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Notes to Accounts of VBC Ferro Alloys Ltd.

Mar 31, 2015

* There are no dues as at the end of the year (as at the end of the previous year also) to Micro, Small and Medium Enterprises as defined under Micro, Small, and Medium Enterprises Development Act, 2006 based on the information available with the Company.

* includes 184.589 lacs(P.Y. 184.589 lacs) shares acquired, the title in respect of which is in the process of transfer.

10 crore equity shares of Konaseema Gas Power Ltd have been pledged with various financial institutions as a collateral security against the term loans sanctioned to the said company.

*5912670 Equity shares of Orissa Power Consortium Ltd have been pledged with various financial institutions as a collateral security against the term loans sanctioned to the said company.

* Represents the retrenchment compensation (net of adjustment for gratuity) as per memorandum of settlement entered by the company with the workers' union on 30th June, 2014

1. (a) EMPLOYEE BENEFIT PLANS:

As per Accounting Standard 15 "Employees Benefits" the disclosure of Employee Benefits as defined in the Accounting Standard are given hereunder:

2. Defined Benefit Plans:

A. In view of retrenchment of all work men as memeorandum of settlement enetrered into by the company with the workers' union and termination of services of most of the employees of the company, the liability towards the gratuity of the Skeleton staff on rolls as at the balance sheet date has been computed at the present value, instead of actuarial valuation using the Projected Unit Credit Method. Accordingly the vrious discclosures required under the Accounting standard could not be made.

3. (a): There are no imports of capital goods or components and spare parts during the current year and the previous year.

4.: Details of imported and indigeneous raw materials and spares consumed:

a The company has received demands for fuel surcharge adjustment (FSA) from Central Power Distribution Company of AP ltd (CPDCL) pursuant to clause 45B of the Andhra Pradesh Electricity Regulatory Commission (Conduct of Business Amendment) Regulations 2003 (FSA Regulations). The levy has been a subject matter of challenge ever since the DISCOMS made their claim in the year 2010 in respect of the period 2008-09 onwards. The challenge with respect to 2008-09 and 2009-10 were initially accepted by a single judge of the Andhra Pradesh High Court and the appeals filed with respect to 2008-09 and 2009-10 are currently pending before the Supreme Court and a full bench of the Andhra Pradesh High Court respectively. With respect to the levy for the years 2010-11 to 2012-13 totaling to Rs 19,06,53,769 no stay has been granted against the levy and collection of FSA charges. Pending the resolution of the legal course being pursued by the company of the dispute no provision has been made for the said demand in the books of account.

b The company has filed its objections before the various administrative authorities of TSSPDCL as per the directions given by Forum for Redressal of Consumer Grievances of TSSPDCL towards load shortfall charges for the period upto 31.03.2012 totaling to Rs 15,10,13,776. Further the company received demand towards load shortfall charges for the years 2012-13 & 2013-14 totalling to Rs 27,32,61,984 in January 2015. Pending disposal of its objections by the authorities, no provision towards load shortfall charges totalling to Rs 42,42,75,760 has been made by the company.

Particulars Current Previous Year Year

Contingent liabilities and commitments

a) Unexpired Bank Guarantees and letters of Credit 5,24,29,000 5,24,29,000

b) Unexpired Corporate Guarantees given to Financial Institutions and strategic Investors on behalf of Body Corporates 157,10,00,000 157,10,00.000

c) Disputed Sales Tax Demands for non submission of "C" & "F" Forms 30,55,523 42,53,723

d) Disputed Income Tax demands for the financial years 2008.09 to 2009.10 3,04,56,364 3,04,56,364

An amount of Rs 11,98,200 (previous year Rs 5192568) Paid under protest against item nos (e) & (f) is shown under the head of "Loans and advances"

e) claims against the company not acknoledged as debts

5. Due to steep increase in the power tariff, the cost of production of Ferro Silicon has far exceeded the market prices, resulting in non recovery of even variable cost of production. Accordingly the company has closed down its production unit at Rudraram Village, Medak district since June 2013. Further the company has entered into a memorandum of settlement with the workers' union on 30.06.2014 for their retrenchment. However, the books of account are maintained under "going concern" concept, as the company has initiated effective steps to meet its power requirements by setting- up a 120 MW captive thermal power plant at Sirpur Kagaznagar Mandel, Adilabad District through a separate company, by transferring its power unit by way of demerger.

Consequent to schedule II of the Companies Act 2013 becoming applicable w. e. f. 01.04.2014, depreciation for the year ended 31st March, 2015, has been provided on the basis of the useful life of all the assets as prescribed under Schedule II of the Act. Accordingly the depreciation charge for the year is higher by Rs. 9,16,235/-, when compared to previous year. Further in respect of the assets whose revised useful life has exhausted before 01.04.2014, the carrying amount of the said assets of Rs. 80,91,625/- has been adjusted to the retained earnings.

6. The company operates in only one business Segment of manufacture of Ferro Alloys and there are no geographical segments to be reported.

7. Related parties in terms of AS 18 issued by the Institute of Chartered Accountants of India.

In the opinion of the board of directors of the company the diminition in the value of certain investments is temporary in nature and hence no provision towards diminition in the value of investments is considered necessary.

8. According to an internal technical assessment,there is no impairment in the carrying cost of cash Generating assets of the Company in terms of Accounting for Impairment of Asset (AS 28) of Companies (Accounting Standard) Rules, 2006.

9. Balances lying in some of the lenders', suppliers', customers' accounts are subject to confirmation.

10.Previous year figure were regrouped wherever necessary to make them comparable with current year figures.


Mar 31, 2014

Note No. 1.1 (a) EMPLOYEE BENEFIT PLANS:

As per Accounting Standard 15 "Employees Benefits" the disclosure of Employee Benefits as defined in the Accounting Standard are given hereunder:

Defined Benefit Plans:

A. The employees'' gratuity fund scheme managed by a Trust is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for compensated absences is recognized in the same manner as gratuity.

Note No. 1.2 (a): There are no imports of capital goods or components and spare parts during the current year and the previous year.

Particulars Current Previous Year Year

Note No: 1.3:

1 Contingent liabilities and commitments

a) Unexpired Bank Guarantees and letters of Credit 5,24,29,000 12,90,32,974

b) The company could not conclude the agreement entered in an earlier year with IFCI to buyback 3 cores of equity shares of Rs 10 each of Konaseema Gas Power Limited (KGPL), which have been subscribed by IFCI on behalf of the company and two other promoter companies of KGPL as part of the undertaking given by them to the financial institutions to meet the cost overrun, if any.

Accordingly during the year another promoter company has since bought back the said equity shares.

c) Unexpired Corporate Guarantees given to Financial Institutions and strategic Investors on behalf of Body Corporates 1,57,10,00,000 1,57,10,00,000

2 a) The company has received demands for fuel surcharge adjustment (FSA) from Central Power Distribution Company of AP ltd (CPDCL) pursuant to clause 45B of the Andhra Pradesh Electricity Regulatory Commission (Conduct of Business Amendment) Regulations 2003 (FSA Regulations)

The levy has been a subject matter of challenge ever since the DISCOMS made their claim in the year 2010 in respect of the period 2008.09 onwards. The challenge with respect to 2008.09 and 2009.10 were initially accepted by a single judge of the Andhra Pradesh High Court and the appeals filed with respect to 2008.09 and 2009.10 are currently pending before the Supreme Court and a full bench of the Andhra Pradesh High Court respectively. With respect to the levy for the years 2010.11 to 2012.13 totaling to Rs 190653769 no stay has been granted against the levy and collection of FSA charges.

Pending the resolution of the legal course being pursued by the company of the dispute no provision has been made for the said demand in the books of account.

(b) Pending disposal of its objections filed before the various administrative authorities of CPDCL as per the directions given by Forum for Redressal of Consumer Grievances of CPDCL towards load shortfall charges for earlier years, totaling to Rs 86699649, no provision has been made by the company for the said demand in the books of account.

c) Disputed Sales Tax Demands for non submission of "C" & "F" Forms 38,09,838 42,53,723

d) Disputed Income Tax demands for the financial years 2008.09 to 2009.10 3,04,56,364 3,47,35,780

An amount of Rs 11,98,200 (previous year Rs 5192568) Paid under protest against item nos (e) &

(f) is shown under the head of "Loans and advances"

e) claims against the company not acknoledged as debts

3. Due to steep increase in the power tariff, by CPDCL, the cost of production of Ferro Silicon has far exceeded the market prices, resulting in non recovery of even variable cost of production. Accordingly the company has closed down its production unit at Rudraram Village, Medak district since June 2013. Further the company is negotiating with the workers union for their retrenchment. However, the books of account are maintained under "going concern" concept, as the company has initiated effective steps to meet its power requirements by setting-up a 120 MW captive thermal power plant at Sirpur Kagaznagar Mandel,

Adilabad District through VBC Power Company Ltd, by transferring its power project division by way of demerger.

4. The company operates in only one business Segment of manufacture of Ferro Alloys and there are no geographical segments to be reported

5A. Related parties in terms of AS 18 issued by the Institute of Chartered Accountants of India.

a) Associates: Konaseema Gas Power Ltd VBC Industries Limited

Orissa power Consortium Limited.

b) Key Managerial Personnel:

Sri M S Lakshmana Rao, Managing Director

c) Relatives of Key Managerial Personnel:

Dr. M V V S Murthi,

Sri M S Rama Rao

d) Others: Enterprises in which key Managerial Personnel or their relatives have substantial interest

VBC Exports Ltd.

Techno Infratech Projects (India) Pvt. Ltd.

BASIL Infrastructure projects Ltd.

Indo-Us Coal Washeries Ltd VBC Power Company Ltd.

B. Transactions carried with related parties:

Nature of Trasactions

i) Transactions pertaining to Associates:

a) Purchases :VBC Industries Ltd - 19,50,956

7 Konaseema Gas Power Limited, Hyderabad is an Associate Company as defined in paragraph 4 of Accounting Standard on "Accounting for Investments in Associates in Consolidated Financial Statements (AS 23)" of Companies (Accounting Standards) Rules, 2006 as the company''s voting power in the said Company exceeds the limits prescribed in the said paragraph. However, the said Accounting Standard is not applicable, as the company is not required to prepare consolidated statements under AS 21

8 According to an internal technical assessment,There is no impairment in the carrying cost of cash Generating assets of the Company in terms of Accounting for Impairment of Asset (AS 28) of Companies (Accounting Standard) Rules, 2006.

9 Previous year figure were regrouped wherever necessary to make them comparable with current year figures


Mar 31, 2013

Note No. 1.1 (a): There are no imports of capital goods or components and spare parts during the current year and the previous year.

Particulars Current Previous Year Year

Note No: 1.2:

1. Contingent liabilities and commitments

a). Unexpired Bank Guarantees and letters of Credit 12,90,32,974 12,90,32,974

b) The company together with two other promoter companies has furnished an undertaking on behalf of Konaseema Gas Power Limited (KGPL) jointly promoted by them to the financial institutions to finance the cost over-run, if any, in respect of the power project executed by the said company. Accordingly, in an earlier year, the company has entered into an agreement with IFCI to buy back 3 crores of equity shares of Rs..10/- each in KGPL, which have been subscribed by them to meet the cost overrun.

c) Unexpired Corporate Guarantees given to Financial Institutions and strategic Investors on behalf of

Body Corporate 157,10,00,000 157,10,00,000

d) Claims made by the Electricity Distribution companies in Andhra Pradesh towards Fuel Surcharge Adjustment (FSA) have been challenged by the company in the Hon''ble High Court of Andhra Pradesh and the Appellate Tribunal of Electricity, New Delhi respectively. Based on legal opinion, the company feels that they have a good case and likely to result in the entire claim / demand being quashed or be substantially reduced. In view of this, no provision has been made in the books for the said claims.

e) Disputed Sales Tax Demands for non submission

of "C" & "F" Forms 42,53,723 42,53,723

f) Disputed Income Tax demands for the financial 3,47,35,780 44,90,463 year 2008-09 to 2009-10

An amount of Rs. 5192568 (previous year Rs. 3994368) Paid under protest against item nos (e) & (f) is shown under the head of "Loans and advances"

g) Demands towards load factor shortfall charges for earlier years, disputed by the company (against which Rs. 300 lakhs - previous year Rs. 200 lakhs paid under protest grouped under

the head of "Loans & Advances") 16,75,44,783 13,93,55,496

2. The company operates in only one business Segment of manufacture of Ferro Alloys and there are no geog raphical segments to be reported

3. A. Related Party Transactions:

Related parties in terms of AS 18 issued by the Institute of Chartered Accountants of India.

i) Associates:

Konaseema Gas Power Ltd

VBC Industries Limited

Orissa power Consortium Limited.


Mar 31, 2012

Exchange differences are credited/ charged to Statement of Profit and Loss.

# includes 184.589 lacs(P.Y. 184.589 lacs) shares acquired, the title in respect of which is in the process of transfer.

10 crore equity shares of Konaseema Gas Power Ltd have been pledged with various financial institutions as a collateral security against the term loans sanctioned to the said company.

*5912670 Equity shares of Orissa Power Consortium Ltd have been pledged with various financial institutions as a collateral security against the term loans sanctioned to the said company.

Note no. 1.1 (a) EMPLOYEE BENEFIT PLANS:

As per Accounting Standard 15 "Employees Benefits" the disclosure of Employee Benefits as defined in the Accounting Standard are given hereunder:

A. The employees' gratuity fund scheme managed by a Trust is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for compensated absences is recognized in the same manner as gratuity.

As per the enterprise's accounting policy actuarial gains and losses are recognized immediately during the same year itself.

The above information is certified by the Actuary.

Note No. 1.2 (a): There are no imports of capital goods or components and spare parts during the current year and the previous year.

Note No: 1.3:

Contingent liabilities and commitments

a). Unexpired Bank Guarantees and letters of Credit 12,90,32,974 7,51,48,735

b) The company together with two other promoter companies has furnished an undertaking on behalf of Konaseema Gas Power Limited (KGPL) jointly promoted by them to the financial institutions to finance the cost over-run, if any, in respect of the power project executed by the said company. Accordingly, in an earlier year, the company has entered into an agreement with IFCI to buy back 3 crores of equity shares of Rs.10/- each in KGPL, which have been sub scribed by them to meet the cost over run.

c) Unexpired Corporate Guarantees given to Financial Institutions and strategic Investors on behalf of

Body Corporate 157,10,00,000 157,10,00,000

d) Disputed Sales Tax Demands for non submission of "C" & "F" Forms 42,53,723 28,30,172

e) Disputed Income Tax demands

An amount of Rs.39.94 lakhs (previous year Rs.64.94 lakhs) Paid under protest against item (e)

is shown under the head of "Other Current Assets" 44,90,463 2,12,17,831

f) Demands towards load factor short fall charges for earlier years, disputed by the company (against which 200 lakhs paid under protest grouped under the head of "Short Term Loans & Advances") 13,93,55,496 12,89,88,244


Mar 31, 2011

Unit Current Previous Year Year

1. Estimated amount of contracts Nil Nil remaining to be executed on Capital Account and not provided for lette rs of credit opened

2. Contingent liabilities

a) Unexpired Bank Guarantees and letters of Credit Rs. 7,51,48,735 4,93,96,690

b) The company together with two other promoter companies has furnished an undertaking on behalf of Konaseema Gas Power Limited (KGPL) jointly promoted by them to the finan- cial institutions to finance the cost over-run, if any, in respect of the power project executed by the said company. Accord- ingly, in an earlier year, the company has entered into an agreement with IFCI to buy back 3 crores of equity shares of Rs.10/- each in KGPL, which have been subscribed by them to meet the cost over run.

c) Unexpired Corporate Guarantees given to Financial Institutions and strategic Investors on behalf of Body Corporates Rs. 1,57,10,00,000 57,10,00,000

d) Disputed Sales Tax Demands for non submission of "C" & "F" Forms Rs. 28,30,172 35,36,852

e) Disputed Income Tax demands an amount of Rs.64.94 lakhs (previous Rs. 2,12,17,831 1,06,16,206 year Rs.5.35 lakhs) Paid under protest against item (e) is shown under the head of "Loans and advances"

f) Demands towards load factor shortfall charges for earlier years, disputed by the company Rs. 12,89,88,244 13,50,68,859

3. The company operates in only one business Segment of manufac ture of Ferro Alloys and there are no geographical segments to be reported.

4. Related Party Transactions:

Related parties in terms of AS 18 issued by the Institute of Char tered Acccountants of India.

a) Associates: Konaseema Gas Power Ltd VBC Industries Limited Orissa power Consortium Limited.

b) Key Managerial Personnel: Sri M S Lakshmana Rao, Managing Director

c) Relatives of Key Managerial Personnel:

Dr. M V V S Murthi, Sri M S Rama Rao

d) Others: Enterprises in which key Managerial Personnel or their relatives have substantial interest

VBC Exports Ltd. Techno Infratech project (India) Pvt. Ltd. BASIL Infrastructure projects Ltd. Indo-Us Coal Washeries Ltd

5. According to an internal technical assessment, There is no impairment in the carrying cost of cash Generating assets of the Company in terms of Accounting Standard 28 (AS 28) issued by the Institute of Chartered Accountants of India.

6. Previous Year's figures have been regrouped and rearranged wherever necessary

7. Paise have been rounded off to the nearest rupee.


Mar 31, 2010

Unit Current Previous Year Year

1. Estimated amount of contracts remaining to be executed on Capital Account and not provided for - Letters of Credit opened Rs. Nil Nil

2. Contingent liabilities a) Unexpired Bank Guarantees and letters of Credit . Rs. 4,93,96,690 5,68,12,825

b) The company together with two other promoter companies has furnished an undertaking on behalf of Konaseema Gas Power Limited (KGPL) jointly promoted by them to the financial institutions to finance the cost over-run, if any, in respect of the power project being executed by the said company.

Accordingly, the company has entered into an agreement with IFCI to buy back 3 Crores of equity shares of Rs. 10 each in KGPL, which have been subscribed by them, during the year, to meet the cost over run.

c) The company together with another promoter company has furnished an undertaking on behalf of Orissa Power Consortium Limited jointly promoted by them to the financial institutions to finance the cost over-run, if any, in respect of the power project being executed by the said company.

3. Disclosures on "Employee Benefits" as per Accounting

Standard 15 - "Employee Benefits" issued by the Institute of Chartered Accountants of India

4. The company operates in only one business segment of manufacture of Ferro Alloys and there are no geographical segments to be reported.

5. Related Party Transactions:

Related parties in terms of AS 18 issued by the Institute of Chartered Accountants of India.

a) Associates: Konaseema Gas Power Ltd. VBC Industries Limited

Orissa power Consortium Limited.

b) Key Managerial Personnel:

Sri. M S Lakshman Rao, Managing Director

c) Relatives of key Managerial Personnel:

Dr. MVVSMurthi Sri M S Rama Rao

d) Others: Enterprises in which Key Managerial Personnel or their relatives have substantial interest:

VBC Exports Ltd.

Techno infratech project (India) pvt. Ltd. BASIL infrastructure projects Ltd. Indo-Us Coal Washeries Ltd.

6. According to an internal technical assessment, there is no impairment in the carrying cost of cash generating assets of the Company in terms of Accounting Standard 28 (AS 28) issued by the Institute of Chartered Accountants of India.

7. Additional information as required under part-ll of Schedule VI to the Companies Act, 1956

8. Previous Years figures have been regrouped and rearranged wherever necessary

9. Paise have been rounded off to the nearest rupee.

 
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