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Notes to Accounts of Steelco Gujarat Ltd.

Mar 31, 2014

Contingent liability is disclosed for:

A Possible obligations which will be confirmed by future events not wholly within the control of the Company, or

B Present obligation arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.

Contingent assets are not recognised in the financial statements since this may result in the recognition of income that may never be realized.

B The equity shares rank parri passu and carry equal rights with respect to voting and dividend.

In the event of liquidation of the Company, the equity shareholders shall be entitled to proportionate share of their holding in the assets remained after distribution of all preferential amounts.

C 12.50% Cumulative Redeemable Non-Convertible Preference Shares are redeemable after a period of 18 years from the date of its issues i.e. 29-09-2008.

The said shares do not carry any voting rights nor do they participate in the profits of the Company, except that they carry preferential right in respect of cumulative arrears of unpaid dividend. In the event of liquidation of the Company, the preference shareholders shall be entitled to proportionate share of their holding in the assets remained after distribution of all other preferential amounts but before distribution to the equity shareholders.

D 7.00 % Cumulative Redeemable Non-Convertible Preference Shares are redeemable after a period of 15 years from the date of its issues i.e.21-02-2014.

The said shares do not carry any voting rights nor do they participate in the profits of the Company, except that they carry preferential right in respect of cumulative arrears of unpaid dividend. In the event of liquidation of the Company, the preference shareholders shall be entitled to proportionate share of their holding in the assets remained after distribution of all other preferential amounts but before distribution to the equity shareholders.

A Securities and Terms of Repayment for Secured Long Term Borrowings:

Rupee Term Loans:

Rupee Term Loan of Rs. 4687.99 Lacs is secured by way of joint mortgage of immovable properties of the company situated at Plot No.2, GIDC Estate, Palej, Dist. Bahruch, Gujarat (India) both present and future, and by way of hypothecation of whole of immovable property of the Company, including plant and machinery and other movables, both present and future (Save and except inventories and book debts) whether installed or not, or in the course of transit by way of first charge to the lenders subject to the first charge on specified movable assets created in favour of banks providing Working capital finance) to rank on "pari-passu basis.

The secured borrowings are further secured by way of pledge of 3,33,08,398 Equity Shares held by the promoters in favour of the Consortium of Bankers and corporate guarantee of Spica Business Corp., Panama, the holding company of Spica Investments Ltd.,Mauritius.

The loans are rescheduled in terms of Corporate Debts Restructuring Scheme as is appoved by the Corporate Debt Restructuring Cell vide its apporval letter dtd June 27, 2012. Accordingly the loans are now repayable in stepped-up quarterly 30 instalments commencing from December 2013 as detailed hereunder.

B Default in repayment of monthly Interest and Term Loan Instalments:

During the year the company has made delays in payment of interest on long term borrowings in the range of 1 to 60 days. Interest accrued & due as at 31st March 2014 has been paid subsequent to the date of financial statement. During the year the company has made delays in repayment of principal value of long term borrowings in the range of 2 to 64 days. Moreover, the company has not paid instalment of Rs. 30,53,876/- which was due on 31 - 03-2014 till the date of financial statement which have been paid subsequent to the date of financial statement.

C Terms of Repayment for Unsecured Long Term Borrowings:

Finance obligations of Rs. 52.07 Lacs is taken against Hypothecation of respective vehicles and it is repayable as per the repayment schedule ranging 36 to 48 equal monthly instalments alongwith interest for the year. The outstanding amount as at 31st March 2014 is Rs. 16.00 Lacs. [As at 31-03-2013: Rs. 30.01 Lacs]. There is no default by the company in repayment of such loan during the year.

Disclosure pursuant to Accounting Standard-15 [Revised] "Employee Benefits" : Defined benefit plan and long term employment benefit

A General description:

Gratuity [Defined benefit plan]:

The Company has a defined benefit gratuity plan. Every employee who has completed continuous services of five years or more, gets a gratuity on death or resignation or retirement at 15 days salary [last drawn salary] for each completed year of service. The gratuity scheme is administered by the company, being unfunded liability.

Leave wages [Long term employment benefit]:

The employees of the company are entitled to leave as per the leave policy of the company. The liability on account of accumulated leave as on last day of the accounting year is recognised at present value of the defined obligation at the balance sheet date based on the actuarial valuation carried out by an independent actuary using projected unit credit method. The Leave encashment obligation is administered by the company, being unfunded liability.

[*] Working Loan comprising Cash Credit(CC), Packing Credit Foreign Currency(PCFC), Export Packing Credit (EPC), Bills discounted and Demand Loan (DL) is repayable on demand from Banks, are secured by way of hypothecation of the Company''s entire current assets including stock of goods, including raw material, work-in-process, finished goods, stores, consumables, spares, goods in transit etc.and book-debts,both present and future, to rank on "pari-passu" basis. These facilities are also secured by way of first charge over the entire fixed assets including Equitable mortgate over leasehold right over the factory land of the Company situated at Plot No.2, GIDC estate, Palej, Dist. Bharuch, Gujarat (India) both present and future. Interest for borrowing in Indian Currency through CC, EPC and DL is is 11% p.a. and for borrowing in foreign currency through PCFC is in the range of Libor 2.25% p.a. to Libor 2.50% p.a.

The secured borrowings are further secured by way of pledge of 3,33,08,398 Equity Shares held by the promoters in favour of the Consortium of Bankers.

During the year the company has drawn the working capital financing facility in excess of sanctioned limits. As at March 31, 2014, total overdrawn amount is Rs. 1110.68 lacs, which have been paid subsequent to the date of financial statement.

Notes:

1 The major items of fixed assets comprising of Leasehold Land, Buildings and Plant and machineries owned by the Company were revalued by M/s Mott MacDonald Private Limited, an independent professional technical experts and valuers as at 31st March, 2011. As per their report, the above assets with a written down value of Rs. 5740.30 lacs have been revalued at 15020.48 lacs resulting into surplus of Rs. 9280.18 lacs,which is credited to "Revaluation Reserve Account." Such assets are revalued considering:- Current prevailing market prices/derived rates attributable to land;

Current cost of construction;

Present day cost of equivalent new plant and machinery installed and ready for production;

Estimated useful life of fixed assets and related degree of obsolescence; Depreciation thereon since acquisition at an appropriate rates following Straight Line Method.

DEFERRED TAX:

A The Company has worked out deferred tax liabilities / assets as at March 31, 2014. In view of unabsorbed depreciation and business losses under tax laws, net result of computation is net deferred tax assets, which are not recognised as a matter of prudence and in absence of virtual certainty as to its realization.

B Break up of Deferred Tax Liabilities and Assets into major components of the respective balances are as under :

Hitherto, the company has been working out the cost of Raw Materials on annual moving average basis.

During the current year, the Company has changed the basis of arriving at cost from the "annual moving average cost" to the "quarterly moving average cost". Had the company followed the same basis during the year to arrive cost of Raw Materials, the closing stocks (i.e. Raw Materials, Work-In-Process and Finished Goods) would have been lower by Rs. 195.39 Lacs and the loss before tax for the year would have been higher by Rs. 195.39 Lacs.

c Central Board of excise & custom ("CBEC") vide its office memorandum dated 22nd February 2011 has clarified that where the cenvat credit is availed in respect of goods exported under the duty free import authorisation("DFIA"). such credit even if the said credit without being utilised is reversed or paid back alongwith interest after the goods are cleared for export, it will be treated as if such credit is availed by the assessee. Being agrieved by issue of such memorandum in respect of benefits claimed by the company on DFIA, the company has filed a writ petition Mumbai High Court challenging the memorandum issued by CBEC, which is decided in favour the company, based on the facts of the case and prevalent legal position and Foreign Trade Policy.

However, central excise department has filed special leave petition in the supreme court challenging the above decision of the Bombay High Court, which has been admitted by Hon''ble Supreme Court. The Company has been advised by its legal advisors that the stand of the excise deptatment is not tenable, hence there would not be any financial liabilities arising on the Company.

[*] Rent Expenses: The Company has taken various residential/office premises/godowns under operating lease or leave and license agreement. The lease terms in respect of such premises are on the basis of individual agreement entered into with the respective landlords. The Company has given refundable interest free security deposits in accordance with the agreed terms. The lease payments are recognised in the statement of Profit and Loss.

Operating leases are mainly in the nature of lease of office premises with no restrictions and are renewable/ can be cancelled at the option of either of the parties. There is no escalation clause in the lease agreement. There are no sub-leases. Lease payment recognised in the statement of Profit and Loss is Rs. 8.43 lacs [Previous Year- Rs. 6.88 lacs]

[**] The Company has approached the Central Government and has filed an application for approval of remuneration payable to Non- Executive Independent Directors of the Company which is pending approval. However, in anticipation of obtaining such approval, remuneration for the current Year amounting to Rs. 2,00,000/- is provided for in the accounts.

SEGMENT INFORMATION:

As the Company has identified manufacture of steel products as its sole primary business segment, the disclosure requirements of Accounting Standard 17 - "Segment Reporting", issued by the Institute of Chartered Accountants of India are not applicable.

GOING CONCERN ASSUMPTION

The Networth of the company has substantialy been eroded and the current liabilities are more than current assets as at the date of financial statements. However the financial statement have been prepared on a "Going Concern" basis. The company has been able to manage its operational cash flows and manufacturing/production activities during the year. Moreover, during the financial year 2012- 2013, the company got the approval for Corporate Debt Restructuring Scheme ("CDR") from Corporate Debt Restructuring cell vide its approval letter dated June 27, 2012. The promoters have also infused additional funds as per the CDR scheme. As per the short term business plan, the management has projected positive cash flows so as to operate and manage normal production levels and fund requirements and operations of the Company without incurring additional capital costs. The ability of the company to continue as a "Going Concern" is dependent upon improvement in industrial and market scenario and achieve the projected profitability.

Confirmation letters have not been obtained from some of the Debtors, Creditors, and Loans & Advances. Hence the, balances of these accounts are subject to confirmation, reconciliation and consequent adjustments, if any.

Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classifications/ disclosure.


Mar 31, 2013

The Company has entered into a supply agreement with supplier of Zinc during the period from 1st April, 2013 to 31st March, 2014 under which it is under obligation to purchase minimum 3000 MT of Zinc during the said period with a minimum quarterly commitment of 750 MT. In case of any shortfall, the favourable pricing treatment would not be available to the Company for such shortfall quantity, the amount of which is not ascertainable.

NOTE: 1-SEGMENT INFORMATION:

As the Company has identified manufacture of steel products as its sole primary business segment, the disclosure requirements of Accounting Standard 17 – "Segment Reporting", issued by the Institute of Chartered Accountants of In dia are not applicable.

NOTE: 2-RELATED PARTY TRANSACTIONS:

A Name of the Related Party and Nature of the Related Party Relationship: a Holding Company:

Spica Business Corp., Panama Holding Company of Spica Investments Limited

Spica Investments Limited, Mauritius Holding Company

b Directors and their relatives:

Mr. R. P. Chandaria Non-Executive Director

Mr. Rashmi Chandaria Non-Executive Director

Mr. P. G. R. Prasad Non-Executive Independent Director (upto 16.11.2012)

Mr. Mahendra Lodha Non-Executive Independent Director

Mr. Jatinder Mehra Non-Executive Independent Director

Dr. R. S. Mamak Non Executive Vice Chairman (Executive Vice Chairman upto 31.01.2013)

Mr. N. M. Mohnot Managing Director

Mrs. Saroj Mohnot Wife of Managing Director

c Enterprises significantly influenced by Directors and/or their relatives:

Amfin Finser (India) LLP Disha Infin Advisor Pvt. Ltd. Ignis International Pvt. Ltd.

NOTE: 3

The financial statements have been prepared on the basis that the Company is a going concern and that no adjustments are required to the carrying value of assets and liabilities though the Company has incurred substantial losses and its net worth has been eroded in view of the fact and having regard to execution of the Master Restructuring Agreement with consortium of lenders and approval of Corporate Debt Restructuring Scheme ("CDR") by Corporate Debt Restructuring Cell vide its approval letter dtd. June 27, 2012, infusion of additional funds by the promoters, improved operating performance and measures taken by the management to sustain the same etc.,

NOTE: 4

Confirmation letters have not been obtained from some of the Debtors, Creditors and Loans & Advances. Hence the, balances of these accounts are subject to confirmation, reconciliation and consequent adjustments, if any.

NOTE: 5

Previous years'' figures have been regrouped / reclassified wherever necessary to correspond with th e current years'' classifications/ disclosure.


Mar 31, 2011

1. The major items of fixed assets comprising of Leasehold Land, Buildings and Plant and machineries owned by the Company were revalued by M/s Mott MacDonald Private Limited, an independent professional technical experts and valuers as at 31st March, 2011. As per their report, the above assets with a written down value of Rs. 5740.30 lacs have been revalued at Rs. 15020.48 lacs resulting into revaluation surplus of Rs.9280.18 lacs, which is credited to "Revaluation Reserve Account." Such assets are revalued considering: -

- Current prevailing market prices/derived rates attributable to land;

- Current cost of construction;

- Present day cost of equivalent new plant and machinery installed and ready for production;

- Estimated useful life of fixed assets and related degree of obsolescence;

- Depreciation thereon since acquisition at an appropriate rate following Straight Line Method.

2.. The Company has approached the Central Government and has filed an application for approval of remuneration payable to Non-Executive Independent Directors of the Company which is pending approval. However, in anticipation of obtaining such approval, remuneration for the financial year amounting to Rs. 7,50,000/- is provided for in the accounts.

3. Estimated amount of Contracts yet to be executed for capital expenditure and not provided for is Rs. 3.31 Lacs [Net of Advances] [As at 31.03.2010 - Rs. 47.83 Lacs].

4. During the year, the company has capitalised the borrowing cost amounting to Rs. Nil (Previous Year Rs. 70.15) Lacs.

5. Contingent Liabilities not provided for in respect of:

(Rs. in Lacs) Current Previous Year Year

I Guarantees given by the Company's Bankers 120.87 82.90

II Letters of Credit opened, material not supplied 355.51 175.31

III Dividend on Cumulative Preference shares 1027.31 617.06

IV Liabilities Disputed and appeals filed before higher Appellate authorities as well as in the process of being filed in respect of:

i. Income tax matters 235.70 328.53

ii. Central Excise matters (entire amount withheld by department shown under "Loans and advances") 437.98 370.50

iii.Interest on Electricity Duty Deferment Loan 83.18 83.18

iv. Labour matters 45.00 45.00

6. SEGMENT INFORMATION:

PRIMARY BUSINESS SEGMENT

As the Company has identified manufacture of steel products as its sole primary business segment, the disclosure requirements of Accounting Standard 17 - "Segment Reporting", issued by the Institute of Chartered Accountants of India are not applicable.

7. RELATED PARTY DISCLOSURE:

Name of the related party and nature of related party relationship:

(a) Enterprises having control over Company:

SpicaI investment Limited - Holding Company

(b) Directors and their relatives:

Mr. R. P. Chandaria Non-Executive Director

Mr. Rashmi Chandaria Non-Executive Director

Mr. S. C. Sheth (ceasod due to sad demise on 26.12.10) Non-Executive Independent Director

Mr. P. G. R. Prasad Non-Executive Independent Director

Mr. Mahendra Lodha Non-Executive Independent Director

Mr. J. Mehra Non-Executive Independent Director

Dr. R. S. Mamak Executive Vice Chairman

Mr. N. M. Mohnot Deputy Managing Director

8. ACCOUNTING FOR TAXES ON INCOME:

a. In view of the brought forward unabsorbed depreciation allowance, the Company does not expect any tax liability on tho income computed as per the provision of the Income Tax Act, 1961. However, in view of the provisions of the Sec. 115JB of the Income Tax Act, 1961, the company has estimated & provided the tax liability on the book profits as computed under the provision of the Sec. 115JB of the Income Tax Act, 1961.

b. The Company has worked out deferred tax liabilities / assets as at March 31, 2011. In view of unabsorbed depreciation and business losses under tax laws, net result of computation is net deferred tax assets, which are not recognised as a matter of prudence.

9. Disclosure pursuant to Accounting Standard-15 (Revised) "Employee Benefits":-

The disclosure required under Accoutring Standard 15 (Revised) "Employee Benefits" notified in the Companies (Accounting Standards) Rules 2006, are given below:-

(a) Gratuity (Defined Benefit Plan):

The company has a defined benefit Gratuity Plan. Every employee who has completed five years or more of service gets a gratuity on death or resignation or retirement at 15 days salary (last drawn salary) for each completed year of service. The gratuity scheme is administered by the company, being unfunded liability.

Leave Wage (Long term employment benefit):

The leave wages are payable to all eligible employees at the rate of daily salary for each day of accumulated leave on death or on resignation or upon retirement on attaining superannuation age.

10. Confirmation letters have not been obtained from some of the Debtors, Creditors, and Loans & Advances. Hence the, balances of these accounts are subject to confirmation, reconciliation and consequent adjustments, if any.

11. Figures of Previous year have been regrouped and reclassified wherever necessary.


Mar 31, 2010

1. Estimated amount of Contracts yet to be executed for capital expenditure and not provided for is Rs. 47.83 Lacs [Net of Advances] [As at 31.03.2009 - Rs. 24.15 Lacs].

2. During the year, the company has capitalised the borrowing cost amounting toRs. 70.15 (Previous Year Rs.9.11 Lacs).

3. Contingent Liabilities not provided for in respect of:

(Rs. in Lacs) Current Year Previous Year

I Guarantees given by the Companys Bankers 82.90 156.45

II Letters of Credit opened, material not supplied 175.31 308.86

III Dividend on Cumulative Preference shares 617.06 206.81

IV Liabilities Disputed and appeals filed before higher appellate authorities as well as in the process of being filed in respect of:

a. Income tax matters 328.53 392.20

b. Central Excise matters (entire amount withheld by department shown under "Loans and advances") 370.50 370.50

c. Interest on Electricity Duty Deferment Loan 83.18 83.18

d. Labour matters 45.00 45.00

4. SEGMENT INFORMATION:

PRIMARY BUSINESS SEGMENT

As the company has identified manufacture of steel products as its sole primary business segment, the disclosure requirements of Accounting Standard 17 - "Segment Reporting", issued by The Institute of Chartered Accountants of India are not applicable.

5. RELATED PARTY DISCLOSURE:

Name of the related party and nature ot related party relationship:

(a) Enterprises having control over Company:

Spica Investment Limited - Holding Company

(b) Directors and their relatives:

Mr. R. P. Chandaria

Mr. Rashmi Chandaria

Mr. S.C.Sheth

Mr. Mahendra Lodha

Mr. J. Mehra

Dr. R. S. Mamak Executive Vice Chairman

Mr. N. M. Mohnot Deputy Managing Director

Mr. M. P. Singh Director (Operations) (resigned w.e.f. 24th June, 2009)

Mr. P. G. R. Prasad Additional Director (appointed w.e.f. 23rd February, 2010)

6. ACCOUNTING FOR TAXES ON INCOME:

a. In view of the brought forward-unabsorbed business losses & depreciation allowance, the company does not expect any tax liability on the income computed as per the provision of the Income Tax Act, 1961. However, in view of the provisions of the Sec. 115JB of the Income Tax Act, 1961, the company has estimated & provided the tax liability on the book profits as computed under the provision of the Sec. 115JBofthe Income Tax Act, 1961.

b. The company has worked out deferred tax liabilities / assets as at March 31,2010. in view of unabsorbed depreciation and business losses under tax laws, net result of computation is net deferred tax assets, which are not recognised as a matter of prudence.

7. Disclosure pursuant to Accounting Standard-15 (Revised) "Employee Benefits":-

The disclosure required under Accounting Standard 15 (Revised) "Employee Benefits" notified in the Companies (Accounting Standards) Rules 2006, are given below:-

(a) Gratuity (Defined Benefit Plan):

The company has a defined benefit Gratuity Plan. Every employee who has completed five years or more of service gets a gratuity on death or resignation or retirement at 15 days salary (last drawn salary) for each completed year of service. The gratuity scheme is administered by the company being unfunded liability.

Leave Wage (Long term employment benefit):

The leave wages are payable to all eligible employees at the rate of daily salary for each day of accumulated leave on death or on resignation or upon retirement on attaining superannuation age.

8. Confirmation letters have not been obtained from some ot the Debtors, Creditors, and Loans & Advances. Hence the, balances of these accounts are subject to confirmation, reconciliation and consequent adjustments, if any.

9. Disclosure regarding MSME:-

The company has not received information from vendors regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006, and hence, disclosure relating to the amounts unpaid as at the year end together with interest paid/ payable under this Act has not been given.

10. Figures of Previous Year have been regrouped and reclassified wherever necessary.

 
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