Mar 31, 2023
1. OVERVIEW
Jindal Steel & Power Limited (âthe Company" or "JSP") is one of the India''s leading steel producers. It is listed on the National Stock Exchange of India and Bombay Stock Exchange in India. The registered office is situated in the state of Haryana, the corporate office is situated in New Delhi and the manufacturing plants in India are in the states of Chhattisgarh, Odisha, Jharkhand etc. The Company has global presence through subsidiaries, mainly in Australia, Botswana, Mauritius, Mozambique, Madagascar, Namibia, South Africa, Tanzania and representative office in China. There are several business initiatives running simultaneously across continents.
These financial statements have been approved and adopted by the Board of Directors of the Company in their meeting held on 16th May,2023.
2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The financial statements have been prepared in accordance with Indian accounting standards as prescribed under Section 133 of the Companies Act, 2013 (the ''Act'') read with Companies (Accounts) Rules, 2015 (Indian Accounting Standards (IND AS)). The Company has consistently applied the accounting policies used in the preparation of its financial statements.
The standalone financial statements provide comparative information in respect of previous year.
The significant accounting policies used in preparing the financial statements are set out in Note no. 3 of the Notes to the Standalone Financial Statements.
The preparation of the financial statements in conformity with Indian Accounting Standards (Ind AS) requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures at the date of the financial statements. The judgments, estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision effects only that period or in the period of the revision and future periods if the revision affects both current and future years and, if material, their effects are disclosed in the notes to the financial statements. Actual results could vary from these estimates. (Refer Note no. 4 on critical accounting estimates, assumptions and judgments).
3. SIGNIFICANT ACCOUNTING POLICIES3.1 Basis of Measurement
These financial statements have been prepared under the historical cost convention on the accrual basis, except for the following assets and liabilities which have been measured fair value:
⢠Property, Plant & Equipment (at fair value as deemed cost as at 1st April 2015),
⢠Derivative financial instruments,
⢠Defined benefit plans- plan assets measured at fair value
⢠Financial assets and liabilities except certain investments and borrowings carried at amortised cost (refer accounting policy regarding financial instruments).
⢠Share based payments
The financial statements are presented in Indian Rupees (H) which is the Company''s functional and presentation currency and all amounts are rounded to the nearest crore (H 00,00,000) and two decimals thereof, except as otherwise stated.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non- financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy in which they fall.
3.3 Property, plant and equipment
On transition to IND AS, the Company has adopted optional exception under IND AS 101 to measure Property, Plant and Equipment at fair value. Consequently the fair value has been assumed to be deemed cost of Property, Plant and Equipment on the date of transition. Subsequently Property, Plant and Equipment are stated at cost/ deemed cost less accumulated depreciation and impairment losses, if any. Costs include costs of acquisition or construction including incidental expenses thereto, borrowing costs, and other attributable costs of bringing the asset to its working condition for its intended use and are net of available duty/tax credits.
Subsequent expenditure relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance costs are recognised in Statement of Profit & Loss as incurred.
Gains or losses arising from discard/sale of Property, Plant and Equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is discarded / sold.
The Company adjusts exchange differences arising on translation/ settlement of long-term foreign currency monetary items as referred in Policy for Foreign exchange transactions.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively.
Capital work-in-progress: Expenditure related to and incurred on implementation of new/expansion-cum-modernisation projects is included under capital work-in-progress until the relevant assets are ready for its intended use. All other
expenditure (including trial run / test run expenditures) during construction / erection period (net of income) are shown as part of pre-operative expenditure pending allocation / capitalization and the same is allocated to the respective asset on completion of its construction/erection.
Depreciation: Depreciation on property, plant and equipment is provided on straight-line method (SLM) as per the useful life of assets, as estimated by the management / independent professional, which is generally in line with Schedule II to the Companies Act, 2013 except for certain assets specified below:
⢠Power generating units: 40-60 years
⢠Certain continuous process plants: 25-48 years
⢠Certain Other Plant and equipment: 15-35 years
2. Certain non -factory buildings: 18-60 Years
Subsequent to adoption of fair value as deemed cost of property, plant and equipment as at 1st April 2015 under IND AS 101, depreciation is charged on fair valued amount less estimated salvage value.
Based on management evaluation, depreciation rates currently used fairly reflect its estimate of the useful lives and residual values of property, plant and equipment.
Certain plant and machinery have been considered as continuous process plant on the basis of technical assessment and depreciation on the same is provided for accordingly.
Leasehold land is amortized on a straight line basis over the period of lease.
Capital expenditure on purchase and development of identifiable non monetary assets without physical substance is recognized as Intangible Assets when:
⢠it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and
⢠the cost of the asset can be measured reliably.
Such Intangible assets are stated at cost less accumulated amortization and impairment losses, if any.
Intangible Assets are amortized on straight-line method over the expected duration of benefits. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each financial year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the assets are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates and adjusted prospectively.
Estimated useful lives of intangible assets are as follows:
⢠Computer software - 1 to 10 years
⢠Design & Drawings- 5 years
⢠Licenses - 25 years
Acquisition Costs
The cost of Mining Assets capitalised includes costs associated with acquisition of licenses and rights to explore, stamp duty, registration fees and other such costs. Bid premium and royalties payable with respect to mining operations is contractual obligation. The said obligations are variable and linked to market prices. The Company has accounted for the same as expenditure on accrual basis as and when related liability arises as per respective agreements/ statute.
Exploration and evaluation expenditure incurred after obtaining the mining right/assets or the legal right to explore are capitalised as exploration and evaluation assets (intangible assets) and stated at cost less impairment.
Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount.
The Company measures its exploration and evaluation assets at cost and classifies as Property, plant and equipment or intangible assets according to the nature of the assets acquired and applies the classification consistently. To the extent that tangible asset is consumed in developing an intangible asset, the amount reflecting that consumption is capitalised as a part of the cost of the intangible asset.
Exploration expenditure includes all direct and allocated indirect expenditure associated with finding specific mineral resources which includes depreciation and applicable operating costs of related support equipment and facilities and other costs of exploration activities.
Site restoration, rehabilitation and environmental costs
Provision is made for costs associated with restoration and rehabilitation of mining sites as soon as the obligation to incur such costs arises. Such restoration and closure costs are typical of extractive industries and they are normally incurred at the end of the life of the mine. The costs are estimated on the basis of mine closure plans and the estimated discounted costs of dismantling and removing these facilities and the costs of restoration are capitalised. The provision for decommissioning assets is based on the current estimates of the costs for removing and decommissioning production facilities, the forecast timing of settlement of decommissioning liabilities and the appropriate discount rate. A corresponding provision is created on the liability side. The capitalised asset is charged to profit and loss over the life of the asset through amortisation over the life of the operation and the provision is increased each period via unwinding the discount on the provision. Management estimates are based on local legislation and/or other agreements are reviewed periodically The actual costs and cash outflows may differ from estimates because of changes in laws and regulations, changes in prices, analysis of site conditions and changes in restoration technology. Details of such provisions are set out in note 24.
Mining assets are amortised using unit of production method over the entire lease term.
3.6 Intangible assets under development
Mines development expenditure incurred in respect of new iron ore/coal and likewise mines are shown under ''Intangible assets under development''. On mines being ready for intended use, this amount is transferred to appropriate head under intangible assets.
Development expenditure incurred on an individual project is recognized as an intangible asset when the Company can demonstrate all the following:
⢠The technical feasibility of completing the intangible asset so that it will be available for use or sale
⢠Its intention to complete the asset
⢠Its ability to use or sell the asset
⢠How the asset will generate future economic benefits
⢠The availability of adequate resources to complete the development and to use or sell the asset
⢠The ability to measure reliably the expenditure attributable to the intangible asset during development.
Biological assets are measured at cost. Feeding and maintenance costs are expensed as incurred.
Investment properties are measured at cost, including transaction costs less accumulated depreciation and impairment losses, if any.
The carrying amount of Property, plant and equipment, Intangible assets and Investment property are reviewed at each Balance Sheet date to assess impairment, if any based on internal / external factors. An asset is treated as impaired when the carrying cost of asset or exceeds its recoverable value being higher of value in use and net selling price. An impairment loss is recognized as an expense in the Statement of Profit & Loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed, if there has been an improvement in recoverable amount.
Non-current assets are classified as "Held for Sale" if their carrying amount is intended to be recovered principally through sale rather than through continuing use. The condition for classification of "Held for Sale" is met when the non-current asset is available for sale. Non-current assets held for sale are measured at the lower of carrying amount and fair value less cost to sell.
Right of Use Assets
The Company recognizes a right-of-use asset, on a lease-by-lease basis, to measure that right-of-use asset an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet immediately before the date of initial application.
The cost of right-of-use assets includes the amount of lease liabilities recognised. Initial direct costs incurred and lease payments made at or before the commencement date less any
lease incentives received, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment test.
The Company recognise a lease liability at the present value of the remaining lease payments, discounted using the lessee''s incremental borrowing rate
The lease payments include fixed payments (including insubstance fixed payments) less any lease incentives receivable, variable lease payments that depend on a lease by lease basis
In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable.
Short-term Leases and leases of low-value assets
The company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
Borrowing costs include interest and other costs that the Company incurs in connection with the borrowing of funds.
Borrowing costs related to a qualifying asset that necessarily takes a substantial period of time to get ready for its intended use is worked out on the basis of actual utilization of funds out of project specific loans and/or other borrowings to the extent identifiable with the qualifying asset and is capitalized with the cost of qualifying asset, using the effective interest method. All other borrowing costs are charged to statement of profit and loss.
In case of significant long term loans, other costs incurred in connection with the borrowing of funds are amortized over the period of respective Loan.
Inventories are valued at lower of cost, computed on weighted average basis, or net realizable value. Cost of inventories includes in case of raw material, cost of purchase and incidental expenses; in case of work-in-progress, estimated direct cost and appropriate proportion of administrative and other overheads; in case of finished goods, estimated direct cost and appropriate administrative and other overheads and excise duty; and in case of traded goods, cost of purchase and other costs.
Scrap is valued at estimated realizable value. However raw materials, components, stores and spares held for use in the production of finished goods are not written down below cost if the finished products are expected to be sold at or above cost.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and
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3.14 Foreign Currency Transactions
⢠Transactions in foreign currencies are initially recorded by the Company at rates prevailing at the date of the transaction. Subsequently, monetary items are translated at closing exchange rates of balance sheet date and the resulting exchange difference recognised in profit or loss. Differences arising on settlement of monetary items are also recognised in profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the transaction. Non-monetary items (Other than investment in shares of Subsidiaries, Joint Ventures and Associates) carried at fair value that are denominated in foreign currencies are translated at the exchange rates prevailing at the date when the fair value was determined. Exchange component of the gain or loss arising on fair valuation of non-monetary items is recognised in line with the gain or loss of the item that gave rise to such exchange difference.
⢠The Company has availed the exemption available in IND AS 101, to continue capitalisation of foreign currency fluctuation on long term foreign currency monetary liabilities outstanding on transition date.
⢠Revenue from contracts with customers is recognized on transfer of control of promised goods or services to a customer at an amount that reflects the consideration to which the Company is expected to be entitled to in exchange for those goods or services.
⢠Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable consideration) allocated to that performance obligation. The transaction price of goods sold and services rendered is net of variable consideration on account of various discounts and schemes offered by the Company as part of the contract. This variable consideration is estimated based on the expected value of outflow. Revenue (net of variable consideration) is recognized only to the extent that it is highly probable that the amount will not be subject to significant reversal when uncertainty relating to its recognition is resolved.
⢠Revenue from sale of products is recognized when the control on the goods have been transferred to the customer. The performance obligation in case of product is satisfied at a point in time i.e., when the material is shipped to the customer or on delivery to the customer, as may be specified in the contract. Revenue is measured at fair value of the consideration received or receivable. The Company recognizes revenue from sale of products net of discounts, sales incentives, rebates granted, returns, GST, VAT, sales tax and duties when the products are delivered to customer or when delivered to a carrier for export sale, which is when significant risks and rewards of ownership pass to the customer, Sale of product is presented gross of manufacturing taxes like excise duty, wherever applicable.
⢠Income from aviation and other services is accounted for at the time of completion of service and billing thereof.
⢠Revenue from sale of power is recognized when delivered and measured based on bilateral contractual arrangements.
⢠Export benefits available are accounted for in the year of export, to the extent the realisation of the same is not considered uncertain by the Company.
⢠Government grants/ subsidies are recognised at fair value where there is reasonable certainty that the grant /subsidy will be received and all attached conditions will be complied with. The grant/subsidy is recognised in the statement of profit and loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate.
3.16 Inter-Division Transfers/Captive sales
⢠Inter-division transfer of independent marketable products, produced by various divisions and used for further production/ sales is accounted for at approximate prevailing market price/ other appropriate price.
⢠Captive sales are in regard to products produced by various divisions and used for capital projects. These are transferred at factory cost to manufacture.
⢠The value of inter-divisional transfer and captive sales is netted off from sales and corresponding cost under cost of materials consumed and total expenses respectively. The same is shown as a contra item in the statement of profit and loss.
⢠Any unrealized profit on unsold/unconsumed stocks is eliminated while valuing the inventories.
⢠Claims receivable
The quantum of accruals in respect of claims receivable such as from railways, insurance, electricity, customs, excise and the like are accounted for on accrual basis to the extent there is reasonable certainty of realization.
⢠Dividend Income from Investment
Dividend income from investments is recognised when the right to receive payment has been established.
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is netted off from interest cost under the head "Interest Cost (Net)" in the statement of profit and loss.
⢠Short term employee benefits are recognized as an expense in the Statement of Profit and Loss of the year in which the related services are rendered.
⢠Payment to defined contribution plan is recognized as expense when employees have rendered services. Re-Measurements of the defined benefit liability/asset comprising actuarial gains and losses are recognized in other comprehensive income.
⢠The liability for gratuity, a defined benefit plan is determined using the projected unit credit method, on the basis of actuarial valuations carried out by third party actuaries at each balance sheet date. Re-Measurements comprising actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions are charged / credited to Other Comprehensive Income in period in which they arise. Other costs are accounted for in Statement of Profit and Loss.
⢠Liability in respect of compensated absences due or expected to be availed within one year from the Balance Sheet date is estimated on the basis of valuation carried out by third party actuaries at each Balance Sheet date. Re-Measurements comprising actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged / credited to profit and loss in the period in which they arise.
⢠Share based compensation benefits are recognised in the profit and loss in the year in which the same is granted as per Employees Share Purchase Scheme/ JSPL Employees Stock Option Plan of the Company.
The Company has created an Employee Benefit Trust (Trust) for providing share-based payment to its employees. The Company uses the Trust as a vehicle for distributing shares to employees under the employee remuneration schemes. The Trust buys shares of the Company from the market, for giving shares to employees. The Company treats Trust as its extension and shared held by the Trust are treated as treasury shares.
Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from Equity. No gain or loss is recognised in profit and loss on the purchase, sale, issue or cancellation of the Company''s own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in other equity. Share options exercised during the reporting year are satisfied with treasury shares.
3.19 Research and Development expenditure
Revenue expenditure on research is expensed as incurred. Capital expenditure ( other than related to specific research activities ) incurred on research is added to the cost of Property, plant and equipment/ respective intangible asset.
Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India and tax laws prevailing in the respective tax jurisdictions where the company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Deferred tax is provided on temporary difference arising between the tax bases of assets & liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax is measured using the tax rate that are expected to apply in the year when the asset is realized or the liability is settled based on the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred tax relating to items recognized directly in equity/OCI is recognized in equity/OCI and not in the statement of profit and loss.
Deferred tax asset is recognized to the extent that it is probable that sufficient future taxable profit will be available against which the deductible temporary differences and the carry forward
unused tax credits and unused tax losses can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized.
3.21 Provisions, contingent liabilities, commitments and contingent assets
Provisions are recognized for present obligations of uncertain timing or amount arising as a result of a past event where a reliable estimate can be made and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.
Where it is not probable that an outflow of resources embodying economic benefits will be required or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability and commitments, unless the probability of outflow of resources embodying economic benefits is remote.
Contingent assets are not recognized but disclosed in the financial statements when an inflow of economic benefits is probable.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
3.22 Earnings per share
Basic earnings per share is computed using the net profit/ (loss) for the year (without taking impact of OCI) attributable to the equity shareholders'' and weighted average number of shares outstanding during the year. The weighted average numbers of shares is adjusted for treasury shares and also includes fixed number of equity shares that are issuable on conversion of compulsorily convertible preference shares, debentures or any other instrument, from the date consideration is received (generally the date of their issue)of such instruments. The diluted EPS is calculated on the same basis as basic EPS, after adjusting for the effect of potential dilutive equity shares unless impact is anti-dilutive.
3.23 Segment Reporting
⢠Identification of Operating segments
The Company''s operating businesses are organized and managed separately according to the nature of products manufactured and services provided, with each segment representing a strategic business unit that offers different products and as reviewed by the Chief operating decision maker of the Company.
⢠Inter-segment transfers
The Company recognises inter-segment sales and transfers as if they were to third parties at current market prices.
⢠Allocation of common costs
Common allocable costs are allocated to each segment on reasonable basis.
in shares of Subsidiaries, Joint Ventures and Associates) to present the subsequent changes in fair value through profit and loss account
¦ Financial assets at fair value through profit or loss
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss. The Company has elected to measure its investments which are classified as equity instruments (other than investment in shares of Subsidiaries, Joint Ventures and Associates) at fair value through profit and loss account.
¦ Impairment of financial assets
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. For impairment purposes significant financial assets are tested on an individual basis, other financial assets are assessed collectively in groups that share similar credit risk characteristics.
The Company recognises lifetime expected losses for all trade receivables. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is recognized as an impairment gain or loss in profit or loss.
The Company follows ''simplified approach'' for the recognition of impairment loss allowance on trade and other receivables.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
The Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the receivables and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
¦ Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest
It includes general administrative expenses, corporate & other office expenses, income that arises at the enterprise level and relate to enterprise as a whole being not allocable to any business segment and also un-allocable assets & liabilities that relate to the company as whole and not allocable to any segment.
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition. Trade Receivables are initially recognised at transaction price where that do not contain any significant portion of financing component. Transaction costs that are directly attributable to the acquisition or release of financial assets and financial liabilities respectively, which are not at fair value through profit or loss, are added to the fair value of underlying financial assets and liabilities on initial recognition. Trade receivables and trade payables that do not contain a significant financing component are initially measured at their transaction price.
a. Non- Derivative Financial Instruments
¦ Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised cost which is held with objective to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
¦ Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income which is held with objective to achieve both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company has made an election for its investments which are classified as equity instruments (other than investment
method. Financial liabilities at fair value through profit and loss includes financial liability held for trading and financial liability designated upon initial recognition as at fair value through profit and loss.
¦ Investment in Subsidiaries, Associates and Joint Ventures
I nvestment in equity shares of subsidiaries, associates and joint ventures is carried at cost in the standalone financial statements.
¦ Cash and cash equivalents
Cash and cash equivalents consist of cash, bank balances in currents and short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
b. Derivative Financial Instruments
Derivative instruments such as forward currency contracts are used to hedge foreign currency risks, and are initially recognized at their fair values on the date on which a derivative contract is entered into and are subsequently re-measured at fair value on each reporting date. A hedge of foreign currency risk of a firm commitment is accounted for as a fair value hedge. Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and Loss. However, if hedging instrument hedges an equity instrument for which the Company has elected to present changes as at fair value through other comprehensive income, then fair value changes are recognized in Other Comprehensive Income.
⢠Derecognition
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition as per Ind AS 109. A financial liability (or a part of a financial liability) is derecognized from the company''s balance sheet when the obligation specified in the contract is discharged or cancelled or expires.
⢠Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
⢠Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the company either begins or ceases to perform an activity that is significant to its operations. If the company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
Cash flow statement is prepared using the indirect method.
3.26. Recent Accounting Pronouncements:
Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On March 31, 2023, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2023, as below:
Ind AS 1 - Presentation of Financial Statements - This amendment requires the entities to disclose their material accounting policies rather than their significant accounting policies. The effective date for adoption of this amendment is annual periods beginning on or after April 1, 2023. The Company has evaluated the amendment and the impact of the amendment is insignificant in these financial statements.
Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors - This amendment has introduced a definition of ''accounting estimates'' and included amendments to Ind AS 8 to help entities distinguish changes in accounting policies from changes in accounting estimates. The effective date for adoption of this amendment is annual periods beginning on or after April 1, 2023. The Company has evaluated the amendment and there is no impact on its financial statements
Ind AS 12 - Income Taxes - This amendment has narrowed the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences. The effective date for adoption of this amendment is annual periods beginning on or after April 1,2023. The Company has evaluated the amendment and there is no impact on its financial statement.
4. CRITICAL ACCOUNTING ESTIMATES,ASSUMPTIONS ANDJUDGEMENTS4.1 Property, plant and equipment
External advisor and/or internal technical team assess the remaining useful life and residual value of property, plant and equipment. Management believes that the assigned useful lives and residual values are reasonable.
Internal technical and user team assess the remaining useful lives of Intangible assets. Management believes that assigned useful lives are reasonable. All Intangibles are carried at net book value on transition.
4.3 Mine restoration obligation
In determining the cost of the mine restoration obligation the Company uses technical estimates to determine the expected cost to restore the mines and the expected timing of these costs.
Liquidated damages payable or receivable are estimated and recorded as per contractual terms/management assertion; estimate may vary from actuals as levy by customer/vendor.
The company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
The Company estimates the un-collectability of accounts receivable by analyzing historical payment patterns, customer concentrations, customer credit-worthiness and current economic trends. If the financial condition of a customer deteriorates, additional allowances may be required. Similarly, as stated above the Company provides for other receivables / recovery against services, interest, etc. Also, the Company provides for inventory obsolescence, excess inventory and inventories with carrying values in excess of net realizable value based on assessment of the future demand, market conditions and specific inventory management initiatives. In all cases inventory is carried at the lower of historical cost and net realizable value.
Mar 31, 2022
1. OVERVIEW
Jindal Steel & Power Limited ("the Company") is one of the India''s leading steel producers. It is listed on the National Stock Exchange of India and Bombay Stock Exchange in India. The registered office is situated in the state of Haryana, the corporate office is situated in New Delhi and the manufacturing plants in India are in the states of Chhattisgarh, Odisha, Jharkhand etc. The Company has global presence through subsidiaries, mainly in Australia, Botswana, Indonesia, Mauritius, Mozambique, Madagascar, Namibia, South Africa, Tanzania and Zambia and representative office in China. There are several business initiatives running simultaneously across continents.
These financial statements have been approved and adopted by the Board of Directors of the Company in their meeting held on 30th May, 2022.
2. A. Basis Of Preparation Of Financial Statements
The financial statements have been prepared in accordance with Indian accounting standards as prescribed under Section 133 of the Companies Act, 2013 (the ''Act'') read with Companies (Accounts) Rules, 2015 (Indian Accounting Standards (IND AS)). The Company has consistently applied the accounting policies used in the preparation of its financial statements.
The standalone financial statements provide comparative information in respect of previous year.
The significant accounting policies used in preparing the financial statements are set out in Note no. 3 of the Notes to the Standalone Financial Statements.
The preparation of the financial statements in conformity with Indian Accounting Standards (Ind AS) requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures at the date of the financial statements. The judgments, estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision effects only that period or in the period of the revision and future periods if the revision affects both current and future years and, if material, their effects are disclosed in the notes to the financial statements. Actual results could vary from these estimates. (Refer Note no. 4 on critical accounting estimates, assumptions and judgments).
B. Estimation of uncertainties relating to the global health pandemic from COVID-19 (COVID-19):
The Company has considered the possible effects that may result from the pandemic relating to COVID-19 in the preparation of these standalone financial statements including the recoverability of carrying amounts of financial and non financial assets. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of this pandemic, the Company has, at the date of approval of these financial statements, used internal and external sources of information and related information and economic forecasts and expects that the carrying amount of these assets will be recovered. The impact of this pandemic may be different from
that estimated as at the date of approval of these standalone financial statements and the Company will continue to closely monitor any material changes to future economic conditions.
3. SIGNIFICANT ACCOUNTING POLICIES
3.1 Basis of Measurement
These financial statements have been prepared under the historical cost convention on the accrual basis, except for the following assets and liabilities which have been measured fair value:
⢠Property, Plant & Equipment (at fair value as deemed cost as at 1st April 2015),
⢠Derivative financial instruments,
⢠Defined benefit plans- plan assets measured at fair value
⢠Financial assets and liabilities except certain investments and borrowings carried at amortised cost (refer accounting policy regarding financial instruments).
⢠Share based payments
The financial statements are presented in Indian Rupees (C) which is the Company''s functional and presentation currency and all amounts are rounded to the nearest crore (C00,00,000) and two decimals thereof, except as otherwise stated.
3.2 Fair Value Measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non- financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy in which they fall.
3.3 Property, plant and equipment
On transition to IND AS, the Company has adopted optional exception under IND AS 101 to measure Property, Plant and Equipment at fair value. Consequently the fair value has been assumed to be deemed cost of Property, Plant and Equipment on the date of transition. Subsequently Property, Plant and Equipment are stated at cost/ deemed cost less accumulated depreciation and impairment losses, if any. Costs include costs of acquisition or construction including incidental expenses thereto, borrowing costs, and other attributable costs of bringing the asset to its working condition for its intended use and are net of available duty/tax credits.
Subsequent expenditure relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance costs are recognised in Statement of Profit & Loss as incurred.
Gains or losses arising from discard/sale of Property, Plant and Equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is discarded / sold.
The Company adjusts exchange differences arising on translation/ settlement of long-term foreign currency monetary items as referred in Policy for Foreign exchange transactions.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively.
Capital work-in-progress: Expenditure related to and incurred on implementation of new/expansion-cum-modernisation projects is included under capital work-in-progress until the relevant assets are ready for its intended use. All other expenditure (including trial run / test run expenditures) during construction / erection period (net of income) are shown as part of pre-operative expenditure pending allocation / capitalization and the same is allocated to the respective asset on completion of its construction/erection.
Depreciation: Depreciation on property, plant and equipment is provided on straight-line method (SLM) as per the useful life of assets, as estimated by the management / independent professional, which is generally in line with Schedule II to the Companies Act, 2013 except for certain assets specified below:
⢠Power generating units: 40-60 years
⢠Certain continuous process plants: 25-48 years
⢠Certain Other Plant and equipment: 15-35 years
2. Certain non -factory buildings: 18-60 Years
Subsequent to adoption of fair value as deemed cost of property, plant and equipment as at 1st April 2015 under IND AS 101, depreciation is charged on fair valued amount less estimated salvage value.
Based on management evaluation, depreciation rates currently used fairly reflect its estimate of the useful lives and residual values of property, plant and equipment.
Certain plant and machinery have been considered as continuous process plant on the basis of technical assessment and depreciation on the same is provided for accordingly.
Leasehold land is amortized on a straight line basis over the period of lease.
Capital expenditure on purchase and development of identifiable non monetary assets without physical substance is recognized as Intangible Assets when:
⢠it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and
⢠the cost of the asset can be measured reliably.
Such Intangible assets are stated at cost less accumulated amortization and impairment losses, if any.
Intangible Assets are amortized on straight-line method over the expected duration of benefits. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each financial year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the assets are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates and adjusted prospectively.
Estimated useful lives of intangible assets are as follows:
⢠Computer software - 1 to 10 years
⢠Design & Drawings- 5 years
⢠Licenses - 25 years
Acquisition Costs
The cost of Mining Assets capitalised includes costs associated with acquisition of licenses and rights to explore, stamp duty, registration fees and other such costs. Bid premium and royalties payable with respect to mining operations is contractual obligation. The said obligations are variable and linked to market prices. The Company has accounted for the same as expenditure on accrual basis as and when related liability arises as per respective agreements/ statute.
Exploration and evaluation expenditure incurred after obtaining the mining right/assets or the legal right to explore are capitalised as exploration and evaluation assets (intangible assets) and stated at cost less impairment.
Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount.
The Company measures its exploration and evaluation assets at cost and classifies as Property, plant and equipment or intangible assets according to the nature of the assets acquired and applies the classification consistently. To the extent that tangible asset
is consumed in developing an intangible asset, the amount reflecting that consumption is capitalised as a part of the cost of the intangible asset.
Exploration expenditure includes all direct and allocated indirect expenditure associated with finding specific mineral resources which includes depreciation and applicable operating costs of related support equipment and facilities and other costs of exploration activities.
Site restoration, rehabilitation and environmental costs
Provision is made for costs associated with restoration and rehabilitation of mining sites as soon as the obligation to incur such costs arises. Such restoration and closure costs are typical of extractive industries and they are normally incurred at the end of the life of the mine. The costs are estimated on the basis of mine closure plans and the estimated discounted costs of dismantling and removing these facilities and the costs of restoration are capitalised. The provision for decommissioning assets is based on the current estimates of the costs for removing and decommissioning production facilities, the forecast timing of settlement of decommissioning liabilities and the appropriate discount rate. A corresponding provision is created on the liability side. The capitalised asset is charged to profit and loss over the life of the asset through amortisation over the life of the operation and the provision is increased each period via unwinding the discount on the provision. Management estimates are based on local legislation and/or other agreements are reviewed periodically. The actual costs and cash outflows may differ from estimates because of changes in laws and regulations, changes in prices, analysis of site conditions and changes in restoration technology. Details of such provisions are set out in note 24.
Mining assets are amortised using unit of production method over the entire lease term.
3.6 Intangible assets under development
Mines development expenditure incurred in respect of new iron ore/coal and likewise mines are shown under ''Intangible assets under development''. On mines being ready for intended use, this amount is transferred to appropriate head under intangible assets.
Development expenditure incurred on an individual project is recognized as an intangible asset when the Company can demonstrate all the following:
⢠The technical feasibility of completing the intangible asset so that it will be available for use or sale
⢠Its intention to complete the asset
⢠Its ability to use or sell the asset
⢠How the asset will generate future economic benefits
⢠The availability of adequate resources to complete the development and to use or sell the asset
⢠The ability to measure reliably the expenditure attributable to the intangible asset during development.
Biological assets are measured at cost. Feeding and maintenance costs are expensed as incurred.
Investment properties are measured at cost, including transaction costs less accumulated depreciation and impairment losses, if any.
The carrying amount of Property, plant and equipment, Intangible assets and Investment property are reviewed at each Balance Sheet date to assess impairment, if any based on internal / external factors. An asset is treated as impaired when the carrying cost of asset or exceeds its recoverable value being higher of value in use and net selling price. An impairment loss is recognized as an expense in the Statement of Profit & Loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed, if there has been an improvement in recoverable amount.
Non-current assets are classified as "Held for Sale" if their carrying amount is intended to be recovered principally through sale rather than through continuing use. The condition for classification of "Held for Sale" is met when the non-current asset is available for sale. Non-current assets held for sale are measured at the lower of carrying amount and fair value less cost to sell.
Right of Use Assets
The Company recognizes a right-of-use asset, on a lease-by-lease basis, to measure that right-of-use asset an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet immediately before the date of initial application.
The cost of right-of-use assets includes the amount of lease liabilities recognised. Initial direct costs incurred and lease payments made at or before the commencement date less any lease incentives received, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment test.
The Company recognise a lease liability at the present value of the remaining lease payments, discounted using the lessee''s incremental borrowing rate
The lease payments include fixed payments (including insubstance fixed payments) less any lease incentives receivable, variable lease payments that depend on a lease by lease basis.
In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable.
Short-term Leases and leases of low-value assets
The company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
Borrowing costs include interest and other costs that the Company incurs in connection with the borrowing of funds.
Borrowing costs related to a qualifying asset that necessarily takes a substantial period of time to get ready for its intended use is worked out on the basis of actual utilization of funds out of project specific loans and/or other borrowings to the extent identifiable with the qualifying asset and is capitalized with the cost of qualifying asset, using the effective interest method. All other borrowing costs are charged to statement of profit and loss.
In case of significant long term loans, other costs incurred in connection with the borrowing of funds are amortized over the period of respective Loan.
Inventories are valued at lower of cost, computed on weighted average basis, or net realizable value. Cost of inventories includes in case of raw material, cost of purchase and incidental expenses; in case of work-in-progress, estimated direct cost and appropriate proportion of administrative and other overheads; in case of finished goods, estimated direct cost and appropriate administrative and other overheads and excise duty; and in case of traded goods, cost of purchase and other costs.
Scrap is valued at estimated realizable value. However raw materials, components, stores and spares held for use in the production of finished goods are not written down below cost if the finished products are expected to be sold at or above cost.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
Initial cost of inventories includes the transfer of gains and losses on qualifying cash flow hedges, recognised in OCI, in respect of the purchases of raw materials.
3.14 Foreign Currency Transactions
⢠Transactions in foreign currencies are initially recorded by the Company at rates prevailing at the date of the transaction. Subsequently, monetary items are translated at closing exchange rates of balance sheet date and the resulting exchange difference recognised in profit or loss. Differences arising on settlement of monetary items are also recognised in profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the transaction.
Non-monetary items (Other than investment in shares of Subsidiaries, Joint Ventures and Associates) carried at fair value that are denominated in foreign currencies are translated at the exchange rates prevailing at the date when the fair value was determined. Exchange component of the gain or loss arising on fair valuation of non-monetary items is recognised in line with the gain or loss of the item that gave rise to such exchange difference.
⢠The Company has availed the exemption available in IND AS 101, to continue capitalisation of foreign currency fluctuation on long term foreign currency monetary liabilities outstanding on transition date.
⢠Revenue from contracts with customers is recognized on transfer of control of promised goods or services to a customer at an amount that reflects the consideration to which the Company is expected to be entitled to in exchange for those goods or services.
⢠Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable consideration) allocated to that performance obligation. The transaction price of goods sold and services rendered is net of variable consideration on account of various discounts and schemes offered by the Company as part of the contract. This variable consideration is estimated based on the expected value of outflow. Revenue (net of variable consideration) is recognized only to the extent that it is highly probable that the amount will not be subject to significant reversal when uncertainty relating to its recognition is resolved.
⢠Revenue from sale of products is recognized when the control on the goods have been transferred to the customer. The performance obligation in case of product is satisfied at a point in time i.e., when the material is shipped to the customer or on delivery to the customer, as may be specified in the contract. Revenue is measured at fair value of the consideration received or receivable. The Company recognizes revenue from sale of products net of discounts, sales incentives, rebates granted, returns, GST, VAT, sales tax and duties when the products are delivered to customer or when delivered to a carrier for export sale, which is when significant risks and rewards of ownership pass to the customer, Sale of product is presented gross of manufacturing taxes like excise duty, wherever applicable.
⢠Income from aviation and other services is accounted for at the time of completion of service and billing thereof.
⢠Revenue from sale of power is recognized when delivered and measured based on bilateral contractual arrangements.
⢠Export benefits available are accounted for in the year of export, to the extent the realisation of the same is not considered uncertain by the Company.
⢠Government grants/ subsidies are recognised at fair value where there is reasonable certainty that the grant /subsidy will be received and all attached conditions will be complied with. The grant/subsidy is recognised in the statement of profit and loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate.
3.16 Inter-Division Transfers/Captive sales
⢠Inter-division transfer of independent marketable products, produced by various divisions and used for further production/ sales is accounted for at approximate prevailing market price/ other appropriate price.
⢠Captive sales are in regard to products produced by various divisions and used for capital projects. These are transferred at factory cost to manufacture.
⢠The value of inter-divisional transfer and captive sales is netted offfrom sales and corresponding cost under cost of materials consumed and total expenses respectively. The same is shown as a contra item in the statement of profit and loss.
⢠Any unrealized profit on unsold/unconsumed stocks is eliminated while valuing the inventories.
⢠Claims receivable
The quantum of accruals in respect of claims receivable such as from railways, insurance, electricity, customs, excise and the like are accounted for on accrual basis to the extent there is reasonable certainty of realization.
⢠Dividend Income from Investment
Dividend income from investments is recognised when the right to receive payment has been established.
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is netted off from interest cost under the head "Interest Cost (Net)" in the statement of profit and loss.
⢠Short term employee benefits are recognized as an expense in the Statement of Profit and Loss of the year in which the related services are rendered.
⢠Payment to defined contribution plan is recognized as expense when employees have rendered services. Re-Measurements of the defined benefit liability/asset comprising actuarial gains and losses are recognized in other comprehensive income.
⢠The liability for gratuity, a defined benefit plan is determined using the projected unit credit method, on the basis of actuarial valuations carried out by third party actuaries at each balance sheet date. Re-Measurements comprising actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged / credited to Other Comprehensive Income in period in which they arise. Other costs are accounted for in Statement of Profit and Loss.
⢠Liability in respect of compensated absences due or expected to be availed within one year from the Balance Sheet date is estimated on the basis of valuation carried out by third party actuaries at each Balance Sheet date. Re-Measurements comprising actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged / credited to profit and loss in the period in which they arise.
⢠Share based compensation benefits are recognised in the profit and loss in the year in which the same is granted as per Employees Share Purchase Scheme/ JSPL Employees Stock Option Plan of the Company.
The Company has created an Employee Benefit Trust (Trust) for providing share-based payment to its employees. The Company uses the Trust as a vehicle for distributing shares to employees under the employee remuneration schemes. The Trust buys shares of the Company from the market, for giving shares to employees. The Company treats Trust as its extension and shared held by the Trust are treated as treasury shares.
Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from Equity. No gain or loss is recognised in profit and loss on the purchase, sale, issue or cancellation of the Company''s own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in other equity. Share options exercised during the reporting year are satisfied with treasury shares.
3.19 Research and Development expenditure
Revenue expenditure on research is expensed as incurred. Capital expenditure incurred on research is added to the cost of Property, plant and equipment/ respective intangible asset.
3.20 Taxes on Income
Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India and tax laws prevailing in the respective tax jurisdictions where the company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Deferred tax is provided on temporary difference arising between the tax bases of assets & liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax is measured using the tax rate that are expected to apply in the year when the asset is realized or the liability is settled based on the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred tax relating to items recognized directly in equity/OCI is recognized in equity/OCI and not in the statement of profit and loss.
Deferred tax asset is recognized to the extent that it is probable that sufficient future taxable profit will be available against which the deductible temporary differences and the carry forward unused tax credits and unused tax losses can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized.
3.21 Provisions, contingent liabilities, commitments and contingent assets
Provisions are recognized for present obligations of uncertain timing or amount arising as a result of a past event where a reliable estimate can be made and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.
Where it is not probable that an outflow of resources embodying economic benefits will be required or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability and commitments, unless the probability of outflow of resources embodying economic benefits is remote.
Contingent assets are not recognized but disclosed in the financial statements when an inflow of economic benefits is probable.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Basic earnings per share is computed using the net profit/ (loss) for the year (without taking impact of OCI) attributable to the equity shareholders'' and weighted average number of shares outstanding during the year. The weighted average numbers of shares is adjusted for treasury shares and also includes fixed number of equity shares that are issuable on conversion of compulsorily convertible preference shares, debentures or any other instrument, from the date consideration is received (generally the date of their issue)of such instruments. The diluted EPS is calculated on the same basis as basic EPS, after adjusting for the effect of potential dilutive equity shares unless impact is anti-dilutive.
⢠Identification of Operating segments
The Company''s operating businesses are organized and managed separately according to the nature of products manufactured and services provided, with each segment representing a strategic business unit that offers different products and as reviewed by the Chief operating decision ma ker of the Compa ny.
The Company recognises inter-segment sales and transfers as if they were to third parties at current market prices.
⢠Allocation of common costs
Common allocable costs are allocated to each segment on reasonable basis.
It includes general administrative expenses, corporate & other office expenses, income that arises at the enterprise level and relate to enterprise as a whole being not allocable to any business segment and also un-allocable assets & liabilities that relate to the company as whole and not allocable to any segment.
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
⢠Initial Recognition
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition. Transaction costs that are directly attributable to the acquisition or release of financial assets and financial liabilities respectively, which are not at fair value through profit or loss, are added to the fair value of underlying financial assets and liabilities on initial recognition. Trade receivables and trade payables that do not contain a significant financing component are initially measured at their transaction price.
a. Non- Derivative Financial Instruments
⢠Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised cost which is held with objective to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
⢠Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income which is held with objective to achieve both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company has made an election for its investments which are classified as equity instruments (other than investment in shares of Subsidiaries, Joint Ventures and Associates) to present the subsequent changes in fair value through profit and loss account
⢠Financial assets at fair value through profit or loss
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss. The Company has elected to measure its investments which are classified as equity instruments (other than investment in shares of Subsidiaries, Joint Ventures and Associates) at fair value through profit and loss account.
⢠Impairment of financial assets
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. For impairment purposes significant financial assets
are tested on an individual basis, other financial assets are assessed collectively in groups that share similar credit risk characteristics.
The Company recognises lifetime expected losses for all trade receivables. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is recognized as an impairment gain or loss in profit or loss.
The Company follows ''simplified approach'' for the recognition of impairment loss allowance on trade and other receivables.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
The Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the receivables and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
⢠Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest method. Financial liabilities at fair value through profit and loss includes financial liability held for trading and financial liability designated upon initial recognition as at fair value through profit and loss.
⢠Investment in Subsidiaries, Associates and Joint Ventures
Investment in equity shares of subsidiaries, associates and joint ventures is carried at cost less impairments in the standalone financial statements.
⢠Cash and cash equivalents
Cash and cash equivalents consist of cash, bank balances in currents and short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
b. Derivative Financial Instruments
Derivative instruments such as forward currency contracts are used to hedge foreign currency risks, and are initially recognized at their fair values on the date on which a derivative contract is entered into and are subsequently re-measured at fair value on each reporting date. A hedge of foreign currency risk of a firm commitment is accounted for as a fair value hedge. Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and Loss. However, if hedging instrument hedges an equity instrument for which the Company has elected to present changes as at fair value through other comprehensive income, then fair value changes are recognized in Other Comprehensive Income.
⢠Derecognition
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition as per Ind AS 109. A financial liability (or a part of a financial liability) is derecognized from the company''s balance sheet when the obligation specified in the contract is discharged or cancelled or expires.
⢠Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
⢠Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the company either begins or ceases to perform an activity that is significant to its operations. If the company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
3.25 Recent accounting pronouncements
The Ministry of Corporate Affairs ("MCA") notifies new standards / amendments under Companies (Indian Accounting Standards) Rules as issued from time to time. On 23rd March, 2022, MCA
amended the Companies (Indian Accounting Standards)
Amendment Rules, 2022, as below:
(a) Ind AS 16 | Property, plant and equipment - The amendment clarifies that excess of net sale proceeds of items produced over the cost of testing, if any, shall not be recognised in the profit or loss but deducted from directly attributable costs considered as part of cost of an item of property, plant and equipment. The effective date for adoption of this amendment is annual periods beginning on or after 1st April, 2022. The Company is in the process of evaluating the impact of these amendments.
(b) Ind AS 37 | Provisions, contingent liabilities and contingent assets - The amendment specifies that the ''cost of fulfilling'' a contract comprises the ''costs that relate directly to the contract''. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract). The effective date for adoption of this amendment is annual periods beginning on or after 1st April 2022, although early adoption is permitted. The Company is in the process of evaluating the impact of these amendments.
(c) Ind AS 103 | Business combinations - The amendment adds a new exception in Ind AS 103 for liabilities and contingent liabilities. The Company is in the process of evaluating the impact of these amendments.
(d) Ind AS 109 | Financial instruments - The amendment clarifies which fees an entity includes when it applies the ''10%'' test in assessing whether to derecognise a financial liability. An entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other''s behalf. The company does not expect the amendments to have any impact in its financial statements.
4. CRITICAL ACCOUNTING ESTIMATES,ASSUMPTIONS AND JUDGEMENTS4.1 Property, plant and equipment
External advisor and/or internal technical team assess the remaining useful life and residual value of property, plant and equipment. Management believes that the assigned useful lives and residual values are reasonable.
Internal technical and user team assess the remaining useful lives of Intangible assets. Management believes that assigned useful lives are reasonable. All Intangibles are carried at net book value on transition.
4.3 Mine restoration obligation
In determining the cost of the mine restoration obligation the Company uses technical estimates to determine the expected cost to restore the mines and the expected timing of these costs.
Liquidated damages payable or receivable are estimated and recorded as per contractual terms/management assertion; estimate may vary from actuals as levy by customer/vendor.
The company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
The Company estimates the un-collectability of accounts receivable by analyzing historical payment patterns, customer concentrations, customer credit-worthiness and current economic trends. If the financial condition of a customer deteriorates, additional allowances may be required. Similarly, as stated above the Company provides for other receivables / recovery against services, interest, etc. Also, the Company provides for inventory obsolescence, excess inventory and inventories with carrying values in excess of net realizable value based on assessment of the future demand, market conditions and specific inventory management initiatives. In all cases inventory is carried at the lower of historical cost and net realizable value.
Mar 31, 2021
1. OVERVIEW
Jindal Steel & Power Limited ("the Company") is one of the India''s leading steel producers. It is listed on the National Stock Exchange of India and Bombay Stock Exchange in India. The registered office is situated in the state of Haryana, the corporate office is situated in New Delhi and the manufacturing plants in India are in the states of Chhattisgarh, Odisha, Jharkhand etc. The Company has global presence through subsidiaries, mainly in Australia, Botswana, Indonesia, Mauritius, Mozambique, Madagascar, Namibia, South Africa, Tanzania and Zambia and representative office in China. There are several business initiatives running simultaneously across continents.
These financial statements have been approved and adopted by the Board of Directors of the Company in their meeting held on 12th May, 2021
2. A. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The financial statements have been prepared in accordance with Indian accounting standards as prescribed under Section 133 of the Companies Act, 2013 (the ''Act'') read with Companies (Accounts) Rules, 2015 (Indian Accounting Standards (IND AS)). The Company has consistently applied the accounting policies used in the preparation of its financial statements.
The standalone financial statements provide comparative information in respect of previous year.
The significant accounting policies used in preparing the financial statements are set out in Note No. 3 of the Notes to the Standalone Financial Statements.
The preparation of the financial statements in conformity with Indian Accounting Standards (Ind AS) requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures at the date of the financial statements. The judgments, estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision effects only that period or in the period of the revision and future periods if the revision affects both current and future years and, if material, their effects are disclosed in the notes to the financial statements. Actual results could vary from these estimates. (Refer Note No. 4 on critical accounting estimates, assumptions and judgments).
B. ESTIMATION OF UNCERTAINTIES RELATING TO THE GLOBAL HEALTH PANDEMIC FROM COVID-19 (COVID-19):
The Company has considered the possible effects that may result from the pandemic relating to COVID-19 in the preparation of these standalone financial statements including the recoverability of carrying amounts of financial and non financial assets. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of this pandemic, the Company has, at the date of approval of these financial statements, used internal and external sources of information and related information and economic forecasts and expects that the carrying amount of these assets will be
recovered. The impact of this pandemic may be different from that estimated as at the date of approval of these standalone financial statements and the Company will continue to closely monitor any material changes to future economic conditions.
3. SIGNIFICANT ACCOUNTING POLICIES
3.1 Basis of Measurement
These financial statements have been prepared under the historical cost convention on the accrual basis, except for the following assets and liabilities which have been measured fair value:
⢠Property, Plant & Equipment (at fair value as deemed cost as at 1st April 2015),
⢠Derivative financial instruments,
⢠Defined benefit plans- plan assets measured at fair value
⢠Financial assets and liabilities except certain investments
and borrowings carried at amortised cost (refer accounting policy regarding financial instruments).
⢠Share based payments
The financial statements are presented in Indian Rupees (?) which is the Company''s functional and presentation currency and all amounts are rounded to the nearest crore (? 00,00,000) and two decimals thereof, except as otherwise stated.
3.2 Fair Value Measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non- financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy in which they fall.
3.3 Property, plant and equipment
On transition to IND AS, the Company has adopted optional exception under IND AS 101 to measure Property, Plant and Equipment at fair value. Consequently the fair value has been assumed to be deemed cost of Property, Plant and Equipment on the date of transition. Subsequently Property, Plant and Equipment are stated at cost/deemed cost less accumulated depreciation and impairment losses, if any. Costs include costs of acquisition or construction including incidental expenses thereto, borrowing costs, and other attributable costs of bringing the asset to its working condition for its intended use and are net of available duty/tax credits.
Subsequent expenditure relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance costs are recognised in Statement of Profit & Loss as incurred.
Gains or losses arising from discard/sale of Property, Plant and Equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is discarded / sold.
The Company adjusts exchange differences arising on translation/settlement of long-term foreign currency monetary items as referred in Policy for Foreign exchange transactions. (Refer Note no. 5)
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively.
Capital work-in-progress: Expenditure related to and incurred on implementation of new/expansion-cum-modernisation projects is included under capital work-in-progress until the relevant assets are ready for its intended use. All other expenditure (including trial run / test run expenditures) during construction / erection period (net of income) are shown as part of pre-operative expenditure pending allocation / capitalization and the same is allocated to the respective asset on completion of its construction/erection.
Depreciation: Depreciation on property, plant and equipment is provided on straight-line method (SLM) as per the useful life of assets, as estimated by the management / independent professional, which is generally in line with Schedule II to the Companies Act, 2013 except for certain assets specified below:
⢠Power generating units: 40-60 years
⢠Certain continuous process plants: 25-48 years
⢠Certain Other Plant and equipment: 15-35 years
2. Certain non -factory buildings: 18-60 Years
Subsequent to adoption of fair value as deemed cost of property, plant and equipment as at 1st April 2015 under IND AS 101, depreciation is charged on fair valued amount less estimated salvage value.
Based on management evaluation, depreciation rates currently used fairly reflect its estimate of the useful lives and residual values of property, plant and equipment.
Certain plant and machinery have been considered as continuous process plant on the basis oftechnical assessment and depreciation on the same is provided for accordingly.
Leasehold land is amortized on a straight line basis over the period of lease.
Capital expenditure on purchase and development of identifiable non monetary assets without physical substance is recognized as Intangible Assets when:
⢠it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and
⢠the cost of the asset can be measured reliably.
Such Intangible assets are stated at cost less accumulated amortization and impairment losses, if any.
Intangible Assets are amortized on straight-line method over the expected duration of benefits. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each financial year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the assets are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates and adjusted prospectively.
Estimated useful lives of intangible assets are as follows:
⢠Computer software - 1 to 10 years
⢠Design & Drawings- 5 years
⢠Licenses - 25 years
3.5 Intangible assets under development
Mines development expenditure incurred in respect of new iron ore/coal and likewise mines are shown under ''Intangible assets under development''. On mines being ready for intended use, this amount is transferred to appropriate head under intangible assets and amortized over a period of ten years starting from the said year or the future expected extraction period of the reserves based on actual extraction till date, whichever is shorter.
Development expenditure incurred on an individual project is recognized as an intangible asset when the Company can demonstrate all the following:
⢠The technical feasibility of completing the intangible asset so that it will be available for use or sale
⢠Its intention to complete the asset
⢠Its ability to use or sell the asset
⢠How the asset will generate future economic benefits
⢠The availability of adequate resources to complete the development and to use or sell the asset
⢠The ability to measure reliably the expenditure attributable to the intangible asset during development.
Biological assets are measured at cost. Feeding and maintenance costs are expensed as incurred.
assets recognition exemption to leases that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
3.11 Borrowing Costs
Borrowing costs include interest and other costs that the Company incurs in connection with the borrowing of funds.
Borrowing costs related to a qualifying asset that necessarily takes a substantial period of time to get ready for its intended use is worked out on the basis of actual utilization of funds out of project specific loans and/or other borrowings to the extent identifiable with the qualifying asset and is capitalized with the cost of qualifying asset, using the effective interest method. All other borrowing costs are charged to statement of profit and loss.
In case of significant long term loans, other costs incurred in connection with the borrowing of funds are amortized over the period of respective Loan.
3.12 Valuation of Inventories
Inventories are valued at lower of cost, computed on weighted average basis, or net realizable value. Cost of inventories includes in case of raw material, cost of purchase and incidental expenses; in case of work-in-progress, estimated direct cost and appropriate proportion of administrative and other overheads; in case of finished goods, estimated direct cost and appropriate administrative and other overheads and excise duty; and in case of traded goods, cost of purchase and other costs.
Scrap is valued at estimated realizable value. However raw materials, components, stores and spares held for use in the production of finished goods are not written down below cost if the finished products are expected to be sold at or above cost.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
Initial cost of inventories includes the transfer of gains and losses on qualifying cash flow hedges, recognised in OCI, in respect of the purchases of raw materials.
3.13 Foreign Currency Transactions
⢠Transactions in foreign currencies are initially recorded by the Company at rates prevailing at the date of the transaction. Subsequently, monetary items are translated at closing exchange rates of balance sheet date and the resulting exchange difference recognised in profit or loss. Differences arising on settlement of monetary items are also recognised in profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the transaction. Non-monetary items (Other than investment in shares of Subsidiaries, Joint Ventures and Associates) carried at fair value that are denominated in foreign currencies are translated at the exchange rates prevailing at the date when the fair value was determined. Exchange component of
Investment properties are measured at cost, including transaction costs less accumulated depreciation and impairment losses, if any.
The carrying amount of Property, plant and equipment, Intangible assets and Investment property are reviewed at each Balance Sheet date to assess impairment, if any based on internal / external factors. An asset is treated as impaired when the carrying cost of asset or exceeds its recoverable value being higher of value in use and net selling price. An impairment loss is recognized as an expense in the Statement of Profit & Loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed, if there has been an improvement in recoverable amount.
Non-current assets are classified as "Held for Sale" if their carrying amount is intended to be recovered principally through sale rather than through continuing use. The condition for classification of "Held for Sale" is met when the non-current asset is available for sale. Non-current assets held for sale are measured at the lower of carrying amount and fair value less cost to sell.
Right of Use Assets
The Company recognizes a right-of-use asset, on a lease-by-lease basis, to measure that right-of-use asset an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet immediately before the date of initial application.
The cost of right-of-use assets includes the amount of lease liabilities recognised. Initial direct costs incurred and lease payments made at or before the commencement date less any lease incentives received, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment test.
The Company recognise a lease liability at the present value of the remaining lease payments, discounted using the lessee''s incremental borrowing rate.
The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on a lease by lease basis.
In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable.
Short-term Leases and leases of low-value assets
The company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value
the gain or loss arising on fair valuation of non-monetary items is recognised in line with the gain or loss of the item that gave rise to such exchange difference.
⢠The Company has availed the exemption available in IND AS 101, to continue capitalisation of foreign currency fluctuation on long term foreign currency monetary liabilities outstanding on transition date.
⢠Revenue from contracts with customers is recognized on transfer of control of promised goods or services to a customer at an amount that reflects the consideration to which the Company is expected to be entitled to in exchange for those goods or services.
⢠Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable consideration) allocated to that performance obligation. The transaction price of goods sold and services rendered is net of variable consideration on account of various discounts and schemes offered by the Company as part of the contract. This variable consideration is estimated based on the expected value of outflow. Revenue (net of variable consideration) is recognized only to the extent that it is highly probable that the amount will not be subject to significant reversal when uncertainty relating to its recognition is resolved.
⢠Revenue from sale of products is recognized when the control on the goods have been transferred to the customer. The performance obligation in case of product is satisfied at a point in time i.e., when the material is shipped to the customer or on delivery to the customer, as may be specified in the contract. Revenue is measured at fair value of the consideration received or receivable. The Company recognizes revenue from sale of products net of discounts, sales incentives, rebates granted, returns, GST, VAT, sales tax and duties when the products are delivered to customer or when delivered to a carrier for export sale, which is when significant risks and rewards of ownership pass to the customer, Sale of product is presented gross of manufacturing taxes like excise duty, wherever applicable.
⢠Income from aviation and other services is accounted for at the time of completion of service and billing thereof.
⢠Revenue from sale of power is recognized when delivered and measured based on bilateral contractual arrangements.
⢠Export benefits available are accounted for in the year of export, to the extent the realisation of the same is not considered uncertain by the Company.
⢠Government grants/subsidies are recognised at fair value where there is reasonable certainty that the grant /subsidy will be received and all attached conditions will be complied with. The grant/subsidy is recognised in the statement of profit and loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate.
3.15 Inter-Division Transfers/Captive sales
⢠Inter-division transfer of independent marketable products, produced by various divisions and used for further production/ sales is accounted for at approximate prevailing market price/ other appropriate price.
⢠Captive sales are in regard to products produced by various divisions and used for capital projects. These are transferred at factory cost to manufacture.
⢠The value of inter-divisional transfer and captive sales is netted off from sales and corresponding cost under cost of materials consumed and total expenses respectively. The same is shown as a contra item in the statement of profit and loss.
⢠Any unrealized profit on unsold/unconsumed stocks is eliminated while valuing the inventories.
⢠Claims receivable
The quantum of accruals in respect of claims receivable such as from railways, insurance, electricity, customs, excise and the like are accounted for on accrual basis to the extent there is reasonable certainty of realization.
⢠Dividend Income from Investment
Dividend income from investments is recognised when the right to receive payment has been established.
⢠Interest Income
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is netted off from interest cost under the head "Interest Cost (Net)" in the statement of profit and loss.
⢠Short term employee benefits are recognized as an expense in the Statement of Profit and Loss of the year in which the related services are rendered.
⢠Payment to defined contribution plan is recognized
as expense when employees have rendered services. Re-Measurements of the defined benefit liability/asset comprising actuarial gains and losses are recognized in other comprehensive income.
⢠The liability for gratuity, a defined benefit plan is determined using the projected unit credit method, on the basis of actuarial valuations carried out by third party actuaries at each balance sheet date. Re-Measurements comprising actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged / credited to Other Comprehensive Income in period in which they arise. Other costs are accounted for in Statement of Profit and Loss.
⢠Liability in respect of compensated absences due or expected to be availed within one year from the Balance Sheet date is estimated on the basis of valuation carried out by third party actuaries at each Balance Sheet date. ReMeasurements comprising actuarial gains and losses arising from experience adjustments and changes in actuarial
assumptions are charged / credited to profit and loss in the period in which they arise.
⢠Share based compensation benefits are recognised in the profit and loss in the year in which the same is granted as per Employees Share Purchase Scheme/ JSPL Employees Stock Option Plan of the Company.
3.18 Research and Development expenditure
Revenue expenditure on research is expensed as incurred. Capital expenditure incurred on research is added to the cost of Property, plant and equipment/ respective intangible asset.
3.19 Taxes on Income
Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India and tax laws prevailing in the respective tax jurisdictions where the Company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Deferred tax is provided on temporary difference arising between the tax bases of assets & liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax is measured using the tax rate that are expected to apply in the year when the asset is realized or the liability is settled based on the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred tax relating to items recognized directly in equity/OCI is recognized in equity/OCI and not in the statement of profit and loss.
Deferred tax asset is recognized to the extent that it is probable that sufficient future taxable profit will be available against which the deductible temporary differences and the carry forward unused tax credits and unused tax losses can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized.
3.20 Provisions, contingent liabilities, commitments and contingent assets
Provisions are recognized for present obligations of uncertain timing or amount arising as a result of a past event where a reliable estimate can be made and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.
Where it is not probable that an outflow of resources embodying economic benefits will be required or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability and commitments, unless the probability of outflow of resources embodying economic benefits is remote.
Contingent assets are not recognized but disclosed in the financial statements when an inflow of economic benefits is probable.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Basic earnings per share is computed using the net profit/ (loss) for the year (without taking impact of OCI) attributable to the equity shareholders'' and weighted average number of shares outstanding during the year. The weighted average numbers of shares also includes fixed number of equity shares that are issuable on conversion of compulsorily convertible preference shares, debentures or any other instrument, from the date consideration is received (generally the date of their issue)of such instruments. The diluted EPS is calculated on the same basis as basic EPS, after adjusting for the effect of potential dilutive equity shares unless impact is anti-dilutive.
⢠Identification of Operating segments
The Company''s operating businesses are organized and managed separately according to the nature of products manufactured and services provided, with each segment representing a strategic business unit that offers different products and as reviewed by the Chief operating decision maker of the Company.
⢠Inter-segment transfers
The Company recognises inter-segment sales and transfers as if they were to third parties at current market prices.
⢠Allocation of common costs
Common allocable costs are allocated to each segment on reasonable basis.
⢠Unallocated items
It includes general administrative expenses, corporate & other office expenses, income that arises at the enterprise level and relate to enterprise as a whole being not allocable to any business segment and also un-allocable assets & liabilities that relate to the Company as whole and not allocable to any segment.
⢠Segment Policies
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition.
Transaction costs that are directly attributable to the acquisition or release of financial assets and financial liabilities respectively, which are not at fair value through profit or loss, are added to the fair value of underlying financial assets and liabilities on initial recognition. Trade receivables and trade payables that do not contain a significant financing component are initially measured at their transaction price.
a) Non- Derivative Financial Instruments
⢠Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised cost which is held with objective to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
⢠Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income which is held with objective to achieve both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company has made an election for its investments which are classified as equity instruments (other than investment in shares of Subsidiaries, Joint Ventures and Associates) to present the subsequent changes in fair value through profit and loss account
⢠Financial assets at fair value through profit or loss
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss. The Company has elected to measure its investments which are classified as equity instruments (other than investment in shares of Subsidiaries, Joint Ventures and Associates) at fair value through profit and loss account.
⢠Impairment of financial assets
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. For impairment purposes significant financial assets are tested on an individual basis, other financial assets are assessed collectively in groups that share similar credit risk characteristics.
The Company recognises lifetime expected losses for all trade receivables. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased
significantly since initial recognition. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is recognized as an impairment gain or loss in profit or loss.
The Company follows ''simplified approach'' for the recognition of impairment loss allowance on trade and other receivables.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
The Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the receivables and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
⢠Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest method. Financial liabilities at fair value through profit and loss includes financial liability held for trading and financial liability designated upon initial recognition as at fair value through profit and loss.
⢠Investment in Subsidiaries, Associates and Joint Ventures
Investment in equity shares of subsidiaries, associates and joint ventures is carried at cost in the standalone financial statements.
⢠Cash and cash equivalents
Cash and cash equivalents consist of cash, bank balances in currents and short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
b) Derivative Financial Instruments
Derivative instruments such as forward currency contracts are used to hedge foreign currency risks, and are initially recognized at their fair values on the date on which a derivative contract is entered into and are subsequently re-measured at fair value on each reporting date. A hedge of foreign currency risk of a firm commitment is accounted for as a fair value hedge. Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and Loss. However, if hedging instrument hedges an equity instrument for which
4. CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGEMENTS
4.1 Property, plant and equipment
External advisor and/or internal technical team assess the remaining useful life and residual value of property, plant and equipment. Management believes that the assigned useful lives and residual values are reasonable.
4.2 Intangibles
Internal technical and user team assess the remaining useful lives of Intangible assets. Management believes that assigned useful lives are reasonable. All Intangibles are carried at net book value on transition.
4.3 Mine restoration obligation
In determining the cost of the mine restoration obligation the Company uses technical estimates to determine the expected cost to restore the mines and the expected timing of these costs.
4.4 Liquidated damages
Liquidated damages payable or receivable are estimated and recorded as per contractual terms/management assertion; estimate may vary from actuals as levy by customer/vendor.
4.5 Leases
The company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
4.6 Other estimates
The Company estimates the un-collectability of accounts receivable by analyzing historical payment patterns, customer concentrations, customer credit-worthiness and current economic trends. If the financial condition of a customer deteriorates, additional allowances may be required. Similarly, as stated above the Company provides for other receivables / recovery against services, interest, etc. Also, the Company provides for inventory obsolescence, excess inventory and inventories with carrying values in excess of net realizable value based on assessment of the future demand, market conditions and specific inventory management initiatives. In all cases inventory is carried at the lower of historical cost and net realizable value.
the Company has elected to present changes as at fair value through other comprehensive income, then fair value changes are recognized in Other Comprehensive Income.
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition as per Ind AS 109. A financial liability (or a part of a financial liability) is derecognized from the Company''s balance sheet when the obligation specified in the contract is discharged or cancelled or expires.
⢠Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
⢠Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
Mar 31, 2018
1.1 Basis of Measurement
These financial statements have been prepared under the historical cost convention on the accrual basis, except for the following assets and liabilities which have been measured fair value:
- Property, Plant & Equipment (at fair value as deemed cost as at 1st April 2015),
- Derivative financial instruments,
- Defined benefit plans- plan assets,
- Financial assets and liabilities except certain investments and borrowings carried at amortised cost (refer accounting policy regarding financial instruments).
- Share based payments
The financial statements are presented in Indian Rupees (Rs.) which is the Companyâs functional and presentation currency and all amounts are rounded to the nearest crore (Rs. 00,00,000) and two decimals thereof, except as otherwise stated.
1.2 Fair Value Measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non- financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy in which they fall.
1.3 Property, plant and equipment
On transition to IND AS, the Company has adopted optional exception under IND AS 101 to measure Property, Plant and Equipment at fair value. Consequently the fair value has been assumed to be deemed cost of Property, Plant and Equipment on the date of transition. Subsequently Property, Plant and Equipment are stated at cost/ deemed cost less accumulated depreciation and impairment losses, if any. Costs include costs of acquisiti on or construction including incidental expenses thereto, borrowing costs, and other attributable costs of bringing the asset to its working conditi on for its intended use and are net of available duty/tax credits.
Subsequent expenditure relati ng to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance costs are recognised in Statement of Profit & Loss as incurred.
Gains or losses arising from discard/sale of Property, Plant and Equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is discarded / sold.
The Company adjusts exchange differences arising on translation/settlement of long-term foreign currency monetary items as referred in Policy for Foreign exchange transactions. (Refer Note no 5)
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively.
Capital work-in-progress: Expenditure related to and incurred on implementation of new/expansion-cum-modernisation projects is included under capital work-in-progress unti l the relevant assets are ready for its intended use. All other expenditure (including trial run / test run expenditures) during construction / erection period (net of income) are shown as part of pre-operative expenditure pending allocation / capitalization and the same is allocated to the respective asset on completion of its construction/erection.
Depreciation: Depreciation on property, plant and equipment is provided on straight-line method (SLM) as per the useful life of assets, as esti mated by the management / independent professional, which is generally in line with Schedule II to the Companies Act, 2013 except for certain assets specified below:
1. Plant and equipment :
- Power generating units: 40-60 years
- Certain continuous process plants: 25-48 years
- Certain Other Plant and equipment: 15-35 years
2. Certain non -factory buildings: 18-30 Years Subsequent to adoption of fair value as deemed cost of property, plant and equipment as at 1st April 2015 under IND AS 101, depreciation is charged on fair valued amount less estimated salvage value.
Based on management evaluation, depreciation rates currently used fairly reflect its estimate of the useful lives and residual values of property, plant and equipment.
Certain plant and machinery have been considered as conti nuous process plant on the basis of technical assessment and depreciation on the same is provided for accordingly.
Leasehold land is amortized on a straight line basis over the period of lease.
1.4 Intangible assets
Capital expenditure on purchase and development of identifiable non monetary assets without physical substance is recognized as Intangible Assets when:
- it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and
- the cost of the asset can be measured reliably.
Such Intangible assets are stated at cost less accumulated amortization and impairment losses, if any.
Intangible Assets are amortized on straight-line method over the expected duration of benefits. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each financial year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the assets are considered to modify the amortizati on period or method, as appropriate, and are treated as changes in accounting estimates and adjusted prospectively.
Estimated useful lives of intangible assets are as follows:
- Computer software - 1 to 10 years
- Design & Drawings- 5 years
- Licenses - 25 years
1.5 Intangible assets under development
Mines development expenditure incurred in respect of new iron ore/coal and likewise mines are shown under âIntangible assets under developmentâ. On mines being ready for intended use, this amount is transferred to appropriate head under intangible assets and amortized over a period of ten years starting from the said year or the future expected extraction period of the reserves based on actual extraction till date, whichever is shorter.
Development expenditure incurred on an individual project is recognized as an intangible asset when the Company can demonstrate all the following:
- The technical feasibility of completing the intangible asset so that it will be available for use or sale
- Its intention to complete the asset
- Its ability to use or sell the asset
- How the asset will generate future economic benefits
- The availability of adequate resources to complete the development and to use or sell the asset
- The ability to measure reliably the expenditure attributable to the intangible asset during development.
1.6 Biological assets
Biological assets are measured at cost. Feeding and maintenance costs are expensed as incurred.
1.7 Investment property
Investment properties are measured at cost, including transaction costs less accumulated depreciation and impairment losses, if any.
1.8 Impairment
The carrying amount of Property, plant and equipment, Intangible assets and Investment property are reviewed at each Balance Sheet date to assess impairment, if any based on internal / external factors. An asset is treated as impaired when the carrying cost of asset or exceeds its recoverable value being higher of value in use and net selling price. An impairment loss is recognized as an expense in the Statement of Profit & Loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed, if there has been an improvement in recoverable amount.
1.9 Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that is not explicitly specified in an arrangement.
a. Finance lease
A lease that transfer substantially all the risk and rewards incidental to ownership to the Company is classified as finance lease.
Assets taken on lease are capitalised at the commencement of the lease at the inception date at lower of fair value of the lease property or present value of the minimum lease payments.
Lease payments are apportioned between finance charges and reduction of lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recoginsed in finance cost in the Statement of Profit or Loss. A leased asset is depreciated over its useful life.
b. Operating lease
An operating lease is a lease other than a finance lease. Lease in which a significant portion of the risks and rewards of ownership are retained by lessor are classified as operating leases. The rental payments under operating lease are recognized as expense in the statement of profit and loss on a straight-line basis over the lease term unless the payments are structured to increase in line with expected general inflation to compensate for the expected inflationary cost increases.
1.10 Borrowing Costs
Borrowing costs include interest and other costs that the Company incurs in connection with the borrowing of funds.
Borrowing costs related to a qualifying asset that necessarily takes a substantial period of time to get ready for its intended use is worked out on the basis of actual utilization of funds out of project specific loans and/or other borrowings to the extent identifiable with the qualifying asset and is capitalized with the cost of qualifying asset, using the effecti ve interest method. All other borrowing costs are charged to statement of profit and loss.
In case of significant long term loans, other costs incurred in connection with the borrowing of funds are amortized over the period of respective Loan.
1.11 Valuation of Inventories
Inventories are valued at lower of cost, computed on weighted average basis, or net realizable value. Cost of inventories includes in case of raw material, cost of purchase and incidental expenses; in case of work-in-progress, estimated direct cost and appropriate proportion of administrative and other overheads; in case of finished goods, estimated direct cost and appropriate administrative and other overheads and excise duty; and in case of traded goods, cost of purchase and other costs.
Scrap is valued at estimated realizable value. However raw materials, components, stores and spares held for use in the production of finished goods are not written down below cost if the finished products are expected to be sold at or above cost.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
Initial cost of inventories includes the transfer of gains and losses on qualifying cash flow hedges, recognised in OCI, in respect of the purchases of raw materials.
1.12 Foreign Currency Transactions
- Transactions in foreign currencies are initially recorded by the Company at rates prevailing at the date of the transaction. Subsequently, monetary items are translated at closing exchange rates of balance sheet date and the resulting exchange difference recognised in profit or loss. Differences arising on settlement of monetary items are also recognised in profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the transaction. Nonmonetary items (Other than investment in shares of Subsidiaries, Joint Ventures and Associates) carried at fair value that are denominated in foreign currencies are translated at the exchange rates prevailing at the date when the fair value was determined. Exchange component of the gain or loss arising on fair valuati on of non-monetary items is recognised in line with the gain or loss of the item that gave rise to such exchange difference.
- The Company has availed the exemption available in IND AS 101, to continue capitalisation of foreign currency fluctuation on long term foreign currency monetary liabilities outstanding on transition date.
1.13 Revenue Recognition
- Revenue is measured at fair value of the consideration received or receivable. The Company recognizes revenue from sale of products net of discounts, sales incentives, rebates granted, returns, GST, VAT, sales tax and duties when the products are delivered to customer or when delivered to a carrier for export sale, which is when significant risks and rewards of ownership pass to the customer, Sale of product is presented gross of manufacturing taxes like excise duty, wherever applicable.
- Income from aviation and other services is accounted for at the time of completion of service and billing thereof.
- Revenue from sale of power is recognized when delivered and measured based on bilateral contractual arrangements.
- Export benefits available are accounted for in the year of export, to the extent the realisation of the same is not considered uncertain by the Company.
- Government grants/ subsidies are recognised at fair value where there is reasonable certainty that the grant /subsidy will be received and all attached conditions will be complied with. The grant/subsidy is recognised in the statement of profit and loss on a systemati c basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate.
1.14 Inter-Division Transfers/Captive sales
- Inter-division transfer of independent marketable products, produced by various divisions and used for further production/sales is accounted for at approximate prevailing market price/other appropriate price.
- Captive sales are in regard to products produced by various divisions and used for capital projects. These are transferred at factory cost to manufacture.
- The value of inter-divisional transfer and captive sales is netted off from sales and corresponding cost under cost of materials consumed and total expenses respecti vely. The same is shown as a contra item in the statement of profit and loss.
- Any unrealized profit on unsold/unconsumed stocks is eliminated while valuing the inventories.
1.15 Other Income
- Claims receivable
The quantum of accruals in respect of claims receivable such as from railways, insurance, electricity, customs, excise and the like are accounted for on accrual basis to the extent there is reasonable certainty of realization.
- Dividend Income from Investment
Dividend income from investments is recognised when the right to receive payment has been established.
- Interest Income
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is netted off from interest cost under the head âInterest Cost (Net)â in the statement of profit and loss.
1.16 Employee Benefits
- Short term employee benefits are recognized as an expense in the Statement of Profit and Loss of the year in which the related services are rendered.
- Payment to defined contribution plan is recognized as expense when employees have rendered services. Re-Measurements of the defined benefit liability/asset comprising actuarial gains and losses are recognized in other comprehensive income.
- The liability for gratuity, a defined benefit plan is determined using the projected unit credit method, on the basis of actuarial valuations carried out by third party actuaries at each balance sheet date. Re-Measurements comprising actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged / credited to Other Comprehensive Income in period in which they arise. Other costs are accounted for in Statement of Profit and Loss.
- Liability in respect of compensated absences due or expected to be availed within one year from the Balance Sheet date is estimated on the basis of valuati on carried out by third party actuaries at each Balance Sheet date. Re-Measurements comprising actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged / credited to profit and loss in the period in which they arise.
- Share based compensation benefits are recognised in the profit and loss in the year in which the same is granted as per Employees Share Purchase Scheme/ JSPL Employees Stock Option Plan of the Company.
1.17 Research and Development expenditure
Revenue expenditure on research is expensed as incurred. Capital expenditure incurred on research is added to the cost of Property, plant and equipment/ respective intangible asset.
1.18 Taxes on Income
Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India and tax laws prevailing in the respective tax jurisdictions where the company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Deferred tax is provided on temporary difference arising between the tax bases of assets & liabilities and their carrying amounts for financial reporti ng purposes at the reporting date. Deferred tax is measured using the tax rate that are expected to apply in the year when the asset is realized or the liability is settled based on the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred tax relating to items recognized directly in equity/OCI is recognized in equity/OCI and not in the statement of profit and loss.
Deferred tax asset is recognized to the extent that it is probable that sufficient future taxable profit will be available against which the deductible temporary differences and the carry forward unused tax credits and unused tax losses can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized.
In the situations where the Company is entitled to a tax holiday under the Income-tax Act, 1961 enacted in India or tax laws prevailing in the respective tax jurisdictions where it operates, no deferred tax [asset or liability] is recognized in respect of temporary differences which reverse during the tax holiday period.
Minimum Alternate tax (MAT) credit is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period.
1.19 Provisions, contingent liabilities, commitments and contingent assets
Provisions are recognized for present obligations of uncertain timing or amount arising as a result of a past event where a reliable estimate can be made and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.
Where it is not probable that an outflow of resources embodying economic benefits will be required or the amount cannot be estimated reliably, the obligation is disclosed as a conti ngent liability and commitments, unless the probability of outflow of resources embodying economic benefits is remote.
Contingent assets are not recognized but disclosed in the financial statements when an inflow of economic benefits is probable.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
1.20 Earnings per share
Basic earnings per share is computed using the net profit/ (loss) for the year (without taking impact of OCI) attributable to the equity shareholdersâ and weighted average number of shares outstanding during the year. The weighted average numbers of shares also includes fixed number of equity shares that are issuable on conversion of compulsorily convertible preference shares, debentures or any other instrument, from the date consideration is received (generally the date of their issue)of such instruments. The diluted EPS is calculated on the same basis as basic EPS, after adjusting for the effect of potential dilutive equity shares unless impact is anti-dilutive.
1.21 Segment Reporting
- Identification of Operating segments
The Companyâs operating businesses are organized and managed separately according to the nature of products manufactured and services provided, with each segment representing a strategic business unit that offers different products and as reviewed by the Chief operating decision maker of the Company.
- Inter-segment transfers
The Company recognises inter-segment sales and transfers as if they were to third parties at current market prices.
- Allocation of common costs
Common allocable costs are allocated to each segment on reasonable basis.
- Unallocated items
It includes general administrative expenses, corporate & other office expenses, income that arises at the enterprise level and relate to enterprise as a whole being not allocable to any business segment and also un-allocable assets & liabilities that relate to the company as whole and not allocable to any segment.
- Segment Policies
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.
1.22 Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
- Initial Recognition
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition. Transaction costs that are directly attributable to the acquisition or release of financial assets and financial liabilities respectively, which are not at fair value through profit or loss, are added to the fair value of underlying financial assets and liabilities on initial recognition. Trade receivables and trade payables that do not contain a significant financing component are initially measured at their transaction price.
- Subsequent Measurement
a. Non-Derivative Financial Instruments
- Financial assets carried at amortised cost A financial asset is subsequently measured at amortised cost which is held with objective to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
- Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income which is held with objective to achieve both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company has made an electi on for its investments which are classified as equity instruments (other than investment in shares of Subsidiaries, Joint Ventures and Associates) to present the subsequent changes in fair value through profit and loss account
- Financial assets at fair value through profit or loss
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss. The Company has elected to measure its investments which are classified as equity instruments (other than investment in shares of Subsidiaries, Joint Ventures and Associates) at fair value through profit and loss account.
- Impairment of financial assets
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. For impairment purposes significant financial assets are tested on an individual basis, other financial assets are assessed collectively in groups that share similar credit risk characteristics.
The Company recognises lifetime expected losses for all trade receivables. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is recognized as an impairment gain or loss in profit or loss.
The Company follows âsimplified approachâ for the recognition of impairment loss allowance on trade and other receivables.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
The Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the receivables and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
- Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest method. Financial liabilities at fair value through profit and loss includes financial liability held for trading and financial liability designated upon initial recognition as at fair value through profit and loss.
- Investment in Subsidiaries, Associates and Joint Ventures
Investment in equity shares of subsidiaries, associates and joint ventures is carried at cost in the standalone financial statements.
- Cash and cash equivalents
Cash and cash equivalents consist of cash, bank balances in currents and short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
b. Derivative Financial Instruments
- Derivative instruments such as forward currency contracts are used to hedge foreign currency risks, and are initially recognized at their fair values on the date on which a derivative contract is entered into and are subsequently remeasured at fair value on each reporting date. A hedge of foreign currency risk of a firm commitment is accounted for as a fair value hedge. Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and Loss. However, if hedging instrument hedges an equity instrument for which the Company has elected to present changes as at fair value through other comprehensive income, then fair value changes are recognized in Other Comprehensive Income.
- Derecognition
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition as per Ind AS 109. A financial liability (or a part of a financial liability) is derecognized from the companyâs balance sheet when the obligation specified in the contract is discharged or cancelled or expires.
- Offseffing of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
- Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The companyâs senior management determines change in the business model as a result of external or internal changes which are significant to the Companyâs operations. Such changes are evident to external parties. A change in the business model occurs when the company either begins or ceases to perform an activity that is significant to its operations. If the company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
Mar 31, 2017
1. OVERVIEW
Jindal Steel & Power Limited ("the Company") is one of the India''s leading steel producers with significant presence in sectors like mining and power generation. It is listed on the National Stock Exchange of India and Bombay Stock Exchange in India. Its business is spread across India and overseas. The registered office is situated in the state of Haryana, the corporate office is situated in New Delhi and the manufacturing plants in India are in the states of Chhattisgarh, Odisha, Jharkhand etc. The Company has global presence through subsidiaries, mainly in Australia, Botswana, Cameroon, China, Dubai, Indonesia, Liberia, Mauritania, Mauritius, Mozambique, Madagascar, Namibia, South Africa, Sultanate of Oman, Tanzania and Zambia. There are several business initiatives running simultaneously across continents.
2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The Company has adopted Indian Accounting Standards (the ''Ind AS'') prescribed under section 133 of the Companies Act, 2013 (the ''Act''), read with the Companies (Indian Accounting Standards) Rules, 2015 and the Companies (Indian Accounting Standards) (Amendment) Rules, 2016, with effect from 1st April 2016 with 1st April 2015 as the date of transition. Accordingly the financial statements have been prepared in accordance with the said Ind AS & Rules and other recognized accounting practices & policies to the extent applicable.
For all periods up to and including the year ended 31st March 2016, the Company had prepared its financial statements in accordance with accounting standards as prescribed under Section 133 of the Companies Act, 2013 (the ''Act'') read with Rule 7 of the Companies (Accounts) Rules, 2014 (referred to as ''Indian GAAP''). The Company has consistently applied the accounting policies used in the preparation of its opening Ind AS Balance Sheet at April 1, 2015 throughout all periods presented, as if these policies had always been in effect and are covered by Ind AS 101 ''''First-time adoption of Indian Accounting Standards''''. The transition was carried out from accounting principles generally accepted in India (''''Indian GAAP'''') which is considered as the previous GAAP, as defined in Ind AS 101. The reconciliation of effects of the transition from Indian GAAP on the equity as at April 1, 2015 and March 31, 2016 and on the net profit and material adjustments to cash flows for the year ended March 31, 2016 is disclosed in Note no 66 to these financial statements.
The standalone financial statements provide comparative information in respect of previous year. In addition, the company presents balance sheet as at the beginning of previous year which is the transition date to Ind AS.
The significant accounting policies used in preparing the financial statements are set out in Note no 3 of the Notes to the Standalone Financial Statements.
The preparation of the financial statements in conformity with Indian Accounting Standards (Ind AS) requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures at the date of the financial statements. The judgments, estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision effects only that period or in the period of the revision and future periods if the revision affects both current and future years and, if material, their effects are disclosed in the notes to the financial statements. Actual results could vary from these estimates. (refer Note no. 4 on critical accounting estimates, assumptions and judgments).
3. SIGNIFICANT ACCOUNTING POLICIES
3.1 Basis of Measurement
These financial statements have been prepared under the historical cost convention on the accrual basis, except for the following assets and liabilities which have been measured fair value:
- Property, Plant & Equipment (at fair value as deemed cost as at 1st April 2015),
- Derivative financial instruments,
- Defined benefit plans- plan assets measured at fair value,
- Financial assets and liabilities except certain investments and borrowings carried at mortised cost (refer accounting policy regarding financial instruments).
- Share based payments
The financial statements are presented in Indian Rupees (?) which is the Company''s functional and presentation currency and all amounts are rounded to the nearest crore(? 00,00,000) and two decimals thereof, excepts otherwise stated.
3.2 Fair Value Measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non- financial asset takes in to account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy in which they fall.
3.3 Property, plant and equipment
On transition to Ind AS, the Company has adopted optional exception under Ind AS 101 to measure Property, Plant and Equipment at fair value. Consequently the fair value has been assumed to be deemed cost of Property, Plant and Equipment on the date of transition. Subsequently Property, Plant and Equipment are stated at cost less accumulated depreciation and impairment losses, if any. Costs include costs of acquisitions or constructions including incidental expenses thereto, borrowing costs, and other attributable costs of bringing the asset to its working condition for its intended use and are net of available duty/tax credits.
Subsequent expenditure relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance costs are recognized in Statement of Profit & Loss as incurred.
Gains or losses arising from discard/sale of Property, Plant and Equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is discarded / sold.
The Company adjusts exchange differences arising on translation/settlement of long-term foreign currency monetary items as referred in Policy for Foreign exchange transactions. (Refer Note no 5)
On transition to Ind AS, the Company has adopted fair value as deemed cost of property, plant and equipment as at 1st April 2015 under Ind AS 101 and revisited and revised useful life of various categories of assets. Subsequent to adoption of fair value as deemed cost of property, plant and equipment as at 1st April 2015 under Ind AS 101, property, plant and equipment are measured in accordance with Ind AS 16''s requirements for cost model.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively.
Capital work-in-progress: Expenditure related to and incurred on implementation of new/expansion-cum-modernization projects is included under capital work-in-progress until the relevant assets are ready for its intended use. All other expenditure (including trial run / test run expenditures) during construction / erection period (net of income) are shown as part of pre-operative expenditure pending allocation / capitalization and the same is allocated to the respective asset on completion of its construction/erection.
Depreciation: Depreciation on property, plant and equipment is provided on straight-line method (SLM) as per the useful life of assets, as estimated by the management / independent professional, which is generally in line with Schedule II to the Companies Act, 2013 except for certain assets specified below:
1. Plant and equipment:
- Power generating units: 40-60 years
- Certain continuous process plants: 25-48 years
- Certain Other Plant and equipments: 15-35 years
2. Certain non-factory buildings: 18-30 years
Subsequent to fair value as deemed cost of property, plant and equipment as at 1st April 2015 under Ind AS 101, depreciation is charged on fair valued amount less estimated salvage value.
Based on management evaluation, depreciation rates currently used fairly reflect its estimate of the useful lives and residual values of property, plant and equipment.
Certain plant and machinery have been considered as continuous process plant on the basis of technical assessment and depreciation on the same is provided for accordingly.
Leasehold land is amortized on a straight line basis over the period of lease.
3.4 Intangible assets
Capital expenditure on purchase and development of identifiable on monetary assets without physical substance is recognized as Intangible Assets when:
- it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and
- the cost of the asset can be measured reliably.
Such Intangible assets are stated at cost less accumulated amortization and impairment losses, if any.
Intangible Assets are amortized on straight-line method over the expected duration of benefits. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each financial year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the assets are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates and adjusted prospectively.
Estimated useful lives of intangible assets are as follows:
- Computer software- 1 to 10 years
- Design & Drawings- 5 years
- Licenses- 25 years
3.5 Intangible assets under development
Mines development expenditure incurred in respect of new iron ore/coal and likewise mines are shown under ''Intangible assets under development''. On mines being ready for intended use, this amount is transferred to appropriate head under intangible assets and amortized over a period of ten years starting from the said year or the future expected extraction period of the reserves based on actual extraction till date, whichever is shorter.
Development expenditure incurred on an individual project is recognized as an intangible asset when the Company can demonstrate all the following:
- The technical feasibility of completing the intangible asset so that it will be available for use or sale
- Its intention to complete the asset
- Its ability to use or sell the asset
- How the asset will generate future economic benefits
- The availability of adequate resources to complete the development and to use or sell the asset
- The ability to measure reliably the expenditure attributable to the intangible asset during development.
3.6 Biological assets
Biological assets are measured at fair value. Feeding and maintenance costs are expensed as incurred.
3.7 Investment property
Investment properties are measured at cost, including transaction costs less accumulated depreciation and impairment losses, if any.
3.8 Impairment
The carrying amount of Property, plant and equipment, Intangible assets and Investment property are reviewed at each Balance Sheet date to assess impairment, if any based on internal / external factors. An asset is treated as impaired when the carrying cost of asset or exceeds its recoverable value being higher of value in use and net selling price. An impairment loss is recognized as an expense in the Statement of Profit & Loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed, if there has been an improvement in recoverable amount.
3.9 Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that is not explicitly specified in an arrangement.
The rental payments under operating lease are recognized as expense in the statement of profit and loss on a straight-line basis over the lease term.
3.10 Borrowing Costs
Borrowing costs include interest and other costs that the Company incurs in connection with the borrowing of funds.
Borrowing costs related to a qualifying asset that necessarily takes a substantial period of time to get ready for its intended use is worked out on the basis of actual utilization of funds out of project specific loans and/or other borrowings to the extent identifiable with the qualifying asset and is capitalized with the cost of qualifying asset, using the effective interest method. All other borrowing costs are charged to statement of profit and loss.
In case of significant long term loans, other costs incurred in connection with the borrowing of funds are amortized over the period of respective Loan.
3.11 Valuation of Inventories
Inventories are valued at lower of cost, computed on weighted average basis, or net realizable value. Cost of inventories includes in case of raw material, cost of purchase and incidental expenses; in case of work-in-progress, estimated direct cost and appropriate proportion of administrative and other overheads; in case of finished goods, estimated direct cost and appropriate administrative and other overheads and excise duty; and in case of traded goods, cost of purchase and other costs.
Scrap is valued at estimated realizable value. However raw materials, components, stores and spares held for use in the production of finished goods are not written down below cost if the finished products are expected to be sold at or above cost.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
Initial cost of inventories includes the transfer of gains and losses on qualifying cash flow hedges, recognized in OCI, in respect of the purchases of raw materials.
3.12 Foreign Currency Transactions
- Transactions in foreign currencies are initially recorded by the Company at rates prevailing at the date of the transaction. Subsequently, monetary items are translated at closing exchange rates of balance sheet date and the resulting exchange difference recognized in profit or loss. Differences arising on settlement of monetary items are also recognized in profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the transaction. Non-monetary items (Other than investment in shares of Subsidiaries, Joint Ventures and Associates) carried at fair value that are denominated in foreign currencies are translated at the exchange rates prevailing at the date when the fair value was determined. Exchange component of the gain or loss arising on fair valuation of non-monetary items is recognized in line with the gain or loss of the item that gave rise to such exchange difference.
- The Company has availed the exemption available in Ind AS 101, to continue capitalization of foreign currency fluctuation on long term foreign currency monetary liabilities outstanding on transition date.
3.13 Revenue Recognition
- Revenue is measured at fair value of the consideration received or receivable. The Company recognizes revenue from sale of products net of discounts, sales incentives, rebates granted, returns, VAT, sales tax and duties when the products are delivered to customer or when delivered to a carrier for export sale, which is when significant risks and rewards of ownership pass to the customer, Sale of product is presented gross of manufacturing taxes like excise duty, wherever applicable.
- Income from aviation and other services is accounted for at the time of completion of service and billing thereof.
- Revenue from sale of power is recognized when delivered and measured based on bilateral contractual arrangements.
- Export benefits available are accounted for in the year of export, to the extent the realization of the same is not considered uncertain by the Company.
- Government grants/ subsidies are recognized at fair value where there is reasonable certainty that the grant /subsidy will be received and all attached conditions will be complied with. The grant/subsidy is recognized in the statement of profit and loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants are intended to compensate.
3.14 Inter-Division Transfers/Captive sales
- Inter-division transfer of independent marketable products, produced by various divisions and used for further production/sales is accounted for at approximate prevailing market price/other appropriate price.
- Captive sales are in regard to products produced by various divisions and used for capital projects. These are transferred at cost to manufacture.
- The value of inter-divisional transfer and captive sales is netted off from sales and corresponding cost under cost of materials consumed and total expenses respectively. The same is shown as a contra item in the statement of profit and loss.
- Any unrealized profit on unsold/unconsumed stocks is eliminated while valuing the inventories.
3.15 Other Income
- Claims receivable
The quantum of accruals in respect of claims receivable such as from railways, insurance, electricity, customs, excise and the like are accounted for on accrual basis to the extent there is reasonable certainty of realization.
- Dividend Income from Investment
Dividend income from investments is recognized when the right to receive payment has been established.
- Interest Income
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is netted off from interest cost under the head "Interest Cost (Net)" in the statement of profit and loss.
3.16 Employee Benefits
- Short term employee benefits are recognized as an expense in the Statement of Profit and Loss of the year in which the related services are rendered.
- Payment to defined contribution plan is recognized as expense when employees have rendered services. Remeasurements of the defined benefit liability/asset comprising actuarial gains and losses are recognized in other comprehensive income.
- The liability for gratuity, a defined benefit plan is determined using the projected unit credit method, on the basis of actuarial valuations carried out by third party actuaries at each balance sheet date. Remeasurements comprising actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged / credited to Other Comprehensive Income in period in which they arise. Other costs are accounted for in Statement of Profit and Loss.
- Liability in respect of compensated absences due or expected to be availed within one year from the Balance Sheet date is estimated on the basis of valuation carried out by third party actuaries at each Balance Sheet date. Remeasurements comprising actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged / credited to profit and loss in the period in which they arise.
- Share based compensation benefits are recognized in the profit and loss in the year in which the same is granted as per Employees Share Purchase Scheme of the Company.
3.17 Research and Development expenditure
Revenue expenditure on research is expensed as incurred. Capital expenditure incurred on research is added to the cost of Property, plant and equipment/ respective intangible asset.
3.18 Taxes on Income
Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India and tax laws prevailing in the respective tax jurisdictions where the company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Deferred tax is provided on temporary difference arising between the tax bases of assets & liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax is measured using the tax rate that are expected to apply in the year when the asset is realized or the liability is settled based on the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred tax relating to items recognized directly in equity/OCI is recognized in equity/OCI and not in the statement of profit and loss.
Deferred tax asset is recognized to the extent that it is probable that sufficient future taxable profit will be available against which the deductible temporary differences and the carry forward unused tax credits and unused tax losses can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized.
In the situations where the Company is entitled to a tax holiday under the Income-tax Act, 1961 enacted in India or tax laws prevailing in the respective tax jurisdictions where it operates, no deferred tax [asset or liability] is recognized in respect of temporary differences which reverse during the tax holiday period.
Minimum Alternate tax (MAT) credit is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period.
3.19 Provisions, contingent liabilities, commitments and contingent assets
Provisions are recognized for present obligations of uncertain timing or amount arising as a result of a past event where a reliable estimate can be made and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.
Where it is not probable that an outflow of resources embodying economic benefits will be required or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability and commitments, unless the probability of outflow of resources embodying economic benefits is remote. Contingent assets are not recognized but disclosed in the financial statements when an inflow of economic benefits is probable.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
3.20 Earnings per share
Basic earnings per share is computed using the net profit/ (loss) for the year (without taking impact of OCI) attributable to the equity shareholders'' and weighted average number of shares outstanding during the year. The weighted average numbers of shares also includes fixed number of equity shares that are issuable on conversion of compulsorily convertible preference shares, debentures or any other instrument, from the date consideration is received (generally the date of their issue)of such instruments. The diluted EPS is calculated on the same basis as basic EPS, after adjusting for the effect of potential dilutive equity shares unless impact is anti-dilutive.
3.21 Segment Reporting
- Identification of Operating segments
The Company''s operating businesses are organized and managed separately according to the nature of products manufactured and services provided, with each segment representing a strategic business unit that offers different products and as reviewed by the Chief operating decision maker of the Company.
- Inter-segment transfers
The Company recognises inter-segment sales and transfers as if they were to third parties at current market prices.
- Allocation of common costs
Common allocable costs are allocated to each segment on reasonable basis.
- Unallocated items
It includes general administrative expenses, corporate & other office expenses, income that arises at the enterprise level and relate to enterprise as a whole being not allocable to any business segment and also unallowable assets & liabilities that relate to the company as whole and not allocable to any segment.
- Segment Policies
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.
3.22 Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
- Initial Recognition
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition. Transaction costs that are directly attributable to the acquisition or release of financial assets and financial liabilities respectively, which are not at fair value through profit or loss, are added to the fair value of underlying financial assets and liabilities on initial recognition. Trade receivables and trade payables that do not contain a significant financing component are initially measured at their transaction price.
- Subsequent Measurement
a. Non- Derivative Financial Instruments
O Financial assets carried at mortised cost
A financial asset is subsequently measured at mortised cost which is held with objective to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
O Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income which is held with objective to achieve both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company has made an election for its investments which are classified as equity instruments (other than investment in shares of Subsidiaries, Joint Ventures and Associates) to present the subsequent changes in fair value through profit and loss account
O Financial assets at fair value through profit or loss A financial asset which is not classified in any of
the above categories are subsequently fair valued through profit or loss. The Company has elected to measure its investments which are classified as equity instruments (other than investment in shares of Subsidiaries, Joint Ventures and Associates) at fair value through profit and loss account.
O Impairment of financial assets
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. For impairment purposes significant financial assets are tested on an individual basis, other financial assets are assessed collectively in groups that share similar credit risk characteristics.
The Company recognizes lifetime expected losses for all trade receivables. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized is recognized as an impairment gain or loss in profit or loss.
The Company follows ''simplified approach'' for the recognition of impairment loss allowance on trade and other receivables.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
The Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the receivables and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analyzed.
O Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest method. Financial liabilities at fair value through profit and loss includes financial liability held for trading and financial liability designated upon initial recognition as at fair value through profit and loss.
O Investment in Subsidiaries, Associates and Joint Ventures
Investment in equity shares of subsidiaries, associates and joint ventures is carried at cost in the standalone financial statements.
O Cash and cash equivalents
Cash and cash equivalents consist of cash, bank balances in currents and short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
b. Derivative Financial Instruments
O Derivative instruments such as forward currency contracts are used to hedge foreign currency risks, and are initially recognized at their fair values on the date on which a derivative contract is entered into and are subsequently re-measured at fair value on each reporting date. A hedge of foreign currency risk of a firm commitment is accounted for as a fair value hedge. Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and Loss. However, if hedging instrument hedges an equity instrument for which the Company has elected to present changes as at fair value through other comprehensive income, then fair value changes are recognized in Other Comprehensive Income.
- Derecognition
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognitionas per Ind AS 109. A financial liability (or a part of a financial liability) is derecognized from the company''s balance sheet when the obligation specified in the contract is discharged or cancelled or expires.
- Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
- Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the company either begins or ceases to perform an activity that is significant to its operations. If the company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The company does not restate any previously recognized gains, losses (including impairment gains or losses) or interest.
4. CRITICAL ACCOUNTING ESTIMATES,ASSUMPTIONS AND JUDGEMENTS
4.1 Property, plant and equipment
External advisor and/or internal technical team assesses the remaining useful life and residual value of property, plant and equipment. Management believes that the assigned useful lives and residual values are reasonable.
4.2 Intangibles
Internal technical and user team assess the remaining useful lives of Intangible assets. Management believes that assigned useful lives are reasonable. All Intangibles are carried at net book value on transition.
4.3 Mine restoration obligation
In determining the cost of the mine restoration obligation the Company uses technical estimates to determine the expected cost to restore the mines and the expected timing of these costs.
4.4 Liquidated damages
Liquidated damages payable or receivable are estimated and recorded as per contractual terms/management assertion; estimate may vary from actual as levy by customer/vendor.
4.5 Other estimates
The Company estimates the un-collectability of accounts receivable by analyzing historical payment patterns, customer concentrations, customer credit-worthiness and current economic trends. If the financial condition of a customer deteriorates, additional allowances may be required. Similarly, the Company provides for inventory obsolescence, excess inventory and inventories with carrying values in excess of net realizable value based on assessment of the future demand, market conditions and specific inventory management initiatives. In all cases inventory is carried at the lower of historical cost and net realizable value.
b. Capital Work in Progress includes Rs, 802.15 crore (March 31, 2016 Rs, 445.62 crore & April 01, 2015 Rs, 299.67 crore) being Pre- operative expenditure and Rs, 383.21 crore (March 31, 2016 Rs, 563.94 crore & April 01, 2015 Rs, 344.00 crore ) being Capital stores.
c. Additions to Property, Plant & Equipment include Rs, 148.32 crore (March 31, 2016 Rs, 1.50 crore & April 01, 2015 Rs, 14.22 crore) and addition to Capital work- in- progress include Rs, (0.02) crore (March 31, 2016 Rs, 0.02 crore & April 01, 2015 Rs, 10.22 crore)being expenditure incurred on Research & Development Activities. Additions to Property, Plant & Equipment includes Rs, (0.02) crore (March 31, 2016 Rs, 1.52 & April 01, 2015 Rs, 14.22 crore) being capitalized from Capital work in progress.
d. The Company has opted to continue the policy to capitalize foreign currency fluctuation on long term borrowings which was followed as per previous I-GAAP as per optional election of Ind AS -101, on all long term foreign currency borrowings outstanding on March 31, 2016. Accordingly additions /(adjustments) to plant and machinery/ capital work-in-progress includes addition of Rs, (41.49) crore (March 31, 2016 Rs, 136.16 crore & April 01, 2015 Rs, 101.13 crore) on account of foreign exchange fluctuation (Gain)/loss.
e. Borrowing cost incurred during the year and capitalized is Rs, 5.02 crore (March 31, 2016 Rs, 14.74 crore & April 01, 2015 Rs, 389.84 crore). Borrowing cost incurred during the year and transferred to capital work-in-progress is Rs, 344.43 crore (March 31, 2016 Rs, 75.76 & April 01, 2015 Rs, 9.66 crore).
(b) Terms/rights attached to equity shares
The Company has only one class of equity shares having par value of Rs, 1 per share. Each holder of equity share is entitled to one vote per share. The Company declares dividend in Indian Rupees. The dividend, if any, proposed by the Board of Directors is subject to approval of the Shareholders in the ensuing Annual General Meeting.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company after payment of all liabilities. The distribution will be in proportion to the number of equity shares held by the shareholders.
c) Aggregate number of bonus shares issued, shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date:
In accordance with Section 77 of the Companies Act,1956 and buy back regulations of SEBI, the Company during the financial year 2013-14 bought back and extinguished 19,959,584 equity shares of Rs, 1 each and created a Capital Redemption Reserve of Rs, 2.00 crore out of surplus in the Statement of Profit and Loss. The premium on buy back of Rs, 498.80 crore had been utilized from Securities Premium Account Rs, 122.96 crore and out of surplus in Statement of Profit and Loss Rs, 375.84 crore.
During the five years immediately preceding 31st March, 2017, the Company has not allotted any equity shares as bonus shares and also not issued any share for consideration other than cash.
In addition the Company allotted 5,94,353 nos. equity shares during the preceding five years under its various Employees Stock Option Schemes / Employee Stock Purchase Scheme.
As per records of the Company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.
e) Employees Stock purchase Scheme
In accordance with SEBI (Share Based Employees Benefits) Regulations 2014 and pursuant to JSPL ESPS 2013 Scheme, the Nomination and Remuneration Committee has vide its resolution dated 27.01.2017 offered and the Corporate Management Committee of the Board vide its resolution dated 03.02.2017 allotted 1,20,434 nos. equity shares of Rs, 1 each at a premium of Rs, 81.20 each to Mr Ravi Uppal, Managing Director & Group CEO. Out of total offered 150000 nos. equity shares so far, the Company had during the earlier year allotted 29,566 nos. equity shares of Rs, 1 each.
Notes-
(i) On account of substantial investment made by the Company in setting up/ expansion of industrial unit(s) at Raigarh (Chhattisgarh), including investment in acquisition of capital assets, one of the Company''s unit is eligible for sales tax exemption under the State Industrial Policy which aims towards industrialization of the State and development of backward areas. The Company had earlier treated the amount relating to sales tax exemption as capital receipt and credited the same to "Sales tax subsidy / Capital reserve" shown under the head "Reserve and Surplus" up to the Financial year ended 31st March, 2015. However, in the year ended 31st March, 2016, the Company had, in view of amendment in the Income tax laws and applicability of Ind AS with effect from 1st April, 2016, credited a sum of Rs, 35.12 crore to sales in the statement of profit and loss. Considering the above, the Company had decided to transfer the accumulated balance of Rs, 316.70 crore appearing under "Sales tax subsidy / Capital Reserve" under the head "Reserve and Surplus" as at 31st March,2016 to the statement of profit and loss during the year 2016-17. Accordingly, during the current year Rs, 316.70 crore as stated above has been credited to and considered as part of "other operating revenue" and loss before tax for the current year is lower to that extent.
(ii) The Company has, as on 31st March, 2017, outstanding loan in foreign currency of US$ 109.95 million (equivalent Rs, 712.95 crore) given to an overseas subsidiary. The said loan was earlier treated as part of quasi equity and hence exchange difference arising on the translation of the said loan was accumulated in foreign currency translation reserve. The said loan is to be repaid by the overseas subsidiary on demand. Accumulated balance appearing in the foreign currency translation reserve of Rs, 70.89 crore as at close of 31st March, 2016 had been credited to the statement of profit and loss during the year ended 31st March, 2016.
(iii) The Company is required to create Debenture Redemption Reserve out of the profits which is available for the purpose of redemption of debentures.
(iv) Capital Redemption Reserve represents the statutory reserve created when capital is redeemed/during buy back. It is not available for distribution.
(v) Securities Premium Reserve represents the amount received in excess of par value of securities (equity shares, preference shares and debentures).This reserve is utilized in accordance with provisions of the act.
Debentures
Security
i) Debentures of Rs, 1000 crore (March 31, 2016 Rs, 1000 crore) placed initially with Life Insurance Corporation of India on private placement basis are redeemable at par in 2 equal annual installments at the end of 9.5 and 10.5 years from the date of respective allotments i.e. Rs, 100 crore (12.10.2009), Rs, 150 crore (22.10.2009), Rs, 150 crore (24.11.2009), Rs, 150 crore (24.12.2009), Rs, 150 crore (25.01.2010), Rs, 150 crore (19.02.2010) and Rs, 150 crore (26.03.2010). The debentures are secured by way of first charge on pari-passu charge basis over the movable and immovable fixed assets of 810 MW (6x135MW) Captive Power Plant, both present and future, of the company at Angul, Odisha in favour of the Debenture Trustees
ii) Debentures ofRs, 62 crore (March 31, 2016 Rs, 62 crore) placed initially with SBI Life Insurance Company Limited on private placement basis are redeemable at par in 5 equal annual installments commencing from the end of 8 years from the date of allotment i.e. 29.12.2009. The debentures are secured by way of first charge on pari-passu charge basis over the movable and immovable fixed assets of 810 MW (6x135MW) Captive Power Plant, both present and future, of the company at Angul, Odisha in favour of the Debenture Trustees.
iii) Debentures ofRs, 500 crore (March 31, 2016 Rs, 500 crore) placed initially with Life Insurance Corporation of India on private placement basis are redeemable at par in 2 equal annual installments at the end of 9.5 and 10.5 years from the date of respective allotments i.e. Rs, 100 crore (24.08.2009), Rs, 80 crore (08.09.2009), Rs, 80 crore (08.10.2009), Rs, 80 crore (09.11.2009), Rs, 80 crore (08.12.2009) and Rs, 80 crore (08.01.2010) . The debentures are secured on pari-passu charge basis by way of hypothecation of movable fixed assets of the Company (excluding assets charged on exclusive basis) in favour of the Debenture Trustees. In addition a first pari passu mortgage on a part of immovable property of the pertaining to unit located at Kharsia Road, Raigarh and a part of the immovable property pertaining to unit located at 13 KM Stone, G E Road, Mandir Hasaud, Raipur in favour of the Debenture Trustees.
Term Loans from Banks
Security
i) Loans of Rs, 2829.64 crore (March 31, 2016 Rs, 2775.44 crore) have been refinanced and are repayable in 79 quarterly installments starting from June, 2016 are secured by way of first pari passu charge on all movable plant & machinery, spares including all insurance policies, project contracts, movable and immovable fixed assets, both present and future under the 1.8 MTPA DRI facility at Angul, Odisha.
ii) Loans of Rs, 40.42 crore (March 31, 2016 Rs, 53.89 crore) repayable in 38 quarterly installments starting from October, 2010 (refinancing is in process) are secured by way of first pari passu charge on all movable and immovable fixed assets both present and future under 2X135 MW Power Plant (Phase- 1) at Dongamauha, Raigarh, Chhattisgarh.
iii) Loans of Rs, 319.80 crore (March 31, 2016 Rs, 314.00 crore) have been refinanced and are repayable in 79 quarterly installments starting from June, 2016 are secured by way of first pari passu charge on all movable and immovable fixed assets including machinery spares, both present and future, of DCPP [2X135 MW Power Plant (Phase - 1)] at Dongamauha, Raigarh, Chhattisgarh. Further, IDFC Loan of Rs, 126.78 crore (March 31, 2016 Rs, 127.50 crore) included in above is additionally secured by all the assets of DCPP [2X135 MW Power Plant (Phase - 2)] at Dongamauha, Raigarh, Chhattisgarh.
iv) Loans of Rs, 2328.99 crore (March 31, 2016 Rs, 2,217.88 crore) have been refinanced and are repayable in 79 quarterly installments starting from June, 2016 are secured by first pari passu charge on all movable (including project contracts) and immovable fixed assets, both present and future under 1.5 MTPA Integrated Steel Plant and 1.2 MTPA Plate Mill project at Angul, Odisha.
v) Loans of Rs, 959.59 crore (March 31, 2016 Rs, 935.22 crore) have been refinanced and are repayable in 79 quarterly installments starting from June, 2016 are secured by first pari passu charge on all movable plant & machinery, spare parts, furniture & fixtures including all the project contracts (including insurance policies, rights and titles) and immovable fixed assets, both present and future under 6x135 MW Power Plant Project at Angul, Odisha.
vi) Loans of Rs, NIL (March 31, 2016 Rs, 62.25 crore) repayable in 16 quarterly installments starting from March 2013 was secured by subservient charge on fixed assets of the Company.
vii) Loans of Rs, 1340 crore(March 31, 2016 Rs, 1,430 crore) initially taken from ICICI bank on bilateral basis are repayable by way of ballooning installments in two tranches. An amount of Rs, 500 crore shall be repayable in a period of 5 (five)years in 16 (sixteen) quarterly installment, whereas an amount of Rs, 1000 crore shall be repayable in a period of 10 (Ten) years in 36 (thirty six) quarterly installment starting from January, 2015.
Loans of Rs, 956.24 crore (March 31, 2016 Rs, 979.67 crore) initially taken from HDFC Bank on bilateral basis are repayable in a period of 8 (eight) years in 28 (twenty eight) quarterly installments starting from June, 2015. Loans of Rs, 1,465.94 crore (March 31, 2016 Rs, 1,500 crore) from State Bank of India are repayable in a period of 8 (eight) years in
32 (Thirty Two) quarterly installments starting from June, 2016. Above loans are secured by way of a first pari passu charge on all the present movable Fixed Assets of units located at Balkudra, Patratu, District Ramgarh, Jharkand; 13 KM Stone, G E Road, Mandir Hasaud, Raipur; 201 to 204, Industrial Park SSD, Punjipatra, Raigarh, Chhattisgarh; Bhikaji Cama Place, New Delhi; and all movable Fixed Assets (present as well as future) located at Kharsia Road, Raigarh, Chhattisgarh. In addition a first ranking mortgage and pari passu charge on immovable property pertaining to unit located at Kharsia Road, Raigarh and a part of the immovable property pertaining to unit located at 13 KM Stone, G E Road, Mandir Hasaud, Raipur.
viii) a. Loans of Rs, 1,559.61 crore (March 31, 2016 Rs, 1574.98 crore) repayable in a period of 7.75 years in 31 (Thirty One) quarterly installments, starting from June, 2017 are secured by way of a first charge on pari passu basis over all the movable and immovable fixed assets (Plate Mill & ISP facility, DRI, Captive power plant and other misc. assets etc.), both present and future, of plant Phase 1A at Angul, Odisha.
b. Loans of Rs, 500.00 crore (March 31, 2016 Rs, 500.00 crore) repayable to HDFC bank in a period of 7.75 years in 31 (Thirty One) quarterly installments starting from June, 2017 are secured by way of a first charge on pari passu basis over all movable fixed assets (Plate Mill & ISP facility, DRI, CPP and other misc. assets etc.), both present and future, of Plant Phase 1A at Angul, Odisha. Further, charge in favour of HDFC bank in respect of said loan by way of a first charge on immovable fixed assets, both present and future, of Plant Phase 1A at Angul, Odisha is to be created.
ix) Loans of Rs, 483.16 crore (March 31, 2016 Rs, 485.90 crore) have been refinanced and are repayable in 79 quarterly installments starting from June, 2016 are secured by way of a first pari passu charge on all movable plant and machinery, spares, vehicles etc. and immovable fixed assets both present and future under 2X135 MW Power Plant (Phase 2) at Dongamahua Raigarh Chattisgarh.
Other Loans Security
Other loans of Rs, 196.21 crore (Previous Year Rs, 197.33 crore) have been refinanced and are repayable in 79 quarterly installments starting from June, 2016 are secured by first pari passu charge on all movable plant & machinery, spare parts, furniture & fixtures including all the project contracts (including insurance policies, rights and titles) and immovable fixed assets, both present and future under 6x135 MW Power Plant Project at Angul, Odisha.
Mar 31, 2016
The significant accounting policies used in preparing the annual
financial statements are set out in note 2 of notes to the annual
financial statements.
Change in Accounting Policy
The accounting policies adopted in the preparation of financial
statements are consistent with those of previous year except for
following:
a) Depreciation and Amortization
During the current year, the Company has upward revised the useful life
of certain class of fixed assets based on internal assessment and
technical estimate. The Company believes that the useful life best
represents the period over which Company expects to use these assets.
The above change has taken place with effect from 1st April, 2015 and
accordingly the depreciation expense for the year ended 31 March, 2016
is lower by Rs.581.01 crore.
b) On account of substantial investment made by the Company in setting
up/ expansion of industrial unit(s) at Raigarh (Chhattisgarh),
including investment in acquisition of capital assets, one of the
Company''s units is eligible for sales tax exemption under the State
Industrial Policy which aims towards industrialization of the State and
development of backward areas. The period of exemption is dependent
upon and linked to the quantum of investment. Till last year, the
Company had, based on legal advise, treated incentive on account of
sales tax exemption, being the element of sales tax embedded in the
sale price of products sold out of the eligible unit, to be in the
nature of subsidy granted by the State Government to incentivize
industrialization in the State and hence as a capital receipt. For the
current year, the Company has, due to amendments in Income tax laws
with effect from April 1, 2015 and Ind AS applicability with effect
from April 1, 2016, credited a sum of Rs.35.12 crore to sales in the
statement of profit and loss. As a result of above change, loss before
tax for the current year is lower by Rs.35.12 crore.
(Note 2(iii)(e) of the annual standalone financial statements)
1 BASIS OF PREPARATION
These abridged financial statements have been prepared in accordance
with the requirements of Rule 10 of the Companies (Accounts)
Rules,2014. These abridged financial statements have been prepared on
the basis of the complete set of financial statements for the year
ended March 31,2016.
2 NON-CURRENT INVESTMENTS Unquoted
As of 31st March,2016 and 31st March,2015 the aggregate book value of
unquoted investment is Rs.1,846.43 crore and Rs.1,828.05 crore
respectively.
Aggregate provision for diminution in the value of investment as at
March 31,2016 and March 31,2015 is Rs.341.09 crore and Rs.341.09 crore
respectively.
Current investments
As of 31st March,2016 and 31st march,2015 the aggregate book value of
investment is Rs. Nil and Rs.1,000.00 crore respectively.
As of 31st March, 2016 and 31st march,2015 the aggregate NAV of units
of mutual funds is Rs. Nil and Rs.1,018.13 crore respectively
3 DISCLOSURE AS REQUIRED BY ACCOUNTING STANDARD (AS-17) "SEGMENT
REPORTING"
The primary reportable segments are the business segments namely Iron &
Steel and Power. Other business segment mainly comprises of aviation
services and machinery division. The secondary reportable segments are
geographical segments which are based on the sales to customers located
in India and outside India.Segment accounting policies are in line with
the accounting policies of the Company. In addition, the following
specific accounting policies have been followed for segment reporting:
a) Segment revenue includes sales and other income directly
identifiable with/allocable to the segment including inter- segment
revenue.
b) Expenses that are directly identifiable with/allocable to segments
are considered for determining the segment results.
c) Expenses/Incomes which relates to the group as a whole and not
allocable to segments are included under Other Un-allocable Expenditure
(net of Un-allocable Income).
d) Segment assets and liabilities include those directly identifiable
with respective segments. Un-allocable assets and liabilities represent
the assets and liabilities that relate to group as a whole and not
allocable to any segment.
4 The Hon''ble Supreme Court of India by its Order dated 24 September
2014 has cancelled number of coal blocks allocated to the Company by
Ministry of Coal, Government of India and directed to pay an additional
levy of Rs.295 per MT on gross coal extracted from the operational
mines from 1993 to till date. The Company filed review petition before
the Hon''ble Supreme Court of India which has been rejected. The Company
is in the process of filing curative petition before the Hon''ble
Supreme Court of India.
i.) The Company has paid under protest such levy on coal extracted
during the period from 1993 to 31 March 2015 of Rs.2,082.23 crore. The
management based on legal opinion has accounted for Rs.807.77 crore
computed on net extraction (run of mines less shale, rejects and
ungraded middling) of coal by the Company. The said amount was shown as
exceptional item in the year 2014-15 and balance amount of Rs.1,274.46
crore has been shown as recoverable from the Government Authority since
the entire amount of additional levy has been paid under protest.
ii.) The Company has net book value of investment made in mining assets
including land, infrastructure and clearance etc. of Rs.425 crore. The
difference, if any, between book value of investment and compensation
to be determined, shall be accounted for when the final compensation is
received pursuant to directive vide letter dated 26 December, 2014
given by the Ministry of Coal on such mines.
Mar 31, 2015
I) Basis of Preparation of Financial Statements
The financial statements are prepared under the historical cost
convention, on going concern basis and all material respects with the
Accounting Standards notified under Section 133 of the Companies Act
2013, read together with paragraph 7 of the Companies (Accounts) Rules
2014. The Company follows the mercantile system of accounting and
recognizes income and expenditure on accrual basis to the extent
measurable and where there is certainty of ultimate realization of
incomes. The accounting policies adopted in the preparation of
financial statements are consistent with those of previous year, except
for the change in depreciation policy which is as per schedule II of
the Companies Act, 2013, as referred in Para 39.
ii) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent liabilities and commitments at
the end of the reporting period and results of operations during the
reporting period. Although these estimates are based upon the
management''s best knowledge of current events and actions, actual
results could differ from these estimates. difference between the
actual result and estimates are recognized in the period in which the
results are known/ materialized.
iii) Fixed Assets - Depreciation and Amortisation
a. Tangible Assets
Tangible Assets are stated at cost less accumulated depreciation and
impairment losses, if any. Costs include costs of acquisitions or
constructions including incidental expenses thereto, borrowing costs ,
and other attributable costs of bringing the asset to its working
condition for its intended use and are net of available duty/tax
credits.
Gains or losses arising from discard/sale of tangible fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is discarded/sold.
The Company adjusts exchange differences arising on translation/
settlement of long-term foreign currency monetary items as referred in
Policy for Foreign exchange transactions.
b. Intangible assets
Intangible assets are recognized in accordance with the criteria laid
down in Accounting Standard (AS-26), whereas they are separately
identifiable, measurable and the Company controls the future benefits
arising out of them. Intangible assets are stated at cost less
amortization and impairment losses, if any.
c. Capital work-in-progress
Expenditure related to and incurred on implementation of new/
expansion-cum-modernisation projects is included under capital
work-in-progress and the same is allocated to the respective tangible
asset on completion of its construction/erection.
d. Intangible assets under development
Mines development expenditure incurred in respect of new iron ore/coal
and likewise mines is shown under ''Intangible assets under
development''. On mines being ready for intended use, this amount is
transferred to appropriate head under intangible assets and amortized
over a period of ten years starting from the said year or the future
expected extraction period of the reserves based on actual extraction
till date, whichever is shorter
e. depreciation and Amortization
Depreciation on tangible assets is provided on straight-line method
(SLM) as per the useful life of the assets estimated by the management
which are equal to the rates specified in Schedule II to the Companies
Act, 2013. Leasehold land is amortised over the period of lease. In the
case of assets where impairment loss is recognised, the revised
carrying amount is depreciated over the remaining estimated useful life
of the asset. Based on management evaluation depreciation rates
currently used fairly reflect its estimate of the useful lives and
residual values of fixed assets.
Certain plant and machinery have been considered as continuous process
plant on the basis of technical assessment and depreciation on the same
is provided for accordingly.
Estimated useful life as specified in Schedule II to the Companies Act
2013 is adjusted in respect of plant and machinery working on shift
basis.
Considering the applicability of Schedule II, the management has
re-estimated useful lives and residual values of all its fixed assets.
The management believes that depreciation rates currently used fairly
reflect its estimate of the useful lives and residual values of fixed
assets.
Intangible Assets are amortized on straight-line method over the
expected duration of benefits not exceeding ten years. The amortisation
period and the amortisation method are reviewed at least at each
financial year end. If the expected useful life of the asset is
significantly different from previous estimates, the amortisation
period is changed accordingly. If there has been a significant change
in the expected pattern of economic benefits from the asset, the
amortisation method is changed to reflect the changed pattern.
iv) Impairment of Assets
The carrying amount of assets is reviewed for impairment at each
balance sheet date wherever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is
recognized for the amount for which the asset''s carrying amount exceeds
its recoverable amount being the higher of the assets net selling price
and its value in use. value in use is based on the present value of the
estimated future cash flows relating to the asset. For the purpose of
assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (i.e. cash generating
units).
Previously recognized impairment losses are reversed where the
recoverable amount increases because of favorable changes in the
estimates used to determine the recoverable amount since the last
impairment was recognized. A reversal of an asset''s impairment loss is
limited to its carrying amount that would have been determined (net of
depreciation or amortisation) had no impairment loss been recognized in
prior years.
v) Accounting for Leases
The rental payments under operating lease as per respective lease
agreements are recognized as expense on straight line basis in the
statement of profit and loss.
vi) Borrowing Cost
Borrowing cost includes interest and amortization of ancillary costs
incurred in connection with the arrangement of borrowings.
Borrowing cost related to a qualifying asset is worked out on the basis
of actual utilization of funds out of project specific loans and/or
other borrowings to the extent identifiable with the qualifying asset
and is capitalized with the cost of qualifying asset. Other borrowing
costs incurred during the year are charged to statement of profit and
loss. In case of significant long term loans, the ancillary costs
incurred in connection with the arrangement of borrowings are amortized
over the period of respective Loan.
vii) valuation of Inventories
Raw materials and stores & spares are valued at lower of cost, computed
on weighted average basis or net realizable value. Cost includes the
purchase price as well as incidental expenses. Scrap is valued at
estimated realizable value. However in case of raw materials,
components, stores and spares held for use in the production of
finished goods are not written down below cost if the finished products
are expected to be sold at or above cost.
Work-in-process is valued at lower of estimated cost or net realizable
value and finished goods are valued at lower of weighted average cost
or net realizable value. Cost for this purpose includes direct cost and
appropriate administrative and other overheads. Cost of finished goods
also includes excise duty.
Traded goods are valued at lower of cost and net realizable value and
cost is determined based on weighted average. Cost includes cost of
purchase and other costs incurred in bringing the inventories to their
present location and condition.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
viii) Foreign Currency Transactions
Foreign currency transactions are recorded at the rate of exchange
prevailing at the date of the transaction.
Monetary foreign currency assets and liabilities are translated at the
year-end exchange rates and resultant gains / losses of above foreign
currency translations are recognized in the statement of profit and
loss for the year except to the extent that they relate to:
(a) The Company has elected to account for exchange differences arising
on reporting of long-term foreign currency monetary items pertaining to
Accounting Standard 11(AS-11) as notified by Government of India.
Accordingly, the effect of exchange differences on foreign currency
loans of the Company is accounted by addition or deduction to the cost
of the assets so far it relates to depreciable capital assets.
(b) Exchange differences relating to monetary items that are in
substance forming part of the Company''s net investment in non- integral
foreign operations are accumulated in Foreign Currency translation
reserve.
The premium or discount arising at the inception of forward exchange
contract, except the contract which are long term foreign currency
monetary items, are recognized in the statement of profit and loss in
the period in which the exchange rates change.
Non-monetary items, which are measured in terms of historical cost
denominated in a foreign currency, are reported using the exchange rate
at the date of the transaction.
ix) Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments.
Long-term investments are carried at cost. Current investments are
carried at the lower of cost or market / fair value. The cost comprises
purchase price and directly attributable acquisition charges such as
brokerage, fees and duties.
Provision is made when, in the opinion of the management, diminution in
the value of investment is other than temporary in nature. The
reduction in carrying amount is reversed when there is a rise in value
of investments or if the reason for the reduction no longer exists.
x) Revenue Recognition
a) Revenue from sale of goods is recognised on transfer of significant
risks and rewards of ownership to the buyer.
b) Gross Revenue from operations comprises of sale of products and
other operating income which also includes export incentives and
aviation income. ''Net Revenue from operations'', net of excise duty,
Inter-divisional transfer and captive sale is also disclosed
separately.
c) Sales are inclusive of excise duty but net of returns, rebates, VAT
and sales tax. Products returned are accounted for in the year of
return.
d) Export benefits available under the Export Import policy of the
Government of India are accounted for in the year of export, to the
extent measurable.
e) Income from aviation and other services is accounted for at the time
of completion of service and billing thereof.
xi) Inter-Division Transfers/Captive sales
a) Inter-division transfer of independent marketable products, produced
by various divisions and used for further production/ sales is
accounted for at approximate prevailing market price/ other appropriate
price.
b) Captive sales are in regard to products produced by various
divisions and used for capital projects. These are transferred at cost
as per CAS4.
c) The value of inter-divisional transfer and captive sales is netted
off from sales and corresponding cost under cost of materials consumed
and total expenses respectively. The same is shown as a contra item in
the statement of profit and loss.
d) Any unrealized profit on unsold/unconsumed stocks is eliminated
while valuing the inventories.
xii) Other Income
a. Claims receivable
The quantum of accruals in respect of claims receivable such as from
Railways, Insurance, Electricity, Customs, Excise and the like are
accounted for on accrual basis to the extent there is certainty of
ultimate realization.
b. Income from Investment
Income from Investment is accounted for on accrual basis when the right
to receive income is established.
xiii) Interest Income
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is netted off from interest cost under the head
"Interest Cost (Net)" in the statement of profit and loss.
xiv) Employee Benefits
Expenses and liabilities in respect of employee benefits are recorded
in accordance with Accounting Standard (AS)-15 - ''Employee Benefits''.
a) Provident Fund
The Company contributes to Government administered fund as well as to
Provident fund Trust. The interest rate payable by the trust to
beneficiaries every year is being notified by Government. The Company
makes good deficiency, if any, in the interest rate declared by the
trust vis-a-vis statutory rate.
b) Gratuity
Gratuity is a post-employment benefit and is in the nature of a defined
benefit plan. The liability recognized in the Balance Sheet in respect
of gratuity is the present value of the defined benefit/ obligation at
the Balance Sheet date less the fair value of plan assets, together
with adjustment for unrecognized actuarial gains or losses and past
service costs. The defined benefit/obligation is calculated at or near
the Balance Sheet date by an independent Actuary using the projected
unit credit method. Actuarial gains or losses are immediately
recognised in the statement of profit and loss and are not deferred.
c) Compensated absences
Liability in respect of compensated absences due or expected to be
availed within one year from the Balance Sheet date is estimated on the
basis of an actuarial valuation performed by Independent Actuarial
using the projected unit credit method. It is recognised on the basis
of undiscounted value of estimated amount required to be paid or
estimated value of benefit expected to be availed by the employees.
xv) Research and Development expenditure
Research and Development expenditure not fulfilling the recognition
criteria as set out in Accounting Standard (AS-26) ''Intangible Assets''
is charged to the statement of profit and loss while capital
expenditure is added to the cost of fixed assets in the year in which
it is incurred.
xvi) Taxes on Income
Tax expense comprises current and deferred tax. Current income- tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date. Deferred income tax
relating to items recognized directly in equity is recognized in equity
and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
In the situations where the company is entitled to a tax holiday under
the Income-tax Act, 1961 enacted in India or tax laws prevailing in the
respective tax jurisdictions where it operates, no deferred tax (asset
or liability) is recognized in respect of timing differences which
reverse during the tax holiday period, to the extent the company''s
gross total income is subject to the deduction during the tax holiday
period. Deferred tax in respect of timing differences which reverse
after the tax holiday period is recognized in the year in which the
timing differences originate. However, the company restricts
recognition of deferred tax assets to the extent that it has become
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. For recognition of deferred taxes,
the timing differences which originate first are considered to reverse
first.
At each reporting date, the company re-assesses unrecognized
deferred tax assets. It recognizes unrecognized deferred tax asset to
the extent that it has become reasonably certain or virtually certain,
as the case may be, that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
Minimum Alternate Tax (MAT) credit is recognized as an asset only when
and to the extent there is convincing evidence that the company will
pay normal income tax during the specified period.
xvii) Provisions, contingent liabilities, commitments and contingent
assets
Provisions are recognized for present obligations of uncertain timing
or amount arising as a result of a past event where a reliable estimate
can be made and it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation. Where it
is not probable that an outflow of resources embodying economic
benefits will be required or the amount cannot be estimated reliably,
the obligation is disclosed as a contingent liability and commitments,
unless the probability of outflow of resources embodying economic
benefits is remote.
Possible obligations, whose existence will only be confirmed by the
occurrence or non-occurrence of one or more uncertain events, are also
disclosed as contingent liabilities and commitments unless the
probability of outflow of resources embodying economic benefits is
remote. Contingent assets are neither recognized nor disclosed in the
financial statements.
xviii) Earnings per share
The earnings considered in ascertaining the Company''s earnings per
share (EPS) comprise of the net profit after tax attributable to equity
shareholders. The number of shares used in computing basic EPS is the
weighted average number of shares outstanding during the year adjusted
for events of bonus issue post period end, bonus elements in right
issue to existing shareholders, share split, and reverse share split
(consolidation of shares). The diluted EPS is calculated on the same
basis as basic EPS, after adjusting for the effect of potential
dilutive equity shares unless impact is anti-dilutive.
xix) Financial derivatives
Forward contracts entered into to hedge foreign currency/ interest rate
risk on unexecuted firm commitments and highly probable forecast
transactions, are recognised in the financial statements at fair value
at each reporting date, in pursuance of the announcement of The
Institute of Chartered Accountants of India (ICAI) on Accounting for
Derivatives.
As a matter of prudence, the company does not recognise any mark to
market gains in respect of any outstanding derivative contract.
xx) Cash and cash equivalents
Cash and cash equivalents consist of cash, bank balances in current and
short-term highly liquid investments that are readily convertible to
cash with original maturities of three months or less at the time of
purchase.
xxi) Segment Reporting
a) Identification of segments
Primary Segment
The Company''s operating businesses are organized and managed separately
according to the nature of products manufactured and services provided,
with each segment representing a strategic business unit that offers
different products.
Secondary Segment
The geographical segments have been identified based on the locations
of the customers: within India and outside India.
b) Inter-segment transfers
The Company recognises inter-segment sales and transfers as if they
were to third parties at current market prices.
c) Allocation of common costs
Common allocable costs are allocated to each segment on reasonable
basis.
d) Unallocated items
It includes general administrative expenses, corporate & other office
expenses, income that arises at the enterprise level and relate to
enterprise as a whole being not allocable to any business segment.
e) Segment Policies
The company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole.
Mar 31, 2014
I) Basis of Preparation of Financial Statements
The financial statements are prepared under the historical cost
convention, ongoing concern basis and in terms of the Accounting
Standards notified by Companies (Accounting Standards) Rules, 2006 in
compliance with Section 211(3C) of the Companies Act, 1956. The Company
follows the mercantile system of accounting and recognises income and
expenditure on accrual basis to the extent measurable and where there
is certainty of ultimate realisation of incomes. Accounting policies
not specifically referred to otherwise are consistent and in consonance
with the generally accepted accounting principles in India.
ii) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent liabilities and commitments at
the end of the reporting period and results of operations during the
reporting period. Although these estimates are based upon the
management''s best knowledge of current events and actions, actual
results could differ from these estimates. Difference between the
actual result and estimates are recognised in the period in which the
results are known/materialised.
iii) Fixed Assets - Depreciation and Amortisation
a. Tangible Assets
Tangible Assets are stated at cost less accumulated depreciation and
impairment losses, if any. Costs include costs of acquisitions or
constructions, including incidental expenses thereto and other
attributable costs of bringing the asset to its working condition for
its intended use and are net of available duty/tax credits
b. Intangible assets
Intangible assets are recognised in accordance with the criteria laid
down in Accounting Standard (AS-26), whereas they are separately
identifiable, measurable and the company controls the future benefits
arising out of them. Intangible assets are stated at cost less
amortisation and impairment losses, if any.
c. Capital work-in-progress
Expenditure related to and incurred on implementation of
new/expansion-cum- modernisation projects is included under capital
work-in-progress and the same is allocated to the respective tangible
asset on completion of its construction/erection.
d. Intangible assets under development
Mines development expenditure incurred in respect of new iron ore/coal
and likewise mines is shown under ''Intangible assets under development.
On mines being ready for intended use, this amount is transferred to
appropriate head under intangible assets and amortised over a period of
ten years starting from the said year or the future expected extraction
period of the reserves based on actual extraction till date, whichever
is shorter.
e. Depreciation and Amortisation
Depreciation on tangible assets is provided on straight-line method
(SLM) at the rates and in the manner specified in Schedule XIV to the
Companies Act, 1956. Leasehold land is amortised over the period of
lease. In the case of assets where impairment loss is recognised, the
revised carrying amount is depreciated over the remaining estimated
useful life of the asset.
Certain plant and machinery have been considered as continuous process
plant on the basis of technical assessment and depreciation on the same
is provided for accordingly.
Intangible Assets are amortised on straight-line method over the
expected duration of benefits not exceeding ten years. The amortisation
period and the amortisation method are reviewed at least at each
financial year end. If the expected useful life of the asset is
significantly different from previous estimates, the amortisation
period is changed accordingly. If there has been a significant change
in the expected pattern of economic benefits from the asset, the
amortisation method is changed to reflect the changed pattern.
iv) Impairment of Assets
The carrying amount of assets is reviewed for impairment at each
balance sheet date wherever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount for which the asset''s carrying amount exceeds
its recoverable amount being the higher of the assets net selling price
and its value in use. Value in use is based on the present value of the
estimated future cash flows relating to the asset. For the purpose of
assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (i.e. cash generating
units).
Previously recognised impairment losses are reversed where the
recoverable amount increases because of favourable changes in the
estimates used to determine the recoverable amount since the last
impairment was recognised. A reversal of an asset''s impairment loss is
limited to its carrying amount that would have been determined (net of
depreciation or amortisation) had no impairment loss been recognised in
prior years.
v) Accounting for Leases
Finance lease is recognised as an asset and a liability to the lessor
at fair value at the inception of the lease.
The lease payments under operating lease as per respective lease
agreements are recognised as expense in the statement of profit and
loss based on the time pattern of the usage benefit over the lease
term.
vi) Borrowing Cost
Borrowing cost related to a qualifying asset is worked out on the basis
of actual utilisation of funds out of project specific loans and/or
other borrowings to the extent identifiable with the qualifying asset
and is capitalised with the cost of qualifying asset. Other borrowing
costs incurred during the period are charged to statement of profit and
loss.
vii) Segment Reporting
a) Identification of segments
Primary Segment
The Company''s operating businesses are organised and managed separately
according to the nature of products manufactured and services provided,
with each segment representing a strategic business unit that offers
different products.
Secondary Segment
The geographical segments have been identified based on the locations
of the customers: within India and outside India.
b) Inter-segment transfers
The Company recognises inter-segment sales and transfers as if they
were to third parties at current market prices. However, inter segment
sales and transfers for Captive/Capital consumption is as per CAS-4
(Cost Accounting Standard-4) with the exception of power segment that
is at current market price.
c) Allocation of common costs
Common allocable costs are allocated to each segment on reasonable
basis.
d) Unallocated items
It includes general administrative expenses, corporate & other office
expenses, income that arises at the enterprise level and relate to
enterprise as a whole being not allocable to any business segment.
e) Segment Policies
The company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole.
viii) Valuation of Inventories
Raw materials and stores & spares are valued at lower of cost, computed
on weighted average basis or net realisable value. Cost includes the
purchase price as well as incidental expenses. Scrap is valued at
estimated realisable value. However in case of raw materials,
components, stores & spares held for use in the production of finished
goods are not written down below cost if the finished products are
expected to be sold at or above cost.
Work-in-process is valued at lower of estimated cost or net realisable
value and finished goods are valued at lower of weighted average cost
or net realisable value. Cost for this purpose includes direct cost and
appropriate administrative and other overheads.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
ix) Inter-Division Transfers
a) Inter-division transfer of independent marketable products, produced
by various divisions and used for captive consumption, is accounted for
at approximate prevailing market price.
b) Inter-division transfer of Raw materials and products, not being
independent marketable products between various divisions is accounted
for primarily in accordance with guidance derived from CAS-4.
c) The value of such inter-divisional transfer is netted off from sales
and operational income and expenses under cost of materials consumed
and other expenses. The same is shown as a contra item in the statement
of profit and loss.
d) Any unrealised profit on unsold/unconsumed stocks is eliminated
while valuing the inventories.
x) Foreign Currency Transactions
Foreign currency transactions are recorded at the rate of exchange
prevailing at the date of the transaction. Monetary foreign currency
assets and liabilities are translated at the year-end exchange rates
and resultant gains / losses are recognised in the statement of profit
& loss for the year, except to the extent that they relate to (a) new
projects till the date of capitalisation which are carried to capital
work-in- progress and those relating to fixed assets which are adjusted
to the carrying cost of the respective assets; and (b) exchange
difference arising on the loans provided to foreign subsidiaries being
non-integral foreign operations is accumulated in foreign currency
translation reserve.
In case of forward foreign exchange contracts, exchange differences are
dealt with in the statement of profit & loss over the life of the
contract except those relating to tangible assets in which case they
are capitalised with the cost of respective tangible assets.
Non-monetary foreign currency items are carried at historical cost.
xi) Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Non-current
investments are carried at cost. Provision is made when, in the opinion
of the management, diminution in the value of investment is other than
temporary in nature. The reduction in carrying amount is reversed when
there is a rise in value of investments or if the reason for the
reduction no longer exists. Current investments are carried at the
lower of cost or market /fair value.
xii) Revenue Recognition
a) Revenue from sale of goods is recognised on transfer of significant
risks and rewards of ownership to the buyer.
b) Gross Revenue from operations comprises of sale of products and
other operating income which also includes export incentives and
aviation income. ''Net Revenue from operations'', net of excise duty and
Inter-divisional transfer is also disclosed separately.
c) Sales are inclusive of excise duty but net of returns, rebates, VAT
and sales tax. Products returned are accounted for in the year of
return.
d) Export sales are accounted for on the basis of the date of bill of
lading/airways bill.
e) Export benefits available under the Export Import policy of the
Government of India are accounted for in the year of export, to the
extent measurable.
f) Income from aviation and other services is accounted for at the time
of completion of service and billing thereof.
xiii) Other Income
a. Claims receivable
The quantum of accruals in respect of claims receivable such as from
Railways, Insurance, Electricity, Customs, Excise and the like are
accounted for on accrual basis to the extent there is certainty of
ultimate realisation.
b. Income from Investment
Income from Investment is accounted for on accrual basis when the right
to receive income is established.
xiv) Excise Duty
Excise Duty liability on finished goods manufactured and lying in the
factory is accounted for and the corresponding amount is considered for
valuation thereof.
xv) Employee Benefits
Expenses & liabilities in respect of employee benefits are recorded in
accordance with Accounting Standard (AS)-15- ''Employee Benefits''.
a) Provident Fund
The Company contributes to Government administered fund as well as
Provident fund Trust. The interest rate payable by the trust to
beneficiaries every year is being notified by Government. The Company
makes good deficiency, if any, in the interest rate declared by the
trust vis-a-vis statutory rate.
b) Gratuity
Gratuity is a post-employment benefit and is in the nature of a defined
benefit plan. The liability recognised in the Balance Sheet in respect
of gratuity is the present value of the defined benefit/obligation at
the Balance Sheet date less the fair value of plan assets, together
with adjustment for unrecognised actuarial gains or losses and past
service costs. The defined benefit/obligation is calculated at or near
the Balance Sheet date by an independent Actuary using the projected
unit credit method. Actuarial gains or losses are immediately
recognised in the statement of profit & loss and not deferred.
c) Compensated absences
Liability in respect of compensated absences due or expected to be
availed within one year from the Balance Sheet date is recognised on
the basis of undiscounted value of estimated amount required to be paid
or estimated value of benefit expected to be availed by the employees.
Liability in respect of compensated absences becoming due or expected
to be availed more than one year after the Balance Sheet date is
estimated on the basis of an actuarial valuation performed by an
independent Actuary using the projected unit credit method.
d) Other short term benefits
Expense in respect of other short term benefits is recognised on the
basis of the amount paid or payable for the period during which
services are rendered by the employee.
xvi) Research and Development expenditure
Research and Development expenditure not fulfilling the recognition
criteria as set out in Accounting Standard (AS-26) ''Intangible Assets''
is charged to the statement of profit and loss while capital
expenditure is added to the cost of fixed assets in the year in which
it is incurred.
xvii) Taxes on Income
Provision for current tax is made considering various allowances and
benefits available to the Company under the provisions of the Income
Tax Act, 1961.
In accordance with Accounting Standard (AS-22) Accounting for Taxes on
Income'', deferred taxes resulting from timing differences between book
and tax profits are accounted for at the tax rate substantively enacted
by the Balance Sheet date to the extent the timing differences are
expected to be crystallised. Deferred tax assets are recognised and
reviewed at each Balance Sheet date to the extent there is
reasonable/virtual certainty of realising such assets against future
taxable income.
Minimum Alternate Tax (MAT) credit is recognised as an asset only when
and to the extent there is convincing evidence that the Company will
pay normal income tax during the specified period.
xviii)Provisions, contingent liabilities, commitments and contingent
assets
Provisions are recognised for present obligations of uncertain timing
or amount arising as a result of a past event where a reliable estimate
can be made and it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation. Where it
is not probable that an outflow of resources embodying economic
benefits will be required or the amount cannot be estimated reliably,
the obligation is disclosed as a contingent liability and commitments,
unless the probability of outflow of resources embodying economic
benefits is remote.
Possible obligations, whose existence will only be confirmed by the
occurrence or non-occurrence of one or more uncertain events, are also
disclosed as contingent liabilities and commitments unless the
probability of outflow of resources embodying economic benefits is
remote. Contingent assets are neither recognised nor disclosed in the
financial statements.
xix) Earnings per share
The earnings considered in ascertaining the Company''s earnings per
share (EPS) comprise of the net profit aftertax attributable to equity
shareholders. The number of shares used in computing basic EPS is the
weighted average number of shares outstanding during the period
adjusted for events of bonus issue post period end, bonus elements in
right issue to existing shareholders, share split, and reverse share
split (consolidation of shares). The diluted EPS is calculated on the
same basis as basic EPS, after adjusting for the effect of potential
dilutive equity shares unless impact is anti-dilutive.
xx) Financial derivatives
Forward contracts, other than those entered into to hedge foreign
currency risk on unexecuted firm commitments or highly probable
forecast transactions, are treated as foreign currency transactions and
accounted for as per Accounting Standard (AS-11) ''The Effects of
Changes in Foreign Exchange Rates''. Exchange differences arising on
such contracts are recognised in the period in which they arise.
All other derivative contracts, including forward contracts entered
into to hedge foreign currency/ interest rate risk on unexecuted firm
commitments and highly probable forecast transactions, are recognised
in the financial statements at fair value at each reporting date, in
pursuance of the announcement of The Institute of Chartered Accountants
of India (ICAI) on Accounting for Derivatives.
As a matter of prudence, the Company does not to recognise any mark to
market gains in respect of any outstanding derivative contracts.
xxi) Cash and cash equivalents
Cash and cash equivalents consist of cash, bank balances in current and
short-term highly liquid investments that are readily convertible to
cash with original maturities of three months or less at the time of
purchase.
b) Terms/rights attached to equity shares
The Company has only one class of equity shares having par value ofRs. 1
per share. Each holder of equity share is entitled to one vote per
share. The Company declares dividends in Indian rupees. The dividend
proposed by the Board of Directors is subject to the approval of the
Shareholders in the ensuing Annual General Meeting.
During the year ended 31st March, 2014, the amount of per share
dividend proposed, subject to approval of shareholders in annual
general meeting, for distribution to equity shareholders is Rs. 1.50
(Previous Year Rs. 1.60)
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive assets of the Company. The
distribution will be in proportion to the number of equity shares held
by the shareholders.
e) Forfeited shares:
Pursuant to the resolution passed at the extra ordinary general meeting
dated 4th September, 2009, the Company reclassified the authorised
share capital of the Company by cancellation of 10,000,000 Preference
Shares of Rs. 100 each and simultaneous creation of 1,000,000,000 fresh
Equity Shares of Rs. 1 each and increased the authorised share capital to
Rs. 2,000,000,000.
"Consequently, the Company had cancelled 20,00,000 preference shares
ofRs. 100 each ( Rs. 5 paid up) which were forefeited earlier. Upon
cancellation of such shares, the amount of Rs. 10,000,000 was transferred
to General Reserve.
f) Buy back of equity shares :
In accordance with Section 77 of the Companies Act,1956 and buy back
regulations of SEBI, the Company during the financial year 2013-14
bought back and extinguished 19,959,584 number of equity shares of Rs. 1
each and created a Capital Redemption Reserve of Rs. 2.00 crore out of
surplus in the Statement of Profit and Loss. The premium on buy back of
Rs. 498.80 crore has been utilised from Securities Premium Account by Rs.
122.96 crore and out of surplus in Statement of Profit and Loss by Rs.
375.84 crore.
g) Employees Stock purchase Scheme
In accordance with SEBI(Employee Stock Option Scheme and Employee Stock
Purchase Scheme) Guidelines 1999,
a) As per resolution passed by the Compensation Committee held on
22.07.2013, during the year on 31.07.2013, 11,750 Equity Shares of Rs.
1/- at a premium ofRs. 201.55 were allotted to Mr Ravi Uppal, Managing
Director & Group CEO, as per the provisions of Employee Stock Purchase
Scheme 2013 (hereinafter referred to as JSPL ESPS 2013 Scheme), duly
approved through postal ballot as on 21.06.2013.
b) As per the resolution passed by Compensation Committee dated
29.08.2013, it is proposed to offer 21000 equity shares of Rs. 1/-
equivalent of Rs. 50 lacs at an average price of Rs. 236.83 to Mr. Ravi
Uppal, Managing Director & Group CEO as per JSPL ESPS 2013 Scheme. This
offer will be for one year from the date of this offer letter as per
his entitlement of Employee Stock Option worth Rs. 50 lacs per annum.
DEBENTURES
i) Debentures of Rs. 1000 crore placed initially with Life Insurance
Corporation of India on private placement basis are redeemable at par
in 2 equal annual instalments at the end of 9.5 and 10.5 years from the
date of respective allotments i.e. Rs. 100 crore (12.10.2009), Rs. 150
crore (22.10.2009), Rs. 150 crore (24.11.2009), Rs. 150 crore (24.12.2009),
Rs. 150 crore (25.01.2010), Rs. 150 crore (19.02.2010) and Rs. 150 crore
(26.03.2010). The debentures are secured on pari-passu charge basis by
way of mortgage of immovable properties and hypothecation of movable
fixed assets created/to be created on the 6x135 MW Power Plant Project
at Angul, Odisha in favour of the Debenture Trustees.
ii) Debentures ofRs. 500 crore placed initially with Life Insurance
Corporation of India on private placement basis are redeemable at par
in 2 equal annual instalments at the end of 9.5 and 10.5 years from the
date of respective allotments i.e. Rs. 100 crore (24.08.2009), Rs. 80 crore
(08.09.2009), Rs. 80 crore (08.10.2009), Rs. 80 crore (09.11.2009), Rs. 80
crore (08.12.2009) and Rs. 80 crore (08.01.2010). The debentures are
secured on pari-passu charge basis by way of mortgage of immovable
properties and hypothecation of movable fixed assets of the Company in
favour of the Debenture Trustees.
iii) Debentures of Rs. 62 crore placed initially with SBI Life Insurance
Company Limited on private placement basis are redeemable at par in 5
equal annual instalments commencing from the end of 8 years from the
date of allotment i.e. 29.12.2009. The debentures are secured on pari
passu basis by way of mortgage of immovable properties and
hypothecation of movable assets created/to be created on the 6x135 MW
Power Plant Project at Angul, Odisha in favour of the Debenture
Trustees.
iv) Debentures of Rs. 25 crore placed initially with ICICI Lombard
General Insurance Company Limited on private placement basis are
redeemable at par at the end of 5 years from the date of allotment i.e.
03.12.2009. The debentures are secured on pari-passu basis by way of
mortgage of immovable properties and hypothecation of movable fixed
assets of the Company in favour of the Debenture Trustees.
v) Debentures ofRs. 75 crore placed initially with ICICI Prudential Life
Insurance Company Limited on private placement basis are redeemable at
par at the end of 5 years from the date of allotment i.e. 03.12.2009.
The debentures are secured on pari-passu basis by way of mortgage of
immovable properties and hypothecation of movable fixed assets of the
Company in favour of the Debenture Trustees.
TERM LOANS Security
i) Loans of Rs. 30.13 crore (Previous year Rs. 97.98 crore) are secured by
exclusive charge on fixed assets created under Steel expansion project
at Raigarh, Chhattisgarh;
ii) Loans of Rs. 57.62 crore (Previous year Rs. 104.04 crore) are secured
by exclusive charge on fixed assets created under Plate Mill project at
Raigarh, Chhattisgarh;
iii) Loans of Rs. 17.14 crore (Previous year Rs. 42.86 crore) are secured
by exclusive charge on fixed assets created under 3x25 MW Power Plant
at Raigarh, Chhattisgarh;
iv) Loans of Rs. 3483.38 crore (Previous year Rs. 2799.40 crore) are
secured by exclusive charge on fixed assets created/to be created under
the DRI project at Angul, Odisha;
v) Loans ofRs. 523.79 crore (Previous year Rs. 609.59 crore) are secured by
exclusive charge on fixed assets created under 2X135 MW Power Plant
(Phase-1) at Dongamahua, Raigarh, Chhattisgarh;
vi) Loans of Rs. 583.07 crore (Previous year Rs. 680.25 crore) are secured
by exclusive charge on fixed assets created/ to be created under 2X135
MW Power Plant (Phase- 2) at Dongamauha, Raigarh, Chhattisgarh;
vii) Loans of Rs. 3022.33 crore (Previous year Rs. 3,154.55 crore) are
secured by exclusive charge on fixed assets created/to be created under
1.6 MTPA Integrated Steel Plant and 1.5 MTPA Plate Mill project at
Angul, Odisha;
viii) Loans of Rs. 1480.50 crore (Previous year Rs. 1,692.20 crore) are
secured/to be secured by exclusive charge on fixed assets created/to be
created under 6x135 MW Power Plant Project at Angul, Odisha;
ix) Loan of Rs. 171.63 crore (Previous year Rs. 234.14 crore) are secured
by subservient charge on fixed assets of the Company.
x) Loan of Rs. 1500 crore (Previous year NIL) initially placed with ICICI
bank on bilateral basis are redeemable by way of ballooning instalments
in two tranches. An amount of Rs. 500 crore shall be repayable in a
period of 5 (five )years in 16 (sixteen) quarterly instalment whereas
an amount of Rs. 1000 crore shall be repayable in a period of 10 (Ten)
years in 36 (thirty six) quarterly instalment. Above loans are secured
by way of a first pari passu charge on all the Borrower''s present
movable Fixed Assets of units located at Patratu, District Ramgarh,
Jharkand; G E Road, Mandir Hasaud, Raipur; Punjipatra, Raigarh
Chhattisgarh; Bhikaji Cama Place, New Delhi; at Village Pachwad,
District Satara, Maharashtra and all movable Fixed Assets (present as
well as future) located at Kharsia Road, Post Box No. 16, Raigarh,
Chhattisgarh. In addition a first ranking mortgage and pari passu
charge on part of immovable property of the Borrower pertaining to its
unit located at Kharsia Road, Post Box No. 16, Raigarh and part of the
immovable property of the Borrower pertaining to its unit located at 13
KM Stone, G E Road, Mandir Hasaud, Raipur;
xi) Loan of Rs. 300 crore (Previous year NIL) initially placed with HDFC
Bank on on bilateral basis are redeemable in a period of 8 (eight)
years in 28 (twenty eight) quarterly installments. Above loans are
secured by way of a fi its located at Pataratu, District Ramgarh,
Jharkand; G E Road, Mandir Hasaud, Raipur; Punjipatra, Raigarh
Chhattisgarh; Bhikaji Cama Place, New Delhi; at Village Pachwad
District Satara, Maharashtra and all movable Fixed Assets (present as
well as future) located at Kharsia Road, Post Box No. 16, Raigarh,
Chhattisgarh. In addition a first ranking mortgage and pari passu
charge on part of immovable property of the Borrower pertaining to its
unit located at Kharsia Road, Post Box No. 16, Raigarh and part of the
immovable property of the Borrower pertaining to its unit located at 13
KM Stone, G E Road, Mandir Hasaud, Raipur.
Mar 31, 2012
I) Basis of Preparation of Financial Statements
The financial statements are prepared under the historical cost
convention, ongoing concern basis and in terms of the Accounting
Standards notified by Companies (Accounting Standards) Rules, 2006 in
compliance with Section 211(3C) of the Companies Act, 1956. The Company
follows the mercantile system of accounting and recognises income and
expenditure on accrual basis to the extent measurable and where there
is certainty of ultimate realisation in respect of incomes. Accounting
policies not specifically referred to otherwise are consistent and in
consonance with the generally accepted accounting principles in India.
The Company has prepared its financial statements in accordance with
Schedule VI as inserted by Notification- S.O. 447(E), dated 28th
February, 2011 (As amended by Notification No F.NO. 2/6/2008-CL-V,
Dated 30th March, 2011). The Schedule does not impact recognition and
measurement principle followed for the preparation of financial
statements. However it has necessitated significant changes in the
presentation of and disclosures in financial statements. The Company
has reclassified its previous year figures to confirm to the
classification as per the aforesaid Schedule.
ii) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent liabilities and commitments at
the end of the financial statements and results of operations during
the reporting period. Although these estimates are based upon the
management's best knowledge of current events and actions, actual
results could differ from these estimates. Difference between the
actual result and estimates are recognised in the period in which the
results are known/materialised.
iii) Fixed Assets and Depreciation
a) Fixed Assets
Fixed Assets are stated at cost less accumulated depreciation and
impairment losses, if any. Costs include costs of acquisitions or
constructions, including incidental expenses thereto and other
attributable costs of bringing the asset to its working condition for
its intended use and are net of available duty/tax credits.
b) Expenditure during construction period Expenditure related to and
incurred during implementation of new/expansion-cum modernisation
projects is included under capital work-in-progress and the same is
allocated to the respective Fixed Assets on completion of its
construction/erection.
c) Intangible Assets
Intangible Assets are recognised on the basis of recognition criteria
as set out in Accounting Standard (AS-26) 'Intangible Assets'.
d) Depreciation and Amortisation
Depreciation on fixed assets is provided on straight- line method (SLM)
at the rates and in the manner specified in Schedule XIV to the
Companies Act, 1956. Leasehold Land and Aircraft are amortised over the
period of lease. In the case of assets where impairment loss is
recognised, the revised carrying amount is depreciated over the
remaining estimated useful life of the asset.
Certain Plant and Machinery have been considered as continuous process
plant on the basis of technical assessment and depreciation on the same
is provided for accordingly.
Intangible Assets are amortised on straight-line method over the
expected duration of benefits not exceeding ten years.
iv) Impairment of Assets
The carrying amount of assets is reviewed for impairment at each
balance sheet date wherever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount for which the asset's carrying amount exceeds
its recoverable amount being the higher of the assets net selling price
and its value in use. Value in use is based on the present value of the
estimated future cash flows relating to the asset. For the purpose of
assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (i.e. cash generating
units).
Previously recognised impairment losses are reversed where the
recoverable amount increases because of favorable changes in the
estimates used to determine the recoverable amount since the last
impairment was recognised. A reversal of an asset's impairment loss is
limited to its carrying amount that would have been determined (net of
depreciation or amortisation) had no impairment loss been recognised in
prior years.
v) Accounting for Leases
a) Finance lease is recognised as an asset and a liability to the
lessor at fair value at the inception of the lease.
b) The lease payments under operating lease as per respective lease
agreements are recognised as expense in the statement of profit and
loss on a straight-line basis over the lease term.
vi) Borrowing Cost
Borrowing cost related to a qualifying asset is worked out on the basis
of actual utilisation of funds out of project specific loans and/or
other borrowings to the extent identifiable with the qualifying asset
and is capitalised with the cost of qualifying asset. Other borrowing
costs incurred during the period are charged to statement of profit and
loss.
vii) Segment Reporting
a) Identification of segments
The Company's operating businesses are organised and managed separately
according to the nature of products manufactured and services provided,
with each segment representing a strategic business unit that offers
different products. The analysis of geographical segment is based on
the areas in which major operating divisions of the Company operate.
b) Inter-segment transfers
The Company accounts for inter-segment sales and transfers as if the
sales or transfers were to third parties at current market prices.
c) Allocation of common costs
Common allocable costs are allocated to each segment on reasonable
basis.
d) Unallocated items
It includes general administrative expenses, head office expenses and
other expenses & income that arise at the enterprise level and relate
to enterprise as a whole, and which are not allocable to any business
segment.
e) Segment Policies
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole.
viii) Valuation of Inventories
Raw materials and stores & spares are valued at lower of cost, computed
on weighted average basis or net realisable value. Cost includes the
purchase price as well as incidental expenses. Scrap is valued at
estimated realisable value.
Work-in-process is valued at lower of estimated cost or net realisable
value and finished goods are valued at lower of cost or net realisable
value. Cost for this purpose includes direct cost and appropriate
administrative and other overheads.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
ix) Inter-Division Transfers
Inter-division transfer of goods, as independent marketable products
produced by various divisions for captive consumption, is accounted for
at approximate prevailing market price. The same is shown as a contra
item to reflect the true working of the respective divisions in the
statement of Profit and Loss. Any unrealised profit on unsold stocks is
eliminated while valuing the inventories. The value of such
inter-divisional transfer is netted off from sales and operational
income and expenses under cost of materials consumed and other
expenses.
Inter-divisional transfer/captive consumption related to fixed assets
is at cost.
x) Foreign Currency Transactions
Foreign currency transactions are recorded at the rate of exchange
prevailing at the date of the transaction. Monetary foreign currency
assets and liabilities are translated at the year-end exchange rates
and resultant gains / losses are recognised in the statement of profit
& loss for the year, except to the extent that they relate to new
projects till the date of capitalisation which are carried to
pre-operative expenses and those relating to fixed assets which are
adjusted to the carrying cost of the respective assets.
In case of forward foreign exchange contracts, exchange differences are
dealt with in the statement of profit & loss over the life of the
contract except those relating to fixed assets in which case they are
capitalised with the cost of respective fixed assets. Non-monetary
foreign currency items are carried at historical cost.
In case of foreign subsidiaries, with non-integral foreign operations,
revenue items are converted at the average rate prevailing during the
year. All assets and liabilities are converted at the rates prevailing
at the end of the year. Exchange difference arising on conversion is
recognised in Foreign Currency Translation Reserve.
xi) Investments
Non-current investments are carried at cost. Provision is made when, in
the opinion of the management, diminution in the value of investment is
other than temporary in nature. The reduction in carrying amount is
reversed when there is a rise in value of investments or if the reason
for the reduction no longer exists. Current investments are carried at
the lower of cost or market / fair value.
xii) Revenue Recognition
a) Gross Revenue from operations comprises of sale of products and
other operating income which also includes export incentives and
aviation income. 'Net Revenue from operations', net of excise duty and
Inter-divisional transfer is also disclosed separately.
b) Sales is inclusive of excise duty but net of returns, rebates, VAT
and sales tax. Products returned/ rejected are accounted for in the
year of return/ rejection.
c) Export sales are accounted for on the basis of the date of bill of
lading/airways bill.
d) Export benefits available under the Export Import policy of the
Government of India are accounted for in the year of export, to the
extent measurable.
e) Income from aviation and other services is accounted for at the time
of completion of service and billing thereof.
xiii) Other Income
a) Claims receivable
The quantum of accruals in respect of claims receivable such as from
Railways, Insurance, Electricity, Customs, Excise and the like are
accounted for on accrual basis to the extent there is certainty of
ultimate realisation.
b) Income from Investment
Income from Investment is accounted for on accrual basis when the right
to receive income is established.
xiv) Excise Duty
Excise Duty liability on finished goods manufactured and lying in the
factory is accounted for and the corresponding amount is considered for
valuation thereof.
xv) Employee Benefits
Expenses & liabilities in respect of employee benefits are recorded in
accordance with Accounting Standard (AS)-15 -Employee Benefits'.
a) Provident Fund
The Company contributes to Government administered fund as well as
Provident fund Trust. The interest rate payable by the trust to
beneficiaries every year is being notified by Government. The Company
makes good deficiency, if any, in the interest rate declared by the
trust vis-a-vis statutory rate.
b) Gratuity
Gratuity is a post employment benefit and is in the nature of a defined
benefit plan. The liability recognised in the Balance Sheet in respect
of gratuity is the present value of the defined benefit/obligation at
the Balance Sheet date less the fair value of plan assets, together
with adjustment for unrecognised actuarial gains or losses and past
service costs. The defined benefit/ obligation is calculated at or near
the Balance Sheet date by an independent Actuary using the projected
unit credit method. Actuarial gains or losses are immediately
recognised in the statement of profit & loss and not deferred.
c) Compensated absences
Liability in respect of compensated absences due or expected to be
availed within one year from the Balance Sheet date is recognised on
the basis of undiscounted value of estimated amount required to be paid
or estimated value of benefit expected to be availed by the employees.
Liability in respect of compensated absences becoming due or expected
to be availed more than one year after the Balance Sheet date is
estimated on the basis of an actuarial valuation performed by an
independent Actuary using the projected unit credit method.
d) Other short term benefits
Expense in respect of other short term benefits is recognised on the
basis of the amount paid or payable for the period during which
services are rendered by the employee.
xvi) Research and Development expenditure
Research and Development expenditure not fulfilling the recognition
criteria as set out in Accounting Standard (AS- 26) 'Intangible Assets'
is charged to the statement of profit and loss while capital
expenditure is added to the cost of fixed assets in the year in which
it is incurred.
xvii) Employee Stock Option Scheme
Stock options granted to the employees of the Company and its
subsidiary under the Employees' Stock Option Scheme(s) are evaluated on
Intrinsic Value Method as per the accounting treatment prescribed by
the Employee Stock Option Scheme and Employee Stock Purchase
Scheme Guidelines, 1999 issued by the Securities and Exchange Board of
India.
Accordingly, excess of market value of the stock option as on date of
grant over the exercise price of the options is recognised as deferred
employee compensation and is charged to the statement of profit and
loss as employee cost on straight line method over the vesting period
of the options. The options that lapse are reversed by a credit to
employees' compensation expenses, equal to amortised portion of value
of lapsed portion and credit to deferred employee compensation expense,
equal to the unamortised portion. The balance in employee stock option
outstanding amount net of any unamortised deferred employee
compensation is shown separately as part of shareholder's fund.
xviii) Taxes on Income
Provision for current tax is made considering various allowances and
benefits available to the Company under the provisions of the Income
Tax Act, 1961.
In accordance with Accounting Standard (AS-22) 'Accounting for Taxes on
Income', deferred taxes resulting from timing differences between book
and tax profits are accounted for at the tax rate substantively enacted
by the Balance Sheet date to the extent the timing differences are
expected to be crystallised. Deferred tax assets are recognised and
reviewed at each Balance Sheet date to the extent there is
reasonable/virtual certainty of realising such assets against future
taxable income.
Minimum Alternate Tax (MAT) credit is recognised as an asset only when
and to the extent there is convincing evidence that the Company will
pay normal income tax during the specified period.
xix) Provisions, contingent liabilities, commitments and contingent
assets
Provisions are recognised for present obligations of uncertain timing
or amount arising as a result of a past event where a reliable estimate
can be made and it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation. Where it
is not probable that an outflow of resources embodying economic
benefits will be required or the amount cannot be estimated reliably,
the obligation is disclosed as a contingent liability and commitments,
unless the probability of outflow of resources embodying economic
benefits is remote.
Possible obligations, whose existence will only be confirmed by the
occurrence or non-occurrence of one or more uncertain events, are also
disclosed as contingent liabilities and commitments unless the
probability of outflow of resources embodying economic benefits is
remote. Contingent assets are neither recognised nor disclosed in the
financial statements.
xx) Intangible assets under development
Mines development expenditure incurred in respect of new iron ore/coal
and likewise mines is shown under 'Intangible assets under development'
and amortised over a period of ten years starting from the year of
commencement of commercial production or the future expected extraction
period of the reserves based on actual extraction till date, whichever
is shorter.
xxi) Earnings per share
The earnings considered in ascertaining the Company's earnings per
share (EPS) comprise of the net profit after tax attributable to equity
shareholders. The number of shares used in computing basic EPS is the
weighted average number of shares outstanding during the period
adjusted for events of bonus issue post period end,bonus elements in
right issue to existing shareholders, share split, and reverse share
split (consolidation of shares). The diluted EPS is calculated on the
same basis as basic EPS, after adjusting for the effect of potential
dilutive equity shares unless impact is anti-dilutive.
xxii) Financial derivatives
Forward contracts, other than those entered into to hedge foreign
currency risk on unexecuted firm commitments or highly probable
forecast transactions, are treated as foreign currency transactions and
accounted for as per Accounting Standard (AS-11). 'The Effects of
Changes in Foreign Exchange Rates'. Exchange differences arising on
such contracts are recognised in the period in which they arise.
All other derivative contracts, including forward contracts entered
into to hedge foreign currency/ interest rate risk on unexecuted firm
commitments and highly probable forecast transactions, are recognised
in the financial statements at fair value at each reporting date, in
pursuance of the announcement of The Institute of Chartered Accountants
of India (ICAI) on Accounting for Derivatives.
xxiii) Cash and cash equivalents
Cash and cash equivalents consist of cash and short-term highly liquid
investments that are readily convertible to cash with original
maturities of three months or less at the time of purchase.
b) Terms/rights attached to equity shares
The Company has only one class of equity shares having par value of Rs. 1
per share. Each holder of equity share is entitled to one vote per
share. The Company declares dividends in Indian rupees. The dividend
proposed by the Board of Directors is subject to the approval of the
Shareholders in the ensuing Annual General Meeting.
During the year ended 31st March, 2012, the amount of per share
dividend recognised as distributions to equity shareholders was Rs. 1.60
(Previous Year Rs. 1.50)
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive assets of the Company. The
distribution will be in proportion to the number of equity shares held
by the shareholders.
The Company has alloted total 775,651,530 fully paid equity shares upto
the year ended 31st March, 2012 as fully paid bonus shares by
capitalising securities premium reserve.
In addition the Company has allotted the following equity shares during
the preceding five years under its various Employees
e) Forfeited shares:
Pursuant to the resolution passed at the EGM dated 4th September, 2009,
the Company reclassified the authorised share capital of the Company by
cancellation of 10,000,000 Preference Shares of Rs. 100 each and
simultaneous creation of 1,000,000,000 fresh Equity Shares of Rs. 1 each
and increased the authorised share capital to Rs. 2,000,000,000.
Consequently, the Company had cancelled 100,000 preference shares of Rs.
100 each, which were forefeited earlier. Upon cancellation of such
shares, the amount of Rs. 10,000,000 was transferred to General Reserve.
f) Shares reserved for issue under options
The details of shares reserved for issue under Employee stock option
(ESOP) plan of the Company are as under:
The Employees Stock Option Scheme - 2005 (ESOS-2005) was approved by
the shareholders of the Company in their Annual General Meeting held on
25th July, 2005 and amended by shareholders on 27th September, 2006.
Under ESOS-2005, a maximum of 1,100,000 (Eleven lacs) equity shares of
Rs. 5/- each could be granted to the employees of the Company and its
subsidiary company(ies). In-principle approval from National Stock
Exchange of India Limited (NSE) and Bombay Stock Exchange Limited (BSE)
was given on 01.02.2006. A Compensation Committee was constituted by
the Board of Directors of the Company in their meeting held on 12th
May, 2005 for the administration of ESOS- 2005. Under ESOS-2005, the
Compensation Committee has granted stock options as follows:-
a) 859,400 (Eight lacs fifty nine thousand four hundred) stock options
on 26.11.2005 at an exercise price of Rs. 1,014/- per share (Series -1)
which would vest after 2 years from the date of grant to the extent of
50% (Part 1), after 3 years from the date of grant to the extent of 25%
(Part 2) and after 4 years from the date of grant to the extent of 25%
(Part 3);
b) 129,550 (One lac twenty nine thousand five hundred fifty) stock
options on 02.09.2006 at an exercise price of Rs. 1,121/- per share
(Series - II) which would vest after 2 years from the date of grant to
the extent of 50% (Part 1), after 3 years from the date of grant to the
extent of 25% (Part 2) and after 4 years from the date of grant to the
extent of 25% (Part 3); and
c) 136,950 (One lacthirty sixthousand nine hundred fifty) stock options
on 27.04.2007 at an exercise price of Rs. 1,819/- per share (Series -
III) which would vest after 2 years from the date of grant to the
extent of 50% (Part 1), after 3 years from the date of grant to the
extent of 25% (Part 2) and after 4 years from the date of grant to the
extent of 25% (Part 3).
Pursuant to Clause 5.3 (f) of SEBI (Employees Stock Option Scheme and
Employees Stock Purchase Scheme) Guidelines, 1999 and para 18 of the
Employees Stock Option Scheme -2005 of the Company, the Compensation
Committee is authorised to make a fair and reasonable adjustment to the
number of options and to the exercise price in respect of options
granted to the employees under the Scheme in case of corporate actions
such as right issue, bonus issue, merger etc.
On 27.12.2007, sub-division of the face value of each equity share of
the Company from Rs. 5/- to 5 equity shares of Rs. 1/- each was approved by
the shareholders in their General Meeting. Thereafter, the Compensation
Committee has, in its meeting held on 27.01.2008, made an adjustment to
the exercise price by reducing it in case of Series I to Rs. 203/- Series
II to Rs. 225/- and Series III to Rs. 364/- per equity share of Rs. 1/- each
and to the number of options by increasing it 5 times the original
grant consequent to which the number of maximum options that could be
issued under the Employees Stock Option Scheme-2005 increased to
5,500,000 (Fifty five lacs) [originally 1,100,000 (Eleven lacs)
Thereafter, the following allotments of equity shares were made under
ESOS-2005 on the exercise of options:-
a) 691,343 (Six lacs ninety one thousand three hundred forty three)
equity shares ofRs. 1/- each were allotted on 16th June, 2008 on exercise
of options granted under Part 1 of Series I of ESOS 2005;
b) 57,136 (Fifty seven thousand one hundred thirty six) equity shares
of Rs. 1/- each were allotted on 13th April, 2009 on exercise of options
granted under Part 1 of Series II of ESOS 2005;
c) 420,487 (Four lacs twenty thousand four hundred eighty seven) equity
shares of Rs. 1/- each were allotted on 21st July, 2009 on exercise of
options granted under Part 2 of Series I of ESOS 2005.
The remaining 4,331,034 (Forty three lacs thirty one thousand thirty
four) equity shares of Rs. 1/- each were available for allotment under
ESOS -2005 after the above 3 allotments.
On 4th September, 2009, issue of 5 equity shares of Rs. 1/- each as bonus
shares on each existing equity share of the Company was approved by the
shareholders in their General Meeting and on 19th September, 2009,
fully paid- up bonus shares were allotted.
Thereafter, pursuant to clause 5.3 (f) of SEBI (Employees Stock Option
Scheme and Employees Stock Purchase Scheme) Guidelines, 1999 and para
18 of the Employees Stock Option Scheme - 2005 of the Company, the
Compensation Committee has, in its meeting held on 31st October, 2009
made the following adjustments:-
a) The number of unexercised options and options yet to be granted is
increased by 5 times Consequently increasing the number of unexercised
options and options yet to be granted from 4,331,034 (Forty three lacs
thirty one thousand thirty four) to 25,986,204 (Two Crore fifty nine
lacs eighty six thousand two hundred four);
b) The price of unexercised options was reduced in case of Series I to
Rs. 34/-, Series II to Rs. 38/- and Series III to Rs. 61/- per equity share
of Rs. 1/- each.
In-principle approval for listing of additional 21,655,170 (Two crore
sixteen lacs fifty five thousand one hundred seventy) equity shares
were obtained from NSE and BSEs.
Thereafter, the following allotments of equity shares were made under
ESOS-2005 on exercise of options:-
452,246 (Four lacs fifty two thousand two hundred forty six) equity
shares of Rs. 1/- each were allotted on 30th January, 2010 on exercise of
options granted under part 1 of Series III of ESOS 2005.
2,52,006 (Two lacs fifty two thousand six) equity shares ofRs. 1/- each
were allotted on 13th April, 2010 on exercise of options granted under
part 2 of Series II of ESOS 2005.
24,56,922 (Twenty four lacs fifty Six thousand nine hundred twenty two)
equity shares ofRs. 1/- each were allotted on 23rd June, 2010 on exercise
of options granted under part 3 of Series I of ESOS 2005.
3,26,021 (Three lacs twenty Six thousand twenty one) equity shares of Rs.
1/- each were allotted on 1st February, 2011 on exercise of options
granted under part 2 of Series III of ESOS 2005.
2,40,564 (Two lacs forty thousand five hundred sixty four) equity
shares ofRs. 1/- each were allotted on 14th April, 2011 on exercise of
options granted under part 3 of Series II of ESOS 2005.
3,24,223 (Three lacs twenty four thousand two hundred twenty three)
equity shares of Rs. 1/- each were allotted on 12th December, 2011 on
exercise of options granted under part 3 of Series III of ESOS 2005.
DEBENTURES
i) Debentures placed with SBI Life Insurance Company Limited on private
placement basis are redeemable at par in 5 equal annual instalments
commencing from the end of 8 years from the date of allotment i.e.
29.12.2009. The debentures are secured on pari passu basis by way of
mortgage of immovable properties and hypothecation of movable assets
created/to be created on the 6x135 MW Power Plant Project at Angul,
Odisha in favour of the Debenture Trustees.
ii) Debentures placed with Life Insurance Corporation of India on
private placement basis are redeemable at par in 2 equal annual
instalments at the end of 9.5 and 10.5 years from the date of
respective allotments i.e. Rs. 100 crore (12.10.2009), Rs. 150 crore
(22.10.2009), Rs. 150 crore (24.11.2009), Rs. 150 crore (24.12.2009), Rs. 150
crore (25.01.2010), Rs. 150 crore (19.02.2010) and Rs. 150 crore
(26.03.2010). The debentures are secured on pari-passu charge basis by
way of mortgage of immovable properties and hypothecation of movable
fixed assets created/to be created on the 6x135 MW Power Plant Project
at Angul, Odisha in favour of the Debenture Trustees.
iii) Debentures placed with Life Insurance Corporation of India on
private placement basis are redeemable at par in 2 equal annual
instalments at the end of 9.5 and 10.5 years from the date of
respective allotments i.e. Rs. 100 crore (24.08.2009), Rs. 80 crore
(08.09.2009), Rs. 80 crore (08.10.2009), Rs. 80 crore (09.11.2009), Rs. 80
crore (08.12.2009) and Rs. 80 crore (08.01.2010). The debentures are
secured on pari-passu charge basis by way of mortgage of immovable
properties and hypothecation of movable fixed assets of the Company in
favour of the Debenture Trustees.
iv) Debentures placed with ICICI Lombard General Insurance Company
Limited on private placement basis are redeemable at par at the end of
5 years from the date of allotment i.e. 03.12.2009. The debentures are
secured on pari-passu basis by way of mortgage of immovable properties
and hypothecation of movable fixed assets of the Company in favour of
the Debenture Trustees.
v) Debentures placed with ICICI Prudential Life Insurance Company
Limited on private placement basis are redeemable at par at the end of
5 years from the date of allotment i.e. 03.12.2009. The debentures are
secured on pari-passu basis by way of mortgage of immovable properties
and hypothecation of movable fixed assets of the Company in favour of
the Debenture Trustees.
vi) Debentures placed with LIC Mutual Fund Asset Management Company
Limited on private placement basis are redeemable at par at the end of
23 months from the date of allotment i.e. 22.01.2010. The debentures
are secured on pari-passu basis by way of mortgage of immovable
properties and hypothecation of movable fixed assets of the Company in
favour of the Debenture Trustees.
vii) Debentures placed with United India Insurance Company Limited on
private placement basis are redeemable at par at the end of 23 months
from the date of allotment i.e. 22.01.2010. The debentures are secured
on pari-passu basis by way of mortgage of immovable properties and
hypothecation of movable fixed assets of the Company in favour of the
Debenture Trustees.
TERM LOANS
Security
i) Loans of Rs. 176.54 crore (Previous year Rs. 255.11 crore) are secured
by exclusive charge on fixed assets created under Steel expansion
project at Raigarh, Chhattisgarh;
ii) Loans of Rs. 150.40 crore (Previous year Rs. 196.87 crore) are secured
by exclusive charge on fixed assets created under Plate Mill project at
Raigarh, Chhattisgarh;
iii) Loans of Rs. 77.14 crore (Previous year Rs. 111.43 crore) are secured
by exclusive charge on fixed assets created under 3x25 MW Power Plant
at Raigarh, Chhattisgarh;
iv) Loans of Rs. NIL crore (Previous year Rs. 454.99 crore) are secured by
exclusive charge on fixed assets created/to be created under the DRI
project at Angul, Odisha;
v) Loans of Rs. 698.47 crore (Previous year Rs. 788.97 crore) are secured
by exclusive charge on fixed assets created under 2X135 MW Power Plant
(Phase -1) at Dongamauha, Raigarh, Chhattisgarh;
vi) Loans of Rs. 450.00 crore (Previous year Rs. 140.55 crore) are secured
by exclusive charge on fixed assets created/ to be created under 2X135
MW Power Plant (Phase - 2) at Dongamauha, Raigarh, Chhattisgarh;
vii) Loans of Rs. 1,841.10 crore (Previous year Rs. 1,054.97 crore) are
secured by exclusive charge on fixed assets created/ to be created
under 1.6 MTPA Integrated Steel Plant and 1.5 MTPA Plate Mill project
at Angul, Odisha;
viii) Loans of Rs. 1,370.00 crore (Previous year Rs. 100.00) are secured/to
be secured by exclusive charge on fixed assets created/to be created
under 6x135 MW Power Plant Project at Angul, Odisha;
ix) Loan of Rs. 250.00 crore (Previous year Rs. 244.25 crore) are secured
by subservient charge on current assets of the Company;
Cash credit from Banks
Secured by hypothecation by way of first charge on stocks of finished
goods, raw materials, work in process, stores and spares and book debts
and second charge in respect of other movable and immovable assets. The
cash credit is repayable on demand.
The Company has so far not received information from vendors regarding
their status under the Micro, Small and Medium Enterprises
(Development) Act, 2006 and hence disclosure relating to amounts unpaid
as at the year-end together with interest paid / payable under this Act
have not been given.
a) Statement Showing the details of Pre-operative Expenditure as at
31st March, 2012
b) Freehold land includes Rs. 5.85 crore jointly owned with a Company
with 50% share and pending registration.
c) Capital Work in Progress includes Rs. 597.14 crore (Previous year Rs.
383.42 crore) being Pre-operative expenditure and Rs. 1,079.40 crore
(PreviousyearRs. 1,083.39 crore) Capital stores.
d) Addition to Fixed Assets includes Rs. 4.84 crore (Previous year Rs. 3.29
crore) and addition to Capital Work in Progress includes Rs. 0.48 crore
(Previous year Rs. 3.16 crore) being expenditure incurred on Research &
Development Activities. The Capital Work in Progress accumulated
balance as on 31st March, 2012 the is Rs. 0.84 crore (Previous year Rs.
3.16 crore)
e) Additions / (Adjustments) to Plant and Machinery/Capital
work-in-progress includes addition of Rs. 332.22 crore (Previous year
addition of Rs. 165.92 crore) on account of foreign exchange fluctuation
on long-term liabilities relating to acquisition of Fixed Assets
pursuant to the notifications issued by the Ministry of Corporate
Affairs relating to Accounting Standard ( AS-11) 'The Effects of
Changes in Foreign Exchange Rates'.
f) Borrowing cost incurred during the year and capitalised is Rs. 50.48
crore (Previous year Rs. 71.02 crore). Borrowing cost incurred during the
year and transferred to Capital Work in Progress is Rs. 372.33 crore
(Previous year Rs. 202.69 crore).
g) Expenditure during Trial Run period has been
capitalised/decapitaised with Fixed Assets as under
Mar 31, 2011
I) Basis of Preparation of Financial Statements
the financial statements are prepared under the historical cost
convention, on going concern basis and in terms of the Accounting
Standards notifed by Companies (Accounting Standards) Rules, 2006 in
compliance with Section 211(3C) of the Companies Act, 1956. The Company
follows the mercantile system of accounting and recognises income and
expenditure on accrual basis to the extent measurable and where there
is certainty of ultimate realisation in respect of incomes. Accounting
policies not specifically referred to otherwise are consistent and in
consonance with the generally accepted accounting principles in India.
ii) Use of estimates
the preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon management's best
knowledge of current events and actions, actual results could differ
from these estimates. difference between the actual result and
estimates are recognised in the period in which the results are
known/materialised.
iii) Fixed Assets and depreciation
a) Fixed Assets
Fixed Assets are stated at cost less accumulated depreciation and
impairment losses, if any. Costs include cost of acquisitions or
constructions, including incidental expenses thereto and other
attributable costs of bringing the asset to its working condition for
its intended use and are net of available duty/tax credits.
b) Expenditure during construction period
Expenditure related to and incurred during implementation of
new/expansion-cum- modernisation projects is included under capital
work-in-progress and the same is allocated to the respective Fixed
Assets on completion of its construction/erection.
c) Intangible Assets
Intangible Assets are recognised on the basis of recognition criteria
as set out in Accounting Standard (AS-26) 'intangible Assets'.
d) depreciation and Amortisation
depreciation on fixed assets is provided on straight-line method (SLm)
at the rates and in the manner specified in Schedule XiV to the
Companies Act, 1956. Leasehold land and aircraft are amortised over the
period of lease. In the case of assets where impairment loss is
recognised, the revised carrying amount is depreciated over the
remaining estimated useful life of the asset.
Certain Plant and machinery have been considered as continuous process
plant on the basis of technical assessment and depreciation on the same
is provided for accordingly.
Intangible Assets are amortised on straight-line method over the
expected duration of benefits not exceeding ten years.
iv) Impairment of Assets
The carrying amount of assets is reviewed for impairment at each
balance sheet date wherever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount for which the asset's carrying amount exceeds
its recoverable amount being the higher of the assets net selling price
and its value in use. Value in use is based on the present value of the
estimated future cash flows relating to the asset. For the purpose of
assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (i.e. cash generating
units).
Previously recognised impairment losses are reversed where the
recoverable amount increases because of favourable changes in the
estimates used to determine the recoverable amount since the last
impairment was recognised. A reversal of an asset's impairment loss is
limited to its carrying amount that would have been determined (net of
depreciation or amortisation) had no impairment loss been recognised in
prior years.
v) Accounting for Leases
a) Finance lease, is recognised as an asset and a liability to the
lessor at fair value at the inception of the lease.
b) The lease payments under operating lease as per respective lease
agreements are recognised as expense in the Profit and loss account on a
straight line basis over the lease term.
vi) Borrowing Cost
Borrowing cost related to a qualifying asset is worked out on the basis
of actual utilisation of funds out of project specific loans and/or
other borrowings to the extent identifiable with the qualifying asset
and is capitalised with the cost of the qualifying asset. other
borrowing costs incurred during the period are charged to Profit and
loss account.
vii) Segment Reporting
a) Identifcation of segments
The Company's operating businesses are organised and managed separately
according to the nature of products manufactured and services provided,
with each segment representing a strategic business unit that offers
different products. The analysis of geographical segments is based on
the areas in which major operating divisions of the Company operate.
b) Inter-segment transfers
The Company accounts for intersegment sales and transfers as if the
sales or transfers were to third parties at current market prices.
c) Allocation of common costs
Common allocable costs are allocated to each segment on reasonable
basis.
d) Unallocated items
It Include general corporate income and expense items which are not
allocable to any business segment.
e) Segment Policies
The company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the company as a whole.
viii) Valuation of Inventories
Raw materials and Stores & Spares are valued at lower of cost, computed
on weighted average basis, and net realisable value. Cost includes the
purchase price as well as incidental expenses. Scrap is valued at
estimated realisable value.
Work-in-process is valued at lower of estimated cost and net realisable
value and finished goods are valued at lower of cost and net realisable
value. Cost for this purpose includes direct cost and appropriate
administrative and other overheads.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
ix) Inter-division transfers
Inter-division transfer of goods, as independent marketable products
produced by various divisions for captive consumption, is accounted for
at approximate prevailing market price. The same is shown as a contra
item to reflect the true working of the respective divisions in the
Profit & Loss Account. Any unrealised Profit on unsold stocks is
eliminated while valuing the inventories. the value of such
inter-divisional transfer is netted off from sales and operational
income and expenses under materials, manufacturing and others.
Inter-divisional transfer/captive consumption related to Fixed Assets
is at cost.
x) Foreign Currency Transactions
Foreign currency transactions are recorded at the rate of exchange
prevailing at the date of the transaction. monetary foreign currency
assets and liabilities are translated at the year-end exchange rates
and resultant gains/losses are recognised in the Profit & loss account
for the year, except to the extent that they relate to new projects
till the date of capitalisation which are carried to pre-operative
expenses and those relating to fixed assets which are adjusted to the
carrying cost of the respective assets.
In case of forward foreign exchange contracts, exchange differences are
dealt with in the Profit & loss account over the life of the contract
except those relating to fixed assets in which case they are capitalised
with the cost of respective fixed assets. Non-monetary foreign currency
items are carried at historical cost.
In case of foreign subsidiaries, with non-integral foreign operations,
revenue items are converted at the average rate prevailing during the
year. All assets and liabilities are converted at the rates prevailing
at the end of the year. Exchange difference arising on conversion is
recognised in Foreign Currency Translation Reserve.
xi) Investments
Long-term investments are carried at cost. Provision is made when, in
the opinion of the management, diminution in the value of investment is
other than temporary in nature. Current investments are carried at the
lower of cost or market/fair value.
xii) Revenue Recognition
a) Sales and operational income comprises of sales, inter-division
transfer, job charges and export benefits. 'Net Sales and operational
income', net of excise duty and inter-divisional transfer is also
disclosed separately.
b) Sales is inclusive of excise but net of returns, rebates, VAt and
sales tax. materials returned/ rejected are accounted for in the year
of return/ rejection.
c) Export sales are accounted for on the basis of the date of bill of
lading/airways bill.
d) Income from job charges is accounted for at the time of completion
of service and billing thereof.
e) export benefits available under the export Import policy of the
Government of India are accounted for in the year of export, to the
extent measurable.
xiii) other income
a) Claims receivable
Since it is not possible to ascertain with reasonable certainty, the
quantum of accruals in respect of claims recoverable such as from
Railways, Insurance, Electricity, Customs, Excise and the like, the
same are accounted for on receipt basis.
b) Income from Investment
Income from Investment is accounted for on accrual basis when the right
to receive income is established.
xiv) excise duty
excise duty liability on finished goods manufactured and lying in the
factory is accounted for and the corresponding amount is considered for
valuation thereof.
xv) employee benefits
expenses & liabilities in respect of employee benefits are recorded in
accordance with Accounting Standard (AS-15) 'employee benefits'.
a) Provident Fund
The Company makes contribution to statutory provident fund in
accordance with the Employees Provident Fund & miscellaneous Provisions
Act, 1952 which is a defined contribution plan and contribution paid or
payable is recognised as an expense in the period in which services are
rendered by the employee.
b) Gratuity
Gratuity is a post employment benefit and is in the nature of a defined
benefit plan. the liability recognised in the Balance Sheet in respect
of gratuity is the present value of the defined benefit/ obligation at
the Balance Sheet date less the fair value of plan assets, together
with adjustment for unrecognised actuarial gains or losses and past
service costs. the defined benefit/obligation is calculated at or near
the Balance Sheet date by an independent Actuary using the projected
unit credit method.
c) Compensated absences
Liability in respect of Compensated absences due or expected to be
availed within one year from the Balance Sheet date is recognised on
the basis of undiscounted value of estimated amount required to be paid
or estimated value of benefit expected to be availed by the employees.
Liability in respect of compensated absences becoming due or expected
to be availed more than one year after the Balance Sheet date is
estimated on the basis of an actuarial valuation performed by an
independent Actuary using the projected unit credit method.
d) other short term benefits expense in respect of other short term
benefits is recognised on the basis of the amount paid or payable for
the period during which services are rendered by the employee.
xvi) Research and development expenditure
Research and development expenditure not fulflling the recognition
criteria as set out in Accounting Standard (AS-26) 'intangible Assets'
is charged to the Profit and loss account while capital expenditure is
added to the cost of fixed assets in the year in which it is incurred.
xvii) employee Stock option Scheme
Stock options granted to the employees of the Company and its
subsidiary under the Employees' Stock option Scheme(s) are evaluated on
intrinsic Value method as per the accounting treatment prescribed by
the employee Stock option Scheme and Employee Stock Purchase Scheme
Guidelines, 1999 issued by the Securities and Exchange Board of India.
Accordingly, excess of market value of the stock option as on date of
grant over the exercise price of the option is recognised as deferred
employee compensation and is charged to the Profit and loss account as
employee cost on straight line method over the vesting period of the
options. The options that lapse are reversed by a credit to employees'
compensation expenses, equal to amortised portion of value of lapsed
portion and credit to deferred employee compensation expense, equal to
the unamortised portion. The balance in employee stock option
outstanding amount net of any unamortised deferred employee
compensation is shown separately as part of shareholder's funds.
xviii) Taxes on Income
Provision for current tax is made considering various allowances and
benefits available to the Company under the provisions of the Income Tax
Act, 1961.
In accordance with Accounting Standard (AS-22) 'Accounting for taxes on
income', deferred taxes resulting from timing differences between book
and tax Profits are accounted for at the tax rate substantively enacted
by the Balance Sheet date to the extent the timing differences are
expected to be crystallised. deferred tax assets are recognised and
reviewed at each Balance Sheet date to the extent there is
reasonable/virtual certainty of realising such assets against future
taxable income.
Minimum Alternate tax (MAT) credit is recognised as an asset only when
and to the extent there is convincing evidence that the Company will
pay normal income tax during the specified period.
xix) Provisions, contingent liabilities and contingent assets
Provisions are recognised for present obligations of uncertain timing
or amount arising as a result of a past event where a reliable estimate
can be made and it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation. Where it is
not probable that an outflow of resources embodying economic benefits
will be required or the amount cannot be estimated reliably, the
obligation is disclosed as a contingent liability, unless the
probability of outflow of resources embodying economic benefits is
remote.
Possible obligations, whose existence will only be confirmed by the
occurrence or non-occurrence of one or more uncertain events, are also
disclosed as contingent liabilities unless the probability of outflow of
resources embodying economic benefits is remote.
Contingent assets are neither recognised nor disclosed in the financial
statements.
xx) Miscellaneous expenditure
Iron ore/Coal mines development expenditure shown under 'miscellaneous
expenditure" is amortised over a period of ten years starting from the
year of commencement of commercial production.
xxi) Earnings per Share
The earnings considered in ascertaining the Company's Earnings per
Share (EPS) comprise of the net Profit after tax attributable to equity
shareholders. The number of shares used in computing basic EPS is the
weighted average number of shares outstanding during the period
adjusted for events of bonus issue post period end, bonus elements in a
rights issue to existing shareholders, share split, and reverse share
split (consolidation of shares). The diluted EPS is calculated on the
same basis as basic EPS, after adjusting for the effects of potential
dilutive equity shares unless impact is anti-dilutive.
xxii) Financial derivatives
Forward contracts, other than those entered into to hedge foreign
currency risk on unexecuted frm commitments or highly probable forecast
transactions, are treated as foreign currency transactions and
accounted as per Accounting Standard (AS-11) 'the Effects of Changes in
Foreign Exchange Rates'. Exchange differences arising on such
contracts are recognised in the period in which they arise.
All other derivative contracts, including forward contracts entered
into to hedge foreign currency/ interest rate risks on unexecuted frm
commitments and highly probable forecast transactions, are recognised
in the financial statements at fair value at each reporting date, in
pursuance of the announcement of the Institute of Chartered Accountants
of India (iCAi) on Accounting for derivatives.
Mar 31, 2010
I) Basis of Preparation of Financial Statements
The financial statements are prepared under the historical cost
convention, on going concern basis and in terms of the Accounting
Standards issued by the Institute of Chartered Accountants of India and
in compliance with Section 211(3C) of the Companies Act, 1956. The
Company follows the mercantile system of accounting and recognises
income and expenditure on accrual basis to the extent measurable and
where there is certainty of ultimate realisation in respect of incomes.
Accounting policies not specifically referred to otherwise are
consistent and in consonance with the generally accepted accounting
principles in India.
ii) Fixed Assets and Depreciation
a) Fixed Assets
Fixed Assets are stated at cost of acquisition inclusive of incidental
expenses related thereto and are net of CENVAT/VAT credit. Fixed assets
acquired by the Company pursuant to a Scheme of Arrangement are stated
at their transfer values.
b) Expenditure during construction period
Expenditure related to and incurred during implementation of
new/expansion-cum-modernisation projects is included under capital
work-in-progress and the same is allocated to the respective Fixed
Assets on completion of its construction/erection. Interest on
borrowing costs related to a qualifying asset is worked out on the
basis of actual utilisation of funds out of project specific loans
and/or other borrowings to the extent identifiable with the qualifying
asset and is capitalised with the cost of the qualifying asset.
c) Intangible Assets
Intangible Assets are recognised on the basis of recognition criteria
as set out in Accounting Standard (AS-26) ÃIntangible Assets.
d) Depreciation and Amortisation
Depreciation on fixed assets is provided on straight-line method (SLM)
at the rates and in the manner specified in Schedule XIV to the Companies
Act, 1956. Leasehold Land and Aircraft are being amortised over the period
of lease. In the case of assets where impairment loss is recognised, the
revised carrying amount is depreciated over the remaining estimated useful
life of the asset.
Certain Plant and Machinery have been considered as continuous process
plant on the basis of technical assessment and depreciation on the same is
provided for accordingly.
Intangible Assets are amortised over the expected duration of benefits
not exceeding ten years.
iii) Foreign Currency Transactions
Foreign currency transactions are recorded at the rate of exchange
prevailing at the date of the transaction. Monetary foreign currency
assets and liabilities are translated at the year-end exchange rates
and resultant gains / losses are recognised in the profit & loss
account for the year, except to the extent that they relate to new
projects till the date of capitalisation which are carried to
pre-operative expenses and those relating to fixed assets which are
adjusted to the carrying cost of the respective assets.
In case of forward foreign exchange contracts, exchange differences are
dealt with in the profit & loss account over the life of the contract
except those relating to fixed assets in which case they are
capitalised with the cost of respective fixed assets. Non-monetary
foreign currency items are carried at historical cost.
In case of foreign subsidiaries, with non-integral foreign operations,
revenue items are converted at the average rate prevailing during the
year. All assets and liabilities are converted at the rates prevailing
at the end of the year. Exchange difference arising on conversion is
recognised in Foreign Currency Translation Reserve.
iv) Investments
Long-term investments are carried at cost. Provision is made when, in
the opinion of the management, diminution in the value of investment is
other than temporary in nature. Current investments are carried at the
lower of cost or market / fair value.
v) Valuation of Inventories
Raw Materials and Stores & Spares are valued at lower of cost, computed
on weighted average basis, and net realisable value. Cost includes the
purchase price as well as incidental expenses. Scrap is valued at
estimated realisable value.
Work-in-progress is valued at lower of estimated cost and net
realisable value and finished goods are valued at lower of cost and net
realisable value. Cost for this purpose includes direct cost and
appropriate administrative and other overheads.
vi) Inter-Division Transfers
Inter-division transfer of goods, as independent marketable products
produced by separate divisions for captive consumption, is transferred
at approximate prevailing market price. The same is shown as a contra
item to reflect the true working of the respective divisions in the
Profit and Loss Account. Any unrealised profit on unsold stocks is
eliminated while valuing the inventories. The value of such
inter-divisional transfer is netted off from sales and operational
income and expenses under materials, manufacturing and others.
Inter-divisional transfer/captive consumption to Fixed Assets is at
cost.
vii) Employee Benefits
Expenses & liabilities in respect of employee benefits are recorded in
accordance with Accounting Standard (AS)-15 -Employee Benefits (revised
2005) issued by ICAI.
a) Provident Fund
The Company makes contribution to statutory provident fund in
accordance with the Employees Provident Fund & Miscellaneous Provisions
Act, 1952 which is a defined contribution plan and contribution paid or
payable is recognised as an expense in the period in which services are
rendered by the employee.
b) Gratuity
Gratuity is a post employment benefit and is in the nature of a defined
benefit plan. The liability recognised in the Balance Sheet in respect
of gratuity is the present value of the defined benefit/obligation at
the Balance Sheet date less the fair value of plan assets, together
with adjustment for unrecognised actuarial gains or losses and past
service costs. The defined benefit/obligation is calculated at or near
the Balance Sheet date by an independent Actuary using the projected
unit credit method.
c) Compensated absences
Liability in respect of Compensated absences due or expected to be
availed within one year from the Balance Sheet date is recognised on
the basis of undiscounted value of estimated amount required to be paid
or estimated value of benefit expected to be availed by the employees.
Liability in respect of compensated absences becoming due or expected
to be availed more than one year after the Balance Sheet date is
estimated on the basis of an actuarial valuation performed by an
independent Actuary using the projected unit credit method.
d) Other short term benefits
Expense in respect of other short term benefits is recognised on the
basis of the amount paid or payable for the period during which
services are rendered by the employee.
viii) Excise Duty and Customs Duty
Excise Duty liability on finished goods manufactured and lying in the
factory is accounted for and the corresponding amount is considered for
valuation thereof. Customs duty in respect of materials lying in bonded
premises and in transit is accounted for as and when the property in
the goods passes to the Company.
ix) Miscellaneous Expenditure
The following expenditure shown under "miscellaneous expenditure" is
amortised as follows:
a) Share issue expenses are written off over a period of ten years.
b) Debenture/Bonds issue expenses and premium on redemption are written
off over the period of Debentures/Bonds.
c) Iron Ore mines/Coal mines development expenditure and Railway plot
development expenditure etc., are written off over a period of ten
years.
x) Revenue Recognition
a) Sales and Operational income is inclusive of excise duty, export
benefits and inter-divisional transfer but net of returns, rebates and
sales tax. Materials returned/rejected are accounted for in the year of
return/rejection. Sales net of excise duty and inter-divisional
transfer is also disclosed separately.
b) Export sales are accounted for on the basis of the date of bill of
lading / airways bill.
c) Income from job charges is accounted for at the time of billing.
d) Since it is not possible to ascertain with reasonable certainty, the
quantum of accruals in respect of certain claims of Railways,
Insurance, Electricity, Customs and Excise, the same continue to be
accounted for on acceptance basis.
xi) Export benefits
Export benefits available under the Export Import policy of the
Government of India are accounted for in the year of export, to the
extent measurable.
xii) Accounting for Leases
In respect of finance lease, the same is recognised as an asset and a
liability to the lessor at fair value at the inception of the lease.
In respect of operating lease, the lease payments as per respective
lease agreements are recognised as expense in the profit and loss
account on a straight-line basis.
xiii) Research and Development Expenditure
Research and Development expenditure not fulfilling the recognition
criteria as set out in Accounting Standard (AS-26) on ÃIntangible
Assets is charged to the profit and loss account while capital
expenditure is added to the cost of fixed assets in the year in which
it is incurred.
xiv) Taxes on Income
Provision for current tax is made considering various allowances and
benefits available to the Company under the provisions of the Income
Tax Act, 1961.
In accordance with Accounting Standard (AS-22) "Accounting for Taxes on
Income" issued by the Institute of Chartered Accountants of India,
deferred taxes resulting from timing differences between book and tax
profits are accounted for at the tax rate substantively enacted by the
Balance Sheet date to the extent the timing differences are expected to
be crystallised. Deferred tax assets are recognised to the extent there
is reasonable/virtual certainty of realising such assets against future
taxable income.
xv) Impairment of Assets
Specified assets are reviewed for impairment wherever events or changes
in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount for which the assets
carrying amount exceeds its recoverable amount being the higher of the
assets net selling price and its value in use. Value in use is based on
the present value of the estimated future cash flows relating to the asset.
For the purpose of assessing impairment, assets are grouped at the lowest
level for which there are separately identifiable cash flows (i.e. cash
generating units).
Previously recognised impairment losses, relating to assets other than
goodwill, are reversed where the recoverable amount increases because
of favourable changes in the estimates used to determine the
recoverable amount since the last impairment was recognised. A reversal
of an assets impairment loss is limited to its carrying amount that
would have been determined (net of depreciation or amortisation) had no
impairment loss been recognised in prior years.
xvi) Provisions and Contingent Liabilities
Provisions are recognised for present obligations of uncertain timing
or amount arising as a result of a past event where a reliable estimate
can be made and it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation. Where it
is not probable that an outflow of resources embodying economic
benefits will be required or the amount cannot be estimated reliably,
the obligation is disclosed as a contingent liability, unless the
probability of outflow of resources embodying economic benefits is
remote.
Possible obligations, whose existence will only be confirmed by the
occurrence or non-occurrence of one or more uncertain events, are also
disclosed as contingent liabilities unless the probability of outflow
of resources embodying economic benefits is remote.
xvii) Employee Stock Option Scheme
Stock options granted to the employees of the Company and its
subsidiary under the Companys Stock Option schemes are evaluated as
per the accounting treatment prescribed by the Employee Stock Option
Scheme and Employee Stock Purchase Scheme Guidelines, 1999 issued by
the Securities and Exchange Board of India. Accordingly, excess of
market value of the stock option as on date of grant over the exercise
price of the options is recognised as deferred employee compensation
and is charged to the profit and loss account as employee cost on
straight line method over the vesting period of the options.