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Notes to Accounts of Jindal Stainless (Hisar) Ltd.

Mar 31, 2015

1. Composite Scheme of Arrangement

1. A Composite Scheme of Arrangement (here in after referred to as 'Scheme') amongst Jindal Stainless Limited (JSL) and its three wholly owned subsidiaries namely Jindal Stainless (Hisar) Limited (the Company/Transferee/Resulting Company), Jindal United Steel Limited (JUSL) and Jindal Coke Limited (JCL) under the provision of Sec 391-394 lead with 100-103 of the Companies Act, 1956 and other relevant provision of Companies Act, 1956 and / or Companies Act, 2013 has been sanctioned by the Hon'ble High Court of Punjab & Haryana, Chandigarh vide its Order dated 21st September 2015, modified by order dated 12th October, 2015. The Schemes inter-alia includes:-

a) Demerger of the Demerged Undertakings (as defined in the scheme) of JSL comprising of the Ferro Alloys Division located at Jindal Nagar, Kothavalasa (AP) and the Mining Division of JSL and vesting of the same in the Company w.e.f. appointed date i.e. close of business hours before midnight of March 31,2014. (Section I of the Scheme)

b) Transfer of the Business undertaking 1 (as defined in the scheme) of JSL comprising of the Stainless Steel Manufacturing Facilities of JSL located at Hisar, Haryana and vesting of the same with the Company on Going Concern basis by way of Slump Sale along with investments in the domestic subsidiaries (listed in Part B of schedule 2 of the Scheme) of JSL w.e.f. from appointed date i.e. close of business hours before midnight of 31st March, 2014. (Section II of the Scheme)

c) Transfer of the Business undertaking 2 (as defined in the scheme) of JSL comprising, inter-alia, of the Hot Strip Plant of JSL located at Odisha and vesting of the same in Jindal United Steel Limited on Going Concern basis by way of Slump Sale w.e.f. appointed date i.e. close of business hours before midnight of March 31,2015. (Section III of the Scheme)

d) Transfer of the Business Undertaking 3 (as defined in the Scheme) of JSL comprising, inter-alia ,of the Coke Oven Plant of JSL Located at Odisha and vesting of the same with Jindal Coke Limited on Going Concern basis by way of Slump Sale w.e.f. appointed date i.e. close of business hours before midnight of March 31,2015. (Section IV of the Scheme)

Section I and Section II of the Scheme became effective on 1st November, 2015, operative from the said appointed date (as stated in sub-para (a) and (b) above) and Section III and Section IV (for section III and IV appointed date as stated in sub-para (c) and (d) above) of the Scheme will become effective on receipt of necessary approvals for transfer/grant of the right to use in the land on which Hot Strip & Coke Oven Plants are located as specified in the Scheme.

2. Pursuant to the Section I and Section II of the Scheme becoming effective:

a) Demerged Undertakings and Business undertaking 1 has been transferred to and vested in the Company with effect from the said Appointed Date; accordingly the same has been given effect to in these accounts.

b) The surplus of Rs, 53,888.94 Lacs of assets over the liabilities pertaining to the Demerged Undertakings transferred to and vested in the Company and the paid up face value of the equity shares & CCCPS issued by JSL has been credited in Security Premium Account.

c) The company is to issue equity shares/CCCPS on a record date to be fixed as specified in the Scheme for allotment of (i) equity shares having face value of Rs, 21- each credited as fully paid up; and (ii) CCCPS having face value of Rs, 21- each credited as fully paid up of the Company to the equity shareholders and holders of CCCPS respectively of JSL in the ratio one equity shares/CCCPS of the company for every one equity shares/CCCPS held in JSL. Pending allotment the same has been shown as "Share Capital Suspense Account".

d) Share capital of the Company comprising of 250000 equity shares having face value of Rs, 2 each, 100% held by JSL deemed to has been cancelled and transferred to capital reserve; which will give effect immediately after issuance of the shares by the Company to the Shareholders of JSL.

e) The Authorized share capital of the company is to be enhanced to Rs, 50,00,00,000 (Rupees Fifty Crore) divided into 24,00,00,000 (Twenty Four Crore) equity shares having face value of Rs, 2 (Two) each and 1,00,00,000 (One Crore) preference shares having face value of Rs, 2 (Rupees Two) each.

f) Business Undertaking 1 (as defined in sub-para (b) of 1 above) has been transferred to and vested in the Company at a lump sum consideration of Rs, 280,979.52 Lacs; out of this Rs, 260,000.00 lacs shall be paid to JSL and Rs, 20,979.52 Lacs has been adjusted against sum of Rs, 57,598.19 lacs lying receivable from JSL in the books of the Company.

Against the balance amount of Rs, 36,618.67 Lacs, JSL is to issue equity shares to the company at a price to be determined with the record date to be fixed as specified in the Scheme. Pending allotment the same has been shown as "Equity Shares pending allotment" under Long Term Investments.

g) On transfer of Business Undertaking 1, the difference between the fair values of assets and liabilities transferred to and vested in the Company and the lump sum consideration to be paid as stated above amounting to Rs, 2,068.81 Lacs has been debited to Goodwill Account.

h) In terms of the Scheme, all the business and activities of Demerged Undertakings and Business Undertaking 1 carried on by JSL on and after the appointed date, as stated above, are deemed to have been carried on behalf of the Company. Accordingly, necessary effects have been given in these accounts on the Scheme becoming effective.

i) The necessary steps and formalities in respect of transfer of and vesting in the properties, licenses, approvals and investments in favor of the Company and modification of charges etc. are under implementation. Further transfer of and vesting in the Mining Rights to Demerged Undertakings (as referred in para 1 (a) above) is subject to necessary approvals of the concerned authorities.

2. The financial statements of the Company for the year ended 31st March, 2015 were earlier approved by the Board of Directors at their meeting held on 25th May, 2015 on which the Statutory Auditors of the Company had issued their report dated 25th May, 2015. These financial statements have been reopened and revised to give effect to the Scheme as stated in note 1 & 2 herein above.

3. Current year's figures are not comparable with those of the previous year for the reasons as stated in note 1 & 2 herein above.

4. Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs, 2,391.05 Lacs (Rs, NIL).

5. Exceptional items includes Gain/(Loss) (net) of Rs, 620.35 Lacs {Rs, NIL} on translation/settlement of foreign currency monetary items (including borrowing), gain / (loss) of (Rs, 22.32 Lacs) {Rs,' NIL} upon marked to market of derivatives contracts, gain/(loss) of Rs, 998.75 Lacs {Rs, NIL} on forward cover cancelation.

6. A Scheme of Amalgamation between JSL Architecture Limited (Transferor Company) with JSL Lifestyle Ltd. (Transferee Company) was filed with the Hon'ble High Court of Punjab and Haryana at Chandigarh entailing transfer of all the assets and liabilities including reserves of the Transferor Company at existing carrying amount w.e.f. appointed date i.e. 1st April, 2014. The Transferee Company, in consideration, would issue 76 fully paid up Equity Shares of Rs, 10 each for Every 100 Equity Shares of Rs, 10 each held by the shareholders of Transferor Company. The Scheme is has been approved by the Hon'ble High Court vide its moral judgment dated 30th October, 2015. Upon receipt of the certified true copy of the order, both the Companies shall file the same with the office of the Registrar of Companies, NCT of Delhi and Haryana and the Scheme shall become effective from the date of such filing.

7. The company had received a notice during the year 2012-2013 from office of the Dy. Director of Mines, Jajpur Road Circle, Odisha (the Office) asking company to deposit Rs, 8,540.27 Lacs with the department on account of cost price on mining of excess quantity of Chrome Ore over and above the approved quantity of mining plan/scheme. The company has disputed and challenged the same as demand made by the Office is incorrect, unjustified, baseless and was without furnishing any supporting documents and/or providing any basis/reason for such demand. The case is pending before Provisional Authority of Mining tribunal, Govt, of India.

8. Pursuant to the requirements of Schedule II of the Companies Act, 2013, the Company has, effective April 1,2014, reviewed and revised the estimated useful lives of its fixed assets related to Vizag and Mine Divisions. Consequent thereto, the depreciation charge for the year ended on 31st March, 2015 is lower by Rs, 147.59 Lacs. Further based on transitional provision of Schedule II, an amount of f 13.84 Lacs has been adjusted against the retained earnings.

9. Based on the intimation received from supplier regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006, the required disclosure is given below *:

10. (A) Certain balances of trade receivable, loan & advance, trade payable and other liabilities are subject to confirmation and/or reconciliation.

(B) Although the book value fair value of certain unquoted investments amounting to Rs, 420.11 Lacs (Rs, NIL), as reflected in Note no 11, is lower than the cost or companies are having negative net worth, considering the strategic and long term nature of the investment, future prospectus and assets base of the investee company, such decline, in the opinion of the management, has been considered to be of temporary nature and hence no provision for the same at this stage is considered necessary.

The company has also given inter corporate deposit to its subsidiary companies amounting to Rs,4,498.66 Lacs (Rs, NIL) where the subsidiary companies has accumulated losses egative net worth. In view of the long term involvement of the company (read with note (B) above) in the said companies no provision has been considered necessary.

11. Advance recoverable in cash or in kind or for value to be received includes Interest free loan to employees amounting to Rs, 15.27 Lacs (Rs, NIL) in the ordinary course of business and as per employee service rules of the company. Maximum balance outstanding during the year is Rs, 24.38 Lacs (Rs, NIL).

12. Research and Development expenses for the year amounting to Rs, 157.94 Lacs (Rs, NIL) on account of revenue expenditure charged/debited to respective heads of accounts.

13. a) Derivative contracts entered into by the company and outstanding as on 31st March, 2015 for hedging currency risks:

Note: INR equivalent values have been calculated at the yearend exchange rates in INR to give an indicative value of the contracts in rupees. Actual hedges however may be in different currency denominations.

14. The Haryana Government levied w.e.f. 05.05.2000 a Local Area Development Tax (the LADT Act) on the Manufacturing units in the State of Haryana on the entry of goods for use and consumption which has been challenged in the Hon'ble Punjab and Haryana High Court. The Hon'ble Punjab and Haryana High Court disallowed the petition in December, 2001 and the company had by a Special Leave Petition challenged the Order of High Court in the Hon'ble Supreme Court. The Hon'ble Supreme Court referred the matter to a 'five judges' Constitutional Bench, which laid certain parameters to examine the Act on those lines. On the basis of these parameters the Hon'ble High Court have declared the Act to be ultra virus on 14th March, 2007. Since, this issue was being canvassed by various High Courts, the Hon'ble Supreme Court gave an Interim Order that those states where the High Courts have given judgment in favor of the petitioner, no tax would be collected. In the mean time the Haryana Government has repealed the LADT Act and introduced another Act by the name of 'Entry Tax' on the same lines. That Act was also been held ultra vires by the High Court. However, on prudence basis, the liability has been fully provided for. The order of Punjab and Haryana High Court and other judgments of all the Courts of India have been long pending. The State Governments have requested the Hon'ble Supreme Court that it is very difficult for them to run the Government. So at least till the pendency of the cases in the Hon'ble Supreme Court they may be allowed to charge from past liability and also from the future liability to be accrued. On 30th October, 2009, the Hon'ble Supreme Court have directed that 1/3rd of the liability is to be paid by all the assesses whose cases are pending in the High Courts. As, at present, there is no Act either LADT/Entry Tax prevalent in Haryana State, no tax is being collected from the assesses however undertaking have given by assesses that in case they lose they will make the payment. As such on prudence basis, full liability has been provided for. In the meantime, i.e. on 16.04.2010 the Entry Tax matters of the states have been referred to a larger 9- Judges Constitutional Bench of the Supreme Court, where the judgment of 7-Judges Constitutional Bench past 49 years ago would be revisited. Constitution Bench has not been constituted as yet and the status of the case is as it is and at present no tax is being collected/paid in Haryana.

The expected return on the plan assets is determined considering several applicable factors mainly the composition of plan assets held, assessed risk of assets management, historical results of returns on the plan assets and the policy for the management of plan assets management.

The estimates of future salary increase, considered in actuarial valuation, taking into account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

(a) The company makes monthly contributions to Provident Fund managed by Trust for qualifying employees. Under the scheme, the company is required to contribute a specified percentage of the payroll costs to fund the benefits.

In keeping with the Guidance on Implementing Accounting Standard (AS) 15 (Revised) on Employee Benefits notified by the companies (Accounting Standards) Rules, 2006, employer established provident fund trusts are treated as Defined Benefit Plans, since the Company is obliged to meet interest shortfall, if any, with respect to covered employees. Accounting to the actuarial Valuation, the Defined Benefit Obligation of Interest Rate Guarantee on exempted Provident Fund in respect of employees of the company as on 31 st March, 2015 works out of Rs, Nil (Rs, Nil) and hence no provision is required to be provided for in the books of account towards the guarantee for notified interest rates.

15. Finance Lease

Assets acquired under leases where the company has substantially all the risks and rewards of ownership are classified as finance lease. Such assets are capitalized at inception of the lease at the lower of the fair value or net present value if minimum lease payments and a liability is created for an equivalent amount.

Lease interest charged to profit & loss for right to use of CTL Machine (Cut to length) for the services regarding cutting of Stainless Steel sheets.

# does not include Rs, 37.48 Lacs allocated from Jindal Stainless Limited pursuant to Composite Scheme of Arrangement (refer note no 26)

45 Capital work-in-progress (CWIP) includes technical know-how and supervision fees, taxes, machinery under installation/in transit, pre-operative expenses and other assets under erection. Details of same areas under:-

16 Previous years' figures have been re-arranged and regrouped wherever considered necessary.

17 Figures in bracket indicate previous year figures.

18. Note 1 to 49 are annexed to and from integral part of the Balance Sheet and Statement of Profit & Loss.

Oct 21, 12:00 am
Oct 21, 4:14 pm
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