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Notes to Accounts of Electrosteel Steels Ltd.

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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