Accounting Policies of Hindustan Construction Company Ltd. Company
Mar 31, 2018
NATURE AND PURPOSE OF RESERVES
i. Capital reserve
The Company recognizes profit or loss on purchase or cancellation (including forfeiture) of its own equity instruments to capital reserve.
ii. Forfeited debentures account
The Company recognizes profit or loss on purchase or cancellation (including forfeiture) of its own debentures to forfeited debentures account.
iii. Securities premium reserve
Securities premium is used to record the premium on issue of shares or debentures. The reserve will be utilized in accordance with the provisions of the Act.
iv. Debenture redemption reserve
The Company is required to create a debenture redemption reserve out of the profits which are available for payment of dividend to be utilized for the purpose of redemption of debentures in accordance with the provisions of the Act.
v. Foreign currency monetary translation account
Exchange difference arising on translation of the long term monetary asset is accumulated in separate reserve within equity. The cumulative amount is reclassified to the Statement of Profit and Loss over the life of the monetary asset on a straight line basis.
vi. Net gain on fair value of defined benefit plans
The Company has recognized remeasurement gains/
(loss) on defined benefit plans in OCI. These changes are accumulated within the OCI reserve within other equity. The Company transfers amounts from this reserve to retained earnings when the relevant obligations are derecognized.
vii. Net gain / (loss) on fair value of equity instruments
The Company has elected to recognize changes in the fair value of certain investments in equity securities in OCI. These changes are accumulated within the OCI reserve within other equity. The Company transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognized.
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Mar 31, 2017
Note 1 Corporate Information
Hindustan Construction Company Limited ("the Company" or "HCC") is a public company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. The Company is principally engaged in the business of providing engineering and construction services. Its shares are listed on two recognized stock exchanges in India - the Bombay Stock Exchange and the National Stock Exchange. The registered office of the Company is located at Hincon House, LBS Marg, Vikhroli (West), Mumbai - 400 083, India.
The standalone financial statements ("the financial statements") of the Company for the year ended 31 March 2017 were authorized for issue in accordance with resolution of the Board of Directors on 4 May 2017
Note 2.1 Significant Accounting Policies
i Basis of Preparation
The financial statements of the Company have been prepared to comply in all material respects with the Indian Accounting Standards ("Ind AS") notified under the Companies (Accounting Standards) Rules, 2015.
The financial statements for all periods up to and including year ended 31 March 2016 were prepared in accordance with the Companies (Accounting Standards) Rules, 2006 notified under Section 133 of the Companies Act ("the Act"), read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended) ("previous GAAP"). The financial statements for the year ended 31 March 2017 are the first financial statements prepared by the Company in accordance with Ind AS. Refer note 2.3 for information on how the Company adopted Ind AS.
The financial statements have been prepared under the historical cost convention with the exception of certain financial assets and liabilities and share based payments which have been measured at fair value, on an accrual basis of accounting.
All the assets and liabilities have been classified as current or non-current, wherever applicable, as per the operating cycle of the Company as per the guidance set out in Schedule III to the Act. Operating cycle for the business activities of the Company covers the duration of the project/ contract/ service including the defect liability period, wherever applicable, and extends up to the realization of receivables (including retention monies) within the credit period normally applicable to the respective project.
The Company''s financial statements are reported in Indian Rupees, which is also the Company''s functional currency, and all values are rounded to the nearest crore (INR 0,000,000), except when otherwise indicated.
ii Accounting Estimates
The preparation of the financial statements, in conformity with the recognition and measurement principles of Ind AS, requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as at the date of financial statements and the results of operation during the reported period. Although these estimates are based upon management''s best knowledge of current events and actions, actual results could differ from these estimates which are recognized in the period in which they are determined.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.
Contract estimates
The Company, being a part of construction industry, prepares budgets in respect of each project to compute project profitability. The two major components of contract estimate are ''claims arising during construction period'' (described below) and ''budgeted costs to complete the contract''. While estimating these components various assumptions are considered by the management such as (i) Work will be executed in the manner expected so that the project is completed timely (ii) consumption norms will remain same (iii) Assets will operate at the same level of productivity as determined (iv) Wastage will not exceed the normal % as determined etc. (v) Estimates for contingencies (vi) There will be no change in design and the geological factors will be same as communicated and (vii) price escalations etc. Due to such complexities involved in the budgeting process, contract estimates are highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
Recoverability of claims
The Company has claims in respect of cost over-run arising due to client caused delays, suspension of projects, deviation in design and change in scope of work etc., which are at various stages of negotiation/ discussion with the clients or under arbitration. The realisability of these claims are estimated based on contractual terms, historical experience with similar claims as well as legal opinion obtained from internal and external experts, wherever necessary. Changes in facts of the case or the legal framework may impact realisability of these claims.
Valuation of investment in/ loans to subsidiaries
The Company has performed valuation for its investments in equity of certain subsidiaries for assessing whether there is any impairment in the fair value. When the fair value of investments in subsidiaries cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow model. Similar assessment is carried for exposure of the nature of loans and interest receivable thereon. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as expected earnings in future years, liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of these investments.
Deferred tax assets
In assessing the realisability of deferred income tax assets, management considers whether some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred income tax assets are deductible, management believes that the Company will realize the benefits of those deductible differences. The amount of the deferred income tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.
Defined benefit plans
The cost and present value of the gratuity obligation and compensated absences are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, attrition rate and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
iii Property, Plant and Equipment
Property, Plant and Equipment are stated at cost of acquisition including attributable interest and finance costs, if any, till the date of acquisition/ installation of the assets less accumulated depreciation and accumulated impairment losses, if any. Subsequent expenditure relating to Property, Plant and Equipment is capitalized only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the Statement of Profit and Loss as incurred. The cost and related accumulated depreciation are eliminated from the financial statements, either on disposal or when retired from active use and the resultant gain or loss are recognized in the Statement of Profit and Loss.
Capital work-in-progress, representing expenditure incurred in respect of assets under development and not ready for their intended use, are carried at cost. Cost includes related acquisition expenses, construction cost, related borrowing cost and other direct expenditure.
On transition to Ind AS, the Company has opted to continue with the carrying values measured under the previous GAAP as at 1 April 2015 of its Property, Plant and Equipment and use that carrying value as the deemed cost of the Property, Plant and Equipment on the date of transition i.e. 1 April 2015.
iv Intangible Assets
Intangible assets comprise of license fees and implementation cost for software and other application software acquired / developed for in-house use. These assets are stated at cost, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably, less accumulated amortization and accumulated impairment losses, if any.
On transition to Ind AS, the Company has opted to continue with the carrying values measured under the previous GAAP as at 1 April 2015 of its Intangible Assets and used that carrying value as the deemed cost of the Intangible Assets on the date of transition i.e. 1 April 2015.
v Depreciation/ Amortization
Depreciation/ amortization is provided:
a In respect of buildings and sheds, on the written down value basis considering the useful lives prescribed in Schedule II to the Act.
b In respect of furniture and fixtures, office equipment, computers, plant and machinery, heavy vehicles, light vehicles and speed boat on straight line basis at rates determined on the basis of useful lives prescribed in Schedule II to the Act, on a pro-rata basis. However, certain class of plant and machinery used in construction projects are depreciated on a straight line basis considering the useful life determined based on the technical evaluation and the management''s experience of use of the assets, that is a period of three to twelve years, as against the period of nine to twenty years as prescribed in Schedule II.
c In respect of helicopter and aircraft, on straight line basis considering the useful life, that is a period of eighteen years and fourteen years, respectively, determined based on the technical evaluation and the management''s experience of use of the assets, as against the period of twenty years as prescribed in Schedule II.
d Leasehold improvements are amortized over the useful lives prescribed in Schedule II to the Act or the period of lease, whichever is lower.
e Software and implementation costs including users license fees and other application software costs are amortized on a straight line basis, from the date they are available for use, over their estimated useful lives that is a period of three to five years.
The useful lives have been determined based on technical evaluation carried out by the management''s expert, in order to reflect the actual usage of the assets. The asset''s useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period.
An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
vi 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.
a Financial Assets
Initial Recognition
In the case of financial assets, not recorded at fair value through profit or loss (FVPL), financial assets are recognized initially at fair value plus transaction costs that are directly attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent Measurement
For purposes of subsequent measurement, financial assets are classified in following categories:
Financial Assets at Amortized Cost
Financial assets are subsequently measured at amortized cost if these financial assets are held within a business model with an objective to hold these assets 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. Interest income from these financial assets is included in finance income using the effective interest rate ("EIR") method. Impairment gains or losses arising on these assets are recognized in the Statement of Profit and Loss.
Financial Assets Measured at Fair Value
Financial assets are measured at fair value through OCI if these financial assets are held within a business model with an objective to hold these assets in order to collect contractual cash flows or to sell these 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. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognized in the Statement of Profit and Loss.
In respect of equity investments (other than for investment in subsidiaries and associates) which are not held for trading, the Company has made an irrevocable election to present subsequent changes in the fair value of such instruments in OCI. Such an election is made by the Company on an instrument by instrument basis at the time of transition for existing equity instruments/ initial recognition for new equity instruments.
Financial asset not measured at amortized cost or at fair value through OCI is carried at FVPL.
On transition to Ind AS, the Company has opted to continue with the carrying values measured under the previous GAAP as at 1 April 2015 of its investments in subsidiaries, associates and joint ventures and used that carrying value as the deemed cost of these investments on the date of transition i.e. 1 April 2015.
Impairment of Financial Assets
In accordance with Ind AS 109, the Company applies the expected credit loss ("ECL'') model for measurement and recognition of impairment loss on financial assets and credit risk exposures.
The Company follows ''simplified approach'' for recognition of impairment loss allowance on trade receivables. Simplified approach does not require the Company to track changes in credit risk.
Rather, it recognizes impairment loss allowance based on lifetime ECL at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognizing impairment loss allowance based on 12-month ECL.
ECL is the difference between all contractual cash flows that are due to the group in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR. Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the Statement of Profit and Loss.
De-recognition of Financial Assets
The Company de-recognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all risks and rewards of ownership of the asset to another entity.
If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the assets and an associated liability for amounts it may have to pay.
If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.
b Equity Instruments and Financial Liabilities
Financial liabilities and equity instruments issued by the Company are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments which are issued for cash are recorded at the proceeds received, net of direct issue costs. Equity instruments which are issued for consideration other than cash are recorded at fair value of the equity instrument.
Financial Liabilities
1) Initial Recognition
Financial liabilities are classified, at initial recognition, as financial liabilities at FVPL, loans and borrowings and payables as appropriate. All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
2) Subsequent Measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at FVPL
Financial liabilities at FVPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as at FVPL. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. Gains or losses on liabilities held for trading are recognized in the Statement of Profit and Loss.
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognized less cumulative amortization. Amortization is recognized as finance income in the Statement of Profit and Loss.
Financial liabilities at amortized cost
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method.
Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognized over the term of the borrowings in the Statement of Profit and Loss.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the Statement of Profit and Loss.
Where the Company issues optionally convertible debenture, the fair value of the liability portion of such debentures is determined using a market interest rate for an equivalent non-convertible debenture. This value is recorded as a liability on an amortized cost basis until extinguished on conversion or redemption of the debentures. The remainder of the proceeds is attributable to the equity portion of the instrument. This is recognized and included in shareholders'' equity (net of income tax) and are not subsequently remeasured.
Where the terms of a financial liability is renegotiated and the Company issues equity instruments to a creditor to extinguish all or part of the liability (debt for equity swap), a gain or loss is recognized in the Statement of Profit and Loss; measured as a difference between the carrying amount of the financial liability and the fair value of equity instrument issued.
3) De-recognition of Financial Liabilities
Financial liabilities are de-recognized when the obligation specified in the contract is discharged, cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as de-recognition of the original liability and recognition of a new liability. The difference in the respective carrying amounts is recognized in the Statement of Profit and Loss.
c Offsetting 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.
vii Employee Benefits
a Defined Contribution Plan
Contributions to defined contribution schemes such as provident fund, employees'' state insurance, labour welfare fund and superannuation scheme are charged as an expense based on the amount of contribution required to be made as and when services are rendered by the employees. Company''s provident fund contribution, in respect of certain employees, is made to a government administered fund and charged as an expense to the Statement of Profit and Loss. The above benefits are classified as Defined Contribution Schemes as the Company has no further obligations beyond the monthly contributions.
b Defined Benefit Plan
In respect of certain employees, provident fund contributions are made to a trust administered by the Company. The interest rate payable to the members of the trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, shall be made good by the Company. Accordingly, the contribution paid or payable and the interest shortfall, if any, is recognized as an expense in the period in which services are rendered by the employee.
The Company also provides for gratuity which is a defined benefit plans the liabilities of which is determined based on valuations, as at the balance sheet date, made by an independent actuary using the projected unit credit method. Re-measurement, comprising of actuarial gains and losses, in respect of gratuity are recognized in the OCI, in the period in which they occur. Re-measurement recognized in OCI are not reclassified to the Statement of Profit and Loss in subsequent periods. Past service cost is recognized in the Statement of Profit and Loss in the year of plan amendment or curtailment.
The classification of the Company''s obligation into current and non-current is as per the actuarial valuation report.
c Leave entitlement and compensated absences
Accumulated leave which is expected to be utilized within next twelve months, is treated as short-term employee benefit. Leave entitlement, other than short term compensated absences, are provided based on a actuarial valuation, similar to that of gratuity benefit. Re-measurement, comprising of actuarial gains and losses, in respect of leave entitlement are recognized in the Statement of Profit and Loss in the period in which they occur.
d Short-term Benefits
Short-term employee benefits such as salaries, wages, performance incentives etc. are recognized as expenses at the undiscounted amounts in the Statement of Profit and Loss of the period in which the related service is rendered. Expenses on non-accumulating compensated absences is recognized in the period in which the absences occur.
viii Inventories
The stock of construction materials, stores, spares and embedded goods and fuel is valued at cost or net realizable value, whichever is lower. Cost is determined on weighted average basis and includes all applicable cost of bringing the goods to their present location and condition. Net realizable value is estimated selling price in ordinary course of business less the estimated cost necessary to make the sale.
ix Cash and Cash Equivalents
Cash and cash equivalents in the Balance Sheet comprises of cash at banks and on hand and short-term deposits with an original maturity of three month or less, which are subject to an insignificant risk of changes in value.
x Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker regularly monitors and reviews the operating result of the whole Company as one segment of "Engineering and Construction" Thus, as defined in Ind AS 108 "Operating Segments" the Company''s entire business falls under this one operational segment and hence the necessary information has already been disclosed in the Balance Sheet and the Statement of Profit and Loss.
xi Borrowing Costs
Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds. Also, the EIR amortization is included in finance costs.
Borrowing costs relating to acquisition, construction or production of a qualifying asset which takes substantial period of time to get ready for its intended use are added to the cost of such asset to the extent they relate to the period till such assets are ready to be put to use. All other borrowing costs are expensed in the Statement of Profit and Loss in the period in which they occur.
xii Foreign Exchange Translation of Foreign Projects and Accounting of Foreign Exchange Transaction
a Initial Recognition
Foreign currency transactions are initially recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. However, for practical reasons, the Company uses a monthly average rate if the average rate approximate the actual rate at the date of the transactions.
b Conversion
Monetary assets and liabilities denominated in foreign currencies are reported using the closing rate at the reporting date. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.
c Treatment of Exchange Difference
Exchange differences arising on settlement/ restatement of short-term foreign currency monetary assets and liabilities of the Company are recognized as income or expense in the Statement of Profit and Loss.
On transition to Ind AS, the Company has opted to continue with the accounting for exchange differences arising on long-term foreign currency monetary items, outstanding as on the transition date, as per previous GAAP Exchange differences arising on long-term foreign currency monetary items related to acquisition of a fixed asset are capitalized and depreciated over the remaining useful life of the asset and exchange differences arising on other long-term foreign currency monetary items are accumulated in the "Foreign Currency Monetary Translation Account" and amortized over the remaining life of the concerned monetary item.
xiii Revenue Recognition
a Accounting of Construction Contracts
The Company follows the percentage completion method, based on the stage of completion at the Balance Sheet date, taking into account the contractual price and revision thereto by estimating total revenue including claims/variations as per Ind AS 11, Construction Contracts, and total cost till completion of the contract and the profit so determined proportionate to the percentage of the actual work done.
Revenue is recognized as follows:
- In case of item rate contracts on the basis of physical measurement of work actually completed, at the Balance Sheet date.
- In case of Lump sum contracts, revenue is recognized on the completion of milestones as specified in the contract or as identified by the management. Foreseeable losses are accounted for as and when they are determined except to the extent they are expected to be recovered through claims presented or to be presented to the customer or in arbitration.
Advance payments received from contractee for which no services are rendered are presented as ''Advance from contractee''.
b Accounting of Supply Contracts-Sale of Goods
Revenue from supply contract is recognized when the substantial risk and rewards of ownership is transferred to the buyer, which is generally on dispatch, and the collectability is reasonably measured. Revenue from product sales are shown as net of all applicable taxes and discounts.
c Accounting for Claims
Claims are accounted as income in the period of receipt of arbitration award or acceptance by client or evidence of acceptance received. Interest awarded, being in the nature of additional compensation under the terms of the contract, is accounted as other operating revenue on receipt of favourable arbitration award.
d Dividend Income
Dividend is recognized when the right to receive the payment is established, which is generally when shareholders approve the dividend.
e Finance and Other Income
Finance income is accrued on a time proportion basis, by reference to the principal outstanding and the applicable EIR. Other income is accounted for on accrual basis. Where the receipt of income is uncertain, it is accounted for on receipt basis.
xiv Interest in Joint Arrangements
As per Ind AS 111 - Joint Arrangements, investment in Joint Arrangement is classified as either Joint Operation or Joint Venture. The classification depends on the contractual rights and obligations of each investor rather than legal structure of the Joint Arrangement.
The Company classifies its Joint Arrangements as Joint Operations.
The Company recognizes its direct right to assets, liabilities, revenue and expenses of Joint Operations and its share of any jointly held or incurred assets, liabilities, revenues and expenses. These have been incorporated in the financial statements under the appropriate headings.
xv Income Tax
Income tax comprises of current and deferred income tax. Income tax is recognized as an expense or income in the Statement of Profit and Loss, except to the extent it relates to items directly recognized in equity or in OCI.
a Current Income Tax
Current income tax is recognized based on the estimated tax liability computed after taking credit for allowances and exemptions in accordance with the Income Tax Act, 1961. Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
b Deferred Income Tax
Deferred tax is determined by applying the Balance Sheet approach. Deferred tax assets and liabilities are recognized for all deductible temporary differences between the financial statements'' carrying amount of existing assets and liabilities and their respective tax base. Deferred tax assets and liabilities are measured using the enacted tax rates or tax rates that are substantively enacted at the Balance Sheet date. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. Deferred tax assets are only recognized to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized. Such assets are reviewed at each Balance Sheet date to reassess realization.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Minimum Alternative Tax ("MAT") credit is recognized as an asset only when and to the extent it is probable that the Company will pay normal income tax during the specified period.
xvi Leases
Leases, where the lessor effectively retains substantially all the risks and benefits of ownership over the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term except where the lease payments are structured to increase in line with expected general inflation. Assets acquired on finance lease are capitalized at fair value or present value of minimum lease payment at the inception of the lease, whichever is lower.
xvii Impairment of Non-Financial Assets
As at each Balance Sheet date, the Company assesses whether there is an indication that a non-financial asset may be impaired and also whether there is an indication of reversal of impairment loss recognized in the previous periods. If any indication exists, or when annual impairment testing for an asset is required, the Company determines the recoverable amount and impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount.
Recoverable amount is determined:
- In case of an individual asset, at the higher of the assets'' fair value less cost to sell and value in use; and
- In case of cash generating unit (a group of assets that generates identified, independent cash flows), at the higher of cash generating unit''s fair value less cost to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and risk specified to the asset. In determining fair value less cost to sell, recent market transaction are taken into account. If no such transaction can be identified, an appropriate valuation model is used.
Impairment losses of continuing operations, including impairment on inventories, are recognized in the Statement of Profit and Loss, except for properties previously revalued with the revaluation taken to OCI. For such properties, the impairment is recognized in OCI up to the amount of any previous revaluation.
When the Company considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, then the previously recognized impairment loss is reversed through the Statement of Profit and Loss.
xviii Trade receivables
A receivable is classified as a ''trade receivable'' if it is in respect of the amount due on account of goods sold or services rendered in the normal course of business. Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the EIR method, less provision for impairment.
xix Trade payables
A payable is classified as a ''trade payable'' if it is in respect of the amount due on account of goods purchased or services received in the normal course of business. These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid. These amounts are unsecured and are usually settled as per the payment terms stated in the contract. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at their fair value and subsequently measured at amortized cost using the EIR method.
xx Earnings Per Share
Basic earnings per share is computed by dividing the net profit or loss for the period attributable to the equity shareholders of the Company by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares, that have changed the number of equity shares outstanding, without a corresponding change in resources.
Diluted earnings per share is computed by dividing the net profit or loss for the period attributable to the equity shareholders of the Company and weighted average number of equity shares considered for deriving basic earnings per equity share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable had the equity shares been actually issued at fair value (i.e. the average market value of the outstanding equity shares).
xxi Provisions, Contingent Liabilities and Contingent Assets
A provision is recognized when the Company has a present obligation (legal or constructive) as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, in respect of which a reliable estimate can be made of the amount of obligation. Provisions (excluding gratuity and compensated absences) are determined based on management''s estimate required to settle the obligation at the Balance Sheet date. In case the time value of money is material, provisions are discounted using a current pre-tax rate that reflects 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. These are reviewed at each Balance Sheet date and adjusted to reflect the current management estimates.
Contingent liabilities are disclosed in respect of possible obligations that arise from past events, whose existence would be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company.
A contingent liability also arises, in rare cases, where a liability cannot be recognized because it cannot be measured reliably.
Contingent assets are neither recognized nor disclosed in the financial statements.
xxii Share Issue Expenses
Share issue expenses are charged off against available balance in the Securities premium reserve.
xxiii Share Based Payments
Certain employees of the Company are entitled to remuneration in the form of equity settled instruments, for rendering services over a defined vesting period. Equity instruments granted are measured by reference to the fair value of the instrument at the date of grant. The fair value determined at the grant date is expensed over the vesting period of the respective tranches of such grants. The stock compensation expense is determined based on the Company''s estimate of equity instruments that will eventually vest using fair value in accordance with Ind-AS 102, Share based payment.
xxiv Exceptional Items
When items of income and expense within profit or loss from ordinary activities are of such size, nature or incidence that their disclosure is relevant to explain the performance of the enterprise for the period, the nature and amount of such material items are disclosed separately as exceptional items.
Note 2.2 Recent accounting pronouncements
Standards issued but not yet effective
In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, ''Statement of cash flows'' and Ind AS 102, ''Share-based payment.''
These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, ''Statement of cash flows'' and IFRS 2, ''Share-based payment,'' respectively. The amendments are applicable to the Company from 1 April 2017
i Amendment to Ind AS 7:
The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.
The Company is evaluating the requirements of the amendment and the effect on the financial statements is being evaluated.
ii Amendment to Ind AS 102:
The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes.
It clarifies that the fair value of cash-settled awards is determined on a basis consistent with that used for equity-settled awards. Market-based performance conditions and non-vesting conditions are reflected in the ''fair values'', but non-market performance conditions and service vesting conditions are reflected in the estimate of the number of awards expected to vest. Also, the amendment clarifies that if the terms and conditions of a cash-settled share-based payment transaction are modified with the result that it becomes an equity-settled share-based payment transaction, the transaction is accounted for as such from the date of the modification. Further, the amendment requires the award that include a net settlement feature in respect of withholding taxes to be treated as equity-settled in its entirety. The cash payment to the tax authority is treated as if it was part of an equity settlement.
The Company is evaluating the requirements of the amendment and the impact on the financial statements is being evaluated.
Note 2.3 Disclosures as required by Indian Accounting standard (Ind AS) 101 First time adoption of Indian accounting standard
The Company has adopted Ind AS with effect from 1 April 2016 with comparatives being restated. Accordingly the impact of transition has been provided in the Opening Reserves as at 1 April 2015 and all the periods presented have been restated accordingly.
i Exemptions availed on first time adoption of Ind AS 101:
On first time adoption of Ind AS, Ind AS 101 allows certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has availed the following exemptions:
a Under Ind AS 109, at initial recognition of a financial asset, an entity may make an irrevocable election to present subsequent changes in the fair value of an investment in an equity instrument in other comprehensive income. Ind AS 101 allows such designation of previously recognized financial assets, as ''fair value through other comprehensive income'' on the basis of the facts and circumstances that existed at the date of transition to Ind AS.
Accordingly, the Company has designated its investments in certain equity instruments at fair value through other comprehensive income on the basis of the facts and circumstances that existed at the date of transition to Ind AS.
b Since, there is no change in the functional currency of the Company, it has opted to continue with the carrying values measured under the previous GAAP and use that carrying value as the deemed cost for property, plant and equipment and intangible assets on the date of transition.
c The Company has opted to continue with the carrying values measured under the previous GAAP and use that carrying value as the deemed cost for investment in subsidiaries, associates and joint ventures on the date of transition to Ind AS.
d The Company has opted to continue with the accounting for exchange differences arising on long-term foreign currency monetary items, outstanding as on the transition date, as per previous GAAP Exchange differences arising on long-term foreign currency monetary items related to acquisition of a fixed asset are capitalized and depreciated over the remaining useful life of the asset and exchange differences arising on other long-term foreign currency monetary items are accumulated in the "Foreign currency monetary translation account" and amortized over the remaining life of the concerned monetary item.
e Share-based payment transactions: Ind AS 101 encourages, but does not require, first time adopters to apply Ind AS 102 Share based payment to equity instruments that were granted on or before the date of transition to Ind AS. The Company has elected not to apply Ind AS 102 to awards that vested prior to 1 April 2015.
f Fair value measurement of financial assets or liabilities at initial recognition: The Company has not applied the provision of Ind AS 109, Financial Instruments, upon the initial recognition of the financial instruments where there is no active market.
g Designation of previously recognized financial instruments: The Company does not have any financial assets or liabilities as of the transition dates which were required to be designated, and which met the required criteria given in Ind AS 101, as a financial asset or financial liability at FVPL.
ii Exceptions
The following mandatory exceptions have been applied in accordance with Ind AS 101 in preparing the financial statements:
a Estimates
The estimates as at 1 April 2015 and 31 March 2016 are consistent with those made for the same dates in accordance with previous GAAP (after adjustment to reflect and differences if any, in accounting policies) apart from the following items where the application of previous GAAP did not require estimation:
(i) Impairment of financial assets based on the expected credit loss model; and
(ii) Investments in equity instruments carried as FVPL or FVOCI.
The estimates used by the Company to present the amounts in accordance with the Ind AS reflect conditions that existed at the date on transition to Ind AS.
b Derecognition of financial assets
The Company has elected to apply the derecognition requirements for financial assets and financial liabilities in Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS.
c Classification and movement of financial assets and liabilities
The Company has classified the financial assets and liabilities in accordance with Ind AS 109 on the basis of facts and circumstances that existed at the date on transition to Ind AS.
Mar 31, 2015
1.1 Basis of Preparation of Financial Statements
The financial statements of Hindustan Construction Company Limited
("the Company" or "HCC") have been prepared to comply in all material
respects with the accounting standards notified by the Companies
(Accounting Standards) Rules, read with Rule 7 to the Companies
(Accounts) Rules 2014 in respect of Section 133 to the Companies Act,
2013. The financial statements are prepared under the historical cost
convention, on an accrual basis of accounting. The accounting policies
applied are consistent with those used in the previous year.
All the assets and liabilities have been classified as current or
non-current, wherever applicable, as per the operating cycle of the
Company as per the guidance as set out in the Schedule III to the
Companies Act, 2013.
Operating cycle for the business activities of the Company covers the
duration of the specific project/ contract /project line /service
including the defect liability period, wherever applicable, and extends
up to the realization of receivables (including retention monies)
within the agreed credit period normally applicable to the respective
project.
1.2 Accounting Estimates
The preparation of the financial statements, in conformity with
generally accepted accounting principles, requires the management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent liabilities as at
the date of financial statements and the results of operation during
the reported period. Although these estimates are based upon
management''s best knowledge of current events and actions, actual
results could differ from these estimates which are recognised in the
period in which they are determined.
1.3 Fixed Assets
a Tangible fixed assets
Fixed assets are stated at cost of acquisition including attributable
interest and finance costs till the date of acquisition / installation
of the assets and improvement thereon less accumulated depreciation and
accumulated impairment losses, if any.
b Intangible assets under development
Intangibles under development represent expenditure incurred in respect
of intangible assets under development and are carried at cost.
c Other Intangible assets
Intangible assets comprise of license fees, implementation cost for
software and other application software acquired for in-house use.
These assets are stated at cost less accumulated amortisation and
impairment losses, if any.
1.4 Depreciation/ Amortisation
Depreciation on tangible assets is provided:
i) In respect of buildings and sheds, on the written down value basis
considering the useful life based on the management''s experience of use
of the assets which is in line with industry practices.
ii) In respect of furniture and fixtures, office equipment, computers,
plant and machinery, heavy vehicles, light vehicles and speed boat on
straight line basis at rates prescribed in Schedule II to the Companies
Act, 2013 on a pro-rata basis. However, certain class of plant and
machinery are depreciated at the rates different from the rates
prescribed in Schedule II to the Companies Act, 2013 having regard to
useful life of those assets in construction projects based on the
management''s experience of use of those assets which is in line with
industry practices.
iii) In respect of helicopter and aircraft, on straight line basis
considering the useful life based on the management''s experience of
use of assets which is in line with industry practices.
iv) Leasehold improvements are amortised over the period of lease or
their estimated useful lives as determined by the management, whichever
is lower.
v) Software and implementation costs including users license fees and
other application software costs are amortised over a period of five
years.
1.5 Investments
Investments, which are readily realisable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as non-current investments.
Current investments are carried in the financial statements at lower of
cost or fair value determined on an individual investment basis. Non-
current investments are carried at cost and provision for diminution in
value is made to recognise a decline other than temporary in the value
of the investments. Trade investments are the investments made for or
to enhance the Company''s business interests.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties. If an investment is acquired, or
partly acquired, by the issue of shares or other securities, the
acquisition cost is the fair value of the securities issued. If an
investment is acquired in exchange for another asset, the acquisition
is determined by reference to the fair value of the asset given up or
by reference to the fair value of the investment acquired, whichever is
more clearly evident.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
Statement of Profit and Loss.
1.6 Employee Benefits
i) Defined Contribution Plan
Contributions to defined contribution schemes such as provident fund,
employees'' state insurance, labour welfare fund and superannuation
scheme, etc. are charged as an expense based on the amount of
contribution required to be made as and when services are rendered by
the employees. Company''s provident fund contribution, in respect of
certain employees, is made to a government administered fund and
charged as an expense to the Statement of Profit and Loss. The above
benefits are classified as Defined Contribution Schemes as the Company
has no further defined obligations beyond the monthly contributions.
ii) Defined Benefit Plan
In respect of certain employees, provident fund contributions are made
to a trust administered by the Company. The interest rate payable to
the members of the trust shall not be lower than the statutory rate of
interest declared by the Central Government under the Employees
Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall,
if any, shall be made good by the Company. Accordingly, the
contribution paid or payable and the interest shortfall, if any, is
recognised as an expense in the period in which services are rendered
by the employee. The Company also provides for retirement/
post-retirement benefits in the form of gratuity and compensated
absences. The Company''s liability towards such defined benefit plans is
determined based on valuations, as at the balance sheet date, made by
independent actuaries using the projected unit credit method. Actuarial
gains and losses in respect of the defined benefit plans are recognised
in the Statement of Profit and Loss in the period in which they arise.
The actuarial valuation method used for measuring the liability is the
Projected Unit Credit method. The classification of the Company''s net
obligation into current and non-current is as per the actuarial
valuation report.
iii) Other Employee Benefits
The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for the measurement
purposes. Such long-term compensated absences are provided for based on
the actuarial valuations using the projected unit credit method at the
period end. Accumulated leave which is expected to be utilised within
next 12 months, is treated as short-term employee benefit. Actuarial
gains and losses in respect of the defined benefit plans are recognised
in the Statement of Profit and Loss in the period in which they arise.
The Company measures the expected cost of such absences as the
additional amount that it expects to pay as a result of the unused
entitlement that has accumulated at the reporting date.
1.7 Inventories
a) The stock of construction materials, stores, spares and embedded
goods and fuel is valued at cost, or net realisable value, whichever is
lower. Cost is determined on weighted average basis and includes all
applicable cost of bringing the goods to their present location and
condition.
b) Project Work-in-Progress is valued at the contract rates and site
mobilisation expenditure of incomplete contracts is stated at lower of
cost or net realisable value.
1.8 Cash and Cash Equivalents
Cash and cash equivalents comprise of cash at bank and cash on hand.
The Company considers all highly liquid investments with an original
maturity of three month or less from date of purchase, to be cash
equivalents.
1.9 Provisions, Contingent Liabilities and Contingent Assets
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to their
present value and are determined based on management''s estimate
required to settle the obligation at the balance sheet date. These are
reviewed at each Balance Sheet date and adjusted to reflect the current
management estimates. Provisions are recognised in the financial
statements in respect of present probable obligations, for amounts
which can be reliably estimated.
Contingent liabilities are disclosed in respect of possible obligations
that arise from past events, whose existence would be confirmed by the
occurrence or non occurrence of one or more uncertain future events not
wholly within the control of the Company.
Contingent assets are neither recognised nor disclosed in the financial
statements.
1.10 Borrowing costs
Borrowing costs relating to acquisition, construction or production of
a qualifying asset which takes substantial period of time to get ready
for its intended use are added to the cost of such asset to the extent
they relate to the period till such assets are ready to be put to use.
Other borrowing costs are charged to the Statement of Profit and Loss
in the period in which it is accrued.
1.11 Foreign Exchange Translation of Foreign Projects and Accounting of
Foreign Exchange Transactions
i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
iii) Treatment of Exchange Differences
Exchange differences arising on settlement/restatement of short term
foreign currency monetary assets and liabilities of the Company are
recognised as income or expense in the Statement of Profit and Loss.
Exchange differences arising on long-term foreign currency monetary
items related to acquisition of a fixed asset are capitalised and
depreciated over the remaining useful life of the asset. Exchange
differences arising on other long-term foreign currency monetary items
are accumulated in the "Foreign Currency Monetary Translation Account"
and amortised over the remaining life of the concerned monetary item.
1.12 Financial Derivatives and Hedging Transactions
Financial derivatives and hedging contracts are accounted on the date
of their settlement and realised gain/loss in respect of settled
contracts is recognised in the Statement of Profit and Loss along with
the underlying transactions.
The premium or discount arising at the inception of forward exchange
contracts entered into to hedge an existing asset/liability, is
amortised as expense or income over the life of the contract. Exchange
differences on such a contract are recognised in the Statement of
Profit and Loss in the reporting period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of such
a forward exchange contract are recognised as income or as expense for
the period.
Forward exchange contracts outstanding as at the year end on account of
firm commitment/highly probable forecast transactions are marked to
market and the losses, if any, are recognised in the Statement of
Profit and Loss and gains are ignored in accordance with the
Announcement of Institute of Chartered Accountants of India on
''Accounting for Derivatives'' issued in March 2008.
1.13 Revenue Recognition
i) Accounting of construction contracts
The Company follows the percentage completion method, based on the
stage of completion at the Balance Sheet date, taking into account the
contractual price and revision thereto by estimating total revenue
including claims/variations as per Accounting Standard 7 and total cost
till completion of the contract and the profit so determined has been
accounted for proportionate to the percentage of the actual work done.
Revenue is recognised as follows:
a) In case of item rate contracts on the basis of physical measurement
of work actually completed, at the Balance Sheet date.
b) In case of Lump sum contracts, revenue is recognised on the
completion of milestones as specified in the contract or as identified
by the management foreseeable losses are accounted for as and when they
are determined except
to the extent they are expected to be recovered through claims
presented or to be presented to the customer or in arbitration.
ii) Accounting of supply contracts-sale of goods
Revenue from supply contract is recognised when the substantial risk
and rewards of ownership is transferred to the buyer and the
collectability is reasonably measured. Revenue from product sales are
shown as net of all applicable taxes and discounts.
iii) Accounting for claims
Claims are accounted as income in the period of receipt of arbitration
award or acceptance by client or evidence of acceptance received.
Interest awarded, being in the nature of additional compensation under
the terms of the contract, is accounted as contract revenue on receipt
of favorable award.
iv) Dividend income
Dividend is recognized when the right to receive the payment is
established.
v) Interest income
Interest and other income are accounted for on accrual basis except
where the receipt of income is uncertain in which case it is accounted
for on receipt basis.
1.14 Accounting for Joint Venture Contracts
(a) Contracts executed in Joint Venture under work sharing arrangement
(consortium) are accounted in accordance with the accounting policy
followed by the Company as that of an independent contract to the
extent work is executed.
(b) In respect of contracts executed in Integrated Joint Ventures under
profit sharing arrangement (assessed as AOP under the Income tax laws),
the services rendered to the Joint Ventures are accounted as income on
accrual basis. The profit / loss is accounted for, as and when it is
determined by the Joint Venture and the net investment in the Joint
Venture is reflected as investments, loans & advances or current
liabilities.
1.15 Taxation Current tax:
Provision for current tax is recognised based on the estimated tax
liability computed after taking credit for allowances and exemptions in
accordance with the Income Tax Act, 1961.
Minimum Alternative 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. In the year in
which the MAT credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in Guidance Note issued
by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the Statement of Profit and Loss and
shown as MAT Credit Entitlement. The Company reviews the same at each
Balance Sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the
effect that Company will pay normal Income Tax during the specified
period.
Deferred tax:
Deferred tax assets and liabilities are recognised for the future tax
consequences attributable to timing differences between the financial
statements'' carrying amount of existing assets and liabilities and
their respective tax basis. Deferred tax assets and liabilities are
measured using the enacted tax rates or tax rates that are
substantively enacted at the Balance Sheet dates. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognised in the period that includes the enactment date. Where there
is unabsorbed depreciation or carry forward losses, deferred tax assets
are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits. Where
there is no unabsorbed depreciation/carry forward loss, deferred tax
assets are recognised only to the extent there is a reasonable certainty
of realisation in future. Such assets are reviewed at each Balance Sheet
date to reassess realisation.
1.16 Leases
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased term, are classified as
operating leases. Operating lease payments are recognised as an expense
in the Statement of Profit and Loss on a straight-line basis over the
lease term.
1.17 Impairment of Assets
The carrying amounts of assets are reviewed at each Balance Sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognised in the Statement of Profit
and Loss whenever the carrying amount of an asset or a cash generating
unit exceeds its recoverable amount. The recoverable amount of the
assets (or where applicable, that of the cash generating unit to which
the asset belongs) is estimated as the higher of its net selling price
and its value in use. A previously recognized impairment loss is
increased or reversed depending on changes in circumstances. However
the carrying value after reversal is not increased beyond the carrying
value that would have prevailed by charging usual depreciation if there
was no impairment.
1.18 Earning per share
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. The
weighted average number of equity shares outstanding during the period
and for all periods presented is adjusted for events, such as bonus
shares, other than the conversion of potential equity shares, that have
changed the number of equity shares outstanding, without a
corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
weighted average number of equity shares outstanding during the period
is adjusted for the effects of all dilutive potential equity shares.
1.19 Share Issue Expenses
Share issue expenses are charged off against available balance in the
Securities Premium Account.
Mar 31, 2014
1.1 Basis of Preparation of Financial Statements
The Company maintains its accounts on accrual basis. Management makes
estimates and technical & other assumptions regarding the amounts of
income and expenses in accordance with Indian GAAP in the preparation
of the financial statements. Difference between the actual results and
estimates are recognised in the period in which they are determined.
1.2 Fixed Assets
Fixed assets are stated at cost of acquisition including attributable
interest & financial costs till the date of acquisition / installation
of the assets and improvement thereon less accumulated depreciation /
amortisation and accumulated impairment losses if any. Intangible
assets comprise of licence fees , other implementation cost for
software (ERP) and other application softwareÂs acquired for in-house
use.
1.3 Depreciation and Amortisation
Depreciation on fixed assets is provided:
i) In respect of buildings and sheds, furniture and office equipments
on the written down value basis at rates prescribed in Schedule XIV of
the Companies Act, 1956.
ii) In respect of plant & machinery, heavy vehicles, light vehicles,
helicopter, aircraft and speed boat on the straight line basis at rates
prescribed in schedule XIV of the Companies Act, 1956 on a pro-rata
basis.
iii) In respect of computers depreciation is provided on straight line
basis over a period of three years on a pro-rata basis.
iv) The depreciation on assets used for construction has been treated
as period cost.
v) Fixed Assets includes cost incurred on the Lease hold Improvements
at 247 park which is being amortised over a period of Nine years.
vi) Software and implementation costs including users licence fees of
the Enterprise Recourse Planning (ERP) system and other application
software costs are amortised over a period of 5 years.
1.4 Investments
Investments, which are readily realisable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
Current investments are carried in the financial statements at lower of
cost or fair value determined on an individual investment basis. Long-
term(Non Current) investments are carried at cost and provision for
diminution in value is made to recognise a decline other than temporary
in the value of the investments.
1.5 Employee Benefits
i) Defined Contribution plan
Contribution to provident fund and superannuation fund is accounted on
accrual basis.
ii) Defined Benefit plan
Gratuity is charged to revenue on the basis of actuarial valuation and
in case of daily rated workmen on actual basis computed on tenure of
service as at the end of the year.
iii) Other Benefits
Short term and long term compensated absences are provided for based on
actuarial valuation. The actuarial valuation is done as per projected
unit credit method.
Accumulated leave which is expected to be utilised within next 12
months, is treated as short term employee benefit. The Company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for the
measurement purposes. Such long term compensated absences are provided
for based on the actuarial valuations using the projected unit credit
method at the year-end.
The obligation is measured at the present value of the estimated future
cash flows. The discount rates used for determining the present value
of the obligation under defined benefit plans, is based on market
yields on Government securities as at the Balance Sheet date, having
maturity periods approximating to the terms of the related obligations.
1.6 Inventories
a) The stock of stores, spares and embedded goods and fuel is valued at
cost (weighted average basis), or net realisable value whichever is
lower.
b) Work-in-Progress is valued at the contract rates and site
mobilisation expenditure of incomplete contracts is stated at cost.
1.7 Cash and cash equivalents
Cash and cash equivalents comprise of cash at bank and cash in hand.
The Company considers all highly liquid investments with an original
maturity of three months or less from date of purchase, to be cash
equivalents.
1.8 Provisions, Contingent liabilities and contingent assets
Provisions involving substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of recourses. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an out flow of resources. Contingent assets are neither
recognised nor disclosed in the financial statements.
1.9 Borrowing costs
Borrowing costs that are attributable to the acquisition, construction
or production of a qualifying asset are capitalised as a part of the
cost of such asset. Other borrowings costs are charged to statement of
profit and loss as incurred.
1.10 Foreign Exchange Translation of Foreign Projects and Accounting of
Foreign Exchange Transactions
a) Initial Recognition
Transactions in foreign currencies entered into by the Company are
accounted at the exchange rates prevailing on the date of the
transaction or at rates that closely approximate the rate at the date
of the transaction.
b) Conversion
Foreign Currency Monetary Items are re-translated at the exchange rate
prevailing on the reporting date.
c) Treatment of Exchange Differences
Exchange differences arising on settlement / restatement of short term
foreign currency monetary assets and liabilities of the Company are
recognised as income or expense in the Statement of Profit and Loss.
The exchange differences arising on settlement / restatement of long
term foreign currency monetary items are capitalised as part of the
depreciable fixed assets to which the monetary items relates and
depreciated over the remaining balance life of such assets and in other
cases amortised over the balance period of such long term foreign
currency monetary items. The unamortised balance is carried in the
Balance Sheet as "Foreign Currency Monetary item Translation Difference
Account" as a separate line item under "Reserves and Surplus Account".
1.11 Financial Derivatives & Hedging transactions
Financial derivatives and hedging contracts are accounted on the date
of their settlement and realised gain / loss in respect of settled
contracts is recognised in the statement of profit and loss along with
the underlying transactions.
1.12 Revenue Recognition
i) Accounting of construction contracts
The Company follows the percentage completion method, based on the
stage of completion at the balance sheet date, taking into account the
contractual price and revision thereto by estimating total revenue
including claims / variations as per Accounting Standard 7 and total
cost till completion of the contract and the profit so determined has
been accounted for proportionate to the percentage of the actual work
done.
Revenue is recognized as follows:
a) In case of Item rate contracts on the basis of physical measurement
of work actually completed at the balance sheet date.
b) In case of Lump sum contracts, revenue is recognized on the
completion of milestones as specified in the contract or as identified
by the management foreseeable losses are accounted for as and when they
are determined except to the extent they are expected to be recovered
through claims presented or to be presented to the customer or in
arbitration.
ii) Accounting of Supply Contracts-Sale of goods
Revenue from supply contract is recognized when the substantial risk
and rewards of ownership is transferred to the buyer.
iii) Accounting Policy for Claims
Claims are accounted as income in the year of receipt of arbitration
award or acceptance by client or evidence of acceptance received.
1.13 Accounting for Joint Venture Contracts
(a) Contracts executed in Joint Venture under work sharing arrangement
(consortium) are accounted in accordance with the Accounting policy
followed by the Company as that of an independent contract to the
extent work is executed.
(b) In respect of contracts executed in Integrated Joint Ventures under
profit sharing arrangement (assessed as AOP under Income tax laws), the
services rendered to the Joint Ventures are accounted as income on
accrual basis. The profit / loss is accounted for, as and when it is
determined by the Joint Venture and the net investment in the Joint
Venture is reflected as investments, loans & advances or current
liabilities.
1.14 Taxation
The tax expense comprises of current tax & deferred tax charged or
credited to the Statement of Profit and Loss for the year. Current tax
is calculated in accordance with the tax laws applicable to the current
financial year. The deferred tax expenses or benefit is recognised
using the tax rates and tax laws that have been enacted by the balance
sheet date. In the event of unabsorbed depreciation or carry forward
losses, deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that sufficient future
taxable income will be available against which such deferred tax assets
can be realised. Other deferred tax assets are recognised only to the
extent there is a reasonable certainty of realisation in future.
Minimum Alternate Tax(MAT) paid in a year is charged to the Statement
of Profit & Loss as current tax. The company recognises MAT credit
available as an asset only to the extent that there is convincing
evidence that company will pay normal income tax during the specified
period, i.e., the period for which MAT credit is allowed to be carried
forward.
1.15 Leases
Lease rentals in respect of assets acquired under operating lease are
charged to Statement of Profit and Loss.
1.16 Impairment of Assets
At each Balance Sheet date, the management makes an assessment of any
indicator that may lead to impairment of assets. An asset is treated as
impaired when the carrying cost of the asset exceeds its recoverable
value, which is higher of net selling price and value in use. Any
impairment loss is charged to Statement of Profit and Loss in the year
in which it is identified as impaired.
1.17 Employees Stock Option Plan
In respect of the stock options granted pursuant to the Company''s Stock
Option Scheme, market value of the Company''s shares as on the grant
date was equal to the par value for the options granted, hence no
accounting entries as per ESOP guidelines are required to be made.
1.18 Earnings per share
Basic and Diluted earnings per share is calculated by diving the net
profit or loss for the period attributable to equity shareholders and
weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
weighted average number of equity shares outstanding during the period
is adjusted for the effects of all dilutive potential equity share.
b Terms/rights attached to shares:
The Company has only one class of equity shares having a par of value
of Rs.1/- per share. Each holder of equity share is entitled to one vote
per share. The company declares and pays 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.
In the event of liquidation of the company, the holders of equity
shares will be entitled to receive remaining assets of the company,
after distribution of all preferential amounts. The distribution will
be in proportion to the no. of equity shares held by the shareholder.
d Shares reserved for issue under options :
As on 31.03.2014, there are 4,694,800 (previous year 6,154,080) stock
options outstanding convertible into 4,694,800 (previous year
6,154,080) equity shares of Rs.1/- each, the same are convertible at an
exercise price of Rs.52.03 per share.
During the period upto 31.03.2014 i.e. from 1.04.2013 till 31.03.2014,
None of the Options were exercised / converted into Equity Shares.
There were 1,459,280 (previous year 308,880) stock options that got
lapsed during 01.04.2013 till 31.03.2014
e. Employees Stock Option Scheme:
i. Options granted
a) The Company offered 4,458,800 Stock Options on April 25, 2008 (each
option carrying entitlement for one equity share of the face value of
Rs.1/- each) at a price of Rs.132.50 per equity share.
In accordance with the approval of the board of directors and
shareholders of the company, the ESOP compensation committee at its
meeting held on July 20, 2009 had reprised 4,131,600 options at Rs.104.05
per equity share.
b) The ESOP Compensation committee at its meeting held on 23rd October
2008 granted 1,93,750 options at an exercise price of Rs.43.40 per equity
share.
The ESOP Compensation Committee of the Company at its Meeting held on
August 12, 2010 has decided to double the number of employee stock
options (vested and unvested but not exercised and in-force as on the
Record Date i.e. August 11, 2010) and halved the exercise price on
account of issuance and allotment of Bonus Equity Shares in the
proportion of 1:1.
Accordingly, 3,553,760 employee stock options inÂforce granted by the
Company on April 25, 2008 have been doubled i.e. 7,107,520 and the
exercise price in respect of the same has been halved i.e. it has been
reduced from Rs.104.05 to Rs.52.03 and 1,93,750 employee stock options
granted by the Company on October 23, 2008 have been doubled i.e.
387,500 and the exercise price in respect of the same has been halved
i.e. it has been reduced from Rs.43.40 to Rs.21.70.
ii. Settlement Through Equity Shares.
iii. Options vested 46,49,800 number of options remain vested and
outstanding as at 31.03.2014.
f. Bonus Shares/ Buy Back/Shares for consideration other than cash
issued during past five years:
(i) Aggregate number and class of shares allotted as fully paid-up
pursuant to contracts without payment being received in cash:
Nil
(ii) Aggregate number and class of shares allotted as fully paid-up by
way of Bonus Shares:
303,256,460 Equity Shares were issued as fully paid Bonus Shares by
capitalisation of Securities Premium Reserve on August 12, 2010.
(iii) Aggregate number and class of shares bought back:
Nil
g. Pursuant to Bonus Issue of Equity Shares in the proportion to 1:1,
outstanding 95,146 Global Depository Shares(outstanding as of Record
Date i.e. August 11, 2010) have increased to 190,292. Out of the total
Global Depository Shares(GDR) issued 120,720 GDR''s are outstanding as
on 31st March 2014.
Mar 31, 2013
1.1 Basis of Accounting
The Company maintains its accounts on accrual basis. Management makes
estimates and technical and other assumptions regarding the amounts of
income and expenses in accordance with Indian GAAP in the preparation
of the financial statements. Difference between the actual results and
estimates are recognised in the period in which they are determined.
1.2 Fixed Assets
Fixed assets are stated at cost of acquisition including attributable
interest & financial costs till the date of acquisition/installation of
the assets and improvement thereon less accumulated depreciation /
amortisation and accumulated impairment losses if any. Intangible
assets comprise of licence fees, other implementation cost for software
(ERP) and other application softwares acquired for inhouse use.
1.3 Depreciation and Amortisation
Depreciation on fixed assets is provided:
i) In respect of buildings and sheds, furniture and office equipments
on the written down value basis at rates prescribed in Schedule XIV of
the Companies Act, 1956.
ii) In respect of plant & machinery, heavy vehicles, light vehicles,
helicopter, aircraft and speed boat on the straight line basis at rates
prescribed in Schedule XIV of the Companies Act, 1956 on a pro-rata
basis.
iii) In respect of computers, depreciation is provided on straight line
basis over a period of three years on a pro-rata basis.
iv) The depreciation on assets used for construction has been treated
as period cost.
v) Fixed Assets includes cost incurred on the Lease hold Improvements
at 247 park which is being amortised over a period of nine years.
vi) Software and implementation costs including users licence fees of
the Enterprise Resource Planning (ERP) system and other application
software costs are amortised over a period of five years.
1.4 Investments
Investments, which are readily realisable and intended to be held for
not more than one year from the date on which such investments are
made,are classified as current investments. All other investments are
classifies as long-term investments.
Current investments are carried in the financial statements at lower of
cost or fair value determined on an individual investment basis.
Long-term(Non Current) investments are carried at cost, provision for
diminution in value is made to recognise a decline other than temporary
in the value of the investments.
1.5 Employee Benefits
i) Defined Contribution plan
Contribution to provident fund and superannuation fund is accounted on
accrual basis.
ii) Defined Benefit plan
Gratuity is charged to revenue on the basis of actuarial valuation and
in case of daily rated workmen on actual basis computed on tenure of
service as at the end of the year.
iii) Other Benefits
Short term and long term compensated absenses are provided for based on
actuarial valuation. The actuarial valuation is done as per projected
unit credit method.
Accumulated leave which is expected to be utilised within next 12
months, is treated as short term employee benefit. The Company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward
beyond tweleve months, as long-term employee benefit for the
measurement purposes. Such long term compensated absences are provided
for based on the actuarial valuations using the projected unit credit
method at the year-end.
The obligation is measured at the present value of the estimated future
cash flows. The discount rates used for determining the present value
of the obligation under defined benefit plans, is based on market
yields on Government securities as at the Balance Sheet date, having
maturity periods approximating to the terms of the related obligations.
1.6 Inventories
a) The stock of stores, spares and embedded goods and fuel is valued at
cost (weighted average basis), or net realisable value whichever is
lower.
b) Work-in-Progress is valued at the contract rates and site
mobilisation expenditure of incomplete contracts is stated at cost.
1.7 Cash and cash equivalents
Cash and cash equivalents comprise of cash at bank and cash in hand.
The Company considers all highly liquid investments with an original
maturity of three months or less from date of purchase, to be cash
equivalents.
1.8 Provisions, Contingent liabilities and contingent assets
Provisions involving substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resourses. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. Contingent assets are neither
recognised nor disclosed in the financial statements.
1.9 Borrowing costs
Borrowing costs that are attributable to the acquisition, construction
or production of a qualifying asset are capitalised as a part of the
cost of such asset. Other borrowing costs are charged to Statement of
Profit and Loss as incurred.
1.10 Foreign Exchange Translation of Foreign Projects and Accounting of
Foreign Exchange Transactions
a) Initial Recognition
Transactions in foreign currencies entered into by the Company are
accounted at the exchange rates prevailing on the date of the
transaction or at rates that closely approximate the rate at the date
of the transaction.
b) Conversion
Foreign Currency Monetary Items are re-translated at the exchange rate
prevailing on the reporting date.
c) Treatment of Exchange Differences
Exchange differences arising on settlement/restatement of short term
foreign currency monetary assets and liabilities of the Company are
recognised as income or expense in the Statement of Profit and Loss.
The exchange differences arising on revaluation of long term foreign
currency monetary items are capitalised as part of the depreciable
fixed assets to which the monetary items relates and depreciated over
the remaining balance life of such assets and in other cases amortised
over the balance period of such long term foreign currency monetary
items. The unamortised balance is carried in the Balance Sheet as
"Foreign currency monetary item translation difference account''.''
1.11 Financial Derivatives & Hedging transactions
Financial derivatives and hedging contracts are accounted on the date
of their settlement and realised gain/loss in respect of settled
contracts is recognised in the Statement of Profit and Loss along with
the underlying transactions.
1.12 Revenue Recognition
i) Accounting of construction contracts
The Company follows the percentage completion method, based on the
stage of completion at the balance sheet date, taking into account the
contractual price and revision thereto by estimating total revenue
including claims/variations as per Accounting Standard 7 and total cost
till completion of the contract and the profit so determined has been
accounted for proportionate to the percentage of the actual work done.
Revenue is recognized as follows:
a) In case of Item rate contracts on the basis of physical measurement
of work actually completed at the balance sheet date.
b) In case of Lumpsum contracts, revenue is recognized on the
completion of milestones as specified in the contract or as identified
by the management. Foreseeable losses are accounted for as and when
they are determined except to the extent they are expected to be
recovered through claims presented or to be presented to the customer
or in arbitration.
ii) Accounting of Supply Contracts-Sale of goods
Revenue from supply contract is recognized when the substantial risk
and rewards of ownership is transferred to the buyer.
iii) Accounting Policy for Claims
Claims are accounted as income in the year of receipt of arbitration
award or acceptance by client or evidence of acceptance received.
1.13 Accounting for Joint Venture Contracts
(a) Contracts executed in Joint Venture under work sharing arrangement
(consortium) are accounted in accordance with the Accounting policy
followed by the Company as that of an independent contract to the
extent work is executed.
(b) In respect of contracts executed in Integrated Joint Ventures under
profit sharing arrangement (assessed as AOP under Income tax laws), the
services rendered to the Joint Ventures are accounted as income on
accrual basis. The profit / loss is accounted for, as and when it is
determined by the Joint Venture and the net investment in the Joint
Venture is reflected as investments, loans & advances or current
liabilities.
1.14 Taxation
The tax expense comprises of current tax & deferred tax charged or
credited to the Statement of Profit and Loss for the year. Current tax
is calculated in accordance with the tax laws applicable to the current
financial year. The deferred tax expenses or benefit is recognised
using the tax rates and tax laws that have been enacted by the balance
sheet date. In the event of unabsorbed depreciation or carry forward
losses, deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that sufficient future
taxable income will be available against which such deferred tax assets
can be realised. Other deferred tax assets are recognised only to the
extent there is a reasonable certainity of realisation in future.
Minimum Alternate Tax(MAT) paid in a year is charged to the Statement
of Profit & Loss as current tax. The Company recognises MAT credit
available as an asset only to the extent that there is convincing
evidence that Company will pay normal income tax during the specified
period, i.e. the period for which MAT credit is allowed to be carried
forward.
1.15 Leases
Lease rentals in respect of assets aquired under operating lease are
charged to Statement of Profit and Loss.
1.16 Impairment of Assets
At each Balance Sheet date, the management makes an assessment of any
indicator that may lead to impairment of assets. An asset is treated as
impaired when the carrying cost of the asset exceeds its recoverable
value, which is higher of net selling price and value in use. Any
impairment loss is charged to Statement of Profit and Loss in the year
in which it is identified as impaired.
1.17 Employees Stock Option Plan
In respect of the stock options granted pursuant to the Company''s Stock
Option Scheme, market value of the Company''s shares as on the grant
date was equal to the par value for the options granted, hence no
accounting entries as per ESOP guidelines are required to be made.
1.18 Earning per share
Basic and Diluted earning per share is calculatd by dividing the net
profit or loss for the period attributable to equity shareholders and
weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earning per share, the net
profit or loss for the period attributable to equity shareholders and
weighted average number of equity shares outstanding during the period
is adjusted for the effects of all dilutive potential equity shares.
Mar 31, 2012
1.1 Basis of Accounting
The Company maintains its accounts on accrual basis. Management makes
estimates and technical and other assumptions regarding the amounts of
income and expenses in accordance with Indian GAAP in the preparation
of the financial statements. Difference between the actual results and
estimates are recognized in the period in which they are determined.
During the year ended March 31, 2012, the revised Schedule VI notified
under the Companies Act, 1956, has become applicable to the Company,
for preparation and presentation of its financial statements. The
adoption of revised Schedule VI does not impact recognition and
measurement principles followed for preparation of financial
statements. However, it has significant impact on presentation and
disclosures made in the financial statements. The Company has also
reclassified the previous year figures in accordance with the
requirements applicable in the current year.
1.2 Fixed Assets
Fixed assets are stated at cost of acquisition including attributable
interest & financial costs till the date of acquisition/installation of
the assets and improvement thereon less accumulated depreciation /
amortization and accumulated impairment losses if any. Intangible
assets comprise of license fees , other implementation cost for
software (ERP) and other application software's acquired for in-house
use.
1.3 Depreciation and Amortization
Depreciation on fixed assets is provided:
I) In respect of buildings and sheds, furniture and office equipments
on the written down value method (pro-rata on additions and deletions
of the year) at rates prescribed in Schedule XIV of the Companies Act,
1956.
ii) In respect of plant & machinery, heavy vehicles, light vehicles,
helicopter, aircraft and speed boat on the straight line method at
rates prescribed in schedule XIV of the Companies Act, 1956 on a
pro-rata basis.
iii) In respect of computers depreciation is provided on straight line
basis over a period of three years on a pro-rata basis.
iv) The depreciation on assets used for construction has been treated
as period cost.
v) Fixed Assets includes cost incurred on the Lease hold Improvements
at 247 park which is being amortized over a period of Nine years.
vi) Software and implementation costs including users license fees of
the Enterprise Recourse Planning (ERP) system and other application
software costs are amortized over a period of 5 years.
1.4 Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classifies as long-term investments.
Current investments are carried in the financial statements at lower of
cost or fair value determined on an individual investment basis.
Long-term investments are carried at cost, provision for diminution in
value is made to recognize a decline other than temporary in the value
of the investments.
1.5 Employee Benefits
i) Defined Contribution plan
Contribution to provident fund and superannuation fund is accounted on
accrual basis.
ii) Defined Benefit plan
Gratuity is charged to revenue on the basis of actuarial valuation and
in case of daily rated workmen on actual basis computed on tenure of
service as at the end of the year.
iii) Other Benefits
Short term and long term compensated absences are provided for based on
actuarial valuation. The actuarial valuation is done as per projected
unit credit method.
Accumulated leave which is expected to be utilized within next 12
months, is treated as short term employee benefit. The Company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for the measurement
purposes. Such long term compensated absences are provided for based on
the actuarial valuations using the projected unit credit method at the
year-end.
The obligation is measured at the present value of the estimated future
cash flows. The discount rates used for determining the present value
of the obligation under defined benefit plans, is based on market
yields on Government securities as at the Balance Sheet date, having
maturity periods approximating to the terms of the related obligations.
1.6 Inventories
a) The stock of stores, spares and embedded goods and fuel is valued at
cost (weighted average basis), or net realizable value whichever is
lower.
b) Work-in-Progress is valued at the contract rates and site
mobilisation expenditure of incomplete contracts is stated at cost.
c) Certain loose plant, tools & service equipments costing below Rs 5
lacs are valued at proportionate written down value @ 3% p.m. over a
period of 32 months.
1.7 Cash and cash equivalents
Cash and cash equivalents comprise of cash at bank and cash in hand .
The Company considers all highly liquid investments with an original
maturity of three months or less from date of purchase, to be cash
equivalents.
1.8 Provisions, Contingent liabilities and Contingent assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of recourses. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an out flow of resources. Contingent assets are neither
recognized nor disclosed in the financial statements.
1.9 Borrowing costs
Borrowing costs that are attributable to the acquisition, construction
or production of a qualifying asset are capitalized as a part of the
cost of such asset. Other borrowings costs are charged to statement of
profit and loss as incurred.
1.10 Foreign Exchange Translation of Foreign Projects and Accounting of
Foreign Exchange Transactions
a) Current assets and current liabilities are translated at the
exchange rate prevailing on the last day of the year.
b) Gains or losses arising out of remittance / translations at the
year-end are credited / debited to the statement of profit and loss for
the year.
c) From the accounting periods commencing on or after December 7, 2006,
the Company adjusts exchange differences arising on
translation/settlement of long- term foreign currency monetary items
pertaining to the acquisition of a depreciable asset to the cost of the
asset and depreciated over the remaining life of the asset. Exchange
differences arising on other long-term foreign currency monetary items
are accumulated in the "Foreign Currency Monetary Item Translation
Difference Account" and amortized over the remaining life of the
concerned monetary item.
d) Foreign exchange transactions are converted into Indian rupees at
the prevailing rate on the date of the transaction.
e) Exchange differences arising on contracts are recognized in the
period in which they arise and the premium paid / received is accounted
as expense / income over the period of the contract.
1.11 Financial Derivatives & Hedging transactions
Financial derivatives and hedging contracts are accounted on the date
of their settlement and realized gain/loss in respect of settled
contracts is recognized in the statement of profit and loss along with
the underlying transactions.
1.12 Revenue Recognition
i) Accounting of construction contracts
The Company follows the percentage completion method, based on the
stage of completion at the balance sheet date, taking into account the
contractual price and revision thereto by estimating total revenue and
total cost till completion of the contract and the profit so determined
has been accounted for proportionate to the percentage of the actual
work done.
Revenue is recognized as follows:
a) In case of Item rate contracts on the basis of physical measurement
of work actually completed at the balance sheet date.
b) In case of Lump sum contracts, revenue is recognized on the
completion of milestones as specified in the contract or as identified
by the management Foreseeable losses are accounted for as and when they
are determined except to the extent they are expected to be recovered
through Claims presented or to be presented to the customer or in
arbitration.
ii) Accounting of Supply Contracts-Sale of goods
Revenue from supply contract is recognized when the substantial risk
and rewards of ownership is transferred to the buyer.
iii) Accounting Policy for Claims
Claims are accounted as income in the year of receipt of arbitration
award or acceptance by client or evidence of acceptance received.
1.13 Accounting for Joint Venture Contracts
(a) Contracts executed in Joint Venture under work sharing arrangement
(consortium) are accounted in accordance with the Accounting policy
followed by the Company as that of an independent contract to the
extent work is executed.
(b) In respect of contracts executed in Integrated Joint Ventures under
profit sharing arrangement (assessed as AOP under Income tax laws), the
services rendered to the Joint Ventures are accounted as income on
accrual basis. The profit / loss is accounted for, as and when it is
determined by the Joint Venture and the net investment in the Joint
Venture is reflected as investments, loans & advances or current
liabilities.
1.14 Taxation
The tax expense comprises of current tax & deferred tax charged or
credited to the statement of profit and loss for the year. Current tax
is calculated in accordance with the tax laws applicable to the current
financial year. The deferred tax expenses or benefit is recognized
using the tax rates and tax laws that have been enacted by the balance
sheet date. In the event of unabsorbed depreciation or carry forward
losses, deferred tax assets are recognized only if there is virtual
certainty supported by convincing evidence that sufficient future
taxable income will be available against which such deferred tax assets
can be realized. Other deferred tax assets are recognized only to the
extent there is a reasonable certainty of realization in future.
Minimum Alternate Tax(MAT) paid in a year is charged to the Statement
of Profit & Loss as current tax. The Company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that Company will pay normal income tax during the specified
period, i.e., the period for which MAT credit is allowed to be carried
forward.
1.15 Leases
Lease rentals in respect of assets acquired under operating lease are
charged to Statement of profit and loss.
1.16 Impairment of Assets
At each Balance Sheet date, the management makes an assessment of any
indicator that may lead to impairment of assets. An asset is treated as
impaired when the carrying cost of the asset exceeds its recoverable
value, which is higher of net selling price and value in use. Any
impairment loss is charged to statement of profit and loss in the year
in which it is identified as impaired.
1.17 Employees Stock Option Plan
In respect of the stock options granted pursuant to the Company's Stock
Option Scheme, market value of the Company's shares as on the grant
date was equal to the par value for the options granted, hence no
accounting entries as per ESOP guidelines are required to be made.
b Terms/rights attached to shares:
The Company has only one class of equity shares having a par value of Rs
1 per share. Each holder of equity share is entitled to one vote per
share. The Company declares and pays dividends in Indian Rupees. The
dividend proposed by the Board of Directors is subject to the apporoval
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 distribution of all preferential amounts. The distribution will
be in proportion to the no. of equity shares held by the shareholder.
d Shares reserved for issue under options :
There are 64,62,960 (previous year 70,97,500) stock options outstanding
convertible into 64,62,960 (previous year 70,97,500) equity shares of Rs
1 each, the same are convertible at an exercise price of Rs 52.03 per
share.
During the year 77500 Equity shares of Rs 1 each at an Exercise price of
Rs 21.70 per share Options were converted into 77,500 Equity shares
(previous year 26,860 out of which 20,000 at an exercise price of Rs
52.03 and 6,860 at an exercise price of Rs 104.05). There were 5,57,040
(previous year 948,500) stock options that got lapsed during the
current year.
e. Employees Stock Option Scheme: i Options granted
a) The Company offered 44,58,800 Stock Options on April 25, 2008 (each
option carrying entitlement for one equity share of the face value of Rs
1 each) at a price of Rs 132.50 per equity share. Out of the total Stock
Options offered, 8,98,180 have been lapsed on account of resignation /
retirement by employees.
In accordance with the approval of the board of directors and
shareholders of the Company, the ESOP compensation committee at its
meeting held on July 20, 2009 had reprised 41,31,600 options at Rs
104.05 per equity share.
b) The ESOP Compensation committee at its meeting held on October 23,
2008 granted 1,93,750 options at an exercise price of Rs 43.40 per
equity share.
The ESOP Compensation Committee of the Company at its Meeting held on
August 12, 2010 has decided to double the number of employee stock
options (vested and unvested but not exercised and in-force as on the
Record Date i.e. August 11, 2010) and halved the exercise price on
account of issuance and allotment of Bonus Equity Shares in the
proportion of 1:1. Accordingly, 35,53,760 employee stock options
in-force granted by the Company on April 25, 2008 have been doubled
i.e. 71,07,520 and the exercise price in respect of the same has been
halved i.e. it has been reduced from Rs 104.05 to Rs 52.03 and 1,93,750
employee stock options granted by the Company on October 23, 2008 have
been doubled i.e. 3,87,500 and the exercise price in respect of the
same has been halved i.e. it has been reduced from Rs 43.40 to Rs 21.70.
f. Bonus Shares/ Buy Back/Shares for consideration other then cash
issued during past five years
(i) Aggregate number and class of shares allotted as fully paid up
pursuant to contracts without payment being received in cash Nil
(ii) Aggregate number and class of shares allotted as fully paid up by
way of Bonus Shares 30,32,56,460 Equity Shares were issued as fully
paid Bonus Shares by capitalisation of Securities Premium Reserve on
August 12, 2010.
(iii) Aggregate number and class of shares bought back Nil
g. Pursuant to Bonus Issue of Equity Shares in the proportion to 1:1,
outstanding 95,146 Global Depository Shares(outstanding as of Record
Date i.e. August 11, 2010) have increased to 1,90,292. Out of the total
Global Depository Shares(GDR) issued 1,20,720 GDR's are outstanding as
on March 31, 2012.
1.18 Additional Information to Secured/Unsecured Long Term Borrowings:
The long term portion of debentures and term loans are shown under long
term borrowings and the current maturities of the long term borrowings
are shown under the current liabilities as per the disclosure
requirements of the Revised Schedule VI.
1.19 Detail of Securities and Terms of repayment
I. Secured
(A) Privately Placed Non Convertible Debentures
i) 11.10% Non-Convertible Debentures - Note 4.I.(A)(1)
Secured by first charge by way of hypothecation of Company's specific
plant and machineries as specified in first and second schedule of the
trust deed executed on August 27, 2008 and Schedule II of Memorandum of
Hypothecation dated March 28, 2011 in favor of IDBI Trusteeship
Services Ltd. (ITSL), the trustees to the debenture holders. These
debentures having a face value of Rs 10,00,000 each aggregating Rs 100
crore are to be redeemed in four equal installments at the end of 4th,
5th, 6th and 7th year from the date of allotment i.e. August 5, 2008.
ii) 9% Non-Convertible Debentures - Note 4.I.(A)(2)
Secured by first charge on Company's plant and machineries and heavy
vehicles as specified in second schedule of the trust deed executed on
January 17, 2007 in favour of AXIS Bank Ltd., the trustees to the
debenture holders.
These debentures having a face value of Rs 10,00,000 each aggregating Rs
50 crore are to be redeemed in three annual equal installments
commencing from the end of 3rd, 4th and 5th year from the date of first
disbursement i.e. September 7, 2006. The first and second installment
of Rs 16.67 crore each have been paid on the respective due dates i.e.
September 7, 2009 and September 7, 2010. (Interest rate reset @ 10.92%
w.e.f September 4, 2008). NCD has been repaid on paying final
Installment of Rs 16.66 crore on September 7, 2011.
iii) 9.5% Non-Convertible Debentures - Note 4.I.(A)(3)
Secured by first charge on Company's plant and machineries and heavy
vehicles as specified in second schedule of the trust deed executed on
January 17, 2007 in favour of AXIS Bank Ltd., the trustees to the
debenture holders.
These debentures having a face value of Rs 10,00,000 each aggregating Rs
50 crore are to be redeemed by bullet payment at the end of 5th year
from the date of allotment i.e. November 20, 2006. NCD has been repaid
by bullet payment on November 18, 2011.
The above debenture is also secured by way of mortgage of a flat
situated at Lok Gaurav Complex, Vikhroli.
iv) 15.50% Non-Convertible Debentures - Note 4.I.(A)(4) Secured by
exclusive first charge on specific marketable immovable assets of
Lavasa Corporation Ltd., which is free from any encumbrances and
charges, any restriction from Govt bodies /Department/ MOEF on creating
mortgage, as specified in the subscription agreement executed on
December 28, 2011 in favour of Axis Trustee Services Limited, the
trustees to the debenture holders. These debentures having a face value
of Rs 10,00,000 each aggregating Rs 120 crore are to be redeemed at the
end of three years from the date of allotment, i.e. December 28, 2011.
(B) Term Loans
(a) Banks:
1. Axis Bank - Note 4.I.(B)(a)(i)(1)
Secured by first charge by way of hypothecation of specific plant and
machineries and heavy vehicles as specified in the schedule annexed to
the loan agreement executed on September 29, 2008. The loan is
repayable in 5 equal half yearly installments of Rs 12 crore each.
Floating interest @ 11.50% p.a.(base rate 10% 150 bps as on March 31,
2012) is applicable on the said loan. The period of Maturity w.r.t.
balance sheet date is 2.5 years.
2. IDBI Bank- Note 4.I.(B)(a)(i)(2)
Secured by way of a) Second charge on all the movable assets of the
Company as on March 31, 2008 and b) First charge on one Flat located at
"Greater Kailas - II" New Delhi - 110048.The loan is repayable in 8
equal quarterly installment of Rs 33.75 crore each. Floating interest
@14% p.a.(Base rate 10.75% 325 bps as on March 31, 2012) is
applicable on the said loan. The period of maturity w.r.t. balance
sheet date is one year and 10 months.
3. Bank of Baroda - Note 4.I.(B)(a)(i)(3)
Secured by first charge by way of hypothecation of specific plant and
machineries movable properties as described in the second schedule of
the Composite Hypothecation agreement of loan executed on May 18, 2009.
The loan is repayable in 10 quarterly installments of Rs 3.125 crore
each. Floating interest @ 13% p.a. (BPLR i.e. 15%- 200 bps as on March
31, 2012) is applicable on the said loan. The period of Maturity w.r.t.
balance sheet date is 2 years and 2 months.
4. Development Bank of Singapore - Note 4.I.(B)(a)(i)(4) & 4.I.(B)
(a)(ii)(2)
Secured by first charge by way of hypothecation of plant and
machineries and heavy vehicles acquired under the facility as described
in schedule I(2) to the deed of hypothecation executed on April 29,
2010. There are 5 different loans and the balance is payable in 12
equal quarterly installments. The details of individual loans are as
under :
5. Standard Chartered Bank - Note 4.I.(B)(a)(i)(5) & 4.I.(B) (a)
(ii)(1)
Secured by first charge by way of hypothecation of plant and
machineries acquired under the facility as described in the first
schedule to the memorandum of hypothecation executed on November 10,
2009.
There are 7 different loans repayable in 9 equal quarterly
installments. The details of individual loans are as under :
6. Bank of Maharashtra Note 4.I.(B)(a)(i)(6)
Secured by first charge by way of hypothecation of specific plant and
machineries in favour of the Bank as described in the fourth schedule
of the deed of hypothecation executed on December 26, 2007. The
outstanding loan is repayable in 5 quarterly installment of Rs 6.25
crore .Floating interest @ 12.10% p.a. (base rate 10.60% 1.5% on March
31, 2012) is applicable on the said loan. The period of maturity w.r.t.
the balance sheet date is 9 months.
7. Export Import Bank of India - Note 4.I.(B)(a)(i)(7)
i) Rs 75 crore-Secured by first pari passu charge by way of
hypothecation of plant and machineries acquired under the facility as
described in the third schedule to the deed of hypothecation executed
on June 23, 2010.The loan is repayable in 13 equal quarterly
installments of Rs 5.77 crore. Floating interest @ 11.75% p.a. is
applicable on the said loan. The period of maturity w.r.t the balance
sheet date is 3.25 years.
ii) Rs 105 crore -Secured by (a) first charge on plant and machineries
of the Company as specified in schedule III of the deed of
hypothecation of movable fixed assets executed by the Company on July
23, 2010 and (b) An appropriate charge over the Tunnel Boring Machine
including accessories of a subcontractor as specified in schedule I of
the deed of hypothecation executed by a subcontractor on July 23, 2010
in favour of EXIM Bank. There are two loan of Rs 84 and Rs 21 crore @ 9%
and 9.25% respectively. The loan are repayable in 7 equal half yearly
installments of Rs15 crore (Rs 12 crore Rs 3 crore). The period of
maturity w.r.t. the balance sheet date is 3 years 5 months.
8. Export Import Bank of India - Note 4.I.(B)(a)(i)(8)
Rs 50 crore-The loan is at fixed interest @ 11% p.a. and is repayable in
2 equal quarterly installments of Rs 25 crore each. The security on the
said loan is yet to be created. The period of maturity w.r.t. the
balance sheet date is 2 years .
9. State Bank of Travancore Term Loan Note 4.I.(B)(a)(i)(9)
Secured by a first charge by way of hypothecation of a pool of specific
plant,machinery,tools and accessories acquired / to be acquired by the
Company as specified in schedule II of the deed of hypothecation
executed in favour of the Bank on February 15, 2007 and deed of
hypothecation executed on March 23, 2009. The loan as at March 31, 2012
is repayable in 2 equal quarterly installments of Rs 7.5 crore each.
Floating Interest @ 12.75% p.a.(base rate 10% 275 bps on March
31,2012) is applicable on the said loan.
10. Export Import Bank of India Note 4.I.(B)(a)(ii)(3)
Secured by (a) first, pari pasu charge on plant and machineries of the
Company, as specified in schedule V of the Deed of hypothecation
executed on September 27, 2010; (b) An undertaking for pledge of
50,05,000 of equity shares held by the Company in the share capital of
HCC Mauritius Enterprises Ltd. in favour of EXIM Bank; (c) An
undertaking by HCC Mauritius Enterprises Ltd. for non- disposal of its
shareholding in Steiner AG, Switzerland. The foreign currency loan
(ECB) is repayable 10 equal quarterly installments of Rs 5.21 crore.
Floating interest @ 4.50% p.a.(L 400 bps) is applicable on the said
loan. The period of maturity w.r.t. the balance sheet date is 3.5
years.
11. Toronto Dominion LLC -Note 4.I.(B)(a)(ii)(4)
Secured by way of first priority mortgage and security interest to and
in favor of Wilmington Trust Company (the "Security Trustee") on one
(1) Hawker model 4000 airframe bearing manufacture's serial number
RC-26 together with two installed model PW308 engines more particularly
described under Clause No. 2.1 as per the Aircraft Charge Agreement
executed on January 6, 2011. The Foreign currency loan is repayable in
balance 30 equal quarterly installment of Rs 2.51 crore each. Floating
interest @ 1.47% (3 month Libor i.e. 0.2665% 1.20%) is applicable on
the said loan. The period of maturity w.r.t. the balance sheet date is
7.5 years .
(b) Others:
1. SREI Equipment Finance Private Limited- Note 4.I.(B)(b)
Secured by first charge by way of hypothecation of specific movable
assets as described in the annexure to schedule VIII of the loan
agreement executed on February 3, 2010 (for disbursement of Rs 25
crore), on March 2, 2010 (for disbursement of Rs 50 crore) and on May
16, 2011 (for disbursement of Rs 45 crore).
II. Unsecured Loans
1. Canara Bank -Note 4.II.(i)(1)
The loan of Rs 60 crore is @ 12.75% interest p.a. and was repayable by
bullet payment on December 21, 2011.
The loan of Rs 75 crore is @ 12.75% interest p.a. and is repayble in 3
equal quarterly installments of Rs 25 crore each. The period of maturity
w.r.t. the balance sheet date is 1.5 years .
The loan of Rs 50 crore is @ 12.75% interest p.a. and is repayable by
bullet payment on September 8, 2013. The period of maturity w.r.t. the
balance sheet date is 1.5 years .
The loan of Rs 150 crore is @ 12.75% interest p.a. and is repayable by
bullet payment on December 20, 2012.The period of maturity w.r.t. the
balance sheet date is 9 months .
2. Syndicate Bank -Note 4.II.(i)(2)
The loan of Rs 200 crore is at @10% interest p.a.is due for repayment on
May 29, 2013 by bullet repayment. The period of maturity w.r.t. the
balance sheet date is 1 year 2 months.
3. United Bank of India -Note 4.II.(i)(3)
The loan of Rs 200 crore is at @ 9.20% interest p.a. is due for
repayment on September 28, 2013 by bullet repayment. The period of
maturity w.r.t. the balance sheet date is 1.5 years .
4. State Bank of Mysore -Note 4.II.(i)(4)
The loan of Rs 100 crore @ 9.25% is due for repayment on August 22, 2012
by bullet repayment. The period of maturity w.r.t. the balance sheet
date is 5 months.
5. Axis Bank -Note 4.II.(i)(5)
The loan Rs 150 crore @ 12% is due for repayment on November 22, 2012 by
bullet repayment. The period of maturity w.r.t. the balance sheet date
is 8 months.
6. EXIM Bank -Note 4.II.(i)(6)
The loan of Rs 47 crore is @ 12% interest p.a. and is repayable in 4
equal quarterly installments of Rs 11.75 each. The period of maturity
w.r.t. the balance sheet date is 1.5 years.
The loan of Rs 28.50 crore is @ 12% interest p.a. and is repayable in 2
half yearly installments of Rs 14.25 crore. The period of maturity
w.r.t. the balance sheet date is 6 months.
The loan of Rs 85 crore is @ 11.75% interest p.a. and is repayable in 2
equal installments of Rs 42.50 crore each. The period of maturity w.r.t.
the balance sheet date is 11 months.
7. EXIM Bank -Note 4.II.(ii)
The loan of Rs 50.87 crore is @ 4.5625% floating interest p.a.(Libor 400
bps) and is repayable by bullet repayment in March 2014. The period of
maturity w.r.t. the balance sheet date is 2 years.
1.20 The Board of Directors in its meeting held on March 9, 2012 had
decided to approach the banks through the Corporate Debt Restructuring
(CDR) process for restructuring of the Company's debt. The CDR
Empowered Group (CDR EG) in its meeting held on March 29, 2012 admitted
the Company's proposal under the CDR. The final debt restructuring
proposal is under consideration.
Note 5 Deferred Tax Liabilities (Net)
Deferred Tax liability for the period ended March 31, 2012 has been
provided on the estimated tax computation for the year.
Major components of deferred tax assets and liabilities arising on
account of timing differences are:
1. Cash Credit Limits - Note 9(I)(A)(a)(1) Secured by way of:
a. First charge on all current assets of the Company and
Third/Residual charge on all moveable properties (including moveable
plant and machinery, machinery spares, tools and accessories (excluding
current assets) of the Company in favour of 3i-Infotech Trusteeship
Services Ltd. ("Security Trustee") ranking on pari pasu basis amongst
participating banks up to the limit of Rs 5300 crore (Rupees Five
Thousand Three Hundred Crore Only).
b. Corporate Guarantee of HCC Real Estate Ltd. to the extent of fund
based limits of Rs 1000 crore (Rupees One Thousand Crore Only).
c. The existing mortgage and charge on the immovable properties i.e.
Land & Building at village Tara, District Raged of the Borrower for
collaterally securing the working capital facilities shall continue to
remain as security for working capital facilities too up to the limit
of Rs 4300 crore (Rupees Four Thousand Three Hundred Crore Only).
The cash credit is repayable on demand and carries interest within the
range of 13.50% to 14.50% p.a.
2. Punjab National Bank- Note 9(I)(A)(a)(2)
Short term loan is secured by way of subservient charge on the current
assets of the Company as on present and future.
3. IDBI Bank - Note 9(I)(A)(a)(3)
First Charge on Current Assets & third charge on Moveable Assets .
4. Union Bank of India - Note 9(I)(A)(a)(4)
The charge on the bank from Union Bank is yet to be created.
5. Standard Chartered Bank - Note 9(I)(A)(a)(5)
First charge on current assets and third charge on fixed assets and
CORPORATE GURANTEE FROM hrel For 10000 crore.
1.21 The Company has amounts due to suppliers under the Micro, Small
and Medium Enterprises Development Act 2006, as at March 31,2012.
1.22 Advances from contracted of Rs 1284.80 crore (previous year Rs
1538.65 crore) have been guaranteed by Company's bankers to the extent
of Rs 824.90 crore (previous year Rs 1069.49 crore).
1.23 Loans and advance to related parties represent inter corporate
deposit placed with subsidiaries.
1.24 Inter Corporate Deposit of Rs 603.32 crore given to HCC
Infrastructure Ltd., whose net worth is negative as of March 31, 2012
is considered fully recoverable considering long term prospects of
the underlying business and expected cash flow.
1.25 During the current year, the Hon'able High Court of Calcutta while
upholding the substantial part of the Award of Rs 148.67 crore
disallowed some portion including interest there on amounting to
Rs 35.50 crore. The Company has contested the same in the Supreme
Court. Hence no provision is considered necessary.
1.26 Residual charge over identified receivable of Rs 626.16 crore has
been created in favour of Yes Bank Ltd. in respect of loan availed by
HCC Infrastructure Ltd.
1.27 Disclosure as per Clause 32 of the Listing agreement and as per
Schedule VI of the Companies Act, 1956. Loans and advances/ICD given
to Subsidiaries.
1.28 Inter Corporate Deposits are repayable on demand and interest is
charged at market rates except interest free loan to the tune of Rs Nil
(Previous year Rs 25.50 crore) and Rs 309.40 crore (Previous year Nil)
to Pune Paud Toll Road Company Limited and HCC Real Estate Ltd w.e.f.
2010.
1.29 Loans and Advances include an amount due from an Officer of the
Company Rs 0.05 crore (previous year Rs 0.07 crore). Maximum amount
outstanding for the period Rs 0.07 crore (previous year Rs 0.09 crore).
1.30 The Company (Accounting Standards) Second Amendment Rules 2011
has amended the provision of AS-11 relating to "The Effects of the
Changes in Foreign Exchange Rates" vide notification dated December
29, 2011. In terms of these amendments, the Company has carried over
long term monetary exchange loss of Rs 5.32 crore through "Foreign
Currency Monetary Items Translation Difference Account", to be
amortized over the balance period of such long term asset/ liability.
1.31 Sub-contract, transportation, hire etc. include insurance
Rs 36.24 crore (previous year Rs 36.36 crore), rates and taxes
Rs 168.59 crore (previous year Rs 165.31 crore ) and lease rent
Rs 27.39 crore (previous year Rs 17.23 crore ).
1.32 Light vehicle expenses grouped under construction expenses
include insurance Rs 1.91 crore (previous year Rs 1.74 crore) and
taxes Rs 0.17 crore (previous year Rs 0.12 crore).
1.33 The Company has taken various construction equipments and
vehicles under non cancelable operating leases. The future minimum
lease payments in respect of these as at March 31, 2012 are as follows.
The lease agreement provides for an option to the Company to renew
the lease period at the end of the non cancelable period. There are no
exceptional/restrictive covenants in the lease agreements.
1.34 Remuneration paid to Chairman & Managing Director and the
President & Whole-time Director is in excess of the limits
specified in Schedule XIII of the Companies Act, 1956 by Rs 7.63
crore. The Company has made an application seeking approval from
Central Government. Approval is awaited.
1.35 In accordance with Accounting Standard 11 (Revised) the net
exchange Loss debited to Profit & Loss Account is Rs 9.53 crore
(previous year Loss Rs 8.60 crore).
Mar 31, 2011
1. Basis of Accounting
The Company maintains its accounts on accrual basis. Management makes
estimates and technical and other assumptions regarding the amounts of
income and expenses in accordance with Indian GAAP in the preparation
of the financial statements. Difference between the actual results and
estimates are recognised in the period in which they are determined.
2. Fixed Assets
Fixed assets are stated at cost of acquisition including attributable
interest & financial costs till the date of acquisition/ installation
of the assets and improvement thereon less accumulated depreciation /
amortisation and impairment if any. Intangible assets comprise of
licence fees, other implementation cost for software (ERP) and other
application softwares acquired for inhouse use.
3. Depreciation
Depreciation on fixed assets is provided:
i) In respect of buildings and sheds, furniture and office equipments
on the written down value method (pro-rata on additions and deletions
of the year) at rates prescribed in Schedule XIV of the Companies Act,
1956.
ii) In respect of plant & machinery, heavy vehicles, light vehicles,
helicopter, aircraft and speed boat on the straight line method at
rates prescribed in schedule XIV of the Companies Act, 1956 on a
pro-rata basis.
iii) In respect of computers depreciation is provided on straight line
basis over a period of three years on a pro- rata basis.
iv) The depreciation on assets used for construction has been treated
as period cost.
v) Software and implementation costs including users licence fees of
the Enterprise Resourse Planning (ERP) system and other application
software costs are amortised over a period of 5 years.
vi) Fixed Assets includes cost incurred on the Lease hold Improvements
at 247 park which is being amortised over a period of Nine years.
4. Investments
Investments are classified as long-term and current investments.
Long-term investments are shown at cost or written down value (in case
of other than temporary diminution) and current investments are shown
at cost or market value whichever is lower.
5. Employee Benefits
i) Defined Contribution plan
Contribution to provident fund and superannuation fund is accounted on
accrual basis.
ii) Defined Benefit plan
Gratuity is charged to revenue on the basis of actuarial valuation and
in case of daily rated workmen on actual basis computed on tenure of
service as at the end of the year.
iii) Other Benefits
Short term and long term compensated absenses are provided for based on
actuarial valuation. The actuarial valuation is done as per projected
unit credit method.
The obligation is measured at the present value of the estimated future
cash flows. The discount rates used for determining the present value
of the obligation under
defined benefit plans, is based on market yields on Government
securities as at the Balance Sheet date, having maturity periods
approximating to the terms of the related obligations.
6. Inventories
a) The stock of stores, spares and embedded goods and fuel is valued at
cost (weighted average basis), or net realisable value whichever is
lower.
b) Work-in-Progress is valued at the contract rates and site
mobilisation expenditure of incomplete contracts is stated at cost.
c) Certain loose plant, tools & service equipments costing below Rs. 5
lacs are valued at proportionate written down value @ 3% p.m. over a
period of 32 months.
d) Site mobilisation expenses are presented as a deduction from
advances from contractees to the extent funded by such advances.
7. Provisions, Contingent liabilities and contingent assets
Provisions involving substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resourses.
Contingent liabilities are not recognised but are disclosed in the
notes. Contingent assets are neither recognised nor disclosed in the
financial statements.
8. Borrowing costs
Borrowing costs that are attributable to the acquisition, construction
or production of a qualifying asset are capitalised. Other borrowings
costs are expensed out.
9. Foreign Exchange Translation of Foreign Projects and Accounting of
Foreign Exchange Transactions
a) Current assets and current liabilities are translated at the
exchange rate prevailing on the last day of the year.
b) Gains or losses arising out of remittance / translations at the
year-end are credited / debited to the profit and loss account for the
year except in cases where they relate to acquisition of Fixed assets,
in which case they are adjusted to the carrying cost of such assets.
c) Foreign exchange transactions are converted into Indian rupees at
the prevailing rate on the date of the transaction.
d) Exchange differences arising on contracts are recognised in the
period in which they arise and the premium paid / received is accounted
as expense / income over the period of the contract.
10. Financial Derivatives & Hedging transactions
Financial derivatives and hedging contracts are accounted on the date
of their settlement and realised gain/loss in respect of settled
contracts is recognised in the profit & loss account along with the
underlying transactions.
11. (i) Accounting of construction contracts
The Company follows the percentage completion method, based on the
stage of completion at the balance sheet date, taking into account the
contractual price and revision thereto by estimating total revenue and
total cost till completion of the contract and the profit so determined
has been accounted for proportionate to the percentage of the actual
work done. Revenue is recognized as follows:
a) In case of Item rate contracts on the basis of physical measurement
of work actually completed at the balance sheet date.
b) In case of Lumpsum contracts, revenue is recognized on the
completion of milestones as specified in the contract or as identified
by the management. Foreseeable losses are accounted for as and when
they are determined except to the extent they are expected to be
recovered through claims presented or to be presented to the customer
or in arbitration. Claims are accounted as income in the year of
receipt of arbitration award or acceptance by client of evidence of
acceptance received.
(ii) Accounting of Supply Contracts
Revenue from supply contract is recognized when the substantial risk
and rewards of ownership is transferred to the buyer.
12. Accounting for Joint Venture Contracts
(a) Contracts executed in Joint Venture under work sharing arrangement
(consortium) are accounted in accordance with the accounting policy
followed by the Company as that of an independent contract to the
extent work is executed.
(b) In respect of contracts executed in Integrated Joint Ventures under
profit sharing arrangement (assessed as AOP under Income tax laws), the
services rendered to the Joint Ventures are accounted as income on
accrual basis. The profit / loss is accounted for, as and when it is
determined by the Joint Venture and the net investment in the Joint
Venture is reflected as investments, loans & advances or current
liabilities.
13. Taxation
The tax expense comprises of current tax & deferred tax charged or
credited to the profit and loss account for the year. Current tax is
calculated in accordance with the tax laws applicable to the current
financial year. The deferred tax charge or credit is recognised using
the tax rates and tax laws that have been enacted by the balance sheet
date. Where there are unabsorbed depreciation or carry forward losses,
deferred tax assets are recognised only if there is virtual certainty
of realisation of such assets. Other deferred tax assets are recognised
only to the extent there is reasonable certainty of realisation in
future. At each balance sheet date, recognised and unrecognised
deferred tax assets are reviewed.
14. Leases
Lease rentals in respect of assets acquired under operating lease are
charged to Profit and Loss account.
15. Impairment of Assets
The Company makes an assessment of any indicator that may lead to
impairment of assets on an annual basis. An asset is treated as
impaired when the carrying cost of the asset exceeds its recoverable
value, which is higher of net selling price and value in use. Any
impairment loss is charged to profit and loss account in the year in
which it is identified as impaired.
16. Employees Stock Option Plan
In respect of the stock options granted pursuant to the Companys stock
option scheme, market value of the Companys shares as on the grant
date was equal to the par value for the options granted, hence no
accounting entries as per ESOP guidelines are required to be made.
Mar 31, 2010
1. Basis of Accounting
The Company maintains its accounts on accrual basis. Management makes
estimates and technical and other assumptions regarding the amounts of
income and expenses in accordance with GAAP in the preparation of the
financial statements. Difference between the actual results and
estimates are recognised in the period in which they are determined.
2. Fixed Assets
Fixed assets are stated at cost of acquisition including attributable
interest & financial costs till the date of acquisition/ installation
of the assets and improvement thereon less accumulated depreciation /
amortisation.
Intangible assets comprise of licence fees, other implementation cost
for software (ERP) and other application softwares acquired for inhouse
use.
3. Depreciation
Depreciation on fixed assets is provided:
i) In respect of buildings and sheds, furniture and office equipments
on the written down value method (pro-rata on additions and deletions
of the year) at rates prescribed in Schedule XIV of the Companies Act,
1956.
ii) In respect of plant & machinery, heavy vehicles, light vehicles,
helicopter, aircraft and speed boat on the straight line method at
rates prescribed in schedule XIV of the Companies Act, 1956 on a
pro-rata basis.
iii) In respect of computers depreciation is provided on straight line
basis over a period of three years on a pro- rata basis.
iv) The depreciation on assets used for construction has been treated
as period cost.
v) Software and implementation costs including users licence fees of
the Enterprise Resourse Planning (ERP) system and other application
software costs are amortised over a period of 5 years.
4. Investments
Investments are classified as long-term and current investments.
Long-term investments are shown at cost or written down value (in case
of other than temporary diminution) and current investments are shown
at cost or market value whichever is lower.
5. Employee Benefits
i) Defined Contribution plan
Contribution to provident fund and superannuation fund is accounted on
accrual basis.
ii) Defined Benefit plan
Gratuity is charged to revenue on the basis of actuarial valuation and
in case of daily rated workmen on actual basis computed on tenure of
service as at the end of the year.
iii) Other Benefits
Short term and long term compensated absenses are provided for based on
actuarial valuation.
The actuarial valuation is done as per projected unit credit method.
The obligation is measured at the present value of the estimated future
cash flows. The discount rates used for determining the present value
of the obligation under defined benefit plans, is based on market
yields on Government securities as at the Balance Sheet date, having
maturity periods approximating to the terms of the related obligations.
6. Inventories
a) The stock of stores, spares and embedded goods and fuel is valued at
cost (weighted average basis), or net realisable value whichever is
lower.
b) Work-in-Progress is valued at the contract rates and site
mobilisation expenditure of incomplete contracts is stated at cost.
c) Certain loose plant, tools & service equipments costing below Rs. 5
lacs are valued at proportionate written down value @ 3% p.m. over a
period of 32 months.
d) Site mobilisation expenses are presented as a deduction from
advances from contractees to the extent funded by such advances.
7. Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resourses.
Contingent liabilities are not recognised but are disclosed in the
notes. Contingent assets are neither recognised nor disclosed in the
financial statements.
8. Borrowing Costs
Borrowing costs that are attributable to the acquisition, construction
or production of a qualifying asset are capitalised. Other borrowings
costs are expensed out.
9. Foreign Exchange Translation of Foreign Projects and Accounting of
Foreign Exchange Transactions
a) Current assets and current liabilities are translated at the
exchange rate prevailing on the last day of the year.
b) Gains or losses arising out of remittance / translations at the
year-end are credited debited to the profit and loss account for the
year except in cases where they relate to acquisition of Fixed assets,
in which case they are adjusted to the carrying cost of such assets.
c) Foreign exchange transactions are converted into Indian rupees at
the prevailing rate on the date of the transaction.
d) Exchange differences arising on contracts are recognised in the
period in which they arise and the premium paid / received is accounted
as expense / income over the period of the contract.
10. Financial Derivatives 8e Hedg "s ""S-sactiois
Financial derivatives and hedging contracts are accounted on the date
of their settlement and realised gain/ loss in respect of settled
contracts is recognised in the profit & loss account along with the
underlying transactions.
11. Accounting of Construction Contracts
The Company follows the percentage completion method, based on the
stage of completion at the balance sheet date, taking into account the
contractual price and revision thereto by estimating total revenue and
total cost till completion of the contract and the profit so determined
has been accounted for proportionate to the percentage of the actual
work done.
Revenue is recognized as follows:
a) In case of Item rate contracts on the basis of physical measurement
of work actually completed at the balance sheet date.
b) In case of lumpsum contracts, revenue is recognized on the
completion of milestones as specified in the contract or as identified
by the management.
Foreseeable losses are accounted for as and when they are determined
except to the extent they are expected to be recovered through claims
presented or to be presented to the customer or in arbitration.
Claims are accounted as income in the year of receipt of arbitration
award or acceptance by client or evidence of acceptance received.
12. Accounting for Joint Venture Contracts
(a) Contracts executed in Joint Venture under work sharing arrangement
(consortium) are accounted in accordance with the accounting policy
followed by the Company as that of an independent contract to the
extent work is executed.
(b) In respect of contracts executed in Integrated Joint Ventures under
profit sharing arrangement (assessed as AOP under Income tax laws), the
services rendered to the Joint Ventures are accounted as income on
accrual basis. The profit / loss is accounted for, as and when it is
determined by the Joint Venture and the net investment in the Joint
Venture is reflected as investments, loans & advances or current
liabilities.
13. Taxation
The tax expense comprises of current tax & deferred tax charged or
credited to the profit and loss account for the year. Current tax is
calculated in accordance with the tax laws applicable to the current
financial year. The deferred tax charge or credit is recognised using
the tax rates and tax laws that have been enacted by the balance sheet
date. Where there are unabsorbed depreciation or carry forward losses,
deferred tax assets are recognised only if there is virtual certainty
of realisation of such assets. Other deferred tax assets are recognised
only to the extent there is reasonable certainty of realisation in
future. At each balance sheet date, recognised and unrecognised
deferred tax assets are reviewed.
14. Leases
Lease rentals in respect of assets aquired under operating lease are
charged to Pofit and Loss account.
15. Impairment of Assets
The Company makes an assessment of any indicator that may lead to
impairment of assets on an annual basis.
An asset is treated as an impaired when the carrying cost of the asset
exceeds its recoverable value, which is higher of net selling price and
value in use. Any impairment loss is charged to profit and loss acco
unt in the year in which it is identified
16. Employees Stock Option Plan
In respect of the stock options granted pursuant to the Companys stock
option scheme, market value of the Companys shares as on the grant
date was equal to the par value for the options granted, hence no
accounting entries as per ESOP guidelines are required to be made.
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