Accounting Policies of SAL Steel Ltd. Company
Mar 31, 2018
Notes to financial statement for the year ended 31 March 2018
A. DISCLOSURE OF ACCOUNTING POLICIES
1.1 CORPORATE INFORMATION
The Company is a Public Company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on National Stock Exchange and Bombay Stock Exchange.The company is engaged in manufacturing Sponge Iron, Ferro Alloys and power and the same are sold in the domestic market. Because of the Captive power generation, company has advantage of low power cost per unit of manufacturing. Company is generating 40 MW Power from waste Heat recovery Boiler & Fluidized Bed Combustion boiler with economic price. Power generated is used for captive consumption and sur-plus power is sold resulting profit.
1.2 BASIS OF PREPARATION OF FINANCIAL STATEMENT
The Financial Statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015. The Financial Statements up to year ended 31 March 2017 were prepared in accordance with accounting standards notified under the Company (Accounting Standards) Rules 2006 read with Rule 7(1) of the Companies (Accounts) Rules, 2014 and the provisions of the Companies Act, 2013 (hereinafter referred to as the âprevious GAAPâ).
These Financial Statements are the first financial statements of the company under Ind AS - the transition date being1st April 2016. The information as to how the company has adopted Ind AS and the impact thereof on Companyâs financial position, financial performance and cash flows is presented in notes to financial statements.
The financial statements have been prepared under the historical cost basis.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. The Companyâs management evaluates all recently issued or revised accounting standards on an on-going basis.
The financial statements are presented in Indian Rupees (âINRâ). Where changes are made in presentation, the comparative figures of the previous year are regrouped and re-arranged accordingly.
1.3 Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assump-tions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting year end. Although these estimates are based upon managementâs best knowledge of current events and actions, actual results could differ from these estimates.
1.4 PROPERTY, PLANT AND EQUIPMENT:
i) Property, Plant and Equipment are stated at original cost (net of tax/dutycreditavailed)less accumulated depreciation and impairment losses. Cost includes cost of acquisition, construction and installation, taxes, duties, freight, other incidental expenses related to the acquisition, and pre-operative expenses including attributable borrowing costs incurred during pre-operational period.
ii) Subsequent costs are included in the assetâs carrying amount or recognized as a separate asset, as appropriate, 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. The carrying amount of any component as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit and loss during the reporting period in which they are incurred.
iii) Assets which are not ready for their intended use on reporting date are carried as capital work-in-progress at cost, comprising direct cost and related incidental expenses.
iv) On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment as at 1st April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment .
v) Property, Plant and Equipment are depreciated and/or amortised on the basis of their useful lives as notified in Schedule II to the Companies Act, 2013. The assetsâ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
vi) Depreciation in respect of additions to assets has been charged on pro rata basis with reference to the period when the assets are ready for use.
vii) An assetâs carrying amount is written down immediately on discontinuation to its recoverable amount if the assetâs carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in Profit/ Loss on Sale and Discard of Fixed Assets.
viii) Useful lives of the Property, Plant and Equipment as notified in Schedule II to the Companies Act, 2013 are as follows : Buildings - 3 to 60 years
Plant and Equipments - 15 to 25 years Furniture and Fixtures - 10 years Vehicles - 8 to 10 years Office Equipments - 5 to 10 years
ix) At each balance sheet date, the Company reviews the carrying amount of property, plant and equipment to determine whether there is any indication of impairment loss. If any such indication exists, the recoverable amount of the assets is estimated in order to determine the extent of impairment loss. The recoverable amount is higher of the net selling price and the value in use, determined by discounting the estimated future cash flows expected from the continuing use of the asset to their present value.
1.5 INTANGIBLE ASSETS:
i) Intangible assets acquired by payment e.g. Computer Software are disclosed at cost less amortization on a straight-line basis over its esti-mated useful life.
ii) Intangible assets are carried at cost, net of accumulated amortization and impairment loss, if any.
iii) On transition to Ind AS, the Company has elected to continue with the carrying value of all of its intangible assets as at 1st April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of the intangible assets.
iv) Intangible assets are amortised on straight-line method as follows :
Computer Software - 5 years
v) At each balance sheet date, the Company reviews the carrying amount of intangible assets to determine whether there is any indication of impair-ment loss. If any such indication exists, the recoverable amount of the assets is estimated in order to determine the extent of impairment loss. The recoverable amount is higher of the net selling price and the value in use, determined by discounting the estimated future cash flows expected from the continuing use of the asset to their present value.
1.6 Revenue Recognition
i) Revenue comprises of all economic benefits that arise in the ordinary course of activities of the Company which result in increase in Equity, other than increases relating to contributions from equity participants. Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable.
ii) Sale of Goods: Revenue from sales of goods is recognized on transfer of significant risks and rewards of ownership to the customers. Revenue shown in the Statement of Profit and Loss are inclusive of Excise Duty upto 30th June 2017 and the value of self-consumption, but excludes, returns, trade discounts, cash discounts, value added tax, central sales tax. Excise Duty expense has been disclosed in Statement of Profit and Loss as expenditure.
iii) Services: Revenue from Services are recognized as and when the services are rendered.
iv) Interest: Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
v) Export Benefits are accounted on accrual basis.
vi) Dividend income is recognized when right to receive is established.
1.7 EMPLOYEE BENEFITS:
i) Short-term employee benefits are recognized as an expense at the undis-counted amount in the Statement of Profit and Loss of the year in which the related service is rendered.
ii) Post Employment and Retirement benefits in the form of Gratuity are considered as defined benefit obligations and is provided for on the basis of third party actuarial valuation, using the projected unit credit method, as at the date of the Balance Sheet. Every Employee who has completed five years or more of service is entitled to Gratuity on terms not less favorable than the provisions of The Payment of Gratuity Act, 1972.
iii) The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of reporting period on government bonds that have terms ap-proximating to the terms of the related obligation.
iv) Employee benefits in the form of Provident Fund is considered as defined contribution plan and the contributions to Employeesâ Provident Fund Organization established under The Employeesâ Provident Fund and Miscellaneous Provisions Act 1952 is charged to the Statement of Profit and Loss of the year when the contributions to the respective funds are due. The Company pays provident fund contributions to publicly administered provident funds as per local regulations. The Company has no further payment obligations once the contributions have been paid.
1.8 Valuation of Inventories
i) The cost of inventories have been computed to include all cost of purchases, cost of conversion and other related costs incurred in bringing the inventories to their present location and condition. The costs of Raw Materials, Stores and spare parts etc., consumed consist of purchase price including duties and taxes (other than those subsequently recoverable by the enterprise from the taxing authorities), freight inwards and other expenditure directly attributable to the procurement.
ii) Stock of Raw Materials are valued at cost and of those in transit and at port related to these items are valued at cost to date.Goods and materials in transit are valued at actual cost incurred upto the date of balance sheet. Material and supplies held for use in the production of inventories are not written down if the finished products in which they will be used are expected to be sold at or above cost.
iii) Stock of Stores and spare parts are valued at cost; and of those in transit and at port related to these items are valued at cost.
iv) Goods-in-process is valued at lower of cost or net realisable value.
v) Stock of Finished goods is valued at lower of cost or net realisable value.
vi) Stock-in-trade is valued at lower of cost or net realisable value.
1.9 Cash flow statement
Cash flows are reported using indirect method, whereby profit before tax is ad-justed for the effects of transactions of a noncash nature and any deferrals or ac-cruals of past or future cash receipts or payments. The cash flow from regular reve-nue generating, financing and investing activities of the Company is segregated.
Cash and cash equivalents in the balance sheet comprise cash at bank, cash/cheques in hand and short term investments with an original maturity of three months or less.
1.10 FINANCIALASSETS:
i) The Company classifies its financial assets as those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and those to be measured at amortised cost.
ii) Trade receivables represent receivables for goods sold by the Company upto to the end of the financial year. The amounts are generally unsecured and are usually received as per the terms of payment agreed with the customers.The amounts are presented as current assets where receivable is due within12 months from the reporting date.
iii) Trade receivables are impaired using the lifetime expected credit loss model under simplified approach. The Company uses a matrix to de-termine the impairment loss allowance based on its historically observed default rates over expected life of trade receivables and is adjusted for for-ward looking estimates. At every reporting date, the impairment loss allowance is determined and updated and the same is deducted from Trade Receivables with corresponding charge/credit to Profit and Loss.
iv) A financial asset is derecognized only when the Company has transferred the rights to receive cashflows from the financial asset,or when it has transferred substantially all the risks and rewards of the asset, or when it has transferred the control of the asset.
1.11 FINANCIAL LIABILITIES:
i) Borrowings are removed from balance sheet when the obligation specified in the contract is discharged, cancelled or expired.
ii) Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
iii) Trade Payables represent liabilities for goods and services provided to the Company upto to the end of the financial year. The amounts are unsecured and are usually paid as per the terms of payment agreed with the vendors. The amounts are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially and subsequently measured at amortised cost.
iv) Financial assets and Financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
1.12 FAIR VALUE MEASUREMENT:
i) Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Company.
ii) The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing the asset or liability, as-suming that market participants act in their economic best interest.
iii) A fair value measurement of a non- financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market partici-pant that would use the asset in its highest and best use.
iv) The Company uses valuation techniques that are appropriate in the cir-cumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
1.13 FOREIGN CURRENCY TRANSACTIONS:
i) The Companyâs financial statements are presented in Indian Rupees (âINRâ), which is also the Companyâs functional currency.
ii) Foreign currency transactions are recorded on initial recognition in the functional currency, using the exchange rate at the date of the transaction. At each balance sheet date, foreign currency monetary items are reported using the closing exchange rate. Exchange differences that arise on settlement of monetary items or on reporting at each balance sheet date of the Companyâs monetary items at the closing rate are recognized as income or expenses in the period in which they arise.
iii) Non-monetary items which are carried at historical cost denominated in foreign currency are reported using the exchange rate at the date of the transaction. Non-monetary items measured at fair value in a foreign currency are translated usingthe exchange rate at the date when the fair value is determined.
1.14 BORROWIN GCOSTS:
i) Borrowing costs are interest and other costs (including exchange differ-ences relating to foreign currency borrowings to the extent that they are regarded as an adjustmentto interest costs) incurred in connection with the borrowing of funds.
ii) General and specific borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets during the period of time that is required to complete and prepare the asset for its intended use. A qualifying asset is one that takes necessarily substantial period of time to get ready for its intended use.
iii) All other borrowing costs are expensed in the period in which they are incurred.
1.15 ACCOUNTING FOR TAXES ON INCOME:
i) Tax expenses comprise of current tax and deferred tax including applicable surcharge and cess.
ii) Current Income tax is computed using the tax effect accounting method, where taxes are accrued in the same period in which the related revenue and expenses arise. A provision is made for income tax annually, based on the tax liability computed, after considering tax allowances and exemptions. Provisions are recorded when it is estimated that a liability due to disallowances or other matters is probable.
iii) Deferred tax is provided using the balance sheet approach on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.Deferred tax liabilities are recognized for all taxable tempo-rary differences. Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any un used tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profits against which the deductible temporary differences,and the carry forward un used tax credits and un used tax losses can be utilized.
iv) The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it is become probable that future taxable profits will allow the deferred taxasset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is setled,based on the tax rates and tax laws that have been enacted or sub-stantively enacted at the reporting date.
v) Deferred tax is recognised in the statement of profit and loss, except to the extent that it relates to items recognised in other comprehensive income. As such, deferred tax is also recognised in other comprehensive income.
vi) Deferred Tax Assets and Deferred Tax Liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax lia-bilities and the Deferred Tax Assets and DeferredTax Liabilities relate to taxes on income levied by same governing taxation laws.
1.16 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:
i) Provisions are made when (a) the Company has a present legal or constructive obligation as a result of past events; (b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (c) a reliable estimate is made of the amount of the obligation.
ii) Contingent liabilities are not provided for but are disclosed by way of Notes on Accounts. Contingent liabilities is disclosed in case of a present obligation from past events (a) when it is not probable that an outflow of resources will be required to settle the obligation;(b)when no reliable esti-mate is possible;(c)unless the probability of outflow of resources is remote.
iii) Contingent assets are not accounted but disclosed by way of Notes on Accounts where the inflow of economic benefits is probable.
1.17CURRENT AND NON-CURRENT CLASSIFICATION:
i) The Normal Operating Cycle for the Company has been assumed to be of twelve months for classification of its various assets and liabilities into âCurrentâ and âNon-Currentâ.
ii) The Company presents assets and liabilities in the balance sheet based on current and non-current classification.
iii) An asset is current when it is (a) expected to be realized or intended to be sold or consumed in normal operating cycle; (b) held primarily for the purpose of trading; (c) expected to be realized within twelve months after the reporting period; (d) Cash and cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current.
iv) An liability is current when (a) it is expected to be settled in normal operat-ing cycle; (b) it is held primarily for the purpose of trading; (c) it is due to be discharged within twelve months after the reporting period; (d) there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current.
1.18 RELATED PARTY TRANSACTIONS:
i) A related party is a person or entity that is related to the reporting entity preparing its financial statements
(a) A person or a close member of that personâs family is related to report-ing entity if that person;
(i) has control or joint control of the reporting entity;
(ii) has significant influence over the reporting entity;or
(iii) is amember of the key management personnel of the reporting entity or of a parent of the reporting entity.
(b) An entity is related to a reporting entity if any of the following conditions applies;
(i) the entity and the reporting entity are members of the same group (whichmeans that each parent,subsidiary and fellow subsidiary is re-lated to the others);
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member);
(iii) Both entities are joint ventures of the same third party;
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) The entity is a post-employment benefit plan for the benefit of em-ployees of either the reporting entity or an entity related to the report-ing entity;
(vi) The entity is controlled or jointly controlled by a person identified in(a);
(vii) A person identified in(a)
(i) Has significant influence over the entity or is a member of thekey management personnel of the entity(or of a parent of the entity);
(viii)The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity.
ii) A related party transaction is a transfer of resources, services or obliga-tions between a reporting entity and a related party, regardless of whether a price is charged.
Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.
Compensation includes all employee benefits i.e. all forms of consideration paid, payable or provided by the entity, or on behalf of the entity, in exchange for services rendered to the entity. It also includes such consideration paid on behalf of a parent of the entity in respect of the entity.
Key management personnel are those persons having authority and re-sponsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity.
iii) Disclosure of related party transactions as required by the accounting standard is furnished in the Notes on Financial Statements.
1.19 EARNINGS PER SHARE:
i) Basic earnings per share are 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.
ii) For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
Mar 31, 2016
1. 1.1 CORPORATE INFORMATION
The company is engaged in manufacturing Sponge Iron, Ferro Alloys, MS & SS Angle and power and the same are sold in the domestic market. Because of the Captive power generation, company has advantage of low power cost per unit of manufacturing. Company is generating 40 MW Power from waste Heat recovery Boiler & Fluidized Bed Combustion boiler with economic price. Power generated is used for captive consumption and surplus power is sold resulting profit.
1.2 BASIS OF PREPARATION OF FINANCIAL STATEMENT
The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 as applicable. The financial statements have been prepared on accrual basis under the historical cost convention. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.
All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. The Company''s activities in its business segments have operating cycles which do not exceed 12 months. As a result, current assets comprise elements that are expected to be realized within 12 months after the reporting date and current liabilities comprise elements that are due for settlement within 12 months after the reporting date.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Use of Estimates
The preparation of the Financial Statements in conformity with the Generally Accepted Accounting principles requires, the management to make estimates and assumptions that affect the reported amount of Assets and Liabilities, Revenues and Expenses and disclosure of contingent liabilities. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Such estimation and assumptions are based on management''s evaluation of relevant facts and circumstances as on date of Financial Statements. Difference between the actual results and estimates are recognized in the period in which the results are known / materialized.
2.2 Revenue Recognition
Revenue is recognized only when it can be reliably measured and it is reasonable to expect ultimate collection. The Company recognizes Sales at the point of transfer of significant risks and rewards of ownership to the customers. Sales are inclusive of Excise Duty and Sales Tax and net of rebate/returns and trade discount. Sales tax / Value added tax paid is charged to Profit and Loss Accounts. Dividend income is recognized when right to receive is established. Interest income is recognized on time proportion basis taking into account, the amount outstanding and the rate applicable.
2.3 Excise Duty
Excise Duty recovered are included in sales. Excise Duty in respect of increase / decrease in Finished Goods are shown separately under the head "Other expenses" and included in Valuation of Finished goods.
2.4 Fixed Assets :
Tangible Assets:
(a) Fixed assets are stated at cost (net of Cenvat credit), less accumulated depreciation and impairment loss, if any. [Other than "freehold land" where no depreciation is charged]. Costs include all expenses incurred to bring the assets to its present location and condition.
(b) Capital Work in progress is stated at cost net of impairment loss.
(c) Cost of Trial run Production incurred during the initial period of production is capitalized amongst the various heads of fixed assets.
(d) Pre-operative expenditure incurred on projects is capitalized amongst the various heads of fixed assets on the commencement of the projects.
(e) Where the construction or development of any such asset requiring a substantial period of time to set up for its intended use, is funded by borrowings, the corresponding borrowing costs are capitalized up to the date when the asset is ready for its intended use.
Intangible Assets:
a) Intangible assets are stated at cost and acquisition less accumulated amortization and impairment loss, if any.
2.5 Valuation of Inventories
Inventories are valued at lower of cost or net realizable value after considering the credit of VAT and CENVAT.
In case of Raw Materials, Trading goods, Stock at third party and Stores and Spares are determined in accordance with FIFO basis. Cost includes cost of purchase price, non refundable taxes and delivery handling cost.
Cost of Finished Goods and Work in Progress is determined using the absorption costing principle. Cost includes cost of material consumed, labour and systematic allocation of variable and fixed production overheads including excise duty at applicable rates. Net realizable value is estimated at the expected selling price less estimated completion and selling costs.
2.6 Cash flow statement
The Cash Flow Statement is prepared by the "Indirect method" set out in Accounting Standard 3 on "Cash Flow Statements" and presents the cash flows by operating, investing and financing activities of the Company. Cash and Cash equivalents presented in the Cash Flow Statement consist of cash on hand and deposits with banks.
2.7 Investments
Investments are classified as Long Term & Current Investments. Long Term Investments are valued at cost less provision for diminution other than temporary, in value, if any. Current Investments are valued at cost or fair value whichever is lower.
2.8 Employee Benefits
(a) Short term
Short Term employee benefits are recognized as an expense at the undiscounted amount expected to be paid over the period of services rendered by the employees to the company.
(b) long term
The Company has both defined contribution and defined benefit plans.
(c) Defined contribution plans
These are plans in which the Company pays pre-defined amounts to separate funds and does not have any legal or informal obligation to pay additional sums. These comprise of contributions to Employees Provident Fund. The Company''s payments to the defined contribution plans are reported as expenses during the period in which the employee performs the services that the payment covers.
(d) Defined benefit plans
Expenses for defined benefit gratuity payment plans are calculated as at the balance sheet date by independent actuaries in the manner that distributes expenses over the employees working life. These commitments are valued at the present value of the expected future payments, with consideration for calculated future salary increases, using a discounted rate corresponding to the interest rate estimated by the actuary having regard to the interest rate on Government Bonds with a remaining term i.e. almost equivalent to the average balance working period of employees.
(e) Other employee benefits
Compensated absences which accrue to employees and which can be carried to future periods but are expected to be encashed or availed in twelve months immediately following the year end are reported as expenses during the year in which the employees perform the services that the benefit covers and the liabilities are reported at the undiscounted amount of the benefits after deducting amounts already paid.
2.9 Taxation
Income tax expenses comprise current tax and Deferred Tax charge or credit. Provision for current tax is made on the basis of the assessable income at the tax rate applicable to the relevant assessment year. The Deferred Tax Assets and Deferred Tax Liability is calculated by applying tax rate and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred Tax Assets arising mainly on account of brought forward losses and unabsorbed depreciation under tax laws are recognized, only if there is a virtual certainty of its realization, supported by convincing evidence. Deferred Tax Assets on account of other timing differences are recognized only to the extent there is a reasonable certainty of its realization. At each Balance Sheet date, the carrying amounts of Deferred Tax Assets are reviewed to reassure realization.
2.10 Depreciation
On Tangible Assets:
Depreciation on fixed assets is provided using the straight line method based on rates specified in Schedule II of the Companies Act 2013.
On Intangible Assets:
Amortization is provided on a straight line basis over the asset''s anticipated useful life. The useful life is determined based on the period of the underlying contract and the period of time over which the intangible asset is expected to be used and generally does not exceed 10 years. The estimated useful life of the intangible assets and the amortization period are reviewed at the end of each financial year and amortization period is revised to reflect the change in pattern if any.
An impairment test of intangible assets is conducted annually or more often if there is an indication of a decrease in value. The impairment loss, if any, is reported in the Statement of Profit and Loss.
2.11 Foreign currency transactions
Transactions in the foreign currency, which are covered by forward contracts, are accounted for at the contracted rate; the difference between the forward rate and the exchange rate at the date of transaction is recognized in the Statement of Profit and Loss over the life of the contract. Transactions in the foreign currency other than those covered by forward contract rates are recorded at rate of exchange in force at the time of occurrence of transactions. Gain or Loss due to fluctuation in exchange rates is dealt with through Statement of Profit and Loss. Monetary Assets and Liabilities related to foreign currency transactions remaining unsettled at the end of the year are translated at the year-end rate. The difference in transactions of monetary liabilities and related gains or losses on foreign exchange transactions is recognized in the Statement of Profit and Loss.
2.12 Borrowing Cost
Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying asset are capitalized as part of cost of such asset. Other borrowing costs are recognized as an expense in the period in which they are incurred.
2.13 Earnings Per Share
Basic earnings per share is calculated by dividing the net profit after tax for the year attributable to Equity Shareholders of the Company by the weighted average number of Equity Shares outstanding for basic EPS purpose. Diluted earnings per Share is calculated by dividing net profit attributable to equity Shareholders (after adjustment for diluted earnings) by the weighted average number of Equity shares outstanding for diluted EPS purpose.
2.14 Impairment of Assets
The carrying value of assets of the Company''s cash generating units are reviewed for impairment annually or more often if there is an indication of decline in value based on internal/external factors. If any indication of such impairment exists, the recoverable amounts of those assets are estimated and impairment loss is recognized, if the carrying amount of those assets exceeds their recoverable amount. The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the estimated future cash flows to their present value based on appropriate discount factor.
2.15 Provisions, Contingent Liability and Contingent Asset
(a) Provision involving substantial degree of estimation in measurement is recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources.
(b) Contingent liabilities are not recognized but are disclosed in the notes.
(c) Contingent Assets are neither recognized nor disclosed in the financial statements.
2.16 Cash and Cash Equivalents
The Company considers all highly liquid financial instruments, which are readily convertible into known amount of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents. This comprises cash and deposit with banks and financial institutions.
Mar 31, 2015
1. 1.1 CORPORATE INFORMATION
The company is engaged in manufacturing Sponge Iron, Ferro Alloys, MS &
SS Angle and power and the same are sold in the domestic market.
Because of the Captive power generation, company has advantage of low
power cost per unit of manufacturing. Company is generating 40 MW
Power from waste Heat recovery Boiler & Fluidized Bed Combustion boiler
with economic price. Power generated is used for captive consumption
and surplus power is sold resulting profit.
1.2 BASIS OF PREPARATION OF FINANCIAL STATEMENT
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards specified under
Section 133 of the Companies Act, 2013, read with Rule 7 of the
Companies (Accounts) Rules, 2014 and the relevant provisions of the
Companies Act, 2013 ("the 2013 Act") / Companies Act, 1956 ("the 1956
Act"), as applicable. The financial statements have been prepared on
accrual basis under the historical cost convention. The accounting
policies adopted in the preparation of the financial statements are
consistent with those followed in the previous year.
All assets and liabilities have been classified as current or
non-current as per the Company's normal operating cycle and other
criteria set out in the Schedule III to the Companies Act, 2013. The
Company's activities in its business segments have operating cycles
which do not exceed 12 months. As a result, current assets comprise
elements that are expected to be realized within 12 months after the
reporting date and current liabilities comprise elements that are due
for settlement within 12 months after the reporting date.
2.1 Use of Estimates
The preparation of the Financial Statements in conformity with the
Generally Accepted Accounting principles requires, the management to
make estimates and assumptions that affect the reported amount of
Assets and Liabilities, Revenues and Expenses and disclosure of
contingent liabilities. The Management believes that the estimates used
in preparation of the financial statements are prudent and reasonable.
Such estimation and assumptions are based on management's evaluation of
relevant facts and circumstances as on date of Financial Statements.
Difference between the actual results and estimates are recognized in
the period in which the results are known / materialized.
2.2 Revenue Recognition
Revenue is recognized only when it can be reliably measured and it is
reasonable to expect ultimate collection. The Company recognizes Sales
at the point of transfer of significant risks and rewards of ownership
to the customers. Sales are inclusive of Excise Duty and Sales Tax and
net of rebate/returns and trade discount. Revenue in respect of excise
duty refund is recognized on accrual basis. Sales tax / Value added tax
paid is charged to Profit and Loss Accounts. Dividend income is
recognized when right to receive is established. Interest income is
recognized on time proportion basis taking into account, the amount
outstanding and the rate applicable.
2.3 Excise Duty
Excise Duty recovered are included in sales. Excise Duty in respect of
increase / decrease in Finished Goods are shown separately under the
head "Other expenses" and included in Valuation of Finished goods.
2.4 Fixed Assets : Tangible Assets:
(a) Fixed assets are stated at cost (net of Cenvat credit), less
accumulated depreciation and impairment loss, if any. [Other than
"freehold land" where no depreciation is charged]. Costs include all
expenses incurred to bring the assets to its present location and
condition.
(b) Capital Work in progress is stated at cost.
(c) Cost of Trial run Production incurred during the initial period of
production is capitalized amongst the various heads of fixed assets.
(d) Pre-operative expenditure incurred on projects is capitalized
amongst the various heads of fixed assets on the commencement of the
projects.
(e) Where the construction or development of any such asset requiring a
substantial period of time to set up for its intended use, is funded by
borrowings, the corresponding borrowing costs are capitalized up to the
date when the asset is ready for its intended use.
Intangible Assets:
a) Intangible assets are stated at cost of acquisition less accumulated
amortization and impairment loss, if any..
2.5 Valuation of Inventories
Inventories are valued at lower of cost or net realizable value after
considering the credit of VAT and CENVAT.
In case of Raw Materials, Trading goods, Stock at third party and
Stores and Spares are determined in accordance with FIFO basis. Cost
includes cost of purchase price, non refundable taxes and delivery
handling cost.
Cost of Finished Goods and Work in Progress is determined using the
absorption costing principle. Cost includes cost of material consumed,
labour and systematic allocation of variable and fixed production
overheads including excise duty at applicable rates.
Net realizable value is estimated at the expected selling price less
estimated completion and selling costs.
2.6 Cash flow statement
The Cash Flow Statement is prepared by the "Indirect method" set out in
Accounting Standard 3 on "Cash Flow Statements" and presents the cash
flows by operating, investing and financing activities of the Company.
Cash and Cash equivalents presented in the Cash Flow Statement consist
of cash on hand and deposits with banks.
2.7 Investments
Investments are classified as Long Term & Current Investments. Long
Term Investments are valued at cost less provision for diminution other
than temporary, in value, if any. Current Investments are valued at
cost or fair value whichever is lower.
2.8 Employee Benefits
(a) Short term
Short Term employee benefits are recognized as an expense at the
undiscounted amount expected to be paid over the period of services
rendered by the employees to the company.
(b) long term
The Company has both defined contribution and defined benefit plans.
(c) Defined contribution plans
These are plans in which the Company pays pre-defined amounts to
separate funds and does not have any legal or informal obligation to
pay additional sums. These comprise of contributions to Employees
Provident Fund. The Company's payments to the defined contribution
plans are reported as expenses during the period in which the employee
performs the services that the payment covers.
(d) Defined benefit plans
Expenses for defined benefit gratuity payment plans are calculated as
at the balance sheet date by independent actuaries in the manner that
distributes expenses over the employees working life. These commitments
are valued at the present value of the expected future payments, with
consideration for calculated future salary increases, using a
discounted rate corresponding to the interest rate estimated by the
actuary having regard to the interest rate on Government Bonds with a
remaining term i.e. almost equivalent to the average balance working
period of employees.
(e) Other employee benefits
Compensated absences which accrue to employees and which can be carried
to future periods but are expected to be encashed or availed in twelve
months immediately following the year end are reported as expenses
during the year in which the employees perform the services that the
benefit covers and the liabilities are reported at the undiscounted
amount of the benefits after deducting amounts already paid.
2.9 Taxation
Income tax expenses comprise current tax and Deferred Tax charge or
credit. Provision for current tax is made on the basis of the
assessable income at the tax rate applicable to the relevant assessment
year. The Deferred Tax Assets and Deferred Tax Liability is calculated
by applying tax rate and tax laws that have been enacted or
substantively enacted by the Balance Sheet date. Deferred Tax Assets
arising mainly on account of brought forward losses and unabsorbed
depreciation under tax laws are recognized, only if there is a virtual
certainty of its realization, supported by convincing evidence.
Deferred Tax Assets on account of other timing differences are
recognized only to the extent there is a reasonable certainty of its
realization. At each Balance Sheet date, the carrying amounts of
Deferred Tax Assets are reviewed to reassure realization.
2.10 Depreciation
On Tangible Assets:
Depreciation on fixed assets is provided using the straight line method
based on rates specified in Schedule II of the Companies Act 2013.
Till the year ended March 31, 2014, Schedule XIV to the Companies Act,
1956, prescribed requirements concerning depreciation of fixed assets.
From the current year, Schedule XIV has been replaced by Schedule II to
the Companies Act, 2013.
Till the year ended March 31, 2014, depreciation rates prescribed under
Schedule XIV were treated as minimum rates and the company was not
allowed to charge depreciation at lower rates even if such lower rates
were justified by the estimated useful life of the asset. Schedule II
to the Companies Act 2013 prescribes useful lives for fixed assets
which, in many cases, are different from lives prescribed under the
erstwhile Schedule XIV. However, Schedule II allows companies to use
higher / lower useful lives and residual values if such useful lives
and residual values can be technically supported and justification for
difference is disclosed in the financial statements.
On Intangible Assets:
Amortization is provided on a straight line basis over the asset's
anticipated useful life. The useful life is determined based on the
period of the underlying contract and the period of time over which the
intangible asset is expected to be used and generally does not exceed
10 years. The estimated useful life of the intangible assets and the
amortization period are reviewed at the end of each financial year and
amortization period is revised to reflect the change in pattern if any.
An impairment test of intangible assets is conducted annually or more
often if there is an indication of a decrease in value. The impairment
loss, if any, is reported in the Statement of Profit and Loss.
2.11 Foreign currency transactions
Transactions in the foreign currency, which are covered by forward
contracts, are accounted for at the contracted rate; the difference
between the forward rate and the exchange rate at the date of
transaction is recognized in the Statement of Profit and Loss over the
life of the contract. Transactions in the foreign currency other than
those covered by forward contract rates are recorded at rate of
exchange in force at the time of occurrence of transactions. Gain or
Loss due to fluctuation in exchange rates is dealt with through
Statement of Profit and Loss. Monetary Assets and Liabilities related
to foreign currency transactions remaining unsettled at the end of the
year are translated at the year-end rate. The difference in
transactions of monetary liabilities and related gains or losses on
foreign exchange transactions is recognized in the Statement of Profit
and Loss.
2.12 Borrowing cost
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying asset are capitalized as part
of cost of such asset. Other borrowing costs are recognized as an
expense in the period in which they are incurred.
2.13 Earnings per share
Basic earnings per share is calculated by dividing the net profit after
tax for the year attributable to Equity Shareholders of the Company by
the weighted average number of Equity Shares outstanding for basic EPS
purpose. Diluted earnings per Share is calculated by dividing net
profit attributable to equity Shareholders (after adjustment for
diluted earnings) by the weighted average number of Equity shares
outstanding for diluted EPS purpose.
2.14 Impairment of Assets
The carrying value of assets of the Company's cash generating units are
reviewed for impairment annually or more often if there is an
indication of decline in value based on internal/external factors. If
any indication of such impairment exists, the recoverable amounts of
those assets are estimated and impairment loss is recognized, if the
carrying amount of those assets exceeds their recoverable amount. The
recoverable amount is the greater of the net selling price and their
value in use. Value in use is arrived at by discounting the estimated
future cash flows to their present value based on appropriate discount
factor.
2.15 Provisions, Contingent Liability and Contingent Asset
(a) Provision involving substantial degree of estimation in measurement
is recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
(b) Contingent liabilities are not recognized but are disclosed in the
notes.
(c) Contingent Assets are neither recognized nor disclosed in the
financial statements.
Mar 31, 2014
1.1 Use of Estimates
The presentation of the Financial Statements in conformity with the
Generally Accepted Accounting policies requires, the management to make
estimates and assumptions that affect the reported amount of Assets and
Liabilities, Revenues and Expenses and disclosure of contingent
liabilities. Such estimation and assumptions are based on management''s
evaluation of relevant facts and circumstances as on date of Financial
Statements. Difference between the actual results and estimates are
recognized in the period in which the results are known / materialized.
1.2 Revenue Recognition
Revenue is recognized only when it can be reliably measured and it is
reasonable to expect ultimate collection. The Company recognizes Sales
at the point of transfer of significant risks and rewards of ownership
to the customers. Sales are inclusive of Excise Duty and Sales Tax and
net of rebate/returns and trade discount. Revenue in respect of excise
duty refund is recognized on accrual basis. Sales tax / Value added tax
paid is charged to Profit and Loss Accounts. Dividend income is
recognized when right to receive is established. Interest income is
recognized on time proportion basis taking into account, the amount
outstanding and the rate applicable.
1.3 Excise Duty
Excise Duty recovered are included in sales. Excise Duty in respect of
increase / decrease in Finished Goods are shown separately under the
head "Other expenses" and included in Valuation of Finished goods.
1.4 Fixed Assets
(a) Fixed assets are stated at cost (net of Cenvat credit), less
accumulated depreciation and impairment loss, if any. [Other than
"freehold land" where no depreciation is charged]. Costs include all
expenses incurred to bring the assets to its present location and
condition.
(b) Capital Work in progress net off capital advances are stated at
cost. (Capital Advances are shown separately under Long Term Loans and
Advances).
(c) Cost of Trial run Production incurred during the initial period of
production has been capitalized amongst the various heads of fixed
assets.
(d) Pre-operative expenditure incurred on projects has been / will be
capitalized amongst the various heads of fixed assets on the
commencement of the projects.
(e) All costs including financing costs, till commencement of
commercial production are capitalized.
(f) Intangible assets are stated at cost of acquisition less
accumulated amortization.
1.5 Valuation of Inventories
Raw Materials and Trading goods are valued at lower of cost or net
realizable value after considering the credit of VAT and CENVAT.
Stores and Spares are valued at Cost. Inventories of Finished Goods and
Work in Process are valued at lower of cost or net realizable value.
Stock in transit and Stock lying at third party Premises are valued at
cost. Cost of Finished Goods is determined using the absorption costing
principle. Cost includes cost of material consumed, labour and
systematic allocation of variable and fixed production overheads
including excise duty at applicable rates.
1.6 Cash flow statement
The Cash Flow Statement is prepared by the "Indirect method" set out in
Accounting Standard 3 on "Cash Flow Statements" and presents the cash
flows by operating, investing and financing activities of the Company.
Cash and Cash equivalents presented in the Cash Flow Statement consist
of cash on hand and deposits with banks.
1.7 Investments
Investments are classified as Long Term & Current Investments. Long
Term Investments are valued at cost less provision for diminution other
than temporary, in value, if any. Current Investments are valued at
cost or fair value whichever is lower.
1.8 Employee Benefits
(a) Short term
Short Term employee benefits are recognized as an expense at the
undiscounted amount expected to be paid over the period of services
rendered by the employees to the company.
(b) long term
The Company has both defined contribution and defined benefit plans.
(c) Defined contribution plans
These are plans in which the Company pays pre-defined amounts to
separate funds and does not have any legal or informal obligation to
pay additional sums. These comprise of contributions to Employees
Provident Fund. The Company''s payments to the defined contribution
plans are reported as expenses during the period in which the employee
performs the services that the payment covers.
(d) Defined benefit plans
Expenses for defined benefit gratuity payment plans are calculated as
at the balance sheet date by independent actuaries in the manner that
distributes expenses over the employees working life. These commitments
are valued at the present value of the expected future payments, with
consideration for calculated future salary increases, using a
discounted rate corresponding to the interest rate estimated by the
actuary having regard to the interest rate on Government Bonds with a
remaining term i.e. almost equivalent to the average balance working
period of employees.
(e) Other employee benefits
Compensated absences which accrue to employees and which can be carried
to future periods but are expected to be encashed or availed in twelve
months immediately following the year end are reported as expenses
during the year in which the employees perform the services that the
benefit covers and the liabilities are reported at the undiscounted
amount of the benefits after deducting amounts already paid.
1.9 Taxation
Income tax expenses comprise current tax and Deferred Tax charge or
credit. Provision for current tax is made on the basis of the
assessable income at the tax rate applicable to the relevant assessment
year. The Deferred Tax Assets and Deferred Tax Liability is calculated
by applying tax rate and tax laws that have been enacted or
substantively enacted by the Balance Sheet date. Deferred Tax Assets
arising mainly on account of brought forward losses and unabsorbed
depreciation undertax laws, are recognized, only if there is a virtual
certainty of its realization, supported by convincing evidence.
Deferred Tax Assets on account of other timing differences are
recognized only to the extent there is a reasonable certainty of its
realization. At each Balance Sheet date, the carrying amounts of
Deferred Tax Assets are reviewed to reassure realization.
1.10 Depreciation
(a) Depreciation on depreciable assets (other than mentioned in point
"b" below) has been provided on straight-line method in accordance with
the provisions of section 205(2)(b) of the Companies Act, 1956, at the
rates specified in Schedule XIV to the Companies Act, 1956.
(b) Depreciation in respect of plant and machineries has been provided
on the basis of triple shift working (except for Plant and Machineries
of Sponge Iron & Ferro Alloys Project on which depreciation has been
provided on continuous process plant working and depreciation on
Rolling Mill Plant has been provided on single shift working on the
basis of certificate received from management). Depreciation in respect
of fixed assets acquired / put to use during the years is charged on
pro-rata basis with reference to the date of installation of fixed
assets.
(c) Intangible assets are amortized for a period of 5 years.
1.11 Foreign currency transactions
Transactions in the foreign currency, which are covered by forward
contracts, are accounted for at the contracted rate; the difference
between the forward rate and the exchange rate at the date of
transaction is recognized in the Statement of Profit and Loss over the
life of the contract. Transactions in the foreign currency other than
those covered by forward contract rates are recorded at rate of
exchange in force at the time of occurrence of transactions. Gain or
Loss due to fluctuation in exchange rates is dealt with through
Statement of Profit and Loss. Monetary Assets and Liabilities related
to foreign currency transactions remaining unsettled at the end of the
year are translated attheyear-end rate. The difference in transactions
of monetary liabilities and related gains or losses on foreign exchange
transactions is recognized in the Statement of Profit and Loss.
1.12 Borrowing cost
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying asset are capitalized as part
of cost of such asset. Other borrowing costs are recognized as an
expense in the period in which they are incurred.
1.13 Earning per share
Basic earnings per share is calculated by dividing the net profit after
tax for the year attributable to Equity Shareholders of the Company by
the weighted average number of Equity Shares outstanding for basic EPS
purpose. Diluted earnings per Share is calculated by dividing net
profit attributable to equity Shareholders (after adjustment for
diluted earnings) by the weighted average number of Equity shares
outstanding for diluted EPS purpose.
1.14 Impairment of Assets
The carrying value of assets of the Company''s cash generating units are
reviewed for impairment annually or more often if there is an
indication of decline in value based on internal/external factors. If
any indication of such impairment exists, the recoverable amounts of
those assets are estimated and impairment loss is recognized, if the
carrying amount of those assets exceeds their recoverable amount. The
recoverable amount is the greater of the net selling price and their
value in use. Value in use is arrived at by discounting the estimated
future cash flows to their present value based on appropriate discount
factor.
1.15 Provisions, Contingent Liability and Contingent Asset
(a) Provision involving substantial degree of estimation in measurement
is recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
(b) Contingent liabilities are not recognized but are disclosed in the
notes.
(c) Contingent Assets are neither recognized nor disclosed in the
financial statements.
Mar 31, 2013
1.1 Use of Estimates
The presentation of the Financial Statements in conformity with the
Generally Accepted Accounting policies requires, the management to make
estimates and assumptions that affect the reported amount of Assets and
Liabilities, Revenues and Expenses and disclosure of contingent
liabilities. Such estimation and assumptions are based on management''s
evaluation of relevant facts and circumstances as on date of Financial
Statements. Difference between the actual results and estimates are
recognized in the period in which the results are known / materialized.
1.2 Revenue Recognition
Revenue is recognized only when it can be reliably measured and it is
reasonable to expect ultimate collection. The Company recognizes Sales
at the point of transfer of significant risks and rewards of ownership
to the customers. Sales are inclusive of Excise Duty and Sales Tax and
net of rebate/returns and trade discount. Revenue in respect of excise
duty refund is recognized on accrual basis. Sales tax / Value added tax
paid is charged to Profit and Loss Accounts. Dividend income is
recognized when right to receive is established. Interest income is
recognized on time proportion basis taking into account, the amount
outstanding and the rate applicable.
1.3 Excise Duty
Excise Duty recovered are included in sales. Excise Duty in respect of
increase / decrease in Finished Goods are shown separately under the
head "Other expenses" and included in Valuation of Finished goods.
1.4 Fixed Assets
(a) Fixed assets are stated at cost (net of Cenvat credit), less
accumulated depreciation and impairment loss, if any. [Other than
"freehold land" where no depreciation is charged]. Costs include all
expenses incurred to bring the assets to its present location and
condition.
(b) Capital Work in progress net off capital advances are stated at
cost. (Capital Advances are shown separately under Long Term Loans and
Advances).
(c) Cost of Trial run Production incurred during the initial period of
production has been capitalized amongst the various heads of fixed
assets.
(d) Pre-operative expenditure incurred on projects has been / will be
capitalized amongst the various heads of fixed assets on the
commencement of the projects.
(e) All costs including financing costs, till commencement of
commercial production are capitalized.
(f) Intangible assets are stated at cost of acquisition less
accumulated amortization.
1.5 Valuation of Inventories
Raw Materials and Trading goods are valued at lower of cost or net
realizable value after considering the credit of VAT and CENVAT. Stores
and Spares are valued at Cost. Inventories of Finished Goods and Work
in Process are valued at lower of cost or net realizable value. Stock
in transit and Stock lying at third party Premises are valued at cost.
Cost of Finished Goods is determined using the absorption costing
principle. Cost includes cost of material consumed, labour and
systematic allocation of variable and fixed production overheads
including excise duty at applicable rates.
1.6 Cash flow statement
The Cash Flow Statement is prepared by the "Indirect method" set out in
Accounting Standard 3 on "Cash Flow Statements" and presents the cash
flows by operating, investing and financing activities of the Company.
Cash and Cash equivalents presented in the Cash Flow Statement consist
of cash on hand and deposits with banks.
1.7 Investments
Investments are classified as Long Term & Current Investments. Long
Term Investments are valued at cost less provision for diminution other
than temporary, in value, if any. Current Investments are valued at
cost or fair value whichever is lower.
1.8 Employee Benefits
(a) Short term
Short Term employee benefits are recognized as an expense at the
undiscounted amount expected to be paid over the period of services
rendered by the employees to the company.
(b) long term
The Company has both defined contribution and defined benefit plans.
(c) Defined contribution plans
These are plans in which the Company pays pre-defined amounts to
separate funds and does not have any legal or informal obligation to
pay additional sums. These comprise of contributions to Employees
Provident Fund. The Company''s payments to the defined contribution
plans are reported as expenses during the period in which the employee
performs the services that the payment covers.
(d) Defined benefit plans
Expenses for defined benefit gratuity payment plans are calculated as
at the balance sheet date by independent actuaries in the manner that
distributes expenses over the employees working life. These commitments
are valued at the present value of the expected future payments, with
consideration for calculated future salary increases, using a
discounted rate corresponding to the interest rate estimated by the
actuary having regard to the interest rate on Government Bonds with a
remaining term i.e. almost equivalent to the average balance working
period of employees.
(e) Other employee benefits
Compensated absences which accrue to employees and which can be carried
to future periods but are expected to be encashed or availed in twelve
months immediately following the year end are reported as expenses
during the year in which the employees perform the services that the
benefit covers and the liabilities are reported at the undiscounted
amount of the benefits after deducting amounts already paid.
1.9 Taxation
Income tax expenses comprise current tax and Deferred Tax charge or
credit. Provision for current tax is made on the basis of the
assessable income at the tax rate applicable to the relevant assessment
year. The Deferred Tax Assets and Deferred Tax Liability is calculated
by applying tax rate and tax laws that have been enacted or
substantively enacted by the Balance Sheet date. Deferred Tax Assets
arising mainly on account of brought forward losses and unabsorbed
depreciation under tax laws, are recognized, only if there is a virtual
certainty of its realization, supported by convincing evidence.
Deferred Tax Assets on account of other timing differences are
recognized only to the extent there is a reasonable certainty of its
realization. At each Balance Sheet date, the carrying amounts of
Deferred Tax Assets are reviewed to reassure realization.
1.10 Depreciation
(a) Depreciation on depreciable assets (other than mentioned in point
"b" below) has been provided on straight-line method in accordance with
the provisions of section 205(2)(b) of the Companies Act, 1956, at the
rates specified in Schedule XIV to the Companies Act, 1956.
(b) Depreciation in respect of plant and machineries has been provided
on the basis of triple shift working (except for Plant and Machineries
of Sponge Iron & Ferro Alloys Project on which depreciation has been
provided on continuous process plant working and depreciation on
Rolling Mill Plant has been provided on single shift working on the
basis of certificate received from management). Depreciation in respect
of fixed assets acquired / put to use during the years is charged on
pro-rata basis with reference to the date of installation of fixed
assets.
(c) Intangible assets are amortized for a period of 5 years.
1.11 Foreign currency transactions
Transactions in the foreign currency, which are covered by forward
contracts, are accounted for at the contracted rate; the difference
between the forward rate and the exchange rate at the date of
transaction is recognized in the Statement of Profit and Loss over the
life of the contract. Transactions in the foreign currency other than
those covered by forward contract rates are recorded at rate of
exchange in force at the time of occurrence of transactions. Gain or
Loss due to fluctuation in exchange rates is dealt with through
Statement of Profit and Loss. Monetary Assets and Liabilities related
to foreign currency transactions remaining unsettled at the end of the
year are translated at the year-end rate. The difference in
transactions of monetary liabilities and related gains or losses on
foreign exchange transactions is recognized in the Statement of Profit
and Loss.
1.12 Borrowing cost
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying asset are capitalized as part
of cost of such asset. Other borrowing costs are recognized as an
expense in the period in which they are incurred.
1.13 Earning per share
Basic earnings per share is calculated by dividing the net profit after
tax for the year attributable to Equity Shareholders of the Company by
the weighted average number of Equity Shares outstanding for basic EPS
purpose. Diluted earnings per Share is calculated by dividing net
profit attributable to equity Shareholders (after adjustment for
diluted earnings) by the weighted average number of Equity shares
outstanding for diluted EPS purpose.
1.14 Impairment of Assets
The carrying value of assets of the Company''s cash generating units are
reviewed for impairment annually or more often if there is an
indication of decline in value based on internal/external factors. If
any indication of such impairment exists, the recoverable amounts of
those assets are estimated and impairment loss is recognized, if the
carrying amount of those assets exceeds their recoverable amount. The
recoverable amount is the greater of the net selling price and their
value in use. Value in use is arrived at by discounting the estimated
future cash flows to their present value based on appropriate discount
factor.
1.15 Provisions, Contingent Liability and Contingent Asset
(a) Provision involving substantial degree of estimation in measurement
is recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
(b) Contingent liabilities are not recognized but are disclosed in the
notes.
(c) Contingent Assets are neither recognized nor disclosed in the
financial statements.
Mar 31, 2012
1.1 Use of Estimates:
The presentation of the Financial Statements in conformity with the
Generally Accepted Accounting policies requires, the management to make
estimates and assumptions that affect the reported amount of Assets and
Liabilities, Revenues and Expenses and disclosure of contingent
liabilities. Such estimation and assumptions are based on management's
evaluation of relevant facts and circumstances as on date of Financial
Statements. Difference between the actual results and estimates are
recognized in the period in which the results are known / materialized
2.2 Revenue Recognition:
Revenue is recognized only when it can be reliably measured and it is
reasonable to expect ultimate collection. The Company recognizes Sales
at the point of transfer of significant risks and rewards of ownership
to the customers. Sales are inclusive of Excise Duty and Sales Tax and
net of rebate/returns and trade discount. Revenue in respect of excise
duty refund is recognized on accrual basis. Sales tax / Value added tax
paid is charged to Profit and Loss Accounts.Dividend income is
recognized when right to receive is established. Interest income is
recognized on time proportion basis taking into account, the amount
outstanding and the rate applicable.
2.3 Excise Duty
Excise Duty recovered are included in sales. Excise Duty in respect of
increase / decrease in Finished Goods are shown separately under the
head "Other expenses" and included in Valuation of Finished goods
2.4 Fixed Assets
(a) Fixed assets are stated at cost (net of Cenvat credit), less
accumulated depreciation and impairment loss, if any. [other than
"freehold land" where no depreciation is charged]. Costs include all
expenses incurred to bring the assets to its present location and
condition.
(b) Capital Work in progress net off capital advances are stated at
cost. (Capital Advances are shown separately under Long Term Loans and
Advances)
(c) Cost of Trial run Production incurred during the initial period of
production has been capitalized amongst the various heads of fixed
assets.
(d) Pre-operative expenditure incurred on projects has been / will be
capitalized amongst the various heads of fixed assets on the
commencement of the projects.
(e) All costs including financing costs, till commencement of
commercial production are capitalized
(f) Intangible assets are stated at cost of acquisition less
accumulated amortization.
2.5 Valuation of Inventories:
Raw Materials, Trading goods and Stores & Spares are valued at lower of
cost or net realizable value after considering the credit of VAT and
CENVAT. Inventories of Finished Goods and Work in Process are valued at
lower of cost or net realizable value. Stock in transit and Stock lying
at third party Premises are valued at cost. Cost of Finished Goods is
determined using the absorption costing principle . Cost includes cost
of material consumed, labour and systematic allocation of variable and
fixed production overheads including excise duty at applicable rates.
2.6 Cash flow statement
The Cash Flow Statement is prepared by the "Indirect method" set out in
Accounting Standard 3 on "Cash Flow Statements" and presents the cash
flows by operating, investing and financing activities of the
Company.Cash and Cash equivalents presented in the Cash Flow Statement
consist of cash on hand and deposits with banks
2.7 Investments
Investments are classified as Long Term & Current Investments. Long
Term Investments are valued at cost less provision for diminution other
than temporary, in value, if any. Current Investments are valued at
cost or fair value whichever is lower.
2.8 Employee Benefits:
(a) Short term:
Short Term employee benefits are recognized as an expense at the
undiscounted amount expected to be paid over the period of services
rendered by the employees to the company
(b) long term:
The Company has both defined contribution and defined benefit plans
(c) Defined contribution plans
These are plans in which the Company pays pre-defined amounts to
separate funds and does not have any legal or informal obligation to
pay additional sums. These comprise of contributions to Employees
Provident Fund. The Company's payments to the defined contribution
plans are reported as expenses during the period in which the employee
performs the services that the payment covers
(d) Defined benefit plans:
Expenses for defined benefit gratuity payment plans are calculated as
at the balance sheet date by independent actuaries in the manner that
distributes expenses over the employees working life. These commitments
are valued at the present value of the expected future payments, with
consideration for calculated future salary increases, using a
discounted rate corresponding to the interest rate estimated by the
actuary having regard to the interest rate on Government Bonds with a
remaining term i.e. almost equivalent to the average balance working
period of employees.
(e) Other employee benefits:
Compensated absences which accrue to employees and which can be carried
to future periods but are expected to be encashed or availed in twelve
months immediately following the year end are reported as expenses
during the year in which the employees perform the services that the
benefit covers and the liabilities are reported at the undiscounted
amount of the benefits after deducting amounts already paid
2.9 Taxation:
Income tax expenses comprise current tax and Deferred Tax charge or
credit. Provision for current tax is made on the basis of the
assessable income at the tax rate applicable to the relevant assessment
year. The Deferred Tax Assets and Deferred Tax Liability is calculated
by applying tax rate and tax laws that have been enacted or
substantively enacted by the Balance Sheet date. Deferred Tax Assets
arising mainly on account of brought forward losses and unabsorbed
depreciation under tax laws, are recognized, only if there is a virtual
certainty of its realization, supported by convincing evidence.
Deferred Tax Assets on account of other timing differences are
recognized only to the extent there is a reasonable certainty of its
realization. At each Balance Sheet date, the carrying amounts of
Deferred Tax Assets are reviewed to reassure realization
2.10 Depreciation:
(a) Depreciation on depreciable assets (other than mentioned in point
"b" below) has been provided on straight-line method in accordance with
the provisions of section 205(2)(b) of the Companies Act, 1956, at the
rates specified in Schedule XIV to the Companies Act, 1956.
(b) Depreciation in respect of plant and machineries has been provided
on the basis of triple shift working (except for Plant and Machineries
of Sponge Iron & Ferro Alloys Project on which depreciation has been
provided on continuous process plant working and depreciation on
Rolling Mill Plant has been provided on single shift working on the
basis of certificate received from management). Depreciation in respect
of fixed assets acquired / put to use during the years is charged on
pro-rata basis with reference to the date of installation of fixed
assets.
(c) Intangible assets are amortized for a period of 5 years
2.11 Foreign currency transactions
Transactions in the foreign currency, which are covered by forward
contracts, are accounted for at the contracted rate; the difference
between the forward rate and the exchange rate at the date of
transaction is recognized in the Statement of Profit and Loss over the
life of the contract. Transactions in the foreign currency other than
those covered by forward contract rates are recorded at rate of
exchange in force at the time of occurrence of transactions. Gain or
Loss due to fluctuation in exchange rates is dealt with through
Statement of Profit and Loss. Monetary Assets and Liabilities related
to foreign currency transactions remaining unsettled at the end of the
year are translated at the year-end rate. The difference in
transactions of monetary liabilities and related gains or losses on
foreign exchange transactions is recognized in the Statement of Profit
and Loss .
2.12 Borrowing cost:
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying asset are capitalized as part
of cost of such asset. Other borrowing costs are recognized as an
expense in the period in which they are incurred
2.13 Earning per share
Basic earning per share is calculated by dividing the net profit after
tax for the year attributable to Equity Shareholders of the Company by
the weighted average number of Equity Shares outstanding for basic EPS
purpose . Diluted earning per Share is calculated by dividing net
profit attributable to equity Shareholders (after adjustment for
diluted earnings) by the weighted average number of Equity shares
outstanding for diluted EPS purpose .
2.14 Impairment of Assets
The carrying value of assets of the Company's cash generating units are
reviewed for impairment annually or more often if there is an
indication of decline in value based on internal/external factors. If
any indication of such impairment exists, the recoverable amounts of
those assets are estimated and impairment loss is recognized, if the
carrying amount of those assets exceeds their recoverable amount. The
recoverable amount is the greater of the net selling price and their
value in use. Value in use is arrived at by discounting the estimated
future cash flows to their present value based on appropriate discount
factor.
2.15 Provisions, Contingent Liability and Contingent Asset
(a) Provision involving substantial degree of estimation in measurement
is recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
(b) Contingent liabilities are not recognized but are disclosed in the
notes.
(c) Contingent Assets are neither recognized nor disclosed in the
financial statements
b) Terms/rights, preferences and restrictions attached to securities:
Equity shares:
The company has one class of equity share having a par value of Rs. 10
each. Each shareholder is eligible for one vote per share held. The
dividend proposed by the Board of directors is subject to the approval
of shareholders in the ensuing Annual general meeting, except in case
of interim dividend. In the case of liquidation, the equity
shareholders are eligible to receive the remaining assets of the
company after distribution of all preferential amounts, in proportion
to their shareholding.
d) Terms of securities convertible into equity shares:
Convertible warrants:
On February 3 2012, 3,20,00,000 convertible warrants were issued for
cash at Rs. 10/- each to strategic investors and to persons belonging to
promoters and promoters group category agrregrating to Rs. 32,00,00,000
convertible into 3,20,00,000 no. of equity shares of face value of
Rs.10/- each, out of which the company has received amount equivalent to
25% of the total consideration per warrant. Accordingly company has
received money to the extent of Rs. 8,00,00,000 and alloted 3,20,00,000
warrants of Rs. 10/- each on February 3, 2012. The lock in requirements
of above warrants and/or equity shares arising on conversion of
warrants into equity shares be in accordance with the provisions of
SEBI(ICDR) Regulations , 2009 [at the sole option of warrant holder(s)
at any time within a period of 18 months from the date of allotment of
warrants.]
The Company has fully utilised money received against issue of
convertible warrant of Rs. 8,00,00,000 towards working capital
requirements.
Secured Borrowings:
(a) Nature of security and terms of repayment for secured borrowings
Term loan:
Term Loans are Secured by first charge on all the Immovable and Movable
assets present & future ranking parri passu with charges created/to be
created in favour of other institution/banks subject to second charge
on current assets in favour of the company's bankers for working
capital borrowings. The Loan is further secured by pledge of
1,07,56,989 shares of SAL Steel Limited hold by Shah Alloys Limited and
personal guarantees of (i) Shri Rajendrabhai V. Shah (ii) Smt. R.R.
Shah ( iii) Shri Jayesh V. Shah (iv) and Corporate Guarantee of M/s
Shah Alloys Limited.(Amounting to Rs. 207,50,00,000/-) Term Loan is
repayable over a period of 6 years.
(b) Period and amount of default as on the balance sheet date
The company has made a default in repayment of Principal amount of Term
Loan to the extent of Rs. 2,45,60,397/- as at the balance sheet date. The
company has also defaulted in payment of interest on term loan to the
extent of Rs. 1,69,08,531/- as at the balance sheet date. The period of
default on repayment of principal and payment of interest is ranging
for a period from 3 days to 87 days and 12 days to 47 days
respectively.
Vehicle loan:
Vehicle loans from "banks" are secured by hypothecation of vehicles and
are repayable over a period of 3 years carrying rate of interest 10 to
12% p.a.
Vehicle loans from "financial institutions" are secured by
hypothecation of vehicles and are repayable over a period of 3 years
carrying rate of interest 10 to 12 %p.a.
Unsecured Borrowings:
(a) Deferred sales tax liability :
Deferred sales tax liability is interest free and payable in six equal
annual installments of Rs. 22,63,082/- each payable from 1st May, 2016
(b) Loans and advances from related parties:
The company has taken an interest free inter corporate deposit.
Nature of security provided for short term borrowings:
Cash Credit facilities are Secured by hypothecation of entire current
assets of the company on parri passu basis with the consortium member
banks & second charge on fixed assets of the company on parri passu
basis with consortium member banks subject to first charge on parri
passu basis with the Union bank of India, State bank of India and State
bank of Hyderabad for their respective Loans. The Loans are further
secured by personal guarantee of i) Shri Rajendrabhai V. Shah ii) Smt.
R.R. Shah iii) Shri Jayesh .V. Shah and iv) Corporate guarantee of M/s
Shah Alloys Limited(Amounting to Rs. 207,50,00,000/-)
Inter corporate loan:
The company has taken loan during the year from two related parties as
mentioned herewith: (a) SAL Care Private Limited of Rs. 1,75,00,000 and
(b) SAL Corporation Private Limited of Rs. 1,00,00,000. These parties are
covered under the register maintained under section 301 of the
Companies Act , 1956.
Cost of Fixed Assets and pre-operative expenses, being technical
matter, are capitalized or allocated to Capital work in progress on the
basis of data certified by technical person & the Management.
Borrowing cost includes interest and other bank charges to the extent
that they are regarded as an adjustment to interest costs which are
directly related to the acquisition & construction of a qualifying
asset.
Advances to Project suppliers are shown under Long term loans &
advances included in Capital advances.
Sundry trade receivables include dues from Associate Concern in which
directors of the company are interested of Rs.13,93,26,289 (Previous
Year: Rs. 2,98,88,134)
Mar 31, 2011
I. a) METHOD OF ACCOUNTING
The Financial Statements are prepared as per historical cost convention
and in accordance with the Generally Accepted Accounting Principles in
India, the provisions of the Companies Act 1956 , and the applicable
Accounting Standards notified under the Companies (Accounting
Standards) Rules, 2006. All Income and Expenditures having material
bearing on the Financial Statements are recognized on accrual basis.
b) USE OF ESTIMATES
The presentation of the Financial Statements in conformity with the
Generally Accepted Accounting policies requires, the management to make
estimates and assumptions that affect the reported amount of Assets and
Liabilities, Revenues and Expenses and disclosure of contingent
liabilities. Such estimation and assumptions are based on management's
evaluation of relevant facts and circumstances as on date of Financial
Statements. Difference between the actual results and estimates are
recognized in the period in which the results are known / materialized.
II. REVENUE RECOGNITION
The Company recognizes Sales at the point of transfer of significant
risks and rewards of ownership to the customers. Sales are inclusive
of Excise Duty and Sales Tax and net of returns.
Revenue in respect of excise duty refund is recognized on accrual
basis.
Sales tax / Value added tax paid is charged to Profit and Loss
Accounts. Dividend income is recognized when right to receive is
established. Interest income is recognized on time proportion basis
taking into account, the amount outstanding and rate applicable.
III. EXCISE DUTY
Excise Duty recovered are included in sales. Excise Duty in respect of
increase / decrease in Finished Goods are shown separately as an item
of Manufacturing & Other Expenses and included in Valuation of Finished
goods.
IV. FIXED ASSETS
(a) Fixed assets are stated at cost (net of Cenvat), less accumulated
depreciation [other than "freehold land" where no depreciation is
charged].
(b) Capital Work in progress including capital advances are stated at
cost.
(c) Cost of Trial run Production incurred during the initial period of
production has been capitalized amongst the various heads of fixed
assets.
(d) Pre-operative expenditure incurred on projects has been / will be
capitalized amongst the various heads of fixed assets on the
commencement of the projects.
(e) All costs including financing costs, till commencement of
commercial production are capitalized
(f) Intangible assets are stated at cost of acquisition less
accumulated amortization.
V. VALUATION OF INVENTORIES
Raw Materials, Trading Goods, - At Lower of Cost or Net Realizable
Stores & Spares & Semi Finished Value after considering credit
Goods of Vat and Cenvat.
Finished goods & By-Product - At Lower of the Cost or Net real
-izable value. finished (Includi
-ng excise duty in respect of
goods)
Cost of Finished Goods is determined using the absorption costing
principle. Cost includes cost of material consumed, labour and
systematic allocation of variable and fixed production overheads,
including Excise Duty at applicable rates.
VI. CASH FLOW STATEMENT
The Cash Flow Statement is prepared by the "indirect method" set out in
Accounting Standard 3 on "Cash Flow Statements" and presents the cash
flows by operating, investing and financing activities of the Company.
Cash and Cash equivalents presented in the Cash Flow Statement consist
of cash on hand and deposits with banks.
VII. INVESTMENTS
Investments are classified as Long Term & Current Investments. Long
Term Investments are valued at cost less provision for diminution other
than temporary, in value, if any. Current Investments are valued at
cost or fair value whichever is lower.
VIII. EMPLOYEE BENEFITS
(a) Short Term
Short Term employee benefits are recognized as an expense at the
undiscounted amount expected to be paid over the period of services
rendered by the employees to the company.
(b) Long Term
The Company has both defined contribution and defined benefit plans.
(c) Defined Contribution Plans
These are plans in which the Company pays pre-defined amounts to
separate funds and does not have any legal or informal obligation to
pay additional sums. These comprise of contributions to Employees
Provident Fund. The Company's payments to the defined contribution
plans are reported as expenses during the period in which the employee
performs the services that the payment covers.
(d) Defined Benefit Plans
Expenses for defined benefit gratuity payment plans are calculated as
at the balance sheet date by independent actuaries in the manner that
distributes expenses over the employees working life. These commitments
are valued at the present value of the expected future payments, with
consideration for calculated future salary increases, using a
discounted rate corresponding to the interest rate estimated by the
actuary having regard to the interest rate on Government Bonds with a
remaining term i.e. almost equivalent to the average balance working
period of employees.
(e) Other Employee Benefit
Compensated absences which accrue to employees and which can be carried
to future periods but are expected to be encashed or availed in twelve
months immediately following the year end are reported as expenses
during the year in which the employees perform the services that the
benefit covers and the liabilities are reported at the undiscounted
amount of the benefits after deducting amounts already paid.
IX. TAXATION
Income tax expenses comprise current tax and Deferred Tax charge or
credit. Provision for current tax is made on the basis of the
assessable income at the tax rate applicable to the relevant assessment
year. The Deferred Tax Assets and Deferred Tax Liability is calculated
by applying tax rate and tax laws that have been enacted or
substantively enacted by the Balance Sheet date. Deferred Tax Assets
arising mainly on account of brought forward losses and unabsorbed
depreciation under tax laws, are recognized, only if there is a virtual
certainty of its realization, supported by convincing evidence.
Deferred Tax Assets on account of other timing differences are
recognized only to the extent there is a reasonable certainty of its
realization. At each Balance Sheet date, the carrying amounts of
Deferred Tax Assets are reviewed to reassure realization.
X. METHOD OF DEPRECIATION
A. Depreciation on fixed assets [other than land where no depreciation
is provided] has been provided on straight-line method in accordance
with the provisions of section 205(2)(b) of the Companies Act, 1956, at
the rates specified in Schedule XIV to the Companies Act, 1956.
B. Depreciation in respect of plant and machineries has been provided
on the basis of triple shift working (except for Plant and Machineries
of Sponge Iron & Ferro Alloys Project on which depreciation has been
provided on continuous process plant working and depreciation on
Rolling Mill Plant has been provided on single shift working on the
basis of certificate received from management). Depreciation in respect
of fixed assets acquired / put to use during the years is charged on
pro-rata basis with reference to the date of installation of fixed
assets.
C. No Depreciation has been provided in respect of Capital Work in
Progress.
D. Intangible assets (Software) are amortized for a period of 5 years.
XI. FOREIGN CURRENCY TRANSACTIONS
Transactions in the foreign currency, which are covered by forward
contracts, are accounted for at the contracted rate; the difference
between the forward rate and the exchange rate at the date of
transaction is recognized in the Profit and Loss Accounts over the life
of the contract. Transactions in the foreign currency other than those
covered by forward contract rates are recorded at rate of exchange in
force at the time of occurrence of transactions. Gain or Loss due to
fluctuation in exchange rates is dealt with through Profit and Loss
Account. Monetary Assets and Liabilities related to foreign currency
transactions remaining unsettled at the end of the year are translated
at the year-end rate. The difference in transactions of monetary
liabilities and related gains or losses on foreign exchange
transactions is recognized in the Profit and Loss Account.
XII. BORROWING COST
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying asset are capitalized as part
of cost of such asset. Other borrowing costs are recognized as an
expense in the period in which they are incurred
XIII. EARNING PER SHARE
Basic earning per share is calculated by dividing the net profit after
tax for the year attributable to Equity Shareholders of the Company by
the weighted average number of Equity Shares in issue during the year.
Diluted earning per Share is calculated by dividing net profit
attributable to equity Shareholders (after adjustment for diluted
earnings) by average number of weighted equity shares outstanding
during the year.
XIV. IMPAIRMENT OF ASSETS
The carrying value of assets of the Company's cash generating units are
reviewed for impairment annually or more often if there is an
indication of decline in value based on internal/external factors. If
any indication of such impairment exists, the recoverable amounts of
those assets are estimated and impairment loss is recognized, if the
carrying amount of those assets exceeds their recoverable amount. The
recoverable amount is the greater of the net selling price and their
value in use. Value in use is arrived at by discounting the estimated
future cash flows to their present value based on appropriate discount
factor.
XV. PROVISIONS, CONTINGENT LIABILITY AND CONTINGENT ASSETS
(a) Provision involving substantial degree of estimation in measurement
is recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
(b) Contingent liabilities are not recognized but are disclosed in the
notes.
(c) Contingent Assets are neither recognized nor disclosed in the
financial statements.
XVI. MISCELLANEOUS EXPENDITURE
Preliminary & Public Issue expenses are amortized to Profit and Loss
Account over a period of 5 years in equal installments.
Mar 31, 2010
I. a) METHOD OF ACCOUNTING
The Financial Statements are prepared as per historical cost convention
and in accordance with the Generally Accepted Accounting Principles in
India, the provisions of the Companies Act 1956 , and the applicable
Accounting Standards notified under the Companies (Accounting
Standards) Rules, 2006. All Income and Expenditures having material
bearing on the Financial Statements are recognized on accrual basis.
b) USE OF ESTIMATES
The presentation of the Financial Statements in conformity with the
Generally Accepted ^Accounting policies requires, the management to
make estimates and assumptions that affect the reported amount of
Assets and Liabilities, Revenues and Expenses and disclosure of
contingent liabilities. Such estimation and assumptions are based on
managements evaluation of relevant facts and circumstances as on date
of Financial Statements. Difference between the actual results and
esti- mates are recognized in the period in which the results are known
/ materialized.
II- REVENUE RECOGNITION
The Company recognizing Sales at the point of transfer of significant
risks and rewards of ownership to the customers. Sales are inclusive
of Excise Duty and Sales Tax and net of returns.
Revenue in respect of excise duty refund is recognized on accrual
basis.
Sales tax / Value added tax paid is charged to Profit and Loss Accounts
III. EXCISE DUTY
Excise Duty recovered are included in sales. Excise Duty in respect of
increase / decrease in Finished Goods are shown separately as an item
of Manufacturing & Other Expenses and included in Valua- tion of
Finished goods.
IV. FIXED ASSETS
(a) Fixed assets are stated at cost (net of Cenvat), less accumulated
depreciation [other than "freehold land" where no depreciation is
charged].
(b) Capital Work in progress including capital advances are stated at
cost.
(c) Cost of Trial run Production incurred during the initial period of
production has been capital- ized amongst the various heads of fixed
assets.
(d) Pre-operative expenditure incurred on projects has been / will be
capitalized amongst the various heads of fixed assets on the
commencement of the projects.
V. VALUATION OF INVENTORIES
Raw Materials, Trading Goods, Stores At Lower of the Cost or Net
realizable
& Spares & Semi Finished Goods: value after considering the credit of
VAT and CENVAT Finished goods & Wastage At Lower of the Cost or Net
realizable value. (Including excise duty in respect of finished goods)
Cost of Finished goods is determined using the absorption costing
principle. Cost includes Cost of material consumed, Labours, and
systematic allocation of variable and fixed production overheads,
Including Excise duty at applicable rates.
VI. CASH FLOW STATEMENT
The Cash Flow Statement is prepared by the "indirect method" set out in
Accounting Standard 3 on "Cash Flow Statements" and presents the cash
flows by operating, investing and financing activities of the Company.
Cash and Cash equivalents presented in the Cash Flow Statement consist
of cash on hand and deposits with banks.
VII. INVESTMENTS
Investments are classified as Long Term & Current Investments. Long
Term Investments are valued at cost less provision for diminution other
than temporary, in value, if any. Current Investments are valued at
cost or fair value whichever is lower.
VIII. EMPLOYEE BENEFITS
(a) Short Term
Short Term employee benefits are recognized as an expense at the
undiscounted amount ex- pected to be paid over the period of services
rendered by the employees to the company.
(b) Long Term
The Company has both defined contribution and defined benefit plans.
(c) Defined Contribution Plans
These are plans in which the Company pays pre-defined amounts to
separate funds and does not have any legal or informal obligation to
pay additional sums. These comprise of contributions to Employees
Provident Fund. The Companys payments to the defined contri- bution
plans are reported as expenses during the period in which the employee
performs the services that the payment covers.
(d) Defined Benefit Plans
Expenses for defined benefit gratuity payment plans are calculated as
at the balance sheet date by independent actuaries in the manner that
distributes expenses over the employees working life. These commitments
are valued at the present value of the expected future payments, with
consideration for calculated future salary increases, using a
discounted rate corresponding to the interest rate estimated by the
actuary having regard to the interest rate on Government Bonds with a
remaining term i.e. almost equivalent to the average bal- ance working
period of employees.
(e) Other Employee Benefit
Compensated absences which accrue to employees and which can be carried
to future peri- ods but are expected to be encashed or availed in
twelve months immediately following the year end are reported as
expenses during the year in which the employees perform the services
that the benefit covers and the liabilities are reported at the
undiscounted amount of the benefits after deducting amounts already
paid.
IX. TAXATION
Income tax expenses comprise current tax and Deferred Tax charge or
credit. Provision for current tax is made on the basis of the
assessable income at the tax rate applicable to the relevant assess-
ment year. The Deferred Tax Assets and Deferred Tax Liability is
calculated by applying tax rate and tax laws that have been enacted or
substantively enacted by the Balance Sheet date. Deferred Tax Assets
arising mainly on account of brought forward losses and unabsorbed
depreciation under tax laws, are recognized, only if there is a virtual
certainty of its realization, supported by convincing evidence.
Deferred Tax Assets on account of other timing differences are
recognized only to the extent there is a reasonable certainty of its
realization. At each Balance Sheet date, the carrying amounts of
Deferred Tax Assets are reviewed to reassure realization.
X. METHOD OF DEPRECIATION
A. Depreciation on fixed assets [other than land where no depreciation
is provided] has been provided on straight-line method in accordance
with the provisions of section 205(2)(b) of the Companies Act, 1956, at
the rates specified in Schedule XIV to the Companies Act, 1956.
B. Depreciation in respect of plant and machineries has been provided
on the basis of triple shift working (except for Plant and Machineries
of Sponge Iron & Ferro Alloys Project on which depreciation has been
provided on continuous process plant working and depreciation on
Rolling Mill Plant has been provided on single shift working on the
basis of certificate received from management). Depreciation in respect
of fixed assets acquired / put to use during the years is charged on
pro-rata basis with reference to the date of installation of fixed
assets.
C. No Depreciation has been provided in respect of Capital Work in
Progress.
D. Intangible assets (Software) are amortize for a period of 5 years.
XI. FOREIGN CURRENCY TRANSACTIONS
Transactions in the foreign currency, which are covered by forward
contracts, are accounted for at the contracted rate; the difference
between the forward rate and the exchange rate at the date of
transaction is recognized in the Profit and Loss Accounts over the life
of the contract. Transactions in the foreign currency other than those
covered by forward contract rates are recorded at rate of exchange in
force at the time of occurrence of transactions. Gain or Loss due to
fluctuation in ex- change rates is dealt with through Profit and Loss
Account. Monetary Assets and Liabilities related to foreign currency
transactions remaining unsettled at the end of the year are translated
at the year- end rate. The difference in transactions of monetary
liabilities and related gains or losses on foreign exchange
transactions is recognized in the Profit and Loss Account.
XII. BORROWING COST
Borrowing costs are recognized in the period to which they relate,
regardless of how the funds have been utilized, except where it relates
to the financing of construction or development of assets requiring a
substantial period of time to prepare for their intended future use.
Interest on borrow- ings if any is capitalized up to the date when the
asset is ready for its intended use. The amount of interest capitalized
for the period is determined by applying the interest rate applicable
to appropri- ate borrowings
XIII. EARNING PER SHARE
Basic earning per share is calculated by dividing the net profit after
tax for the year attributable to Equity Shareholders of the Company by
the weighted average number of Equity Shares in issue during the year.
Diluted earning per Share is calculated by dividing net profit
attributable to equity Shareholders (after adjustment for diluted
earnings) by average number of weighted equity shares outstanding
during the year.
XIV. IMPAIRMENT OF ASSETS
The carrying value of assets of the Companys cash generating units are
reviewed for impairment annually or more often if there is an
indication of decline in value based on internal/external factors. If
any indication of such impairment exists, the recoverable amounts of
those assets are estimated and impairment loss is recognized, if the
carrying amount of those assets exceeds their recoverable amount. The
recoverable amount is the greater of the net selling price and their
value in use. Value in use is arrived at by discounting the estimated
future cash flows to their present value based on appropriate discount
factor.
XV. CONTINGENT LIABILITY AND CONTINGENT ASSETS
(a) Contingent liabilities are not recognized but are disclosed in the
notes.
(b) Contingent Assets are neither recognized nor disclosed in the
financial statements.
XVI. MISCELLANEOUS EXPENDITURE
Preliminary & Public Issue expenses are amortized to Profit and Loss
Account over a period of 5 years in equal installments.
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