Accounting Policies of Marmagoa Steel Ltd. Company

Mar 31, 2015

A) System of Accounting:

The financial statements are prepared on accrual basis and are in accordance with the historical cost convention.

b) Sales:

Sales are exclusive of Excise Duties and Value Added Tax and are recognized on transfer of property in the goods.

c) Accounting for Fixed Assets:

Fixed Assets are stated at cost of acquisition or construction as reduced by MODVAT/CENVAT credit availed and depreciation. All costs relating to the acquisition and installation of fixed assets including financing and other costs incurred upto the date of commencement of commercial production/ the asset was put to use, are included in the cost of fixed assets.

d) Depreciation Accounting:

Depreciation on assets is written off in the manner prescribed in Schedule II of the Companies Act 2013 with effect from 1st April 2014.

e) Valuation of Inventories:

Finished Goods are valued at lower of cost or net realizable value. Raw materials, stores & spare parts are valued on Weighted Average Cost (on FIFO method). Work in Process is valued at cost. VAT component is not considered for valuation. Excise duty paid is included in the valuation of stock of finished goods at depots.

f) Accounting of Investment:

Investments are shown at Cost.

g) Accounting for Employee benefits:

i) Gratuity: Liability on account of gratuity payable to the employees if they were to retire from service on 31st March 2015 amounted to Rs 244.45 Lakhs (previous year - Rs. 242.95 Lakhs). Provision has been made for the said liability in the books. The Company has set up a Recognized Gratuity fund which has taken a Group Gratuity cum Life Assurance Scheme Policy of Life Insurance Corporation of India covering all the employees of the Company. The amount funded in the said policy as on 31st March 2015 is Rs. 15.82 Lakhs (Previous year Rs. 14.51 Lakhs). The balance amount of provision with the Company is Rs. 228.63 Lakhs.

ii) Leave Encashment Benefit: Liability on account of Leave Encashment benefit should all the employees retire from the Company computed up to 31st March 2013 amounts to Rs.71.22 Lakhs (Previous Year Rs.71.22 Lakhs). Although provision has been made for the above sum in the books, the liability is not funded. However, incremental provision for the previous and current reporting periods has not been made as the entire operations were shut since May 2013.

iii) Bonus and Ex-Gratia Payment: As the entire operations were shut since May 2013, no Bonus is provided for the previous and current reporting periods. A sum of Rs.4.81 lakhs provided in earlier years is outstanding as on 31.03.2015. Ex-Gratia payments payable on account of the informal practice of the Company has not been provided as in last year on account of shutting down of operations since May 2013. Similarly, salary for the closure period has not been paid based on 'no work, no pay'.

iv) Leave Travel Allowance: Employees are entitled for reimbursement of leave travel expenses/encashment, subject to a limit of one month's salary (Basic DA) per year. However, as the entire operations were shut since May 2013, no provision is made for the previous and current reporting periods. A sum of Rs.19.42 lakhs provided in earlier years is outstanding as on 31.03.2015.

h) Leases:

Keeping in view the nature of the Operating Leases and the terms and conditions there under; rentals for the year in respect of assets taken on operating leases up to 31.03.2015 have been charged to the profit and loss account on accrual basis. The Company had no finance leases or non-cancelable operating leases current during the year.

i) Segment Reporting:

The Board of Directors of the Company has identified the business segment as the primary segment and the geographical segment as the secondary segment. The Company has only one segment comprising of manufacture and sale of Steel Billets and its Rolled Products, restricted only to the geographical segment of India.

j) RELATED PARTY DISCLOSURES

Transaction value Sl Name of Nature of Nature of 2014-15 2013-14 no. related party relationship transaction (Rs in (Rs in Lakhs) Lakhs)

1 Sri R. K. Key Remuneration 1.89 5.54 Radhakrishna management given personnel - Managing director

2 Chandor Holding Advance Given - - Engineering & Company Trading Repayment - - Company Pvt Ltd

Outstanding balance Sl Name of 31.03.15 31.03.14 no. related party (Rs in (Rs in Lakhs) Lakhs)

1 Sri R. K. - - Radhakrishna

2 Chandor 52.52 52.52 Engineering & (Dr) (Dr) Trading

k) Accounting for Taxes on Income:

In compliance with the Accounting Standard 22 on 'Accounting for Taxes on Income', the Company has recognized a net cumulative deferred tax liability of Rs. 300.50 Lakhs (previous year Rs. 323.20 Lakhs) & deferred tax assets of Rs. 319.82 Lakhs (previous year Rs. 321.17 Lakhs). Deferred tax assets created on account of items u/s 40(a)(ia) and 43B of the Income Tax Act, 1961 amounts to Rs.6.44 lakhs (Previous Year 127.36 Lakhs).

l) Earnings per Share:

The basic earnings per share has been calculated by dividing the profits/ loss for the year attributed to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year and the immediately preceding year were 6,09,43,000.

m) Impairment of assets:

The Company would recognize impairment of assets based on the technical evaluation thereto conducted at periodical intervals.

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Mar 31, 2014

A) System of Accounting:

The financial statements are prepared on accrual basis and are in accordance with the historical cost convention.

b) Sales:

Sales are exclusive of Excise Duties and Value Added Tax and are recognized on transfer of property in the goods.

c) Accounting for Fixed Assets:

Fixed Assets are stated at cost of acquisition or construction as reduced by MODVAT/CENVAT credit availed and depreciation. All costs relating to the acquisition and installation of fixed assets including financing and other costs incurred upto the date of commencement of commercial production/ the asset was put to use, are included in the cost of fixed assets.

d) Depreciation Accounting:

Depreciation on assets is written off on Straight Line Method at the rates and in the manner prescribed in Schedule XIV to The Companies Act, 1956. Assets costing upto Rs 5000 are depreciated fully during the year of purchase/ capitalization. Double and triple shift of depreciation has not been written off from the inception of the Company. The depreciation not so written off up to date works out to be Rs.106.66 Lakhs. (Previous year Rs.106.29 Lakhs)

e) Valuation of Inventories:

Finished Goods are valued at lower of cost or net realizable value. Raw materials, stores & spare parts are valued on Weighted Average Cost (on FIFO method). Work in Process is valued at cost. VAT component is not considered for valuation. Excise duty paid is included in the valuation of stock of finished goods at depots.

f) Accounting of Investment:

Investments are shown at Cost.

g) Accounting for Employee benefits:

i) Gratuity: Liability on account of gratuity payable to the employees if they were to retire from service on 31st March 2014 amounted to Rs 242.95 Lakhs (previous year - Rs. 232.63 Lakhs). Provision has been made for the said liability in the books. The Company has set up a Recognized Gratuity fund which has taken a Group Gratuity cum Life Assurance Scheme Policy of Life Insurance Corporation of India covering all the employees of the Company. The amount funded in the said policy as on 31st March 2014 is Rs. 14.51 Lakhs (Previous year Rs. 130.44 Lakhs). The balance amount of provision with the Company is Rs. 228.44 Lakhs.

ii) Leave Encashment Benefit: Liability on account of Leave Encashment benefit should all the employees retires from the Company computed up to 31st March 2013 amounts to Rs.71.22 Lakhs (Previous Year Rs.88.58 Lakhs). Although provision has been made for the above sum in the books, the liability is not funded. However, incremental provision for the current reporting period has not been made as the entire operations were shut since June 2013.

iii) Bonus and Ex-Gratia Payment: As the entire operations were shut since June 2013, no Bonus is provided for the current reporting period (Previous year Rs.4.08 Lakhs). Ex-Gratia payments payable on account of the informal practice of the Company has not been provided as in last year on account of losses incurred by the company and the financial stringency the company is facing.

iv) Leave Travel Allowance: Employees are entitled for reimbursement of leave travel expenses/ encashment, subject to a limit of one month''s salary (Basic DA) per year. However, as the entire operations were shut since June 2013, no provision is made for the current reporting period (Previous Year Rs. 35.84 Lakhs). A sum of Rs.19.42 lakhs provided in earlier years is outstanding as on 31.03.2014.

h) Leases:

Keeping in view the nature of the Operating Leases and the terms and conditions there under; rentals for the year in respect of assets taken on operating leases up to 31.03.2013 have been charged to the profit and loss account on accrual basis. The Company had no finance leases or non-cancelable operating leases current during the year.

i) Segment Reporting:

The Board of Directors of the Company has identified the business segment as the primary segment and the geographical segment as the secondary segment. The Company has only one segment comprising of manufacture and sale of Steel Billets and its Rolled Products, restricted only to the geographical segment of India.

j) RELATED PARTY DISCLOSURES

k) Accounting for Taxes on Income:

In compliance with the Accounting Standard 22 on ‘Accounting for Taxes on Income'', the Company has recognized a net cumulative deferred tax liability of Rs. 323.20 Lakhs (previous year Rs. 352.14 Lakhs) & deferred tax assets of Rs. 321.17 Lakhs (previous year Rs. 216.95 Lakhs). Deferred tax assets created on account of items u/s 40(a)(ia) and 43B of the Income Tax Act, 1961 amounts to Rs. 127.36 Lakhs (Previous Year 194.54 Lakhs)

l) Earnings per Share:

The basic earnings per share has been calculated by dividing the profits/ loss for the year attributed to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year and the immediately preceding year were 6,09,43,000.

m) Impairment of assets:

In the opinion of the Board there are no indications that any of the assets of the Company are or may become impaired in the near future.

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Mar 31, 2013

A) System of Accounting:

The financial statements are prepared on accrual basis and are in accordance with the historical cost convention.

b) Sales:

Sales are exclusive of Excise Duties and Value Added Tax and are recognized on transfer of property in the goods.

c) Accounting for Fixed Assets:

Fixed Assets are stated at cost of acquisition or construction as reduced by MODVAT/CENVAT credit availed and depreciation. All costs relating to the acquisition and installation of fixed assets including financing and other costs incurred upto the date of commencement of commercial production/ the asset was put to use, are included in the cost of fixed assets.

d) Depreciation Accounting:

Depreciation on assets is written off on Straight Line Method at the rates and in the manner prescribed in Schedule XIV to The Companies Act, 1956. Assets costing upto Rs. 5000 are depreciated fully during the year of purchase/ capitalization. Double and triple shift of depreciation has not been written off from the inception of the Company. The depreciation not so written off up to date works out to be Rs.106.29 Lakhs. (Previous year Rs.105.63 Lakhs)

e) Valuation of Inventories:

Finished Goods are valued at lower of cost or net realizable value. Raw materials, stores & spare parts are valued on Weighted Average Cost (on FIFO method). Work in Process is valued at cost. VAT component is not considered for valuation. Excise duty paid is included in the valuation of stock of finished goods at depots.

f) Accounting of Investment:

Investments are shown at Cost.

g) Accounting for Employee benefits:

i) Gratuity: Liability on account of gratuity payable to the employees if they were to retire from service on 31st March 2013 amounted to Rs. 232.63 Lakhs (previous year - Rs. 238.13 Lakhs). Provision has been made for the said liability in the books. The Company has set up a Recognized Gratuity fund which has taken a Group Gratuity cum Life Assurance Scheme Policy of Life Insurance Corporation of India covering all the employees of the Company. The amount funded in the said policy as on 31st March 2013 is Rs. 130.44 Lakhs (Previous year Rs. 120.50 Lakhs). The balance amount of provision with the Company is Rs. 102.19 Lakhs.

ii) Leave Encashment Benefit: Liability on account of Leave Encashment benefit should all the employees retire from the Company on 31st March 2013 amounts to Rs.71.22 Lakhs (PY Rs.88.58 Lakhs). Provision has been made for the above sum in the books. The liability is not funded.

iii) Bonus and Ex-Gratia Payment: Bonus payable under the Payment of Bonus Act amounts to Rs. 4.08 Lakhs (Previous year Rs.4.93 Lakhs) and the same has been provided in the books. Ex-Gratia payments payable on account of the informal practice of the Company has not been provided as in last year on account of losses incurred by the company and the financial stringency the company is facing.

iv) Leave Travel Allowance: Employees are entitled for reimbursement of leave travel expenses/ encashment, subject to a limit of one month''s salary (Basic DA) per year. The liability on this account for the year works out to Rs. 35.84 Lakhs (PY Rs. 21.51 Lakhs). The same has been provided in the books.

h) Leases:

Keeping in view the nature of the Operating Leases and the terms and conditions there under; rentals for the year in respect of assets taken on operating leases up to 31.03.2013 have been charged to the profit and loss account on accrual basis. The Company had no finance leases or non-cancelable operating leases current during the year.

i) Segment Reporting:

The Board of Directors of the Company has identified the business segment as the primary segment and the geographical segment as the secondary segment. The Company has only one segment comprising of manufacture and sale of Steel Billets and its Rolled Products, restricted only to the geographical segment of India.

k) Accounting for Taxes on Income:

In compliance with the Accounting Standard 22 on ''Accounting for Taxes on Income'', the Company has recognized a net cumulative deferred tax liability of Rs. 352.14 Lakhs (previous year Rs. 378.86 Lakhs) & deferred tax assets of Rs. 216.95 Lakhs (previous year Rs. 140.51 Lakhs). Deferred tax assets created on account of items u/s 40(a)(ia) and 43B of the Income Tax Act, 1961 amounts to Rs. 194.54 Lakhs (Previous Year Rs. 119.28 Lakhs)

l) Earnings per Share:

The basic earnings per share has been calculated by dividing the profits/ loss for the year attributed to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year and the immediately preceding year were 6,09,43,000.

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Mar 31, 2012

A) System of Accounting:

The financial statements are prepared on accrual basis and are in accordance with the historical cost convention.

b) Sales:

Sales are exclusive of Excise Duties and Value Added Tax and are recognized on transfer of property in the goods.

c) Accounting for Fixed Assets:

Fixed Assets are stated at cost of acquisition or construction as reduced by MODVAT/CENVAT credit availed and depreciation. All costs relating to the acquisition and installation of fixed assets including financing and other costs incurred upto the date of commencement of commercial production/ the asset was put to use, are included in the cost of fixed assets.

d) Depreciation Accounting:

Depreciation on assets is written off on Straight Line Method at the rates and in the manner prescribed in Schedule XIV to The Companies Act, 1956. Assets costing upto Rs. 5000 are ! depreciated fully during the year of purchase/capitalization. Double and triple shift of depreciation has not been written off from the inception of the Company. The depreciation not so written off up to date works out to be Rs. 105.63 Lakhs. (Previous year Rs. 104.63 Lakhs)

e) Valuation of Inventories:

Finished Goods are valued at lower of cost or net realizable value. Raw materials and stores & spare parts are valued on Weighted Average Cost (on FIFO method). Work in Process is valued at cost. VAT component is not considered for valuation. Excise duty paid is included in the valuation of stock of finished goods at depots.

f) Accounting of Investment:

Investments are shown at Cost. *

g) Accounting for Employee benefits:

i) Gratuity: Liability on account of gratuity payable to the employees if they were to retire from service on 31st March 2012 amounted to Rs. 238.13 Lakhs (previous year - Rs. 210.74 Lakhs). Provision has been made for the said liability in the books. The Company has set up a Recognized Gratuity fund which has taken a Group Gratuity cum Life Assurance Scheme Policy of Life Insurance Corporation of India covering all the employees of the Company.

The amount funded in the said policy as on 31st March 2012 is Rs. 120.50 Lakhs (Previous year Rs. 96.88 Lakhs). The balance amount of provision with the Company is Rs. 117.63 Lakhs.

ii) Leave Encashment Benefit: Liability on account of Leave Encashment benefit should all the employees retires from the Company on 31s1 March 2012 amounts to Rs. 88.58 Lakhs (PY Rs. 75.94 Lakhs). Provision has been made for the above sum in the books. The liability is not funded.

iii) Bonus and Ex-Gratia Payment: Bonus payable under the Payment of Bonus Act amounts to Rs. 4.93 Lakhs (Previous year Rs. 6.19 Lakhs) and the same has been provided in the books. Ex-Gratia payments payable on account of the informal practice of the Company has not been provided as in last year on account of losses incurred by the company and the financial stringency the company is facing.

iv) Leave Travel Allowance: Employees are entitled for reimbursement of leave travel expenses/ encashment, subject to a limit of one month's salary (Basic DA) per year. The liability on this account for the year works out to Rs. 21.51 Lakhs (PY Rs. 19.72 Lakhs). The same has been provided in the books.

h) Leases:

Keeping in view the nature of the Operating Leases and the terms and conditions thereunder; rentals for the year in respect of assets taken on operating leases up to 31.03.2012 have been charged to the profit and loss account on accrual basis. The Company had no finance leases or non-cancelable operating leases current during the year.

i) Segment Reporting:

The Board of Directors of the Company has identified the business segment as the primary segment and the geographical segment as the secondary segment. The Company has only one segment comprising of manufacture and sale of Steel Billets and its Rolled Products, restricted only to the geographical segment of India.

k) Accounting for Taxes on Income:

In compliance with the Accounting Standard 22 on 'Accounting for taxes on Income', the Company has recognized a net cumulative deferred tax liability of Rs. 378.86 Lakhs (previous year Rs. 408.95 Lakhs). Deferred tax assets of Rs. 140.51 Lakhs (previous year Rs. 118.73 Lakhs). Deferred tax assets created on account of items u/s 40(a)(ia) and 43B of the Income Tax Act, 1961 amounts to Rs. 119.28 Lakhs (Previous Year Rs. 26.34 Lakhs)

I) Earnings per Share:

The basic earnings per share has been calculated by dividing the profits/ loss for the year attributed to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year and the immediately preceding year were 6,09,43,000.

m) Impairment of assets:

In the opinion of the Board there are no indications that any of the assets of the Company are or may be impaired in the near future.

The above long term borrowings is from Rukmini Finance Private Limited, a related party. There are no terms stipulated for repayment of loan which carries interest at 12.50%. There is no default in terms of repayment of principal and interest.

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Mar 31, 2010

A) System of Accounting:

The financial statements are prepared on accrual basis and are in accordance with the historical cost convention.

b) Sales:

Sales are exclusive of Excise Duties and Value Added Tax and are recognized on transfer of property in the goods.

c) Accounting for Fixed Assets:

Fixed Assets are stated at cost of acquisition or construction as reduced by modvat/cenvat credit availed and depreciation. All costs relating to the acquisition and installation of fixed assets including financing and other costs incurred upto the date of commencement of commercial production/ the asset was put to use, are included in the cost of fixed assets.

d) Depreciation Accounting:

Depreciation on assets is written off on Straight Line Method at the rates and in the manner prescribed in Schedule XIV to The Companies Act, 1956. Assets costing upto Rs 5000 are depreciated fully during the year of purchase/ capitalization. Double and triple shift of depreciation has not been written off from the inception of the Company. The depreciation not so written off up to date works out to be Rs.103.95 lakhs. (Previous year Rs.102.88 lakhs)

e) Valuation of Inventories:

Finished Goods are valued at lower of cost or net realisable value. Raw materials and stores & spare parts are valued on Weighted Average Cost (on FIFO method). Work in Process is valued at cost. VAT component has not been considered for valuation. Excise duty paid has been included in the valuation of stock of finished goods at depots. f) Accounting of Investment:

Investments are shown at Cost. g) Accounting for Employee benefits:

i) Gratuity: Liability on account of gratuity payable to the employees if they were to retire from service on 31st March 2010 amounted to Rs 143.55 Lakhs (previous year - Rs. 127.36 Lakhs). Provision has been made for the said liability in the books. The Company has set up a Recognized Gratuity fund which has taken a Group Gratuity cum Life Assurance Scheme Policy of Life Insurance Corporation of India covering all the employees of the Company. The amount funded in the said policy as on 31" March 2010 is Rs. 79.90 lakhs (Previous year Rs. 66.34 lakhs). The balance amount of provision with the Company is Rs. 63.65 lakhs. ii) Leave Encashment Benefit: Liability on account of Leave Encashment benefit should all the employees retire from the Company on 31" March 2010 amounts to Rs.65.41 Lakhs (PY 62.56 Lakhs).Provision has been made for the above sum in the books. The liability is not funded. iii) Bonus and Ex-Gratia Payment: Bonus payable under the Payment of Bonus Act and Ex-Gratia payments payable on account of the informal practice of the Company amounts to Rs.22.95 lakhs. (Previous year Rs.39.72 Lakhs).The same has been provided in the books. iv) Leave Travel Allowance: Employees are entitled for reimbursement of leave travel expenses/encashment, subject to a limit of one months salary (Basic + DA) per year. The liabilityn on this account for the year works out to Rs.21.48 Lakhs (PY Rs.18.49 Lakhs). The same has been provided in the books.

h) Leases:

Keeping in view the nature of the Operating Leases and the terms and conditions thereunder; rentals for the year in respect of assets taken on operating leases upto 31.03.2010 have been charged to the profit and loss account on accrual basis. The Company had no finance leases or non-cancelable operating leases current during the year.

i) Segment Reporting:

The Board of Directors of the Company has identified the business segment as the primary segment and the geographical segment as the secondary segment. The Company has only one segment comprising of manufacture and sale of Steel Billets and its Rolled Products, restricted only to the geographical segment of India.

k) Accounting for Taxes on Income:

In compliance with the Accounting Standard 22 on Accounting for Taxes on Income, the Company has recognized a net cumulative deferred tax liability of Rs.428.26 Lakhs (previous year Rs. 380.91 lakhs). Deferred tax assets of Rs. 20.86 Lakhs ( previous year Rs. 3.59 lakhs) recognized in earlier years has been reversed during the current year. Deferred tax assets created on account of items u/s 40(a)(ia) and 43B of the Income Tax Act,1961 amounts to Rs 72.64 Lakhs (Previous Year 87.25 Lakhs)

l) Earnings per Share:

The basic earning per share has been calculated by dividing the profits/ loss for the year attributed to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year and the immediately preceding year were 6,09,43,000.

m) Impairment of assets:

In the opinion of the Board there are no indications that any of the assets of the Company are or may be impaired in the near future.