Company, the holders of Ordinary Shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of Equity Shares held by the shareholders and their paid up amounts.

(f) During the Financial year ended 31st March 2015, pursuant to the Corporate Debt Restructuring (CDR) Scheme, the Company had made preferential allotment of 22.25 crores Equity Shares of Rs 10 each fully paid to Electrosteel Castings Limited under SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009 and Companies Act 2013. The proceeds of the issue have been utilised for the capital expenditure at the Plant, which is in line with CDR Scheme.

(g) 250,75,71,148 (Two Hundred Fifty crore seventy five lac seventy one thousand and one hundred and forty eight) number of Equity Shares (“These Shares”) of Rs. 10/- each are reserved for issue and allotment on preferential basis to the lenders as per the Strategic Debt Restructuring (SDR) terms under loans contract with the lenders by conversion of loan for a sum of Rs. 2507.57 crore. These Shares will rank pari-passu with the existing Equity Shares with the right of pro-rata dividend from the date of allotment and that these Shares will be listed on the stock exchanges where the existing Equity Shares are listed.

5.1 Refer Statement of changes in equity for movement in balances of reserves.

5.2 Securities Premium Reserve

Securities Premium Reserve represents the amount received in excess of par value of securities. Section 52 of Companies Act, 2013 specify restriction and utilisation of security premium.

5.3 Retained Earnings

Retained Earnings generally represent the undistributed profits/amount of accumulated earnings of the Company whether shown as a reserve or otherwise or any change in carrying amount of an assets or liability upon measurement at fair value recognised in Statement of Profit and Loss. It includes Rs. 1,73,55.54 lakhs which is not available for distribution as dividend represented by fair valuation of land.

5.4 Other Comprehensive Income

Other Comprehensive Income Reserve represent the balance in equity for items to be accounted in Other Comprehensive Income (OCI). The transaction under OCI are classified as follows:

Items that will not be reclassified to profit and loss.

The actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions have been recognised in OCI.

In the financial year 2013-14, the Company was referred by the lenders to the Corporate Debt Restructuring (CDR) Cell. The CDR Empowered Group (CDR EG) Cell vide its Letter of Approval dated 28 September 2013 had approved a package to restructure/reschedule the Company’s Debt and provide additional facilities. The Master Restructuring Agreement had been executed between the Company and the concerned lenders on 20 January 2014. The borrowings from non-CDR lenders (viz. HUDCO, IL & FS and SREI, appearing under the head ‘From Others’) had also been restructured bilaterally in line with CDR guidelines subject to certain modifications. Due Compliance of the sanctioned CDR packages could not be met with. The lenders have since invoked the “Strategic Debt Restructuring(SDR) pursuant to RBI Circulars dated June 08, 2015 and Sept 24, 2015 and the implementation thereof is under process.

A Security

(1) The entire facilities from CDR lenders and a non-CDR lender (HUDCO) are secured by:

(a) first ranking pari passu charge by way of mortgage/hypothecation of all immovable and movable properties (including fixed assets, plant & machinery, tools & accessories etc.), current assets (including inventory and book debts), present and future and assignment over all of Company’s bank accounts;

(b) pledge of 866,750,000 Equity Shares of the Company held by Electrosteel Castings Ltd. (‘ECL’) being the Promoter Company;

(c) pledge of 517,000 Equity Shares of the Company held by Mr. Umang Kejriwal (Director);

(d) pledge of 32,675,270 Equity Shares of ECL held by 2 of its promoter group companies;

(e) personal guarantee of Mr. Umang Kejriwal and Ms. Radha Kinkari Kejriwal (OSD)

(2) The facility from a non-CDR lender (SREI) is secured by:

(a) second ranking pari passu charge by way of hypothecation of all movable assets (including receivables and intangibles), present and future;

(b) second charge on all rights, titles and interest in all assets of the Project, letter of credit/ guarantee/ performance bond provided in respect of the Project and all Project documents, Contracts, Insurance Policies etc.

(c) first charge byway of mortgage of a piece of land with factory building owned by ECL.

(3) The facility from another non-CDR lender (IL & FS) is secured by

(a) second ranking pari passu charge byway of mortgage/hypothecation of all assets mentioned in A(1)(a) above;

(b) pledge of Shares as mentioned in A(1)(b) to A(1)(d) above ranking subservient to the pledge already created in favour of lenders;

(c) personal guarantees as mentioned in A(1)(e) above.

(4) As compared to the amount of secured loans due, there is a shortfall in the carrying value of securities.

Consequently the secured loans are not fully secured to the extent of such shortfall in the securities.

B Repayment terms

(a) The Restructured Term Loan, Additional Term Loan and FITL from all lenders (except a non-CDR lender are repayable in 29 quarterly instalments commencing from December 2015 and ending on December 2022 in a stepped up manner as follows:

(b) Repayment terms of a non-CDR lender (SREI):

(i) The Restructured Term Loan (Rs. 35,000.00 lacs) is repayable in 16 quarterly instalments commencing from April 2016 and ending on January 2020 in a stepped up manner as follows:

(ii) The Restructured Term Loan (Rs. 2,986.00 lacs) was repayable on or before 15th March 2016.

(iii) The FITL is repayable in 19 equal quarterly instalments commencing from July 2015 and ending on January 2020.

C The applicable rate of interest on the above term loans during the year are -

(a) FITL from all lenders carries interest @ 10.75% to 11.00% p.a.

(b) Additional Term Loan from all lenders carries interest @ 11.00% p.a.

(c) Buyers’ Credit carries interest rate at LIBOR plus spread being 0.24% to 0.75%.

(d) Restructured term loan carries interest @ 10.75% p.a. upto 29th February 2016 and @11% p.a. effective from 1st March 2016.

(e) The interest on the term loans due from a non-CDR lender (SREI) has been provided in line with the CDR terms as approved by the CDR-EG. However, their claim for additional interest, management fee etc is under renegotiation.

(*) Relates to old credit balances of certain suppliers/service providers for equipment supplies, civil and commissioning jobs. This also includes excess liabilities in various intermediary accounts which were checked and identified as not payable due to excess mapping in the Purchase/Work orders. The excess liabilities of these parties/intermediary accounts, as determined by the Company, have been taken into Statement of Profit and Loss since asset-wise identification of the job values is not practical for their being various contracts and at various times in earlier years.

(**) Net of Rs. 721.97 lakhs on fair valuation of Derivative instrument designated at fair value through Profit and Loss.

Post Retirement Benefit Plans

The Company provides for gratuity liability in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service of 5 years are eligible for gratuity. The amount of gratuity payable on termination/retirement is the employees last drwan basic salary per month computed proportionately for 15 days for number of completed year of service.

The employee’s gratuity fund scheme managed by TATA AIA is a defined benefit plan. The present value of obligation is determined based on independent actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build upthe final obligation.

6.1 The dues to L&T Fin Corp on account of bill discoutingare secured by charges created on all book debts, all cash flows and receivables and proceeds arising from/in connection with supplies to L&T ECC.

For its Integrated Steel Manufacturing facilities, the Company had entered into contracts with several parties for supply of equipment, structures, civil and erection commissioning etc. Given the fact that the time was an essence, the contracts had clauses relating to recovery of liquidated damages and penalties from the vendors. Essentially, the objective of these clauses was to compensate the Company for the loss of opportunity/profit.

There was significant delay in delivery and commissioning of the plant modules by some of these vendors thereby delaying the commissioning of the integrated plant and having a cascading impact on the profitability of the Company.

The Company, on account of such loss of profit due to the delays in past, has assessed and recovered a part of the amount from the available old balance in the Supplier’s Payable accounts. Since the said recovery is towards the compensation for loss of profit, the amount has been recognised as income in the “Statement of Profit and Loss” as “Exceptional Item” during the current year.

For the unrecovered such loss of profit, requisite action has to betaken and the same will be accounted for in the year significant certainty is established.

7 RELATED PARTY TRANSACTIONS

Related party disclosure as identified by the management in accordance with the IND AS 24 on ‘Related Party Disclosures’where control exits and with whom transactions have taken place during reported periods.:

Names of the related parties and description of relationships:

A Company Relationship

Electrosteel Castings Limited Promoter/Associate Company

C Entities where KMP or their close member have significant influence or control

Rama Mining Consultants Private Limited

North Dhadhu mining Company Private Limited

Asian informatics Private Limited

Jhilmil Traders Private Limited

Bose Estates Private Limited

Sree Khemisati Constructions Private Limited

Hooghly Alloy & Steels Company Private Limited

Wilcox Merchants Private Limited

Tulsi Highrise Private Limited

Ampleforth Trading And Resources Private Limited

Hooghly Extrusions Limited

8 COMMITMENTS AND CONTINGENCIES

i. Operating leases:

Lease payments in respect of land taken on operating lease terms, are recognised as an expense on straight line basis over the lease term. The Company does not have the right to sub-let the said land. The company has an option to renew the said lease land after the expiry of initial period of 30 years from the date of agreement, at such rent as may then be fixed by the lessor. The Company does not have an option to purchase the leased land at the expiry of the lease period.

Further to above, the Company has certain operating lease arrangements for office accommodations, transit houses, railway siding etc. with tenure extending from 1 to 9 years. Term of certain lease arrangements include escalation clause for rent on expiry of 12 and 36 months from the commencement date of such lease and deposit/refund of security deposit etc. Expenditure incurred on account of rental payments under such leases during the year and recognized in the Profit and Loss account amounts to Rs. 84.46 lakhs (Previous Year Rs. 79.35 lakhs).

iii. Contingent Assets

a) Contingent is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.

b) During the normal course of business, several unresolved claims are currently outstanding. The inflow of economic benefits, in respect of such claims cannot be measured due to uncertainties that surround the related events and circumstances. To the extent identified, as on March 31, 2017 under mentioned amounts are pending under various judicial authorities as given below:

c) The Company has significant amount of unused tax credits, however since availability of future taxable income is not certain, no provision for deferred tax assets has been made under IND AS 12 ‘ Income Taxes’. The carrying amount of such deferred tax is given below:

(f) There are several Civil and criminal proceedings pending against the Company, the financial liability thereof, if any, is unascertainable.

The Company’s pending litigations comprises of claims against the company and proceedings pending with Statutory/ Government Authorities. The Company has reviewed all its pending litigations and proceedings and has made adequate provisions, and disclosed contingent liabilities, where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a material impact on its financial positions. Future cash flow, if any in respect of (a), (d), (e) and (f) is dependent upon the outcome of judgements/decisions.

9 Segment information

The Company’s activities during the period were relating to setting up of its Integrated Steel & D I Pipe Plant. A part of the plant facility has commenced production. Considering the nature of the Company’s business operations and future prospects and possible capacity utilisation etc., there are no separate reportable segments (business and/or geographical) in accordance with the requirements of IND AS 108 ‘Operating Segments’.

10 The company has incurred an accumulated net loss of Rs. 3,18,925 lakhs (Previous year Rs. 1,72,577 lakhs) upto the year ended 31.03.2017. The current liabilities exceeds the current assets by Rs. 5,55,233 lakhs (Previous year Rs. 3,17,361 lakhs). The net worth has fully eroded, in view of the accumulated losses. The lenders have since envoked ‘Strategic Debt Restructuring’ (SDR) pursuantto RBI Circulars dated June 8, 2015 & September 24, 2015, after the due compliance of the CDR package could not be met with. The company has positive EBIDTA in the F.Ys. 2015-16 & 2016-17. It along with the lenders is also seeking a potential investors for requisite funds. Restructuring & infusion of funds proposals are under consideration by the lenders, the outcome whereof is awaited. Considering the above, and expecting favorable market conditions in future the company has prepared these financial statements on a going concern basis.

b) Fair Valuation Techniques

The fair values of the financial assets and liabilities are included at the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The following methods and assumptions were used to estimate the fair values:

1 The fair value of cash and cash equivalents, trade receivables, trade payables, current financial liabilities/financial assets and borrowings approximate their carrying amount largely due to the shortterm nature of these instruments. The management considers that the carrying amounts of financial assets and financial liabilities recognised at nominal cost/amortised cost in the financial statements approximate their fair values.

2 A substantial portion of the Company’s long-term debt has been contracted at fixed rates of interest. Fair value of variable interest rate borrowings approximates their carrying value subject to adjustments made for transaction cost. In respect of fixed interest rate borrowings, fair value is determined by using discount rates that reflects the issuer’s borrowing rates.

3 Investments in liquid and short-term mutual funds, which are classified as available-for-sale, are measured using quoted market prices at the reporting date multiplied by the quantity held.

4 The fair value of derivative financial instruments is determined based on observable market inputs including currency spot and forward rates, yield curves, currency volatility etc. These derivatives are estimated by using the pricing models, where the inputs to those models are based on readily observable market parameters basis contractual terms, period to maturity, and maturity parameters such as foreign exchange rates and volatility. These models do not contain a high level of subjectivity as the valuation techniques used do not require significant judgement, and inputs thereto are readily observable from actively quoted market prices. The said valuation has been carried out by an independent party with whom the contract has been entered with. Management has evaluated the credit and non-performance risks associated with the counterparties and believes them to be insignificant and not requiring any credit adjustments.

During the year ended March 31,2017 and March 31,2016, there were no transfers between Level 1, Level 2 and Level 3.

The Inputs used in fair valuation measurement are as follows:

a) Derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the marketplace. The inputs used under level II market valuation technique for forward contracts are Forward foreign currency exchange rates and Interest rates to discount future cash flow.

b) Inputs used in fair valuation of Financial assets and liabilities not within the operating cycle of the company is amortised based on the borrowing rate of the company.

d) Derivatives assets and liabilities:

The Company follows established risk management policies, including the use of derivatives to hedge its exposure to foreign currency fluctuations on foreign currency assets / liabilities. The counter party in these derivative instruments is a bank and the Company considers the risks of non-performance by the counterparty as non-material.

e) Sale of financial assets

From time to time, in the normal course of business, the Company transfers accounts receivables, bills receivable to banks. Under the terms of the arrangements, the Company surrenders control over the financial assets and transfer is without recourse. Accordingly, such transfers are recorded as sale of financial assets. Gains and losses on sale of financial assets without recourse are recorded at the time of sale based on the carrying value of the financial assets and fair value of servicing liability. In certain cases, transfer of financial assets may be with recourse. Under arrangements with recourse, the Company is obligated to repurchase the uncollected financial assets, subject to limits specified in the agreement with the banks. Accordingly, in such cases the amounts received are recorded as borrowings in the statement of financial position and cash flows from financing activities.

During the year ended March 31, 2017 and 2016, the Company transferred and recorded as sale of financial assets of Rs. 339.35 lakhs and Rs. 552.50 lakhs respectively, under arrangements without recourse and has included the proceeds from such sale in net cash provided by operating activities. These transfers resulted in gain/(loss) of Rs. NIL lakhs and Rs. NIL lakhs for the year ended March 31, 2017 and 2016, respectively.

f) FINANCIAL RISK MANAGEMENT

The Company’s activities expose it to a variety of financial risks market risk, foreign currency risk, interest rate risk, commodity price risk, credit risk and liquidity risk. The Company’s focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk. The Company uses derivative financial instruments to mitigate foreign exchange related risk exposures. The Company’s exposure to credit risk is influenced mainly by the individual characteristic of each customer and the concentration of risk from the top few customers. The Company’s senior management oversees the management of these risks. The risks are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. The Management reviews and approves policies for managing each of these risks, which are summarized below:

i) MARKET RISK

Market risk is the risk or uncertainty arising from possible market price movements resulting in fluctuation of the fair value of future cash flows of a financial instrument. The major components of Market risks are foreign currency exchange risk, interest rate risk and price risk. Financial instruments affected by market risk includes borrowings, investments and derivative financial instruments.

ii) FOREIGN CURRENCY RISK

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s foreign currency denominated borrowing.

The Company evaluates exchange rate exposure arising from these transactions and enters into foreign currency derivative instruments to mitigate such exposure. The Company follows established risk management policies, including the use of derivatives like foreign exchange forward contracts to hedge cash flows denominated in foreign currency.

iii) INTEREST RATE RISK

The company exposure to the risk of change in market risk interest rate primarily arises from floating rate borrowing with banks and financial institutions. The Company’s fixed-rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates while the variable-rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. All of the company borrowing fall underthe fixed interest rates (approved under CDR schemes) hence there will no interest rate risk.

Interest rate risk primarily arises from floating rate borrowing with banks and financial institutions. The Company’s fixed-rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates while the variable-rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. As stated in Note no. 18, the company was under CDR Package due to which all its borrowings had been converted to fixed interest rate. Considering the same the carrying amount of said borrowing was considered to be at fair value.

iv) CREDIT RISK

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables). To manage this, the management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The Company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends and ageing of accounts receivable. Individual risk limits are set accordingly. Further the company obtains necessary security including letter of credits and/or bank guarantee to mitigate its credit risk.

The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. Receivables from customers are reviewed/evaluated periodically by the management and appropriate provisions are made to the extent recovery there against has been considered to be remote.

The carrying amount of respective financial assets recognised in the financial statements, (net of impairment losses) represents the Company’s maximum exposure to credit risk.

The Company takes collateral or other credit enhancements to secure the credit risk. The Company has also taken advances, security deposits and Letter of Credit from its customers, which mitigate the credit risk to that extent.

The concentration of credit risk is limited due to the customer base being large and unrelated. Of the trade receivables balance at the end of the year, the customer accounted for more than 10% of the accounts receivable are as follows:

Financial assets that are neither past due nor impaired

Cash and cash equivalents, investment, security deposits and deposits with banks are neither past due nor impaired. Cash and cash equivalents with banks, which have high credit-ratings assigned by international and domestic credit-rating agencies.

Financial assets that are past due but not impaired

Trade receivables disclosed include amounts that are past due at the end of the reporting period but against which the Company has not recognised an allowance for doubtful receivables because there has not been a significant change in credit quality and the amounts are still considered recoverable. The aging analysis of the trade receivables, net of allowances that are past due, is given in Note no. 10.1.

v) Counterparty risk

Counterparty risk encompasses settlement risk on derivative and money market contracts and credit risk on demand and time deposits. Settlement and credit risk is reduced by the policy of entering into transactions with counterparties that are usually banks or financial institutions with acceptable credit ratings. Exposure to these risks are closely monitored and maintained within predetermined parameters. There are limits on credit exposure to any financial institution. The limits are regularly assessed and determined based upon credit analysis including financial statements and capital adequacy ratio reviews. In addition, net settlement agreements are contracted with significant counterparties.

vi) Liquidity risk

Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at a reasonable price. The Company is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management. The Company monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Company’s present operations and to mitigate the effects of fluctuations in cash flows. However, the liquidity crisis has led to defaults in repayments and interest payments to the lenders.

vii) LIQUIDITY AND INTEREST RISK TABLES

The following tables detail the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows.

The company also manages its capital to meet financial covenants, if any attached to the borrowings. Non compliances may result in levy of higher rate of interest charged on loans charged by the lenders. At present the company has generally been complying with the financial covenants of the borrowings during the reported period except as stated in Note no. 18.

11 INCOMETAX

Deferred taxes on unrealized foreign exchange gain/loss relating to cash flow hedges is recognized in other comprehensive income and presented within equity in the cash flow hedging reserve. Apart from this, the changes in deferred tax assets and liabilities are primarily recorded in the statement of income.

In assessing the relisability of deferred tax assets, the Company considers the extent to which, it is probable that the deferred tax asset will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable profits during the periods in which those temporary differences and tax loss carry forwards become deductible. The Company considers the expected reversal of deferred tax liabilities and projected future taxable income in making this assessment. Based on this, the Company believes that it is probable that the Company will realize the benefits of these deductible differences. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if the estimates of future taxable income during the carry-forward period are reduced.

Deferred tax asset in respect of unused tax losses amounting to Rs. 31,976.14 lakhs and Rs. 66,529.78 lakhs as of March 31,2016 and 2017, respectively have not been recognized by the Company, since availability of future taxable income is not certain.

12 FIRST TIME ADOPTION OF IND AS- Disclosures, Reconciliation etc.

a) Reconciliation in terms of IND AS 101 “First time adoption of Indian Accounting Standards”

b) FIRST-TIME ADOPTION-Mandatory Exceptions and optional Exemptions

These financial statements are covered by Ind AS 101, “First Time Adoption of Indian Accounting Standards”, as they are the Company’s first Ind AS financial statements for the year ended March 31,2017.

i) Overall principle:

The Company has prepared the opening balance sheet as per Ind AS as at April 1,2015 (the transition date) by recognizing all assets and liabilities whose recognition is required by Ind AS, not recognizing items of assets or liabilities which are not permitted by Ind AS, by reclassifying certain items from Previous GAAP to Ind AS as required under the Ind AS, and applying Ind AS in the measurement of recognized assets and liabilities. The accounting policies that the Company used in its opening Ind-AS Balance Sheet may have differed from those that it used for its previous GAAP. The resulting adjustments arise from events and transactions before the date of transition to Ind-AS had recognized directly in retained earnings at the date of transition.

However, this principle is subject to certain mandatory exceptions and certain optional exemptions availed by the Company as detailed below.

ii) Derecognition of financial assets and financial liabilities

The Company has applied the derecognition requirements of financial assets and financial liabilities prospectively for transactions occurring on or after April 1,2015 (the transition date).

iii) Fair Value as deemed cost for Property, Plant and Equipment

Property, plant and equipment has been valued at Fair value at the date of transition, which has been considered as deemed cost.

iv) Deemed cost for Intangible assets

The Company has elected to continue with the carrying value of all of its intangible assets recognised as of April 1,2015 (transition date) measured as per the Previous GAAP and used that carrying value as its deemed costas of the transition date.

v) Impairment of financial assets

Ind AS 109 “Financial Instruments” requires the impairment to be carried out retrospectively; however, as permitted by Ind AS 101, the Company, has used reasonable and supportable information that is available without undue cost or effort to determine the credit risk at the date that financial instruments were initially recognized in order to compare it with the credit risk at the transition date. Further, the Company has not undertaken an exhaustive search for information when determining, at the date of transition to Ind AS, whether there have been significant increases in credit risk since initial recognition, as permitted by Ind AS 101.

vi) Determining whether an arrangement contains a lease

The Company as on the date of transition complied with Ind AS 17 to determine whether an arrangement contains a Lease on the basis of facts and circumstances existing at the date of transition to Ind AS, accordingly leasehold land has been reclassified as operating lease.

c) Explanatory Notes to reconciliation between Previous GAAP and Ind AS

(i) PROPERTY, PLANT & EQUIPMENT:

The company has used fair value of the assets as on the date of transition in its opening IND AS statement of financial position as deemed cost for all class of assets.

(a) The aggregate of those fair values is Rs.4,82,060.31 lakhs;and

(b) The aggregate adjustment to the carrying amounts reported under previous GAAP is Rs.173,55.54 lakhs.

The fair value of PPE has been determined based on the valuation carried out by External Independent Valuer. The fair value of the properties was determined based on market value of similar assets, significantly adjusted for differences in the nature, location or condition of the specific items of PPE. The fair valuation involves higher degree of uncertainty and subjectivity.

(c) Derognised general administrative and other overheads amounting to Rs. 1373.54 lakhs recognised under Pre-operative expenditure during the year 2015-16 as these were not directly attributable cost under Ind AS-16 “Property, Plant and Equipment”. This has resulted in increase in Loss before Tax for the year ended March 31,2016 by Rs. 1373.54 lakhs.

(d) Derognised foreign exchange fulatuation resultant from fair valuation of derivative instruments and realignment etc. of capex vendors amounting to Rs. 6,204.59 lakhs based on criteria laid down under Ind AS-21, “Effect of changes in Foreign Exchange Rates”. This has resulted in increase in Loss before tax for the year ended March 31,2016 by Rs. 6,204.59 lakhs.

ii) FAIR VALUATION OF FINANCIAL ASSETS AND LIABILITIES

Under previous GAAP, receivables and payables were measured at transaction cost less allowances for recoverability, ifany.

Under IND AS, the financial assets and liabilities are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less allowances for impairment, ifany. The resulting changes are recognised either under finance income or expenses in the Statement of Profit and Loss.

On transition, the company has fair valued the Security Deposit resulting in loss of Rs.182.92 lakh. This has resulted in decrease in equity by Rs. 182.96 lakhs and Profit before Tax for the year ended March 31,2016 has increased by Rs. 55.03 lakhs.

iii) INVESTMENTSIN MUTUAL FUNDS

Under previous GAAP, current investments were measured at lower of cost or market price.

Under IND AS, Current Investments are measured at fair value through profit and loss and accordingly, difference between the fair value and carrying value is recognised in the Statement of Profit and Loss.

On transition, the Company has recognised a gain of Rs. 109.27 lakhs in respect of mutual funds and deducted the same from Pre-operative expenses in accordance with Ind AS-23, “Borrowing Cost”.

iv) FAIR VALUATION OF DERIVATIVE FINANCIAL INSTRUMENTS

Under previous GAAP, exchange difference arising with respect to forward contracts otherthan those entered into, to hedge foreign currency risk on unexecuted firm contracts or of highly probable forecast transactions were recognised in the period in which they arise and the difference between the forward contract and exchange rate at the date of transaction is recognised as revenue/expense over the life of the contract.

In respect of derivative contracts (other than forward contract dealt as above) premium paid, gains/losses on settlement and losses on restatement are recognised in statement of profit and loss.

Under IND AS, both reduction and increase to the fair value of derivative contracts are recognised in Statement of Profit and Loss and premium is not separately accounted and amortised.

On transition, the Company has fair valued the outstanding forward contract based on valuation provided by Banks and data available from Reuters resulting in decrease liability of Rs. 787.05 lakhs and derognition of anamortised premium of Rs. 840.83 lakhs. This has resulted in decrease in equity by Rs. 53.78 lakhs.

v) FINANCECOST

Under previous GAAP, receivables and payables were measured at transaction cost. Cost incurred in respect of Funds borrowed were either charged off to revenue or capitalised.

Finance Liabilities consisting of Long Term Borrowings have been designated and measured at amortised cost based on Effective Interest Rate (EIR) method. The upfront fees or borrowing cost incurred including restructuring of loan cost has been deferred and accounted for based on EIR. Borrowings are shown as net of unamortised amount. On transition Rs. 621.03 lakhs has been adjusted against Capital Work in Progress. This has resulted in increase in loss for the year ended March 31,2016 by Rs. 131.81 lakhs

vi) PRIOR PERIOD ADJUSTMENTS

Under previous GAAP, prior period expenses were charged off in the year the same were recognised with separate disclosure in the financial statement.

Under IND AS, in case of prior period items the company shall correct material prior period errors in the first set of financial statements approved for issue after their discovery by restating the opening balance of assets, liabilities and equity for the earliest prior period presented.

Accordingly, on transition an amount of Rs. 18.57 lakh relating to prior years has been recognised in the first set of financial statements. This has resulted in decrease in Other Equity by Rs. 18.57 lakhs and increase in Profit before Tax for the year ended March 31,2016.

vii) REMEASUREMENT OF DEFINED BENEFIT PLANS

Both under previous GAAP and Ind AS, the Company recognizes costs related to its post-employment defined benefit plan on an actuarial basis. Under previous GAAP, the entire cost, including remeasurement, are charged to Statement of Profit and Loss. Under Ind AS, re-measurements [comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets excluding amounts included in net interest on the net defined benefit liability] are recognized immediately in the balance sheet with a corresponding debit or credit to equity through Other Comprehensive Income (OCI).

Accordingly on transition, the company has reclassified an amount of Rs. 109.71 lakhs from Surplus to Other Comprehensive Income.

viii) RECLASSIFICATION OF LEASE

Under previous GAAP, leasehold land in the form of perpetual agreement was classified as finance lease.

Under IND AS, finance lease includes leases that substantially transfer all the risks and rewards incidental to ownership of an assets. Land is considered to have an indefinite life and whose value appreciate with passage of time. Accordingly, on transition the company has reclassified such leasehold land to operating lease amounting to Rs. 85.44 lakhs as on 1st April 2015 and Rs 82.28 lakhs as on 31st March 2016.

ix) Previous GAAP figures have been reclassifed/regrouped wherever necessary to confirm with financial statements prepared under IND AS.

13 DISCLOSURE ON SPECIFIED BANK NOTES (SBNS)*:

The details of SBN (Rs. 500 and Rs. 1000 notes existing as on November 08, 2016) and other notes held and transacted during the period from November 8, 2016 to December 30,2016 as defined and required vide MCA Notification Number GSR 308(E) dated March 30,2017 is given below:

41 These financial statements have been approved by the Board of Directors of the Company on May 15, 2017 for issue to the shareholders for their adoption.


Mar 31, 2016

A. Security

1) The entire facilities from CDR lenders and a non-CDR lender (HUDCO) are secured by:

(a) first ranking pari passu charge by way of mortgage/hypothecation of all immovable and movable properties (including fixed assets, plant & machinery, tools & accessories etc.), current assets (including book debts), present and future and assignment over all of Company''s bank accounts;

(b) pledge of 866,750,000 Equity Shares of the Company held by Electro steel Castings Ltd. (''ECL'') being the Promoter Company;

(c) pledge of 517,000 Equity Shares of the Company held by Mr. Umang Kejriwal (Director);

(d) pledge of 32,675,270 Equity Shares of ECL held by 2 of its promoter group companies;

(e) personal guarantee of Mr. Umang Kejriwal and Ms. Radha Kinkari Kejriwal (COO - MSD)

2) The facility from a non-CDR lender (SREI) is secured by:

(a) second ranking pari passu charge by way of hypothecation of all movable assets (including receivables and intangibles), present and future;

(b) second charge on all rights, titles and interest in all assets of the Project, letter of credit/guarantee/performance bond provided in respect of the Project and all Project documents, Contracts, Insurance Policies etc.

(c) first charge by way of mortgage of a piece of land with factory building owned by ECL.

3) The facility from another non-CDR lender (IL & FS) is secured by

(a) second ranking pari passu charge by way of mortgage/hypothecation of all assets mentioned in 1(a) above;

(b) pledge of Shares as mentioned in 1(b) to 1(d) above ranking subservient to the pledge already created in favour of lenders;

(c) personal guarantees as mentioned in 1(e) above.

.1 The Interest on the term loans due from a non-CDR lender (SREI) has been provided in line with the CDR terms as approved by the CDR EG. However, their claim for additional interest, management fee etc. is under renegotiation.

2 The dues to L&T Fin Corp on account of bill discounting are secured by charges created on all book debts, all cash flows and receivables and proceeds arising from/in connection with supplies to L&T ECC.

3. Employee Benefits

The disclosures required under Accounting Standard 15 "Employee Benefits" issued by the Institute of Chartered Accountants of India (ICAI), are given below:

4 The Company has, during the year, capitalized part of the plant facility. Accordingly the Pre-Operative Expenses incurred up to the date of capitalization have been allocated to the cost of the facility on a proportionate basis.

5. Segment information

The Company''s activities during the period were relating to setting up of its Integrated Steel & D I Pipe Plant. A part of the plant facility has commenced production (refer Note 28 above). Considering the nature of the Company''s business and operations, there are no separate reportable segments (business and/ or geographical) in accordance with the requirements of Accounting Standard 17 ''Segment Reporting'', issued by ICAI.

6. Accounting for Taxes on Income

Since availability of future taxable income is not certain, no provision for deferred tax assets has been made under Accounting Standard 22 ''Accounting for Taxes in Income'' issued by ICAI, in accordance with the transitional provisions.

7. Valuation of Current Assets, Loan & Advances

In the opinion of the management, current assets, loans and advances and trade receivables have the value at which these are stated in the Balance Sheet, unless otherwise stated, and adequate provisions for all known liabilities have been made and are not in excess of the amount reasonably required.

Vendor balances appearing under Long-term liabilities, trade Payables & other liabilities, loans & advances and trade receivables are subject to reconciliation/ confirmation and adjustments in this respect are carried out as and when amount thereof, if any, are ascertained.

8. The Company has incurred a net loss of Rs. 32654.67 lac ( Previous Year Rs. 62,404,23 lac) during the year ended 31st March 2015. The Current liabilities exceeds the current assets by Rs. 320,780.13 lac (Previous year Rs. 163,669.49 Iac).Further there has been an erosion of net worth by more than fifty percent because of accumulated losses.

The lenders have since invoked the ''Strategic Debt Restructuring'' (SDR) pursuant to RBI Circulars dated June 08, 2015 and Sept 24, 2015, and the implementation thereof is under progress. The Company was EBIDTA positive in the financial year 2015-16. The Company is seeking potential investment of necessary funds. Considering the above developments and favourable impact thereof on the financials of the Company and its operations, the Company has prepared these financial statements on going concern basis.

9. Previous year figures have been reclassified wherever appropriate to confirm to current year''s presentation.

10. All the figures in these notes are in ''Rs. in lakhs'' except otherwise stated

Please refer to the Section ''Internal Financial Controls'' of the Report and ''Internal Controls'' in the enclosed Management Discussion & Analysis Report.

PARTICULARS OF THE EMPLOYEES

The information required pursuant to Section 197 of the Act, read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, in respect of employees of the Company is given a separate annexure to this Report. The Reports and Accounts are being sent to Members and other entitled thereto, excluding the information on employee''s particulars which is available for inspection by the Members at the Registered Office of the Company during business hours on any working day. If any member is interested in obtaining a copy thereof, such member may write to Company Secretary in this regard.


Mar 31, 2015

Note 1. A. Security

1) The entire facilities from CDR lenders and a non-CDR lender (HUDCO) are secured by:

(a) first ranking pari passu charge by way of mortgage/hypothecation of all immovable and movable properties (including fixed assets, plant & machinery, tools & accessories etc.), current assets (including book debts), present and future and assignment over all of Company's bank accounts;

(b) pledge of 866,750,000 equity shares of the Company held by Electrosteel Castings Ltd. ('ECL') being the Promoter Company;

(c) pledge of 517,000 equity shares of the Company held by Mr. Umang Kejriwal (Director);

(d) pledge of 32,675,270 equity shares of ECL held by 2 of its promoter group companies;

(e) personal guarantee of Mr. Umang Kejriwal and Ms. Radha Kinkari Kejriwal (Sr. Executive).

2) The facility from a non-CDR lender (SREI) is secured by:

(a) second ranking pari passu charge by way of hypothecation of all movable assets (including receivables and intangibles), present and future;

(b) second charge on all rights, titles and interest in all assets of the Project, letter of credit/guarantee/performance bond provided in respect of the Project and all Project documents, Contracts, Insurance Policies etc.

(c) first charge by way of mortgage of a piece of land with factory building owned by ECL.

3) The facility from another non-CDR lender (IL & FS) is secured by

(a) second ranking pari passu charge by way of mortgage/hypothecation of all assets mentioned in 1(a) above;

(b) pledge of shares as mentioned in 1(b) to 1(d) above ranking subservient to the pledge already created in favour of lenders;

(c) personal guarantees as mentioned in 1(e) above.

Note 2. The Interest on the term loans due from a non-CDR lender (SREI) has been provided in line with the CDR terms as approved by the CDR EG. However, their claim for additional interest, management fee etc. is under renegotiation.

Note 3. The dues to L&T Fin Corp on account of bill discouting are secured by charges created on all book debts, all cash flows and receivables and proceeds arising from/in connection with supplies to L&T ECC.

Note 4. Employee Benefits

The disclosures required under Accounting Standard 15 "Employee Benefits" issued by the Institute of Chartered Accountants of India (ICAI), are given below:

Note 5. The Company has, during the year, capitalized part of the plant facility. Accordingly the Pre-Operative Expenses incurred up to the date of capitalization have been allocated to the cost of the facility on a proportionate basis.

Note 6. Segment information

The Company's activities during the period were relating to setting up of its Integrated Steel & D I Pipe Plant. A part of the plant facility has commenced production (refer Note 27 above). Considering the nature of the Company's business and operations, there are no separate reportable segments (business and/ or geographical) in accordance with the requirements of Accounting Standard 17 'Segment Reporting', issued by ICAI.

Note 7. Related Party Disclosures

As per Accounting Standard 18 'Related Party Disclosures' issued by ICAI, the disclosure of transactions with related parties are given below:

(i) Names of the related parties and description of relationship List of related parties where control exists:

Electrosteel Castings Limited - Promoter Company

Key Management Personnel (KMP) and their relatives

Mr. Rama Shankar Singh - Whole Time Director

Mrs Puspha Singh - Wife

Enterprises where Key Management Personnel (KMP) have significant influence or control

Rama Mining Consultants Private Limited

North Dhadhu Mining Company Private Limited

Asian Informatics Private Limited

Jhilmil Traders Private Limited

MDA Projects India Private Limited

Note 8. Contingent liabilities 31 March, 2015 31 March, 2014

Rs. in Lakhs Rs. in Lakhs

Claims against the company not acknowledged as debt 58,646.64 25,066.26

Note 9. Valuation of Current Assets, Loan & Advances

In the opinion of the management, current assets, loans and advances and trade receivables have the value at which these are stated in the Balance Sheet, unless otherwise stated, and adequate provisions for all known liabilities have been made and are not in excess of the amount reasonably required.

Vendor balances appearing under Long-term liabilities, trade Payables & other liabilities, loans & advances and trade receivables are subject to reconciliation/ confirmation and adjustments in this respect are carried out as and when amount thereof, if any, are ascertained.

Note 10. The Company has incurred a net loss of Rs. 62,404.23 lac ( Previous Year Rs. 29113.17 lac) during the year ended 31st March 2015. The Current liabilities exceeds the current assets by Rs. 163,669.48 lac (Previous year Rs. 76,680.50 lac). Further there has been an erosion of net worth by more than fifty percent because of accumulated losses. As stated earlier, the Company was sanctioned CDR Package on 28th September, 2013 to restructure and reschedule the Company's debt and provide additional facilities. The Master Restructuring Agreement was executed only on 20th January, 2014, resulting in delayed release of additional funds. The consequent release of additional term loan under CDR Package happened with delay which resulted in delay of operationalization of project modules. The Company is yet to get some portion of sanctioned loans requiring for the project completion.

Further, the financial closure of the need based working capital funds was inordinately delayed and the loan documentations made in November, 2014 only. There after release of the sanctioned working capital facility by the majority of the lenders was done gradually. However, the company is still to get the entire sanctioned need based working capital.

The release of working capital facility has enabled the Company to increase its production. The same is evident with the gradual increase in sales over on quarter - on- quarter basis. With the release of entire working capital facility, the Company would be able to step the production level which would add to enhanced top line and generation of cash flows. The company was EBIDTA positive in the financial year 2014-15.

Further, under the CDR Package, the Company is required to be infused further funds in the form of equity/preference shares/unsecured loan etc. by March 2016. The Company is seeking potential investment of necessary funds.

Thus, with the operationalization of other Project facilities together with the increase in release of working capital limits and the infusion of funds, it is expected that the project will be completed and the overall financial health of the company would improve considerably.

Considering the above developments and favourable impact thereof on the financials of the Company and its operations, the Company has prepared these financial statements on going concern basis.

Note 11. Previous year figures have been reclassified wherever appropriate to confirm to current year's presentation.

Note 12. All the figures in these notes are in 'Rs. in lakhs' except otherwise stated.


Mar 31, 2014

1. Contingent liabilities

31 March, 2014 31 March, 2013 Rs. in Lakhs Rs. in Lakhs

Show cause notice from Central Excise Authorities alleging wrong availment of Cenvat credit 5,382.56 5,264.09

Bills Discounted with Bank 1,142.08 249.31

Sales Tax litigation 466.09 53.99

Income Tax & TDS 14.53 –

Right of Recompense of Lenders as per CDR Guidelines 17,961.00 –

Show Cause Notice from SEBI 100.00 –

Civil and criminal proceedings pending against the Company, the financial liability thereof, if any, is unascertainable.

2. Details of dues to micro and small enterprises as defined under the MSMED Act,2006

The Company has circulated confirmation for the identification of suppliers registered under the Micro, Small and Medium Enterprises Development Act, 2006. On the basis of information available with the Company under the aforesaid Act, there are no Enterprises to whom the Company owes dues which are outstanding at year end. This has been relied upon by the Auditors.

3. Valuation of Current Assets, Loan & Advances

In the opinion of the management, current assets, loans and advances and trade receivables have the value at which these are stated in the Balance Sheet, unless otherwise stated, and adequate provisions for all known liabilities have been made and are not in excess of the amount reasonably required.

Vendor balances appearing under Long-term liabilities, trade Payables & other liabilities, loans & advances and trade receivables are subject to reconciliation/ confirmation and adjustments in this respect are carried out as and when amount thereof, if any, are ascertained.

4. Previous year figures have been reclassified wherever appropriate to confirm to current year''s presentation.

5. All the figures in these notes are in ''Rs. in lakhs'' except otherwise stated.


Mar 31, 2013

1. Exceptional Items

On a review, for appropriate presentation of tangible assets at the year end, the recalculation of provision of depreciation since inception has resulted in deficiency of Rs 229.52 lakhs ascertained upto 31.03.2012 under the head ''Plant & Machinery'' which has been charged to the Statement of Profit & Loss for the current year as an ''Exceptional Items''. This has increased the loss for the year to that extent.

2. Gratuity and other post-employment benefits plan

The disclosures required under Accounting Standard 15 "Employee Benefits" issued by the Institute of Chartered Accountants of India (ICAI), are as below.

Defined Contribution Plans

Contributions to Defined Contribution Plans, recognized are charged off for the period (included in Statement of Profit & Loss and Project Development Expenditure) as under:

Defined Benefit Plan

The present value of obligation for Employee''s Gratuity Scheme is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for Leave Encashment is recognized in the same manner as Gratuity.

3. Project Development Expenditure

The Company is in the process of setting up an Integrated Steel & D I Pipe Plant in the state of Jharkhand, India. The expenditure incurred during construction period is classified as ''Project Development Expenditure'' pending capitalisation to be allocated to the respective asset on the completion thereof. Necessary details have been disclosed below:

3.1 A part of the plant facility has commenced commercial production and the proportionate expenditure related thereto is duly capitalised. Expenditure incurred thereafter is treated as revenue.

4. Segment information

The Company''s activities during the period were relating to setting up of its Integrated Steel & D I Pipe Plant. A part of the plant facility has commenced production (refer Note 26 above). Considering the nature of the Company''s business and operations, there are no separate reportable segments (business and/ or geographical) in accordance with the requirements of Accounting Standard 1 7 ''Segment Reporting'', issued by ICAI.

5. Related Party Disclosures

As per Accounting Standard 18 ''Related Party Disclosures'' issued by ICAI, the disclosure of transactions with related parties are given below:

(i) Names of the related parties and description of relationship List of related parties where control exists:

1. Key Management Personnel (KMP) and their relatives

Mr. Umang Kejriwal - Director

Mr. Nigam Chander Bahl - Whole Time Director

Mr. Sunil V Diwakar - Nominee Director

Mr. Ghanshyam Kejriwal - Relative of Director

Mrs. Uma Kejriwal - Relative of Director

Mr. Mayank Kejriwal - Relative of Director

Mrs. Asha Kejriwal - Relative of Director

Ms. Radha Kinkari Kejriwal - Relative of Director

Ms. Priya Sakhi Kejriwal Mehta - Relative of Director

2. Enterprises where KMP/ relatives of KMP have significant influence or control

Akshara Manor Pvt. Ltd. Greenchip Trexim Pvt. Ltd.

Avalokiteshwar Valinv Ltd. Lanco Industries Ltd.

Badrinath Industries Ltd. Malay Commercial Enterprises Ltd.

Bose Estates Pvt. Ltd. Murari Investment & Trading Co. Ltd.

Calcutta Diagnostics Centre Pvt. Ltd. Oxford Heights Pvt. Ltd.

Cubbon Marketing Pvt. Ltd. Quinline Dealcomm Pvt. Ltd.

Electrosteel Aviation Ltd. Resina Developers Pvt. Ltd.

Electrosteel Thermal Coal Ltd. Sigma Commercials Pvt. Ltd.

Electrosteel Thermal Power Ltd. Sri Gopal Investments Ventures Ltd.

Ellenbarrie Chemical Allied Pvt. Ltd. Sree Khemisati Construction Pvt. Limited

Ellenbarrie Developers Pvt. Ltd. Tulsi Enclave Pvt. Ltd.

Escal Finance Services Ltd. Tulsi Highrise Pvt. Ltd.

Electrocast Sales India Ltd. Tulip Enclave Pvt. Ltd.

Gaushree Enterprises Uttam Commercial Co. Ltd.

G. K. Investments Ltd. UNB Estates Pvt. Ltd.

G. K. & Sons Pvt. Ltd. Wilcox Merchants Pvt. Ltd.

Global Export Ltd.

3. Other related parties

Electrosteel Castings Ltd. Electrosteel Castings Gulf Fze

Electrosteel Europe SA Electrosteel Trading S.A. Spain

Electrosteel Algeria SPA Electrosteel USA LLC

Electrosteel Brasil Ltd. A Tubos E Conexoes Duteis Singardo International PTE Ltd.

Electrosteel Castings (UK) Ltd. Waterfab LLC

6. Accounting for Taxes on Income

Since the major part of the Company''s activities during the period were for the setting up of the project, no provision for deferred tax assets has been made under Accounting Standard 22 ''Accounting for Taxes in Income'' issued by ICAI, in accordance with the transitional provisions.

7. Details of dues to micro and small enterprises as defined under the MSMED Act, 2006

The Company has circulated confirmation for the identification of suppliers registered under the Micro, Small and Medium Enterprises Development Act, 2006. On the basis of information available with the Company under the aforesaid Act, there are no Enterprises to whom the Company owes dues which are outstanding at year end. This has been relied upon by the Auditors.

8. Valuation of Current Assets, Loan & Advances

In the opinion of the management, current assets, loans and advances and trade receivables have the value at which these are stated in the Balance Sheet, unless otherwise stated, and adequate provisions for all known liabilities have made and are not in excess of the amount reasonably required.

9. Previous year figures have been reclassified wherever appropriate to confirm to current year''s presentation.

10. All the figures in these notes are in ''Rs. in lakhs'' except otherwise stated.


Mar 31, 2012

A. Security

1) The Senior Debts and External Commercial Borrowings from Bank and others are secured by:

(a) First ranking pari passu mortgage and charge on all immovable and movable properties including fixed assets, plant and machinery (both tangible & intangible), present and future, on all bank accounts in relation to the Project and assignment of project agreements, subject to charges created / to be created in favour of working capital lenders on the current assets for securing Working Capital Facilities; and

(b) Pledge of 500,000,000 Equity Shares of the Company held by Electrosteel Castings Limited.

2) The Subordinate Debts from Bank and others are secured by a second charge, which shall be subject to and subsurvient to the first charge created / to be created as in (1) above.

3) Securitization Loan is secured by :

(a) Assignment of receivables pertaining to sale of two of the products; and

(b) Second charge over the fixed assets both present and future of the Company ranking pari passu with existing term lenders as in (1) & (2) above and the working capital lenders.

4) Buyers Credit (appearing under current liabilities) are secured by letter of credit issued by lenders.

5) Loan from Others - Rs. 500,00.00 Lakhs is secured by :

(a) Second charge on all movable assets (including all receivables and intangibles) both present and future; and

(b) Second charge over the rights, titles and interest of the Company in, to and under all the assets of the project and all the project documents, contracts, insurance policies, clearances, permit/approvals; and

(c) First mortgage of a piece of land with factory building thereon owned by Electrosteel Castings Limited.

6) Other Loan of Rs. 1 38,00.00 lakhs is secured by way of Corporate Guarantee from Electrosteel Castings Limited.

B. Repayment terms

a) The Senior and Subordinate debts are repayable in further 28 quarterly instalments of Rs. 166,87.84 Lakhs each up to March 2019.

b) Securitization loan (partially disbursed) is repayable in quarterly instalments wef 30.06.201 3 as follow: first 16 instalments of Rs. 600.00 Lakhs next 12 instalments of Rs. 750.00 Lakhs final 6 instalments of Rs. 900.00 Lakhs the final instalment is payable on 30/09/2021.

c) Term loan of Rs. 500,00.00 Lakhs is due for bullet repayment in July 201 3.

d) External Commercial Borrowings are repayable in 24 quarterly instalments of Rs. 1986.21 lakhs (US $ 39.03 lakhs) each up to Dec 2018.

C. The applicable rate of interest on the above term loans during the year are -

a) Senior Debts from Banks and Others carries interest rate of Base Rate plus spread (being 2.50% to 3.00%) of the respective Lenders.

b) Subordinate Debts from Banks and Others carries interest rate of 1.50% to 2.00% above the rate of Senior Debts in (a) above.

c) External Commercial Borrowings carries interest of Libor (6 months) plus 4.75%.

d) Buyers Credit carries interest rate of Libor plus spread ranging between 1.25 % to 4.25%.

e) Securitization Loan carries interest rate of Base Rate plus spread (being 2.25%) of the Lending Bank.

f) Secured Loan from Others carries interest rate of Lenders' Benchmark Rate minus spread (being 3.50%).

g) Unsecured Loan carries interest rate of Base Rate plus spread (being 1.25%) of the Lending Bank.

Working Capital facility from a Bank is secured by way of first charge over current assets and second charge over the fixed assets of the company, both present and future, pari-passu with other Lenders. The facility carries interest of base rate plus spread (being 3.90%) of the Lending Bank.

7. Gratuity and other post-employment benefits plan

The disclosures required under Accounting Standard 15 "Employee Benefits" issued by the Institute of Chartered Accountants of India (ICAI), are as below:

Defined Contribution Plans

Contributions to Defined Contribution Plans, recognized are charged off for the period as under:

Defined Benefit Plan

The present value of obligation for Employee's Gratuity Scheme is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for Leave Encashment is recognized in the same manner as Gratuity.

8. Project Development Expenditure

The Company is in the process of setting up an Integrated Steel & D I Pipe Plant in the state of Jharkhand, India. The expenditure incurred during construction period is classified as 'Project Development Expenditure' pending capitalisation to be allocated to the asset on the completion thereof. Necessary details have been disclosed below:

25.1 A part of the plant facility has commenced production (Pig Iron & DI Pipes). Accordingly the proportionate expenditure related to the project under construction and erection has been accounted as 'Project Development Expenditure' pending capitalization under 'Capital work-in-Progress'.

9. Segment information

The Company's activities during the period were relating to setting up of its Integrated Steel & D I Pipe Plant. A part of the plant facility has commenced production (refer Note 25 above). Considering the nature of the Company's business and operations, there are no separate reportable segments (business and/ or geographical) in accordance with the requirements of Accounting Standard 17 'Segment Reporting', issued by ICAI.

10. Accounting for Taxes on Income

Since the major part of the Company's activities during the period were for the setting up of the project, no provision for deferred tax assets has been made under Accounting Standard 22 'Accounting for Taxes in Income' issued by ICAI, in accordance with the transitional provisions.

11. Details of dues to micro and small enterprises as defined under the MSMED Act,2006

The Company has circulated confirmation for the identification of suppliers registered under the Micro, Small and Medium Enterprises Development Act, 2006. On the basis of information available with the Company under the aforesaid Act, there are no Enterprises to whom the Company owes dues which are outstanding at year end. This has been relied upon by the Auditors.

12. Valuation of Current Assets, Loan & Advances

In the opinion of the management, current assets, loans and advances have the value at which these are stated in the Balance Sheet, unless otherwise stated, and adequate provisions for all known liabilities have made and are not in excess of the amount reasonably required.

Vendor balances appearing under Long-term Liabilities, Trade Payables & Other Liabiltiies and Loans and Advances are subject to reconciliation/ confirmation and adjustments in this respect are carried out as and when amount thereof, if any, are ascertained.

13. Previous year figures have been reclassified wherever appropriate to confirm to current year's presentation.

14. All the figures in these notes are in 'Rs. in lakhs' except otherwise stated.


Mar 31, 2011

1 The Profit & Loss Account has been prepared for the period after commencement of commercial production of one of the Blast Furnaces during the year and as such no previous yearfigures have been reported.

2 The Company had come up with an Initial Public Offering (IPO) of 259,343,616 equity shares (including Green Shoe Option (GSO) of up to 33,827,428 equity shares) of Rs 10 each at a premium of Rs 1 per share aggregating to Rs 28,527.80 lacs. The share issue expenses amounting to Rs 1,826.89 lacs after netting off cenvat credit of Rs 289.72 lacs have been adjusted to Securities Premium Account.

3 The Company has circulated confirmation for the identification of suppliers registered under the Micro, Small and Medium Enterprises Development Act, 2006. On the basis of information available with the Company under the aforesaid Act, there are no Enterprises to whom the Company owes dues which are outstanding at year end. This has been relied upon by the Auditors.

4 The Company got sanction of External Commercial Borrowings (ECB) for USD 95 million as a substitute to the existing undrawn rupee term loan commitment from the existing Consortium lenders.

5 Project Development Expenditure/Profit & Loss Account includes remuneration paid to Whole Time Directors Rs 14,565,004 (P.Y. Rs 20,256,346).

6 In the opinion of the management, current assets, loans and advances have the value at which these are stated in the Balance Sheet, unless otherwise stated, and adequate provisions for all known liabilities have been made and are not in excess of the amount reasonably required.

7 Balances of Sundry Creditors and Loans & Advances are subject to reconciliation/confirmation and adjustments in this respect are carried out as and when amounts thereof, if any, are ascertained.

8, The Companys activities during the period were relating to setting up of its Integrated Steel & DI Pipe Plant. A part of the plant was commissioned in September, 2010, which was temporarily shut down for the purpose of syncronisation with other units and has since restarted from 14th March, 2011 (refer Note B1.1 and 1.2 above). Considering the nature of the Companys business and operations, there are no separate reportable segments (business and/ or geographical) in accordance with the requirements of Accounting Standard 17 Segment Reporting, issued by ICAI.

9. As per Accounting Standard 18 Related Party Disclosures issued by ICAI, the disclosure of transactions with related parties are given below:

i. List of related parties where control exists:

Names of the related parties and description of relationship

1. Key Management Personnel (KMP) and their relatives

Mr. Umang Kejriwal - Director

Mr. Nigam Chander Bahl - Whole Time Director

Mr. Vilas Vishnu Jamnis - Whole Time Director (resigned on 10.08.2010)

Mr. Sunil V Diwakar -Director

Mr. Ghanshyam Kejriwal - Relative of Director

Mr. Mayank Kejriwal - Relative of Director

Mrs. Vaishali Vilas Jamnis - Relative of Whole Time Director

2. Enterprises where KMP/ relatives of KMP have significant influence or control

Akshara Manor Pvt. Ltd. G. K. & Sons Pvt. Ltd.

Badrinath Industries Ltd. Greenchip Trexim Pvt. Ltd.

Bose Estates Pvt. Ltd. Malay Commercial Enterprises Ltd.

Calcutta Diagnostics Centre Pvt. ltd. Murari Investment & Trading Co. Ltd.

Cubbon Marketing Pvt. Ltd. Quinline Dealcomm Pvt. Ltd.

Electrocast Sales India Ltd. Sigma Commercials Pvt. Ltd.

Electrosteel Aviation Ltd. Sri Gopal Investments Ventures Ltd.

Electrosteel Thermal Coal Ltd. Tulsi Highrise Pvt. Ltd.

Ellenbarrie Chemical Allied Pvt. Ltd. Utkal Investments Ltd.

Ellenbarrie Developers Pvt. Ltd. Uttam Commercial Co. Ltd.

Escal Finance Services Ltd. Wilcox Merchants Pvt. Ltd. G. K. Investments Ltd.

3. Other related parties

Electrosteel Castings Ltd. Electrosteel USA LLC

Electrosteel Europe SA Lanco Industries Ltd.

Electrosteel Algeria SPA Singardo International PTE Ltd.

Electrosteel Castings (UK) Ltd. Waterfab LLC Electrosteel Thermal Power Ltd.

10. Since the major part of the Companys activities during the period were for the setting up of the project, no provision for deferred tax assets has been made under Accounting Standard 22, "Accounting for Taxes on Income" issued by ICAI, in accordance with the transitional provisions.

11. The expenses incurred on Initial Public Offer have been adjusted against the Securities Premium Account as permitted under Section 78 of the Companies Act, 1956. The expenses incurred on Company formation for Rs 177,419 has been charged to the profit & loss account as Prior Period Items.

12. All the figures in this schedule are in Rupees except otherwise stated.

13. Previous year figures have been reclassified wherever appropriate to confirm to current years presentation.

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