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Notes to Accounts of Hindalco Industries Ltd.

Mar 31, 2016

1. For the year ended 31st March, 2016, the Board of Directors of the Company have recommended dividend of Rs. 1.00 per share (Previous year Rs. 1.00 per share) to equity shareholders aggregating to Rs. 248.54 crore (Previous year Rs. 246.09 crore) including Dividend Distribution Tax.

2. The Company has furnished bank guarantees to Nominated Authority of Ministry of Coal towards fulfilment of certain conditions of the agreements signed by it in respect of the four coal blocks awarded to it through auction. Some of the conditions could not be fulfilled despite best efforts for reasons beyond its control as certain approvals/clearances that are under the purview of the concerned State Governments have been delayed. The Company has made representation with the Nominated Authority in this regard and is confident that its request will be considered favourably. Accordingly, no provision has been made for this.

3. The Company is one of the promoter members of Aditya Birla Management Corporation Private Limited (ABMCPL), a Company limited by guarantee which has been formed to provide common facilities and resources to its members, with a view to optimize the benefits of specialization and minimize cost for each member. The Company is one of the participants in the common pool and shares the expenses incurred by ABMCPL and accounted for under appropriate heads.

4. Segment Reporting:

A. Primary Segment Reporting (by Business Segment):

(a) The Company has two reportable segments, viz, Aluminium and Copper which have been identified in line with the Accounting Standard-17 on Segment Reporting, taking into account the organizational structure as well as differential risk and return of these segments. Details of products included in each segments are as under:

(i) Aluminium : Hydrate and Alumina, Aluminium and Aluminium Product

(ii) Copper : Continuous Cast Copper Rods, Copper Cathode, Sulphuric Acid, DAP and Complexes, Gold and Silver

(b) Inter-segment transfers are based on market rates.

(c) The details of the revenue, results, assets, liabilities and other information from operations by reportable business segments are as under:

B. Secondary Segment Reporting (by Geographical Demarcation):

(a) The secondary segment is based on geographical demarcation, i.e., India and Rest of the World.

(b) The Company''s revenue from external customers and information about its assets and others by geographical location are as under:

5. Employee Share Based Payment

Employee Stock Option Scheme-2006 ("ESOS-2006")

On 7th December, 2006, the Board of Directors approved the Employee Stock Option Scheme-2006 ("ESOS-2006") for issue of 3,475,000 stock options to its permanent employees in the management cadre, in one or more tranches, whether working in India or out of India, including the Managing/Whole-time Directors of the Company. Each option when exercised would be converted into one fully paid-up equity share of Rs. 1/- each of the Company. The options will vest in 4 equal annual instalments after one year from the date of grant. The maximum period of exercise is 5 years from the date of vesting, and these options do not carry rights to dividends or voting rights till the date of exercise. Further, on 23rd September, 2011, the ESOS-2006 has been partially modified and by which the Company may issue 6,475,000 options to its eligible employees.

According to ESOS-2006, so far the Company has granted 4,328,159 options (Previous year 4,328,159 options) to its eligible employees out of which 1,774,296 options (Previous year 1,386,213 options) has been cancelled/lapsed, and are available for grant as per the term of the Scheme. A summary of the activity in the stock options granted under ESOS 2006 for the year ended 31st March, 2016 is as follows:

During the year ended 31st March, 2016, the Company has allotted 3,185 fully paid-up equity shares of Rs. 1/- each of the Company (Previous year 373,666) on exercise of options under ESOE-2006, for which the Company has realised Rs. 0.03 crore (Previous year Rs. 3.83 crore) as exercise money. The weighted average share price at the exercise date was Rs. 134.70 per share (Previous year Rs. 168.73 per share).

Employee Stock Option Scheme 2013 ("ESOS-2013")

During FY 2013-14, the Company has instituted Employee Stock Option Scheme-2013 ("ESOS-2013"), under which the Company may grant 5,462,000 stock options and restricted stock units (RSU) to the permanent employees in the management cadre and Managing/Whole-time Directors of the Company and its subsidiary companies in India and abroad, in one or more tranches. The ESOS-2013 is administered by the Compensation Committee of the Board of Directors of the Company ("the Committee"). The option exercise price would be determined by the Committee whereas the RSU exercise price shall be the face value of the equity shares of the Company as on the date of grant of RSUs. Each option and each RSU entitles the holders to apply for and be allotted one fully paid-up equity share of Rs. 1/- each of the Company upon payment of exercise price during the exercise period. The options will vest in 4 equal annual instalments after one year of the date of grant, whereas RSU will vest at the end of three years from the date of grant. The maximum period of exercise is 5 years from the date of vesting and these options/RSUs do not carry rights to dividends or voting rights till the date of exercise. Further, cancelled/lapsed options and RSUs are also available for grant.

In terms of ESOS-2013, so far, the Company has granted 2,173,824 stock options and 2,175,272 RSUs (Previous year 2,062,564 stock options and 2,063,938 RSUs) to the eligible employees of the Company and some of its subsidiary companies. Further, 204,161 stock options and 215,772 RSUs (Previous year 100,421 stock options and 111,960 RSUs) have been cancelled/lapsed and are available for grant as per term of the Scheme. A summary of the activity in the stock options and RSUs granted under ESOS-2013 for the year ended 31st March, 2016, is as follows:

During the year ended 31st March, 2016, the Company has allotted 2,193 fully paid-up equity share of Rs. 1/- each of the Company (Previous year 18,848) on exercise of options under ESOS-2013 for which the Company has realised Rs. 0.03 crore (Previous year Rs. 0.22 crore) as exercise money. The weighted-average share price at the exercise date was Rs. 114.30 per share (Previous year Rs. 154.54 per share).

Fair Valuation

The Fair Value of the options used to compute net Profit and earnings per share have been done by an independent valuer using Black and Scholes Model. The details of options granted during the year ended 31st March, 2016, the key assumptions and the Fair Value on the date of grant are as under:

The expected volatility was determined based on the historical share price volatility over the past period depending on life of the options granted.

For the year ended 31st March, 2016, the Company determined Rs. 7.05 crore (Previous year Rs. 7.28 crore) as amortized compensation cost for stock options granted including Rs. 0.14 crore (Previous year Rs. 0.06 crore) expenses relating to options granted to employees of a subsidiary of the Company which has been realised from that company. The Company measures compensation cost for the stock options granted using intrinsic value method. Had the compensation cost been determined in a manner consistent with fair value approach, the Company''s net Profit and earnings per share as reported would have been as under:

6. The Company had formulated a scheme of financial restructuring under Sections 391 to 394 of the Companies Act, 1956 ("the Scheme"), between the Company and its equity shareholders approved by the High Court of Judicature of Bombay to deal with various costs associated with its organic and inorganic growth plan. Pursuant to this, a separate reserve account titled as Business Reconstruction Reserve ("BRR") was created during the year 2008-09 by transferring balance standing to the credit of Securities Premium Account of the Company, for adjustment of certain expenses as prescribed in the Scheme. Accordingly, the Company had transferred Rs. 8,647.37 crore from Securities Premium Account to BRR, and till 31st March, 2015, Rs. 250.33 crore have been adjusted against BRR. During the year, following expenses has been adjusted with BRR:

(a) Rs. 279.46 crore towards expenses on exited Projects

(b) Impairment loss of Rs. 367.31 crore (Net of deferred tax Rs. 194.39 crore)

(c) Provision of Rs. 35.50 crore towards diminution in value of investments

Had the Scheme not prescribed aforesaid treatment, the impact on results and Earnings Per Share (EPS) would have been as under:

Profit for the year lower by Rs. 682.27 crore

Basic EPS lower by Rs. 3.30

Diluted EPS lower by Rs. 3.30

7. Gain or (Loss) on foreign currency transaction and translation has been accounted for under respective head of accounts depending upon the nature of transaction. The details of net gain or (loss) included in various head of accounts are as under:

8. Derivative Financial Instruments:

(a) The Company has adopted Accounting Standard-30, "Financial Instruments: Recognition and Measurement", issued by the Institute of Chartered Accountants of India, so far as it relates to derivative accounting.

(b) In the ordinary course of business, the Company is exposed to risks resulting from changes in prices of commodity, exchange rate fluctuation and interest rate movements. It manages its exposure to these risks through derivative financial instruments. It uses derivative instruments such as forwards, futures, swaps and options to manage these risks. These derivative instruments reduce the impact of both favourable and unfavourable fluctuations.

The Company''s risk management activities are subject to the management, direction and control of Risk Management Board (RMB). The RMB is composed of three directors including Managing Director, Deputy Managing Director and at least two officers, one being the Chief Financial Officer. The RMB reports to the Board of Directors on the scope of its activities.

The decision of whether and when to execute derivative financial instruments along with its tenure can vary from period to period depending on market conditions and the relative costs of the instruments. The tenure is always linked to the timing of the underlying exposure, with the connection between the two being regularly monitored. The Company is exposed to losses in the event of non-performance by the counterparties to the derivative contracts. All derivative contracts are executed with counterparties that, in our judgment, are creditworthy. The credit levels are reviewed to ensure that there is no inappropriate concentration of outstanding to any particular counterparty.

Commodity Price Risk

Copper and Precious Metals

This business is conducted under a conversion model. The prices of input and output are derived from the same benchmark and/or are linked to each other through a defi ned formula. The objective of risk management is to attempt to use derivatives to match the price fluctuations arising out of the timing mismatch in pricing the input and output to make the margins immune to the fluctuations in prices of the input and output.

Aluminium

This business is vertically integrated. The main raw material, viz., bauxite (mostly mined from own mines) and other purchased raw materials do not have any linkage with the output price which is Aluminium LME prices. When the prices of input(s) and output(s) do not follow the above condition, then risk management attempts to use derivatives so as to protect the margins from adverse movements in prices on either side, i.e., from a rise in input cost or from a fall in output price.

Coal and Furnace Oil

Smelting and other associated operations of aluminium require significantamount of power. Such power is mostly supplied through captive power generation units which are coal based. In order to meet the gap between requirement of coal and its availability domestically, sometimes coal is also imported. The domestic prices of coal are not linked to any internationally traded price whereas the imported coal is linked to internationally traded prices. Hence the imported coal price fluctuates in line with the international prices. To mitigate this risk, coal commodity derivatives are taken. Similarly, Furnace Oil is also an important input for manufacturing alumina which is the input for aluminium production. Furnace oil is sourced mainly from domestic market but the price is linked to international crude price movement. Hence, to mitigate this risk, furnace oil commodity derivatives are taken.

Foreign Currency Exchange Risk

Exchange rate movements, particularly, the United States Dollar (USD) and Euro (EUR) against Indian Rupee (INR), have an impact on our operating results. In addition to the foreign exchange flow from exports, the commodity prices in the domestic market are derived based on the landed cost of imports in India where LME prices and USD/INR exchange rate are the main factors. In case of conversion business, the objective is to match the exchange rate of outflows and related inflows through derivative financial instruments. With respect to Aluminium business, where costs are predominantly in INR, the strengthening of INR against USD adversely affects the profitability of the business and benefits when INR depreciates against USD. The Company enters into various foreign exchange contracts to protect profitability. The Company also enters into various foreign exchange contracts to mitigate the risk arising out of foreign currency exchange rate movement in foreign currency contracts executed with foreign suppliers to procure capital items for its project activities. Also, certain foreign exchange future derivatives are taken for arbitrage between exchange and OTC.

Embedded derivatives

Copper concentrate is purchased on future pricing model based on month''s average LME (in case of copper)/LBMA (in case of gold and silver). Since the value of the concentrate changes with response to change in commodity pricing indices, embedded derivatives (ED) is identified and segregated in the contract. The ED, so segregated, is treated like commodity derivative and qualify for hedge accounting. These derivatives are put into a Fair Value hedge relationship with inventory.

The objective of hedge designation of the embedded commodity derivative is to offset the volatility in the Statement of Profit and Loss due to change in value of un-priced inventory with response to LME/ LBMA.

9. Related Party Disclosures as per Accounting Standard (AS)-18:

A. List of Related Parties:

(a) Enterprises where control exists:

i. Subsidiaries:

1 Hindalco Guinea SARL

2 Minerals & Minerals Limited

3 Utkal Alumina Technical & General Services Limited

4 Suvas Holdings Limited

5 Utkal Alumina International Limited

6 Aditya Birla Chemicals (India) Limited (Merged with Grasim Industries Limited w.e.f. 1st April, 2015)

7 Aditya Birla Chemicals (Belgium) BVBA (Merged with Grasim Industries Limited w.e.f. 1st April, 2015)

8 Renukeshwar Investments & Finance Limited

9 Renuka Investments & Finance Limited

10 Dahej Harbour and Infrastructure Limited

11 Lucknow Finance Company Limited

12 Hindalco - Almex Aerospace Limited

13 Hindalco do Brasil Indústria e Comércio de Alumina Ltda.

14 Tubed Coal Mines Limited

15 East Coast Bauxite Mining Company Private Limited

16 Mauda Energy Limited

17 Birla Resources Pty. Limited

18 Aditya Birla Minerals Limited

19 Birla Maroochydore Pty. Limited

20 Birla Nifty Pty. Limited

21 Birla Mt. Gordon Pty. Limited (Disposed of on 27th October, 2015)

22 AV Minerals (Netherlands) N.V.

23 AV Metals Inc.

24 Novelis Inc.

25 Novelis (India) Infotech Ltd.

26 4260848 Canada Inc.

27 4260856 Canada Inc.

28 8018227 Canada Inc.

29 8018243 Canada Limited (Amalgamated with Novelis Inc. w.e.f. 31st March, 2016)

30 Novelis Corporation

Aluminum Upstream Holdings LLC (Amalgamated with Novelis South America Holding LLC

31 w.e.f. 2nd December, 2015)

32 Eurofoil Inc. (USA) (Amalgamated with Novelis PAE Corporation w.e.f. 1st November, 2015)

33 Logan Aluminium Inc.

34 Novelis Acquisitions LLC

35 Novelis Global Employment Organization Inc. (Formerly known as Novelis PAE Corporation change w.e.f. 15th December, 2015)

36 Novelis Holdings Inc.

37 Novelis South America Holdings LLC

38 Novelis Delaware LLC (Amalgamated with Novelis Inc. w.e.f. 31st March, 2016)

39 Albrasilis - Aluminio do Brasil Indústria e Comércio Ltda. (Dissolved 18th November, 2015)

40 Novelis do Brasil Ltda.

41 Novelis Laminés France SAS

42 Novelis PAE SAS

43 Novelis Aluminium Beteiligungs GmbH

44 Novelis Deutschland GmbH

45 Novelis Sheet Ingot GmbH

46 Novelis Aluminium Holding Company

47 Novelis Italia SpA

48 Al Dotcom Sdn. Berhad (Dissolved w.e.f. 21st January, 2016)

49 Alcom Nikkei Specialty Coatings Sdn. Berhad

50 Aluminum Company of Malaysia Berhad

51 Novelis de Mexico SA de CV

52 Novelis Korea Limited

53 Novelis AG

54 Novelis Switzerland SA

55 Novelis UK Ltd.

56 Novelis Europe Holdings Limited

57 Novelis Services Limited

58 Novelis (Shanghai) Aluminum Trading Company

59 Novelis (China) Aluminum Products Co., Ltd.

60 Novelis MEA Ltd.

61 Novelis Vietnam Company Limited

62 Novelis Asia Holdings (Singapore) Pte. Ltd. (struck off w.e.f. 17th March, 2016)

63 Brecha Energetica Ltda.

64 Brito Energetica Ltda.

65 Novelis Services (North America) Inc.

(b) Other Related Parties:

i. Associates:

1 Aditya Birla Science & Technology Company Private Limited

2 Idea Cellular Limited

3 Aluminium Norf GmbH

4 Deutsche Aluminium Verpackung Recycling GmbH

5 France Aluminium Recyclage SA

ii. Joint Ventures:

1 Mahan Coal Limited

2 Hydromine Global Minerals (GmbH) Limited

3 MNH Shakti Limited

iii. Trust of the Company:

1 Trident Trust

iv. Key Managerial Personnel:

Mr. D. Bhattacharya - Managing Director

Mr. Satish Pai - Deputy Managing Director

10. Previous year figures have been reclassified/regrouped to conform to this year''s classification.


Mar 31, 2015

1. Segment Reporting:

A. Primary Segment Reporting (by Business Segment):

(a) The Company has two reportable segments, viz., Aluminium and Copper, which have been identifi ed in line with the Accounting Standard-17 on Segment Reporting, taking into account the organizational structure as well as differential risk and return of these segments. Details of products included in each segment are as under:

(i) Aluminium: Hydrate & Alumina, Aluminium and Aluminium Products

(ii) Copper: Continuous Cast Copper Rods, Copper Cathode, Sulphuric Acid, DAP & Complexes, Gold and Silver

(b) Inter-segment transfers are based on market rates.

(c) The details of the revenue, results, assets, liabilities and other information from operations by reportable business segments are as under:

2. Employee Share Based Payment:

Employee Stock Option Scheme-2006 ("ESOS 2006")

On 7th December, 2006, the Board of Directors approved the Employee Stock Option Scheme 2006 ("ESOS 2006") for issue of 3,475,000 stock options to its permanent employees in the management cadre, in one or more tranches, whether working in India or out of India, including the Managing/Deputy Managing Directors of the Company. Each option when exercised would be converted into one fully paid-up equity share of Rs. 1/- each of the Company. The options will vest in 4 equal annual instalments after one year from the date of grant. The maximum period of exercise is 5 years from the date of vesting and these options do not carry rights to dividends or voting rights till the date of exercise. Further, on 23rd September, 2011, the ESOS-2006 has been partially modifi ed and by which the Company may issue 6,475,000 options to its eligible employees.

Employee Stock Option Scheme 2013 ("ESOS 2013")

During FY 2013-14, the Company has instituted Employee Stock Option Scheme 2013 ("ESOS 2013"), under which the Company may grant 5,462,000 stock options and restricted stock units (RSU) to the permanent employees in the management cadre and Managing/Whole-time Directors of the Company and its subsidiary companies in India and abroad, in one or more tranches. The ESOS 2013 is administered by the Compensation Committee of the Board of Directors of the Company ("the Committee"). The option exercise price would be determined by the Committee whereas the RSU exercise price shall be the face value of the equity shares of the Company as on the date of grant of RSUs. Each option and each RSU entitles the holders to apply for and be allotted one fully paid-up equity share of Rs. 1/- each of the Company upon payment of exercise price during exercise period. The options will vest in 4 equal annual instalments after one year of the date of grant whereas RSU will vest at the end of three years from the date of grant. The maximum period of exercise is 5 years from the date of vesting and these option/RSU do not carry rights to dividends or voting rights till the date of exercise. Further, cancelled/lapsed options and RSU are also available for grant.

3. The Hon''ble Supreme Court of India, in its judgment dated 25th August, 2014, and order dated 24th September, 2014, has declared all allocations of the coal blocks made through Screening Committee route since 1993 as illegal and has quashed the allocation of coal blocks, which include:

(a) Mahan, Tubed and Talabira II & III Coal Blocks allocated to joint venture companies Mahan Coal Limited (Mahan Coal), Tubed Coal Mines Limited (Tubed Coal) and MNH Shakti Limited (MNH Shakti), respectively. The Company holds equity of 50%, 60% and 15%, respectively, in these joint venture companies. In view of, said judgement, Mahan Coal and Tubed Coal have reported that the going concern concept has been vitiated and, accordingly, these companies have made necessary provisions in their fi nancial statements to bring down the assets and liabilities to their realisable value. Considering these facts, the Company has made appropriate provisions for diminution in the value of investments in these companies.

(b) Talabira I Coal Block held and operated by the Company stands cancelled with effect from 1st April, 2015, following deallocation of coal blocks by the Hon''ble Supreme Court. However, an additional levy of Rs. 295/- per MT of coal extracted since beginning till 31st March, 2015, has been paid, as per direction of the Hon''ble Supreme Court.

4. The Company has been awarded four coal blocks in the auction conducted by the Nominated Authority of the Ministry of Coal.

5. Labour Commissioner of Administration of Dadra and Nagar Haveli has approved closure of Silvassa Foil & Packaging plant on 27th January, 2015. All 186 permanent workers at the plant have opted for voluntary retirement during the current year. Total amount incurred on this account is Rs. 14.37 crore which is included in Employee Benefi ts Expenses.

6. During this year, the Company has received an amount of Rs. 1,393.96 crore from its wholly owned subsidiary A V Minerals (Netherlands) N. V. towards return of capital by reducing nominal value of shares from EURO 643.76 to EURO 567.83 per share. The amount of Rs. 1,032.85 core has been adjusted in carrying cost of investments, and the foreign exchange gain of Rs. 361.11 crore on this transaction have been accounted for as "Exceptional Income".

7. The Company had formulated a scheme of fi nancial restructuring under Sections 391 to 394 of the Companies Act, 1956 ("the Scheme"), between the Company and its equity shareholders approved by the High Court of judicature of Bombay to deal with various costs associated with its organic and inorganic growth plan. Pursuant to this, a separate reserve account titled as Business Reconstruction Reserve ("BRR") was created during the year 2008-09 by transferring the balance standing to the credit of Securities Premium Account of the Company for adjustment of certain expenses as prescribed in the Scheme. Accordingly, the Company had transferred Rs. 8,647.37 crore from Securities Premium Account to BRR and till 31st March, 2014, Rs. 153.04 crore have been adjusted against BRR. During the year, following expenses has been adjusted with BRR:

(a) Impairment loss of Rs. 62.29 crore (Net of deferred tax Rs. 32.97 crore) arising on deteriorating operating performance in one of its cash generating units of Aluminium Business. (refer Note No. 32 (a))

(b) Provision of Rs. 35.00 crore towards diminution in the value of investments of Mahan Coal Limited, joint venture of the Company, and Tubed Coal Mines Limited, subsidiary of the Company, made following deallocation of coal blocks by the Hon''ble Supreme Court. (refer Note No. 24 (c))

Had the Scheme not prescribed aforesaid treatment, the impact on results and Earnings Per Share (EPS) would have been as under:

Profit for the year lower by Rs. 97.29 crore

Basic EPS lower by Rs. 0.47

Diluted EPS lower by Rs. 0.47

B. In respect of defi ned Contribution Schemes:

(a) As required under Guidance Note on Implementation of Accounting Standard-15 (Revised) issued by the ICAI in respect of exempted Provident Fund, the Company has carried out actuarial valuation to ascertain shortfall in interest, if any, payable to the members of Provident Fund and has made appropriate provision in the books. The Company contributes 12% of salary for all eligible employees towards Provident Fund managed either by approved trusts or by the Central Government and debited to the Statement of Profi t and Loss. In view of typical nature of such the Provident Fund scheme involving defi ned benefi t underpin in respect of interest payable to members as declared by the Employees, Provident Fund Organisation, the defi ned benefi t obligation relating to interest shortfall is considered to be Other Long Term Employee Benefi ts. The amount debited to the Statement of Profi t and Loss during the year was Rs. 87.29 crore (Previous year Rs. 70.90 crore).

(b) The Company contributes a certain percentage of salary for all eligible employees in managerial cadre towards Superannuation Funds managed by approved trusts or by Life Insurance Corporation of India. The amount debited to the Statement of Profi t and Loss during the year was Rs. 13.27 crore (previous year Rs. 13.05 crore).

(b) In the ordinary course of business, the Company is exposed to risks resulting from changes in prices of commodity, exchange rate fl uctuation and interest rate movements. It manages its exposure to these risks through derivative fi nancial instruments. It uses derivative instruments such as forwards, futures, swaps and options to manage these risks. These derivative instruments reduce the impact of both favourable and unfavourable fl uctuations.

The Company''s risk management activities are subject to the management, direction and control of Risk Management Board (RMB). The RMB is composed of three directors including Managing Director, Deputy Managing Director and at least two offi cers, one being the Chief Financial Offi cer. The RMB reports to the Board of Directors on the scope of its activities.

The decision of whether and when to execute derivative fi nancial instruments along with its tenure can vary from period to period depending on market conditions and the relative costs of the instruments. The tenure is always linked to the timing of the underlying exposure, with the connection between the two being regularly monitored. The Company is exposed to losses in the event of non-performance by the counterparties to the derivative contracts. All derivative contracts are executed with counterparties that, in our judgment, are creditworthy. The credit levels are reviewed to ensure that there is no inappropriate concentration of outstanding to any particular counterparty.

Commodity Price Risk

Copper and Precious Metals

This business is conducted under a conversion model. The prices of input and output are derived from the same benchmark and/or are linked to each other through a defi ned formula. The objective of risk management is to attempt to use derivatives to match the price fl uctuations arising out of the timing mismatch in pricing the input and output to make the margins immune to the fl uctuations in prices of the input and output.

Aluminium

This business is vertically integrated. The main raw material viz. bauxite (mostly mined from own mines) and other purchased raw materials do not have any linkage with the output price which is Aluminium LME prices. When the prices of input(s) and output(s) do not follow the above condition, then the risk management attempts to use derivatives so as to protect the margins from adverse movements in prices on either side, i.e. from a rise in input cost or from a fall in output price.

Coal

Both green fi eld and brown fi eld expansion has increased the power requirement mainly for smelting and other associated operations. Power is mostly supplied to these smelters through captive power generation units which are coal based. In order to meet the gap between requirement of coal and availability in the domestic market as also from own sources, at times coal is also imported . The domestic price are not linked to any internationally traded price whereas the imported coal is linked to internationally traded prices. Hence, the imported coal price fl uctuates in line with the international prices. To mitigate this risk, coal commodity derivatives are taken.

Foreign Currency Exchange Risk

Exchange rate movements, particularly the United States Dollar (USD) and Euro (EUR) against Indian Rupee (INR), have an impact on our operating results. In addition to the foreign exchange fl ow from exports, the commodity prices in the domestic market are derived based on the landed cost of imports in India where LME prices and USD/INR exchange rate are the main factors. In the case of conversion business, the objective is to match the exchange rate of outfl ows and related infl ows through derivative fi nancial instruments. With respect to Aluminium business where costs are predominantly in INR, the strengthening of INR against USD adversely affects the profi tability of the business and benefi ts when INR depreciates against USD. The Company enters into various foreign exchange contracts to protect profi tability. The Company also enters into various foreign exchange contracts to mitigate the risk arising out of foreign currency exchange rate movement in foreign currency contracts executed with foreign suppliers to procure capital items for its project activities. Also, certain foreign exchange future derivatives are taken for arbitrage between exchange and OTC.

Embedded derivatives

Copper concentrate is purchased on future pricing model based on month''s average LME (in case of copper)/LBMA (in case of gold and silver). Since the value of the concentrate changes with response to change in commodity pricing indices, embedded derivatives (ED) is identifi ed and segregated in the contract. The ED so segregated, is treated like commodity derivative and qualify for hedge accounting. These derivatives are put into a Fair Value hedge relationship with inventory.

The objective of hedge designation of the embedded commodity derivative is to offset the volatility in the Statement of Profi t and Loss due to change in value of un-priced inventory with response to LME/LBMA.

8. Contingent Liabilities and Commitments:

(Rs. Crore)

As at

31/03/2015 31/03/2014

A. Contingent Liabilities

(a) Claims against the Company not acknowledged as debt: Following demands are disputed by the Company and are not provided for:

(i) Demand of interest on past dues of the Aluminium Regulation account up to 31st December, 1987. 6.33 6.33

* The demand is in dispute with Controller of Aluminium Regulation Account.

(ii) Retrospective Revision of Water Rates by UP Jal Vidyut Nigam Limited (April 1989 to June 1993 & January 2000 to January 2001). 4.08 4.08

* Writ petition pending with Lucknow Bench of Allahabad High Court. The demand for arrears stayed vide order dated 11/05/2001.

(iii) Transit fees levied by Divisional Forest Officer, Renukoot, on Coal and Bauxite. 117.63 106.65

* Appeal pending with the Hon''ble High Court of Allahabad and payment of transit fee has been stayed. According to the legal opinion received by the Company, the Forest Department has no authority to levy such fees. The Company has filed a transfer application before the Hon''ble Supreme Court. The Hon''ble Supreme Court of India, while issuing notice on our Transfer Petition, stayed the further proceedings of the Company''s Writ Petition pending before the Hon''ble Allahabad High Court.

(iv) M. P. Transit Fee on Coal demanded by Northern Coal Fields Limited. 24.51 23.77

* Company had challenged the demand towards M. P. transit Fee on Coal and filed Writ Petition before the Hon''ble Jabalpur High Court. The Hon''ble High Court has struck down the levy and also ordered for refund of the amount paid under protest. The State government has filed an Appeal before the Hon''ble Supreme Court of India against the said order and the Hon''ble Supreme Court has been stayed the order of Hon''ble High Court. The Counter affidavit in the matter has been filed. The rejoinder has also been filed by the state. To be listed along withthe similar matter before the Supreme Court of India.

(v) Imposition of Cess on Coal by Shaktinagar Special Area Development Authority. 3.98 11.17 *Writ pending before the Allahabad High Court, Allahabad. Demand and levy stayed. However, the company has moved a transfer petition before the Hon''ble Supreme Court of India for tagging the matter with CA No. 1883 of 06 (ORISED Matter). The matter is tagged with ORISED and to be heard by the Nine Judges Bench of the Hon''ble Supreme Court.

(vi) Demand of Royalty on Vanadium by District Mining Officer, Lohardaga. 7.96 7.96

* Appeal is pending with the Hon''ble High Court of Allahabad. The demand has been stayed on certain conditions.

(vii) The demand of Excise Duty on gold. 155.31 155.31

* Part of the demand was confi rmed against which our ROM request is pending at CESTAT Department''s appeal is pending before the Hon''ble Supreme Court for the part of the demand and penalty that was dropped.

(viii) Demand raised on assessment under CST Act and UP Sales Tax Act. - 6.39

* Demand has been quashed at fi rst appeal and second appeal stage. Department has gone in the revision before the Hon''ble High Court, Allahabad which has rejected the Department appeal.

(ix) Revision of surface rent on land by Government of Jharkhand w.e.f. 16th June, 2005. 29.97 26.18

* Matter is in dispute at Hon''ble High Court of Jharkhand.

(x) Demand made by Nayab Tehsildar Kusmi/ Collector under Chhattisgarh as per Adhosanrachna Vikas evam Parayavaran Upkar Adhiniyam, 2005 @ 5% as environment tax on royalty plus 5% as development tax. 7.37 6.60

* The Writ petition fi led by the Company before Hon''ble High Court of Chhattisgarh at Bilaspur has been transferred to the Hon''ble Supreme Court and tagged with other Civil Appeals.

(xi) Service tax paid on Goods Transport Agency and Business Auxiliary Services. 11.27 11.27

* Commissioner has confi rmed the demand. Appeal is being filed at CESTAT New Delhi.

(xii) M.P. Transit Fee on Bauxite. 1.30 1.30

* Company has fi led Writ Petition before the Hon''ble Jabalpur High Court. The Hon''ble High Court has struck down the levy and also ordered for refund of the amount paid under protest. The State government has filed an appeal against the order of the Hon''ble High Court.

(xiii) Demand for Entry Tax relating to valuation dispute of 2004-05 to 2005-06, for which appeals have been filed. 1.18 1.18

* Appeal has been fi led with Additional CCT, Sambalpur.

(xiv) CST demand on reopening of assessments for 1999-00 to 2003-04. 5.01 8.81

* Appeals have been filed.

(xv) Demand of penalty on excess CENVAT Credit taken. 0.10 1.09

* Appeal pending with CESTAT, Mumbai.

(xvi) Demand for Sales Tax u/s 15B for A.Y. 2001-02 & 2002-03. 7.96 7.96

* Appeal is pending with J. C. Appellate Authority, Baroda.

(xvii) Service Tax on insurance policy attributable to Renusagar. 3.97 3.97

* Commissioner has confi rmed the demand. Appeal is pending before the CESTAT, New Delhi.

(xviii) Disallowance of CENVAT credit. 5.29 5.29

* The matter is pending with CESTAT, Ahmedabad.

(xix) Demand raised on assessment under CST Act and APGST Act for various years. 5.89 5.77

* Appeals have been fi led with appropriate authorities.

(xx) Demand for Service Tax on Consulting Engineer Services and Scientifi c & Tech Service. 3.84 3.84

* Appeal pending with Commissioner (Appeals), Ahmedabad.

(xxi) Excise Duty on Dross. - 19.78

* Favourable order of Hon''ble Bombay High Court received during the year, quashing circulars issued by CBEC regarding Excise Duty on Dross.

(xxii) Alleged Cenvat taken without receipt of Alumina Hydrate inside the factory. 3.46 3.46

* Appeal filed with CESTAT.

(xxiii) Alleged CENVAT availed on the Input services at captive Mines. 36.05 36.05

* Appeal pending with CESTAT

(xxiv) CENVAT of Service Tax Credit availed on Supplementary Invoices. 11.05 3.12

* Pending with appropriate Authority

(xxv) Clearence of Silver at Nil Rate of Duty under Notification No.5/2006. - 8.96

* CESTAT has given favorable judgement.

(xxvi) Excess rebate has been sanctioned to the extent duty paid by supplementary invoices 5.08 5.08

* Appeal pending with Commissioner of Customs (Appeals),Mumbai

(xxvii) Disallowance of CENVAT on input services. 7.74 6.79

* Pending with appropriate Authority.

(xxviii) Parallel operation charges on capacity of Captive Power Plant by Madhya Pradesh Electricity Regulatory Commission. - 7.05

* Matter is pending before Hon''ble High court of Madhya Pradesh at Jabalpur. The Hon''ble High Court passed an order on 20.9.2013 and stayed the operation of order passed by MPERC subject to deposit of 50% of the amount since provided.

(xxix) Water Tariff revision demand for previous years. 10.86 -

* Matter is pending in Hon''ble High Court of Karnataka.

(xxx) Demand for Sales Tax under KVAT Act 2003 for Tax period 2011-2012 & 2012-13. 16.46 -

* Appeal pending with Commissioner, Appellate Authority, Bengaluru.

(xxxi) Demand for Sales Tax under MPVAT Act, 2002, for Tax period 2010-11. 7.64 -

* Appeal pending with Commissioner, Appellate Authority, Indore

(xxxii) Demand for Sales Tax under CST Act, 1969, for Tax Period 2009-10 1.21 -

* Appeal pending with Commissioner, Appellate Authority, Bengaluru.

(xxxiii) Other Contingent Liabilities in respect of Excise, Customs, Sales Tax, etc., each being for less than Rs. 1 Crore. 17.72 15.51

* The demands are in dispute at various legal forums. 520.22 510.72

(b) Corporate Guarantees Outstandings 5,270.76 5,287.03 (Rs. 5,229.70 crore* (previous year Rs. 5246.47 crore) given on behalf of subsidiary companies)

* Includes Rs. 5,181.28 crore (Previous year Rs. 5,198.05 crore) given to lenders against loan provided to various subsidiaries , amount of loan outstanding as on 31st March 2015 is Rs. 4,887.43 crore (Previous Year Rs. 4,950.00 crore).

(c) Other money for which the Company is contingently liable:

(i). Bills discounted with Banks 0.87 3.53

(ii). Customs duty on Capital Goods and Raw Materials imported under EPCG Scheme/ Advance License, against which export obligation is to be fulfi lled (excluding cenvatable portion). 328.03 368.51

(iii). The Company has received a notice dated 24th March, 2007, from Collector (Stamp), Kanpur, Uttar Pradesh, alleging that stamp duty of Rs. 252.96 crore is payable in view of the order dated 18th November, 2002, of the Hon''ble High Court of Allahabad approving the scheme of arrangement for merger of Copper business of Indo Gulf Corporation Limited with the Company. The Company is of the opinion that it has a very strong case as there is no substantive/computation provision for levy/ calculation of stamp duty on court order approving the scheme of arrangement under Companies Act, 1956, within the provisions of Uttar Pradesh Stamp Act, moreover, the properties in question are located in the State of Gujarat and thus the Collector (Stamp), Kanpur, has no territorial jurisdiction to make such a demand. It is pertinent to note that the Company in 2003-04 has already paid stamp duty which has been accepted as per the provisions of the Bombay Stamp Act, 1958, with regard to transfer of shareholding of Indo Gulf Corporation Limited as per the Scheme of Arrangement. Furthermore, the demand made, is on an incorrect assumption. The Company''s contention, amongst the various other grounds made is that the demand is illegal, against the principles of natural justice, incorrect, bad in law and malafi de. The Company has fi led a writ petition before the Hon''ble High Court of Allahabad, inter alia, on the above said grounds, which is pending determination.

(iv). The assessing offi cer, while framing the assessment for AY 2008-09, made adjustment, inter alia, amounting to Rs. 270.32 crore, to total income on account of purported arm''s length fee for corporate guarantee provided to foreign banks for granting loan to a wholly owned subsidiary of the Company, viz., AV Minerals (Netherlands) N.V. The Company has fi led appeal before the Income Tax Tribunal.

(v). The Company has an agreement with Uttar Pradesh Power Corporation Limited (UPPCL), under which banking of surplus energy with UPPCL is permitted and such banked energy may be drawn as and when required at free of cost. However, UPPCL has raised demand of Rs. 55.42 crore with retrospective effect from 1.4.2009 on the alleged ground that drawal of energy against the banked energy is not permissible during peak hours. The Company has challenged the demand by fi ling a petition on 27.12.2013 under Section 86(i)(f) read with other relevant provisions of Electricity Act, 2003, seeking quashing/setting aside the demand. The matter has been heard on 12.2.2014 and the Hon''ble Uttar Pradesh Electricity Regulatory Commission (UPERC), vide its order dated 24.2.2014, has directed the UPPCL to restrain from taking any coercive action till final order of UPERC. The Company believes that it has a strong case and no provision towards this is required.

(Rs. Crore)

As at

31/03/2015 31/03/2014

B. Commitments

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for net of advances 574.76 1,181.44

(b) The Company, along with Aditya Birla Nuvo Limited, Grasim Industries Limited and Birla TMT Holdings Pvt. Limited (the Sponsors), being promoters of Idea, Cellular Limited (Idea) has given the following undertakings to the Facility Agent:

i. The Sponsors shall collectively continue to hold at least 33% of the equity capital of Idea till the end of FY 2015-16 and shall not, without prior written approval of the Facility Agent, divest, transfer, assign, dispose of, pledge, charge, create any lien or in any way encumber 33% of shareholdings in Idea. Consequent upon the infusion of fresh equity capital of Idea, if the Sponsors'' stake gets diluted from 40% to 33% in the equity capital of Idea, the Sponsors agree and undertake to obtain the prior consent of the Rupee Facility Agent and in other circumstances, the Sponsors agree and undertake to obtain the prior consent of the secured lenders representing 51% of the aggregate outstanding secured loans.

ii. The Sponsors shall collectively continue to hold 26% of the equity capital of Idea after FY 2015-16 and shall not, without the prior written approval of the Rupee Facility Agent, divest, transfer, assign, dispose of, pledge, charge, create any lien or in any way encumber 26% shareholdings in the capital of Idea.

iii. Not without prior approval of the Facility Agent in writing divest shareholdings in the equity capital of Idea that may result in a single investor along with its affi liates holding more than 25% of the equity capital of Idea.

(c) The Company, has given the following undertakings in connection with the loan of Utkal Aluminium International Limited (UAIL), a wholly owned subsidiary:

i. To hold minimum 51% equity shares in UAIL.

ii. To ensure to meet the Financial Covenants, except Fixed Asset Coverage Ratio, as provided in the loan agreements.

9. As per Section 135 of the Companies Act, 2013, a Corporate Social Responsibility committee has been formed by the Company. The Company has incurred expenses amounting to Rs. 32.42 crore in alignment with the CSR Policy of the Company, which is in confi rmity with the activities specified in Schedule VII to the Companies Act, 2013.

10. Previous year figures have been reclassifi ed/regrouped to conform to this year''s classification.


Mar 31, 2014

1. Share Capital:

(b) Rights, Preferences and Restrictions attached to Equity Shares:

The Company has one class of equity shares having a par value of Rs. 1/- per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

(d) Shares Reserved for Issue under Options:

The Company has reserved Equity Shares for issue under the Employee Stock Options Scheme. Please refer Note No. 41 on "Employee Share-Based Payment" for details of Employee Stock Options Scheme.

2. Money Received against Share Warrants:

In accordance with the provisions of Chapter VII of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, the Company had allotted 150,000,000 warrants on a preferential basis to the Promoter Group on 22nd March, 2012, entitling them to apply for and obtain allotment of one equity share of Rs. 1/- each fully paid-up at a price of Rs. 144.35 per share against each such warrant at any time after the date of allotment but on or before the expiry of 18 months from the date of allotment in one or more tranches for which the Company has received Rs. 541.31 crore being 25% against these warrants. The Promoter Group Companies applied for conversion of warrants into equity shares at pre-determined price, accordingly, the Company has issued and allotted 150,000,000 equity shares of Rs. 1/- each at a premium of Rs. 143.35 per share on 20th September, 2013, to the Promoter Group on payment of balance amount of these warrants. The entire amount so received has been utilised for various Greenfield and brownfield projects expenditure.

3. Long-Term Borrowings:

(b) Term Loans of Rs. 7,227.54 crore from Banks and Rs. 149.18 crore from Other Parties for Aditya Aluminium Project and Term Loan of Rs. 7,046.37 crore from Banks and Rs. 90.63 crore from Other Parties for Mahan Aluminium Project have been prepaid by the Company on 17th September, 2013 and 3rd January, 2014, respectively.

(c) Term Loans from Banks of Rs. 7,365.00 crore to be secured by a fi rst ranking charge/mortgage/security interest in respect of all the movable assets of Mahan Aluminium Project (except Current Assets) and all the immovable properties of Mahan Aluminium Project, both present and future. However, security creation is pending for want of no due certifi cate from previous term loan lenders.

Total loan of Rs. 7,500.00 crore carry interest at the State Bank of India''s base rate plus 0.50% and are repayable in 40 quarterly instalments commencing from 31st March, 2014 and ending on 31st December, 2023. The repayment in each financial year in percentage is 1.8, 7.95, 9.2, 9.2, 10.2, 10.2, 10.2, 10.2, 11.1, 11.4 and 8.55 of the loan amount.

(d) Term Loans from Banks of Rs. 8,850.00 crore to be secured by a fi rst ranking charge/mortgage/security interest in favour of the State Bank of India, in respect of all the movable and immovable properties of Aditya Aluminium Project, both present and future. However, security on 2,579.89 acres of Project land is pending due to non-availability of approval from the appropriate authority.

Above loans carry interest at the State Bank of India''s base rate plus 1.25% till project COD and 0.25% thereafter, and are repayable in 34 quarterly instalments commencing from 1st June, 2015 and ending on 1st September, 2023. The repayment in each financial year in percentage is 2.32, 4.20, 6.20, 8.60, 9, 11.50, 16, 26 and 16.18 of the loan amount.

The Company will have an option to prepay all or any portion of these loans, without payment of Prepayment Penalty within 30 (Thirty) days after any annual Interest Reset Date.

(e) Term Loans from Other Parties include Foreign Currency Term Loans from Export Development Canada (EDC) of USD 90.70 million (Previous year USD 100.00 million) are secured by a fi rst charge on all movable assets of the Mahan Aluminium Project and a second charge on the current assets of the Company, both present and future.

Total loan of USD 100 million carry interest at the LIBOR plus 3.50% and are repayable in 43 quarterly instalments commencing from 30th June, 2013 and ending on 31st December, 2023. The repayment in each fi nancial year in percentage is 9.30, 9.30, 9.30, 9.30, 9.30, 9.30. 9.30. 9.30, 9.30, 9.30 and 7 of the loan amount. Subject to the prevailing RBI ECB Regulations, the Company may prepay all or any part of these loans at any time.

(f) Deferred Payment Liabilities represent sales tax deferral which is payable in yearly instalment by FY 2018.

4. Deferred Tax Liabilities (Net):

Major components of Deferred Tax arising on account of temporary timing differences are given below:

(a) Working Capital Loan for Aluminium Business, granted under the Consortium Lending Arrangement, are secured by a fi rst pari passu charge on entire stocks of raw materials, work-in-process, fi nished goods, consumable stores and spares and also book debts pertaining to the Company''s Aluminium business. Working Capital Loan of State Bank of India for the Copper business is secured by a fi rst pari passu charge by way of hypothecation of stocks of raw materials, work-in-process, fi nished goods and consumable stores and spares, and also book debts and other movable assets of Copper business, both present and future.

5. Long-Term Loans and Advances:

(Unsecured, Considered Good, unless otherwise stated)

(a) Loans, Advances and Deposits to Related Parties include Rs. 34.45 crore (Previous year Rs. 34.45 crore) towards balance with Trident Trust which represents 16,316,130 equity shares of Rs. 1/- each fully paid-up of the Company issued, pursuant to a Scheme of Arrangement approved by the Hon''ble High Courts at Mumbai and Allahabad vide their Orders dated 31st October, 2002 and 18th November, 2002, respectively, to the Trident Trust, created wholly for the benefit of the Company and is being managed by trustees appointed by it. The tenure of the Trust is up to 23rd January, 2017.

(b) Others include CENVAT credit receivable, VAT credit receivable, Service Tax credit receivable, etc., primarily relating to ongoing projects.

6. Revenue from Operations:

(i) Sales of Copper Products and Precious Metals are accounted for provisionally pending fi nalization of price and quantity. Variations are accounted for in the year of settlement. Final price receivable on sale of above products, for which quotational price was not fi nalized in the previous year, were realigned at the year end forward LME/LMBA rate and reversal of Rs. 1.84 crore (Previous year Rs. 8.21 crore) was accounted for. During the year, fi nal price was settled at Rs. 6.50 crore (Previous year Rs. 47.27 crore) and further reversal of sales of Rs. 4.65 crore (Previous year Rs. 39.06 crore) was taken into account. As on 31st March, 2014, sales of Copper Products and Precious Metals, pending for price fi nalization, were realigned at the year end forward LME/ LMBA and reversal of sales of Rs. 7.83 crore (Previous year Rs. 1.84 crore) was accounted for. Actual cash fl ow is expected on fi nalization of quotational price and quantity in the subsequent financial year.

(ii) Include sales of DAP including nutrient-based subsidy of P&K Rs. 273.34 crore (Previous year Rs. 298.27 crore).

7. Cost of Materials Consumed:

(a) Purchase of Copper Concentrate is accounted for provisionally pending fi nalization of contents in the concentrate and price. Variations are accounted for in the year of settlement. Final price payable on purchase of copper concentrate, for which quotational price and quantity were not fi nalized in the previous year, was realigned based on forward LME and LMBA rate at the year end of copper and precious metals, respectively, and accordingly receivable of Rs. 122.82 crore (Previous year payable Rs. 141.51 crore) was accounted for. During the year, fi nal price was settled at Rs. 248.90 crore (Previous year payable Rs. 10.78 crore) and accordingly further net receivable of Rs. 126.08 crore (Previous year Rs. 130.73 crore) has been accounted for. As on 31st March, 2014, receivable of Rs. 155.88 crore (Previous year Rs. 122.82 crore) was accounted for on realignment of unpriced copper concentrate. Actual cash fl ow is expected on fi nalization of quotational price and quantity in the subsequent financial year.

8. Exceptional Items

(a) Liability of Rs. 324.36 crore under UP Tax on Entry of Goods into Local Areas Act, 2007 (UP Entry Tax)

(b) Liability of Rs. 71.62 crore under Madhya Pradesh Gramin Avsanrachna Tatha Sarak Vikas Adhiniyam (MPGATSVA).

Both the above levies have been contested by the Company and appeals against these are pending before the Hon''ble Supreme Court. In the matter of UP Entry Tax, the Hon''ble Supreme Court has granted a stay on the adverse order of the Hon''ble Allahabad High Court. In the matter of MPGATSVA, the Supreme Court has not stayed the adverse order of the Hon''ble Jabalpur High Court in a separate, but similar, case. Since in both these matters an adverse order has been passed by a High Court upholding the validity of the levy, and the amount of the levy has either been paid or secured by bank guarantees provided by the Company, the Statement of Profi t and Loss has been debited with the total amount pertaining to these levies following principles of prudence. The amount paid towards these levies has been shown as advance recoverable in the Balance Sheet.

9. The Company had formulated a scheme of financial restructuring under Sections 391 to 394 of the Companies Act, 1956 ("the Scheme") between the Company and its equity shareholders approved by the High Court of judicature of Bombay to deal with various costs associated with its organic and inorganic growth plan. Pursuant to this, a separate reserve account titled as Business Reconstruction Reserve ("BRR") was created during the year 2008-09 by transferring balance standing to the credit of Securities Premium Account of the Company for adjustment of certain expenses as prescribed in the Scheme. Accordingly, the Company has transferred Rs. 8,647.37 crore from Securities Premium Account to BRR and till 31st March, 2013, Rs. 66.98 crore has been adjusted against BRR.

During the year, a provision of Rs. 86.06 crore has been made for diminution in value of investment in Hindalco- Almex Aerospace Limited, a subsidiary of the Company. The entire amount of provision has been adjusted against BRR. Had the Scheme not prescribed aforesaid treatment, the impact on results would have been as under:

Profi t for the year lower by Rs. 86.06 crore

Basic EPS lower by Rs. 0.43

Diluted EPS lower by Rs. 0.43

10. For the year ended 31st March, 2014, the Board of Directors of the Company have recommended dividend of Rs. 1.00 per share (Previous year Rs. 1.40 per share) to equity shareholders aggregating to Rs. 241.55 crore (Previous year Rs. 313.60 crore) including Dividend Distribution Tax.

11. Segment Reporting:

A. Primary Segment Reporting (by Business Segment):

(a) The Company has two reportable segments, viz., Aluminium and Copper, which have been identifi ed in line with the Accounting Standard-17 on Segment Reporting, taking into account the organizational structure as well as differential risk and return of these segments. Details of products included in each segments are as under:

(i) Aluminium: Hydrate & Alumina, Aluminium and Aluminium Product.

(ii) Copper: Continuous Cast Copper Rods, Copper Cathode, Sulphuric Acid, DAP & Complexes, Gold and Silver.

(b) Inter-segment transfers are based on market rates.

12. Employee Share-Based Payment:

Employee Stock Options Scheme 2006 ("ESOS 2006")

On 7th December, 2006, the Board of Directors approved the Employee Stock Options Scheme 2006 ("ESOS 2006") for issue of 3,475,000 stock options to its permanent employees in the management cadre, in one or more tranches, whether working in India or out of India, including the Managing/Whole-time Directors of the Company. Each option when exercised would be converted into one fully paid-up equity share of Rs. 1/- each of the Company. The options will vest in 4 equal annual instalments after one year from the date of grant. The maximum period of exercise is 5 years from the date of vesting, and these options do not carry rights to dividends or voting rights till the date of exercise. Further, on 23rd September, 2011, the ESOS 2006 has been partially modifi ed and by which the Company may now issue 6,475,000 options to its eligible employees.

According to ESOS 2006, so far the Company has granted 4,328,159 options (Previous year 3,545,550 options) to its eligible employees, out of which 1,169,574 options (Previous year 880,145 options) has been cancelled/ lapsed and are available for grant as per term of the Scheme.

During the year ended 31st March, 2014, the Company has allotted 4,800 fully paid-up equity share of Rs. 1/- each of the Company (Previous year 40,760) on exercise of options under ESOS 2006, for which the Company has realised Rs. 0.05 crore (Previous year Rs. 0.40 crore) as exercise money. The weighted-average share price for the year ended 31st March, 2014, over which options exercised was Rs. 115.20 (Previous year Rs. 117.41).

Employee Stock Options Scheme 2013 ("ESOS 2013")

During this year, the Company has instituted Employee Stock Options Scheme 2013 ("ESOS 2013"), under which the Company may grant 5,462,000 stock options and restricted stock units (RSU) to the permanent employees in the management cadre and Managing/Whole-time Directors of the Company and its subsidiary companies in India and abroad, in one or more tranches. The ESOS 2013 is administered by the Compensation Committee of the Board of Directors of the Company ("the Committee"). The option exercise price would be determined by the Committee, whereas the RSU exercise price shall be the face value of the equity shares of the Company as on the date of grant of RSUs. Each option and each RSU entitle the holders to apply for and be allotted one fully paid-up equity share of Rs. 1/- each of the Company upon payment of exercise price during exercise period. The options will vest in 4 equal annual instalments after one year of the date of grant, whereas RSU will vest at the end of three years from the date of grant. The maximum period of exercise is 5 years from the date of vesting and these options/RSUs do not carry rights to dividends or voting rights till the date of exercise. Further, cancelled/lapsed options and RSUs are also available for grant.

The Company has various schemes (funded/unfunded) for payment of gratuity to all eligible employees calculated at specifi ed number of days (ranging from 15 days to 1 month) of last drawn salary depending upon the tenure of service for each year of completed service, subject to minimum service of fi ve years payable at the time of separation upon superannuation or on exit otherwise.

B. In respect of defi ned Contribution Schemes:

(a) As required under Guidance Note on Implementation of Accounting Standard-15 (Revised) issued by the ICAI in respect of exempted Provident Fund, the Company has carried out actuarial valuation to ascertain shortfall in interest, if any, payable to the members of Provident Fund, and has made appropriate provision in the books. The Company contributes 12% of salary for all eligible employees towards Provident Fund managed either by approved trusts or by the Central Government. The amount debited to the Statement of Profi t and Loss during the year was Rs. 70.90 crore (Previous year Rs. 62.56 crore). In view of the typical nature of such Provident Fund scheme involving defi ned benefit underpin in respect of interest payable to members as declared by the Employees'' Provident Fund Organisation, the defi ned benefit obligation relating to interest shortfall is considered to be Other Long-Term Employee benefits.

(b) The Company contributes a certain percentage of salary for all eligible employees in the managerial cadre towards Superannuation Funds managed by approved trusts or by Life Insurance Corporation of India. The amount debited to the Statement of Profi t and Loss during the year was Rs. 13.05 crore (Previous year Rs. 12.52 crore).

13 Derivative Financial Instruments:

(a) The Company has adopted Accounting Standard-30, "Financial Instruments: Recognition and Measurement", issued by the Institute of Chartered Accountants of India so far as it relates to derivative accounting.

(b) In the ordinary course of business, the Company is exposed to risks resulting from changes in prices of commodity, exchange rate fl uctuation and interest rate movements. It manages its exposure to these risks through derivative financial instruments. It uses derivative instruments such as forwards, futures, swaps and options to manage these risks. These derivative financial instruments reduce the impact of both favourable and unfavourable fl uctuations. Except where noted, the derivative contracts are marked- to-market (MTM) and the related gains and losses are included in the Statement of Profi t and Loss in the current accounting period.

The Company''s risk management activities are subject to the management, direction and control of Risk Management Board (RMB). The RMB is composed of two directors including Managing Director, Chief Financial Officer and other offi cers and employees selected by the Managing Director. The RMB reports to the Board of Directors on the scope of its activities.

The decision of whether and when to execute derivative financial instruments along with its tenure can vary from period to period depending on market conditions and the relative costs of the instruments. The tenure is always linked to the timing of the underlying exposure, with the connection between the two being regularly monitored. The Company is exposed to losses in the event of non-performance by the counterparties to the derivative contracts. All derivative contracts are executed with counterparties that, in our judgment, are creditworthy. The credit levels are reviewed to ensure that there is not an inappropriate concentration of outstanding to any particular counterparty.

Commodity Price Risk

Copper and Precious Metals

This business is conducted under a conversion model. The prices of input and output are derived from the same benchmark and/or are linked to each other through a defi ned formula. The objective of risk management is to attempt to use derivatives to match the price fl uctuations arising out of the timing mismatch in pricing the input and output so as to ''pass through'' the change in input cost to customers to make the margins immune to the fl uctuations in prices of the input and output.

Aluminium

This business is vertically integrated. The main raw material, viz., bauxite (mostly mined from own mines) and other purchased raw materials do not have any linkage with the output price which is Aluminium LME prices. When the prices of input(s) and output(s) do not follow the above condition, then the risk management attempts to use derivatives so as to protect the margins from adverse movements in prices on either side, i.e., from a rise in input cost or from a fall in output price.

As a condition of sale, customers often require the Company to enter into fi xed price commitments. These commitments expose the Company to the risk of fl uctuating aluminum prices between the time the order is committed and the time that the material is shipped. The Company may enter into derivative financial instruments to mitigate the risk arising out of the fi xed price commitments. Consequently, the gain or loss resulting from movements in the price of aluminum on these contracts would generally be offset by an equal and opposite impact on the net sales and purchases being hedged.

Foreign Currency Exchange Risk

Exchange rate movements, particularly the United States Dollar (USD) and Euro (EUR) against Indian Rupee (INR), have an impact on our operating results. In addition to the foreign exchange fl ow from exports, the commodity prices in the domestic market are derived based on the landed cost of imports in India where LME prices and USD/INR exchange rate are the main factors. In case of conversion business, the objective is to match the exchange rate of outfl ows and related infl ows through derivative financial instruments. With respect to Aluminium business, where costs are predominantly in INR, the strengthening of INR against USD adversely affects the profitability of the business and benefits when INR depreciates against USD. The Company enters into various foreign exchange contracts to protect profi tability. The Company also enters into various foreign exchange contracts to mitigate the risk arising out of foreign currency exchange rate movement in foreign currency contracts executed with foreign suppliers to procure capital items for its project activities.

Embedded Derivatives

Copper concentrate is purchased on future pricing model based on month''s average LME (in case of copper)/LBMA (in case of gold and silver). Since the value of the concentrate changes with response to change in commodity pricing indices, embedded derivatives (ED) are identifi ed and segregated in the contract. The ED so segregated is treated like commodity derivative and qualify for hedge accounting. These derivatives are put into a Fair Value hedge relationship with inventory.

The objective of hedge designation of the embedded commodity derivative is to offset the volatility in the Statement of Profi t and Loss due to change in value of un-priced inventory with response to LME/LBMA.

14. Contingent Liabilities and Commitments:

(Rs. Crore)

As at 31/03/2014 31/03/2013

A. Contingent Liabilities

(a) Claims against the Company not acknowledged as debt:

Following demands are disputed by the Company and are not provided for:

(i) Demand notice by Asstt. Collector, Central Excise, Mirzapur, for excise duty on power generated by the Company''s captive power plant, Renusagar Power Company Limited (Since amalgamated). - 9.12 *Favourable judgment has been received from the Hon''ble Delhi High Court.

(ii) Demand of interest on past dues of the Aluminium Regulation Account up to 31st December, 1987. 6.33 6.33 * The demand is in dispute with the Controller of Aluminium Regulation Account.

(iii) Retrospective Revision of Water Rates by UP Jal Vidyut Nigam Limited (April 1989 to June 1993 and January 2000 to January 2001). 4.08 4.08 * Write petition pending with Lucknow Bench of Allahabad High Court. The demand for arrears stayed vide order dated 11/05/2001.

(iv) Transit fees levied by Divisional Forest officer, Renukoot, on Coal and Bauxite. 106.65 134.38

* Appeal pending with the Hon''ble High Court of Allahabad, and payment of Transit Fee has been stayed. According to the legal opinion received by the Company, the Forest Department has no authority to levy such fees. The Company has fi led a transfer application before the Hon''ble Supreme Court. The Hon''ble Supreme Court of India on while issuing notice on our Transfer Petition stayed the further proceedings of the Company''s Writ Petition pending before the Hon''ble Allahabad High Court.

(v) M.P. Transit Fee on Coal demanded by Northern Coal Fields Limited. 23.77 23.43

* The Company had challenged the demand towards MP Transit Fee on Coal and fi led Writ Petition before the Hon''ble Jabalpur High Court. The Hon''ble High Court has struck down the levy and also ordered for refund of the amount paid under protest. The State government has fi led an Appeal against the order of the Hon''ble Supreme Court of India, and the Hon''ble High Court''s order has been stayed. The Counter affi davit in the matter has been fi led. The rejoinder has also been fi led by the state. To be listed along with the similar matter before the Supreme Court of India.

(vi) Imposition of Cess on Coal by Shaktinagar Special Area Development Authority. 11.17 9.38

* The Writ pending before Allahabad High Court, Allahabad. Demand and levy stayed. However, the Company has moved a transfer petition before the Hon''ble Supreme Court for tagging the matter with CA No. 1883 of 06 (ORISED Matter). The matter is tagged with ORISED and to be heard by the Nine Judges Bench of the Hon''ble Supreme Court.

(vii) Demand of Royalty on Vanadium by District Mining Officer, Lohardaga. 7.96 8.44

* Appeal is pending with the Hon''ble High Court of Allahabad. The demand has been stayed on certain conditions.

(viii) The demand of Excise Duty on gold. 155.31 155.31

* Part of the demand was confirmed, against which our ROM request is pending at CESTAT. Department''s appeal is pending before the Hon''ble Supreme Court for the part of the demand and penalty that was dropped.

(ix) Tax under MPGATSVA, 2005 @ 5% on basic price of coal, w.e.f. 30th September, 2005 by M.P. State Government. - 60.76

* Liability provided in the books of account.

(x) Demand raised on the assessment for entry tax with retrospective effect from the period November 1999 to till date. - 271.96

* Liability provided in the books of account.

(xi) Demand raised on assessment under CST Act and UP Sales Tax Act. 6.39 6.39

* Demand has been quashed at fi rst appeal and second appeal stage. However, Dept. has gone in the revision before the Hon''ble High Court. Allahabad.

(xii) Revision of surface rent on land by the Government of Jharkhand, w.e.f. 16th June, 2005. 26.18 22.56

* Matter is in dispute at the Hon''ble High Court of Jharkhand.

(xiii) Demand made by Nayab Tehsildar Kusmi/ Collector under Chhattisgarh as per Adhosanrachna Vikas evam Parayavaran Upkar Adhiniyam, 2005 @ 5% as environment tax on royalty plus 5% as development tax. 6.60 5.55

* The Writ petition, which has been fi led by the Company before the Hon''ble High Court of Chhattisgarh at Bilaspur, has been transferred to the Hon''ble Supreme Court and tagged with other Civil Appeals.

(xiv) Service tax paid on Goods Transport Agency and Business Auxiliary Services. 11.27 11.27

* Commissioner has confirmed the demand. Appeal is being filed at CESTAT New Delhi.

(xv) M.P. Transit Fee on Bauxite. 1.30 1.30

Company has fi led Writ Petition before the Hon''ble Jabalpur High Court. The Hon''ble High Court has struck down the levy and also ordered for refund of the amount paid under protest. The State government has fi led an appeal against the order of the Hon''ble High court.

(xvi) Demand for Entry Tax relating to valuation dispute of 2004-05 to 2005-06, for which appeals have been filed. 1.18 1.18

* Appeal has been fi led with Additional CCT, Sambalpur.

(xvii) CST demand on reopening of assessments for 1999-00 to 2003-04. 8.81 8.81

* Appeals have been fi led.

(xviii) Demand of penalty on excess CENVAT Credit taken. 1.09 1.09

* Appeal is pending with CESTAT, Mumbai.

(xix) Demand for Sales Tax u/s 15B for AYs 2001-02 and 2002-03. 7.96 7.96

* Appeal is pending with J.C. Appellate Authority, Baroda.

(xx) Service Tax on insurance policy attributable to Renusagar. 3.97 3.97

* Commissioner has confirmed the demand. Appeal is pending before the CESTAT, New Delhi.

(xxi) Disallowance of CENVAT credit. 5.29 5.29

* The matter is pending with CESTAT, Ahmedabad.

(xxii) Demand raised on assessment under CST Act and APGST Act for various years. 5.77 6.55

* Appeals have been fi led with appropriate authorities.

(xxiii) Demand for Service Tax on Consulting Engineer Services and Scientific & Tech Service. 3.84 3.84

* Appeal is pending with Commissioner (Appeals), Ahmedabad.

(xxiv) Excise Duty on Dross. 19.78 16.16

* Company has challenged the letter issued by Excise Department to pay Excise Duty on Dross before the Hon''ble Allahabad High Court.

(xxv) Alleged CENVAT taken without receipt of Alumina Hydrate inside the factory. 3.46 3.46

* Appeal fi les with Hon''ble CESTAT.

(xxvi) Alleged CENVAT availed on the Input services at captive Mines. 36.05 36.07

Appeal is pending with CESTAT.

(xxvii) CENVAT of Service Tax Credit availed on Supplementary Invoices. 3.12 3.12

* Pending with appropriate Authority.

(xxviii) Clearence of Silver at Nil Rate of Duty under Notification No. 5/2006. 8.96 8.96

* Appeal pending before CESTAT.

(xxix) Excess rebate has been sanctioned to the extent duty paid by supplementary invoices 5.08 7.65

* Appeal is pending with Commissioner of Customs (Appeals), Mumbai.

(xxx) Disallowance of CENVAT on input services. 6.79 5.40

* Pending with appropriate Authority.

(xxxi) Service Tax on reverse charge basis. - 31.10

* Since provided.

(xxxii) Parallel operation charges on capacity of Captive Power Plant by Madhya Pradesh Electricity Regulatory Commission. 7.05 -

* Matter is pending before the Hon''ble High Court of Madhya Pradesh at Jabalpur. The Hon''ble High Court passed an order on 20.9.2013 and stayed the operation of order passed by MPERC subject to deposit of 50% of the amount.

(xxxiii) Other Contingent Liabilities in respect of Excise, Customs, Sales Tax etc., each being for less than Rs. 1 crore. 15.51 13.33

* The demands are in dispute at various legal forums.

510.72 894.20

(b) Corporate Guarantees Outstandings 5,287.03 488.98

(Rs. 5,246.47 crore* (Previous year Rs. 448.42 crore) given on behalf of subsidiary companies)

* Includes Rs. 5,000 crore given to lender against loan provided to a subsidiary company, amount of loan outstanding as on 31st March 2014, is Rs. 4,950.

(c) Other money for which the Company is contingently liable:

i. Bills Discounted with Banks 3.53 -

ii. Customs Duty on Capital Goods and Raw Materials imported under EPCG Scheme/ Advance License, against which export obligation is to be fulfi lled (excluding cenvatable portion). 368.51 359.09

iii. The Company has received a notice dated 24th March, 2007, from Collector (Stamp), Kanpur, Uttar Pradesh, alleging that stamp duty of Rs. 252.96 crore is payable in view of order dated 18th November, 2002, of the Hon''ble High Court of Allahabad approving scheme of arrangement for merger of Copper business of Indo Gulf Corporation Limited with the Company. The Company is of the opinion that it has a very strong case as there is no substantive/computation provision for levy/calculation of stamp duty on court order approving scheme of arrangement under Companies Act, 1956, within the provisions of Uttar Pradesh Stamp Act. Moreover the properties in question are located in the State of Gujarat and thus the Collector (Stamp), Kanpur, has no territorial jurisdiction to make such a demand. It is pertinent to note that the Company in 2003-04 has already paid stamp duty which has been accepted as per the provisions of the Bombay Stamp Act 1958 with regard to transfer of shareholding of Indo Gulf Corporation Limited as per the Scheme of Arrangement. Furthermore, the demand made is on an incorrect assumption. The Company''s contention amongst the various other grounds made is that the demand is illegal, against the principles of natural justice, incorrect, bad in law and malafi de. The Company has fi led a writ petition before the Hon''ble High Court of Allahabad, inter alia, on the above said grounds, which is pending determination.

iv. Against the notifi cations issued by the State Electricity Regulatory Commissions of Uttar Pradesh, Odisha and Madhya Pradesh states under the provisions of Electricity Act, 2003, in respect of Renewable Purchase Obligation (RPO), the Company has fi led writ petitions before the jurisdictional high courts on the ground, inter alia, that RPO cannot be made applicable to captive users and the High Court(s) at Allahabad, Cuttack and Jabalpur have granted stay on the applicability of the RPO. Further, the Company has received favorable order from the Appellate Authority and Uttar Pradesh Regulatory Commission on applicability of RPO to units with Co-generation facility. In view of pending writ petitions and favourable order obtained from Appellate Authority, no provision has been considered necessary at this stage.

v. The assessing offi cer, while framing the assessment for AYs 2008-09, 2009-10 and 2010-11, has made adjustment, inter alia, amounting to Rs. 270.32 crore, Rs. 1,063.89 crore and Rs. 316.10 crore to total income of respective assessment years on account of purported arms'' length fee for corporate guarantee provided to foreign banks for granting loan to a wholly owned subsidiary of the Company, viz., AV Minerals (Netherlands) N.V. The Company has fi led appeals against these orders. The Company has been advised that, considering the facts of the case, no provision is necessary for these adjustments.

B Commitments

Estimated amount of contracts remaining to be executed on capital

(a) account and not provided for net of advances 1,181.44 2,957.37

(b) The Company, along with Aditya Birla Nuvo Limited, Grasim Industries Limited and Birla TMT Holdings Pvt. Limited (the Sponsors), being promoters of Idea Cellular Limited (Idea), has given the following undertakings to the Facility Agent:

i. The Sponsors shall collectively continue to hold at least 33% of the equity capital of Idea till the end of FY 2015-16 and shall not, without prior written approval of the Facility Agent, divest, transfer, assign, dispose of, pledge, charge, create any lien or in any way encumber 33% of shareholdings in Idea. Consequent upon the infusion of fresh equity capital of Idea, if the Sponsors'' stake gets diluted from 40% to 33% in the equity capital of Idea, the Sponsors agree and undertake to obtain the prior consent of the Rupee Facility Agent and, in other circumstances, the Sponsors agree and undertake to obtain the prior consent of the secured lenders representing 51% of the aggregate outstanding secured loans.

ii. The Sponsors shall collectively continue to hold 26% of the equity capital of Idea after FY 2015-16 and shall not, without the prior written approval of the Rupee Facility Agent, divest, transfer, assign, dispose of, pledge, charge, create any lien or in any way encumber 26% shareholdings in the capital of Idea.

iii. Not without prior approval of the Facility Agent in writing divest shareholdings in the equity capital of Idea that may result in a single investor along with its affi liates holding more than 25% of the equity capital of Idea.

(c) As the Parent Company, Hindalco has given the following undertakings to the lenders of Utkal Alumina International Limited (UAIL), a wholly owned subsidiary of the Company.

i. To hold minimum 51% equity shares in UAIL.

ii. To ensure to meet the Financial Covenants, except Fixed Asset Coverage Ratio, as provided in the loan agreements.

15. Both the green field projects of the Company, viz., Aditya Aluminium and Mahan Aluminium, as well as the green field project of its wholly-owned subsidiary company, Utkal Alumina International Limited have started operations during the year and are in the process of ramp up.

16. Information related to Micro, Small and Medium Enterprises, as defi ned in the Micro, Small and Medium Enterprises Development Act, 2006 (MSME Development Act), are given below. The information given below have been determined to the extent such enterprises have been identifi ed on the basis of information available with the Company:

17. The Company is one of the promoter members of Aditya Birla Management Corporation Private Limited (ABMCPL), a Company limited by guarantee which has been formed to provide common facilities and resources to its members, with a view to optimize the benefits of specialization and minimize cost for each member. The Company is one of the participants in the common pool and shares the expenses incurred by ABMCPL and accounted for under appropriate heads.

18. Related Party Disclosures:

A. List of Related Parties:

(a) Enterprises where control exists: i. Subsidiaries:

1 Hindalco Guniea SARL

2 Minerals & Minerals Limited

3 Aditya Birla Chemicals (India) Limited

4 Utkal Alumina International Limited

5 Utkal Alumina Technical and General Services Limited

6 Suvas Holdings Limited

7 Renukeshwar Investments & Finance Limited

8 Renuka Investments & Finance Limited

9 Dahej Harbour and Infrastructure Limited

10 Lucknow Finance Company Limited

11 Hindalco-Almex Aerospace Limited

12 Hindalco do Brasil Indústria e Comércio de ALumina Ltda., (w.e.f. 1st August, 2013)

13 Tubed Coal Mines Limited

14 East Coast Bauxite Mining Company Private Limited

15 Mauda Energy Limited

16 Birla Resources Pty. Limited

17 Aditya Birla Minerals Limited

18 Birla Maroochydore Pty. Limited

19 Birla Nifty Pty. Limited

20 Birla Mt. Gordon Pty. Limited

21 A V Minerals (Netherlands) N.V.

22 A V Metals Inc.

23 Novelis Inc.

24 Novelis (India) Infotech Ltd.

25 Novelis No. 1 Limited Partnership

26 4260848 Canada Inc.

27 4260856 Canada Inc.

28 8018227 Canada Inc.

29 8018243 Canada Limited

30 Novelis Cast House Technology Ltd.

31 Novelis Corporation (Texas)

32 Aluminum Upstream Holdings LLC (Delaware)

33 Eurofoil Inc. (USA) (New York)

34 Logan Aluminium Inc. (Delaware)

35 Novelis Acquisitions LLC (Delaware)

36 Novelis Brand LLC (Delaware)

37 Novelis PAE Corporation

38 Novelis North America Holdings Inc.

39 Novelis South America Holdings LLC

40 Novelis Delaware LLC (Delaware)

41 ALBRASILIS - Aluminio do Brasil Industria e Comércio Ltda.

42 Novelis do Brasil Ltda.

43 Novelis Laminés France SAS

44 Novelis PAE SAS

45 Novelis Aluminium Beteiligungs GmbH

46 Novelis Deutschland GmbH

47 Novelis Sheet Ingot GmbH

48 Novelis Aluminium Holding Company

49 Novelis Italia SpA

50 Al Dotcom Sdn Berhad

51 Alcom Nikkei Specialty Coatings Sdn Berhad

52 Aluminum Company of Malaysia Berhad

53 Novelis de Mexico S.A. de C.V.

54 Novelis Madeira, Unipessoal, Limited

55 Novelis Korea Limited

56 Novelis AG

57 Novelis Switzerland SA

58 Novelis UK Ltd.

59 Novelis Europe Holdings Limited

60 Novelis Services Limited

61 Novelis (Shanghai) Aluminum Trading Co., Ltd.

62 Novelis (China) Aluminum Products Co., Ltd.

63 Novelis MEA Ltd. (Dubai)

64 Novelis Vietnam Company Limited

65 Novelis Asia Holdings (Singapore) Pte. Ltd., w.e.f. 5th December, 2013 (b) Other Related Parties:

i. Associates:

1 Aditya Birla Science and Technology Company Limited

2 Idea Cellular Limited

3 Aluminum Norf GmbH

4 Consorcio Candonga

5 Deutsche Alumnum Verpackung Recycling GmbH

6 France Aluminum Recyclage SA ii. Joint Ventures:

1 Mahan Coal Limited

2 Hydromine Global Minerals (GmbH) Limited

3 MNH Shakti Limited iii. Trust of the Company:

1 Trident Trust

iv. Key Managerial Personnel:

Mr. D. Bhattacharya - Managing Director

Mr. Satish Pai - Deputy Managing Director (w.e.f. 13th August, 2013)

19. Previous year''s figures have been reclassified/regrouped to conform to this year''s classification.


Mar 31, 2013

1. Impairment Loss/(Reversal) (Net):

Certain assets of copper business have been impaired as a result of uneconomical operation. Accordingly, an amount of Rs. 17.25 crore (Previous year Rs. Nil) has been recorded as impairment loss during the year.

2. Segment Reporting

A. Primary Segment Reporting (by Business Segment):

(a) The Company has two reportable segments viz. Aluminium and Copper which have been identified in line with the Accounting Standard 17 on Segment Reporting, taking into account the organizational structure as well as differential risk and return of these segments. Details of products included in each segments are as under:

(i) Aluminium : Hydrate & Alumina, Aluminium and Aluminium Product

(ii) Copper : Continuous Cast Copper Rods, Copper Cathode, Sulphuric Acid, DAP & Complexes, Gold and Silver

(b) Inter-segment transfers are based on market rates.

(c) The details of the revenue, results, assets, liabilities and other information from operations by reportable business segments are under:

B. Secondary Segment Reporting (by Geographical demarcation):

(a) The secondary segment is based on geographical demarcation i.e. India and Rest of the World.

(b) The Company''s revenue from external customers and information about its assets and others by geographical location are as under:

3. The Company had formulated a scheme of financial restructuring under Sections 391 to 394 of the Companies Act 1956 ("the Scheme") between the Company and its equity shareholders approved by the High Court of judicature of Bombay to deal with various costs associated with its organic and inorganic growth plan. Pursuant to this, a separate reserve account titled as Business Reconstruction Reserve ("BRR") was created during the year 2008-09 by transferring balance standing to the credit of Securities Premium Account of the Company for adjustment of certain expenses as prescribed in the Scheme. Accordingly, the Company has transferred Rs. 8,647.37 crore from Securities Premium Account to BRR and so far Rs. 66.98 crore adjusted against BRR.

4. For the year ended 31st March, 2013, the Board of Directors of the Company have recommended dividend of Rs. 1.40 per share (Previous year Rs. 1.55 per share) to equity shareholders aggregating to Rs. 313.60 crore (Previous year Rs. 344.89 crore) including Dividend Distribution Tax.

5. Share Based Payment Employee stock option scheme

The shareholders of the Company has approved on 23rd January, 2007 an Employee Stock Option Scheme ("ESOS 2006"), formulated by the Company, under which the Company may issue 3,475,000 options to its permanent employees in the management cadre, in one or more tranches, whether working in India or out of India, including the Whole lime Directors of the Company. The shareholders have also approved giving discount up to 30% of the average price of the equity shares of the Company in the immediate preceding seven day period on the stock exchange. The ESOS 2006 is administered by the Compensation Committee of the Board of Directors of the Company ("the Committee"). Each option when exercised would be converted into one fully paid-up equity share of Rs. 1/- each of the Company. The options will vest in 4 equal annual instalments after one year of the grant. The maximum period of exercise is 5 years from the date of vesting. Further, forfeited/expired options are available to the Committee for grant. These options do not carry rights to dividends or voting rights till the date of exercise. Further, on 23rd September, 2011 the ESOS 2006 has been partially modified by which the Company may now issue 6,475,000 options.

However, under the ESOS 2006, so far the Committee has granted 3,545,550 options (Previous year 3,545,550 options) to its eligible employees in three tranches out of which 880,145 options (Previous year 706,901 options) have been forfeited/expired and are available to the Committee for grant as per term of the Scheme.

The compensation cost of stock options granted to employees have been accounted by the Company using the intrinsic value method. Accordingly, Employee benefits expenses includes Rs. 0.27 crore (Previous year Rs. 1.29 crore) being the amortization of intrinsic value for the year ending 31st March, 2013.

6. Operating Lease

The total of future minimum lease payment commitments under non-cancellable operating lease agreement for a period of twenty years expiring in 2022 to use railway tracks along with locomotives for transportation of materials are as under:

7 Derivative Financial Instruments

(a) The Company has adopted Accounting Standard 30, "Financial Instruments: Recognition and Measurement" issued by The Institute of Chartered Accountants of India so far as it relates to derivative accounting.

(b) In the ordinary course of business, the Company is exposed to risks resulting from changes in prices of commodity, exchange rate fluctuation and interest rate movements. It manages its exposure to these risks through derivative financial instruments. It uses derivative instruments such as forwards, futures, swaps and options to manage these risks. These derivative financial instruments reduce the impact of both favourable and unfavourable fluctuations. Except where noted, the derivative contracts are marked- to-market (MTM) and the related gains and losses are included in the Statement of Profit and Loss in the current accounting period.

The Company''s risk management activities are subject to the management, direction and control of Risk Management Board (RMB). The RMB is composed of two directors including Managing Director, Chief Financial Officer and other officers and employees selected by the Managing Director. The RMB reports to the Board of Directors on the scope of its activities.

The decision of whether and when to execute derivative financial instruments along with its tenure can vary from period to period depending on market conditions and the relative costs of the instruments. The tenure is always linked to the timing of the underlying exposure, with the connection between the two being regularly monitored. The Company is exposed to losses in the event of non-performance by the counterparties to the derivative contracts. All derivative contracts are executed with counterparties that, in our judgment, are creditworthy. The credit levels are reviewed to ensure that there is not an inappropriate concentration of outstanding to any particular counterparty.

Commodity Price Risk Copper and Precious Metals

This business is conducted under a conversion model. The prices of input and output are derived from the same benchmark and/or are linked to each other through a defined formula. The objective of risk management is to attempt to use derivatives to match the price fluctuations arising out of the timing mismatch in pricing the input and output so as to ''pass through'' the change in input cost to customers to make the margins immune to the fluctuations in prices of the input and output.

Aluminium

This business is vertically integrated. The main raw material viz. bauxite (mostly mined from own mines) and other purchased raw materials do not have any linkage with the output price which is Aluminium LME prices. When the prices of input(s) and output(s) do not follow the above condition, then risk management attempts to use derivatives so as to protect the margins from adverse movements in prices on either side, i.e. from a rise in input cost or from a fall in output price.

As a condition of sale, customers often require the Company to enter into fixed price commitments. These commitments expose the Company to the risk of fluctuating aluminum prices between the time the order is committed and the time that the material is shipped. The Company may enter into derivative financial instruments to mitigate the risk arising out of the fixed price commitments. Consequently, the gain or loss resulting from movements in the price of aluminum on these contracts would generally be offset by an equal and opposite impact on the net sales and purchases being hedged.

Foreign Currency Exchange Risk

Exchange rate movements, particularly the United States Dollar (USD) and Euro (EUR) against Indian Rupee (INR), have an impact on our operating results. In addition to the foreign exchange flow from exports, the commodity prices in the domestic market are derived based on the landed cost of imports in India where LME prices and USD/INR exchange rate are the main factors. In case of conversion business, the objective is to match the exchange rate of outflows and related inflows through derivative financial instruments. With respect to Aluminium business where costs are predominantly in INR, the strengthening of INR against USD adversely affects the profitability of the business and benefits when INR depreciates against USD. The company enters into various foreign exchange contracts to protect profitability. The Company also enters into various foreign exchange contracts to mitigate the risk arising out of foreign currency exchange rate movement in foreign currency contracts executed with foreign suppliers to procure capital items for its project activities.

Embedded derivatives

Copper concentrate is purchased on future pricing model based on month''s average LME (in case of copper) / LBMA (in case of gold and silver). Since the value of the concentrate changes with response to change in commodity pricing indices, embedded derivatives (ED) is identified and segregated in the contract. The ED so segregated, is treated like commodity derivative and qualify for hedge accounting. These derivatives are put into a Fair Value hedge relationship with inventory.

The objective of hedge designation of the embedded commodity derivative is to offset the volatility in the Statement of Profit and Loss due to change in value of un-priced inventory with response to LME / LBMA.

8. Information related to Micro, Small and Medium Enterprises, as defined in the Micro, Small and Medium Enterprises Development Act, 2006 (MSME Development Act), are given below. The information given below have been determined to the extent such enterprises have been identified on the basis of information available with the Company:

9. The Company is one of the promoter members of Aditya Birla Management Corporation Private Limited (ABMCPL), a Company limited by guarantee which has been formed to provide common facilities and resources to its members, with a view to optimize the benefits of specialization and minimize cost for each member. The Company is one of the participants in the common pool and shares the expenses incurred by ABMCPL and accounted for under appropriate heads.

10. Related Party Disclosures:

A List of Related Parties:

(a) Enterprises where control exists:

i. Subsidiaries:

1 Hindalco Guinea SARL

2 Minerals & Minerals Limited

3 Aditya Birla Chemicals (India) Limited

4 Utkal Alumina International Limited

5 Suvas Holdings Limited

6 Renukeshwar Investments & Finance Limited

7 Renuka Investments & Finance Limited

8 Dahej Harbour and Infrastructure Limited

9 Lucknow Finance Company Limited

10 Hindalco-Almex Aerospace Limited

11 HAAL USA Inc. (dissovled w.e.f. 23rd April 2012)

12 Tubed Coal Mines Limited

13 East Coast Bauxite Mining Company Private Limited

14 Mauda Energy Limited

15 Birla Resources Pty Limited

16 Aditya Birla Minerals Limited

17 Birla Maroochydore Pty Limited

18 Birla Nifty Pty Limited

19 Birla Mt. Gordon Pty Limited

20 AV Minerals (Netherlands) B.V.

21 AV Metals Inc.

22 Novelis MEA Ltd (Dubai)

23 Novelis Inc.

24 Albrasilis - Aluminio do Brazil Industria e Comercia Ltda

25 Novelis do Brasil Ltda.

26 4260848 Canada Inc.

27 4260856 Canada Inc.

28 Novelis Cast House Technology Ltd.

29 Novelis No. 1 Limited Partnership

30 Novelis Sheet Ingot GmbH

31 Novelis Lamines France SAS

32 Novelis PAE SAS

33 Novelis Aluminum Beteiligungs GmbH

34 Novelis Deutschland GmbH

35 Novelis Aluminum Holding Company

36 Novelis Italia SpA

37 Novelis (Shanghai) Aluminum Trading Company

38 Aluminum Company of Malaysia Berhad

39 Alcom Nikkei Specialty Coatings Sdn Berhad

40 Al Dotcom Sdn Berhad #

41 Novelis (India) Infotech Ltd.

42 Novelis de Mexico SA de CV

43 Novelis Korea Ltd.

44 Novelis AG

45 Novelis Switzerland SA

46 Novelis Europe Holdings Limited

47 Novelis UK Ltd.

48 Aluminum Upstream Holdings LLC (Delaware)

49 Eurofoil, Inc. (USA) (New York)

50 Logan Aluminum Inc. (Delaware)

51 Novelis Corporation (Texas)

52 Novelis Madeira, Unipessoal, Limited

53 Novelis Services Limited

54 Novelis Brand LLC (Delaware)

55 Novelis PAE Corp (Delaware)

56 Novelis South America Holdings LLC

57 Novelis (China) Aluminum Products Company Ltd.

58 8018227 Canada Inc.

59 8018243 Canada Limited

60 Novelis Acquisitions LLC (Delaware)

61 Novelis North America Holdings Inc. (Delaware)

62 Novelis Delaware LLC (Delaware)

63 Novelis Vietnam Company Ltd.

(b) Other Related Parties:

i. Associates:

1 Aditya Birla Science and Technology Company Limited

2 Idea Cellular Limited

3 Aluminum Norf GmbH

4 Consorcio Candonga

5 MiniMRF LLC (Delaware)

6 Deutsche Aluminum Verpackung Recycling GmbH

7 France Aluminum Recyclage SA

ii. Joint Ventures:

1 Mahan Coal Limited

2 Hydromine Global Minerals (GMBH) Limited

iii. Trust of the Company:

1 Trident Trust

iv. Key Managerial Personnel:

Mr. D. Bhattacharya - Managing Director

11. Previous year figures have been reclassified/regrouped to conform to this year''s classification.


Mar 31, 2012

(a) Rights, preferences and restrictions attached to Equity Shares:

The Company has one class of equity shares having a par value of Rs. 1/- per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

(b) Shares reserved for issue under options:

The Company has reserved equity shares for issue under the Employee Stock Option Scheme. The Company has also reserved equity shares for issue against warrants allotted on preferential basis to the Promoter Group.

Please refer Note 38 on "Share Based Payment" for details of Employee Stock Option Scheme and Note 4 on "Money received against Share Warrants" for details of share warrants allotted to the Promoter Group.

(i) During the year ended 31st March, 2009, the Company has allotted 376 Equity Shares of Rs. 1/- each and 2,032,734 6% Redeemable Cumulative Preference Shares of Rs. 2/- each fully paid-up to the shareholders of erstwhile Indian Aluminium Company, Limited pursuant to a Scheme of Amalgamation without payment being received in cash. However, 2,032,734 6% Redeemable Cumulative Preference Shares, allotted as above, has been redeemed on 1st April, 2009.

1. Money received against Share Warrants:

During the year, the Company has allotted 150,000,000 warrants on a preferential basis to the Promoter Group on 22nd March, 2012 entitling them to apply for and obtain allotment of one equity share of Rs. 1 /- each fully paid-up at a price of Rs. 144.35 per share against each such warrant at any time after the date of allotment but on or before the expiry of 18 months from the date of allotment in one or more tranches. The Company has received Rs. 541.31 crore being 25% against these warrants. The entire amount so received is being utilised for various greenfield and brownfield projects expenditure.

(a) Term Loans from Banks Rs. 5,142.99 crore (Previous year Rs. 5,142.99 crore) is secured by the first ranking pari-passu charge on all immovable properties (except greenfield projects i.e. Mahan Aluminium Project, Aditya Aluminium Project, and Aluminium project in the state of Jharkhand) of the company both present and future, and hypothecation of all movable assets (except book debt & current assets and movable assets of greenfield projects) both present and future of the Company. This loan carries interest at the rate of IDBI Bank's base rate plus 1.25%.

As per original loan agreement Rs. 2,146.66 crore, Rs. 2571.49 crore and Rs. 424.84 crore are repayable in FY14, FY15 and FY16, respectively. However, in exercise of its prepayment option without payment of any fees or penalty, the Company has served a notice on all lenders to prepay this loan on June 29, 2012.

(b) Term Loans from Banks Rs. 5,890.77 crore (Previous year Rs. Nil) and from other parties Rs. 78.35 crore (Previous year Rs. Nil) are secured by a first ranking charge / mortgage/ security interest in respect of all the immovable and movable properties and assets and all intangible assets for the Mahan Aluminium Project, both present and future, except Current Assets, Cash and investments and a second ranking charge / mortgage/ security interest, in respect of the Current Assets and Cash.

Above loans carries interest at the rate of State Bank of India's base rate plus 1.75% and is repayable in 42 quarterly instalments commencing from September 30, 2013 and ending on December 31, 2023. The repayment in each financial year in percentage is 4.25, 7.75, 9, 9, 10, 10, 10, 10, 10.75, 11 and 8.25 of the loan amount.

Post Commercial Operation Date of the Mahan Project, the Company will have an option to prepay all or any portion of this Loan, without payment of Prepayment Penalty within 15 (fifteen) days after any annual Margin Reset Date.

(c) Deferred Payment Liabilities represent sales tax deferral which is payable in yearly instalment by FY 2018.

(a) Cash Credit, Export Credit etc. granted under the Consortium Lending Arrangement are secured by a first pari passu charge in the form of hypothecation of the entire stocks of raw materials, work-in- process, finished goods, consumable stores & spares and book debts pertaining to the Company's Aluminium business. Working Capital Loan of State Bank of India for the Copper business is secured by a first charge by way of hypothecation of stocks of raw materials, work-in-process, finished goods and consumable stores & spares of Copper business, both present and future, and second charge on the immovable properties of the Copper business.

(b) Payable under Trade Financing Arrangements comprise of unsecured credit availed from Banks for payment to suppliers for raw materials purchased by the Company. The arrangements are interest- bearing and are normally payable within 180 days.

(b) Although the book/market value of certain investments (amount not ascertained) is lower than cost, considering the strategic and long term nature of the investments and asset base of the investee companies, in the opinion of the management such decline is temporary in nature and no provision is necessary for the same.

(i) Sales of Continuous Cast Copper Rod and Copper Cathode are accounted for provisionally, pending finalization of price. Variations are accounted for in the year of settlement. Final price receivable from sale of Copper for which quotational price was not finalized in previous year, were realigned at year end rate based on LME Rate and additional Sale of Rs. 8.86 crore (Previous year reversal of sales of Rs. 4.99 crore) were accounted for. During the Year final price was settled at Rs. 13.20 crore (Previous year Rs. 13.35 crore) and further sales of Rs. 4.33 crore (Previous year credit for further sales 7 8.36 crore) was taken into account. As on 31st March, 2012, sale of Copper, Gold, Silver and Anode Slime amounting to Rs.737.22 crore (Previous year Rs. 649.40 crore) pending for price finalization were realigned at year-end rate of LME and reversal of sales of Rs. 8.21 crore (Previous year additional sales Rs. 8.86 crore) was accounted for. Actual inflow or outflow is expected on finalization of price.

(ii) Include sales of DAP including nutrient based subsidy of P&K Rs. 421.97 crore (Previous year Rs. 367.98 crore).

2. For the year ended 31st March, 2012, the Board of Directors of the Company have recommended dividend of Rs. 1.55 per share (Previous year Rs. 1.50 per share) to equity shareholders aggregating to Rs. 344.89 crore (Previous year Rs. 333.75 crore) including Dividend Distribution Tax.

3. Segment Reporting

A Primary Segment Reporting (by Business Segment):

(a) The Company has two reportable segments viz. Aluminium and Copper which have been identified in line with the Accounting Standard 17 on Segment Reporting, taking into account the organizational structure as well as differential risk and return of these segments. Details of products included in each segments are as under:

(i) Aluminium : Hydrate & Alumina, Aluminium and Aluminium Product.

(ii) Copper : Continuous Cast Copper Rods, Copper Cathode, Sulphuric Acid, DAP & Complexes, Gold and Silver.

(b) Inter-segment transfers are based on market rates.

4. Share Based Payment

Employee Stock Option Scheme

The shareholders of the Company has approved on 23rd January, 2007 an Employee Stock Option Scheme ("ESOS 2006"), formulated by the Company, under which the Company may issue 3,475,000 options to its permanent employees in the management cadre, in one or more tranches, whether working in India or out of India, including the Whole Time Directors of the Company. The shareholders have also approved giving discount upto 30% of the average price of the equity shares of the Company in the immediate preceding seven day period on the stock exchange. The ESOS 2006 is administered by the Compensation Committee of the Board of Directors of the Company ("the Committee"). Each option when exercised would be converted into one fully paid-up equity share of Rs. 1/- each of the Company. The options will vest in 4 equal annual instalments after one year of the grant. The maximum period of exercise is 5 years from the date of vesting. Further, forfeited/ lapsed options are available to the Committee for grant. These options do not carry rights to dividends or voting rights till the date of exercise. Further, on 23rd September, 2011 the ESOS 2006 has been partially modified by which the Company may now issue 6,475,000 options.

However, under the ESOS 2006, so far the Committee has granted 3,545,550 options to its eligible employees in three tranches out of which 706,901 options have been forfeited/ lapsed and are available to the Committee for grant as per term of the Scheme.

The compensation cost of stock options granted to employees have been accounted by the Company using the intrinsic value method. Accordingly, Employee benefits expenses includes Rs. 1.29 crore (Previous year Rs. 1.34 crore) being the amortization of intrinsic value for the year ending 31st March, 2012.

The weighted average share price at the date of exercise of stock options exercised during the year ended 31st March, 2012 and 31st March, 2011 was Rs. 149.92 and Rs. 206.45 respectively.

Fair Valuation:

At grant date, the estimated fair value of stock options granted in Tranche I, Tranche II and Tranche III under ESOS 2006 was Rs. 65.78, Rs. 57.11 and Rs. 102.96 respectively. The fair valuation of stock options have been done by an independent valuer using Black and Scholes Model. For fair valuation, expected volatility is based on the historical share price volatility over the past 5 years. The details of stock options granted and the key assumptions taken into account for fair valuation are as under:

5. The Company had formulated a scheme of financial restructuring under Sections 391 to 394 of the Companies Act 1956 ("the Scheme") between the Company and its equity shareholders approved by the High Court of Judicature of Bombay to deal with various costs associated with its organic and inorganic growth plan.

Pursuant to this, a separate reserve account titled as Business Reconstruction Reserve ("BRR") was created during the year 2008-09 by transferring balance standing to the credit of Securities Premium Account of the Company for adjustment of certain expenses as prescribed in the Scheme. Accordingly, the Company has transferred Rs. 8,647.37 crore from Securities Premium Account to BRR and so far Rs. 66.98 crore adjusted against BRR.

6. The Company has terminated Joint Venture with Almex USA Inc. ("Almex") on 10th August, 2011 and Almex has sold 8,011,000 equity shares of Hindalco-Almex Aerospace Limited ("HAAL") to the Company. HAAL has further issued 133,745,744 equity shares of Rs. 10/- each to the Company towards advance of Rs. 110.19 crore, conversion of unsecured loan Rs. 21.00 crore and interest accrued thereon amounting to Rs. 2.56 crore on 12th September, 2011. Consequently, the Company holds 97.18% of shares in the HAAL and the balance 2.82% is held by Almex.

7. The Company has received a net amount of Rs. 69.81 crore on 9th February, 2012 from its wholly owned subsidiary A V Minerals (Netherlands) B. V. towards return of capital by reducing nominal value of shares from EURO 778.20 to EURO 773.24 per share. The said amount has been adjusted in carrying cost of investment and the foreign exchange gain of Rs. 2.95 crore on this transaction has been netted off from Miscellaneous Expenses under Other Expenses.

The Company has various schemes (funded/unfunded) for payment of gratuity to all eligible employees calculated at specified number of days (ranging from 15 days to 1 month) of last drawn salary depending upon the tenure of service for each year of completed service subject to minimum service of five years payable at the time of separation upon superannuation or on exit otherwise.

B. In respect of defined Contribution Schemes:

(a) As required under Guidance Note on Implementation of Accounting Standard 15 (revised! issued by the ICAI in respect of exempted Provident Fund, the Company has ascertained shortfall in interest payable to the members of Provident Fund based on actuarial valuation and made appropriate provision in the books. The Company contributes 12% of salary for all eligible employees towards Provident Fund managed either by approved trusts or by the Central Government. The amount debited to statement of profit and loss during the year was Rs. 58.30 crore (previous year Rs. 55.00 crore). In view of typical nature of such Provident fund scheme involving defined benefit underpin in respect of interest payable to members as declared by The Employees Provident Fund Organisation, the defined benefit obligation relating to interest shortfall is considered to be Other Long Term Employee Benefits.

(b) The Company contributes a certain percentage of salary for all eligible employees in managerial cadre towards Superannuation Funds managed by approved trusts or by Life Insurance Corporation of India. The amount debited to Statement of Profit and Loss during the year was Rs. 11.92 crore (previous year Rs. 10.41 crore).

8. Derivative Financial Instruments

(a) The Company has adopted Accounting Standard 30, "Financial Instruments: Recognition and Measurement" issued by The institute of Chartered Accountants of India so far as it relates to derivative accounting.

(b) In the ordinary course of business, the Company is exposed to risks resulting from changes in prices of commodity, exchange rate fluctuation and interest rate movements. It manages its exposure to these risks through derivative financial instruments. It uses derivative instruments such as forwards, futures, swaps and options to manage these risks. These derivative financial instruments reduce the impact of both favourable and unfavourable fluctuations. Except where noted, the derivative contracts are marked- to-market (MTM) and the related gains and losses are included in the Statement of Profit and Loss in the current accounting period.

The Company's risk management activities are subject to the management, direction and control of Risk Management Board (RMB). The RMB is composed of two directors including Managing Director, Chief Financial Officer and other officers and employees selected by the Managing Director. The RMB reports to the Board of Directors on the scope of its activities.

The decision of whether and when to execute derivative financial instruments along with its tenure can vary from period to period depending on market conditions and the relative costs of the instruments. The tenure is always linked to the timing of the underlying exposure, with the connection between the two being regularly monitored. The Company is exposed to losses in the event of non-performance by the counterparties to the derivative contracts. All derivative contracts are executed with counterparties that, in our judgment, are creditworthy. The credit levels are reviewed to ensure that there is not an inappropriate concentration of outstanding to any particular counterparty.

Commodity Price Risk

Copper and Precious Metals

This business is conducted under a conversion model. The prices of input and output are derived from the same benchmark and/or are linked to each other through a defined formula. The objective of risk management is to attempt to use derivatives to match the price fluctuations arising out of the timing mismatch in pricing the input and output so as to 'pass through' the change in input cost to customers to make the margins immune to the fluctuations in prices of the input and output.

Aluminium

This business is vertically integrated. The main raw material viz. bauxite (mostly mined from own mines) and other purchased raw materials do not have any linkage with the output price which is Aluminium LME prices. When the prices of input(s) and output(s) do not follow the above condition, then risk management attempts to use derivatives so as to protect the margins from adverse movements in prices on either side, i.e. from a rise in input cost or from a fall in output price.

As a condition of sale, customers often require the Company to enter into fixed price commitments. These commitments expose the Company to the risk of fluctuating aluminum prices between the time the order is committed and the time that the material is shipped. The Company may enter into derivative financial instruments to mitigate the risk arising out of the fixed price commitments. Consequently, the gain or loss resulting from movements in the price of aluminum on these contracts would generally be offset by an equal and opposite impact on the net sales and purchases being hedged.

Foreign Currency Exchange Risk

Exchange rate movements, particularly the United States Dollar (USD) and Euro (EUR) against Indian Rupee (INR), have an impact on operating results. In addition to the foreign exchange flow from exports, the commodity prices in the domestic market are derived based on the landed cost of imports in India where LME prices and USD/INR exchange rate are the main factors. In case of conversion business, the objective is to match the exchange rate of outflows and related inflows through derivative financial instruments. With respect to Aluminium business where costs are predominantly in INR, the strengthening of INR against USD adversely affects the profitability of the business and benefits when INR depreciates against USD. The Company enters into various foreign exchange contracts to protect profitability. The Company also enters into various foreign exchange contracts to mitigate the risk arising out of foreign currency exchange rate movement in foreign currency contracts executed with foreign suppliers to procure capital items for its project activities.

Embedded derivatives

Copper concentrate is purchased on future pricing model based on month's average LME (in case of copper) / LBMA (in case of gold and silver). Since the value of the concentrate changes with response to change in commodity pricing indices, embedded derivatives (ED) is identified and segregated in the contract. The ED so segregated, is treated like commodity derivative and qualify for hedge accounting. These derivatives are put into a Fair Value hedge relationship with inventory.

The objective of hedge designation of the embedded commodity derivative is to offset the volatility in the Statement of Profit and Loss due to change in value of un-priced inventory with response to LME / LBMA.

iii. The Company has received a notice dated 24th March, 2007 from collector (Stamp) Kanpur, Uttar Pradesh alleging that stamp duty of Rs. 252.96 crore is payable in view of order dated - 18th November, 2002 of Hon'ble High Court of Allahabad approving scheme of arrangement for merger of Copper business of Indo Gulf Corporation Limited with the Company. The Company is of the opinion that it has a very strong case as there is no substantive/computation provision for levy/calculation of stamp duty on court order approving scheme of arrangement under Companies Act, 1956 within the provisions of Uttar Pradesh Stamp Act, moreover the properties in question are located in the State of Gujarat and thus the collector (stamp) Kanpur has no territorial jurisdiction to make such a demand. It is pertinent to note that the Company in 2003-04 has already paid stamp duty which has been accepted as per the provisions of the Bombay Stamp Act 1958 with regard to transfer of shareholding of Indo Gulf Corporation Limited as per the Scheme of Arrangement. Furthermore, the demand made is on an incorrect assumption. The Company's contention amongst the various other grounds made is that the demand is illegal, against the principles of natural justice, incorrect, bad in law and malafide. The Company has filed a writ petition before the Hon'able High Court of Allahabad, inter alia, on the above said grounds, which is pending determination.

iv. Against the notifications issued by the State Electricity Regulatory Commissions of Uttar Pradesh and Odisha States under the provisions of Electricity Act, 2003 in respect of Renewable Purchase Obligation (RPO), the Company has filed writ petitions before jurisdictional high courts on the ground, inter alia, that RPO cannot be made applicable to captive users and the High Court(s) at Allahabad and Cuttack have granted stay on the applicability of the RPO. Pending disposal of these, no provision has been considered necessary at this stage.

v. As per the draft assessment order dated 27th December, 2011 for the Assessment Year 2008- 09 under the provisions of the Income-tax Act, 1961, the Assessing Officer has proposed an addition of Rs. 1,156 crore to the total income of the Company by considering guarantee as provision of service and has imputed a Guarantee Fee at the rate of 10.70% per annum on the loan amount on account of purported arm's length fee of corporate guarantee provided to foreign banks for granting loan to wholly-owned foreign subsidiary for funding acquisition of Novelis Inc. The Company has filed objections before Dispute Resolution Panel (DRP) against the said order which is pending. As on date no demand has been raised.

(b) The Company, along with Aditya Birla Nuvo Limited, Grasim Industries Limited and Birla TMT Holdings Pvt. Limited (the Sponsors), being promoters of Idea Cellular Limited (Idea) has given the following undertakings to the Facility Agent:

i. The Sponsors shall collectively continue to hold at least 33% of the equity capital of Idea till the end of FY 2015-16 and shall not without prior written approval of the Facility Agent, divest, transfer, assign, dispose of, pledge, charge, create any lien or in any way encumber 33% of shareholdings in Idea. Consequent upon the infusion of fresh equity capital of Idea, if the Sponsors' stake gets diluted from 40% to 33% in the equity capital of Idea, the Sponsors agree and undertake to obtain the prior consent of the Rupee Facility Agent and in other circumstances, the Sponsors agree and undertake to obtain the prior consent of the secured lenders representing 51 % of the aggregate outstanding secured loans.

ii. The Sponsors shall collectively continue to hold 26% of the equity capital of Idea after FY 2015-16 and shall not without the prior written approval of the Rupee Facility Agent, divest, transfer, assign, dispose of, pledge, charge, create any lien or in any way encumber 26% shareholdings in the capital of Idea.

iii. Not without prior approval of the Facility Agent in writing divest shareholdings in the equity capital of Idea that may result in a single investor along with its affiliates holding more than 25% of the equity capital of Idea.

(c) As the Sponsor, the Company has executed a Common Rupee Loan Agreement (CRLA) to avail financing of Rs. 4,906 crore for project undertaken by Utkal Alumina International Limited (Utkal), a wholly-owned subsidiary of the Company. Under the CRLA, the Company has following obligations:

i. To infuse base equity of Rs. 2,103 crore in Utkal.

ii. To ensure that debt: equity ratio in Utkal is always maintained at 70:30.

iii. To hold minimum 51% equity shares in Utkal.

iv. To bring funds for meeting cost overrun of the project.

v. If Utkal exercises its right or requires to replace any lender under the CRLA and to enable to bring other lender to replace such a lender within the permitted time, the Company is required to infuse funds for prepayment of the loan to such lender and for undrawn portion of such rupee lender.

9 The Company is one of the promoter members of Aditya Birla Management Corporation Private Limited (ABMCPL), a Company limited by guarantee which has been formed to provide common facilities and resources to its members, with a view to optimize the benefits of specialization and minimize cost for each member. The Company is one of the participants in the common pool and shares the expenses incurred by ABMCPL and accounted for under appropriate heads.

10 Related Party Disclosures:

A List of Related Parties:

(a) Enterprises where control exists:

i. Subsidiaries:

1 Indal Exports Limited (dissolved on 4th March, 2011)

2 Minerals & Minerals Limited

3 Aditya Birla Chemicals (India) Limited

4 Utkal Alumina International Limited

5 Suvas Holdings Limited

6 Renukeshwar Investments & Finance Limited

7 Renuka Investments & Finance Limited

8 Dahej Harbour and Infrastructure Limited

9 Lucknow Finance Company Limited

10 Hindalco-Almex Aerospace Limited

11 HAAL USA Inc.

12 Tubed Coal Mines Limited

13 East Coast Bauxite Mining Company Private Limited

14 Mauda Energy Limited

15 Birla Resources Pty Limited

16 Aditya Birla Minerals Limited

17 Birla Maroochydore Pty Limited

18 Birla Nifty Pty Limited

19 Birla Mt. Gordon Pty Limited

20 AV Minerals (Netherlands) B.V.

21 AV Metals Inc.

22 AV Aluminum Inc. (merged with Novelis Inc. w.e.f. 29th September, 2010)

23 Novelis Inc.

24 Albrasilis - Aluminio do Brazil Industria e Comercia Ltda

25 Novelis do Brasil Ltda.

26 4260848 Canada Inc.

27 4260856 Canada Inc.

28 Novelis Cast House Technology Ltd.

29 Novelis No. 1 Limited Partnership

30 Novelis Foil France SAS

31 Novelis Lamines France SAS

32 Novelis PAE SAS

33 Novelis Aluminium Beteiligungs GmbH

34 Novelis Deutschland GmbH

35 Novelis Aluminium Holding Company

36 Novelis Italia SpA

37 Novelis Luxembourg SA

38 Aluminum Company of Malaysia Berhad

39 Alcom Nikkei Specialty Coatings Sdn Berhad

40 Al Dotcom Sdn Berhad

41 Novelis (India) Infotech Ltd.

42 Novelis de Mexico SA de CV

43 Novelis Korea Ltd.

44 Novelis AG

45 Novelis Switzerland SA

46 Novelis Europe Holdings Limited

47 Novelis UK Ltd.

48 Aluminum Upstream Holdings LLC (Delaware)

49 Eurofoil, Inc. (USA) (New York)

50 Logan Aluminium Inc. (Delaware)

51 Novelis Corporation (Texas)

52 Novelis Madeira, Unipessoal, Limited '

53 Novelis Services Limited

54 Novelis Brand LLC (Delaware)

55 Novelis PAE Corp (Delaware)

56 Novelis South America Holdings LLC

57 Evermore Recycling LLC

58 8018227 Canada Inc.

59 8018243 Canada Limited

60 Novelis Acquisitions LLC (Delaware)

61 Novelis North America Holdings Inc. (Delaware)

62 Novelis Delaware LLC (Delaware)

(b) Other Related Parties:

i. Associates:

1 Aditya Birla Science and Technology Company Limited

2 Idea Cellular Limited

3 Aluminium Norf GmbH

4 Consorcio Candonga

5 MiniMRF LLC (Delaware)

6 Deutsche Aluminium Verpackung Recycling GmbH

7 France Aluminium Recyclage SA

ii. Joint Ventures:

1 Mahan Coal Limited

2 Hydromine Global Minerals (GMBH) Limited

iii. Trust of the Company:

1 Trident Trust

iv. Key Managerial Personnel:

Mr. D. Bhattacharya -Managing Director

11 The financial statements for the year ended 31st March, 2011 had been prepared as per the then applicable, pre-revised Schedule VI to the Companies Act, 1956. Consequent to the notification of Revised Schedule VI under the Companies Act, 1956, the financial statements for the year ended 31st March,2012 are prepared as per Revised Schedule VI. Previous year figures have been reclassified/regrouped to conform to this year's classification. The adoption of Revised Schedule VI for previous year figures does not impact recognition and measurement principles followed for preparation of financial statements except for accounting for dividend on investments in subsidiaries.

 
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