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Accounting Policies of Gujarat NRE Coke Ltd. Company

Mar 31, 2014

I. Accounting Conventions

The financial statements are prepared under historical cost conventions and as a going concern basis following the accrual basis of accounting and in accordance with the Generally Accepted Accounting Principles (GAAP) in India and in compliance with the provision of the Companies Act, 1956.

ii. Use of Estimates

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues & expenses for the Year under review and assets & liabilities, disclosure of contingent liabilities, on the date of the financial statements. Actual results could differ from these estimates. Any revision to accounting estimates is recognized prospectively in the current and future periods.

iii. Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company and revenue can be reliably measured

a. In respect of Sales : When the significant risks and rewards of ownership of goods have been passed

on to the buyer, which generally coincides with delivery / shipment of goods to customers.

b. In respect of Interest Income : On time proportion basis taking into account the amount outstanding and the rate

applicable.

c. In respect of Service Income : When the services are performed as per contract.

d. In respect of Dividend Income : When right to receive payment is established.

e. In respect of Insurance Claims : On Settlement of Claims

f. In respect of Guarantee Commission : When right to receive payment is established.

Revenue from product sales is recognized inclusive of Excise duty but exclusive of Sales Tax/Value added Tax (VAT) and net of returns, Sales Discount etc. Sales Returns are accounted for when goods are returned.

iv. Fixed Assets

Fixed assets are stated at historical cost, which comprises cost of purchase/construction cost, cost of borrowing and other cost directly attributable to bring the assets at its working condition and location for its intended use. Expenditures during construction period are allocated to the relevant assets in the ratio of costs of respective assets.

v. Depreciation on Fixed Assets

Depreciation on Fixed assets is provided on Straight - Line Method (SLM) at the rates and in the manner prescribed in Schedule XIV of the Companies Act, 1956.

vi. Inventories

1. Inventories are valued as under:

a. Raw Materials : At Cost or Net Realisable Value whichever is lower

b. Finished Products : At Cost or Net Realisable Value whichever is lower

c. Stores, Spares and Components : At Cost or Net Realisable Value whichever is lower

d. Stock in process : At Raw material Cost plus estimated cost of conversion up to the stage of completion or Net Realisable Value whichever is lower.

Cost includes all direct cost and applicable manufacturing and administrative overheads.

2. Inventories are valued on FIFO basis.

3. Variation, if any, between books and physical stocks detected on physical verification, obsolete & slow moving stocks are adjusted in accounts as found appropriate.

vii. Investments

Long term investments are stated at cost. Provision is made when diminution in the value of investments is considered permanent in nature.

Current investments are stated at lower of cost and market value.

viii. Foreign Exchange Transactions

a. Initial Recognition

Foreign Exchange transactions are recorded normally at the exchange rates prevailing on the date of the transactions.

b. Conversion

Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of transaction and non- monetary items which are carried at the fair value or other similar denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.

c. Exchange differences

Exchange differences arising on settlement of transactions or on reporting monetary items of the Company at the rate different from those at which they were initially recorded during the year, or reported in previous financial statement, are recognised as income or expenses in the year in which they arise except in case where they relate to acquisition of fixed assets.

d. Forward Exchange Contract not intended for trading or speculative purposes

The premium or discount arising at the inception of forward exchange contract is amortized as expenses or income over the life of the respective contract. Exchange differences on such contracts are considered in the statement of Profit or Loss in the Year in which exchange rate changes. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expenses for the Year.

ix. Provisions, Contingent Liabilities and Contingent Assets

The Company makes a provision when there is present obligation as a result of past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Contingent Assets are disclosed when an inflow of economic benefit is probable and/or certain.

x. Borrowing Costs

Borrowing Costs that are attributable to the acquisition and constructions of qualifying assets are capitalised as a part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. Other borrowing costs of the Year are charged to revenue in the period in which they are incurred.

xi. Taxation

Current Tax is determined as the amount of tax payable in respect of taxable income for the Period.

Deferred Tax Liability is recognized for all timing differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

Deferred Tax Assets are recognized only if there is reasonable certainty that the same will be realized and are reviewed for the appropriateness of its respective carrying values at each Balance Sheet date.

Tax on Distributed Profit Payable is in accordance with the provision of Section 155O of the Income Tax Act, 1961 and in accordance with guidance note on Accounting for Corporate Dividend Tax. Wealth Tax is determined on taxable value of assets on the balance sheet date.

xii. Employee benefits

a) Short Term & Post Employment Benefits

Employee benefits of short-term nature are recognized as expense as and when those accrue. Post employments benefits are recognized as expenses based on actuarial valuation at Year end which takes into account actuarial gains and losses.

b) Employee Stock Option Scheme (ESOS)

Aggregate quantum of options granted under the schemes in monetary term net of consideration of issue, to be paid in cash, are shown in the Balance Sheet as Employees Stock Option outstanding under Reserves & Surplus and as Deferred Employees Compensation (ESOS) under Unamortised Expenditure as per guide-lines of SEBI in this respect.

With the exercise of options and consequent issue of equity shares corresponding ESOS outstanding is transferred to Securities

Premium Account.

xiii. Indirect Taxes

Excise Duty on Finished Goods Stock is accounted for at the point of manufacture of goods and is accordingly considered for valuation of finished goods stock as on Balance sheet date. Customs duty on imported raw materials is accounted for on the clearance of goods from the Customs Authorities.

xiv. Unamortised Expenditure

Unamortised expenditure, stated at cost, is amortized over period of time as under:

(i) Deferred Revenue Expenses-5 years

(ii) Deferred Employees Compensation under ESOS- Amortised on straight line basis over vesting period.

xv. Impairment of Assets

The Company assesses at each Balance Sheet date whether there is any indication of an asset being impaired. An asset is treated as impaired when the carrying amount of assets exceeds its recoverable value, in which case the impairment loss is charged to the Statement of Profit and Loss of the Year in which an asset is identified as impaired. The impairment loss, if any, recognised in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

xvi. Research and development

Revenue expenditure on research and development is expensed as incurred. Capital expenditures incurred on research and development are capitalised as fixed assets and depreciated in accordance with the depreciation policy of the Company.

xvii. Earning per share (EPS)

The basic earning per share ("EPS") is computed by dividing the net profit after tax for the Year by the weighted average number of equity shares outstanding during the Year. For the purpose of calculating diluted earnings per share, net profit after tax for the Year and the weighted average number of shares outstanding during the Year are adjusted with the effects of all dilutive potential equity shares. The dilutive potential equity shares are deemed converted as of the beginning of the Year, unless they have been issued at a later date.

xviii. Prior Period Adjustments, Extra-ordinary Items and Changes in Accounting Policies

Prior period adjustments, extraordinary items and changes in accounting policies, if any, having material impact on the financial affairs of the Company are disclosed.

xix. Segment Reporting

i. Identification of Segments :

The Company''s Operating Businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets.

ii. Allocation of Common Costs :

Common allocable costs are allocated to each segment according to sales of each segment to total sales of the Company.

2.4 i) The grant of option to the employees under the stock Option Schemes is on the basis of their performance and other eligibility criteria .The options are vested over a period, subject to the discretion of the Management and fulfillment of certain conditions.

(ii) The Company has calculated Employee Compensation Costs on the basis of Intrinsic Value Method and has amortized Rs. (0.06) Crores (Previous Year Rs. 0.67 Crores) for the Year ended 31st March, 2014. However, had the company followed Fair Value Method for calculating Employee Compensation Costs, such costs for the Year would have been lower by Rs.0.11 Crores with corresponding impact on the Profit after Tax and Basic as well as Diluted EPS for the Year.

(iv) The Company has issued 200, 5.5% Unsecured Foreign Currency Convertible Bonds (FCCB) of US$ 100,000 each aggregating US $ 20 Millions at par on 29th October''2012. These bonds are convertible into equity shares of the Company at the option of the bond holders at a price of Rs. 22.50 per share. On Conversion these Bonds will result in 47,764,444 equity shares of the Company.

4 (A). For all Secured Term Loans & Non Convertible Debentures excluding "B" & "C" i) Primary Security:

a) Pari- passu 1st charge over the entire fixed assets (both present & future) of the company''s coke units at Khambhalia and Bhachau in the state of Gujarat, Dharwad in the state of Karnataka, Waste Heat Recovery Power Plant (along with land) at Dharwad in the state of Karnataka, Steel unit at Bhachau in the state of Gujarat and Windmill units at various locations in the state of Gujarat excluding the movable fixed assets exclusively charged to Tata Capital Financial Services Ltd.

b) Pari- passu 1st charge over the entire fixed assets (both present & future) of NRE Metcoke Ltd. at Bhachau in the state of Gujarat.

c) Pari-passu 2nd charge over the entire fixed assets (both present & future) of Bajrangbali Coke Industries Ltd. at Bhachau in the state of Gujarat.

ii) Collateral Security:

a) Pari-passu 2nd charge over the entire current assets (both present & future) of the company''s coke units at Khambhalia and Bhachau in the state of Gujarat and Dharwad in the state of Karnataka and Steel unit at Bhachau in the state of Gujarat.

b) Along with Working Capital facilities

– First Pari-passu charge on Residential Property at 1, Clyde Row, Hastings, Kolkata in the name of Mr. Arun Kumar

Jagatramka – First Pari-passu charge on Residential-cum-office Property at NRE House, Saru Road, Jamnagar, Gujarat in the name of Mr. Arun Kumar Jagatramka – Pledge of 78,478,035 Equity shares and 12,357,468 "B" Equity Shares of Gujarat NRE Coke Ltd (GNCL) held by the promoters/ promoter Group Companies . – Personal Guarantees of Promoter Directors viz. Mr. Arun Kumar Jagatramka and Mrs. Mona Jagatramka. – Corporate Guarantee (to the extent of the value of shares pledged) of promoter group companies namely Gujarat NRE Mineral Resources Ltd and Mangal Crystal Coke Pvt. Ltd. – Corporate Guarantee of Bajrangbali Coke Industries Ltd., NRE Metcoke Ltd. and Bharat NRE Coke Limited.

c) The Rupee Term Loan II of Rs. 54 Crores from ICICI Bank Ltd. presently converted into FCNRB is further secured by Corporate guarantee of Gujarat NRE Ltd.

(B) Term Loan from Laxmi Vilas Bank Ltd. amounting to Rs. 48.50 Crores

Primary Security:

Pari- passu 1st charge over the entire fixed assets (both present & future) of Bajrangbali Coke Industries Ltd. at Bhachau in the state of Gujarat. Collateral Security:

a) Pari- passu 2nd Charge over the entire fixed assets (both present & future) of the company''s coke units at Khambhalia and Bhachau in the state of Gujarat, Dharwad in the state of Karnataka, Waste Heat Recovery Power Plant (along with land) at Dharwad in the state of Karnataka, Steel unit at Bhachau in the state of Gujarat and Windmill units at various locations in the state of Gujarat excluding the movable fixed assets exclusively charged to Tata Capital Financial Services Ltd.

b) Refer Note No.4(A)(ii)(b)

C) Term Loan from others are secured by Hypothecation of specified Movable fixed assets financed.

E) The Company has issued 200, 5.5% Unsecured Foreign Currency Convertible Bonds (FCCB) of US$ 100,000 each aggregating US $ 20 Millions at par on 29th October''2012. These bonds are convertible into equity shares of the Company at the option of the bond holders at a price of Rs. 22.50 per share. On Conversion these Bonds will result in 47,764,400 equity shares of the Company. If not converted then they are reedemable on 30th October''2017

i Primary Security:

Pari-passu 1st charge over the entire current assets (both present & future) of the company''s coke units at Khambhalia and Bhachau in the state of Gujarat and Dharwad in the state of Karnataka and Steel unit at Bhachau in the state of Gujarat.

ii Collateral Security:

a) Pari- passu 2nd charge over the entire fixed assets (both present & future) of the company''s coke units at Khambhalia and Bhachau in the state of Gujarat, Dharwad in the state of Karnataka, Waste Heat Recovery Power Plant (along with land) at Dharwad in the state of Karnataka, Steel unit at Bhachau in the state of Gujarat and Windmill units at various locations in the state of Gujarat excluding the movable fixed assets exclusively charged to Tata Capital Financial Services Ltd.

b) Pari- passu 2nd charge over the entire fixed assets (both present & future) of the company''s leased unit namely NRE Metcoke Ltd. at Bhachau in the state of Gujarat.

c) Refer Note 4(A)(ii)(b)

iii The Working Capital Loan of Rs. 75 Crores from ICICI Bank Ltd. is further secured by Corporate guarantee of Gujarat NRE Ltd.

The Management of the Company is reasonably certain that the Company would be having Future Taxable Income and deferred tax assets are only recognized to the extent that their utilization is probable, i.e. tax benefit is expected in future periods and the same is further supported by the Technical & Economical Valuation conducted by Mecon Ltd. as a part of CDR Implementaion.

iv General Descriptions of defined benefit plans:

a) Gratuity Plan:

The Company operates gratuity plan wherein every employee is entitled to the benefit equivalent to fifteen days salary last drawn for each completed year of service. The same is payable on Termination of service, or retirement, whichever is earlier. The benefit vests after five years of continuous service.

b) Provident Fund Plan:

The Company contributes 12% of salary for all eligible employees towards Provident Fund managed by the Regional Provident Fund Authority.

25 Segment Informations:

Segment wise Revenue, Results and Capital Employed for the Year ended 31st March,2014.

The Company has two reportable segments i.e. "Coal & Coke" and "Steel" as primary business segments.

In the above statement, paid up Equity & Earning Per Share include both Equity Shares & "B" Equity Shares since both class of shares are pari-passu in all respect except for voting rights.

27 a) Debt Restructuring:

During the year, the Company was referred to the Corporate Debt Restructuring (CDR) Cell, a non statutory voluntary mechanism set up under the aegis of Reserve Bank of India. Pursuant to that a Corporate Debt Restructuring (CDR) Package as recommended by State Bank of India, the lead banker has been approved by the CDR empowered Group (CDR EG) at its meeting held on 14th March 2014 and communicated vide Letter of Approval dated 22nd March 2014 as amended/modified vide letter dated 7th April 2014. The key features of the approved CDR Package are as follows:

a) The Cutoff date under the CDR package is 01st August 2013.

b) The tenure of existing NCDs and Term Loans aggregating to Rs. 1020.69 Crores has been revised to 10 years from the cut - off date with a moratorium of 2 years. The repayment shall be in 32 quarterly installments from 1st August 2015. The revised applicable interest rate shall be initially 10.75% p.a. and gradually being stepped upto 11.65% p.a.

c) Conversion of various irregular/devolved portion of working capital facilities into Working Capital Term Loan (WCTL) of 10 years repayable after a moratorium of 2 years from the cut off date in 32 quarterly installments from 1st August 2015. The applicable interest rate shall be initially 10.75% p.a. and gradually being stepped upto 15.00% p.a.

d) Interest on existing Term Loan, NCDs and WCTL for the period from 1st August 2013 to 31st July 2015 and Interest on Working Capital outstanding for the period from 1st August 2013 to 31st March 2014 will be funded and converted into Funded Interest Term Loan (FITL) of 10 years repayable after a moratorium of 2 years from the cut off date in 32 quarterly installments from 1st August 2015. The applicable interest rate shall be initially 11.00% p.a. gradually being stepped upto 15.00% p.a.

e) Additional Term Loan - I of Rs. 450 Crores for meeting long term working capital needs of the company to be provided by 3 working capital CDR lenders and 2 working capital Non CDR lenders. The repayment shall be in 32 quarterly installments from 1st August 2015. The applicable interest rate shall be initially 11.00% p.a. and gradually being stepped upto 11.50% p.a.

f) Additional Term Loan - II of Rs. 50 Crores to part finance the capital expenditure for completing the Waste Heat Recovery Based Power plant (Phase I & II) at Dharwad, Karnataka. The repayment shall be in 32 quarterly from 1st August 2015. The applicable interest rate shall be initially 10.75% p.a. and gradually being stepped upto 11.65% p.a.

g) Need based working capital requirement assessed for FY 2014 - 15 of Rs. 650 Crores(Fund Based) and Non fund based limit of Rs. 425 Crore (LC/LOU of Rs. 400 Crores and Bank Guarantee of Rs. 25 Crores). The rate of interest on fund based limits shall be @ 11% p.a.

h) Waiver of penal interest and all other charges from the cut - off date.

i) Non levy/waiver/refund of liquidated damages/penal interest/penal charges for delay/ irregularities due to

lenders/creation of security from the cut off date.

j) Right of Recompense to CDR lenders for the relief and sacrifice extended, subject to provisions of CDR guidelines.

k) Contribution of Rs. 51.50 crores in the company by promoters towards lenders'' sacrifice. In addition Promoters will also

bring in Rs. 20 crores as their margin/ Contribution for the Waste Heat Recovery Based Power Plant.

l) Out of Rs. 71.50 crores as mention above, the promoter has contributed Rs. 65.26 crores as advance and the said

amount has been accounted as Advance against Share Warrants.

b) Status of Implementation of CDR Package:

Sanctions under the CDR package have been received from 13 out of 15 CDR lenders. The CDR package has partially been implemented by 12 CDR lenders. However, as the CDR package has been approved by super majority of the CDR lenders as per RBI guidelines, debt owing to all the CDR lenders have been reclassified and interest has been recalculated in accordance with the CDR package. The above reclassifications and interest calculations are subject to reconciliation and approval by these lenders.

In terms of the provisions of the CDR package, ICICI Bank Limited on 31/03/2014 has converted its existing Term Loan facilities of Rs. 95.67 crores to FCNRB loan of US$ 15.94 million at the interest rate of 3 months LIBOR 5.00% p.a.

In terms of the provisions of the CDR package, ICICI Bank Limited has requested to convert a sum of Rs. 13.39 crores (part of FITL interest) into fully paid up equity shares of Rs.10/- each. The price based on the terms of SEBI (Issue of Capital and Disclosures requirements) Regulations 2009 has been taken at Rs. 11.01 per share. The said amount has been adjusted with the FITL account of ICICI Bank Ltd and transferred to Advance against Share application money Account. The Bank shall be issued 121.61 lacs equity shares of Rs. 10 each at a premium of Rs. 1.01 per share.

The aggregate present value of the outstanding sacrifice made/to be made by CDR lenders as per the approved CDR package is estimated at Rs. 342.39 Crores.


Mar 31, 2012

I. Accounting Conventions

The financial statements are prepared under historical cost conventions and as a going concern basis following the accrual basis of accounting and in accordance with the Generally Accepted Accounting Principles (GAAP) in India and in compliance with the provision of the Companies Act, 1956.

ii. Use of Estimates

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues & expenses for the Year under review and assets & liabilities, disclosure of contingent liabilities, on the date of the financial statements. Actual results could differ from these estimates. Any revision to accounting estimates is recognized prospectively in the current and future periods.

iii. Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company and revenue can be reliably measured

a. In respect of Sales

: When the significant risks and rewards of ownership of goods have been passed on to the buyer, which generally coincides with delivery / shipment of goods to customers.

b. In respect of Interest Income

: On time proportion basis taking into account the amount outstanding and the rate applicable.

c. In respect of Service Income : When the services are performed as per contract.

d. In respect of Dividend Income : When right to receive payment is established.

e. In respect of Insurance Claims : On Settlement of Claims

f. In respect of Guarantee Commission : When right to receive payment is established.

Revenue from product sales is recognized inclusive of Excise duty but exclusive of Sales Tax/Value added Tax (VAT) and net of returns, Sales Discount etc. Sales Returns are accounted for when goods are returned.

iv. Fixed Assets

Fixed assets are stated at historical cost, which comprises cost of purchase/construction cost, cost of borrowing and other cost directly attributable to bring the assets at its working condition and location for its intended use. Expenditures during construction period are allocated to the relevant assets in the ratio of costs of respective assets.

v. Depreciation on Fixed Assets

Depreciation on Fixed assets is provided on Straight - Line Method (SLM) at the rates and in the manner prescribed in Schedule XIV of the Companies Act, 1956.

vi. Inventories

1. Inventories are valued as under:

a. Raw Materials : At Cost or Net Realisable Value whichever is lower

b. Finished Products : At Cost or Net Realisable Value whichever is lower

c. Stores, Spares and Components : At Cost or Net Realisable Value whichever is lower

d. Stock in process : At Raw material Cost plus estimated cost of conversion up to the stage of completion or Net Realisable Value whichever is lower.

Cost includes all direct cost and applicable manufacturing and administrative overheads.

2. Inventories are valued on FIFO basis.

3. Variation, if any, between books and physical stocks detected on physical verification, obsolete & slow moving stocks are adjusted in accounts as found appropriate.

vii. Investments

Long term investments are stated at cost. Provision is made when diminution in the value of investments is considered permanent in nature.

Current investments are stated at lower of cost and market value.

viii. Foreign Exchange Transactions

a. Initial Recognition:

Foreign Exchange transactions are recorded normally at the exchange rates prevailing on the date of the transactions.

b. Conversion

Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of transaction and non- monetary items which are carried at the fair value or other similar denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.

c. Exchange differences

Exchange differences arising on settlement of transactions or on reporting monetary items of the Company at the rate different from those at which they were initially recorded during the year, or reported in previous financial statement, are recognised as income or expenses in the year in which they arise except in case where they relate to acquisition of fixed assets.

d. Forward Exchange Contract not intended for trading or speculative purposes

The premium or discount arising at the inception of forward exchange contract is amortized as expenses or income over the life of the respective contract. Exchange differences on such contracts are considered in the statement of Profit or Loss in the Year in which exchange rate changes. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expenses for the Year.

ix. Provisions, Contingent Liabilities and Contingent Assets

The Company makes a provision when there is present obligation as a result of past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Contingent Assets are disclosed when an inflow of economic benefit is probable and/or certain.

x. Borrowing Costs

Borrowing Costs that are attributable to the acquisition and constructions of qualifying assets are capitalised as a part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. Other borrowing costs of the Year are charged to revenue in the period in which they are incurred.

xi. Taxation

Current Tax is determined as the amount of tax payable in respect of taxable income for the Period.

Deferred Tax Liability is recognized for all timing differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

Deferred Tax Assets are recognized only if there is reasonable certainty that the same will be realized and are reviewed for the appropriateness of its respective carrying values at each Balance Sheet date.

Tax on Distributed Profit Payable is in accordance with the provision of Section 155O of the Income Tax Act, 1961 and in accordance with guidance note on Accounting for Corporate Dividend Tax.

Wealth Tax is determined on taxable value of assets on the balance sheet date.

xii. Employee benefits

a) Short Term & Post Employment Benefits

Employee benefits of short-term nature are recognized as expense as and when those accrue. Post employments benefits are recognized as expenses based on actuarial valuation at Year end which takes into account actuarial gains and losses.

b) Employee Stock Option Scheme (ESOS)

Aggregate quantum of options granted under the schemes in monetary term net of consideration of issue, to be paid in cash, are shown in the Balance Sheet as Employees Stock Option outstanding under Reserves & Surplus and as Deferred Employees Compensation (ESOS) under Unamortised Expenditure as per guide-lines of SEBI in this respect.

With the exercise of options and consequent issue of equity shares corresponding ESOS outstanding is transferred to Securities Premium Reserve.

xiii. Indirect Taxes

Excise Duty on Finished Goods Stock is accounted for at the point of manufacture of goods and is accordingly considered for valuation of finished goods stock as on Balance sheet date. Customs duty on imported raw materials is accounted for on the clearance of goods from the Customs Authorities.

xiv. Unamortised Expenditure

Unamortised expenditure, stated at cost, is amortized over period of time as under:

(i) Deferred Revenue Expenses-5 years

(ii) Deferred Employees Compensation under ESOS-Amortised on straight line basis over vesting period.

xv. Impairment of Assets

The Company assesses at each Balance Sheet date whether there is any indication of an asset being impaired. An asset is treated as impaired when the carrying amount of assets exceeds its recoverable value, in which case the impairment loss is charged to the Statement of Profit & Loss of the Year in which an asset is identified as impaired. The impairment loss, if any, recognised in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

xvi. Research and development

Revenue expenditure on research and development is expensed as incurred. Capital expenditures incurred on research and development are capitalised as fixed assets and depreciated in accordance with the depreciation policy of the Company.

xvii. Earning per share (EPS)

The basic earning per share ("EPS") is computed by dividing the net profit after tax for the Year by the weighted average number of equity shares outstanding during the Year. For the purpose of calculating diluted earnings per share, net profit after tax for the Year and the weighted average number of shares outstanding during the Year are adjusted with the effects of all dilutive potential equity shares. The dilutive potential equity shares are deemed converted as of the beginning of the Year, unless they have been issued at a later date.

xviii. Prior Period Adjustments, Extra-ordinary Items and Changes in Accounting Policies

Prior period adjustments, extraordinary items and changes in accounting policies, if any, having material impact on the financial affairs of the Company are disclosed.

xix. Segment Reporting

i. Identification of Segments :

The Company's Operating Businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets.

ii. Allocation of Common Costs :

Common allocable costs are allocated to each segment according to sales of each segment to total sales of the Company.

4) a) i 11.90% Non-Convertible Debentures and 12.50% Non- Convertible Debentures are secured by following securities:

– First pari-passu charge over entire fixed assets of the company, both present and future.

– Second pari-passu charge over entire current assets of the company, both present and future.

ii 11% Non - Convertible Debentures are Secured by First pari-passu charge over entire fixed assets of the Company, both present and future.

iii Term Loans from State Bank of India, Axis Bank Limited, ICICI Bank Limited, IDBI Bank Limited, State Bank of Patiala, The Lakshmi Vilas Bank Ltd.-I and State Bank of Hyderabad-II are secured by following securities:

– First pari-passu charge over entire fixed assets of the company, both present and future.

– Second pari-passu charge over entire current assets of the company, both present and future.

– Personal guarantee of Mr. Arun Kumar Jagatramka, Chairman & Managing Director of the company. iv Term Loan from IDBI Bank Ltd is collaterally secured by following securities:

– Pledge of equity shares of the company held by Gujarat NRE Mineral Resources Limited, a promoter company along with Corporate Guarantee

– Personal Guarantee of Mr. Arun Kumar Jagatramka, Chairman & Managing Director of the company. v Term Loan from Dhanalakshmi Bank Limited is secured by following securities:

– Subservient charge on movable assets of the company

– Pledge of equity shares of the company held by Gujarat NRE Mineral Resources Limited, a promoter company and Mr. Arun Kumar Jagatramka, Chairman and Managing Director of the Company;

– Personal Guarantee of Mr. Arun Kumar Jagatramka, Chairman & Managing Director of the company and / or Corporate Guarantee by Gujarat NRE Mineral Resources Limited, a Promoter Company. vi Term Loans from State Bank of Hyderabad-I and State Bank of Travancore are secured by following securities:

– Subservient Charges on movable fixed and Current assets of the Company;

– Personal Guarantee of Mr. Arun Kumar Jagatramka, Chairman & Managing Director of the Company. vii Term Loan from Yes Bank Ltd. is secured by following securities:

– Subservient charge on movable fixed and current assets of the company, both present & future.

– Exclusive Charge on Entire Fixed & current assets, both present & future, of Bharat NRE Coke Ltd., an associate Company, along with Corporate Guarantee.

– Pledge of equity shares of the company held by Gujarat NRE Mineral Resources Limited, a promoter company, along with Corporate Guarantee;

– Personal Guarantee of Mr. Arun Kumar Jagatramka, Chairman & Managing Director of the company.

viii Term Loan from others is secured by Hypothecation of specific assets financed.

ix The aggregate amount of all the Personal Guarantee given by Mr. Arun Kumar Jagatrmaka, Chairman & Managing Director as securities noted above comes to Rs. 2078.10 Crores 4) b) Maturity Profile and Rate of interest of Non-Convertible Debentures are as set below:

i 11.00% Secured Redeemable Non Convertible Debentures of Rs. 250.00 Crores (Previous Year - Rs.250.00 Crores) are redeemable at par in 8 equal half yearly installments commencing from 29th April 2013.

ii 12.50% Secured Redeemable Non Convertible Debentures of

– Rs. 10.00 Crores (Previous Year 10.00 Crores) are redeemable at par in 4 equal annual installments commencing from 30th May 2012,

– Rs. 10.00 Crores Previous Year 10.00 Crores) are redeemable at par on 30th May 2015,

– Rs. 10.00 Crores (Previous Year 10.00 Crores) are redeemable at par on 30th May 2014,

– Rs. 10.00 Crores (Previous Year 10.00 Crores) are redeemable at par on 30th May 2013,

– Rs. 10.00 Crores (Previous Year 10.00 Crores) are redeemable at par on 30th May 2012

iii 11.90% Secured Redeemable Non Convertible Debentures of Rs. 75.00 Crores (Previous Year Rs. 100.00 Crores) are redeemable at par in 3 equal annual installments from 7th February 2013.

iv General Descriptions of defined benefit plans:

a) Gratuity Plan:

The Company operates gratuity plan wherein every employee is entitled to the benefit equivalent to fifteen days salary last drawn for each completed year of service. The same is payable on Termination of service, or retirement, whichever is earlier. The benefit vests after five years of continuous service.

b) Provident Fund Plan:

The Company contributes 12% of salary for all eligible employees towards Provident Fund managed by the Regional Provident Fund Authority.


Mar 31, 2011

I) Accounting Conventions

The consolidated financial statements are prepared under historical cost conventions and as a going concern basis following the accrual basis of accounting and in accordance with the generally accepted accounting principles (GAAP) in India.

ii) Principles of Consolidation

The accounts of subsidiaries including foreign subsidiaries have been consolidated with the parent companies accounts in accordance with Accounting Standard-21 on "Consolidated Financial Statements" and investments in Associates have been accounted for using the equity method as per Accounting Standard-23 on "Accounting for Associates in Consolidated Financial Statements" as specified in the Companies (Accounting Standard) Rules, 2006.

Consolidated Financial Statements have been made by adding together like items of assets, liabilities, income and expenses. The inter-company transactions and unrealized profits/(losses) thereon have been eliminated in full.

Goodwill/Capital Reserves represent the difference between the cost of control in the subsidiaries/associates, over the book value of net assets at the time of acquisition of control in the subsidiaries/associates.

Foreign subsidiaries are considered as non-integral foreign operation as per Accounting Standard-11, on "The effect of Changes in Foreign Exchange Rates". The financial statements of the same have been converted using the following methods:

Components of Profit & Loss Account except opening & closing stock have been converted using monthly average rate of the reported year.

Components of Balance Sheet have been converted using the rates at the balance sheet date, except balance of Profit & Loss Account. Resultant foreign exchange translation difference has been recognized as "Foreign Currency Translation Reserve".

iii) Use of estimates

The preparation of the consolidated financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities for the year under review and disclosure of contingent liabilities on the date of the consolidated financial statements. Actual results could differ from these estimates. Any revision to accounting estimates is recognized prospectively in the current and future periods.

iv) Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the company and revenue can be reliably measured

a. In respect of Sales : When the significant risks and rewards of ownership of goods have been passed on to the buyer, which generally coincides with delivery / shipment of goods to customers.

b. In respect of Interest Income : On time proportion basis taking into account the amount outstanding and the rate applicable.

c. In respect of Service Income : When the s erv i c es are performed as per contract.

d. In respect of Dividend Income : When right to receive payment is established.

e. In respect of Insurance Claims : On Settlement of Claims Revenue from product sales is recognised inclusive of Excise duty but exclusive of Sales Tax / Value added Tax (VAT) and net of returns, Sales Discount etc. Sales Returns are accounted for when goods are returned.

v) Fixed Assets

Fixed assets are stated at historical cost, which comprises cost of purchase/construction cost, cost of borrowing and other cost directly attributable to bring the assets at its working condition and location for its intended use. Expenditures during construction period are allocated to the relevant assets in the ratio of costs of respective assets.

vi) Depreciation on Fixed Assets

Depreciation on Fixed Assets is provided on Straight Line Method (SLM) at the rates and in the manner prescribed in Schedule XIV of the Companies Act, 1956.

In case of foreign subsidiaries, depreciation is provided on Straight Line Method (SLM) over the useful life of the assets.

Mining lease is amortised over the life of the asset. Amortisation is calculated in proportion of actual production when measured against the resources available in the mine.

Mine Development is activities undertaken to gain access to mineral reserves. Typically this includes sinking shafts, permanent excavations, building transport infrastructure and roadways. All costs relating to mine development are capitalised and are amortised over the estimated reserve in that developed area of the mine. Amortisation is calculated in proportion to actual production when measured against mineable resources in the mine area developed on which the expenses were incurred. The carrying value of mine development is reviewed to ensure it is not in excess of its recoverable amount.

All costs relating to the pre-production of coal were capitalized as Pre Production Expenses and are amortised over the estimated life of reserves in the mine. Amortisation is calculated in proportion to actual production when measured against mineable resources in the mine seam for which the expenses were incurred. The carrying value of pre-production is reviewed by directors to ensure it is not in excess of its recoverable amount.

vii) Inventories

1. Inventories are valued as under:

a. Raw Materials : At Cost or Net Realisable Value whichever is lower

b. Finished Products : At Cost or Net Realisable Value whichever is lower

c. Stores, Spares and Components

At Cost or Net Realisable Value whichever is lower

d. Stock in process : At Raw material Cost plus estimated cost of conversion upto the stage of completion or Net Realisable Value whichever is lower.

Cost includes all direct cost and applicable manufacturing and administrative overheads.

2. Inventories are valued on FIFO basis.

3. Variation, if any, between books and physical stocks detected on physical verification, obsolete & slow moving stocks are adjusted in accounts as found appropriate.

viii) Investments

Long term investments are stated at cost. Provision is made when diminution in the value of investments is considered permanent in nature.

Current investments are stated at lower of cost and market value.

ix) Foreign Exchange Transactions

a. Initial Recognition:

Foreign Exchange transactions are recorded normally at the exchange rates prevailing on the date of the transactions.

b. Conversion

Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of transaction and non-monetary items which are carried at the fair value or other similar denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.

Foreign Currency Convertible Bonds (FCCBs) are treated as fully convertible into equity shares

c. Exchange differences

Exchange differences arising on settlement of transactions or on reporting monetary items of the Company at the rate different from those at which they were initially recorded during the year, or reported in previous financial statement, are recognised as income or expenses in the year in which they arise except in case where they relate to acquisition of fixed assets.

d. Forward Exchange Contract not intended for trading or speculative purposes

The premium or discount arising at the inception of forward exchange contract is amortized as expenses or income over the life of the respective contract. Exchange differences on such contracts are recognised in the statement of Profit or Loss in the year in which exchange rate changes. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expenses for the year.

x) Provisions, Contingent Liabilities and Contingent Assets

The Company makes a provision when there is present obligation as a result of past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for contingent liabilities is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Contingent Assets are disclosed when an inflow of economic benefit is probable and/or certain.

xi) Borrowing Costs

Borrowing Costs that are attributable to the acquisition and construction of qualifying assets are capitalised as a part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. Other borrowing costs of the year are charged to revenue in the period in which they are incurred.

xii) Taxation

Current Tax is determined as the amount of tax payable in respect of taxable income for the period.

Deferred Tax Liability is recognized for all timing difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

Deferred Tax Assets are recognized only if there is reasonable certainty that the same will be realized and are reviewed for the appropriateness of its respective carrying values at each Balance Sheet date.

Tax on Distributed Profit Payable is in accordance with the provision of Section 155O of the Income Tax Act, 1961 and in accordance with guidance note on Accounting for Corporate Dividend Tax.

Wealth Tax is determined on taxable value of assets on the balance sheet date.

Foreign Companies recognize tax liabilities and assets as per their rules and regulations.

xiii) Employee Benefits

a) Short Term & Post Employment Benefits

Employee benefits of short-term nature are recognized as expense as and when those accrue. Post employments benefits are recognized as expenses based on actuarial valuation at year end which takes into account actuarial gains and losses.

b) Employee Stock Option Scheme (ESOS)

Aggregate quantum of options granted under the schemes in monetary term net of consideration of issue, to be paid in cash, are shown in the Balance Sheet as Employees Stock Option outstanding under Reserves & Surplus and as Deferred Employees Compensation under Miscellaneous Expenditure as per guidelines of SEBI in this respect. With the exercise of options and consequent issue of equity shares corresponding ESOS outstanding is transferred to Securities Premium Account.

In case of foreign subsidiaries the fair value of options granted is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognized over the period during which the employee become unconditionaly entitled to the options. Fair value at grant date is independently determined using binomial method for option pricing.

xiv) Indirect Taxes

Excise Duty on Finished Goods Stock is accounted for at the point of manufacture of goods and is accordingly considered for valuation of finished goods stock as on Balance sheet date. Customs duty on imported raw materials is accounted for on the clearance of goods from the Customs Authorities.

In Foreign Subsidiaries

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST.

xv) Miscellaneous Expenditures

Miscellaneous expenditure, stated at cost, is amortized over period of time as under:

(i) Deferred Revenue Expenses - 5 years

(ii) Deferred Employees Compensation under ESOS- Amortised on straight line basis over vesting period.

The restoration liability calculated as discounted present value in relation to restoration guarantee at the end of the lease is correspondingly represented by a Miscellaneous Expenditures as Deferred restoration Guarantee.

The Deferred Restoration Guarantee, after deducting the change in liability, is amortised on a straight line basis over the life of the mine lease.

xvi) Impairment of Assets

The Company assesses at each Balance Sheet date whether there is any indication of an asset being impaired. An asset is treated as impaired when the carrying amount of assets exceeds its recoverable value, in which case the impairment loss is charged to the Profit and Loss Account of the year in which an assets is identified as impaired. The impairment loss, if any recognised in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

xvii) Research and development

Revenue expenditure on research and development is expensed as incurred. Capital expenditures incurred on research and development having alternate uses are capitalised as fixed assets and depreciated in accordance with the depreciation policy of the Company.

xviii) Earning per share (EPS)

The basic earning per share ("EPS") is computed by dividing the net profit after tax for the year by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, net profit after tax for the year and the weighted average number of shares outstanding during the year are adjusted with the effects of all dilutive potential equity shares. The dilutive potential equity shares are deemed converted as of the beginning of the period, unless they have been issued at a later date.

xix) Prior Period Adjustments, Extra-ordinary Items and Changes in Accounting Policies

Prior period adjustments, extraordinary items and changes in accounting policies having material impact on the financial affairs of the Company are disclosed.

xx) Minority Interest

Minority Interest as shown in the consolidated balance sheet comprises of share in equity and reserves and surplus/losses of the subsidiaries.

xxi) Segment Reporting

a) Identification of Segments :

The Group's Operating Businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets.

b) Allocation of Common Costs:

Common allocable costs are allocated to each segment according to sales of each segment to total sales of the Group.


Mar 31, 2010

1. All amounts in the financial statements are presented in Rupees Crores, unless otherwise stated. The note numbers appeared in the “[ ]” are as they appear in the complete set of Financial Statements. These abridged financial statements have been prepared in accordance with the requirements of Rule 7A of the Companies (Central Government’s) General Rules & Forms, 1956 and clause 32 of the Listing Agreement. These abridged financial statements have been prepared on the basis of the complete set of financial statements for the year ended March 31, 2010.

2. [B3] Contingent liabilities not provided for in respect of :

a. Letter of Credits outstanding for purchase of materials as on the Balance Sheet date aggregating to Rs. 162.75 crores (Previous Year Rs. 84.46 crores).

b. Outstanding Bank Guarantees and Counter / Corporate Guarantees given on behalf of sub subsidiaries/associates companies as on Balance Sheet date aggregating to Rs. 886.06 crores (Previous Year Rs. 550.02 crores)

c. Capital commitments as on Balance Sheet date - Rs. 164.64 crores (Previous Year- Rs. 189.53 crores)

d. On Balance Sheet date, the disputed amount involved in two income-tax demands under appeal - Rs.4.09 crores (Previous Year - Rs. 3.55 crores). The management is of view that the outcome of the appeal would be favourable to the company, hence no provision has been made against these income-tax demands.

e. A demand raised by the Service tax department of Rs. 0.06 crores, against which company has filed an appeal to the jurisdiction authorities.

f. Duty on account of Advance Authorisation against Export obligation is 1.61 crores. (Previous Year - Nil.)

g. Bills discounted under letter of credit with banks aggregating to Rs. 40.62 crores (Previous Year – Rs. 50.32 crores)

3. [B6] Austral Coke & Projects Limited has filed a defamation suit in Hon’ble Bombay High Court against the Company for Rs.600 Crores. The Company has also filed Civil Suit in Hon’ble Calcutta High Court against Austral Coke & Projects Limited, all its Directors, its merchant bankers and Auditors and others claiming for loss of damages worth Rs.4761 crores. Management is confident that outcome of the defamation filed by the Austral Coke & Projects Limited would be in favour of the company.

4. [B7] Particulars of Managerial remuneration:

The remuneration paid to the Chairman & Managing Director and Executive Director of the company during the year is Rs. 2.05 crores (Previous Year-Rs. 3.52 crores), detailed as under:

5. [B8] Besides Sales of Coke, Coal, Power and Steel, Sales include the followings :

6. [B9] The details of amounts outstanding to Micro, Small and Medium Enterprise Development Act, 2006 (MSMED Act), based on the available information with the company are as under: