Mar 31, 2021
Notes
a) Plant and equipment include refineries, smelters, power plants, railway sidings, ships, aircraft, river fleet and related facilities.
b) During the year ended 31 March 2021, interest capitalised was ''233 Crore (31 March 2020: ''673 crore).
c) Certain property, plant and equipment are pledged as collateral against borrowings, the details related to which have been described in Note 17 on "Borrowings".
d) In accordance with the exemption given under Ind AS 101, which has been exercised by the Company, a first time adopter can continue its previous GAAP policy for accounting for exchange differences arising from translation of long-term foreign currency monetary items recognised in the previous GAAP financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period, i.e., 01 April 2016.
Accordingly, foreign currency exchange differences arising on translation/settlement of long-term foreign currency monetary items acquired before 01 April 2016 pertaining to the acquisition of a depreciable asset amounting to ''40 Crore loss (31 March 2020: ''13 crore loss) is adjusted to the cost of respective item of property, plant and equipment.
e) Property, Plant and Equipment, Capital work-in-progress and exploration and evaluation assets net block includes share ofjointly owned assets with the joint venture partners ''6,510 Crore (31 March 2020: ''6,229 Crore).
g) Freehold Land includes ''144 Crore (31 March 2020: ''146 Crore), accumulated amortization of ''127 Crore (31 March 2020: ''127 Crore), which is available for use during the lifetime of the Production Sharing Contract of the respective Oil and Gas blocks and the title deed for the same is in the name of the licensee of the block.
h) A parcel of land aggregating to ''349 Crore relating to Iron Ore business was reclassified during the previous year, due to existence of litigation, to Financial Assets and later impaired (Refer note 32) and during the year ''1 Crore (31 March 2020: ''1 Crore) was transferred to intangible assets from Capital Work in Progress.
a. Carrying value of investment in equity shares of Hindustan Zinc Limited (HZL) is at deemed cost and for all other subsidiaries, it is at the cost of acquisition.
b. Pursuant to the Government of Indiaâs policy of disvestment, the Company in April 2002 acquired 26% equity interest in HZL from the Government of India. Under the terms of the Shareholderâs Agreement (''SHAâ), the Company had two call options to purchase all of the Government of Indiaâs shares in HZL at fair market value. The Company also acquired an additional 20% of the equity capital in HZL through an open offer. The Company exercised the first call option on 29 August 2003 and acquired an additional 18.9% of HZLâs issued
share capital, increasing its shareholding to 64.9%. The second call option provides the Company the right to acquire the Government of Indiaâs remaining 29.5% share in HZL. This call option is subject to the right of the Government of India to sell 3.5% of HZL shares to HZL employees. The Company exercised the second call option on 21 July 2009.
The Government of India disputed the validity of the call option and has refused to act upon the second call option. Consequently, the Company invoked arbitration which is in the early stages. The next date of hearing is to be notified. The Government of India without prejudice to the position on the Put / Call option issue has received approval from the Cabinet for divestment and the Government is looking to divest through the auction route. Meanwhile, the
Supreme Court has, in January 2016, directed status quo pertaining to disinvestment of Government of Indiaâs residual shareholding while hearing the public interest petition filed. The Company has filed an early hearing application in Supreme Court which is currently pending and is sub-judice. The hearings in the matter have started and will now be listed for further arguments in due course.
Pursuant to the Government of Indiaâs policy of divestment, the Company in March 2001 acquired 51% equity interest in BALCO from the Government of India. Under the terms of the SHA, the Company has a call option to purchase the Government of Indiaâs remaining ownership interest in BALCO at any point from March 2, 2004. The Company exercised this option on March 19, 2004. However, the Government of India has contested the valuation and validity of the option and contended that the clauses of the SHA violate the (Indian) Companies Act,
1956 by restricting the rights of the Government of India to transfer its shares and that as a result such provisions of the SHA were null and void. In the arbitration filed by the Company, the arbitral tribunal by a majority award rejected the claims of the Company on the grounds that the clauses relating to the call option, the right of first refusal, the "tag-along" rights and the restriction on the transfer of shares violate the erstwhile Companies Act, 1956 and are not enforceable. The Company has challenged the validity of the majority award in the Hon''ble High Court of Delhi and sought for setting aside the arbitration award to the extent that it holds these clauses ineffective and inoperative. The Government of India also filed an application before the High Court of Delhi to partially set aside the arbitral award in respect of certain matters involving valuation. The matter is currently scheduled for hearing by the Delhi High Court. Meanwhile, the
Government of India without prejudice to its position on the Put / Call option issue has received approval from the Cabinet for divestment and the Government is looking to divest through the auction route.
On January 9, 2012, the Company offered to acquire the Government of Indiaâs interests in HZL and BALCO for ''15,492 Crore and ''1,782 Crore respectively. This offer was separate from the contested exercise of the call options, and Company proposed to withdraw the ongoing litigations in relation to the contested exercise of the options should the offer be accepted. To date, the offer has not been accepted by the Government of India and therefore, there is no certainty that the acquisition will proceed.
In view of the lack of resolution on the options, the non-response to the exercise and valuation request from the Government of India, the resultant uncertainty surrounding the potential transaction and the valuation of the consideration payable, the Company considers the strike price of the options to be at the fair value, which is effectively nil, and hence the call options have not been recognised in the financial statements.
c. Reduction pursuant to merger of Cairn India Limited with Vedanta Limited accounted for in the year ended 31 March 2017.
d. During the year, 15 lakh 0.1% compulsorily convertible debentures of ''1,000 each held by the Company have been fully converted into 1.5 Crore equity shares of Vizag General Cargo Berth Private Limited of face value of ''10 each at a premium of ''90 per share.
(a) The credit period given to customers ranges from zero to 90 days. Also refer note 20(C)(d).
(b) For amounts due and terms and conditions relating to related party receivables see note 37.
(c) As at 31 March 2021, trade receivables amounting to ''1,323 Crore (31 March 2020: '' 1,349 Crore) withheld by GRIDCO (''GRIDCOâ or ''the Customerâ) on account of certain disputes relating to computation of power tariffs pending adjudication by Appellate Tribunal for Electricity (APTEL), which the Company is confident of recovering fully. The Customer has also raised claims of ''413 Crore on the Company in respect of short supply of power for which a provision of ''218 Crore has been made. Various minutes of meetings were signed with the Customer for computing the short supply claims, which were subject to approval of Odisha State Electricity Regulatory Commission (''OERCâ). On 22 June 2020 OERC pronounced its order on computation methodology for short supply claims, basis which both the parties had to recompute the amount of claim and settle the matter in two months from the date of the order. On initial impact assessment of the said Order by the Company, it believes that no further provisioning is required in this regard.
Further, the Company filed an appeal before APTEL against the OERC Order. The matter is now listed before registrar court on 14 July 2021. The Customer has also sought review of the OERC Order. The matter has been posted for order by OERC in due course. In the meanwhile, power supply to GRIDCO has resumed and GRIDCO has been making regular payments against monthly energy invoices.
(d) The total trade receivables as at 01 April 2019 were ''3,214 Crore (net of provision for expected credit loss).
(a) Site restoration asset earns interest at fixed rate based on respective deposit rate.
(b) A parcel of land amounting to ''349 Crore relating to Iron Ore business has been reclassified during the previous year, due to existing litigation, from Property, plant and equipment and was later provided for (Refer note 32).
(c) Bank deposits include margin money of ''4 Crore (31 March 2020: Nil).
(a) Includes ''30 Crore (31 March 2020: ''30 Crore), being Company''s share of gross amount of ''86 Crore (31 March 2019: ''86 Crore) paid under protest on account of Education Cess and Secondary Higher Education Cess for the financial year 2013-14.
(b) Others include claim receivables, advance recoverable (oil and gas business), prepaid expenses and export incentive receivables. This also includes amounts receivable from KCM (Refer note 32).
(c) During the previous year, an impairment charge of ''196 Crore has been recognised relating to copper business. Refer note 32(b).
(a) Includes ''633 Crore (31 March 2020: ''256 Crore) on lien with banks and margin money ''12 Crore (31 March 2020: ''12 Crore).
(b) Restricted funds of ''460 Crore (31 March 2020: Nil) held as interest reserve created against interest payment on loans from banks and ''21 Crore (31 March 2020: Nil) on lien with Others.
(c) Bank deposits earns interest at fixed rate based on respective deposit rate.
(d) Earmarked unpaid dividend accounts are restricted in use as it relates to unclaimed or unpaid dividend.
(e) Earmarked escrow account is restricted in use as it relates to unclaimed redeemable preference shares.
* The % of holding has been calculated on the issued and subscribed share capital as at the respective balance sheet date.
(1) All the above entities are subsidiaries of Volcan Investments Limited, the ultimate holding Company.
(2) Represented by 2,48,23,177 American Depository Shares ("ADS") which got coverted to equity shares in FY 20-21.
(3) Vedanta Holdings Mauritius II Limited (part of Promoter Group of Vedanta Limited) had purchased 185,000,000 equity shares aggregating to 4.98% of equity share capital of Vedanta Limited, on 24 December 2020 via bulk deal on stock exchange.
As per the records of the Company, including its register of shareholders/members, the above shareholding represents legal ownership of shares.
(i) The Company has one class of equity shares having a par value of ''1 per share. Each shareholder is eligible for one vote per share held and dividend as and when declared by the Company. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend which is paid as and when declared by the Board of Directors. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company,
after distribution of all preferential amounts, in proportion to their shareholding.
(ii) ADS shareholders do not have right to attend General meetings in person and also do not have right to vote. They are represented by depository, CITI Bank N.A. New York. As at 31 March 2021 -16,09,03,244 equity shares were held in the form of 4,02,25,811 ADS (31 March 2020: 26,17,80,208 equity shares were held in the form of 6,54,45,052 ADS).
(iii) In terms of Scheme of Arrangement as approved by the Hon''ble High Court of Judicature at Mumbai, vide its order dated 19 April 2002, the erstwhile Sterlite Industries (India) Limited (merged with the Company during 2013-14) during 2002-2003 reduced its paid up share capital by ''10 Crore.
There are 2,01,296 equity shares (31 March 2020: 2,01,711 equity shares) of ''1 each pending clearance from NSDL. The Company has filed an application
in Hon''ble High Court of Mumbai to cancel these shares, the final decision on which is pending.
Hon''ble High Court of Judicature at Mumbai, vide its interim order dated 06 September 2002 restrained any transaction with respect to subject shares.
15 OTHER EQUITY (REFER STATEMENT OF CHANGES IN EQUITY)
a) General reserve: Under the erstwhile Companies Act, 1956, general reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations. The purpose of these transfers was to ensure that if a dividend distribution in a given year is more than 10% of the paid-up capital of the Company for that year, then the total dividend distribution is less than the total distributable reserves for that year. Consequent to introduction of Companies Act, 2013, the requirement to mandatorily transfer a specified percentage of the net profit to general reserve has been withdrawn.
b) Debenture redemption reserve: As per the
earlier provision under the Indian Companies Act, companies that issue debentures were required to create debenture redemption reserve from annual profits until such debentures are redeemed. Companies are required to maintain 25% as a reserve of outstanding redeemable debentures.
The amounts credited to the debenture redemption reserve may not be utilized except to redeem debentures.The MCA vide its Notification dated 16 August 2019, had amended the Companies (Share Capital and Debenture) Rules, 2014, wherein the requirement of creation of Debenture Redemption Reserve has been exempted for certain class of companies, hence, in view of the same, Vedanta Limited is not required to create Debenture Redemption Reserve.
c) Preference share redemption reserve: The
Companies Act, 2013 provides that companies that issue preference shares may redeem those shares from profits of the Company which otherwise would be available for dividends, or from proceeds of a new issue of shares made for the purpose of redemption of the preference shares. If there is a
premium payable on redemption, the premium must be provided for, either by reducing the additional paid in capital (securities premium account) or net income, before the shares are redeemed. If profits are used to redeem preference shares, the value of the nominal amount of shares redeemed should be transferred from profits (retained earnings) to the preference share redemption reserve. This amount should then be utilised for the purpose of redemption of redeemable preference shares. This reserve can be used to issue fully paid-up bonus shares to the shareholders of the Company.
d) Capital reserve: The balance in capital reserve has mainly arisen consequent to merger of Cairn India Limited with the Company.
The Companyâs objectives when managing capital is to safeguard continuity, maintain a strong credit rating and healthy capital ratios in order to support its business
and provide adequate return to shareholders through continuing growth. The Companyâs overall strategy remains unchanged from previous year.
The Company sets the amount of capital required on the basis of annual business and long-term operating plans which include capital and other strategic investments.
The funding requirements are met through a mixture of equity, internal fund generation and borrowings. The Companyâs policy is to use current and non-current borrowings to meet anticipated funding requirements.
The Company monitors capital on the basis of the gearing ratio which is net debt divided by total capital (equity plus net debt). The Company is not subject to any externally imposed capital requirements.
Net debt are non-current and current debts as reduced by cash and cash equivalents, other bank balances and current investments. Equity comprises all components including other comprehensive income.
(a) The constituents of ''total cashâ for the purpose of capital management disclosure to include only those amounts of restricted funds that are corresponding to liabilities (e.g. margin money deposits). Consequently, restricted funds amounting to ''76 Crore (As at 31 March 2021: ''559 Crore) have been excluded from ''total cashâ in the capital management disclosures for the comparative year ended 31 March 2020 (Refer note 13(b),13(d) and 13(e)).
c) The Company facilities are subject to certain financial and non- financial covenants. The primary covenants which must be complied with include interest service coverage ratio, current ratio, debt service coverage ratio, total outside liabilities to total net worth, fixed assets coverage ratio, ratio of total term liabilities to net worth and return on fixed assets. The Company has complied with the covenants as per the terms of the loan agreement.
18B Operational Buyers'' /Suppliers'' Credit is availed in foreign currency from offshore branches of Indian banks or foreign banks at an interest rate ranging from 0.4% to 3.5% per annum and in rupee from domestic banks at interest rate ranging from 4.25-6.65% per annum. These trade credits are largely repayable within 180 days from the date of draw down. Operational Buyers'' credit availed in foreign currency is backed by Standby Letter of Credit issued under working capital facilities sanctioned by domestic banks. Part of these facilities are secured by first pari passu charge over the present and future current assets of the Company.
(b) Does not include any amounts, due and outstanding, to be credited to Investor Education and Protection Fund except ''0.10 Crore (31 March 2020: ''0.10 Crore) which is held in abeyance due to a pending legal case.
(c) Matured deposits of ''0.01 Crore (March 31,2020: ''0.01 Crore) due for transfer to Investor Education and Protection Fund have not been transferred in view of pending litigation between the beneficiaries.
(d) Includes revenue received in excess of entitlement interest of ''737 Crore (31 March 2020: ''765 Crore), reimbursement of expenses, provision for expenses, liabilities related to compensation/claim etc.
The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instruments by valuation techniques:
(i) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
(ii) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e., derived from prices).
(iii) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The below table summarises the categories of financial assets and liabilities as at 31 March 2021 and 31 March 2020 measured at fair value:
active markets. Other current investments are valued on the basis of market trades, poll and primary issuances for securities issued by the same or similar issuer and for similar maturities or based on the applicable spread movement for the security derived based on the aforementioned factor(s).
Trade receivables, cash and cash equivalents, other bank balances, loans, other financial assets, current borrowings, trade payables and other current financial liabilities: fair values approximate their carrying amounts largely due to the short-term maturities of these instruments.
The fair value of the financial assets and liabilities are at the amount that would be received to sell an asset and paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following methods and assumptions were used to estimate the fair values:
Investments traded in active markets are determined by reference to quotes from the financial institutions; for example: Net asset value (NAV) for investments in mutual funds declared by mutual fund house. For other listed securities traded in markets which are not active, the quoted price is used wherever the pricing mechanism is same as for other marketable securities traded in
Other non-current financial assets and liabilities: Fair value is calculated using a discounted cash flow model with market assumptions, unless the carrying value is considered to approximate to fair value.
Non-current fixed-rate and variable-rate borrowings:
Fair value has been determined by the Company based on parameters such as interest rates, specific country risk factors, and the risk characteristics of the financed project.
Derivative financial assets/liabilities: The Company enters into derivative financial instruments with various counterparties. Interest rate swaps, foreign exchange forward contracts and commodity forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include the forward pricing and swap models, using present value calculations. The models incorporate various inputs including foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies, interest rate curves and forward rate curves of the underlying commodity. Commodity contracts are valued using the forward LME rates of commodities actively traded on the listed metal exchange i.e. London Metal Exchange, United Kingdom
(U.K.).
For all other financial instruments, the carrying amount is either the fair value, or approximates the fair value.
The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationship and the value of other financial instruments recognised at fair value.
The estimated fair value amounts as at 31 March 2021 have been measured as at that date. As such, the fair values of these financial instruments subsequent to reporting date may be different than the amounts reported at each year-end.
There were no significant transfers between Level 1, Level 2 and Level 3 during the year.
The Companyâs businesses are subject to several risks and uncertainties including financial risks.
The Companyâs documented risk management policies act as an effective tool in mitigating the various financial risks to which the businesses are exposed in the course of their daily operations. The risk management policies cover areas such as liquidity risk, commodity price risk, foreign exchange risk, interest rate risk, counterparty credit risk and capital management. Risks are identified at both the corporate and individual subsidiary level
with active involvement of senior management. Each operating subsidiary in the Company has in place risk management processes which are in line with the Companyâs policy. Each significant risk has a designated ''ownerâ within the Company at an appropriate senior level. The potential financial impact of the risk and its likelihood of a negative outcome are regularly updated.
The risk management process is coordinated by the Management Assurance function and is regularly reviewed by the Companyâs Audit Committee. The Audit Committee is aided by the other Committees of the Board including the Risk Management Committee, which meets regularly to review risks as well as the progress against the planned actions. Key business decisions are discussed at the periodic meetings of the Executive Committee. The overall internal control environment and risk management programme including financial risk management is reviewed by the Audit Committee on behalf of the Board.
The risk management framework aims to:
¦ improve financial risk awareness and risk transparency
¦ identify, control and monitor key risks
¦ identify risk accumulations
¦ provide management with reliable information on the Companyâs risk situation
¦ improve financial returns Treasury management
Treasury management focuses on liability management, capital protection, liquidity maintenance and yield maximisation. The treasury policies are approved by the Committee of the Board. Daily treasury operations of the business units are managed by their respective finance teams within the framework of the overall Group treasury policies. Long-term fund raising including strategic treasury initiatives are managed jointly by the business treasury team and the central team at corporate treasury while short-term funding for routine working capital requirements is delegated to business units. A monthly reporting system exists to inform senior management of the Companyâs investments and debt position, exposure to currency, commodity and interest rate risk and their mitigants including the derivative position. The Company has a strong system of internal control which enables effective monitoring of adherence to Companyâs policies. The internal control measures are effectively supplemented by regular internal audits.
The Company uses derivative instruments to manage the exposure in foreign currency exchange rates, interest rates and commodity prices. The Company does not
acquire or issue derivative financial instruments for trading or speculative purposes. The Company does not enter into complex derivative transactions to manage the treasury and commodity risks. Both treasury and commodities derivative transactions are normally in the form of forward contracts, interest rate and currency swaps and these are in line with the Company''s policies.
The Company is exposed to the movement of base metal commodity prices on the London Metal Exchange. Any decline in the prices of the base metals that the Company produces and sells will have an immediate and direct impact on the profitability of the businesses. As a general policy, the Company aims to sell the products at prevailing market prices. The commodity price risk in imported input commodity such as of Alumina, anodes, etc., for our aluminium and copper business respectively, is hedged on back-to-back basis ensuring no price risk for the business. Hedging is used primarily as a risk management tool and, in some cases, to secure future cash flows in cases of high volatility by entering into forward contracts or similar instruments. The hedging activities are subject to strict limits set out by the Board and to a strictly defined internal control and monitoring mechanism. Decisions relating to hedging of commodities are taken at the Executive Committee level, basis clearly laid down guidelines.
Whilst the Company aims to achieve average LME prices for a month or a year, average realised prices may not necessarily reflect the LM E price movements because of a variety of reasons such as uneven sales during the year and timing of shipments.
The Company is also exposed to the movement of international crude oil price and the discount in the price of Rajasthan crude oil to Brent price.
Financial instruments with commodity price risk are entered into in relation to following activities:
¦ economic hedging of prices realised on commodity contracts
¦ cash flow hedging of revenues, forecasted highly probable transactions
The requirement of the primary raw material, alumina, is partly met from own sources and the rest is purchased primarily on negotiated price terms. Sales prices are linked to the LME prices. At present the Company on selective basis hedges the aluminium content in outsourced alumina to protect its margins. The Company also enters into hedging arrangements for its aluminium sales to realise average month of sale LME prices.
The Companyâs custom refining copper operations at Silvassa is benefitted by a natural hedge except to the extent of a possible mismatch in quotational periods between the purchase of anodes / blisters and the sale of finished copper. The Companyâs policy on custom smelting is to generate margins from Refining Charges or "RC", improving operational efficiencies, minimising conversion cost, generating a premium over LME on sale of finished copper, sale of by-products and from achieving import parity on domestic sales. Hence, mismatches in quotational periods are managed to ensure that the gains or losses are minimised. The Company hedges this variability of LME prices through forward contracts and tries to make the LME price a pass-through cost between purchases of anodes / blisters and sales of finished products, both of which are linked to the LME price.
RCs are a major source of income for the Indian copper refining operations. Fluctuations in Rcs are influenced by factors including demand and supply conditions prevailing in the market for smelters output. The Companyâs copper business has a strategy of securing a majority of its anodes / blisters feed requirement under long-term contracts with smelters / traders.
The Company sells its Iron Ore production from Goa on the prevailing market prices and from Karnataka through e-auction route as mandated by State Government of Karnataka in India.
The prices of various crude oils are based upon the price of the key physical benchmark crude oil such as Dated Brent, West Texas Intermediate, and Dubai/Oman etc. The crude oil prices move based upon market factors like supply and demand. The regional producers price their crude basis these benchmark crude with a premium or discount over the benchmark based upon quality differential and competitiveness of various grades.
Natural gas markets are evolving differently in important geographical markets. There is no single global market for natural gas. This could be owing to difficulties in large-scale transportation over long distances as compared to crude oil. Globally, there are three main regional hubs for pricing of natural gas, which are USA (Henry Hub Prices), UK (NBP Price) and Japan (imported gas price, mostly linked to crude oil).
Provisionally priced financial instruments
On 31 March 2021, the value of net financial liabilities linked to commodities (excluding derivatives) accounted for on provisional prices was ''394 Crore (31 March 2020: liabilities of ''334 Crore). These instruments are subject to
price movements at the time of final settlement and the final price of these instruments will be determined in the financial year beginning 01 April 2021.
The above sensitivities are based on volumes, costs, exchange rates and other variables and provide the estimated impact of a change in LME prices on profit and equity assuming that all other variables remain constant. A 10% decrease in LME prices would have an equal and opposite effect on the Companyâs financial statements.
The impact on pre-tax profit/(loss) mentioned above includes the impact of a 10% increase in closing copper LME for provisionally priced copper concentrate purchased at Copper division custom smelting operations in India of ''87 Crore loss (31 March 2020: ''79 Crore loss), which is pass through in nature and as such will not have any impact on the profitability.
Financial risk
The Companyâs Board approved financial risk policies include monitoring, measuring and mitigating the liquidity, currency, interest rate and counterparty risk. The Company does not engage in speculative treasury activity but seeks to manage risk and optimize interest and commodity pricing through proven financial instruments.
(a) Liquidity
The Company requires funds both for short-term operational needs as well as for long-term investment programmes mainly in growth projects. The Company generates sufficient cash flows from the current operations which together with the available cash and cash equivalents and short-term investments provide liquidity both in the short-term as well as in the longterm. The Company has been rated by CRISIL Limited (CRISIL) and India Ratings and Research Private Limited (India Rating) for its capital market issuance in the form of CPs and NCDs and for its banking facilities in line with Basel II norms.
Set out below is the impact of 10% increase in LME prices on pre-tax profit/ (loss) for the year and pre-tax total equity as a result of changes in value of the Companyâs commodity financial instruments:
CRISIL affirmed our rating for the Companyâs long-term bank facilities and its Non-Convertible Debentures (NCD) programme to CRISIL AA / Stable during the year. India Ratings has revised the outlook on Vedanta Limitedâs ratings to IND AA / Negative from IND AA/ Stable on account of delay in deleveraging due to sharp fall in commodity prices and delay in volume ramp-up in key business segments. Vedanta Limited has the highest short term rating on its working capital and Commercial Paper Programme at A1 from CRISIL and India Ratings.
During FY2020, Moodys downgraded Corporate Family Rating of Vedanta Resources from Ba3 to B1 (and the rating of senior unsecured notes from B2 to B3) and subsequently placed the rating under review for downgrade in March 2020 on account of expectation of weaker credit metrics in low commodity price environment in wake of Covid-19. On 28 July 2020, Moodyâs confirmed Vedanta Resources Limitedâs B1 Corporate Family Rating and B3 rating on the senior unsecured notes of the company and changed the outlook on the rating to negative from ratings under review for downgrade. The confirmation of the ratings is driven by Moodyâs expectation of stretched credit profile in fiscal year 2021 in wake of Covid 19 pandemic and recovery in credit metrics appropriate for current rating in fiscal year 2022. The negative outlook takes into account heightened refinancing risk in challenging market conditions. Further to the downgrade of VRL by S&P to B / Stable in November 2019, S&P downgraded the ratings to B- with stable outlook in March 2020 on account of weakened liquidity and increased refinancing risk due to volatility in commodity prices.
Anticipated future cash flows, together with undrawn fund based committed facilities of ''1,084 Crore, and
cash, bank and current investments of ''2,994 Crore as at 31 March 2021, are expected to be sufficient to meet the liquidity requirement of the Company in the near future.
The Company remains committed to maintaining a healthy liquidity, a low gearing ratio, deleveraging and strengthening its balance sheet. The maturity profile of the Companyâs financial liabilities based on the remaining period from the date of balance sheet to the contractual maturity date is given in the table below. The figures reflect the contractual undiscounted cash obligation of the Company.
Exposures on foreign currency loans are managed through the Company wide hedging policy, which is reviewed periodically to ensure that the results from fluctuating currency exchange rates are appropriately managed. The Company strives to achieve asset liability offset of foreign currency exposures and only the net position is hedged.
The Companyâs presentation currency is the Indian Rupee (INR). The assets are located in India and the Indian Rupee is the functional currency except for Oil and Gas business operations which have a dual functional currency. Natural hedges available in the business are identified at each entity level and hedges are placed only for the net exposure. Short-term net exposures are hedged progressively based on their maturity. A more conservative approach has been adopted for project expenditures to avoid budget overruns, where cost of the project is calculated taking into account the hedge cost. The hedge mechanisms are reviewed periodically to ensure that the risk from fluctuating currency exchange rates is appropriately managed.
The following analysis is based on the gross exposure as at the reporting date which could affect the statement of profit and loss. The exposure is mitigated by some of the derivative contracts entered into by the Company as disclosed under the section on "Derivative financial instrumentsâ.
The Companyâs exposure to foreign currency arises where an entity holds monetary assets and liabilities denominated in a currency different to the functional currency of the respective business, with US dollar being the major nonfunctional currency.
The foreign exchange rate sensitivity is calculated by the aggregation of the net foreign exchange rate exposure with a simultaneous parallel foreign exchange rates shift in the foreign currencies by 10% against the functional currency of the respective businesses.
Set out below is the impact of a 10% strengthening in the functional currencies of the respective businesses on pretax profit/(loss) and pre-tax equity arising as a result of the revaluation of the Companyâs foreign currency monetary financial assets/liabilities:
The Company has pledged financial instruments with carrying amount of ''13,147 Crore (31 March 2020: ''11,069 Crore) and inventories with carrying amount of ''5,555 Crore (31 March 2020: ''5,689 Crore) as per the requirements specified in various financial facilities in place. The counterparties have an obligation to release the securities to the Company when financial facilities are surrendered.
(b) Foreign exchange risk
Fluctuations in foreign currency exchange rates may have an impact on the statement of profit and loss, the statement of changes in equity, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the Company.
The table below illustrates the impact of a 0.5% to 2.0% movement in interest rates on floating rate financial assets/ liabilities (net) on profit/(loss) and equity assuming that the changes occur at the reporting date and has been calculated based on risk exposure
An equivalent reduction in interest rates would have an equal and opposite effect on the Companyâs financial statements.
(d) Counterparty and concentration of credit risk
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults.
The Company is exposed to credit risk from trade receivables, contract assets, investments, loans, other financial assets, and derivative financial instruments.
Credit risk on receivables is limited as almost all credit sales are against letters of credit and guarantees of banks of national standing.
Moreover, given the diverse nature of the Companyâs businesses trade receivables are spread over a number of customers with no significant concentration of credit risk. The history of trade receivables shows a negligible provision for bad and doubtful debts. Therefore, the Company does not expect any material risk on account of non-performance by any of the Companyâs counterparties.
A 10% weakening of functional currencies of the respective businesses would have an equal and opposite effect on the Companyâs financial statements.
(c) Interest rate risk
At 31 March 2021, the Companyâs net debt of ''26,314 Crore (31 March 2020: ''33,985 Crore) comprises debt of ''32,166 Crore (31 March 2020: ''38,937 Crore) offset by cash, bank and investments of ''5,852 Crore (31 March 2020: ''4,952 Crore).
The Company is exposed to interest rate risk on short-term and long-term floating rate instruments and on the refinancing of fixed rate debt. The Companyâs policy is to maintain a balance of fixed and floating interest rate borrowings and the proportion of fixed and floating rate debt is determined by current market interest rates. The borrowings of the Company are principally denominated in Indian Rupees and US dollars with mix of fixed and floating rates of interest. The USD floating rate debt is linked to US dollar LIBOR and INR Floating rate debt to Bankâs base rate. The Company has a policy of selectively using interest rate swaps, option contracts and other derivative instruments to manage its exposure to interest rate movements. These exposures are reviewed by appropriate levels of management on a monthly basis. The Company invests cash and liquid investments in short-term deposits and debt mutual funds, some of which generate a tax-free return, to achieve the Companyâs goal of maintaining liquidity, carrying manageable risk and achieving satisfactory returns.
Floating rate financial assets are largely mutual fund investments which have debt securities as underlying assets. The returns from these financial assets are linked to market interest rate movements; however the counterparty invests in the agreed securities with known maturity tenure and return and hence has manageable risk.
outstanding as of that date. The year end balances are not necessarily representative of the average debt outstanding during the year. This analysis also assumes that all other variables, in particular foreign currency rates, remain constant.
The Company has clearly defined policies to mitigate counterparty risks. For current investments, counterparty limits are in place to limit the amount of credit exposure to any one counterparty. This, therefore, results in diversification of credit risk for our mutual fund and bond investments. For derivative and financial instruments, the Company attempts to limit the credit risk by only dealing with reputable banks and financial institutions.
The carrying value of the financial assets represents the maximum credit exposure. The Companyâs maximum exposure to credit risk is ''16,063 Crore and ''14,410 Crore as at 31 March 2021 and 31 March 2020 respectively.
The maximum credit exposure on financial guarantees given by the Company for various financial facilities is described in Note 36 on "Commitments, contingencies, and guaranteesâ.
None of the Companyâs cash equivalents, including time deposits with banks, are past due or impaired. Regarding trade receivables, loans and other financial assets (both current and non-current), there were no indications as at 31 March 2021, that defaults in payment obligations will occur except as described in Note 7 and 9 on allowance for impairment of trade receivables and other financial assets.
Considering the net debt position as at 31 March 2021 and the investment in bank deposits, corporate bonds and debt mutual funds, any increase in interest rates would result in a net loss and any decrease in interest rates would result in a net gain. The sensitivity analysis below has been determined based on the exposure to interest rates for financial instruments at the balance sheet date.
Receivables are deemed to be past due or impaired with reference to the Companyâs normal terms and conditions of business. These terms and conditions are determined on a case to case basis with reference to the customerâs credit quality and prevailing market conditions. Receivables that are classified as ''past dueâ in the above tables are those that have not been settled within the terms and conditions that have been agreed with that
customer. The Company based on past experiences does not expect any material loss on its receivables.
The credit quality of the Companyâs customers is monitored on an ongoing basis. Where receivables have been impaired, the Group actively seeks to recover the amounts in question and enforce compliance with credit terms.
commodity price contracts for hedging the commodity price risk of highly probable forecast transactions.
The cash flows related to above are expected to occur during the year ended 31 March 2022 and consequently may impact profit or loss for that year depending upon the change in the commodity prices and foreign exchange rates movements. For cash flow hedges regarded as basis adjustments to initial carrying value of the property, plant and equipment, the depreciation on the basis adjustments made is expected to affect profit or loss over the expected useful life of the property, plant and equipment.
(ii) Fair value hedge
The fair value hedges relate to forward covers taken to hedge currency exposure and commodity price risks.
The Companyâs sales are on a quotational period basis, generally one month to three months after the date of delivery at a customerâs facility. The Company enters into forward contracts for the respective quotational period
to hedge its commodity price risk based on average LME prices. Gains and losses on these hedge transactions are substantially offset by the amount of gains or losses on the underlying sales. Net gains and losses are recognized in the statement of profit and loss.
The Company uses foreign exchange contracts from time to time to optimize currency risk exposure on its foreign currency transactions. Fair value changes on such forward contracts are recognized in the statement of profit and loss.
(iii) Non- designated economic hedge
The Company enters into derivative contracts which are not designated as hedges for accounting purposes, but provide an economic hedge of a particular transaction risk or a risk component of a transaction. Hedging instruments include copper, aluminium future contracts on the LME and certain other derivative instruments.
Fair value changes on such derivative instruments are recognized in the statement of profit and loss.
D. Derivative financial instruments
The Company uses derivative instruments as part of its management of exposure to fluctuations in foreign currency exchange rates, interest rates and commodity prices. The Company does not acquire or issue derivative financial instruments for trading or speculative purposes. The Company does not enter into complex derivative transactions to manage the treasury and commodity risks. Both treasury and commodities derivative transactions are normally in the form of forward contracts and these are subject to the Company guidelines and policies.
The fair values of all derivatives are separately recorded in the balance sheet within current and non-current assets and liabilities. Derivatives that are designated as hedges are classified as current or non-current depending on the maturity of the derivative.
The use of derivatives can give rise to credit and market risk. The Company tries to control credit risk as far as possible by only entering into contracts with reputable banks and financial institutions. The use of derivative instruments is subject to limits, authorities and regular monitoring by appropriate levels of management.
The limits, authorities and monitoring systems are periodically reviewed by management and the Board.
The market risk on derivatives is mitigated by changes in the valuation of the underlying assets, liabilities or transactions, as derivatives are used only for risk management purposes.
(i) Cash flow hedges
The Company enters into forward exchange and commodity price contracts for hedging highly probable forecast transaction and account for them as cash flow hedges and states them at fair value. Subsequent changes in fair value are recognized in equity through OCI until the hedged transaction occurs, at which time, the respective gain or losses are reclassified to profit or loss. These hedges have been effective for the year ended 31 March 2021.
The Company uses foreign exchange contracts from time to time to optimize currency risk exposure on its foreign currency transactions. The Company hedged part of its foreign currency exposure on capital commitments during the year ended 2020. Fair value changes on such forward contracts are recognized in other comprehensive income.
The majority of cash flow hedges taken out by the Company during the year comprise non-derivative hedging instruments for hedging the foreign exchange rate of highly probable forecast transactions and
c) Restoration, rehabilitation and environmental costs
The provisions for restoration, rehabilitation and environmental liabilities represent the management''s best estimate of the costs which will be incurred in the future to meet the Company''s obligations under existing Indian law and the terms of the Company''s exploration and other licences and contractual arrangements.
The principal restoration and rehabilitation provisions are recorded within oil & gas business where a legal obligation exists relating to the oil and gas fields, where costs are expected to be incurred in restoring the site of production facilities at the end of the producing life of an oil field. The Company recognises the full cost of site restoration as a liability when the obligation to rectify environmental damage arises.
These amounts are calculated by considering discount rates within the range of 2% to 3%, and become payable
at the end of the producing life of an oil field and are expected to be incurred over a period of twenty one years.
An obligation to incur restoration, rehabilitation and environmental costs arises when environmental disturbance is caused by the development or ongoing production from a producing field.
The Company participates in defined contribution and benefit plans, the assets of which are held (where funded) in separately administered funds.
For defined contribution plans the amount charged to the statement of profit and loss is the total amount of contributions payable in the year.
For defined benefit plans, the cost of providing benefits under the plans is determined by actuarial valuation separately each year for each plan using the projected unit credit method by independent qualified actuaries as at the year end. Remeasurement gains and losses arising in the year are recognised in full in other comprehensive income for the year.
Central recognised provident fund
In accordance with the ''The Employee''s Provident Funds and Miscellaneous Provisions Act, 1952â, employees are entitled to receive benefits under the Provident Fund. Both the employee and the employer make monthly contributions to the plan at a predetermined rate (12% for the year ended 31 March 2020 and 31 March 2019) of an employeeâs basic salary. All employees have an option to make additional voluntary contributions.
These contributions are made to the fund administered and managed by the Government of India (GOI) or to independently managed and approved funds. The Company has no further obligations under the fund managed by the GOI beyond its monthly contributions which are charged to the statement of profit and loss in the period they are incurred.
The Pension Fund was established in 1995 and is managed by the Government of India. The employee makes no contribution to this fund but the employer makes a contribution of 8.33% of salary each month subject to a specified ceiling per employee. This is provided for every permanent employee on the payroll.
At the age of superannuation, contributions ceases and the individual receives a monthly payment based on the level of contributions through the years, and on their salary scale at the time they retire, subject to a maximum ceiling of salary level. The Government funds these payments, thus the Company has no additional liability beyond the contributions that it makes, regardless of whether the central fund is in surplus or deficit.
Superannuation, another pension scheme applicable in India, is applicable only to senior executives. The Company holds a policy with Life Insurance Corporation of India ("LIC"), to which it contributes a fixed amount relating to superannuation and the pension annuity is met by LIC as required, taking into consideration
the contributions made. The Company has no further obligations under the scheme beyond its monthly contributions which are charged to the statement of profit and loss in the year they are incurred.
National Pension Scheme is a retirement savings account for social security and welfare applicable for executives covered under the superannuation benefit of Vedanta Limited, on a choice basis. It was introduced to enable employees to select the treatment of superannuation component of their fixed salaries and avail the benefits offered by National Pension Scheme launched by Government of India. Vedanta Limited holds a corporate account with one of the pension fund managers authorized by the Government of India to which the Company contributes a fixed amount relating to superannuation and the pension annuity will be met by the fund manager as per rules of National Pension Scheme. The Company has no further obligations under the scheme beyond its monthly contributions which are charged to the statement of profit and loss in the year they are incurred.
ii) Defined benefit plans
(a) Contribution to provident fund trust (the "trust")
The provident fund of the Iron Ore division is exempted under Section 17 of The Employee''s Provident Funds and Miscellaneous Provisions Act, 1952. Conditions for grant of exemption stipulates that the employer shall make good deficiency, if any, between the return guaranteed by the statute and actual earning of the Fund. Based on actuarial valuation in accordance with Ind AS 19 and Guidance note issued by Institute of Actuaries of India for interest rate guarantee of exempted provident fund liability of employees, there is no interest shortfall in the funds managed by the trust and hence there is no further liability as on 31 March 2021 and 31 March 2020. Having
(b) Gratuity plan
In accordance with the Payment of Gratuity Act, 1972, the Company contributes to a defined benefit plan (the "Gratuity Planâ) covering certain categories of employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement, disability or termination of employment being an amount based on the respective employeeâs last drawn salary and the number of years of employment with the Company. The Gratuity plan is a funded plan and the Company makes contribution to recognised funds in India.
Based on actuarial valuations conducted as at year end using the projected unit credit method, a provision is recognised in full for the benefit obligation over and above the funds held in the Gratuity Plan.
The iron ore and oil & gas division of the Company have constituted a trust recognised by Indian Income Tax Authorities for gratuity to employees, contributions to the trust are funded with Life Insurance Corporation of India (LIC) and ICICI Prudential Life Insurance Company Limited.
The above sensitivity analysis may not be representative of the actual benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
In presenting the above sensitivity analysis, the present value of defined benefit obligation has been calculated using the projected unit credit method at the end of reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognized in the balance sheet.
Risk analysis
The Company is exposed to a number of risks in the defined benefit plans. Most significant risks pertaining to defined benefit plans and management''s estimation of the impact of these risks are as follows:
Investment risk
The Gratuity plan is funded with Life Insurance Corporation of India (LIC) and ICICI Prudential Life (ICICI). The Company does not have any liberty to manage the fund provided to LIC and ICICI.
The present value of the defined benefit plan obligation is calculated using a discount rate determined by reference to Government of India bonds. If the return on plan asset is below this rate, it will create a plan deficit.
Interest risk
A decrease in the interest rate on plan assets will increase the net plan obligation.
Longevity risk / Life expectancy
The present value of the defined benefit plan obligation is calculated by reference to the best estimate of the mortality of plan participants both during and at the e
Mar 31, 2019
1. COMPANY OVERVIEW:
Vedanta Limited ("the Companyâ) is a diversified natural resource company engaged in exploring, extracting and processing minerals and oil and gas. The Company engages in the exploration, production and sale of oil and gas, aluminium, copper, iron ore and power.
The Company was incorporated on September 08, 1975 under the laws of the Republic of India. The registered office of the Company is situated at 1st Floor, ''C'' wing, Unit 103, Corporate Avenue, Atul Projects, Chakala, Andheri (East), Mumbai-400092, Maharashtra. The Company''s shares are listed on National Stock Exchange and Bombay Stock Exchange in India. In June 2007, the Company completed its initial public offering of American Depositary Shares, or ADS, each representing four equity shares, and listed its ADSs on the New York Stock Exchange. In July 2009, the Company completed its follow-on offering of an additional 131,906,011 ADSs, each currently representing four equity shares, which are listed on the New York Stock Exchange.
The Company is majority owned by Twin Star Holdings Limited ("Twin Starâ), Finsider International Company Limited ("Finsiderâ), West Globe Limited ("West Globeâ) and Welter Trading Limited ("Welterâ) which are in turn wholly-owned subsidiaries of Vedanta Resources PLC ("VRPLCâ), which was a public limited company incorporated in the United Kingdom and listed on the London Stock Exchange (VRPLC has been delisted from London Stock Exchange on October 01, 2018 and is renamed as "Vedanta Resources Limitedâ ("VRLâ) with effect from October 29, 2018). Twin Star, Finsider, West Globe and Welter held 37.1%, 10.8%, 1.2% and 1.0% respectively of the Company''s equity as at March 31, 2019.
Details of Company''s various businesses are as follows:
- The Company''s oil and gas business (prior to merger was owned and operated by erstwhile Cairn India Limited) is engaged in business of exploration and development and production of oil and gas.
- The Company''s iron ore business consists of iron ore exploration, mining and processing of iron ore, pig iron and metallurgical coke. The Company has iron ore mining operations in the States of Goa and Karnataka. Pursuant to Honourable Supreme Court of India order, operations in the state of Goa are currently suspended.
- The Company''s copper business is principally one of custom smelting and includes captive power plants at Tuticorin in Southern India. The Company''s copper business at Tuticorin has received an order from the Tamil Nadu Pollution Control Board ("TNPCBâ) on April 09, 2018, rejecting the Company''s application for renewal of consent to operate under the Air and Water Acts for the 400,000 tpa copper smelter plant in Tuticorin for want of further clarification and consequently the operations were suspended. The Company has filed an appeal with TNPCB Appellate authority against the said order. During the pendency of the appeal, TNPCB through its order dated May 23, 2018 ordered for disconnection of electricity supply and closure of copper smelter plant. Post such order, the state government on May 28, 2018 ordered the permanent closure of the plant. (Refer note3(c)(A)(x)).
- The Company''s aluminium business include a refinery and captive power plant at Lanjigarh and a smelter and captive power plants at Jharsuguda both situated in the State of Odisha in India.
- The Company''s power operations include a thermal coal-based commercial power facility of 600 MW at Jharsuguda in the State of Odisha in Eastern India.
Besides the above the Company has business interest in zinc, lead, silver, iron ore, steel and other products and services through its subsidiaries in India and overseas.
These are the Company''s separate financial statements.
The details of Company''s material subsidiaries, associates and joint ventures is given in note 38.
2. BASIS OF PREPARATION AND BASIS OF MEASUREMENT OF FINANCIAL STATEMENTS
(a) Basis of preparation
These financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Companies Act, 2013 (the Act) (as amended from time to time) and Guidance Note on Accounting for Oil and Gas Producing Activities issued by the Institute of Chartered Accountants of India.
These financial statements have been prepared in accordance with the accounting policies, set out below and were consistently applied to all periods presented unless otherwise stated.
These financial statements are approved for issue by the Board of Directors on May 07, 2019.
Certain comparative figures appearing in these financial statements have been regrouped and/or reclassified to better reflect the nature of those items.
All financial information presented in Indian Rupee has been rounded off to the nearest Crore. Amounts less than Rs. 0.50 Crore have been presented as "0â.
(b) Reclassification/Restatement
(i) The Company has revised the presentation of forward premium relating to derivative instruments to present it along with the mark-to-market gain/loss on these instruments, as these more appropriately reflect the substance of the forward premiums on derivative transactions. As a result of the change, forward premium expense amounting to Rs. 547 Crore (year ended March 31, 2019: Rs. 244 Crore) has been reclassified from ''Finance cost'' to other income/ other expense'' for the comparative year ended March 31, 2018. Similarly, net cash flows from operating activities in the statement of cash flows has reduced by an equivalent amount with corresponding effect on the net cash used in financing activities.
(ii) The classification of export incentives from government has also been revised to present it under other operating income'', as the revised classification is more appropriate. As a result of the change, export incentives amounting to Rs. 263 Crore has been reclassified from ''revenue'' to other operating income'' for the comparative year ended March 31, 2018. Similarily, scrap sales and miscellaneous income amounting to Rs. 100 Crore and Rs. 115 Crore respectively have also been reclassified from ''revenue'' to other operating income'' for the comparative year ended March 31, 2018.
(c) Basis of measurement
The financial statements have been prepared on a going concern basis using historical cost convention and on an accrual method of accounting, except for certain financial assets and liabilities which are measured at fair value as explained in the accounting policies below.
a) Export incentive has been reclassified from ''segment revenue'' to ''other operating income''. Refer note 2(b).
b) EBITDA is a non-GAAP measure
c) Amorisation of duty benefits relating to assets recognised as government grant.
d) Total Capital expenditure includes capital expenditure of Rs. 3 Crore not allocable to any segment.
e) Total of Impairment reversal/(charge) - net / provision includes net impairment reversal on investment in subsidiaries of Rs.4 Crore not allocable to any segment.
a) Export incentive has been reclassified from ''segment revenue'' to ''other operating income''. Refer note 2(b).
b) EBITDA is a non-GAAP measure
c) Amorisation of duty benefits relating to assets recognised as government grant.
d) Depreciation, depletion and amortisation expense excludes and unallocated income is net of unallocated deprection of Rs. 7 Crore.
e) Total Capital expenditure includes capital expenditure of Rs. 11 Crore not allocable to any segment.
f) Total of Impairment reversal/(charge) - net / provision includes impairment reversal on investment in subsidiaries of Rs. 2,710 Crore not allocable to any segment.
II) Geographical segment analysis
The following table provides an analysis of the Company''s sales by region in which the customer is located, irrespective of the origin of the goods.
Information about major customers
Revenue from one customer amounted to Rs. 5,077 Crore (March 31, 2018 : Rs. 1,687 Crore), arising from sales made in the Aluminium and Copper segment.
Disaggregation of revenue
Below table summarises the disaggregated revenue from contract with customers :
Notes
a) Plant and equipment include refineries, smelters, power plants, railway sidings, ships, aircrafts, river fleet and related facilities.
b) During the year ended March 31, 2019, interest capitalised was Rs. 567 Crore (March 31, 2018: Rs. 349 Crore).
c) Certain property, plant and equipment are pledged as collateral against borrowings, the details related to which have been described in Note 17 on "Borrowingsâ.
d) In accordance with the exemption given under Ind AS 101, which has been exercised by the Company, a first time adopter can continue its previous GAAP policy for accounting for exchange differences arising from translation of long-term foreign currency monetary items recognised in the previous GAAP financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period i.e. April 01, 2016.
Accordingly, foreign currency exchange differences arising on translation/settlement of long-term foreign currency monetary items acquired before April 01, 2016 pertaining to the acquisition of a depreciable asset amounting to Rs. 2 Crore loss (March 31, 2018: Rs. 1 Crore gain) is adjusted to the cost of respective item of property, plant and equipment.
Capital work-in-progress includes foreign currency exchange loss of Nil incurred during the year (March 31, 2018: Rs. 17 Crore loss) on such long term foreign currency monetary liabilities.
e) Property,Plant and Equipment, Capital work-in-progress and exploration and evaluation assets net block includes share of jointly owned assets with the joint venture partners Rs. 12,211 Crore (March 31, 2018: Rs. 11,151 Crore). Refer note 3(c)(A)(xi) for reasons for transfer of exploration and evaluation assets to property, plant and equipment and capital work-in-progress.
g) Freehold Land includes gross block of Rs. 129 Crore (March 31, 2018: Rs. 119 Crore), accumulated amortisation of Rs. 112 Crore (March 31, 2018: '' 95 Crore), which is available for use during the lifetime of the Production Sharing Contract of the respective Oil and Gas blocks.
a. Carrying value of investment in equity shares of Hindustan Zinc Limited is at deemed cost and for all other subsidiaries, it is at the cost of acquisition.
b. Pursuant to the Government of India''s policy of disinvestment, the Company in April 2002 acquired 26% equity interest in Hindustan Zinc Limited (HZL) from the Government of India. Under the terms of the Shareholder''s Agreement (''SHA''),the Company had two call options to purchase all of the Government of India''s shares in HZL at fair market value. The Company exercised the first call option on August 29, 2003 and acquired an additional 18.9% of HZL''s issued share capital. The Company also acquired an additional 20% of the equity capital in HZL through an open offer, increasing its shareholding to 64.9%. The second call option provides the Company the right to acquire the Government of India''s remaining 29.5% share in HZL. This call option was subject to the right of the Government of India to sell 3.5% of HZL shares to HZL employees. The Company exercised the second call option on July 21, 2009. The Government of India disputed the validity of the call option and refused to act upon the second call option. Consequently the Company invoked arbitration which is in the early stages. The next date of hearing is to be notified. The Government of India without prejudice to the position on the Put / Call option issue has received approval from the Cabinet for divestment and the Government is looking to divest through the auction route. Meanwhile, the Supreme Court has, in January 2016, directed status quo pertaining to disinvestment of Government of India''s residual shareholding in a public interest petition filed which is currently pending and sub-judice.
Pursuant to the Government of India''s policy of divestment, the Company in March 2001 acquired 51% equity interest in BALCO from the Government of India. Under the terms of the SHA, the Company had a call option to purchase the Government of India''s remaining ownership interest in BALCO at any point from March 2, 2004. The Company exercised this option on March 19, 2004. However, the Government of India contested the valuation and validity of the option and contended that the clauses of the SHA violate the erstwhile Companies Act, 1956 by restricting the rights of the Government of India to transfer its shares and that as a result such provisions of the SHA were null and void. In the arbitration filed by the Company, the arbitral tribunal by a majority award rejected the claims of the Company on the ground that the clauses relating to the call option, the right of first refusal, the "tag alongâ rights and the restriction on the transfer of shares violate the erstwhile Companies Act, 1956 and are not enforceable. The Company has challenged the validity of the majority award before the Hon''ble High Court at Delhi and sought for setting aside the arbitration award to the extent that it holds these clauses ineffective and inoperative. The Government of India also filed an application before the High Court to partially set aside the arbitral award in respect of certain matters involving valuation. The matter is currently scheduled for hearing by the Delhi High Court on August 02, 2019. Meanwhile, the Government of India without prejudice to its position on the Put / Call option issue has received approval from the Cabinet for divestment and the Government is looking to divest through the auction route.
On January 9, 2012, the Company offered to acquire the Government of India''s interests in HZL and BALCO for Rs. 15,492 Crore and Rs. 1,782 Crore respectively. This offer was separate from the contested exercise of the call options, and Company proposed to withdraw the ongoing litigations in relation to the contested exercise of the options should the offer be accepted. To date, the offer has not been accepted by the Government of India and therefore, there is no certainty that the acquisition will proceed.
In view of the lack of resolution on the options, the non-response to the exercise and valuation request from the Government of India, the resultant uncertainty surrounding the potential transaction and the valuation of the consideration payable, the Company considers the strike price of the options to be at the fair value, which is effectively nil, and hence the call options have not been recognised in the financial statements.
c. Reduction pursuant to merger of Cairn India Limited with Vedanta Limited accounted for in the year ended March 31, 2017.
d. During the previous year, the Company made an investment of Rs. 11.30 Lacs in 1.13 Lacs equity shares having face value of Rs. 10/- each in Gaurav Overseas Private Limited.
e. During the previous year, the maturity of investments in compulsorily convertible debentures of Vizag General Cargo Berth Private Limited has been extended by 2 years 10 months till January 28, 2021.
f. During the previous year, the Company made an investment in 1,70,418 Compulsory convertible debentures of MALCO energy limited (MEL) having face value of Rs. 100/- each at an premium of '' 900/- each.
g. On April 23, 2018, Vedanta Star Limited was incorporated as a 100% subsidiary of the Company. The Company has made an investment of Rs. 1,770 Crore in 1,77,50,000 equity shares having face value of Rs. 10 each including 6 shares held by nominees. Further during the year, 18,67,256 shares were issued as bonus shares. Vedanta Star Limited in turn has acquired the controlling stake in Electrosteel Steels Limited.
(a) The interest free credit period given to customers is upto 90 days. Also refer note 20(C)(d)
(b) For amounts due and terms and conditions relating to related party receivables see note 36.
(c) Additionally, as at March 31, 2018, Rs. 767 Crore was outstanding on account of certain disputes relating to computation of tariffs and differential revenues recognised with respect to tariffs pending finalisation by the Odisha State Regulatory Commission. During the current year the said disputes were settled. However, the customer has raised certain claims on the Company in respect of short supply of power for which a provision of Rs. 218 Crore has been made. A Minutes of Meeting (MOM) has been signed with the customer and subsequently the Company has received payment of Rs. 55 Crore in March 2019. Pending ratification of MOM by Odisha Electricity Regulatory Commission (OERC) and adjudication on certain issues related to the claim, the customer has withheld Rs. 1,248 Crore, which the Company is confident of recovering.
(a) Includes Rs. 30 Crore (March 31, 2018: Rs. 30 Crore), being Company''s share of gross amount of Rs.86 Crore (March 31, 2018: Rs. 86 Crore) paid under protest on account of Education Cess and Secondary Higher Education Cess for the FY 2014.
(b) Includes Rs.9 Crore (March 31, 2018: Rs.48 Crore), being Company''s share of gross amount of Rs. 26 Crore (March 31, 2018: Rs. 139 Crore), of excess oil cess paid under Oil Industry (Development) Act.
(c) Represents prepayments in respect of land taken under operating leases, being amortised equally over the period of the lease.
(d) Others include claim receivables, advance recoverable (oil and gas business), prepaid expenses and export incentive receivables.
(a) Bank deposits earns interest at fixed rate based on respective deposit rate.
(b) Includes Nil Crore (March 31, 2018 : Rs. 8 Crore) on lien with banks.
(c) Includes Rs. 591 Crore (March 31, 2018 : Rs. 193 Crore) on lien with banks and margin money Rs. 11 Crore (March 31, 2018 : Rs. 39 Crore).
(d) Earmarked unpaid dividend accounts are restricted in use as it relates to unclaimed or unpaid dividend.
(e) Earmarked escrow account is restricted in use as it relates to unclaimed redeemable preference shares.
(a) Redeemable preference shares of Rs. 3,010 Crore were redeemed on October 27, 2018 i.e. 18 months from the date of allotment as per the scheme of amalgamation of Cairn India Limited with Vedanta Limited. An equivalent amount of Rs. 3,010 Crore has been transferred from general reserve to preference share redemption reserve.
(b) Includes 3,08,232 (March 31, 2018: 3,08,232) equity shares kept in abeyance. These shares are not part of listed equity capital and pending allotment as they are sub-judice.
(c) Includes 1,49,98,702 (March 31, 2018: 92,33,871) equity shares held by Vedanta Limited ESOS Trust (Refer note 25).
F. Other disclosures
(i) The Company has one class of equity shares having a par value of Rs. 1 per share. Each shareholder is eligible for one vote per share held and dividend as and when declared by the Company. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend which is paid as and when declared by the Board of Directors. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts, in proportion to their shareholding.
(ii) The Company had one class of 7.5% non-cumulative redeemable preference shares having a par value of Rs.10 per share. Each preference shareholder is eligible for one vote per share as per terms of Section 47(2) of the Companies Act 2013 and dividend as and when declared by the Company.
As per the terms of preference shares, these shares are redeemable at par on expiry of 18 months from the date of their allotment. In the event of winding up of Vedanta Limited, the holders of Preference Shares shall have a right to receive repayment of capital paid up and arrears of dividend, whether declared or not, up to the commencement of winding up, in prioirty to any payment of capital on the equity shares out of the surplus of Vedanta Limited.
(iii) ADS shareholders do not have right to attend General meetings in person and also do not have right to vote. They are represented by depository, CITI Bank N.A. New York. As at March 31, 2019 - 24,87,79,452 equity shares were held in the form of 6,21,94,863 ADS (March 31, 2018- 24,84,24,696 equity shares in form of 6,21,06,174 ADS).
(iv) In terms of Scheme of Arrangement as approved by the Hon''ble High Court of Judicature at Mumbai, vide its order dated April 19, 2002, the erstwhile Sterlite Industries (India) Limited (merged with the Company during 2013-14) during 2002-2003 reduced its paid up share capital by Rs. 10 Crore. There are 2,01,305 equity shares (March 31, 2018: 204,525 equity shares) of Rs. 1 each pending clearance from NSDL/CDSL. The Company has filed an application in Hon''ble High Court of Mumbai to cancel these shares, the final decision on which is pending. Hon''ble High Court of Judicature at Mumbai, vide its interim order dated September 06, 2002 restrained any transaction with respect to subject shares.
3. OTHER EQUITY (REFER STATEMENT OF CHANGES IN EQUITY)
a) General reserve: Under the erstwhile Companies Act 1956, general reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations. The purpose of these transfers was to ensure that if a dividend distribution in a given year is more than 10% of the paid-up capital of the Company for that year, then the total dividend distribution is less than the total distributable results for that year. Consequent to introduction of Companies Act 2013, the requirement to mandatorily transfer a specified percentage of the net profit to general reserve has been withdrawn.
b) Debenture redemption reserve: The Companies Act requires companies that issue debentures to create a debenture redemption reserve from annual profits until such debentures are redeemed. Companies are required to maintain 25% as a reserve of outstanding redeemable debentures. The amounts credited to the debenture redemption reserve may not be utilised except to redeem debentures.
c) Preference share redemption reserve: The Companies Act provides that companies that issue preference shares may redeem those shares from profits of the Company which otherwise would be available for dividends, or from proceeds of a new issue of shares made for the purpose of redemption of the preference shares. If there is a premium payable on redemption, the premium must be provided for, either by reducing the additional paid in capital (securities premium account) or net income, before the shares are redeemed. If profits are used to redeem preference shares, the value of the nominal amount of shares redeemed should be transferred from profits (retained earnings) to the preference share redemption reserve account. This amount should then be utilised for the purpose of redemption of redeemable preference shares. This reserve can be used to issue fully paid-up bonus shares to the shareholders of the Company. During the year, on redemption of preference share, Rs. 3,010 Crore has been transferred from general reserve to preference share redemption reserve.
d) Capital reserve: The balance in capital reserve has mainly arisen consequent to merger of Cairn India Limited with the Company.
4. CAPITAL MANAGEMENT
The Company''s objectives when managing capital is to safeguard continuity, maintain a strong credit rating and healthy capital ratios in order to support its business and provide adequate return to shareholders through continuing growth. The Company''s overall strategy remains unchanged from previous year.
The Company sets the amount of capital required on the basis of annual business and long-term operating plans which include capital and other strategic investments.
The funding requirements are met through a mixture of equity, internal fund generation and other current borrowings. The Company''s policy is to use current and non-current borrowings to meet anticipated funding requirements.
The Company monitors capital on the basis of the gearing ratio which is net debt divided by total capital (equity plus net debt) . The Company is not subject to any externally imposed capital requirements.
Net debt are non-current and current debts as reduced by cash and cash equivalents, other bank balances and current investments. Equity comprises all components including other comprehensive income.
c) The Company facilities are subject to certain financial and non- financial covenants. The primary covenants which must be complied with include interest service coverage ratio, current ratio, debt service coverage ratio, total outside liabilities to total net worth, fixed assets coverage ratio, ratio of total term liabilities to net worth and return on fixed assets. The Company has complied with the covenants as per the terms of the loan agreement.
Other non-cash changes comprises of amortisation of borrowing costs, foreign exchange difference on borrowings and reclassification between borrowings due within one year and borrowings due after one year. Additionally non-cash changes for the year ended March 31, 2018 includes preference shares issued on merger of Cairn India Limited with Vedanta Limited.
(a) Trade payables are non- interest bearing and are normally settled upto 180 days terms.
(b) For terms and conditions relating to related party payables, see note 36.
(c) Operational Buyers'' Credit and Suppliers'' Credit is availed in foreign currency from offshore branches of Indian banks or foreign banks at an interest rate ranging from 2.5% to 4% per annum and in rupee from domestic banks at interest rate ranging from 8%-9%. These trade credits are largely repayable within 180 days from the date of draw down. Operational Buyer''s credit availed in foreign currency is backed by Standby Letter of Credit issued under working capital facilities sanctioned by domestic banks. Part of these facilities are secured by first pari passu charge over the present and future current assets of the Company.
(b) Does not include any amounts, due and outstanding, to be credited to Investor Education and Protection Fund except Rs. 0.11 Crore (March 31, 2018: Rs. 0.07 Crore) which is held in abeyance due to a pending legal case.
(c) Matured deposits of Rs. 0.01 Crore (March 31,2018: Rs. 0.01 Crore) due for transfer to Investor Education and Protection Fund have not been transferred in view of pending litigation between the beneficiaries.
(d) Includes revenue received in excess of entitlement interest of Rs. 1,439 Crore (March 31, 2018: Rs.648 Crore), reimbursement of expenses, provision for expenses, liabilities related to compensation/claim etc.
5. FINANCIAL INSTRUMENTS
A. Financial assets and liabilities:
The accounting classification of each category of financial instruments, and their carrying amounts, are set out below:
B. Fair value hierarchy
The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instruments by valuation techniques:
(i) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
(ii) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e. derived from prices).
(iii) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
The below table summarises the categories of financial assets and liabilities as at March 31, 2019 and March 31, 2018 measured at fair value:
The fair value of the financial assets and liabilities are at the amount that would be received to sell an asset and paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following methods and assumptions were used to estimate the fair values:
Investments traded in active markets are determined by reference to quotes from the financial institutions; for example: Net asset value (NAV) for investments in mutual funds declared by mutual fund house. For other listed securities traded in markets which are not active, the quoted price is used wherever the pricing mechanism is same as for other marketable securities traded in active markets. Other current investments are valued on the basis of market trades, poll and primary issuances for securities issued by the same or similar issuer and for similar maturities or based on the applicable spread movement for the security derived based on the aforementioned factor(s).
Trade receivables, cash and cash equivalents, other bank balances, loans, other financial assets, current borrowings, trade payables and other current financial liabilities: fair values approximate their carrying amounts largely due to the short-term maturities of these instruments.
Other non-current financial assets and liabilities: Fair value is calculated using a discounted cash flow model with market assumptions, unless the carrying value is considered to approximate to fair value.
Non-current fixed-rate and variable-rate borrowings: Fair value has been determined by the Company based on parameters such as interest rates, specific country risk factors, and the risk characteristics of the financed project.
Derivative financial assets/liabilities: The Company enters into derivative financial instruments with various counterparties. Interest rate swaps, foreign exchange forward contracts and commodity forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include the forward pricing and swap models, using present value calculations. The models incorporate various inputs including foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies, interest rate curves and forward rate curves of the underlying commodity. Commodity contracts are valued using the forward LME rates of commodities actively traded on the listed metal exchange i.e. London Metal Exchange, United Kingdom (U.K.).
For all other financial instruments, the carrying amount is either the fair value, or approximates the fair value.
The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationship and the value of other financial instruments recognised at fair value.
The estimated fair value amounts as at March 31, 2019 have been measured as at that date. As such, the fair values of these financial instruments subsequent to reporting date may be different than the amounts reported at each year-end.
There were no significant transfers between Level 1, Level 2 and Level 3 during the year.
C. Risk management framework
The Company''s businesses are subject to several risks and uncertainties including financial risks.
The Company''s documented risk management policies act as an effective tool in mitigating the various financial risks to which the businesses are exposed in the course of their daily operations. The risk management policies cover areas such as liquidity risk, commodity price risk, foreign exchange risk, interest rate risk, counterparty credit risk and capital management. Risks are identified at both the corporate and individual subsidiary level with active involvement of senior management. Each operating subsidiary in the Company has in place risk management processes which are in line with the Company''s policy. Each significant risk has a designated ''owner'' within the Company at an appropriate senior level. The potential financial impact of the risk and its likelihood of a negative outcome are regularly updated.
The risk management process is coordinated by the Management Assurance function and is regularly reviewed by the Company''s Audit Committee. The Audit Committee is aided by the other Committees of the Board including the Risk Management Committee, which meets regularly to review risks as well as the progress against the planned actions.
Key business decisions are discussed at the periodic meetings of the Executive Committee. The overall internal control environment and risk management programme including financial risk management is reviewed by the Audit Committee on behalf of the Board.
The risk management framework aims to:
- improve financial risk awareness and risk transparency
- identify, control and monitor key risks
- identify risk accumulations
- provide management with reliable information on the Company''s risk situation
- improve financial returns
Treasury management
Treasury management focuses on liability management, capital protection, liquidity maintenance and yield maximisation. The treasury policies are approved by the Committee of the Board. Daily treasury operations of the business units are managed by their respective finance teams within the framework of the overall Group treasury policies. Long-term fund raising including strategic treasury initiatives are managed jointly by the business treasury team and the central team at corporate treasury while short-term funding for routine working capital requirements is delegated to business units. A monthly reporting system exists to inform senior management of the Company''s investments and debt position, exposure to currency, commodity and interest rate risk and their mitigants including the derivative position.
The Company has a strong system of internal control which enables effective monitoring of adherence to Company''s policies. The internal control measures are effectively supplemented by regular internal audits.
The investment portfolio at the Company is independently reviewed by CRISIL Limited and Company portfolio has been rated as Tier I or "Very Goodâ meaning highest safety.
The investments are made keeping in mind safety, liquidity and yield maximization.
The Company uses derivative instruments to manage the exposure in foreign currency exchange rates, interest rates and commodity prices. The Company does not acquire or issue derivative financial instruments for trading or speculative purposes. The Company does not enter into complex derivative transactions to manage the treasury and commodity risks. Both treasury and commodities derivative transactions are normally in the form of forward contracts, interest rate and currency swaps and these are in line with the Company''s policies.
Commodity price risk
The Company is exposed to the movement of base metal commodity prices on the London Metal Exchange. Any decline in the prices of the base metals that the Company produces and sells will have an immediate and direct impact on the profitability of the businesses. As a general policy, the Company aims to sell the products at prevailing market prices. The commodity price risk in import input commodity such as of Copper Concentrate & Alumina, for our copper and aluminium business respectively, is hedged on back-to back basis ensuring no price risk for the business. Hedging is used primarily as a risk management tool and, in some cases, to secure future cash flows in cases of high volatility by entering into forward contracts or similar instruments. The hedging activities are subject to strict limits set out by the Board and to a strictly defined internal control and monitoring mechanism. Decisions relating to hedging of commodities are taken at the Executive Committee level, basis clearly laid down guidelines.
Whilst the Company aims to achieve average LME prices for a month or a year, average realised prices may not necessarily reflect the LME price movements because of a variety of reasons such as uneven sales during the year and timing of shipments.
The Company is also exposed to the movement of international crude oil price and the discount in the price of Rajasthan crude oil to Brent price.
Financial instruments with commodity price risk are entered into in relation to following activities:
- economic hedging of prices realised on commodity contracts
- cash flow hedging of revenues, forecasted highly probable transactions
Aluminium
The requirement of the primary raw material, alumina, is partly met from own sources and the rest is purchased primarily on negotiated price terms. Sales prices are linked to the LME prices. At present the Company on selective basis hedges the aluminium content in outsourced alumina to protect its margins. The Company also enters into hedging arrangements for its aluminium sales to realise average month of sale LME prices.
Copper
The Company''s custom smelting copper operations at Tuticorin is benefited by a natural hedge except to the extent of a possible mismatch in quotational periods between the purchase of concentrate and the sale of finished copper.
The Company''s policy on custom smelting is to generate margins from Treatment charges /Refining charges (TC/RC), improving operational efficiencies, minimising conversion cost, generating a premium over LME on sale of finished copper, sale of by-products and from achieving import parity on domestic sales. Hence, mismatches in quotational periods are managed to ensure that the gains or losses are minimised. The Company hedges this variability of LME prices through forward contracts and tries to make the LME price a pass-through cost between purchases of copper concentrate and sales of finished products, both of which are linked to the LME price.
TC/RCs are a major source of income for the Indian copper smelting operations. Fluctuations in TC/RCs are influenced by factors including demand and supply conditions prevailing in the market for mine output. The Company''s copper business has a strategy of securing a majority of its concentrate feed requirement under long-term contracts with mines.
Iron ore
The Company sells its Iron Ore production from Goa on the prevailing market prices and from Karnataka through e-auction route as mandated by State Government of Karnataka in India.
Oil and Gas
The prices of various crude oils are based upon the price of the key physical benchmark crude oil such as Dated Brent, West Texas Intermediate, and Dubai/Oman etc. The crude oil prices move based upon market factors like supply and demand. The regional producers price their crude basis these benchmark crude with a premium or discount over the benchmark based upon quality differential and competitiveness of various grades.
Natural gas markets are evolving differently in important geographical markets. There is no single global market for natural gas. This could be owing to difficulties in large-scale transportation over long distances as compared to crude oil. Globally, there are three main regional hubs for pricing of natural gas, which are USA (Henry Hub Prices), UK (NBP Price) and Japan (imported gas price, mostly linked to crude oil).
Provisionally priced financial instruments
On March 31, 2019, the value of net financial assets linked to commodities (excluding derivatives) accounted for on provisional prices was Rs. 15 Crore (March 31, 2018: liability of Rs. 3,335 Crore). These instruments are subject to price movements at the time of final settlement and the final price of these instruments will be determined in the financial year beginning April 01, 2019.
Set out below is the impact of 10% increase in LME prices on pre-tax profit/ (loss) for the year and pre-tax total equity as a result of changes in value of the Company''s commodity financial instruments:
The above sensitivities are based on volumes, costs, exchange rates and other variables and provide the estimated impact of a change in LME prices on profit and equity assuming that all other variables remain constant. A 10% decrease in LME prices would have an equal and opposite effect on the Company''s financial statements.
The impact on pre-tax profit/(loss) mentioned above includes the impact of a 10% increase in closing copper LME for provisionally priced copper concentrate purchased at Copper division custom smelting operations in India of Rs. 74 Crore (March 31, 2018: Rs. 368 Crore), which is pass through in nature and as such will not have any impact on the profitability.
Financial risk
The Company''s Board approved financial risk policies include monitoring, measuring and mitigating the liquidity, currency, interest rate and counterparty risk. The Company does not engage in speculative treasury activity but seeks to manage risk and optimize interest and commodity pricing through proven financial instruments.
(a) Liquidity
The Company requires funds both for short-term operational needs as well as for long-term investment programmes mainly in growth projects. The Company generates sufficient cash flows from the current operations which together with the available cash and cash equivalents and short-term investments provide liquidity both in the short-term as well as in the long-term. The Company has been rated by CRISIL Limited (CRISIL) and India Ratings and Research Private Limited (India Rating) for its capital market issuance in the form of CPs and NCDs and for its banking facilities in line with Basel II norms.
CRISIL changed the outlook for the Company''s long-term bank facilities and its Non-Convertible Debentures (NCD) programme to CRISIL AA / Stable from CRISIL AA /Positive during the year on account of delay in deleveraging amid weaker commodity prices. India Ratings has revised the outlook on Vedanta Limited''s ratings to IND AA / Stable from IND AA/ Positive on account of weaker profitability resulting in delay in deleveraging. Vedanta Limited has the highest short term rating on its working capital and Commercial Paper Programme at A1 from CRISIL and India Ratings.
Anticipated future cash flows, together with undrawn fund based committed facilities of Rs. 3 ,205 Crore, and cash, bank and current investments of Rs. 8,269 Crore as at March 31, 2019, are expected to be sufficient to meet the liquidity requirement of the Company in the near future.
The Company remains committed to maintaining a healthy liquidity, a low gearing ratio, deleveraging and strengthening our balance sheet. The maturity profile of the Company''s financial liabilities based on the remaining period from the date of balance sheet to the contractual maturity date is given in the table below. The figures reflect the contractual undiscounted cash obligation of the Company.
Collateral
The Company has pledged financial instruments with carrying amount of Rs. 13,030 Crore and inventories with carrying amount of Rs. 7,657 Crore as per the requirements specified in various financial facilities in place. The counterparties have an obligation to release the securities to the Company when financial facilities are surrendered.
(b) Foreign exchange risk
Fluctuations in foreign currency exchange rates may have an impact on the statement of profit and loss, the statement of changes in equity, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the Company.
Exposures on foreign currency loans are managed through the Company wide hedging policy, which is reviewed periodically to ensure that the results from fluctuating currency exchange rates are appropriately managed. The Company strives to achieve asset liability offset of foreign currency exposures and only the net position is hedged.
The Company''s presentation currency is the Indian Rupee (INR). The assets are located in India and the Indian Rupee is the functional currency except for Oil and Gas business operations which have a dual functional currency. Natural hedges available in the business are identified at each entity level and hedges are placed only for the net exposure. Short-term net exposures are hedged progressively based on their maturity. A more conservative approach has been adopted for project expenditures to avoid budget overruns, where cost of the project is calculated taking into account the hedge cost. The hedge mechanisms are reviewed periodically to ensure that the risk from fluctuating currency exchange rates is appropriately managed.
The following analysis is based on the gross exposure as at the reporting date which could affect the statement of profit and loss. The exposure is mitigated by some of the derivative contracts entered into by the Company as disclosed under the section on "Derivative financial instrumentsâ.
The carrying amount of the Company''s financial assets and liabilities in different currencies are as follows
The Company''s exposure to foreign currency arises where an entity holds monetary assets and liabilities denominated in a currency different to the functional currency of the respective business, with US dollar being the major non-functional currency.
The foreign exchange rate sensitivity is calculated by the aggregation of the net foreign exchange rate exposure with a simultaneous parallel foreign exchange rates shift in the foreign currencies by 10% against the functional currency of the respective businesses.
Set out below is the impact of a 10% strengthening in the functional currencies of the respective businesses on pre-tax profit/(loss) and pre-tax equity arising as a result of the revaluation of the Company''s foreign currency monetary financial assets/liabilities:
(c) Interest rate risk
At March 31, 2019, the Company''s net debt of Rs.33,935 Crore (March 31, 2018: Rs. 33,582 Crore) comprises cash, bank and investments of Rs. 8,269 Crore (March 31, 2018: Rs. 7,131 Crore) offset by debt of Rs. 42,204 Crore (March 31, 2018: Rs.40,713 Crore).
The Company is exposed to interest rate risk on short-term and long-term floating rate instruments and on the refinancing of fixed rate debt. The Company''s policy is to maintain a balance of fixed and floating interest rate borrowings and the proportion of fixed and floating rate debt is determined by current market interest rates. The borrowings of the Company are principally denominated in Indian Rupees and US dollars with mix of fixed and floating rates of interest.
The USD floating rate debt is linked to US dollar LIBOR and INR Floating rate debt to Bank''s base rate. The Company has a policy of selectively using interest rate swaps, option contracts and other derivative instruments to manage its exposure to interest rate movements. These exposures are reviewed by appropriate levels of management on a monthly basis. The Company invests cash and liquid investments in short-term deposits and debt mutual funds, some of which generate a tax-free return, to achieve the Company''s goal of maintaining liquidity, carrying manageable risk and achieving satisfactory returns.
Floating rate financial assets are largely mutual fund investments which have debt securities as underlying assets. The returns from these financial assets are linked to market interest rate movements; however the counterparty invests in the agreed securities with known maturity tenure and return and hence has manageable risk.
Considering the net debt position as at March 31, 2019 and the investment in bank deposits, corporate bonds and debt mutual funds, any increase in interest rates would result in a net loss and any decrease in interest rates would result in a net gain.
The sensitivity analysis below has been determined based on the exposure to interest rates for financial instruments at the balance sheet date.
The table below illustrates the impact of a 0.5% to 2.0% movement in interest rates on floating rate financial assets/ liabilities (net) on profit/(loss) and equity assuming that the changes occur at the reporting date and has been calculated based on risk exposure outstanding as of date. The year end balances are not necessarily representative of the average debt outstanding during the year. This analysis also assumes that all other variables, in particular foreign currency rates, remain constant.
An equivalent reduction in interest rates would have an equal and opposite effect on the Company''s financial statements.
d) Counterparty and concentration of credit risk
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults.
The Company is exposed to credit risk for trade receivables, contract assets, investments, loans, other financial assets, and derivative financial instruments.
Credit risk on receivables is limited as almost all credit sales are against letters of credit and guarantees of banks of national standing.
Moreover, given the diverse nature of the Company''s businesses trade receivables are spread over a number of customers with no significant concentration of credit risk.
The history of trade receivables shows a negligible provision for bad and doubtful debts. Therefore, the Company does not expect any material risk on account of non-performance by any of the Company''s counterparties.
The Company has clearly defined policies to mitigate counterparty risks. For current investments, counterparty limits are in place to limit the amount of credit exposure to any one counterparty. This, therefore, results in diversification of credit risk for our mutual fund and bond investments. For derivative and financial instruments, the Company attempts to limit the credit risk by only dealing with reputable banks and financial institutions.
The carrying value of the financial assets represents the maximum credit exposure. The Company''s maximum exposure to credit risk is Rs. 15,208 Crore and Rs. 13,292 Crore as at March 31, 2019 and March 31, 2018 respectively.
The maximum credit exposure on financial guarantees given by the Company for various financial facilities is described in Note 35 on "Commitments, contingencies, and guaranteesâ.
None of the Company''s cash equivalents, including time deposits with banks, are past due or impaired.
Regarding trade receivables, loans and other financial assets (both current and non-current), there were no indications as at March 31, 2019, that defaults in payment obligations will occur except as described in Note 7 and 9 on allowance for impairment of trade receivables and other financial assets.
Of the year end trade receivables, loans and other financial assets (excluding bank deposits, site restoration fund and derivatives) balance the following, though overdue, are expected to be realised in the normal course of business and hence, are not considered impaired as at March 31, 2019 and March 31, 2018:
Receivables are deemed to be past due or impaired with reference to the Company''s normal terms and conditions of business. These terms and conditions are determined on a case to case basis with reference to the customer''s credit quality and prevailing market conditions. Receivables that are classified as ''past due'' in the above tables are those that have not been settled within the terms and conditions that have been agreed with that customer. The Company based on past experiences does not expect any material loss on its receivables.
The credit quality of the Company''s customers is monitored on an ongoing basis and assessed for impairment where indicators of such impairment exist. The Company uses simplified approach for impairment of financial assets. If credit risk has not increased significantly, 12-month expected credit loss is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime expected credit loss is used. The solvency of the debtor and their ability to repay the receivable is considered in assessing receivables for impairment. Where receivables have been impaired, the Company actively seeks to recover the amounts in question and enforce compliance with credit terms.
D. Derivative financial instruments
The Company uses derivative instruments as part of its management of exposure to fluctuations in foreign currency exchange rates, interest rates and commodity prices.
The Company does not acquire or issue derivative financial instruments for trading or speculative purposes. The Company does not enter into complex derivative transactions to manage the treasury and commodity risks. Both treasury and commodities derivative transactions are normally in the form of forward contracts and these are subject to the Company guidelines and policies.
The fair values of all derivatives are separately recorded in the balance sheet within current and non-current assets and liabilities. Derivatives that are designated as hedges are classified as current or non-current depending on the maturity of the derivative.
The use of derivatives can give rise to credit and market risk. The Company tries to control credit risk as far as possible by only entering into contracts with reputable banks and financial institutions. The use of derivative instruments is subject to limits, authorities and regular monitoring by appropriate levels of management. The limits, authorities and monitoring systems are periodically reviewed by management and the Board. The market risk on derivatives is mitigated by changes in the valuation of the underlying assets, liabilities or transactions, as derivatives are used only for risk management purposes.
(i) Cash flow hedges
The Company enters into forward exchange and commodity price contracts for hedging highly probable forecast transaction and account for them as cash flow hedges and states them at fair value. Subsequent changes in fair value are recognized in equity though OCI until the hedged transaction occurs, at which time, the respective gain or losses are reclassified to profit or loss. These hedges have been effective for the year ended March 31, 2019.
The Company uses foreign exchange contracts from time to time to optimize currency risk exposure on its foreign currency transactions. The Company hedged part of its foreign currency exposure on capital commitments during the year ended 2019. Fair value changes on such forward contracts are recognized in comprehensive income.
The majority of cash flow hedges taken out by the Company during the year comprise non-derivative hedging instruments for hedging the foreign exchange rate of highly probable forecast transactions and commodity price contracts for hedging the commodity price risk of highly probable forecast transactions.
The cash flows related to above are expected to occur during the year ended March 31, 2020 and consequently may impact profit or loss for that year depending upon the change in the commodity prices and foreign exchange rates movements.
For cash flow hedges regarded as basis adjustments to initial carrying value of the property, plant and equipment, the depreciation on the basis adjustments made is expected to affect profit or loss over the expected useful life of the property, plant and equipment.
(ii) Fair value hedge
The fair value hedges relate to forward covers taken to hedge currency exposure and commodity price risks.
The Company''s sales are on a quotational period basis, generally one month to three months after the date of delivery at a customer''s facility. The Company enters into forward contracts for the respective quotational period to hedge its commodity price risk based on average LME prices. Gains and losses on these hedge transactions are substantially offset by the amount of gains or losses on the underlying sales.
Net gains and losses are recognized in the statement of profit and loss.
The Company uses foreign exchange contracts from time to time to optimize currency risk exposure on its foreign currency transactions. Fair value changes on such forward contracts are recognized in the statement of profit and loss.
(iii) Non- designated economic hedge
The Company enters into derivative contracts which are not designated as hedges for accounting purposes, but provide an economic hedge of a particular transaction risk or a risk component of a transaction. Hedging instruments include copper, aluminium future contracts on the LME and certain other derivative instruments. Fair value changes on such derivative instruments are recognized in the statement of profit and loss.
(a) Other statutory liabilities mainly includes contribution to PF, ESIC, withholding taxes, goods & service tax, VAT etc.
(b) Represents government assistance in the form of the duty benefit availed under Export Promotion Capital Goods (EPCG) Scheme and Special Economic Zone (SEZ) scheme on purchase of property, plant and equipments accounted for as government grant and being amortised over the useful life of such assets.
(c) Advance from customers are contract liabilities and include amounts received under long term supply agreements.
The advance payment plus a fixed rate of return/ discount will be settled by supplying respective commodity over a period up to twenty four months under an agreed delivery schedule as per the terms of the respective agreements. As these are contracts that the Company expects, and has the ability, to fulfil through delivery of a non-financial item, these are recognised as advance from customers and will be recognised as revenue as and when control of respective commodities is transferred to customer under the agreements. The portion of the advance that is expected to be settled within the next 12 months has been classified as a current liability.
c) Restoration, rehabilitation and environmental costs
The provisions for restoration, rehabilitation and environmental liabilities represent the management''s best estimate of the costs which will be incurred in the future to meet the Company''s obligations under existing Indian law and the terms of the Company''s exploration and other licences and contractual arrangements.
The principal restoration and rehabilitation provisions are recorded within oil & gas division where a legal obligation exists relating to the oil and gas fields, where costs are expected to be incurred in restoring the site of production facilities at the end of the producing life of an oil field. The Company recognises the full cost of site restoration as a liability when the obligation to rectify environmental damage arises.
These amounts are calculated by considering discount rates within the range of 2% to 3%, and become payable at the end of the producing life of an oil field and are expected to be incurred over a period of twenty two years.
An obligation to incur restoration, rehabilitation and environmental costs arises when environmental disturbance is caused by the development or ongoing production from a producing field.
6. EMPLOYEE BENEFIT PLANS
The Company participates in defined contribution and benefit plans, the assets of which are held (where funded) in separately administered funds.
For defined contribution plans the amount charged to the statement of profit and loss is the total amount of contributions payable in the year.
For defined benefit plans, the cost of providing benefits under the plans is determined by actuarial valuation separately each year for each plan using the projected unit credit method by independent qualified actuaries as at the year end. Remeasurement gains and losses arising in the year are recognised in full in other comprehensive income for the year.
Central recognised provident fund
In accordance with the ''The Employees Provident and Miscellaneous Provisions Act ,1952'', employees are entitled to receive benefits under the Provident Fund. Both the employee and the employer make monthly contributions to the plan at a predetermined rate (12% for the year ended March 31, 2019 and March 31, 2018) of an employee''s basic salary.
All employees have an option to make additional voluntary contributions. These contributions are made to the fund administered and managed by the Government of India (GOI) or to independently managed and approved funds.
The Company has no further obligations under the fund managed by the GOI beyond its monthly contributions which are charged to the statement of profit and loss in the period they are incurred.
Family pension fund
The Pension Fund was established in 1995 and is managed by the Government of India. The employee makes no contribution to this fund but the employer makes a contribution of 8.33% of salary each month subject to a specified ceiling per employee. This is provided for every permanent employee on the payroll.
At the age of superannuation, contributions ceases and the individual receives a monthly payment based on the level of contributions through the years, and on their salary scale at the time they retire, subject to a maximum ceiling of salary level. The Government funds these payments, thus the Company has no additional liability beyond the contributions that it makes, regardless of whether the central fund is in surplus or deficit.
Superannuation
Superannuation, another pension scheme applicable in India, is applicable only to senior executives. The Company holds a policy with Life Insurance Corporation of India ("LICâ), to which it contributes a fixed amount relating to superannuation and the pension annuity is met by LIC as required, taking into consideration the contributions made. The Company has no further obligations under the scheme beyond its monthly contributions which are charged to the statement of profit and loss in the year they are incurred.
ii) Defined benefit plans
(a) Contribution to provident fund trust (the "trust")
The provident fund of the Iron Ore division is exempted under section 17 of The Employees Provident Fund and Miscellaneous Provisions Act, 1952. Conditions for grant of exemption stipulates that the employer shall make good deficiency, if any, between the return guaranteed by the statute and actual earning of the Fund. Based on actuarial valuation in accordance with Ind AS 19 and Guidance note issued by Institute of Actuari
Mar 31, 2018
2 Significant Judgments
a) Revenue recognition and receivable recovery in relation to the power business
In certain cases, the Companyâs power customers are disputing various contractual provisions of Power Purchase Agreements (PPA). Significant judgments is required in both assessing the tariff to be charged under the PPA in accordance with Ind AS 18 and to assess the recoverability of withheld revenue currently accounted for as receivables.
In assessing this critical judgment, management considered favorable external legal opinions the Company has obtained in relation to such claims. In addition the fact that the contracts are with government owned companies implies the credit risk is low (Refer note 11 (iv))
b) Contingencies
In the normal course of business, contingent liabilities may arise from litigation, taxation and other claims against the Company. A tax provision is recognized when the Company has a present obligation as a result of a past event, it is probable that the Company will be required to settle that obligation.
Where it is managementâs assessment that the outcome cannot be reliably quantified or is uncertain, the claims are disclosed as contingent liabilities unless the likelihood of an adverse outcome is remote. Such liabilities are disclosed in the notes but are not provided for in the financial statements.
When considering the classification of a legal or tax cases as probable, possible or remote, there is judgments involved. This pertains to the application of the legislation, which in certain cases is based upon managementâs interpretation of country specific applicable law, in particular India, and the likelihood of settlement. Management uses in-house and external legal professionals to make informed decision.
Although there can be no assurance regarding the final outcome of the legal proceedings, the Company does not expect them to have a materially adverse impact on the Companyâs financial position or profitability. The liabilities which are assessed as possible and hence are not recognized in these financial statements are disclosed in note 49.
c) Exceptional items:
Exceptional items are those items that management considers, by virtue of their size or incidence (including but not limited to impairment charges and acquisition and restructuring related costs), should be disclosed separately to ensure that the financial information allows an understanding of the underlying performance of the business in the year, so as to facilitate comparison with prior periods. Also tax charges related to exceptional items and certain one-time tax effects are considered Exceptional. Such items are material by nature or amount to the yearâs result and require separate disclosure in accordance with Ind AS.
The determination as to which items should be disclosed separately requires a degree of judgments. These are set out in note 34.
(z) Recently issued accounting pronouncements
The following standards/amendment to standards have been issued but are not yet effective up to the date of issuance of the Companyâs financial statements. Except specifically disclosed below, the Company is evaluating the requirements of these standards, improvements and amendments and has not yet determined the impact on the financial statements.
- Ind AS 115: Revenue from Contracts with Customers
This standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The standard replaces most of the current revenue recognition guidance. The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively including service revenues and contract modifications and improve guidance for multiple element arrangements. The new Standard comes into effect for the annual reporting periods beginning on or after April 1, 2018.
In order to identify the potential impact of the standard on the Companyâs financial statements, the Company has analyzed contracts of the relevant revenue streams of the Company. The work done is focused on evaluating the contractual arrangements across the Companyâs principal revenue streams, particularly key terms and conditions which may impact revenue recognition and measurement of revenue.
Based on the work carried out, the areas of impact in implementing Ind AS 115, on the Company results is detailed below.
The Company has products which are provisionally priced at the date revenue is recognized. Revenue in respect of such contracts will be recognized when control passes to the customer and will be measured at the amount the entity expects to be entitled - being the estimate of the price expected to be received at the end of the measurement period. Post transfer of control of goods, provisional pricing features will be accounted in accordance with Ind AS 109 âFinancial Instrumentsâ rather than Ind AS 115 and therefore the Ind AS 115 rules on variable consideration do not apply. These âprovisional pricingâ adjustments i.e. the consideration received post transfer of control will continue to be included in the revenue on the face of the statement of profit and loss, and these would be disclosed by way of note to the financial statements.
On the basis of the analysis conducted, the new standard would result in identification of freight and insurance services as a separate performance obligation implying segregation of revenue on account of sale of goods and sale of services. The revenue on account of these services is required to be deferred and recognized over time as this obligation is fulfilled.
The overall effect of implementation of Ind AS 115 is not material on the recognition and measurement of revenues, though there would be significant additional disclosure requirements for the Company to comply with.
The Company will adopt the modified transitional approach to implementation where any transitional adjustment is recognized in retained earnings at April 01, 2018 without adjustment of comparatives and the new standard will only be applied to contracts that remain in force at that date.
4 Merger of Cairn India Limited with Vedanta Limited
(i) Vedanta Limited and Cairn India Limited (Cairn), had initially announced a scheme of merger between the two companies on June 14, 2015, terms whereof were amended on July 22, 2016 (âSchemeâ). As per the terms of the Scheme, Cairn India Limited was to merge into Vedanta Limited and upon the merger becoming effective:
a) Non-controlling shareholders of Cairn India Limited were to receive one equity share in Vedanta Limited of face value '' 1 each and four 7.5% Redeemable Preference Shares (redeemable after 18 months from issuance) in Vedanta Limited with a face value of '' 10 each for each equity share held in Cairn India Limited.
b) No shares were to be issued to Vedanta Limited or any of its subsidiaries for their shareholding in Cairn India Limited.
c) The employees of Cairn India Limited who were holding stock options in Cairn India Limited were to be compensated either in cash or through issuance of stock options of Vedanta Limited.
d) The authorized share capital of Cairn India Limited aggregating to '' 2,250 Crore was to be assumed by the Company, resulting in an increase in its authorized share capital from Rs, 5,162 Crore (divided into 5,127 Crore equity shares of Rs, 1 each and 3.50 Crore preference shares of Rs, 10 each) to Rs, 7,412 Crore (divided into 4,402 Crore equity shares of Rs, 1 each and 301 Crore preference shares of Rs, 10 each).
All substantive approvals for effecting the merger of Cairn India Limited with Vedanta Limited were received by March 27, 2017 and therefore the same was accounted for in the previous financial year ended March 31, 2017. The Board of Directors of both the companies made the merger operative on April 11, 2017, where after Cairn India Limited ceased to exist.
(ii) Since the amalgamating entity, Cairn India Limited, was a subsidiary of the Company and both have in turn been controlled by a common parent Vedanta Resources Plc, the transaction has been accounted for in accordance with the Appendix C to Ind AS 103 âCommon Control Business Combinationâ, which requires retroactive accounting of the merger from the date common control was established. Accordingly, financial information as on April 1, 2015, being the earliest period presented in the annual standalone financial statements of the Company, and all periods thereafter, were restated to give effect of the merger.
(iii) The accounting effects arising out of merger are explained below:
a) Equity shares aggregating to Rs, 75 Crore required to be issued to the non-controlling shareholders of Cairn, has been accounted for as an item of equity on April 1, 2015, as equity shares proposed to be issued.
b) Upon the merger being substantively completed in March 2017, the liability towards issuance of preference shares of Rs, 3,010 Crore has been accounted for as a financial liability.
c) The carrying value of the assets, liabilities and reserves of Cairn India Limited as appearing in the consolidated financial statements of the Company have been recognized in the standalone financial statements of the Company. The said values relating to Cairn India Limited in the consolidated financial statements of the Company prior to the merger, were computed by restating past business combinations as permitted by Ind AS 101.
d) Sesa Resources Limited (âSRLâ), a wholly owned subsidiary of the Company, held investments in Cairn having a fair value of Rs, 956 Crore, which have been cancelled without any consideration. Accordingly, the said fair value, has been reduced from the carrying value of investments in SRL with a corresponding reduction in the value of Reserves and Surplus. As per the provisions of the Scheme necessary adjustment in the Reserves and Surplus has been carried through the Securities premium account.
e) Twin Star Mauritius Holdings Limited (âTMHLâ), an indirect wholly owned subsidiary, also held investments in Cairn and had corresponding liabilities which it had incurred to fund the purchase of investments in Cairn. As per the terms of the Scheme, the investments held by TMHL have been cancelled and accordingly, its liabilities have been reflected in the financial statements of the Company.
The net effects of Rs, 28,906 Crore arising out of the above adjustments have been recognized as a capital reserve on December 8, 2011, being the date of initial common control.
(iv) All changes to the liabilities arising on account of interest and exchange differences post December 8, 2011, of Rs, 11,311 Crore, have been recognized directly in retained earnings as of April 1, 2015 and net charge of Rs, 623 Crore in the statement of profit and loss as an âExceptional itemâ for the financial year ended March 31, 2017.
(v) All the direct subsidiaries of Cairn India Limited, viz., Cairn India Holdings Limited (âCIHLâ) and CIG Mauritius Holding Private Limited have become the direct subsidiaries of the Company.
(vi) Further, some of the wholly owned subsidiaries of the Company had advanced monies to TMHL, either directly or through some other wholly owned subsidiaries. Pursuant to the merger being effective, the amounts recoverable from TMHL have been impaired by the said subsidiaries as TMHLâs investments in Cairn has been cancelled. This has had the effect of discharging the obligation reflected in the financial statements of the Company (refer â(iii)eâ above) with a corresponding reduction in the value of the Companyâs investments in its direct subsidiaries. The net excess of liability being discharged over the carrying value of such investments of Rs, 1,993 Crore has been recognized as an exceptional gain in the statement of profit and loss during the previous year. During the current year, CIHL discharged the balance obligation Rs, 6,762 Crore which resulted in a further reduction in the carrying value of the said subsidiary by an equivalent amount.
a) Additions includes deferred stripping cost of Rs, Nil Crore (March 31, 2017 Rs, 4 Crore).
b) Certain property, plant and equipment are pledged as collateral against borrowings, the details related to which have been described in Note 19 on âBorrowingsâ.
c) In accordance with the exemption given under Ind AS 101, which has been exercised by the Company, a first time adopter can continue its previous GAAP policy for accounting for exchange differences arising from translation of long-term foreign currency monetary items recognized in the previous GAAP financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period i.e. April 01, 2016.
Accordingly, foreign currency exchange differences arising on translation/settlement of long-term foreign currency monetary items acquired before April 01, 2016 pertaining to the acquisition of a depreciable asset amounting to Rs, 1 crore gain (March 31, 2017 Rs, 4 crore loss) is adjusted to the cost of respective item of property, plant and equipment.
Capital work-in-progress includes foreign currency exchange loss of Rs, 17 crore incurred during the year (March 31, 2017 Rs, 27 crore gain) on such long term foreign currency monetary liabilities.
d) Gross block of property, plant and equipment includes Rs, 32,694 Crore (March 31, 2017 Rs, 31,967 Crore) representing Companyâs share of assets co-owned with the joint venture partners. Accumulated depreciation, depletion and impairment on these assets is Rs, 30,487 Crore (March 31, 2017 Rs, 29,790 Crore) and net book value is Rs, 2,207 Crore (March 31, 2017 Rs, 2,177 Crore).
Capital work-in-progress includes Rs, 994 Crore (March 31, 2017 Rs, 1,001 Crore) jointly owned with the joint venture partners.
Exploration intangible assets under development includes Rs, 7,950 Crore (March 31, 2017 Rs, 5,028 Crore) jointly owned with the joint venture partners.
1. Financial Assets- Non Current : Investments continued
a. Pursuant to the Government of Indiaâs policy of disinvestment, the Company in April 2002 acquired 26% equity interest in Hindustan Zinc Limited (HZL) from the Government of India. Under the terms of the Shareholderâs Agreement (âSHAâ),the Company had two call options to purchase all of the Government of Indiaâs shares in HZL at fair market value. The Company exercised the first call option on August 29, 2003 and acquired an additional 18.9% of HZLâs issued share capital. The Company also acquired an additional 20% of the equity capital in HZL through an open offer, increasing its shareholding to 64.9%. The second call option provided the Company the right to acquire the Government of Indiaâs remaining 29.5% share in HZL. This call option was subject to the right of the Government of India to sell 3.5% of HZL shares to HZL employees. The Company exercised the second call option on July 21, 2009.The Government of India disputed the validity of the call option and refused to act upon the second call option. Consequently the Company invoked arbitration which is in the early stages. The next date of hearing is scheduled on November 24, 2018.
b. Pursuant to the Government of Indiaâs policy of divestment, the Company in March 2001 acquired 51% equity interest in BALCO from the Government of India. Under the terms of the SHA, the Company had a call option to purchase the Government of Indiaâs remaining ownership interest in BALCO at any point from March 2, 2004. The Company exercised this option on March 19, 2004. However, the Government of India contested the valuation and validity of the option and contended that the clauses of the SHA violate the erstwhile Companies Act, 1956 by restricting the rights of the Government of India to transfer its shares and that as a result such provisions of the SHA were null and void. In the arbitration filed by the Company, the arbitral tribunal by a majority award rejected the claims of the Company on the ground that the clauses relating to the call option, the right of first refusal, the âtagalongâ rights and the restriction on the transfer of shares violate the erstwhile Companies Act, 1956 and are not enforceable. The Company has challenged the validity of the majority award before the Honâble High Court at Delhi and sought for setting aside the arbitration award to the extent that it holds these clauses ineffective and inoperative. The Government of India also filed an application before the High Court to partially set aside the arbitral award in respect of certain matters involving valuation. The matter is currently scheduled for hearing by the Delhi High Court on July 3, 2018.
On January 9, 2012, the Company offered to acquire the Government of Indiaâs interests in HZL and BALCO for Rs, 15,492 Crore and Rs, 1,782 Crore respectively. This offer was separate from the contested exercise of the call options, and Company proposed to withdraw the ongoing litigations in relation to the contested exercise of the options should the offer be accepted. To date, the offer has not been accepted by the Government of India and therefore, there is no certainty that the acquisition will proceed.
In view of the lack of resolution on the options, the non-response to the exercise and valuation request from the Government of India, the resultant uncertainty surrounding the potential transaction and the valuation of the consideration payable, the Company considers the strike price of the options to be at the fair value, which is effectively nil, and hence the call options have not been recognized in the financial statements.
c. During the the previous year, the Company made an investment of Rs, 14,730 Crore in 220 Crore equity shares of US$ 1 each in Bloom Fountain Limited.
d. During the current year, the Company made an investment of Rs, 11.30 Lacs in 1.13 Lacs equity shares having face value of Rs, 10/- each in Gaurav Overseas Private Limited .
e. During the current year, the maturity of investments in compulsorily convertible debentures of Vizag General Cargo Berth Private has been extented has been extented by 2 years 10 months till January 28, 2021.
f. During the current year, the Company made an investment in 1,70,418 Compulsory convertible debentures of Malco energy limited (MEL) having face value of Rs, 100/- each at a premium of Rs, 900/- each.
(i) Bank deposits earns interest at fixed rate based on respective deposit rate.
(ii) Bank deposits includes site restoration fund amounting to Rs, 318 Crore (March 31, 2017: Rs, 275 Crore)
(a) Represents prepayments in respect of land taken under operating leases, being amortized equally over the period of the lease.
(b) Includes Rs, 30 Crore (March 31, 2017: Rs, 30 Crore), being CompanyRs,s share of gross amount of Rs, 86 Crore (March 31, 2017: Rs, 86 Crore) paid under protest on account of Education Cess and Secondary Higher Education Cess for the year ended 2013-14.
(c) Includes Rs, 48 Crore (March 31, 2017: Rs, 46 Crores), being Companyâs share of gross amount of Rs, 139 Crore (March 31, 2017: Rs, 131 Crores), of excess oil cess paid under Oil Industry (Development) Act.
(i) For method of valuation of inventories, refer note 3(j).
(ii) Inventories with a carrying amount of Rs, 7,961 Crore (March 31, 2017 : Rs, 5,125 Crore) have been pledged as security against certain bank borrowings of the Company (Refer note 19).
(iii) Inventory held at net realizable value amounted to Rs, 90 Crore (March 31, 2017 : Rs, 2 Crore).
(iv) The write down of inventories amounting to Rs, 42 Crore (March 31, 2017: Rs, Nil Crore) has been charged to the statement of profit and loss.
(i) The interest free credit period given to customers is upto 90 days. Also refer note 48c(d).
(ii) Trade receivables with a carrying value of Rs, 2,429 Crore (March 31, 2017 : Rs, 1,917 Crore) have been given as collateral towards borrowings (Refer note 19).
(iii) For amounts due and terms and conditions relating to related party receivables see note 51.
(iv) Current & Non-current trade receivables (net of provisions) includes Rs, 767 Crores as at March 31, 2018 (March 31, 2017: Rs, 893 Crores) relating to amounts held back by a customer in the power segment, owing to certain disputes relating to computation of tariffs and differential revenue recognized with respect to tariffs pending finalisation by the state electricity regulatory commission. Basis legal advice received on the matter, the management considers these to be fully recoverable as there is a high probability of success.
(v) There are no outstanding debts due from directors or other officers of the Company.
(a) Includes Nil Crore (March 31, 2017 Rs, 115 Crores) on lien with banks.
(b) Bank deposits earns interest at fixed rate based on respective deposit rate.
Bank deposits earns interest at fixed rate based on respective deposit rate.
a Includes Rs, 8 Crore (March 31, 2017 : Rs, 1 Crore) on lien with banks.
b Includes Rs, 193 Crore (March 31, 2017 : Rs, 195 Crore) on lien with banks and margin money Rs, 39 Crore (March 31, 2017 : Rs, 40 Crore) c Earmarked unpaid dividend accounts are restricted in use as it relates to unclaimed or unpaid dividend.
(a) During the year, 7.5% preference share capital of Rs, 3,010 Crore comprising of 301 Crore shares of Rs, 10/- each have been issued and the same are disclosed under borrowings (Refer note 19).
(b) Includes 308,232 (March 31, 2017: 310,632) equity shares kept in abeyance. These shares are not part of listed equity capital.
(c) Includes 92,33,871 (March 31, 2017: 39,84,256) equity shares held by Vedanta Limited ESOS Trust (Refer note 38).
(d) Voting rights exercisable upon issuance.
* The % of holding has been calculated on the issued and subscribed share capital as at respective balance sheet date.
(1) All the above entities are subsidiaries of Volcan Investments Limited, the ultimate holding Company.
(2) Represented by 2,48,23,177 American Depository Shares (âADSâ).
E. Aggregate number of bonus shares issued, shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date
* The % of holding has been calculated on the issued and subscribed share capital as at respective balance sheet date.
# 2,48,23,177 ADS, held by CITI Bank N.A. New York as a depository.
As per the records of the Company, including its register of shareholders/members, the above shareholding represents legal ownership of shares.
2. Share capital continued G. Other disclosures
(1) The Company has one class of equity shares having a par value of Rs, 1 per share. Each shareholder is eligible for one vote per share held and dividend as and when declared by the Company. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend which is paid as and when declared by the Board of Directors. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts, in proportion to their shareholding.
(2) The Company has one class of 7.5% non-cumulative redeemable preference shares having a par value of Rs, 10 per share. Each preference shareholder is eligible for one vote per share as per terms of Section 47(2) of the Companies Act 2013 and dividend as and when declared by the Company. As per the terms of preference shares, these shares are redeemable at par on expiry of 18 months from the date of their allotment. In the event of winding up of Vedanta Limited, the holders of Preference Shares shall have a right to receive repayment of capital paid up and arrears of dividend, whether declared or not, up to the commencement of winding up, in prioirty to any payment of capital on the equity shares out of the surplus of Vedanta Limited.
(3) ADS shareholders do not have right to attend General meetings in person and also do not have right to vote. They are represented by depository, CITI Bank N.A. New York. As on March 31, 2018 - 24,84,24,696 equity shares were held in the form of 6,21,06,174 ADS (March 31, 2017- 21,70,19,900 equity shares in form of 5,42,54,975 ADS).
(4) In terms of Scheme of Arrangement as approved by the Honâble High Court of Judicature at Mumbai, vide its order dated April 19, 2002, the erstwhile Sterlite Industries (India) Limited (merged with the Company during 2013-14) during 2002-2003 reduced its paid up share capital by '' 10 Crore. There are 204,525 equity shares (March 31, 2017: 199,026 equity shares) of '' 1 each pending clearance from NSDL/CDSL. The Company has filed an application in Honâble High Court of Mumbai to cancel these shares, the final decision on which is pending. Honâble High Court of Judicature at Mumbai, vide its interim order dated September 06, 2002 restrained any transaction with respect to subject shares.
3. Other equity (Refer statement of changes in equity)
a) General reserve: Under the erstwhile Companies Act 1956, general reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations. The purpose of these transfers was to ensure that if a dividend distribution in a given year is more than 10% of the paid-up capital of the Company for that year, then the total dividend distribution is less than the total distributable results for that year. Consequent to introduction of Companies Act 2013, the requirement to mandatorily transfer a specified percentage of the net profit to general reserve has been withdrawn.
b) Debenture redemption reserve: The Companies Act requires companies that issue debentures to create a debenture redemption reserve from annual profits until such debentures are redeemed. Companies are required to maintain 25% as a reserve of outstanding redeemable debentures. The amounts credited to the debenture redemption reserve may not be utilized except to redeem debentures.
c) Preference share redemption reserve: The Companies Act provides that companies that issue preference shares may redeem those shares from profits of the Company which otherwise would be available for dividends, or from proceeds of a new issue of shares made for the purpose of redemption of the preference shares. If there is a premium payable on redemption, the premium must be provided for, either by reducing the additional paid in capital (securities premium account) or net income, before the shares are redeemed. If profits are used to redeem preference shares, the value of the nominal amount of shares redeemed should be transferred from profits (retained earnings) to the preference share redemption reserve account. This amount should then be utilised for the purpose of redemption of redeemable preference shares. This reserve can be used to issue fully paid-up bonus shares to the shareholders of the Company.
d) Capital reserve: The balance in capital reserve has mainly arisen consequent to merger of Cairn India Limited with the Company in the previous year as described in note 4.
i) The Company has not defaulted in the repayment of loans and interest as at Balance Sheet date.
ii) Bank loans availed by the Company are subject to certain covenants relating to interest service coverage, current ratio, debt service coverage ratio, total outside liabilities to total net worth, fixed assets coverage ratio, ratio of total term liabilities to net worth and return on fixed assets. The Company has complied with the covenants as per the terms of the loan agreement.
* The NCDs have been pre-paid during the year
** The debenture holders of these NCDs and the Company have put and call option at the end of 5 years from the respective date of the allotment of the NCDs
(iv) Summary of secured borrowings:
Vedanta Limited has taken borrowings towards funding of its acquisitions, capital expenditure and working capital requirements. The borrowings comprise of funding arrangements from various banks. The Companyâs total secured borrowings and a summary of security provided by the Company are as follows -
a. Represents government assistance in the form of the duty benefit availed under Export Promotion Capital Goods (EPCG) Scheme and Special Economic Zone (SEZ) scheme on purchase of property, plant and equipments accounted for as government grant and being amortized over the useful life of such assets.
* Refer note 19 for borrowing details
The Company has discounted trade receivables on recourse basis of '' 65 Crore (March 31, 2017: '' 520 Crore). Accordingly, the monies received on this account are shown as borrowings as the trade receivables does not meet de-recognition criteria. The above borrowings pertaining to trade receivables discounted has been restated on account of foreign exchange fluctuation.
(a) Trade payables are non- interest bearing and are normally settled upto 180 days terms
(b) Operational Buyerâs Credit is availed from offshore banks at an interest rate ranging from 1.5% to 3.5% per annum and are repayable within one year from the date of draw down, based on the letter of comfort issued under working capital facilities sanctioned by domestics banks. Some of these facilities are secured by first pari-passu charge over the present and future current assets of the Company.
(c) For amounts due and terms and conditions relating to related party payables see note 51.
(b) Does not include any amounts, due and outstanding, to be credited to Investor Education and Protection Fund except Rs, 38 Lacs (March 31, 2017: Rs, 38 Lacs) which is held in abeyance due to a pending legal case.
(c) Includes revenue received in excess of entitlement interest of Rs, 648 Crore (March 31, 2017 : Rs, 5 Crore), reimbursement of expenses, provision for expenses, liabilities related to compensation/claim etc.
a Statutory and other liabilities mainly includes contribution to PF, ESIC, withholding taxes, goods & service tax, excise duty, VAT, service tax etc. b Advance from customers includes the amount received under long term supply agreements. The portion of advance that is expected to be settled within next 12 months has been classified as current liability. c Represents current portion of government assistance in the form of the duty benefit availed under Export Promotion Capital Goods (EPCG) Scheme and Special Economic Zone scheme on purchase of property, plant and equipments accounted for as government grant and being amortized over the useful life of such assets.
a) Includes gratuity, compensated absences, deferred cash bonus etc.
a) With effect from July 01, 2017 Goods and Service Tax (GST) has been implemented which has replaced several indirect taxes including excise duty. While Ind-AS required excise duty to be included while computing revenues, GST is required to be excluded from revenue computation. Accordingly âRevenue from operation (net of excise duty)â has been additionally disclosed to enhance comparability of financial information.
a. Net of recoveries of Rs, 56 Crore ( March 31, 2017 : Rs, 70 Crore) from subsidiaries.
b. Includes Corporate social responsibility expenses of Rs, 45 Crore (March 31, 2017 : Rs, 49 Crore) as detailed in note 41.
c. Includes refund of Rs, 4.28 Crore being the donation given to a political party.
a) Includes Rs, 209 Crore (March 31, 2017 : Nil) on redeemable preference shares.
b) Net of interest cost of Rs, 349 Crore (March 31, 2017 : Rs, 556 Crore) capitalized during the year, relating to funds borrowed specifically to acquire/construct the qualifying assets. The capitalization rate of these borrowings is approximately 8.1% (March 31, 2017 : approximately 9%).
a. During the year ended March 31, 2018, the Company has recognized a loss of Rs, 251 Crore relating to certain items of capital work-in-progress at the aluminum operations, which are no longer expected to be used.
b. During the year ended March 31, 2017, the Company has recognized Rs, 201 Crore impairment charge relating to certain old items of capital work-in-progress at the Alumina refinery operations.
c. During the year ended March 31, 2018, the Company has recognized net impairment reversal of Rs, 3,513 Crore on its assets in the oil and gas segment comprising of:
i) reversal of previously recorded impairment charge of Rs, 3,622 Crore relating to Rajasthan oil and gas block (âCGUâ) mainly following the progress on key growth projects expected to result in the enhanced recovery of resources in a commercially viable manner leading to a higher forecast of oil production and adoption of integrated development strategy for various projects leading to savings in cost. Of this reversal, Rs, 536 Crore reversal has been recorded against oil and gas producing facilities and Rs, 3,086 Crore reversal has been recorded against exploration intangible assets under development.
The recoverable amount of the Companyâs share in Rajasthan Oil and Gas cash generating unit âRJ CGUâ was determined to be Rs, 8,664 Crore (US $ 1,332 million) and Rs, 6,815 Crore (US $ 1,051 million) as at March 31, 2018 and March 31, 2017 respectively.
The recoverable amount of the RJ CGU was determined based on the fair value less costs of disposal approach, a level-3 valuation technique in the fair value hierarchy, as it more accurately reflects the recoverable amount based on the Companyâs view of the assumptions that would be used by a market participant. This is based on the cash flows expected to be generated by the projected oil and natural gas production profiles up to the expected dates of cessation of production sharing contract (PSC)/cessation of production from each producing field based on the current estimates of reserves and risked resources. Reserves assumptions for fair value less costs of disposal tests consider all reserves that a market participant would consider when valuing the asset, which are usually broader in scope than the reserves used in a value-in-use test. Discounted cash flow analysis used to calculate fair value less costs of disposal uses assumption for short-term oil price of US $ 62 per barrel for the next one year (March 31, 2017: US $ 58 per barrel) and scales upto long-term nominal price of US $ 65 per barrel three years thereafter (March 31, 2017: US $ 70 per barrel) derived from a consensus of various analyst recommendations. Thereafter, these have been escalated at a rate of 2.5% per annum. The cash flows are discounted using the post-tax nominal discount rate of 10.1% (March 31, 2017: 10.2%) derived from the post-tax weighted average cost of capital after factoring in the risks ascribed to PSC extension including successful implementation of key growth projects. Based on the sensitivities carried out by the Company, change in crude price assumptions by US$ 1/bbl and changes to discount rate by 0.5% would lead to a change in recoverable value by Rs, 238 Crore (US $ 37 million) and Rs, 180 Crore (US $ 28 million) respectively.
ii) impairment charge of Rs, 109 Crore recorded against exploration intangible assets under development representing the carrying value of exploratory wells in Block PR-OSN-2004/1 which has been relinquished during the year.
During the year ended March 31, 2017, the Company has recognized net impairment reversal of Rs, 252 Crore relating to Rajasthan Oil and Gas block. Of this net reversal, Rs, 114 Crore charge has been recorded against cost of oil and gas producing facilities and Rs, 366 Crore reversal has been recorded against exploration intangible assets under development.
d. During the year ended March 31, 2018, the Company has recognized an impairment charge of Rs, 452 Crore as against the net carrying value of Rs, 1,048 Crore on its iron ore assets in Goa in the iron ore segment.
Pursuant to an order passed by the Honâble Supreme Court of India on February 7, 2018 the second renewal of the mining leases granted by the State of Goa to all miners including Vedanta were cancelled. Consequentially all mining operations stopped with effect from March 16, 2018 until fresh mining leases (not fresh renewals or other renewals) and fresh environmental clearances are granted in accordance with the provisions of the The Mines and Minerals (Development and Regulation) (MMDR) Act.
Significant uncertainty exists over the resumption of mining at Goa under the current leases. The Company has assessed the recoverable value of all its assets and liabilities associated with existing mining leases which led to a non-cash impairment charge. Upon consideration of past precedence, the provision for restoration and rehabilitation with respect to these mines has been assessed as Nil, as the Company believes that the same would be carried out by the future successful bidder at the time of mine closure.
e. Charge pursuant to unfavorable arbitration order- Rs, 113 Crore (Refer note 49 (b) - Contractor claims).
f. During the year ended March 31, 2018 and March 31, 2017 the Company has recognized net impairment reversal of Rs, 2,710 Crore and net impairment charge of Rs, 97 Crore respectively, on its investment in subsidiaries, comprising of:
(i) Cairn India Holding Limited (âCIHLâ) holds 35% share in Rajasthan oil and gas block through its step down subsidiary Cairn Energy Hydrocarbons Limited. The recoverable value of investment in CIHL was determined to be Rs, 13,754 Crore (US $ 2,115 million) and Rs, 17,157 Crore (US $ 2,646 million) as at March 31, 2018 and March 31, 2017 respectively, represented by CIHLâs share of discounted cash flows in RJ CGU held through its subsidiary and net fair value of its other assets. (Refer note (c)(i) above).
(ii) The net recoverable value of investment in Sesa Resources Limited (âSRLâ) was determined to be Rs, 109 Crore. The Supreme Court judgement relating to iron ore mining in Goa resulted in impairment. The recoverable value is represented by the estimated selling price of the underlying assets of SRL. (Refer note (d) above).
Certain businesses of the Company are eligible for specified tax incentives which are included in the table above as tax holidays and similar exemptions. These are briefly described as under:
The location based exemption: SEZ Operations
In order to boost industrial development and exports, provided certain conditions are met, profits of undertaking located in Special Economic Zone (âSEZâ) may benefit from a tax holiday. Such a tax holiday works to exempt 100% of the profits for the first five years from the commencement of the tax holiday, 50% of profits for five years thereafter and 50% of the profits for further five years provided the amount allowable in respect of deduction is credited to Special Economic Zone Re-Investment Reserve account. However, such undertaking would continue to be subject to the Minimum Alternative tax (âMATâ).
The Company has setup SEZ Operations in its aluminum division (where no benefit has been drawn).
Sectoral Benefit - Power Plants
To encourage the establishment of certain power plants, provided certain conditions are met, tax incentives exist to exempt 100% of profits and gains for any ten consecutive years within the 15 years period following commencement of the power plantâs operation. However, such undertakings generating power would continue to be subject to the MAT provisions.
The total effect of such tax holidays and exemptions was Rs,8 crore for the year ended March 31,2018 (March 31,2017: Rs,524 crore).
Investment Allowance u/s 32 AC of the Income Tax Act -
Incentive for acquisition and installation of new high value plant or machinery to manufacturing companies by providing an additional deduction of 15% of the actual cost of plant or machinery acquired and installed during the year. The actual cost of the new plant or machinery should exceed Rs,25 Crore to be eligible for this deduction. Deduction u/s 32AC was available up to financial year ended March 31, 2017.
(c) Deferred tax assets/liabilities
The Company has accrued significant amounts of deferred tax. The majority of the deferred tax liability represents accelerated tax relief for the depreciation of property, plant and equipment and the depreciation on mining reserves, net of losses carried forward by Vedanta Limited (post the re-organisation) and unused tax credit in the form of MAT credits carried forward. Significant components of Deferred tax (assets) & liabilities recognized in the balance sheet are as follows :
a) The above does not include dividend and tax thereon paid by erstwhile Cairn India Limited to its fellow subsidiaries.
b) The Board of Directors of the Company declared an interim dividend of Rs, 6,580 Crore on March 30, 2017 which has been paid during the current year.
c) Tax on interim and final dividend (net of dividend from subsidiary) u/s 115O of the Income Tax Act, 1961.
d) Dividend @ 7.5% p.a. on the redeemable preference shares of face value of Rs, 10/- per preference share as per their terms of issuance was declared during the year ended March 31, 2018. The same has been accounted for as a interest cost and has been recorded in the statement of profit and loss. (Refer note 33)
4. Share Based Payments
The Company offers equity based option plans to its employees, officers and directors through the Companyâs stock option plan introduced in the previous year, Cairn Indiaâs stock option plan now administered by the Company pursuant to merger with the Company and Vedanta Resources Plc plans [Vedanta Resources Long-Term Incentive Plan (âLTIPâ), Employee Share Ownership Plan (âESOPâ), Performance Share Plan (âpSpâ) and Deferred Share Bonus Plan (âDSBPâ)] collectively referred as âVR PLC ESOPâ scheme.
The Vedanta Limited Employee Stock Option Scheme (ESOS) 2016
The Company introduced an Employee Stock Option Scheme 2016 (âESOSâ), which was approved by the Vedanta Limited shareholders to provide equity settled incentive to all employees of the Company including subsidiary companies. The ESOS scheme includes both tenure based and performance based on stock option options. The maximum value of options that can be awarded to members of the wider management group is calculated by reference to the grade average cost-to-company (âCTCâ) and individual grade of the employee. The performance conditions attached to the option is measured by comparing companyâs performance in terms of Total Shareholder Return (âTSRâ) over the performance period with the performance of two group of comparator companies (i.e. Indian and global comparator companies) defined in the scheme. The extent to which an option vests will depend on the Companyâs TSR rank against a group or groups of peer companies at the end of the performance period and as moderated by the Remuneration Committee. Dependent on the level of employee, part of these options will be subject to a continued service condition only with the remainder measured in terms of TSR.
The performance condition is measured by taking Vedanta Limitedâs TSR at the start and end of the performance period (without averaging), and comparing its performance with that of the comparator group or groups. The information to enable this calculation to be carried out on behalf of the Nomination and Remuneration Committee (the Committee) is provided by the Companyâs advisers. The Committee considers that this performance condition, which requires that the Companyâs total return has outperformed a group of industry peers, provides a reasonable alignment of the interests of participants with those of the shareholders.
38 Share Based Payments continued
Initial options under the ESOS were granted on 15 December 2016. Further during the year, new options were granted in September 2017, October 2017 and November 2017. However, in the scheme launched during the year, business performance (âEBIDTAâ) set against business plan for the financial year is included as an additional condition. The exercise price of the options is '' 1 per share and the performance period is three years, with no re-testing being allowed.
The fair value of all options has been determined at the date of grant of the option allowing for the effect of any market-based performance conditions. This fair value, adjusted by the Groupâs estimate of the number of options that will eventually vest as a result of non-market conditions, is expensed over the vesting period.
The fair values were calculated using the Black-Scholes Model for tenure based and EBIDTA based options and Monte Carlo simulation model for TSR based options. The inputs to the model include the share price at date of grant, exercise price, expected volatility, expected dividends, expected term and the risk free rate of interest. Expected volatility has been calculated using historical return indices over the period to date of grant that is commensurate with the performance period of the option. The volatilities of the industry peers have been modelled based on historical movements in the indices over the period to date of grant which is also commensurate with the performance period for the option. The history of return indices is used to determine the volatility and correlation of share prices for the comparator companies and is needed for the Monte Carlo model to estimate their future TSR performance relative to the Vedanta Limitedâs TSR performance. All options are assumed to be exercised immediately after vesting, as the exercise period is 6 months.
The Company recognized total expenses of Rs, 47 Crore (March 31, 2017 Rs, 7 Crore) related to above equity settled share-based payment transactions in the year ended March 31, 2018 out of which Rs, 18 Crore (March 31, 2017 Rs, 3 Crore) was recovered from group companies.
CIPOP plan
Options will vest (i.e., become exercisable) at the end of a âperformance periodâ which has been set by the Nomination remuneration committee at the time of grant (although such period will not be less than three years). However, the percentage of an option which vests on this date will be determined by the extent to which pre-determined performance conditions have been satisfied. Phantom options are exercisable proportionate to the period of service rendered by the employee subject to completion of one year.
CIESOP plan
There are no specific vesting conditions under CIESOP plan other than completion of the minimum service period. Phantom options are exercisable proportionate to the period of service rendered by the employee subject to completion of one year.
Volatility is the measure of the amount by which the price has fluctuated or is expected to fluctuate during the period. The measure of volatility used in Black-Scholes option-pricing model is the annualized standard deviation of the continuously compounded rates of return on the stock over a period of time. Time to maturity /expected life of options is the period for which the Company expects the options to be live. Time to maturity has been calculated as an average of the minimum and maximum life of the options.
Employee share option plan of Vedanta Resources Plc
The value of shares that are awarded to members of the Group is calculated by reference to the individual fixed salary and share-based remuneration consistent with local market practice. ESOP scheme of VRPLC is both tenure and performance based share schemes. The options are indexed to and settled by Parentâs shares (Vedanta Resources Plc shares as defined in the scheme). The options have a fixed exercise price denominated in Parentâs functional currency (10 US cents per share), the performance period of each option is three years and is exercisable within a period of six months from the date of vesting beyond which the option lapses.
Amount recovered by the Parent and recognized by the Company in the Statement of Profit and Loss for year ended March 31, 2018 is Rs, 29 Crore (March 31, 2017: Rs, 33 Crore). The Company considers these amounts as not material and accordingly has not provided further disclosures.
Out of the total expense of Rs, 58 Crore pertaining to equity settled options for the year ended March 31, 2018, the Group has capitalized Rs, 2 Crore expense for the year ended March 31, 2018.
39 Employee Benefit Plans a) Defined contribution plans
The Company contributed a total of Rs, 59 crore for the year ended March 31, 2018 and Rs, 54 Crore for the year ended March 31, 2017 to the following defined contribution plans.
Central provident fund and family pension fund
In accordance with The Employees Provident Funds and Miscellaneous Provisions Act, 1952 employees are entitled to receive benefits under the provident fund. Both the employee and the employer make monthly contributions to the plan at a predetermined rate (12% for fiscal year 2018 and 2017) of an employeeâs basic salary. All employees have an option to make additional voluntary contributions. These contributions are made to the fund administered and managed by the Government of India (GOI) or to independently managed and approved funds. The Company has no further obligations under the fund managed by the GOI beyond its monthly contributions which are charged to the statement of profit and loss in the period they are incurred. Where the contributions are made to independently managed and approved funds, shortfall in actual return, if any, from the return guaranteed by the State are made by the employer, these are accounted for as defined benefit plans. The benefits are paid to employees on their retirement or resignation from the Company. There is no shortfall in the actual return for independently managed funds for the year ended March 31, 2018 and March 31, 2017. Having regard to the assets of the fund and the return on the investments, the Company does not expect any deficiency in the foreseeable future.
Superannuation
Superannuation, another pension scheme applicable in India, is applicable only to senior executives. The Company holds a policy with Life Insurance Corporation of India (âLICâ), to which it contributes a fixed amount relating to superannuation and the pension annuity is met by LIC as required, taking into consideration the contributions made. The Company has no further obligations under the scheme beyond its monthly contributions which are charged to the statement of profit and loss in the year they are incurred.
5. Employee Benefit Plans continued
b) Defined benefit plans
Contribution to provident fund trust (the âtrustâ)
The provident fund of the Iron Ore division is exempted under section 17 of The Employees Provident Fund and Miscellaneous Provisions Act, 1952. Conditions for grant of exemption stipulates that the employer shall make good deficiency, if any, between the return guaranteed by the statute and actual earning of the Fund. Based on actuarial valuation in accordance with Ind AS 19 and Guidance note issued by Institute of Actuaries of India for interest rate guarantee of exempted provident fund liability of employees, there is no interest shortfall in the funds managed by the trust and hence there is no further liability as on March 31, 2018 and March 31, 2017. Having regard to the assets of the Fund and the return on the investments, the Company does not expect any deficiency in the foreseeable future.
Gratuity plan
In accordance with the Payment of Gratuity Act, 1972, the Company contributes to a defined benefit plan (the âGratuity Planâ) for employees who have completed 5 years of service. The Gratuity Plan provides a lump sum payment to vested employees at retirement, disability or termination of employment being an amount based on the respective employeeâs last drawn salary and the number of years of employment with the Company. The Gratuity plan is a funded plan and the Company makes contribution to recognized funds in India.
Based on actuarial valuations conducted as at year end, a provision is recognized in full for the benefit obligation over and above the funds held in the Gratuity Plan.
The above plan assets have been invested in the qualified insurance policies.
The actual return on plan assets was Rs, 8 Crore for the year ended March 31, 2018 and Rs, 8 Crore for the year ended March 31, 2017.
The weighted average duration of the defined benefit obligation is 16.75 years and 16.60 years as at March 31, 2018 and March 31, 2017 respectively.
.6 Employee Benefit Plans continued
The Company expects to contribute Rs, 20 Crore to the funded defined benefit plans in fiscal year 2019.
Sensitivity analysis
Below is the sensitivity analysis determined for significant actuarial assumptions for the determination of defined benefit obligations and based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period while holding all other assumptions constant.
The above sensitivity analysis may not be representative of the actual benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
In presenting the above sensitivity analysis, the present value of defined benefit obligation has been calculated using the projected unit credit method at the end of reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognized in the balance sheet.
Risk analysis
Company is exposed to a number of risks in the defined benefit plans. Most significant risks pertaining to defined benefit plans and, managementâs estimation of the impact of these risks are as follows:
Investment risk
The Gratuity plan is funded with Life Insurance Corporation of India (LIC) and ICICI Prudential Life (ICICI). Company does not have any liberty to manage the fund provided to LIC and ICICI.
The present value of the defined benefit plan liability is calculated using a discount rate determined by reference to Government of India bonds. If the return on plan asset is below this rate, it will create a plan deficit.
Interest risk
A decrease in the interest rate on plan assets will increase the plan liability.
Longevity risk / Life expectancy
The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and at the end of the employment. An increase in the life expectancy of the plan participants will increase the plan liability
Salary growth risk
The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. An increase in the salary of the plan participants will increase the plan liability.
7. Capital management
The Companyâs objectives when managing capital is to safeguard continuity, maintain a strong credit rating and healthy capital ratios in order to support its business and provide adequate return to shareholders through continuing growth. The Companyâs overall strategy remains unchanged from previous year.
The Company sets the amount of capital required on the basis of annual business and long-term operating plans which include capital and other strategic investments.
The funding requirements are met through a mixture of equity, internal fund generation and other non-current borrowings. The Companyâs policy is to use current and non-current borrowings to meet anticipated funding requirements.
The Company monitors capital on the basis of the gearing ratio which is net debt divided by total capital (equity plus net debt) . The Company is not subject to any externally imposed capital requirements.
Net debt are non-current and current debts as reduced by cash and cash equivalents, other bank balances and current investments. Equity comprises all components including other comprehensive income.
* Includes probable oil reserves of 22.69 mmstb (of which 15.05 mmstb is developed) and probable gas reserves of 18.31 bscf (of which 5.02 bscf is developed)
** Includes probable oil reserves of 20.36 mmstb (of which 11.73 mmstb is developed) and probable gas reserves of 22.69 bscf (of which 4.75 bscf is developed)
*** Includes probable oil reserves of 15.43 mmstb (of which 2.97 mmstb is developed) and probable gas reserves of 14.51 bscf (of which 3.91 bscf is developed)
mmboe = million barrels of oil equivalent
mmstb = million stock tank barrels
bscf = billion standard cubic feet
1 million metric tonnes = 7.4 mmstb
1 standard cubic meter =35.315 standard cubic feet
MBA = Mangala, Bhagyam & Aishwarya
EOR = Enhanced Oil Recovery
8. The Scheme of Amalgamation and Arrangement amongst Sterlite Energy Limited (âSELâ), Sterlite Industries (India) Limited (âSterliteâ), Vedanta Aluminium Limited (âVALâ), Ekaterina Limited (âEkaterinaâ), Madras Aluminium Company Limited (âMalcoâ) and the Company (the âSchemeâ) had been sanctioned by the Honourable High Court of Madras and the Honourable High Court of Judicature of Bombay at Goa and was given effect to in the year ended March 31, 2014.
Subsequently the above orders of the Hâonable High Court of Bombay and Madras have been challenged by Commissioner of Income Tax, Goa and Ministry of Corporate Affairs through a Special Leave Petition before the Supreme Court and also by a creditor and a shareholder of the Company. The said petitions are pending for hearing and admission.
9. Financial guarantees
The Company has issued financial guarantees to banks on behalf of and in respect of loan facilities availed by its group companies. In accordance with the policy of the Company (Refer note 3(h)) the Company has designated such guarantees as âInsurance Contractsâ. The Company has classified financial guarantees as contingent liabilities.
Accordingly, there are no assets and liabilities recognized in the balance sheet under these contracts other than those related to commission income recognized and/or receivable from such group companies as disclosed in note 51.
Refer below for details of the financial guarantees issued:
Lease payments recognized as expenses on non-cancellable lease during the year is Rs, 1 Crore (March 31, 2017: Rs, 28Crore)
10. Financial instruments
This section gives an overview of the significance of financial instruments for the Company and provides additional information on the balance sheet. Details of significant accounting policies, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognized, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 2 and Note 3.
* Investment in note 6 also includes investments (in equity and preference shares) in subsidiaries, associates and joint ventures which are carried at cost and hence are not required to be disclosed as per Ind AS 107 âFinancial Instruments Disclosuresâ. Hence, the same have been excluded from the above table.
B. Fair value hierarchy
The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instruments by valuation techniques:
(i) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
(ii) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e. derived from prices).
(iii) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
The fair value of the financial assets and liabilities are at the amount that would be received to sell an asset and paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following methods and assumptions were used to estimate the fair values:
Investments traded in active markets are determined by reference to quotes from the financial institutions; for example: Net asset value (NAV) for investments in mutual funds declared by mutual fund house. For other listed securities traded in markets which are not active, the quoted price is used wherever the pricing mechanism is same as for other marketable securities traded in active markets. Other current investments are valued on the basis of market trades, poll and primary issuances for securities issued by the same or similar issuer and for similar maturities or based on the applicable spread movement for the security derived based on the aforementioned factor(s).
Non-current fixed-rate and variable-rate borrowings: Fair value has been determined by the Company based on parameters such as interest rates, specific country risk factors, and the risk characteristics of the financed project.
Other non-current financial assets and liabilities: Fair value is calculated using a discounted cash flow model with market assumptions, unless the carrying value is considered to approximate to fair value.
Derivative financial assets/liabilities: The Company enters into derivative financial instruments with various counterparties. Interest rate swaps, foreign exchange forward contracts and commodity forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies, interest rate curves and forward rate curves of the underlying commodity. Commodity contracts are value
Mar 31, 2017
Notes:
a) Additions to mining property includes deferred stripping cost of Rs.4.13 Crore (March 31, 2016 Nil
b) Capital work-in-progress is net of impairment of Rs.539.90 Crore (March 31, 2016 Rs.339.20 Crore, April 01, 2015 Rs.213.84 Crore). (Refer note-34)
c) Certain property, plant and equipment are pledged as collateral against borrowings, the details related to which have been described in Note 19 on âBorrowingsâ.
d) In accordance with the exemption given under Ind AS 101, which has been exercised by the Company, a first time adopter can continue its previous GAAP policy for accounting for exchange differences arising from translation of long-term foreign currency monetary items recognised in the previous GAAP financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period i.e. April 01, 2016.(Refer note 55- First time adoption of Ind AS)
Accordingly, foreign currency exchange differences arising on translation/settlement of long-term foreign currency monetary items acquired before April 01, 2016 pertaining to the acquisition of a depreciable asset amounting to Rs.4.16 Crore loss (March 31, 2016 Rs.33.02 Crore loss) are adjusted to the cost of respective item of property, plant and equipment which is included in foriegn exchange difference above.
Capital work-in-progress is net of foreign currency exchange differences of Rs.27.12 Crore gain adjusted during the year (March 31, 2016 Rs.114.44 Crore loss).
e) Gross block of property, plant and equipment includes Rs.31,966.62 Crore (March 31, 2016 Rs.31,939.92 Crore, April 01, 2015 Rs.28,633.24 Crore) representing Companyâs share of assets co-owned with the joint venture partners. Accumulated depreciation and impairment on these assets is Rs.29,790.01 Crore (March 31, 2016 Rs.28,763.54 Crore, April 01, 2015 Rs.20,872.23 Crore) and net book value is Rs.2,176.61 Crore (March 31, 2016 Rs.3,176.38 Crore, April 01, 2015 Rs.7,761.01 Crore).
Capital work-in-progress includes Rs.1,001.18 Crore (March 31, 2016 Rs.1,781.81 Crore, April 01, 2015 Rs.2,687.81) representing Companyâs share of assets coowned with the joint venture partners.
Exploration intangible assets under development represents Companyâs share of assets co-owned with the joint venture partners.
h) Freehold Land includes Rs.110.61 Crore (March 31, 2016 Rs.68.52 Crore, April 01, 2015 Rs.64.66 Crore), accumulated amortisation of Rs.81.51 Crore (March 31, 2016 Rs.60.76 Crore and April 01, 2015 Rs.52.70 Crore), which is available for use during the lifetime of the Production Sharing Contract of the respective Oil and Gas blocks.
1 Financial assets- non current: Investments
a. Pursuant to the Government of Indiaâs policy of disinvestment, the Company in April 2002 acquired 26% equity interest in Hindustan Zinc Limited (HZL) from the Government of India. Under the terms of the Shareholderâs Agreement (âSHAâ), the Company had two call options to purchase all of the Government of Indiaâs shares in HZL at fair market value. The Company exercised the first call option on August 29, 2003 and acquired an additional 18.9% of HZLâs issued share capital. The Company also acquired an additional 20% of the equity capital in HZL through an open offer, increasing its shareholding to 64.9%. The second call option provided the Company the right to acquire the Government of Indiaâs remaining 29.5% share in HZL. This call option was subject to the right of the Government of India to sell 3.5% of HZL shares to HZL employees. The Company exercised the second call option on July 21, 2009. The Government of India disputed the validity of the call option and refused to act upon the second call option. Consequently the Company invoked arbitration which is in the early stages. The next date of hearing is scheduled for July 15, 2017. Meanwhile, the Government of India without prejudice to the position on the Put/Call option issue has received approval from the Cabinet for disinvestment and the Government is looking to divest through the auction route.
b. Pursuant to the Government of Indiaâs policy of divestment, the Company in March 2001 acquired 51% equity interest in BALCO from the Government of India. Under the terms of the SHA, the Company had a call option to purchase the Government of Indiaâs remaining ownership interest in BALCO at any point from March 2, 2004. The Company exercised this option on March 19, 2004. However, the Government of India contested the valuation and validity of the option and contended that the clauses of the SHA violate the erstwhile Companies Act, 1956 by restricting the rights of the Government of India to transfer its shares and that as a result such provisions of the SHA were null and void. In the arbitration filed by the Company, the arbitral tribunal by a majority award rejected the claims of the Company on the ground that the clauses relating to the call option, the right of first refusal, the âtagalongâ rights and the restriction on the transfer of shares violate the erstwhile Companies Act, 1956 and are not enforceable.
The Company has challenged the validity of the majority award before the Honâble High Court at Delhi and sought for setting aside the arbitration award to the extent that it holds these clauses ineffective and inoperative. The Government of India also filed an application before the High Court of Delhi to partially set aside the arbitral award in respect of certain matters involving valuation. The matter is currently scheduled for hearing by the Delhi High Court on July 10, 2017. Meanwhile, the Government of India without prejudice to its position on the Put/Call option issue has received approval from the Cabinet for divestment and the Government is looking to divest through the auction route.
On January 9, 2012, the Company offered to acquire the Government of Indiaâs interests in HZL and BALCO for Rs.15,492.00 Crore and Rs.1,782.00 Crore respectively. This offer was separate from the contested exercise of the call options, and Company proposed to withdraw the ongoing litigations in relation to the contested exercise of the options should the offer be accepted. To date, the offer has not been accepted by the Government of India and therefore, there is no certainty that the acquisition will proceed.
I n view of the lack of resolution on the options, the non response to the exercise and valuation request from the Government of India, the resultant uncertainty surrounding the potential transaction and the valuation of the consideration payable, the Company considers the strike price of the options to be at the fair value, which is effectively nil, and hence the call options have not been recognised in the financial statements.
c. The Companyâs investment in CMHPL was for funding the operations of an oil and gas block in Srilanka, held by CMHPLâs step down subsidiary, Cairn Lanka Private Limited. Given the level of gas prices and fiscal terms, the development of hydrocarbons in the said block was not commercially viable. Therefore, the value of the investment had been considered as permanently diminished in the earlier years. The said subsidiary has been transferred to Cairn Energy Hydrocarbons Limited during the year ended March 31, 2016.
d. During the current year, the Company made an investment of Rs.14,729.58 Crore in 220 Crore equity shares of USD 1 each of its subsidiary Bloom Fountain Limited.
e. During the year ended March 31, 2016, the Company had subscribed to Compulsorily Convertible Debentures (CCDs) of Rs.100 each at a premium of Rs.900 each carrying coupon of 2% per annum issued by its wholly owned subsidiary Malco Energy Limited (âMALCOâ). CCDs shall be compulsorily convertible into equity shares not later than 10 years from the date of issue of such CCDs or at such other dates as may be mutually agreed between the parties at the fair value prevailing at the date of conversion. During the current year, the coupon rate of these CCDâs have been changed to 0% and the conversion ratio also has been fixed at the fair value as on March 31, 2016.
f. During the year, the Company disposed of its investment in its subsidiary âSterlite Infraventures Limitedâ and incurred a loss of Rs.2.66 Crore on the same, which has been recognised as an expense under Other Expenses.
g. During the year pursuant to demerger of âSterlite Technologies Limitedâ into âSterlite Technologies Limitedâ and âSterlite Power Transmission Limitedâ, 9,52,859 shares of âSterlite Power Transmission Limitedâ have been alloted to the Company.
2 Non-current financial assets - Others
(i) Bank deposits earns interest at fixed rate based on respective deposit rate.
(ii) Bank deposits includes site restoration fund amounting to Rs.275.23 Crore (March 31, 2016: Rs.234.91 Crore and April 01, 2015: Rs.172.68 Crore)
3 Other non-current assets
(a) Represents prepayments in respect of land taken under operating leases, being amortised equally over the period of the lease.
(b) IncludesRs.30.00 Crore (March 31, 2016: Rs.30.00 Crore and April 01, 2015: Rs.30.00 Crore), being Companyâs share of gross amount of Rs.85.85 Crore paid under protest on account of Education Cess and Secondary Higher Education Cess for the year ended 2013-14.
(c) Includes Rs.45.85 Crore (March 31, 2016: Nil and April 01, 2015: Nil), being Companyâs share of gross amount of Rs.130.99 Crore, of excess oil cess paid under OIDA Act.
4 Inventories
(i) For method of valuation of inventories, refer note 3(n).
(ii) Inventories with a carrying amount of Rs.5,124.94 Crore (March 31, 2016 : Rs.4,756.27 Crore and April 01, 2015: Rs.5,047.51 Crore) have been pledged as security against certain bank borrowings of the Company (Refer note 19).
(iii) Inventory held at net realizable value amounted to Rs.1.72 Crore (March 31, 2016 : Rs.48.75 Crore and April 01, 2015: Rs.67.25 Crore).
5 Trade receivables
(i) The interest free credit period given to customers is upto 90 days. Also refer note 50.
(ii) Trade receivables with a carrying value of Rs.1,917.20 Crore (March 31, 2016 : Rs.1,321.08 Crore and April 01, 2015: Rs.744.37 Crore) have been given as collateral towards borrowings (Refer note 19).
(iii) For amounts due and terms and conditions relating to related party receivables see note 53.
Bank deposits earns interest at fixed rate based on respective deposit rate.
a. Includes Rs.0.91 Crore (March 31, 2016 : Rs.3.72 Crore and April 01, 2015: Rs.7.46 Crore) on lien with banks and margin money Nil (March 31, 2016 : Rs.37.69 Crore and April 01, 2015: Nil)
b. Includes Rs.306.38 Crore (March 31, 2016 : Rs.187.00 Crore and April 01, 2015: Rs.187.00 Crore) on lien with banks and margin money Rs.40.02 Crore (March 31, 2016 : Nil and April 01, 2015: Rs.38.13 Crore)
c. Include a sum of Nil (March 31, 2016: Nil and April 01, 2015: Rs.143.12 Crore) deposited in an escrow account for the buyback of its own shares by erstwhile Cairn India Limited.
d. Earmarked unpaid dividend accounts are restricted in use as it relates to unclaimed or unpaid dividend.
6 Share capital
(a) includes 310,632 (March 31, 2016: 310,632 and April 01, 2015: 310,632) equity shares kept in abeyance. These shares are not part of listed equity capital.
(b) includes 39,84,256 (March 31, 2016: Nil and April 01, 2015: Nil) equity shares held by Vedanta Limited ESOS Trust (Refer note 38).
(c) voting rights exercisable upon issuance.
G. Other disclosures
(7) The Company has one class of equity shares having a par value of Rs.1 per share. Each shareholder is eligible for one vote per share held and dividend as and when declared by the Company. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend which is paid as and when declared by the Board of Directors. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts, in proportion to their shareholding.
(8) The Company has one class of 7.5% non-cumulative redeemable preference shares having a par value of Rs.10 per share. Each preference shareholder is eligible for one vote per share as per terms of Section 47(2) of the Companies Act 2013 and dividend as and when declared by the Company. As per the terms of preference shares, these shares are redeemable at par on expiry of 18 months from the date of their allotment. In the event of winding up of Vedanta Limited, the holders of Preference Shares shall have a right to receive repayment of capital paid up and arrears of dividend, whether declared or not, up to the commencement of winding up, in priority to any payment of capital on the equity shares out of the surplus of Vedanta Limited.
(9) ADS shareholders do not have right to attend General meetings in person and also do not have right to vote. They are represented by depository, CITI Bank N.A. New York. As on March 31, 2017, 217,019,900 equity shares were held in the form of 54,254,975 ADS.
(10) I n terms of Scheme of Arrangement as approved by the Honâble High Court of Judicature at Mumbai, vide its order dated April 19, 2002 the erstwhile Sterlite Industries (India) Limited (merged with the Company during 2013-14) during 20022003 reduced its paid up share capital by Rs.10.03 Crore There are 199,026 equity shares (March 31, 2016: 198,900 equity shares) of Rs.1 each pending clearance from NSDL/CDSL. The Company has filed application in Honâble High Court of Mumbai to cancel these shares, the final decision on which is pending. Honâble High Court of Judicature at Mumbai, vide its interim order dated September 06, 2002 restrained any transaction with respect to subject shares.
11 Other equity (Refer statement of changes in equity)
a) General reserve: Under the erstwhile Companies Act 1956, general reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations. The purpose of these transfers was to ensure that if a dividend distribution in a given year is more than 10% of the paid-up capital of the Company for that year, then the total dividend distribution is less than the total distributable results for that year. Consequent to introduction of Companies Act 2013, the requirement to mandatorily transfer a specified percentage of the net profit to general reserve has been withdrawn.
b) Debenture redemption reserve: The Companies Act requires companies that issue debentures to create a debenture redemption reserve from annual profits until such debentures are redeemed. Companies are required to maintain 25% as a reserve of outstanding redeemable debentures. The amounts credited to the debenture redemption reserve may not be utilised except to redeem debentures.
c) Preference share redemption reserve: The Companies Act provides that companies that issue preference shares may redeem those shares from profits of the Company which otherwise would be available for dividends, or from proceeds of a new issue of shares made for the purpose of redemption of the preference shares. If there is a premium payable on redemption, the premium must be provided for, either by reducing the additional paid in capital (securities premium account) or net income, before the shares are redeemed. If profits are used to redeem preference shares, the value of the nominal amount of shares redeemed should be transferred from profits (retained earnings) to the preference share redemption reserve account. This amount should then be utilised for the purpose of redemption of redeemable preference shares. This reserve can be used to issue fully paid-up bonus shares to the shareholders of the Company.
(i) The Company has not defaulted in the repayment of loans and interest as at Balance Sheet date.
(ii) Bank loans availed by the Company are subject to certain covenants relating to interest service coverage, current ratio, debt service coverage ratio, total outside liabilities to total net worth, fixed assets coverage ratio, ratio of total term liabilities to net worth and return on fixed assets. The Company has complied with the covenants as per the terms of the loan agreement.
(iii) Summary of Redeemable non convertible debentures (Carrying Value):
*The debenture holders of these NCDs and the Company have put and call option at the end of 5 years from the respective date of the allotment of the NCDs.
(iv) Summary of Secured borrowings:
The company has taken borrowings in various countries towards funding of its acquisitions, capital expenditure and working capital requirements. The borrowings comprise of funding arrangements from various banks . The Companyâs total secured borrowings and a summary of security provided by the Company are as follows -
12 Other non-current liabilities
a. Advances from customers include amount received under long term supply agreements. The advance would be settled by supplying goods as per the terms of the agreement.
b. Represents government assistance in the form of the duty benefit availed under Export Promotion Capital Goods (EPCG) Scheme and Special Economic Zone (SEZ) scheme on purchase of property, plant and equipments accounted for as government grant and being amortised over the useful life of such assets.
The Company has discounted trade receivable on recourse basis of Rs.520.34 Crore (March 31, 2016: Rs.431.05 Crore and April 01, 2015: Rs.629.31 Crore). Accordingly, the monies received on this account are shown as borrowings as the trade receivable does not meet de-recognisation criteria. The above borrowings pertaining to trade receivables discounted has been restated on account of foreign exchange fluctuation.
13 Current financial liabilities - Trade payables
(a) Trade payables are non- interest bearing and are normally settled up to 180 days terms.
(b) Operational Buyerâs Credit is availed from banks at an interest rate ranging from 1% to 2% per annum and are repayable within one year from the date of draw down, based on the letter of comfort issued under working capital facilities sanctioned by domestics banks. Some of these facilities are secured by first pari-passu charge over the present and future current assets of the Company.
14 Current financial liabilities - Others
a Current Maturities of Long Term Borrowings consists of
b Does not include any amounts, due and outstanding, to be credited to Investor Education and Protection Fund except Rs.0.38 Crore (March 31, 2016 Rs.0.38 Crore and April 01, 2015: Rs.0.38 Crore ) which is held in abeyance due to a pending legal case.
c Other liabilities include reimbursement of expenses, provision for expenses, liabilities related to compensation/claim, etc.
15 Other current liabilities
a Statutory and other liabilities mainly includes contribution to PF, ESIC, withholding taxes, excise duty, VAT, service tax etc. Also includes amount payable to owned provident fund trust. (Refer note 53) b Advance from customers includes the amount received under long term supply agreements. The portion of advance that is expected to be settled within next 12 months has been classified as current liability. c Represents current portion of government assistance in the form of the duty benefit availed under Export Promotion Capital Goods (EPCG) Scheme and Special Economic Zone (SEZ) scheme on purchase of property, plant and equipments accounted for as government grant and being amortised over the useful life of such assets.
16 Provisions
Current liabilities - provisions
a) The Company had created a provision for meeting certain obligation of one of its subsidiaries CIG Mauritius Holding Private Limited. As part of internal re-organisation, the said subsidiary was transferred to Cairn Energy Hydrocarbons Limited, another wholly owned subsidiary of the Company and the above obligation was discharged for a total of Rs.264.23 Crore.
17 Employee benefits expense
18 Exceptional items
a. Impairment loss on capital work-in-progress represents non-cash provision during the year ended March 31, 2017 of Rs.200.70 Crore relating to certain old items of capital work-in-progress at the Alumina refinery operations and Rs.115.44 Crore during the year ended March 31, 2016 against the idle plant and equipment and building at Bellary, Karnataka.
b. During the year ended March 31, 2017, the Company has recognized net impairment reversal of Rs.251.39 Crore relating to Rajasthan Oil and Gas block. Of this net reversal, Rs.114.11 Crore charge has been recorded against cost of oil and gas producing facilities and Rs.365.50 Crore reversal has been recorded against exploration intangible assets under development. During the year ended March 31, 2016, the Company had recognised an impairment charge on its oil and gas assets of Rs.16,117.51 Crore mainly relating to Rajasthan oil and gas block, triggered by the significant fall in the crude oil prices, prevailing discount of Rajasthan crude and adverse long term impact of revised oil cess. Of this charge, Rs.3,515.78 Crore had been recorded against cost of oil and gas producing facilities, Rs.9.92 Crore against capital work in progress and Rs.12,591.81 Crore against exploration intangible assets under development.
Further impairment reversal of Rs.313.42 Crore and impairment charge of Rs.3,724.85 Crore during the year ended March 31, 2017 and March 31, 2016 respectively relates to investment in Cairn India Holdings Limited âCIHLâ which holds 35% share in Rajasthan oil and gas block through its step down subsidiary Cairn Energy Hydrocarbons Limited.
The recoverable amount of the Companyâs share in Rajasthan Oil and Gas cash generating unit âRJ CGUâ was determined to be Rs.6,814.54 Crore and Rs.7,522.15 Crore as at March 31, 2017 and March 31,2016 respectively and that of CIHL was determined to be Rs.17,156.78 and Rs.25,147.98 as at March 31, 2017 and March 31, 2016 respectively (valuation of CIHL is represented by its share of discounted cash flows in RJ CGU held through its subsidiary and net fair value of its other assets).
The recoverable amount of the RJ CGU was determined based on the fair value less costs of disposal approach, a level-3 valuation technique in the fair value hierarchy, as it more accurately reflects the recoverable amount based on the Companyâs view of the assumptions that would be used by a market participant. This is based on the cash flows expected to be generated by the projected oil and natural gas production profiles up to the expected dates of cessation of production sharing contract (PSC)/cessation of production from each producing field based on the current estimates of reserves and risked resources.
Reserves assumptions for fair value less costs of disposal tests consider all reserves that a market participant would consider when valuing the asset, which are usually broader in scope than the reserves used in a value-in-use test. Discounted cash flow analysis used to calculate fair value less costs of disposal uses assumption for short-term oil price of US$ 54 per barrel for the next one year (March 31, 2016: US$ 41 per barrel) and scales up to long-term nominal price of US$ 68 per barrel three years thereafter (March 31, 2016: US$ 70 per barrel) derived from a consensus of various analyst recommendations. Thereafter, these have been escalated at a rate of 2.5% per annum. The cash flows are discounted using the post-tax nominal discount rate of 10.2% (March 31, 2016: 11%) derived from the post-tax weighted average cost of capital and has been adjusted for risks associated with the business including extension of PSC, which is due for renewal in May 2020.
c. Provision for diminution in value of investments for the year ended March 31, 2017 of Rs.96.53 Crore includes impairment of investment in Bloom Fountain Limited of Rs.409.95 Crore, due to reduction in its value as a result of the effect of merger of Cairn India Limited with Vedanta Limited (Refer note 4). Provision for dimunition in value of investments for the year ended March 31, 2016 of Rs.4,851.19 Crore includes, diminution of investment in Bloom Fountain Limited of Rs.1,126.34 Crore as a result of underlying assets of Western Cluster Limited, due to low iron ore prices and geo-political factors resulting in continued uncertainty in the project.
There are certain income-tax related legal proceedings which are pending against the Company. Potential liabilities, if any have been adequately provided for, and the Company does not currently estimate any probable material incremental tax liabilities in respect of these matters. (Refer note 51)
Certain businesses of the company are eligible for specified tax incentives which are included in the table above as tax holidays and similar exemptions. These are briefly described as under:
Sectoral Benefit - Power Plants
To encourage the establishment of certain power plants, provided certain conditions are met, tax incentives exist to exempt 100% of profits and gains for any ten consecutive years within the 15 year period following commencement of the power plantâs operation. However, such undertakings generating power would continue to be subject to the MAT provisions.
Sectoral benefit - oil & gas
Provided certain conditions are met, profits of newly constructed industrial undertakings engaged in the oil & gas sector may benefit from a deduction of 100% of the profits of the undertaking for a period of seven consecutive years. This deduction is only available to blocks licensed prior to March 31, 2011. However, such businesses would continue to be subject to the MAT provisions.
Erstwhile Cairn India Limited (now merged with Vedanta Limited) benefited from such deductions till March 31, 2016.
Investment Allowance U/s 32 AC of the Income Tax Act -
Incentive for acquisition and installation of new high value plant or Machinery to manufacturing companies by providing an additional deduction of 15% of the actual cost of plant or Machinery acquired and installed during the year. The actual cost of the new Plant or Machinery should exceed Rs.25 Crore. to be eligible for this deduction. Deduction U/s.32AC is available up to financial year March 31, 2017.
(c) Deferred tax assets/liabilities
The Company has accrued significant amounts of deferred tax. The majority of the deferred tax liability represents accelerated tax relief for the depreciation of property, plant and equipment and the depreciation on mining reserves, net of losses carried forward by Vedanta Limited (post the re-organisation) and unused tax credit in the form of MAT credits carried forward. Significant components of Deferred tax (assets) & liabilities recognized in the standalone statements of financial position as follows:
Deferred tax assets on carry forward unused tax losses have been recognised to the extent of deferred tax liabilities on taxable temporary differences available. It is expected that any reversals of the deferred tax liability would be offset against the reversal of the deferred tax asset.
Unused tax losses/ unused tax credit for which no deferred tax asset is recognized amount to Rs.Nil, Rs.269.70 Crore and Rs.464.27 Crore as at March 31, 2017, March 31, 2016, April 01, 2015 respectively. The unused tax losses expire as detailed below:
19 Share based payments
The Company offers equity based award plans to its employees, officers and directors through the Companyâs stock option plan introduced in the current year, Cairn Indiaâs stock option plan now administered by the Company pursuant to merger with the Company and Vedanta Resources Plc [Vedanta Resources Long-Term Incentive Plan (âLTIPâ), Employee Share Ownership Plan (âESOPâ), Performance Share Plan (âPSPâ) and Deferred Share Bonus Plan (âDSBPâ)] collectively referred as âVRPLC ESOPâ scheme.
The Vedanta Limited Employee Stock Option Scheme (ESOS) 2016
During the year, the Company introduced an Employee Stock Option Scheme 2016 (âESOSâ), which was approved by the Vedanta Limited shareholders to provide equity settled incentive to all employees of the Company including holding and subsidiary companies. The ESOS scheme includes both tenure based and performance based on stock option awards. The value of options that can be awarded to members of the wider management group is calculated by reference to the grade average CTC and individual grade of the employee. The performance conditions attached to the award is measured by comparing Companyâs performance in terms of Total Shareholder Return (TSR) over the performance period with the performance of two group of comparator companies (i.e. Indian and global comparator companies) defined in the scheme. The extent to which an award vests will depend on the Vedanta Limitedâs TSR rank against a group or groups of peer companies at the end of the performance period and as moderated by the Remuneration Committee. Dependent on the level of employee, part of these awards will be subject to a continued service condition only with the remainder measured in terms of TSR.
The performance condition is measured by taking Vedanta Limitedâs TSR at the start and end of the performance period (without averaging), and comparing its performance with that of the comparator group or groups. The information to enable this calculation to be carried out on behalf of the Remuneration Committee (the Committee) is provided by the Companyâs advisers. The Committee considers that this performance condition, which requires that the Vedanta Limitedâs total return has outperformed a group of industry peers, provides a reasonable alignment of the interests of participants with those of the shareholders.
Initial awards under the ESOS were granted on December 15, 2016. The exercise price of the awards is Rs.1 per share and the performance period is three years, with no re-testing being allowed.
The fair value of all awards has been determined at the date of grant of the award allowing for the effect of any market-based performance conditions. This fair value, adjusted by the Companyâs estimate of the number of awards that will eventually vest as a result of non-market conditions, is expensed on over the vesting period.
The fair values were calculated using the Black-Scholes Model for tenure based awards and Monte Carlo simulation model for performance based awards. The inputs to the model include the share price at date of grant, exercise price, expected volatility, expected dividends, expected term and the risk free rate of interest. Expected volatility has been calculated using historical return indices over the period to date of grant that is commensurate with the performance period of the award. The volatilities of the industry peers have been modelled based on historical movements in the indices over the period to date of grant which is also commensurate with the performance period for the option. The history of return indices is used to determine the volatility and correlation of share prices for the comparator companies and is needed for the Monte Carlo model to estimate their future TSR performance relative to the Vedanta Limitedâs TSR performance. All options are assumed to be exercised immediately after vesting, as the exercise period is 6 months.
The Company recognized total expenses of Rs.6.68 Crore related to above equity settled share-based payment transactions in the year ended March 31, 2017 out of which Rs.3.27 Crore was recovered from group companies. Equity settled employee stock options reserve outstanding with respect to the above scheme as at year end is Rs.6.68 Crore.
Employee stock option plans of estwhile Cairn India Limited:
The Company has provided various share based payment schemes to its employees. During the year ended 31 March 2017, the following schemes were in operation:
CIPOP plan (including phantom options)
Options will vest (i.e., become exercisable) at the end of a âperformance periodâ which has been set by the remuneration committee at the time of grant (although such period will not be less than three years). However, the percentage of an option which vests on this date will be determined by the extent to which pre-determined performance conditions have been satisfied. Phantom options are exercisable proportionate to the period of service rendered by the employee subject to completion of one year.
CIESOP plan (including phantom options)
There are no specific vesting conditions under CIESOP plan other than completion of the minimum service period. Phantom options are exercisable proportionate to the period of service rendered by the employee subject to completion of one year.
Volatility is the measure of the amount by which the price has fluctuated or is expected to fluctuate during the period. The measure of volatility used in Black-Scholes option-pricing model is the annualized standard deviation of the continuously compounded rates of return on the stock over a period of time. Time to maturity /expected life of options is the period for which the Company expects the options to be live. Time to maturity has been calculated as an average of the minimum and maximum life of the options.
Modification in terms of Employee stock option plans
Pursuant to the merger of Cairn India Limited with the Company as referred to in note 4, the stock option plans of Cairn India Limited stands modified as follows:
a) The exercise price of CIESOP plan is reduced by Rs.40 per option.
b) The liability w.r.t. the CIPOP plans (including phantom options) has been fixed based on the share price of Cairn India Limited as on March 27, 2017, being the effective date of merger. Accordingly, the outstanding employee stock option liability (Equity Settled) and Provision for employee stock option (Cash Settled) of Rs.62.51 Crores and Rs.8.25 Crores respectively, has been transferred to financial liability.
The incremental fair value for the remaining stock options, being the difference between the fair value of the modified equity instrument and that of the original equity instrument, has been re-estimated on the effective date of merger and the difference has been recognised in the statement of profit and loss account.
Employee share option plan of Vedanta Resources Plc
The value of shares that are awarded to members of the group is calculated by reference to the individual fixed salary and share-based remuneration consistent with local market practice. ESOP scheme of VRPLC is both tenure and performance based share schemes. The awards are indexed to and settled by Parentâs shares (Vedanta Resources Plc shares as defined in the scheme). The awards have a fixed exercise price denominated in Parentâs functional currency (10 US cents per share), the performance period of each award is three years and is exercisable within a period of six months from the date of vesting beyond which the option lapses.
Amount recovered by the Parent and recognized by the Company in the Statement of Profit and Loss (net of capitalisation) for year ended March 31, 2017 is Rs.33.89 Crore (March 31, 2016: Rs.33.04 Crore). The Company considers these amounts as not material and accordingly has not provided further disclosures.
20 Employee benefit plans
a) Defined contribution plans
The Company contributed a total of Rs.54.45 Crore for the year ended March 31,2017 and Rs.55.85 Crore for the year ended March 31, 2016 to the following defined contribution plans.
Central provident fund
In accordance with The Employees Provident Funds Act, 1952 employees are entitled to receive benefits under the provident fund. Both the employee and the employer make monthly contributions to the plan at a predetermined rate (12% for fiscal year 2017 and 2016) of an employeeâs basic salary. All employees have an option to make additional voluntary contributions. These contributions are made to the fund administered and managed by the Government of India (GOI) or to independently managed and approved funds. The Company has no further obligations under the fund managed by the GOI beyond its monthly contributions which are charged to the statement of profit and loss in the period they are incurred. Where the contributions are made to independently managed and approved funds, shortfall in actual return, if any, from the return guaranteed by the State are made by the employer, these are accounted for as defined benefit plans. The benefits are paid to employees on their retirement or resignation from the Company.
Superannuation
Superannuation, another pension scheme applicable in India, is applicable only to senior executives. The Company holds a policy with Life Insurance Corporation of India (âLICâ), to which it contributes a fixed amount relating to superannuation and the pension annuity is met by LIC as required, taking into consideration the contributions made. The Company has no further obligations under the scheme beyond its monthly contributions which are charged to the Statement of Profit and Loss in the period they are incurred.
b) Defined benefit plans
Contribution to provident fund (the âtrustâ)
The provident fund of the Iron Ore division is exempted under section 17 of The Employees Provident Fund and Miscellaneous Provisions Act, 1952. Conditions for grant of exemption stipulates that the employer shall make good deficiency, if any, between the return guaranteed by the statute and actual earning of the Fund. Based on actuarial valuation in accordance with Ind AS 19 and Guidance note issued by Institute of Actuaries of India for interest rate guarantee of exempted provident fund liability of employees, there is no interest shortfall in the funds managed by the trust and hence there is no further liability as on March 31, 2017 and March 31, 2016. Having regard to the assets of the Fund and the return on the investments, the Company does not expect any deficiency in the foreseeble future.
The Company contributed a total of Rs.10.82 Crore for the year ended March 31,2017 and Rs.6.29 Crore for the year ended March 31, 2016, The present value of obligation and the fair value of plan assets of the trust are summarised below.
Gratuity plan
In accordance with the Payment of Gratuity Act, 1972, the Company contributes to a defined benefit plan (the âGratuity Planâ) for employees who have completed 5 years of service. The Gratuity Plan provides a lump sum payment to vested employees at retirement, disability or termination of employment being an amount based on the respective employeeâs last drawn salary and the number of years of employment with the Company. The Gratuity plan is a funded plan and the Company makes contribution to recognised funds in India.
Based on actuarial valuations conducted as at year end, a provision is recognised in full for the benefit obligation over and above the funds held in the Gratuity Plan.
Principal actuarial assumptions
Principal actuarial assumptions used to determine the present value of the defined benefit obligation are as follows:
The actual return on plan assets was Rs.7.30 Crore for the year ended March 31, 2017 and Rs.8.76 Crore for the year ended March 31, 2016.
The weighted average duration of the defined benefit obligation is 16.60 years and 17.60 years as at March 31, 2017 and March 31, 2016, respectively.
The Company expects to contribute Rs.18.99 Crore to the funded defined benefit plans in fiscal year 2018.
Sensitivity analysis
Below is the sensitivity analysis determined for significant actuarial assumptions for the determination of defined benefit obligations and based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period while holding all other assumptions constant.
The above sensitivity analysis may not be representative of the actual benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
In presenting the above sensitivity analysis, the present value of defined benefit obligation has been calculated using the projected unit credit method at the end of reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognized in the balance sheet.
Risk analysis
Company is exposed to a number of risks in the defined benefit plans. Most significant risks pertaining to defined benefits plans, and managementâs estimation of the impact of these risks are as follows:
Interest risk
A decrease in the interest rate on plan assets will increase the plan liability.
Longevity risk/ Life expectancy
The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and at the end of the employment. An increase in the life expectancy of the plan participants will increase the plan liability.
Salary growth risk
The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. An increase in the salary of the plan participants will increase the plan liability.
Investment risk
The Gratuity plan is funded with Life Insurance Corporation of India (LIC) and ICICI Prudential Life (ICICI). Company does not have any liberty to manage the fund provided to LIC and ICICI prudential.
The present value of the defined benefit plan liability is calculated using a discount rate determined by reference to Government of India bonds. If the return on plan asset is below this rate, it will create a plan deficit.
21 Capital management
The Companyâs objectives when managing capital is to safeguard continuity, maintain a strong credit rating and healthy capital ratios in order to support its business and provide adequate return to shareholders through continuing growth. The Companyâs overall strategy remains unchanged from previous year.
The Company sets the amount of capital required on the basis of annual business and long-term operating plans which include capital and other strategic investments
The funding requirements are met through a mixture of equity, internal fund generation and other non-current borrowings. The Companyâs policy is to use current and non-current borrowings to meet anticipated funding requirements.
The Company monitors capital on the basis of the gearing ratio which is net debt divided by total capital (equity plus net debt) . The Company is not subject to any externally imposed capital requirements.
Net debt are non-current and current debts as reduced by cash and cash equivalents, other bank balances and current investments. Equity comprises all components including other comprehensive income.
22 The Company has incurred an amount of Rs.48.48 Crore (March 31, 2016 Rs.66.17 Crore) towards Corporate Social Responsibility (CSR) as per Section 135 of the Companies Act, 2013 and is included in other expenses.
23 Oil & gas reserves and resources
The Companyâs gross reserve estimates are updated atleast annually based on the forecast of production profiles, determined on an asset-by-asset basis, using appropriate petroleum engineering techniques. The estimates of reserves and resources have been derived in accordance with the Society for Petroleum Engineers âPetroleum Resources Management System (2007)â The changes to the reserves are generally on account of future development projects, application of technologies such as enhanced oil recovery techniques and true up of the estimates. The managementâs internal estimates of hydrocarbon reserves and resources at the period end, based on the current terms of the PSCs, are as follows: :
24 Advance(s) in the nature of Loan (Regulation 34 of Listing Obligations & Disclosure Requirements):
a) Loans and advances in the nature of Loans
(b) None of the loanee have made, per se, investment in the shares of the Company.
(c) Investments made by Sterlite Ports Limited in Maritime Ventures Private Limited - 10,000 equity shares and Goa Sea Port - 50,000 equity shares
Investments made by Sesa Resources Limited in Sesa Mining Corporation Limited - 11,50,000 equity shares and Goa Maritime Private Limited- 5,000 Shares
(d) The above loans and advances to subsidiary fall under the category of loans and advances in the nature of loans where there is no repayment schedule and are repayable on demand.
(e) As per the Companyâs policy, loan to employees are not considered in (a) above.
25 Interest in other entities
a) Subsidiaries
The Company has a number of subsidiaries held directly and indirectly by the Company which operate and are incorporated around the world. Following are the details of shareholdings in the subsidiaries.
b) The Company participates in several unincorporated joint operations which involve the joint control of assets used in oil and gas exploration, development and producing activities which are as follows:
c) Interest in associates and joint ventures
Set out below are the associates and joint ventures of the Company as at March 31, 2017 which, in the opinion of the directors, are not material to the Company. The country of incorporation or registration is also their principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held.
26 The Scheme of Amalgamation and Arrangement amongst Sterlite Energy Limited (âSELâ), Sterlite Industries (India) Limited (âSterliteâ), Vedanta Aluminium Limited (âVALâ), Ekaterina Limited (âEkaterinaâ), Madras Aluminium Company Limited (âMalcoâ) and the Company (the âSchemeâ) had been sanctioned by the Honourable High Court of Madras and the Honourable High Court of Judicature of Bombay at Goa and was given effect to in the year ended March 31, 2014.
Subsequently the above orders of the Honâble High Court of Bombay and Madras have been challenged by Commissioner of Income Tax, Goa and Ministry of Corporate Affairs through a Special Leave Petition before the Supreme Court and also by a creditor and a shareholder of the Company. The said petitions are pending for hearing and admission.
27 Financial guarantees
The Company has issued financial guarantees to banks on behalf of and in respect of loan facilities availed by its group companies. In accordance with the policy of the Company (refer note 3(j) the Company has designated such guarantees as âInsurance Contractsâ The Company has classified financial guarantees as contingent liabilities.
Accordingly, there are no assets and liabilities recognized in the balance sheet under these contracts other than those related to commission income recognized and/or receivable from such group companies as disclosed in note 53.
28 Leases
Operating lease commitments - as lessee
The Company is having an operating lease in relation to the office premises, with a non-cancellable lease period of 3 years. There are no restrictions imposed by lease arrangements and there are no subleases. There are no contingent rents. The information required with respect to non-cancellable leases are as follow:
29 Financial instruments
This section gives an overview of the significance of financial instruments for the company and provides additional information on the balance sheet. Details of significant accounting policies, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 2 and Note 3.
A. Financial assets and liabilities:
The accounting classification of each category of financial instruments, and their carrying amounts, are set out below:
B. Fair value hierarchy
The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instruments by valuation techniques:
(i) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
(ii) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).
(iii) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
The below table summarises the categories of financial assets and liabilities as at March 31, 2017, March 31, 2016 and April 01, 2015 measured at fair value:
The fair value of the financial assets and liabilities are at the amount that would be received to sell an asset and paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following methods and assumptions were used to estimate the fair values:
Investments traded in active markets are determined by reference to quotes from the financial institutions at the reporting date; for example: Net asset value (NAV) for investments in mutual funds declared by mutual fund house. For other listed securities traded in markets which are not active, the quoted price is used wherever the pricing mechanism is same as for other marketable securities traded in active markets. Other current investments are valued on the basis of market trades, poll and primary issuances for securities issued by the same or similar issuer and for similar maturities or based on the applicable spread movement for the security derived based on the aforementioned factor(s) [a level 1 technique].
Non-current fixed-rate and variable-rate borrowings: Fair value has been determined by the Company based on parameters such as interest rates, specific country risk factors, and the risk characteristics of the financed project [a level 2 technique].
Other non-current financial assets and liabilities: Fair value is calculated using a discounted cash flow model with market assumptions, unless the carrying value is considered to approximate to fair value [a level 3 technique].
Derivative financial assets/liabilities: The Company enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. Interest rate swaps, foreign exchange forward contracts and commodity forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies, interest rate curves and forward rate curves of the underlying commodity. Commodity contracts are valued using the forward LME rates of commodities actively traded on the listed metal exchange i.e. London Metal Exchange, United Kingdom (U.K.) [a level 2 technique].
Trade receivables, cash and cash equivalents, other bank balances, loans, other financial assets, current borrowings, trade payables and other current financial liabilities: approximate their carrying amounts largely due to the short-term maturities of these instruments.
The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationship and the value of other financial instruments recognised at fair value.
The estimated fair value amounts as at March 31, 2017 have been measured as at that date. As such, the fair values of these financial instruments subsequent to reporting date may be different than the amounts reported at each year-end.
There were no transfers between Level 1, Level 2 and Level 3 during the year. .
C. Risk management framework
The Companyâs businesses are subject to several risks and uncertainties including financial risks.
The Companyâs documented risk management polices act as an effective tool in mitigating the various financial risks to which the business is exposed to in the course of the daily operations. The risk management policies cover areas such as liquidity risk, commodity price risk, foreign exchange risk, interest rate risk, counterparty and concentration of credit risk and capital management. Risks are identified through a formal risk management programme with active involvement of senior management personnel and business managers at both corporate and division level. Each operating division has in place risk management processes which are in line with the Companyâs policy. Each significant risk has a designated âownerâ within the Company at an appropriate senior level. The potential financial impact of the risk and its likelihood of a negative outcome are regularly updated.
The risk management process is coordinated by the Management Assurance function and is regularly reviewed by the Companyâs Audit Committee. The Audit Committee is aided by the CFO Committee and the Risk Management Committee, which meets regularly to review risks as well as the progress against the planned actions. Key business decisions are discussed at the meetings of the CFO Committee and Executive Committee. The overall internal control environment and risk management programme including financial risk management is reviewed by the Audit Committee on behalf of the Board.
The risk management framework aims to:
- improve financial risk awareness and risk transparency
- identify, control and monitor key risks
- identify risk accumulations
- provide management with reliable information on the Companyâs risk situation
- improve financial returns
Treasury management
Treasury management focuses on liability management, capital protection, liquidity maintenance and yield maximisation. The treasury policies are approved by the Committee of the Board. Daily treasury operations of the Company are managed by the finance team within the framework of the Companyâs treasury policies. Long-term fund raising including strategic treasury initiatives are handled by a central team. A monthly reporting system exists to inform senior management of investments, debt, currency, commodity and interest rate derivatives. The Company has a strong system of internal control which enables effective monitoring of adherence to Companyâs policies. The internal control measures are supplemented by regular internal audits.
The investment portfolio at the Company is independently reviewed by CRISIL Limited and it has been rated as âVery Goodâ meaning highest safety. The investments are made keeping in mind safety, liquidity and yield maximisation.
The Company uses derivative instruments to manage the exposure in foreign currency exchange rates, interest rates and commodity prices. The Company does not acquire or issue derivative financial instruments for trading or speculative purposes. The Company does not enter into complex derivative transactions to manage the treasury and commodity risks. Both treasury and commodities derivative transactions are normally in the form of forward contracts, interest rate and currency swaps and these are in line with the Companyâs policies.
Commodity price risk
The Company is exposed to the movement of base metal commodity prices on the London Metal Exchange. Any decline in the prices of the base metals that the Company produces and sells will have an immediate and direct impact on the profitability of the business. As a general policy, the Company aims to sell the products at prevailing market prices. The commodity price risk in import of Copper Concentrate and Alumina is hedged on back-to back basis ensuring no price risk for the business. Hedging is used primarily as a risk management tool and, in some cases, to secure future cash flows in cases of high volatility by entering into forward contracts or similar instruments. The hedging activities are subject to strict limits set out by the Board and to a strictly defined internal control and monitoring mechanism. Decisions relating to hedging of commodities are taken at the Executive Committee level, basis clearly laid down guidelines.
Whilst the Company aims to achieve average LME prices for a month or a year, average realised prices may not necessarily reflect the LME price movements because of a variety of reasons such as uneven sales during the year and timing of shipments.
Financial instruments with commodity price risk are entered into in relation to following activities:
- economic hedging of prices realised on commodity contracts
- cash flow hedging of revenues, forecasted highly probable transactions
Aluminum
The requirement of the primary raw material, alumina, is partly met from own sources and the rest is purchased primarily on negotiated price terms. Sales prices are linked to the LME prices. At present the Company on selective basis hedges the aluminium content in outsourced alumina to protect its margins. The Company also enters into hedging arrangements for its aluminium sales to realise average month of sale LME prices.
Copper
The Companyâs custom smelting copper operations at Tuticorin is benefited by a natural hedge except to the extent of a possible mismatch in quotational periods between the purchase of concentrate and the sale of finished copper. The Companyâs policy on custom smelting is to generate margins from Treatment charges /Refining charges (TC/RC), improving operational efficiencies, minimising conversion cost, generating a premium over LME on sale of finished copper, sale of by-products and from achieving import parity on domestic sales. Hence, mismatches in quotational periods are managed to ensure that the gains or losses are minimised. The Company hedges this variability of LME prices through forward contracts and tries to make the LME price a pass-through cost between purchases of copper concentrate and sales of finished products, both of which are linked to the LME price.
TC/RCs are a major source of income for the Indian copper smelting operations. Fluctuations in TC/RCs are influenced by factors including demand and supply conditions prevailing in the market for mine output. The Companyâs copper business has a strategy of securing a majority of its concentrate feed requirement under long-term contracts with mines.
Iron ore
The Company sells its Iron Ore production from Goa on the prevailing market prices and from Karnataka through e-auction route as mandated by State Government of Karnataka in India.
Oil and Gas
The prices of various crude oils are based upon the price of the key physical benchmark crude oil such as Dated Brent, West Texas Intermediate, and Dubai/ Oman etc. The crude oil prices move based upon market factors like supply and demand. The regional producers price their crude basis these benchmark crude with a premium or discount over the benchmark based upon quality differential and competitiveness of various grades.
Natural gas markets are evolving differently in important geographical markets. There is no single global market for natural gas. This could be owing to difficulties in large-scale transportation over long distances as compared to crude oil. Globally, there are three main regional hubs for pricing of natural gas, which are USA (Henry Hub Prices), UK (NBP Price) and Japan (imported gas price, mostly linked to crude oil).
The above sensitivities are based on volumes, costs, exchange rates and other variables and provide the estimated impact of a change in LME prices on profit and equity assuming that all other variables remain constant. A 10% decrease in LME prices would have an equal and opposite effect on the Companyâs financial instruments.
Financial risk
The Companyâs Board approved financial risk policies comprise liquidity, currency, interest rate and counterparty risk. The Company does not engage in speculative treasury activity but seeks to manage risk and optimize interest and commodity pricing through proven financial instruments.
(a) Liquidity
The Company requires funds both for short-term operational needs as well as for long-term investment programmes mainly in growth projects. The Company generates sufficient cash flows from the current operations which together with the available cash and cash equivalents and short-term investments provide liquidity both in the short-term as well as in the long-term. The Company has been rated by CRISIL Limited (CRISIL) and India Ratings and Research Private Limited (India Rating) for its capital market issuance in the form of CPs and NCDs and for its banking facilities in line with Basel II norms.
CRISIL upgraded the ratings for the Companyâs long-term bank facilities and its Non-Convertible Debentures (NCD) programme to CRISIL AA / Stable Outlook from CRISIL AA- / Negative at the beginning of FY2017. The revision happened in three steps in September 2016
- Change in Outlook from Negative to Stable with AA-rating; February 2017 - change in Outlook from Stable to Positive with AA- rating and April 2017 - Upgrade of Ratings from CRISIL AA- / Positive outlook to CRISIL AA / Stable Outlook. The Company has the highest short term rating on its working capital and Commercial Paper Programme at CRISIL A1 . The agency expects that the ramp-up of aluminium, iron ore and power capacities; and stable commodity prices shall aid higher cash flow generation and leverage reduction for the company in near to medium term. Also, the agency shall be guided by extent and timeline for reduction in gross debt for further positive rating action.
India Ratings has revised the outlook on the Companyâs ratings from IND AA/ Negative to IND AA/Stable on account of improved financial metrics and completion of the merger with Cairn.
The Company remains committed to maintaining a healthy liquidity, ge
Mar 31, 2015
1 Company overview:
Vedanta Limited [formerly known as Sesa Sterlite Limited/ Sesa Goa
Limited] ("Vedanta" or "the Company") is engaged in the business of
iron ore mining, non-ferrous metals (copper and aluminium production)
and commercial power generation. Vedanta''s equity shares are listed on
National Stock Exchange and Bombay Stock Exchange in India and its
American depository shares ("ADS") are listed on New York Stock
Exchange in United States of America. Each ADS represents four equity
shares. Vedanta is majority-owned and controlled subsidiary of Vedanta
Resources Plc, the London listed diversified natural resource company.
The Company''s iron ore business (Iron ore) consist of iron ore
exploration, mining, beneficiation and exports. Vedanta has iron ore
mining operations in the States of Goa and Karnataka. Vedanta is also
in the business of manufacturing pig iron and metallurgical coke.
The Company''s copper business (Copper India) principally consists of
custom smelting and includes a copper smelter, a refinery, a phosphoric
acid plant and power plants at Tuticorin, Tamilnadu and a refinery and
two copper rod plants at Silvassa in the Union Territory of Dadra and
Nagar Haveli.
The Company''s power business (Jharsuguda 2,400 MW power plant) comprise
of 2,400 MW (four units of 600 MW each) thermal coal based power
facility in the State of Odisha.
The Company''s aluminium business (Jharsuguda aluminium) principally
consists of production of 1.0 mtpa alumina at Lanjigarh, Odisha,
production of 0.5 mtpa aluminium at Jharsuguda, Odisha and captive
power plants situated at Jharsuguda & Lanjigarh. The Company is also
setting up a 1.25 mtpa aluminium smelter at Jharsuguda, 4.0 mtpa of
alumina refinery at Lanjigarh and 210 MW at Lanjigarh.
Subsequent to the year end, pursuant to the approval of the members of
the Company and the receipt of fresh certificate of incorporation from
the Ministry of Corporate Affairs dated April 21,2015, name of the
Company has been changed to Vedanta Limited.
During the previous year, pursuant to approval received from Registrar
of Companies, the name of the Company had been changed from Sesa Goa to
Sesa Sterlite Limited, w.e.f. September 18, 2013.
2. Other disclosures
(1) The Company has one class of equity shares having a par value of
Rs. 1 per share. Each shareholder is eligible for one vote per share
held and dividend as and when declared by the Company. The dividend
proposed by the Board of Directors is subject to the approval of the
shareholders in the ensuing Annual General Meeting, except in case of
interim dividend which is paid as and when declared by the Board of
Directors. In the event of liquidation of the Company, the holders of
equity shares will be entitled to receive any of the remaining assets
of the Company, after distribution of all preferential amounts, in
proportion to their shareholding.
(2) ADS shareholders do not have right to attend General meetings in
person and also do not have right to vote.
They are represented by depository, CITI Bank N.A. New York. As on
March 31,2015, 221,331,788 equity shares were held in the form of
55,332,947 ADS.
(3) In terms of Scheme of Arrangement as approved by the Hon''ble High
Court of Judicature at Mumbai, vide its order dated April 19, 2002 the
erstwhile Sterlite Industries (India) Limited during 2002-2003 reduced
its paid up share capital by Rs. 10.03 Crore. There are 219,214 equity
shares of Rs. 1 each pending clearance from NSDL/CDSL. The Company has
filed application in Hon''ble High Court of Mumbai to cancel these
shares, the final decision on which is pending. Hon''ble High Court of
Judicature at Mumbai, vide its interim order dated September 06, 2002
restrained any transaction with respect to subject shares.
3. Terms and conditions of Long-term borrowings
Secured
a) Redeemable Non Convertible Debentures (NCD''s) includes ;
(i) 9.10% NCDs issued by the Company of Rs. 2,500.00 Crore. These
NCDs are secured by way of mortgage on the immovable property of the
Company situated at Tuticorin in the State of Tamilnadu and also by way
of first ranking pari passu charge over the tangible and intangible
movable fixed assets, both present and future of Jharsuguda 2,400 MW
power plant with a security cover of 1.25 times on the face value of
outstanding NCDs at all times during the tenure of the NCDs. These NCDs
are redeemable on April 5, 2023. The debenture holders of these NCDs
and the Company have put and call option at the end of the 5 years from
the respective date of the allotment of the NCDs.
(ii) NCDs issued by the Company for an aggregate amount of Rs.
2,000.00 Crore. Out of these, Rs. 1,000.00 Crore NCDs are issued at a
coupon rate of 9.40% per annum, while another Rs. 1,000.00 Crore NCDs
have been issued at a coupon rate of 9.24% per annum. These NCDs are
secured by way of mortgage on the immovable property of the Company
situated at Sanaswadi in the State of Maharashtra and also by way of
hypothecation on the movable fixed assets of Jharsuguda 2,400 MW power
plant with a security cover of 1.25 times on the face value of
outstanding NCDs at all times during the currency of NCDs. These NCDs
are redeemable in tranches of Rs. 500.00 Crore each on December 20,
2022, December 6, 2022, November 27, 2022 and October 25, 2022.
In respect of all the four tranches of NCDs, the debenture holders
and the Company have put and call option respectively at the end of the
5 years from the respective date of the allotment of the NCDs.
(iii) 11.50% Non Convertible Debentures (NCDs) issued by Aluminium
division of Rs. 133.33 Crore [including current maturity of long-term
borrowings (Refer note no. 10)] are secured by first pari passu charge
in favour of Debenture Trustees on the immovable properties situated at
Mauje Ishwarpura, Taluka Kadi, District Mehsana, Gujarat and in the
District of Kalahandi, Orissa. These NCDs are further secured by first
pari passu charge over the fixed assets of 1MTPA Lanjigarh Alumina
Refinery. These NCDs are redeemable on October 22, 2015.
(iv) NCDs issued by the Company of Rs. 1,200.00 Crore in two tranches
of Rs. 750.00 Crore and Rs. 450.00 Crore, with an interest rate of
9.17% per annum. These NCDs are secured by way of mortgage on the
immovable property of theNCompany situated at Tuticorin in the State of
Tamilnadu and also by way of first pari passu charge over the movable
ixed assets of Lanjigarh refinery expansion project including 210 MW
power plant project, with a security cover of 1.25 times on the face
value of outstanding NCDs at all times during the tenure of the NCD.
hese NCDs are redeemable on July 4, 2023 for Rs. 750.00 Crore and on
July 5, 2023 for Rs. 450.00 Crore. The debenture holders of these NCDs
and the Company have put and call option at the end of the 5 years from
the respective date of the allotment of the NCDs.
(v) 9.36% NCDs of Rs. 1,500.00 Crore issued by Iron ore division in
two tranches of Rs. 975.00 Crore and Rs. 525.00 Crore during the
current year. These NCDs are redeemable in two instalments of Rs.
975.00 Crore and Rs. 525.00 Crore payable on October 30, 2017 and
December 30, 2017 respectively. These NCDs are secured by way of
mortgage on the immovable property of the Company situated at Tuticorin
in the State of Tamilnadu and also by way of first ranking pari passu
charge over "movable fixed assets" in relation to the Company''s Iron
Ore business (Pig Iron & Met Coke assets) and power plant assets
located in Goa and the Copper plant assets located at Tuticorin with a
security cover of 1.25 times on the face value of outstanding NCDs at
all times during the tenure of the NCDs.
b) Term loans from banks includes :
(i) Loan from State Bank of India taken by Aluminium division amounting
to Rs. 4,332.50 Crore [including current maturity of long term
borrowings Rs. 187.50 Crore (Refer note no. 10)] at an interest rate
of 10.60% per annum. The loan is secured by (i) first pari passu charge
by way of hypothecation of all present and future movable fixed
asset of Aluminium division, and
(ii) first pari passu charge by way of mortgage on all present and
future immovable fixed asset (including leasehold land, if any)
acquired or to be acquired for the Aluminium division. The loan is
repayable as Rs. 187.50 Crore within one year, Rs. 250.00 Crore
within second year, NRs. 2,000.00 Crore within third to fifth year
and Rs. 1,895.00 Crore after fifth year.
(ii) Loan of Rs. 250.00 Crore taken by Aluminium division from Axis
Bank at an interest rate of 10.40% per annum.
The loan is secured by (i) first pari passu charge by way of
hypothecation of all present and future movable fixed asset of
Aluminium division, and (ii) first pari passu charge by way of mortgage
on all present and future immovable fixed asset (including leasehold
land, if any) acquired or to be acquired for the Aluminium division.
The loan is repayable as Rs. 75.00 Crore in February 2017, Rs. 87.50
Crore in February 2018 and Rs. 87.50 Crore in February 2019.
(in) Loan of Rs. 250.00 Crore taken by Aluminium division from Vijaya
Bank at an interest rate of 10.50% per annum.
The loan is secured by (i) first pari passu charge by way of
hypothecation of all present and future movable fixed asset of
Aluminium division, and (ii) first pari passu charge by way of mortgage
on all present and future immovable fixed asset (including leasehold
land, if any) acquired or to be acquired for the Aluminium division.
The loan is repayable as Rs. 75.00 Crore in February 2017, Rs. 87.50
Crore in February 2018 and Rs. 87.50 Crore in February 2019.
(iv) Loan of Rs. 500.00 Crore taken by Aluminium division from
Corporation Bank at an interest rate of 10.50% per annum. The loan is
secured by (i) first pari passu charge by way of hypothecation of all
present and future movable fixed asset of Aluminium division, and (ii)
first pari passu charge by way of mortgage on all present and future
immovable fixed asset (including leasehold land, if any) acquired or to
be acquired for the Aluminium division. The loan is repayable as Rs.
150.00 Crore in February 2017, Rs. 175.00 Crore in February 2018 and
Rs. 175.00 Crore in February 2019.
(v) Loan of Rs. 500.00 Crore taken by Aluminium division from Bank of
India at an interest rate of 10.50% per annum.
The loan is secured by (i) first pari passu charge by way of
hypothecation of all present and future movable fixed asset of
Aluminium division, and (ii) first pari passu charge by way of mortgage
on all present and future immovable fixed asset (including leasehold
land, if any) acquired or to be acquired for the Aluminium division.
The loan is repayable as Rs. 150.00 Crore in February 2017, Rs.
175.00 Crore in February 2018 and Rs. 175.00 Crore in February 2019.
(vi) Loan of Rs. 500.00 Crore taken by Aluminium division from
Syndicate Bank at an interest rate of 10.50% per annum.
The loan is secured by (i) first pari passu charge by way of
hypothecation of all present and future movable fixed asset of
Aluminium division, and (ii) first pari passu charge by way of mortgage
on all present and future immovable fixed asset (including leasehold
land, if any) acquired or to be acquired for the Aluminium division.
The loan is repayable as Rs. 150.00 Crore in February 2017, Rs.
175.00 Crore in February 2018 and Rs. 175.00 Crore in February 2019.
(vii) Loan from Union Bank of India taken by Aluminium division
amounting to Rs. 985.00 Crore [including current maturity of long-term
borrowings Rs. 100.00 Crore (Refer note no.
10)] at an interest rate of 10.40% per annum. The loan is secured by
(i) first pari passu charge by way of hypothecation of all present and
future movable fixed asset of Aluminium division, and (ii) first pari
passu charge by way of mortgage on all present and future immovable
fixed asset (including leasehold land, if any) acquired or to be
acquired for the Aluminium division. The loan is repayable as Rs.
100.00 Crore within one year, Rs. 140.00 Crore within second year, Rs.
660.00 Crore within third to fifth year and Rs. 85.00 Crore after
fifth year.
(viii) Loan from Bank of India taken by Aluminium division amounting to
Rs. 1,905.00 Crore [including current maturity of long-term borrowings
Rs. 200.00 Crore (Refer note no.
10)] at an interest rate of 10.50% per annum. The loan is
secured by (i) first pari passu charge by way of hypothecation of all
present and future movable fixed asset of Aluminium division, and (ii)
first pari passu charge by way of mortgage on all present and future
immovable fixed asset (including leasehold land, if any) acquired or to
be acquired for the Aluminium division. The loan is repayable as Rs.
200.00 Crore within one year, Rs. 280.00 Crore within second year,
Rs. 1,320.00 Crore within third to fifth year and Rs. 105.00 Crore
after fifth year.
(ix) Loan from Syndicate Bank taken by Aluminium division amounting to
Rs. 1,014.75 Crore [including current maturity of long-term borrowings
Rs. 102.50 Crore (Refer note no.
10)] at an interest rate of 10.50% per annum. The loan is secured by
(i) first pari passu charge by way of hypothecation of all present and
future movable fixed asset of Aluminium division, and (ii) first pari
passu charge by way of mortgage on all present and future immovable
fixed asset (including leasehold land, if any) acquired or to be
acquired for the Aluminium division. The loan is repayable as Rs.
102.50 Crore within one year, Rs. 143.50 Crore within second year, Rs.
676.50 Crore within third to fifth year and Rs. 92.25 Crore after
fifth year.
(x) Loan from Bank of Baroda taken by Aluminium division amounting to
Rs. 1,980.00 Crore [including current maturity of long-term borrowings
Rs. 200.00 Crore (Refer note no. 10)] at an interest rate of 10.50%.
The loan is secured by (i) first pari passu charge by way of
hypothecation of all present and future movable fixed asset of
Aluminium division, and (ii) first pari passu charge by way of mortgage
on all present and future immovable fixed asset (including leasehold
land, if any) acquired or to be acquired for the Aluminium division.
The loan is repayable as Rs. 200.00 Crore within one year,
Rs. 280.00 Crore within second year, Rs. 1,320.00 Crore within third
to fifth year and Rs. 180.00 Crore after fifth year.
(xi) Loan from State Bank of Bikaner and Jaipur taken by Aluminium
division amounting to Rs. 495.00 Crore [including current maturity of
long-term borrowings Rs. 50.00 Crore (Refer note no. 10)] at an
interest rate of 10.50% per annum. The loan is secured by (i) first
pari passu charge by way of hypothecation of all present and future
movable fixed asset of Aluminium division, and (ii) first pari passu
charge by way of mortgage on all present and future immovable fixed
asset (including leasehold land, if any) acquired or to be acquired for
the Aluminium division. The loan is repayable as Rs. 50.00 Crore
within one year, Rs. 70.00 Crore within second year,
Rs. 330.00 Crore within third to fifth year and Rs. 45.00 Crore after
fifth year.
(xii) Loan of Rs. 937.50 Crore [including Rs. 250.00 Crore of current
maturity of long-term borrowings (Refer note no. 10)] taken during the
year by Jharsuguda 2,400 MW power plant from Canara Bank at an interest
rate of 10.50 % per annum.
The loan is secured by way of second pari passu charge on specific
fixed assets of Jharsuguda 2,400 MW power plant except agricultural
land. The loan is repayable in fifteen equal quarterly instalments of
Rs. 62.50 Crore each.
Foreign currency loans From banks includes :
c) External Commercial Borrowings ("ECB") of Aluminium division
aggregating Rs. 3,408.41 Crore (US$ 544.55 million) [including current
maturity of long-term borrowings Rs. 1,530.69 Crore (Refer note no
10)] in two tranches at an interest rate of LIBOR
plus 170 basis points for Rs. 3,129.54 Crore (US$ 500.00 million) and
LIBOR plus 129 basis points for Rs. 278.87 Crore (US$ 44.55 million).
The ECB on US$ 500 million is payable in three annual instalments on
April 21,2015 and April 21,2016 for US$ 200 million each and on April
21,2017 for US$ 100 million. The loan of US$ 44.55 million is due on
July 24, 2015. The ECB is secured by all present and future movable
asset of Aluminium division including its movable plant and machinery,
equipment, machinery, spare tools and accessories and other movable
whether installed or not and all replacements thereof and additions
thereof whether by way of substitution, addition,
replacement, conversion or otherwise howsoever together with all
benefits, rights and incidental attached thereto which are now owned or
to be owned in the future by the borrower.
Unsecured
d) Unsecured deferred sales tax liability of Rs. 138.58 Crore
[including current maturity of long-term borrowings of Rs. 5.42 Crore
(Refer note no 10)] outstanding as at March 31,2015 is currently
repayable in monthly instalments till March 2027.
e) The Company has not defaulted in the repayment of loans and interest
as at Balance Sheet date.
4. Terms and conditions of Short-term borrowings
a) Buyer''s credit from banks (Secured) includes :
(i) Rs. 1,845.54 Crore of Aluminium division at an interest rate of
LIBOR plus 22- 55 basis points secured Nby exclusive charge on the
assets ofJharsuguda Aluminium imported under facility and first charge
on current assets of Aluminium division on pari passu basis.
(ii) Rs. 2,800.00 Crore of Copper India at an interest rate of 0.68%
per annum secured by way of first charge by hypothecation on the entire
stock of raw materials, work-in-progress and all semi-finished,
finished, manufactured articles together with all stores, components
and spares, both present and future book debts, outstanding monies,
receivables, claims and bills arising out of sale etc. and such charge
in favour of the banks ranking pari passu inter se, without any
preferences or priority to one over other(s) in any manner.
(iii) Rs. 168.84 Crore at the Jharsuguda 2,400 MW power plant at an
interest rate ranging from 0.52% to 0.86% per annum secured against
first pari passu charge on entire current assets of Jharsuguda 2,400 MW
power plant.
b) Maximum amount outstanding at any time during the year was Rs.
6,485.00 Crore (Previous year Rs. 8,020.00 Crore).
c) The Company has not defaulted in the repayment of loans and interest
as at Balance Sheet date.
5. a. In pursuance to the Government of India''s policy of disinvestment
and the Share Purchase Agreement and a Shareholder''s Agreement ("SHA")
both dated April 4, 2002 entered into with the Government of India, the
Company acquired 26% equity interest in Hindustan Zinc Limited (HZL).
Under the terms of the SHA, the Company had two call options to
purchase all of the Government of India''s shares in HZL at fair market
value. The Company exercised the first call option on August 29, 2003
and acquired an additional 18.9% of HZL''s issued share capital. The
Company also acquired additional 20% of the equity capital in HZL
through an open offer, increasing its shareholding to 64.9%. The
second call option provides the Company, the right to acquire the
Government of India''s remaining 29.5% share in HZL. This call option
is subject to the right of the Government of India to sell 3.5% of HZL
shares to HZL employees. The Company exercised the second call option
vide its letter dated July 21,2009. The Government of India
disputed the validity of call option and has refused to act upon the
second call option. Consequently, the Company invoked arbitration and
filed a statement of claim. The arbitration proceedings are under
progress in early stages. The next date of hearing is fixed on August
08, 2015.
b. The Company purchased a 51.0% holding in Bharat Aluminium Company
Limited (BALCO) from the Government of India on March 2, 2001. Under
the terms of the Shareholder''s Agreement ("SHA") for BALCO, the Company
has a call option that allows it to purchase the Government of India''s
remaining ownership interest in BALCO at any point from March 2, 2004.
The Company exercised this option on March 19, 2004. However, the
Government of India has contested the valuation and validity of the
option and contended that the clauses of the SHA violate the provision
of Section 111A of the (Indian) erstwhile Companies Act, 1956 by
restricting the rights of Government of India to transfer its shares
and that as a result such provisions of the SHA were null and void.
Subsequently the Company referred the matter to arbitration as provided
in the SHA and the majority award of the arbitral tribunal rejected the
claims of the Company on the ground that the clauses relating to the
call option, the right of first refusal, the "tag-along" rights and the
restriction on the transfer of shares violate the (Indian) Companies
Act, 1956 and are not enforceable.
The Company challenged the validity of the majority award under section
34 of the Arbitration and Conciliation Act, 1996 in the High Court of
Delhi and sought for setting aside the arbitration award to the extent
that it holds these clauses ineffective and inoperative. The Government
of India also filed an application before the High Court of Delhi to
partially set aside the arbitral award in respect of certain matters
involving valuation. The High Court of Delhi passed an order dated
August 10, 2011 directing the Company''s application and the application
by the Government of India to be heard together as they arise from a
common arbitral award. The matter is currently pending before the High
Court of Delhi and next date of hearing is fixed on August 3, 2015.
On January 9, 2012, the Company offered to acquire the Government of
India''s interests in HZL and BALCO for Rs. 15,492.00 Crore and Rs.
1,782.00 Crore, respectively. The Company has, by way of letters dated
April 10, 2012 and July 6, 2012, sought to engage with the Government
of India on the same terms as the offer. This offer was separate from
the contested exercise of the call options, and the Company proposed
to withdraw the ongoing litigations in relation to the contested
exercise of the options should the offer be accepted. To date, the
offer has not been accepted by the Government of India and therefore
there is no certainty that the acquisition will proceed.
c. On February 23, 2012, the Company entered into a tripartite
agreement with Larsen & Toubro Limited (L&T) and Raykal Aluminium
Company Private Ltd (Raykal). L&T holds certain prospecting licenses
for bauxite mines located at Sijmali and Kurumali of Rayagada and
Kalahandi districts of Odisha. By this agreement the entire bauxite
excavated from above mines will be available for the use of Raykal and
/ or to the Company. It is also further agreed that the Company will
acquire 100% of equity share capital of Raykal in a phased manner at a
pre-agreed consideration in a milestone based acquisition. As on the
balance sheet date, the Company has acquired 24.5% of the share capital
of Raykal for a consideration of Rs. 200.70 Crore. The recommendation
for grant of Mining License by State Government is under active
consideration.
d. Pursuant to the Scheme approved by the Honorable High Court of
Madras filed by Malco Energy Limited ("MEL") in the matter of reduction
of capital, MEL undertook restructuring whereby the subscribed and paid
up capital was reduced from Rs. 2/- per equity share to Rs. 0.05/-
per equity share and simultaneously with the reduction of share capital
of the Company, 854,656,250 equity shares of the reduced face value of
Rs. 0.05/- each were then consolidated into 21,366,406 equity shares of
Rs. 2/- each fully paid-up. Further on March 30, 2105, the Company
subscribed for 2,000,000 equity shares of Rs. 2 each at a premium of
Rs. 498 per share.
e. During the year, 1,000,000 Redeemable Cumulative Preference shares
having a face value of Rs. 100 Crore issued at a premium of Rs. 2,900
Crore on March 28, 2012, and redeemable on March 28, 2022 at a premium
of Rs. 68,650 per preference share, were fully redeemed by MEL on
March 30, 2015, together with a foreclosure cost of Rs. 200 Crore on
account of early redemption.
f. Pursuant to Scheme of Amalgamation of Sterlite Infra Limited (Refer
note no. 33)
6. a. Net of recoveries
b. In view of the inadequacy of profits for the FY 2013-14, the
remuneration paid to the Executive Chairman of the Company was in
excess of the limits specified in Section 198 read together with
Schedule XIII to the erstwhile Companies Act, 1956. The Company had
been legally advised that the said remuneration paid / payable by the
Company to such executive / whole time directors was in continuity and
in accordance with the Scheme of Arrangement sanctioned by the
Honorable High Court of Madras and High Court of Judicature of Bombay
at Goa, for amalgamation of Sterlite Industries (India) Limited with
the Company, and hence shall not be deemed to be excess remuneration
in terms of Schedule XIII to the erstwhile Companies Act, 1956. The
Company had filed an application with the Ministry of Corporate Affairs
(MCA) for approval of waiver of excess remuneration paid to the
Executive Chairman. The Company is awaiting formal communication
from the MCA.
c. The Company offers equity-based award plans to its employees,
officers and directors through its parent, Vedanta Resources
Plc (the "Parent"), [The Vedanta Resources Long-Term Incentive Plan
("LTIP"), Employee Share Ownership Plan ("ESOP") and Performance Share
Plan ("PSP")].
During the year, the PSP is the primary arrangement under which
share-based incentives are provided to the defined management group,
previously these awards were granted on a similar basis under the LTIP.
The maximum value of shares that can be awarded to members of the
defined management group is calculated by reference to the individual
fixed salary and share- based remuneration consistent with local market
practice. The performance condition attaching to outstanding awards
under the PSP and LTIP is that of Parent''s performance, measured in
terms of Total Shareholder Return ("TSR") compared over a three year
period with the performance of the competitor companies as defined in
the scheme from the date of grant. Initial awards under the LTIP were
granted in February 2004 and subsequently further awards were granted
in the respective years until 2012- 13. Additionally, PSP vesting
conditions includes continued employment with the Group till the date
of vesting. Initial awards under the PSP were granted in November 2014.
The awards are indexed to and settled by Parent shares. The awards have
a fixed exercise price denominated in Parent''s functional currency of
10 US cents per share, the performance period of each award is three
years and are exercisable within a period of six months from the date
of vesting beyond which the option lapse.
The Parent has also granted awards under the ESOP scheme that shall
vest based on the achievement of business performance in the
performance period. The vesting schedule is staggered over a period of
three years. Under these schemes the Parent is obligated to issue the
shares.
Further, in accordance with the terms of the agreement between the
Parent and the Company, the fair value of the awards as on
the grant date is recovered by the Parent from the Company and its
subsidiaries.
Amount recovered by the Parent and recognised by the Company in the
Statement of Profit and Loss (net of capitalisation) for the year ended
March 31,2015 is Rs. 60.43 Crore (Previous year Rs. 70.28 Crore). The
Company considers these amounts as not material and accordingly has not
provided further disclosures.
7. Amalgamation schemes
The Schemes of Amalgamation (the "Schemes") amongst Goa Energy Limited
(GEL), Sterlite Infra Limited (SIL) (fully owned subsidiary companies)
and Vedanta Limited was sanctioned by the High Court of Judicature of
Bombay at Goa vide its order dated March 12, 2015 and High Court of
Madras has vide its order dated March 25, 2015 respectively. The
Schemes became effective from March 24, 2015 for Vedanta and GEL and
from April 8, 2015 for Vedanta and SIL, being the date of filing the
respective orders with the Registrar of Companies.
The above Schemes have been given effect to in the financial statements
for the year ended March 31,2015.
The appointed date as per the scheme is April 1,2014 and have been
accounted under "pooling of interest method" prescribed in the
Accounting Standard on Accounting for Amalgamation (AS) - 14.
I. Amalgamation of GEL with Vedanta:
a) GEL was engaged in the generation of commercial power in the State
of Goa and was a wholly owned subsidiary of Vedanta.
b) In accordance with the Scheme:
(i) GEL stands dissolved without winding up with effect from April
01,2014, on the effective date.
(ii) All assets, debts and liabilities of GEL have been deemed
transferred to and vested in the Company with effect from April
01,2014.
(iii) GEL carried on the business for and behalf of the Company for the
period from the appointed date to the effective date, in trust as per
the Scheme.
(iv) In accordance with the Scheme, GEL being a wholly owned subsidiary
of Vedanta, no shares were issued and allotted by Vedanta.
(c) The amalgamation has been accounted under the ''Pooling of
Interests'' method as envisaged in the Accounting Standard (AS)-14 on
Accounting for Amalgamations, whereby:
(i) In accordance with the Scheme, the assets, liabilities and reserves
(excluding share premium) of GEL as at April 01,2014 have been recorded
at their book values. Further, equity share capital, share premium
account of GEL, and investments in the equity shares of GEL has been
eliminated and resultant balance amount of Rs. 14.01 Crore has been
debited to General Reserve of the Company.
(ii) The operations of GEL during the year have been accounted for in
the current year''s Statement of Profit and Loss of the Company. The
credit balance in Surplus in Statement of Profit and Loss of GEL as at
April 01, 2014 Rs. 5.67 Crore has been included in Surplus in Statement
of Profit and Loss of the Company.
(iii) In terms of the Scheme inter-company balances (payables,
receivables, loans, advances, etc) between GEL and the Company as at
appointed date have been cancelled.
II. Amalgamation of SIL with Vedanta:
a) SIL was a wholly owned subsidiary of Vedanta, and through its
overseas subsidiaries owns mines in Namibia, South Africa and Ireland.
In accordance with the Scheme:
(i) SIL stands dissolved without winding up with effect from April
01,2014, on the effective date.
(ii) All assets, debts and liabilities of SIL have been deemed
transferred to and vested in the Company with effect from April
01,2014.
(iii) SIL carried on the business for and behalf of the Company for the
period from the appointed date to the effective date, in trust as per
the Scheme.
(iv) In accordance with the Scheme, SIL being a wholly owned subsidiary
of Vedanta, no shares were issued and allotted by Vedanta.
(b) The amalgamation has been accounted under the ''Pooling of
Interests'' method as envisaged in the Accounting Standard (AS)-14 on
Accounting for Amalgamations, whereby:
(i) In accordance with the Scheme, the assets, liabilities and reserves
(excluding share premium) of SIL as at April 01,2014 have been recorded
at their book values. Further, equity share capital of SIL and
investments in the equity shares of SIL has been eliminated.
(ii) The operations of SIL during the year have been accounted for in
the current year''s Statement of Profit and Loss of the Company. The
debit balance in Surplus in Statement of Profit and Loss of SIL as at
April 01, 2014 Rs. 345.85 Crore has been included in Surplus in
Statement of Profit and Loss of the Company.
(iii) In terms of the Scheme inter-company balances (payables,
receivables, loans, advances, etc) between SIL and the Company as at
appointed date have been cancelled.
8. a) The Scheme of Amalgamation and Arrangement amongst Sterlite
Energy Limited (''SEL''), Sterlite Industries (India) Limited
(''Sterlite''), Vedanta Aluminium Limited (''VAL''), Ekaterina Limited
(''Ekaterina''), Madras Aluminium Company Limited (''Malco'') and the
Company (the "Scheme") had been sanctioned by the Honorable High Court
of Madras and the Honorable High Court of Judicature of Bombay at Goa.
The Scheme had been given effect to in the year ended March 31,2014.
Subsequent to, the effectiveness of the Scheme, the Commissioner of
income tax, Goa and the Ministry of Corporate Affairs have challenged
the orders of the High Court of Judicature of Bombay at Goa by way of a
Special Leave Petition before the Supreme Court. Further, a
creditor and a shareholder have challenged the order of the High Court
of Madras. The said petitions have not yet been admitted pending
hearing.
b) By way of Slump sale agreement dated August 19, 2013 between VAL and
the Company, the power business consisting of 1,215 MW (9x135 MW)
captive power plants situated at Jharsuguda and 300 MW co-generation
facility (90MW operational and 210 MW under development) at Lanjigarh
together with the assets and liabilities, has been purchased by the
Company on a going concern basis at its carrying value at a
consideration of Rs. 2,893 Crore. The said consideration was fully
discharged by the Company during the year.
9. The Company entered into Joint venture agreement with Orissa Mining
Corporation Limited (OMCL) and incorporated South West Orissa Bauxite
Mining Private Limited (SWOBM) with equity contribution of Rs. 0.05
Crore in the ratio of 74 (the Company):26 (OMCL). SWOBM was
incorporated on July 15, 2009 to carry on the business of raising and
mining bauxite and alumina bearing ore from the bauxite mines in the
State of Odisha. As per JV agreement dated October 05, 2004 and
subsequent amendment thereto in 2009, the Company was to enter into
raising contract agreement with OMCL, the lessee of Niyamgiri Mines to
raise bauxite from said mines. Since Ministry of Environment &
Forests (MoEF) has not granted approval for forest diversion, no mining
activity has been undertaken and accordingly the raising contract
agreement was not entered into.
10. The Company had entered into an EPC contract with SEPCO Electric
Power Construction Corporation (SEPCO) for setting up 1,980 MW
Independent Power Plant at Talwandi, Punjab. The said contract has been
novated in the name of Talwandi Sabo Power Limited (TSPL) by virtue of
a novation agreement dated November 17, 2009 between the Company, TSPL
and SEPCO and all rights and obligations of the Company have been
assigned to TSPL by virtue of the novation agreement. The Company has
guaranteed to SEPCO to discharge TSPL''s obligation, including right of
recourse to the Company under the guarantee, in case of failure of TSPL
to perform its obligations under the EPC contract.
11. The Company has subscribed to the memorandum of association of M/s
Rampia Coal Mines and Energy Private Limited, a joint venture company
incorporated in India under the Companies Act for the purpose of
development of coal block. The Company had invested in 2.43 Crore
equity shares of Rs. 1 each amounting to Rs. 2.43 Crore representing
17.39% of the total equity shares. During the current year provision
of Rs. 2.43 Crore has been recognised in respect of such investment
due to cancellation of coal blocks by the Supreme Court of India.
Following is the information pertaining to the Company''s interest in
the above jointly controlled entity as extracted from the financial
information of the jointly controlled entity.
12. (i) Karnataka mining
Consequent to the clearance for resumption of iron ore mining
operations at Karnataka by the Honourable Supreme Court of India (the
"Supreme Court"), the Company had resumed mining operations with effect
from December 28, 2013 but had to again suspend operations from
July 31, 2014 due to the expiry of Temporary Working Permission.
Subsequent thereto, on execution of Mining Lease Deed (ML) and
Final Forest Clearance (FC) during the year, the Company has
resumed mining operations in Karnataka on February 28, 2015.
(ii) Goa mining
a) The Honourable Supreme Court of India (the "Supreme Court") vide its
judgment dated April 21,2014 had lifted the ban on mining in the State
of Goa, subject to certain conditions; including that no mining
operations can be carried out until renewal/execution of mining lease
deeds by the State Government. It also directed that out of the sale
proceeds of the e-auction of excavated ore, leaseholders to be paid
average cost of excavation of iron ore, and the balance amounts are to
be allocated amongst various affected stakeholders and unallocated
amounts to be appropriated to the State Government. In pursuance of
the said judgement, the State Government of Goa has on October 1,2014
announced the Goa Grant of Mining Leases Policy, 2014. The State
Government has renewed the mining leases and the Company is in the
process of obtaining other approvals/clearances. The Government of Goa
has vide its order dated January 15, 2015 revoked its earlier order
on temporary suspension of mining operations in the State of Goa. In
view of the above developments, the Company expects to restart mining
activities in Goa shortly.
b) In view of the Supreme Court judgment designating the State
Government as owners of the ore and mine lessees entitled to
reimbursement of the average cost of excavation and based on rules
framed for auction of such ore, during the year inventories of carrying
value of Rs. 295.25 Crore, which would have been disclosed as such and
included in inventories as at March 31, 2014, have instead been
disclosed as "Claims and other receivables" under the head "Short term
loans and advances" as at March 31,2015.
13. A) Contingent liabilities
(Rs. in Crore)
As at As at
March 31, March 31,
2015 2014
(a) Disputed liabilities in appeal :
(i) Income tax demands principally in
respect of depreciation consequent to
block assessment, disallowance 1,209.63 1,347.49
of short term capital loss, disallowance
of commission on sales paid to non
resident, Section 14A, demurrage,
Section10B deduction and additional
depreciation on plant and machinery.
(ii) Sales tax demands relating to tax
on Freight and Entry Tax on
imported goods 687.20 498.46
(iii) Excise duty relating to disputes
in respect of dutiability and
availing of cenvat credit 160.42 154.32
on certain capital goods and other
inputs.
(iv) Service tax demands for certain
services rendered 39.83 25.95
(v) Custom duty relating to differential
export duty on export shipments 36.79 14.04
(vi) FERA/FEMA matters relating to
disputes in respect of certain
investments into the 59.90 59.90
Company
(vii) Forest development tax levied by
Government of Karnataka 297.80 297.80
(viii) Cess on transportation of ore,
coal and coke levied by
Government of Goa under the Goa 109.38 107.33
Rural and Development and Welfare
Cess Act, 2000 (Goa Act 29 of 2000)
(ix) Royalty demand in Karnataka 12.11 12.11
(x) Other matters principally related
to Building Cess under Building
and Construction Workers (RECS) Act, 11.07 10.63
1996 and corresponding Welfare Cess
Act, 1996
(b) Claims against the Company not
acknowledged as debts principally
related to commercial 400.93 249.29
and employment contracts, stacking
charges, dead rent on deemed mining
leases and royalty.
(c) Estimated cost of variation in copper and precious metals quantity
due to adjustments done based on metal contents as per laboratory
assessments pending receipt of final invoice amounts to Rs. 46.13
Crore (Previous year Rs. 37.28 Crore).
(d) Shenzhen Shandong Nuclear Power Construction Co. Limited (''SSNP'')
subsequent to terminating the EPC contract invoked arbitration as per
the contract alleging non-payment of their dues towards construction of
a 210 MW co-generation power plant for refinery expansion project, and
filed a claim of Rs. 1,553.00 Crore. Based on the assessment, the
Company had booked the liability for Rs. 174.00 Crore in earlier years
and continues to defend the balance claim. The Company is defending the
claim and has filed a counter claim of Rs. 2,458.00 Crore for delays
caused for which SSNP is responsible. SSNP has also filed a petition
under Section 9 of the Arbitration and Conciliation Act, 1996 before
the Bombay High Court praying for interim relief seeking restrain order
on encashment of Advance Bank Guarantee (ABG), injunction from
disposing or creating third party right over Plant & Machinery (P&M) at
the project site and security for the amount due
under the contract. The Bombay High Court initially dismissed their
petition, but on a further appeal by SSNP, the Division Bench of the
Bombay High Court directed the Company to deposit a bank guarantee for
an amount of Rs. 187.00 Crore as a security, being a prima facie
representation of the claim, until arbitration proceedings are
completed. The Company has deposited a bank guarantee of equivalent
amount to the satisfaction of the Prothonotary, Bombay High Court.
Moreover, the SSNP''s Application under Section 31(6) of Arbitration Act
for Interim Award of Rs. 202.00 Crore was also disallowed by the
majority bench of the tribunal as pre-mature and unjustified.
Management is of the opinion that this claim is not valid under the
terms of the contract with SSNP and it is unlikely that SSNP can
legally sustain the claim and accordingly, no provision is considered
necessary.
(e) Future cash flows in respect of the above, if any, is determinable
only on receipt of judgement/decisions pending with relevant
authorities. The Company does not expect the outcome of matters stated
above to have a material adverse effect on the Company''s financials
conditions, result of operations or cash flows.
B) Capital and other commitments
c) In an appeal filed by the Company against the closure order of the
Tuticorin Copper smelter by Tamilnadu Pollution Control Board
("TNPCB"), the appellate authority National Green Tribunal ("NGT")
passed an interim order on May 31,2013 allowing the copper smelter to
recommence operations and appointed an Expert Committee to submit a
report on the plant operations. Post the interim order, the plant
recommenced operations on June 23, 2013. The Expert Committee submitted
a report on the operations of the plant stating that the plant''s
emission were within prescribed standards and based on this report,
NGT ruled on July 15, 2013 that the copper smelter could continue its
operations. NGT vide its final judgment dated August 08, 2013 made its
interim order dated May 31,2013 absolute and allowed the copper smelter
to continue its operation subject to it implementing all
recommendations and suggestions given by Expert Committee for better
functioning of the copper smelter in a time bound manner. The Company
has implemented all of the recommendations and the copper smelter
has been operating normally. TNPCB has filed appeals against the
interim and final orders of the NGT before the Supreme Court of India,
which are pending as on date.
D) i) Lanjigarh project - Niyamgiri mining lease:
In respect of the Niyamgiri mining lease of the Company, the Honourable
Supreme Court in its order dated April 18, 2013 directed the Government
of Odisha ("GOO") to place any unresolved issues and claims of the
local communities under the Forest Right Act and Rules before the Gram
Sabha. The GOO completed the process of conducting Gram Sabha meetings
in 12 villages and submitted its report on the proceedings to the
Ministry of Environment and Forests ("MOEF"). Further the MoEF based on
the report submitted by the GOO rejected the grant of stage II forest
clearance for the Niyamgiri project of Orissa Mining Corporation
Limited, which is one of the sources of supply of bauxite to the
alumina refinery at Lanjigarh. In terms of the Memorandum of
Understanding with the GOO (through OMC), 150 million tonnes of bauxite
is required to be made available to the Company.
The Company is also considering sourcing of bauxite from alternate
sources to support the existing and the expanded refinery operations.
The Company is also pursuing with Government of Odisha and Ministry of
Mines, Government of India for securing bauxite to refinery in terms of
MOU with GOO.
ii) Expansion of Alumina Refinery:
Environment Clearance (EC) process has gone ahead with a favorable
Public Hearing, and Expert Appraisal Committee, in its meeting held on
January 9, 2015, has recommended the project for EC subject to Stage-I
forestry clearance for the Gramya Jungle Jogya land which is under
pursuance. Pending the same, the expansion project continues to be on
hold.
Both the above matters are critical to the planned operations of the
aluminium division of the Company and, if government approvals are not
obtained timely, could adversely impact its performance, although
significant steps have been taken during the year by management for
procuring bauxite from alternate mines/ sources.
E) The Central Excise Department had, in June 2010, alleged violation
of Advance license conditions for the period 2005-09 on the Company.
Show cause notice in this regard has been served on the Company. The
Company has filed a writ petition to quash the Show Cause Notice on
recoveries / further proceedings from the Honourable Madras High Court,
Madurai Bench in this matter. The Company has also been legally advised
that the alleged charges are not legally sustainable and there is no
financial liability on the Company.
F) Except as described above, there are no pending litigations which
the Company believes could reasonably be expected to have a material
adverse effect on the results of operations, cash flow or the financial
position of the Company.
14. Related Party disclosures
List of related parties and relationships
A) Entities controlling the Company (Holding Companies)
Volcan Investments Limited (Ultimate Holding Company)
Intermediate Holding Company
Finsider International Company Limited
Richter Holdings Limited
Twin Star Holdings Limited
Vedanta Resources Cyprus Limited
Vedanta Resources Finance Limited
Vedanta Resources Holdings Limited
Vedanta Resources Pic
Welter Trading Limited
Westglobe Limited
Chairman Emeritus
Mr. Anil Agarwal
B) Fellow Subsidiaries (with whom transactions have taken place)
Konkola Copper Mines Plc
Sterlite Grid Limited
Sterlite Iron and Steel Company Limited
Sterlite Technologies Limited
The Madras Aluminium Company Limited 2
C) Associates
Gaurav Overseas Private Limited
Raykal Aluminium Company Private Limited
RoshSk or Township (Proprietary) Limited
D) Subsidiaries
Amica Guesthouse (Proprietary) Limited
Bharat Aluminium Company Limited
Black Mountain Mining (Proprietary) Limited
Bloom Fountain Limited
Cairn Energy Australia Pty Limited#
Cairn Energy Cambay B.V.3*
Cairn Energy Discovery Limited#
Cairn Energy Gujarat B.V.3#
Cairn Energy Gujarat Block 1 Limited#
Cairn Energy Holdings Limited#
Cairn Energy Hydrocarbons Limited#
Cairn Energy India Pty Limited#
Cairn Energy India West B.V. 3#
Cairn Energy Netherlands Holdings B.V. 3#
Cairn Exploration (No. 2) Limited#
Cairn Exploration (No. 7) Limited#
Cairn Exploration (No. 6) Limited#
Cairn India Holdings Limited#
Cairn India Limited#
Cairn Lanka Private Limited#
Cairn South Africa Proprietary Limited#
CEH Australia Limited1#
CIG Mauritius Holdings Private Limited#
CIG Mauritius Private Limited#
Copper Mines of Tasmania Pty Limited
Fujairah Gold FZC Goa Energy Limited*
Hindustan Zinc Limited
Killoran Lisheen Finance Limited
Killoran Lisheen Mining Limited
Lakomasko B.V.
Lisheen Milling Limited
Malco Energy Limited (formerly Vedanta Aluminium Limited)
Maritime Ventures Private Limited
Monte Cello B.V. (MCBV)
Namzinc (Proprietary) Limited
Paradip Multi Cargo Berth Private Limited
Pecvest 17 Proprietary Limited
Rosh Pinah Health Care (Proprietary) Limited
Sesa Mining Corporation Limited
Sesa Resources Limited
Skorpion Mining Company (Proprietary) Limited
Skorpion Zinc (Proprietary) Limited
Sterlite (USA) Inc. Sterlite Infra Limited*
Sterlite Infraventures Limited
Sterlite Ports Limited
Talwandi Sabo Power Limited
Thalanga Copper Mines Pty Limited
THL Zinc Holding B.V.
THL Zinc Limited
THL Zinc Namibia Holdings (Proprietary) Limited
THL Zinc Ventures Limited
Twin Star Energy Holdings Limited
Twin Star Mauritius Holdings Limited
Vedanta Exploration Ireland Limited
Vedanta Lisheen Holdings Limited (formerly Vedanta Lisheen Finance
Limited)
Vedanta Lisheen Mining Limited
Vizag General Cargo Berth Private Limited
Western Cluster Limited
Cairn Energy Investments Australia Pty Limited@#
Wessington Investments Pty Limited@#
Sydney Oil Company Pty Limited@#
Cairn Exploration (No.4) Limited@#
Cairn Petroleum India Limited@#
Cairn Energy India Holdings B.V.@#
Cairn Energy Group Holdings B.V.@#
Cairn Energy Gujarat Holding B.V.@#
Cairn Energy India West Holdings B.V.@#
Cairn Energy Cambay Holding B.V.@#
CEH Australia Pty Limited@#
Cairn Energy Asia Pty Limited@#
E) Key Management Personnel
Mr. Navin Agarwal
Mr. Tarun Jain
Mr. Thomas Albanese (w.e.f. April 1,2014)
Mr. D. D. Jalan (w.e.f. April 1,2014)
Mr. M. S. Mehta (upto March 31,2014)
Mr. P. K. Mukherjee (upto March 31,2014)
Mr. Amit Pradhan (resigned w.e.f. August 18, 2013)
F) Relatives of Key Management Personnel
Mr. Dwarka Prasad Agarwal (Father of Mr. Navin Agarwal)
Mr. Naivaidya Agarwal (Son of Mr. Navin Agarwal)
G) Others
Anil Agarwal Foundation Trust
Vedanta Foundation
Sesa Community Development Foundation
Rampia Coal Mines & Energy Private Limited (Jointly controlled entity)
Goa Maritime Private Limited (Jointly controlled entity)
1 Dissolved during the year
2 Fellow Subsidiary upto August 17, 2014
3 Deregistered during the year
* Ceases to be a related party w.e.f. April 01,2014 pursuant to the
Scheme of Amalgamation (Refer note no. 33)
@ Dissolved during the
previous year
# Subsidiary w.e.f. August 26, 2013 (Associate for remaining period in
previous year)
15. The Company considers its investment in and loans to subsidiaries
as strategic and long term in nature and accordingly, in the view of
the management, any decline in the value of such long term investments
in subsidiaries is considered as temporary in nature and hence no
provision for dimunition in value is considered necessary.
16. Previous year''s figures have been regrouped/reclassified wherever
necessary to conform with the current year''s classification /
disclosure.
17. Consequent to the effectiveness of the Schemes of Amalgamation
(Refer note no. 33), the current year''s figures are not comparable with
the previous year''s figures.
Mar 31, 2014
1. AMALGAMATION SCHEMES
The Scheme of Amalgamation and Arrangement (the "Scheme-1") amongst
Sterlite Energy Limited (''SEL), Sterlite Industries (India) Limited
(''Sterlite''), Vedanta Aluminium Limited I''VAL), Madras Aluminium
Company Limited (''Malco'') and the Company was sanctioned by the High
Court of Judicature of Bombay at Goa vide its order dated April 3, 2013
and the Honourable High Court of Madras vide its order dated July 25,
2013. The Scheme became effective for Sterlite and Malco on August 17,
2013; and for SEL and VAL the scheme became effective on August 19,
2013.
The Honourable Supreme Court of Mauritius by an order dated August 24,
2012 and the Honourable High Court of Judicature of Bombay at Goa by an
Order dated April 03, 2013, approved the Scheme of Amalgamation (the
"Scheme-2") of Ekaterina (holding 70.5% shareholding in Vedanta
Aluminium Limited), with the Company. The effective date of
amalgamation is August 17, 2013.
NOTES
I. Amalgamation of SEL with the Company:
(a) SEL was engaged in the generation of commercial power in the State
of Odisha and was a wholly owned subsidiary of erstwhile Sterlite.
(b) In accordance with the Scheme-1:
(i) SEL stands dissolved without winding up with effect from January
01, 2011, on the effective date.
(ii) All assets, debts and liabilities of SEL have been deemed
transferred to and vested in the Company with effect from January 01,
2011.
(iii) SEL carried on the business for and behalf of the Company for the
period from the appointed date to the effective date, in trust as per
the Scheme-1.
(iv) In accordance with the Scheme-1 upon Chapter 2 of the Scheme-1
becoming effective, SEL became a wholly owned subsidiary of SGL, and
accordingly no shares were issued and allotted by SGL.
(c) The amalgamation has been accounted under the ''Pooling of
Interests'' method as envisaged in the Accounting Standard (AS) -14 on
Accounting for Amalgamations specified in the Companies (Accounting
Standard) Rules 2006, whereby:
(i) In accordance with the Scheme-1, the assets, liabilities and
reserves (excluding share premium) of SEL as at January 01, 2011 along
with subsequent additions/deletions up to March 31, 2013 have been
recorded at their book values. Further, equity share capital, share
premium account of SEL, and investments in the equity shares of SEL has
been eliminated and resultant balance amount of Rs. 2.48 Crore has been
debited to General Reserve of the Company.
(ii) The profits of SEL from appointed date January 01, 2011 to March
31, 2013 have been transferred to the Surplus in Statement of Profit
and Loss of the Company. The operations of SEL during the year have
been accounted for in the current year''s Statement of Profit and Loss
of the Company. The credit balance in Surplus in Statement of Profit
and Loss of SEL as at April 01, 2013 Rs. 194.02 Crore (after the
alignment of accounting policies of SEL in line with SGL accounting
policies) has been included in Surplus in Statement of Profit and Loss
of the Company.
(iii) In terms of the Scheme-1 inter-company balances (payables,
receivables, loans, advances, etc) between SEL and the Company (after
giving effect of Sterlite amalgamation) as at appointed date have been
cancelled.
II. Amalgamation of Sterlite with the Company:
(a) Sterlite was engaged in the copper smelting business:
(b) In accordance with the Scheme-1:
(i) Sterlite stands dissolved without winding up with effect from April
01, 2011, on the effective date.
(ii) 1,656,179,625 number of equity shares have been issued to the
equity shareholders of Sterlite, except for equity shares of Sterlite
held by MALCO and excluding shares against which ADS were issued in the
ratio of 3 equity shares of face value of Re 1/- each in the Company
for every 5 equity shares held in Sterlite. 72,173,625 ADS of the
Company representing 288,694,500 equity shares of the Company have been
issued in the ratio of 3 ADS of the Company for every 5 ADS of
Sterlite.
(iii) All assets, debts and liabilities of Sterlite have been deemed
transferred to and vested in the Company with effect from April 01,
2011.
(iv) Sterlite carried on the business for and behalf of the Company for
the period from the appointed date to the effective date, in trust as
per the Scheme-1.
(c) The amalgamation has been accounted under the ''Pooling of
Interests'' method as envisaged in the Accounting Standard (AS) -14 on
Accounting for Amalgamations specified in the Companies (Accounting
Standard) Rules 2006, whereby:
(i) In accordance with the Scheme-1, the assets, liabilities and
reserves of Sterlite as at April 01, 2011 along with subsequent
addition/deletion up to March 31, 2013 have been recorded at their book
values. The difference between the value of total assets, total
liabilities and the face value of share capital allotted to the
shareholders of Sterlite amounting to Rs. 134.45 Crore and credit balance
in the General Reserve of Rs. 2,770.29 Crore has been credited to the
General Reserve in accordance with the Scheme-1.
(ii) In terms of the Scheme-1, inter-company balances (payables,
receivables, loans, advances, etc) between VAL-Aluminium and the
Company (after giving effect of Sterlite amalgamation) as at appointed
date have been cancelled.
(iii) The profits of Sterlite from the appointed date April 01, 2011 to
March 31, 2013 have been transferred to Surplus in the Statement of
Profit and Loss of the Company. The operations of Sterlite during the
year have been accounted for in the current year''s Statement of Profit
and Loss of the Company. The balance in Surplus in Statement of Profit
and Loss of Sterlite as at April 01, 2013 Rs. 3,069.67 Crore (after the
alignment of the accounting policies of Sterlite in line with SGL
accounting policies) has been included in Surplus in Statement of
Profit and Loss of the Company.
III. Aluminium Division of Vedanta Aluminium Limited ("VAL-Aluminium")
with the Company:
(a) Vedanta Aluminium Limited was engaged in the production of
aluminium with associated captive power plants. "VAL-aluminium"
consisting of 0.5 mtpa aluminium smelter at Jharsuguda and 1.0 mtpa
alumina refinery at Lanjigarh in the State of Odisha.
(b) In accordance with the Scheme-1:
(i) VAL-Aluminium demerged from VAL and merged with the Company from
appointed date April 01. 2011.
(ii) No shares have been issued and allotted by the Company to Vedanta
Aluminium Limited for the demerger of the VAL-Aluminium and merger with
the Company.
(iii) All assets, debts and liabilities of VAL- Aluminium have been
deemed transferred to and vested in the Company with effect from April
01. 2011.
(iv) Vedanta Aluminium Limited carried on VAL- Aluminium business for
and behalf of the Company for the period from the appointed date to the
effective date, in trust as per the Scheme-1.
(c) The merger has been accounted as under :
(i) In accordance with the Scheme-1, the assets and liabilities of
VAL-Aluminium as at April 01, 2011 along with subsequent
addition/deletion up to March 31, 2013 have been recorded at their book
values. Further, in accordance with the Scheme-1, excess of book values
of assets over liabilities of VAL-Aluminium business amounting to Rs.
532.46 Crore has been credited to General Reserve of the Company.
(ii) In terms of the Scheme inter-company balances (payables,
receivables, loans, advances, etc) between VAL-Aluminium and the
Company (after giving effect of Sterlite amalgamation) as at appointed
date have been cancelled.
(iii) The losses of VAL-Aluminium during the period April 01, 2011 to
March 31, 2013 have been transferred to Surplus in Statement of Profit
and Loss of the Company. The operations of VAL-Aluminium during the
year have been accounted for in the current year''s Statement of Profit
and Loss of the Company. The debit balance of Surplus in Statement of
Profit and Loss of VAL-Aluminium as of April 01, 2013 Rs. 4,389.54 Crore
(after the alignment of accounting policies of VAL-Aluminium in line
with SGL accounting policies) has been included in Surplus in Statement
of Profit and Loss of the Company.
(iv) In accordance with the Scheme-1, post the vesting of VAL-Aluminium
business with the Company, shortfall of book values of assets over the
liabilities of the aluminium business after adjusting the carrying
value of equity share investment in VAL as on the effective date not
representing by the net assets value of VAL as on effective date
amounting to Rs. 1,471.63 Crore has been debited to General Reserve of
the Company.
IV. Residual business of The Madras Aluminium Company Limited
(''Malco-residual'') with the Company:
(a) The Madras Aluminium Company Limited was engaged in the production
of aluminium and commercial power generation business in the State of
Tamil Nadu.
(b) In accordance with the Scheme-1:
(i) In accordance with the Scheme-1, the power business of Malco
consisting of 100 MW coal based power plant was sold at a consideration
of Rs. 150.00 Crore to VAL with appointed date of April 01, 2012.
Residual business of Malco merged with the Company from appointed date
August 17, 2013 and Malco ceased to exist.
(ii) 78,724,989 number of equity shares have been issued to the equity
shareholders of Malco in the ratio of 7 equity shares of face value of
Re 1/- each in the Company for every 10 equity shares held in Malco.
(iii) All assets, liabilities and reserves of Malco- residual business
were deemed transferred to and vested in the Company with effect from
August 17, 2013.
(c) The amalgamation has been accounted under the ''Pooling of
Interests'' method as envisaged in the Accounting Standard (AS) -14 on
Accounting for Amalgamations specified in the Companies (Accounting
Standard) Rules 2006, whereby:
(i) The assets, liabilities and reserves of Malco- residual (except
investment in the equity shares of Sterlite) as at appointed date have
been recorded at their respective carrying values in the books of the
Company. In accordance with the Scheme-1, the difference between the
value of total assets (excluding investment in Sterlite), total
liabilities, reserves and the face value of share capital allotted to
the shareholders of Malco Rs. 14.62 Crore and credit balance in the
General Reserve of Rs. 231.24 Crore has been credited to General Reserve
of the Company.
(ii) In terms of the Scheme-1, as at appointed date the investment in
the equity shares of Sterlite in the books of Malco-residual has been
cancelled and resultant balance amount of Rs. 312.26 Crore has been
debited to General Reserve of the Company.
(iii) In terms of the Scheme-1 inter-company balances (payables,
receivables, loans, advances, etc) between Malco-residual and the
Company as at the appointed date have been cancelled.
(iv) The balance in Surplus in Statement of Profit and Loss of
Malco-residual as at August 17, 2013 Rs. 351.06 Crore (after the
alignment of accounting policies of Malco-residual business in line
with SGL accounting policies) has been included in Surplus in Statement
of Profit and Loss of the Company.
(V) Amalgamation of Ekaterina Limited (Ekaterina) with the Company:
(a) The Honourable High Court of Judicature of Bombay at Goa, by an
Order dated April 03, 2013, and The Honourable Supreme Court of
Mauritius by an order dated August 24, 2012, approved the Scheme of
Amalgamation (the "Scheme-2") of Ekaterina (holding 70.5% shareholding
in Vedanta Aluminium Limited), with the Company effective from the
appointed date April 01, 2012. The effective date of amalgamation is
August 17, 2013.
(b) In accordance with the Scheme-2:
(i) 72,304,334 number of equity shares were issued to the equity
shareholders of Ekaterina in the ratio of 1 equity share of face value
Re 1 each in the Company for every 25 shares held in Ekaterina.
(ii) In accordance with the Scheme-2, the assets, liabilities and
reserves of Ekaterina as at April 01, 2012 along with subsequent
addition/ deletion up to March 31, 2013 have been recorded in the books
of the Company at their respective book values.
(iii) Ekaterina stands dissolved without winding up with effect from
April 01, 2012.
(iv) Ekaterina carried on the business for and behalf of the Company
for the period from the appointed date to the effective date, in trust
as per the Scheme-2.
(c) The amalgamation has been accounted under the ''Pooling of
Interests'' method as envisaged in the Accounting Standard (AS) -14 on
Accounting for Amalgamations specified in the Companies (Accounting
Standard) Rules 2006, whereby:
(i) The assets, liabilities and reserves of Ekaterina as at appointed
date have been recorded at their respective carrying values in the
books of the Company. In accordance with the Scheme-2, difference
between total assets, total liabilities, reserves and the face of value
share capital allotted to the shareholders of EKTL amounting to Rs.
917.48 Crore credited to General Reserve of the Company.
(ii) In terms of the Scheme-2 inter-company balances (payables,
receivables, loans, advances, etc) between Ekaterina and the Company as
at the appointed date have been cancelled.
VI. Consequentto the above and utilising the carry forward unabsorbed
tax losses of VAL-Aluminium and SEL, the Company has recognised a
current tax credit of Rs. 1,755.09 Crore during the year.
VII. Subsequent to, the effectiveness of the Scheme, a Special Leave
Petition challenging the order of the High Court of Judicature of
Bombay at Goa has been filed by the income tax department, a creditor
and a shareholder have challenged the Scheme in the High Court of
Madras. The said petitions are pending for admission/hearing.
2. ACQUISITION OF VAL''S POWER BUSINESS THROUGH SLUMP SALE :
By way of Slump sale agreement dated August 19, 2013 between VAL and
the Company, the power business consisting of 1,215 MW (9x135 MW)
captive power plants situated at Jharsuguda and 300 MW co-generation
facility (90MW operational and 210 MW under development) at Lanjigarh
together with the assets and liabilities, has been purchased by the
Company on a going concern basis at its carrying value at a
consideration of Rs. 2,893 Crore.
3. ACQUISITION OF CAIRN INDIA LIMITED WITH ASSOCIATED DEBT :
Pursuant to the share purchase agreement, dated February 25, 2012
between Bloom Fountain Limited I''BFL), a wholly owned subsidiary of the
Company and Vedanta Resources Holdings Limited (''VRHL), BFL acquired
38.68% shareholding in Cairn India Limited and associated debt of USD
5,998 million byway of acquisition of Twin Star Energy Holding Limited
(TEHL), for a nominal cash consideration of USD 1. Consequently w.e.f.
August 26, 2013, TEHL, Twin Star Mauritius Holdings Limited (''TMHL) and
Cairn India Limited (including all its subsidiaries) have become
subsidiaries of the Company.
4. The employees'' gratuity fund scheme (a defined benefit plan) is
managed by Life Insurance Corporation of India (LIC) and ICICI
Prudential Life Insurance Company Limited. The present value of
obligation is determined based on actuarial valuation using projected
unit credit method, which recognize each period of service as giving
rise to additional unit of employee benefit entitlement and measures
each unit separately to build up the final obligation. The obligation
for short term compensated absences is recognised on actual basis for
the portion of accumulated leave which an employee can encash.
5. The Company (erstwhile Sterlite) entered into Joint venture
agreement with Orissa Mining Corporation Limited (OMCL) and
incorporated South West Orissa Bauxite Mining Private Limited (SWOBM)
with equity contribution of Rs. 0.05 Crore in the ratio of 74 (the
Company):26 (OMCL). SWOBM was incorporated on July 15, 2009 to carry on
the business of raising and mining bauxite and alumina bearing ore from
the bauxite mines in the State of Odisha. As per JV agreement dated
October 05, 2004 and subsequent amendment thereto in 2009, The Company
was to enter into raising contract agreement with OMCL, the lessee of
Niyamgiri Mines to raise bauxite from said mines. Since Ministry of
Environment & Forests (MoEF) has not granted approval for forest
diversion, no mining activity has been undertaken and accordingly the
raising contract agreement was not entered into.
6. In an appeal filed by the Company (erstwhile Sterlite] against the
closure order of the Tuticorin Copper smelter by Tamilnadu Pollution
Control Board ("TNPCB"), the appellate authority National Green
Tribunal ("NGT"] passed an interim order on May 31, 2013 allowing the
copper smelter to recommence operations and appointed an Expert
Committee to submit a report on the plant operations. Post the interim
order, the plant recommenced operations on June 23, 2013 and therefore
the plant remained closed for the major duration of the first quarter
of fiscal 2014 impacting the revenue and profits of the copper segment.
The Expert Committee submitted a report on the operations of the plant
stating that the plant'' semission were within prescribed standards and
based on this report, NGT ruled on July 15, 2013 that the Copper
smelter could continue its operations. The NGT also ordered that the
recommendations made by the Expert Committee be implemented in a time
bound manner. The Company has implemented all of the recommendations
during the year. TNPCB has filed an appeal against the order of the NGT
before the Supreme Court of India, which is yet to listed for hearing.
7. The Central Excise Department had, in June 2010, alleged violation
of Advance license conditions for the period 2005-2009 on the Company
(erstwhile Sterlite). No show cause notice in this regard has been
served on the Company. The Company has obtained a Writ for stay on
recoveries / further proceedings from the Honourable Madras High Court,
Madurai Bench in this matter. The company has also been legally advised
that the alleged charges are not legally sustainable and there is no
financial liability on the Company.
8. The Company (erstwhile SEL) had entered into an EPC contract with
SEPCO Electric Power Construction Corporation (SEPCO) for setting up
1,980 MW Independent Power Plant at Talwandi, Punjab. The said contract
has been novated in the name of Talwandi Sabo Power Limited (TSPL) by
virtue of a novation agreement dated November 17, 2009 between the
company, TSPL and SEPCO and all rights and obligations of the Company
have been assigned to TSPL by virtue of the novation agreement. The
Company has guaranteed to SEPCO to discharge TSPLs obligation,
including right of recourse to the Company under the guarantee, in case
of failure of TSPL to perform its obligations under the EPC contract.
9. The Company (erstwhile SEL) has subscribed to the memorandum of
association of M/s Rampia Coal Mines and Energy Private Limited, a
joint venture company incorporated in India under the Companies Act,
1956 for the purpose of development of coal block. The Company has
invested in Rs. 2.43 Crore equity shares of Rs. 1 each amounting to Rs. 2.43
Crore representing 17.39% of the total equity shares.
Following is the information pertaining to the Company''s interest in
the above jointly controlled entity as extracted from the financial
information of the jointly controlled entity.
10 a) Lanjigarh project - Niyamgiri mining lease:
In respect of the Niyamgiri mining lease of the Company (erstwhile
VAL), the Hon''ble Supreme Court in its order dated April 18, 2013
directed the Government of Odisha ("GOO") to place any unresolved
issues and claims of the local communities under the Forest Right Act
and rules before the Gram Sabha. The GOO completed the process of
conducting Gram Sabha meetings in 12 villages and submitted its report
on the proceedings to the Ministry of Environment and Forests ("MOEF").
Further the MOEF based on the report submitted by the GOO rejected the
grant of stage II forest clearance for the Niyamgiri project of Orissa
Mining Corporation Limited, which is one of the sources of supply of
bauxite to the alumina refinery at Lanjigarh. In terms of the
Memorandum of Understanding with the GOO (through OMC), 150 million
tonnes of bauxite is required to made available to the Company. The
Company is also considering sourcing of bauxite from alternate sources
to support the existing and the expanded refinery operations.
b) Expansion of Alumina Refinery:
With regard to the expansion project at Lanjigarh, the Company''s fresh
application of environmental clearance is under consideration. In the
meantime the expansion plans are on hold.
The above matters are critical to the planned operations of the
aluminium business of the Company. The management expects that with
timely support of relevant authorities, the above matters will be
satisfactorily resolved.
11. In terms of the Mineral Concession Rules 1960 and Mineral
Conservation and Development Rules (MCDR) 1988, the Company has
provided a "financial assurance" in the form of a bank guarantee to the
Regional Controller of Mines, towards its mine closure obligation. The
Company has made a provision for expense to the extent of the bank
guarantees provided.
12. A) Contingent liabilities
As at As at
March 31, 2014 March 31, 2013
(a) Disputed liabilities in appeal:
(i) Income Tax demands principally
in respect of depreciation 1,347.49 1,522.47
consequent to block assessment,
disallowance of short term I capital
loss, disallowance of commission on
sales paid to non I resident,
Section 14A, demurrage, Sectionl OB
deduction and I additional
depreciation on plant and machinery.
(ii) Sales Tax demands relating to
tax on Freight and Entry Tax 498.46 -
on imported goods
(iii) Excise Duty relating to
disputes in respect of dutiability and 154.32 -
availing of cenvat credit on certain
capital goods and other I inputs.
(iv) Service Tax demands for certain
services rendered 25.95 -
(v) Custom duty relating to differential
export duty on export 14.04 34.41
shipments
(vi) FERA/FEMA matters relating to
disputes in respect of 59.90 -
certain investments into the Company
(vii) Forest development tax levied by
Government of Karnataka 297.80 195.36
(viii) Cess on transportation of Ore,
coal and coke levied by 107.33 105.33
Government of Goa under the Goa Rural
and Development and Welfare
Cess Act, 2000 (Goa Act 29 of 2000)
(ix) Royalty demand in Karnataka 12.11 -
(x) Other matters principally related
to Building Cess under 10.63 -
Building and Construction Workers
(RECS) Act, 1996 and corresponding
Welfare Cess Act, 1996
(b) Claims against the company not
acknowledged as debts principally 249.29 23.83
related to commercial and employment
contracts, stacking charges, dead
rent on deemed mining leases and royalty.
(c) Estimated cost of variation in copper and precious metals quantity
due to adjustments done based on metal contents as per laboratory
assessments pending receipt of final invoice amounts to Rs. 37.28 Crore
(Previous year Nil).
(d) Shenzhen Shandong Nuclear Power Construction Co. Limited (''SSNP'')
subsequent to terminating the EPC contract invoked arbitration as per
the contract alleging non-payment of their dues towards construction of
a 210 MW co-generation power plant for refinery expansion project, and
filed a claim of Rs. 1,780.16 Crore. SSNP also filed a petition under
Section 9 of the Arbitration and Conciliation Act, 1996 before the
Bombay High Court praying for interim relief. The Bombay High Court
initially dismissed their petition, but on a further appeal by SSNP,
the Division Bench of the Bombay High Court directed Jharsuguda
aluminium to deposit a bank guarantee for an amount of Rs. 187.00 Crore
as a security, being a prima facie representation of the claim, until
arbitration proceedings are completed. Jharsuguda Aluminium has
deposited a bank guarantee of equivalent amount. Management is of the
opinion that this claim is not valid under the terms of the contract
with SSNP and it is unlikely that SSNP can legally sustain the claim
and accordingly, no provision is considered necessary.
(e) Future cash flows in respect of the above, if any, is determined
only on receipt of judgement/decisions pending with relevant
authorities. The Company does not expect the outcome of matters stated
above to have a material adverse effect on the Company''s financials
conditions, result of operations or cash flows.
13. (i) Karnataka mining:
The mining ban in Karnataka was lifted on April 18, 2013. The Company
has complied with all conditions for the recommencement of operations,
and mining operations resumed in December 2013 with a production 1.5
million tonnes during the year.
(ii) Goa mining:
Subsequent to the year end, the Honorable Supreme Court (Supreme Court)
vide its judgment dated April 21, 2014 has lifted the ban on mining in
the State of Goa, subject to certain conditions, including formulation
of the state policy for mining leases and renewals. It has imposed an
interim restriction on the maximum annual excavation from the mining
leases in the State of Goa to 20 million tonnes subject to
determination of final capacity by Expert Committee appointed by the
Supreme Court. Further, in its order, the Supreme Court has held that
all mining leases in the State of Goa, including those of Sesa
Sterlite, have expired in 2007 and no mining operations can be carried
out until renewal/execution of mining lease deeds by the State
government. It has also directed that out of the sale proceeds of the
e-auction of excavated ore Leaseholders to be paid average cost of
excavation of iron ore, and the balance amounts are to be allocated
amongst various affected stakeholders and unallocated amounts to be
appropriated to the State Government. The Company is of the view that
its carrying value of inventories aggregating Rs. 296.43 Crore as at the
Balance Sheet date would not be less than the realisation proceeds in
terms of the said judgement. In view of the above, the iron ore
inventories as at the balance sheet date have been carried at cost. The
Company is in the process of obtaining the necessary permissions for
commencement of operations at the earliest.
14. In March 2010, ASARCO had filed a complaint against the Company
(erstwhile Sterlite) and its subsidiary Sterlite (USA) Inc, in the
Bankruptcy Court of the Southern District of Texas, for alleged breach
of the Purchase and Sale agreement signed in May 2008. The Bankruptcy
Court of the Southern District of Texas, heard the matter and vide its
order dated final judgement of February 27, 2012, has ruled that ASARCO
is entitled to a gross amount of US$ 132.75 million in incidental
damages. This amount shall be reduced by US$ 50 million paid by the
Company to ASARCO in December 2009, making ASARCO entitled for a net
amount of US$ 82.75 million. The Company has recognised a liability of
Rs. 497.33 Crore (US$ 82.75 million). The Company and its subsidiary have
filed notice of appeal against this judgement, the hearing of which is
scheduled on the July 30, 2014.
15. RELATED PARTY DISCLOSURES
List of related parties and relationships
A) Entities Controlling the Company (Holding Companies)
Volcan Investments Limited (Ultimate Holding Company)
Vedanta Resources Pic (Intermediate Holding Company)
Vedanta Resources Holdings Limited (Intermediate Holding Company)
Richter Holding Limited (Intermediate Holding Company)
Vedanta Resources Finance Limited (Intermediate Holding Company)
Vedanta Resources Cyprus Limited (Intermediate Holding Company)
Twin Star Holdings Limited (Intermediate Holding Company)
Finsider International Company Limited (Intermediate Holding Company)
Westglobe Limited (Intermediate Holding Company)
Welter Trading Limited (Intermediate Holding Company)
B) Fellow Subsidiaries
Konkola Copper Mines Pic
The Madras Aluminium Company Limited* (Fellow Subsidiary upto August
17, 2014)
Sterlite Technologies Limited
Sterlite Grid Limited
Sterlite Iron and Steel Company Limited
Sterlite Industries (India) Limited*
C) Associates
Gaurav Overseas Private Limited
Raykal Aluminium Company Private Limited
D) Subsidiaries
Hindustan Zinc Limited (Previous Year: Fellow Subsidiary)
Bharat Aluminium Company Limited (Previous Year: Fellow Subsidiary)
Malco Energy Limited (Earlier Vedanta Aluminium Limited) (Previous
Year: Fellow Subsidiary]
Copper Mines of Tasmania Pty Limited (CMT)
Thalanga copper mines Pty Limited (TCM)
Sterlite Infra Limited (SIL)
Monte Cello B.V. (MOBV)
Talwandi Sabo Power Limited (TSPL) (Previous Year: Fellow Subsidiary]
Sesa Resources Limited (''SRL]
Sesa Mining Corporation Limited (''SMCL]
Goa Energy Limited
Bloom Fountain Limited 1''BFL]
Twin Star Energy Holdings Limited (TEHL] (Previous Year: Fellow
Subsidiary]
Twin Star Mauritius Holdings Limited (TMHL] (Previous Year: Fellow
Subsidiary]
Western Cluster Limited
Sterlite (USA) Inc.
Fujairah Gold FZC
THL Zinc Ventures Ltd
THL Zinc Ltd
THL Zinc Holding B.V.
THL Zinc Namibia Holdings (Proprietary] Limited
Skorpion Zinc (Proprietary) Limited
Skorpion Mining Company (Proprietary] Limited
Namzinc (Proprietary) Limited
Arnica Guesthouse (Proprietary) Limited
Rosh Pinah Health Care (Proprietary] Limited
Black Mountain Mining (Proprietary) Limited (Previous Year: Fellow
Subsidiary)
Vedanta Lisheen Holdings Limited (earlier Vedanta Lisheen Finance
Limited]
Vedanta Lisheen Mining Limited
Killoran Lisheen Mining Limited
Killoran Lisheen Finance Limited
Lisheen Milling Limited
Vedanta Exploration Ireland Limited (Date of Incorporation - May 16,
2013]
Sterlite Ports Limited
Maritime Ventures Private Limited
Sterlite Infraventures Limited
Pecvest 17 Proprietary Limited
Vizag General Cargo Berth Private Limited (Previous Year: Fellow
Subsidiary]
Paradip Multi Cargo Berth Private Limited
Lakomasko B.V.
Cairn India Limited
Cairn India Holdings Limited
Cairn Energy Holdings Limited
Cairn Energy Hydrocarbons Ltd
Cairn Exploration (No. 7) Limited
Cairn Exploration (No. 6) Limited
Cairn Exploration (No. 2) Limited
Cairn Energy Gujarat Block 1 Limited
Cairn Energy Discovery Limited
Cairn Energy Cambay B.V.
Cairn Energy India West B.V.
Cairn Energy Gujarat B.V.
Cairn Energy Netherlands Holdings B.V.
Cairn Energy Australia Pty Limited
Cairn Energy India Pty Limited
CEH Australia Limited
CIG Mauritius Holdings Private Limited
CIG Mauritius Private Limited
Cairn Lanka Private Limited
Cairn South Africa Proprietary Limited
Cairn Energy Investments Australia Pty Limited
Wessington Investments Pty Limited
Sydney Oil Company Pty Limited
Cairn Exploration (No.4) Limited
Cairn Petroleum India Limited
Cairn Energy India Holdings B.V.
Cairn Energy Group Holdings B.V.
Cairn Energy Gujarat Holding B.V
Cairn Energy India West Holdings B.V.
Cairn Energy Cambay Holding B.V.
CEH Australia Pty Limited
Cairn Energy Asia Pty Limited
E) Key Management Personne
Mr. Anil Agarwal
Mr. Navin Agarwal
Mr. Tarun Jain
Mr. M.S. Mehta (Upto March 31,2014)
Mr. P. K. Mukherjee (Upto March 31,2014)
Mr. Amit Pradhan (resigned w.e.f. August 18, 2013)
Mr. Thomas Albanese $
Mr. D. D.Jalan#
F) Relatives of Key Management Personnel
Mr. Dwarka Prasad Agarwal
G) Others
Vedanta Foundation
Sesa Community Development Foundation
Public & Political Awareness Trust
Rampia Coal Mines & Energy Private Limited (Jointly Controlled Entity)
Goa Maritime Private Limited (Jointly Controlled Entity)
* Ceases to be related party for the Company pursuant to the Scheme of
Amalgamation (Refer note no 31 ] (3 Subsidiary w.e.f. August 26, 2013
(Previous Year: Associate]
1 Dissolved during the year
$ Appointed as Chief Executive Officer w.e.f. April 1, 2014
# Appointed as Whole Time Director & Chief Financial Officer w.e.f.
April 1, 2014
54 ln Accordance with Clause 32 of Listing Agreement, Advance(s) in the
nature of Loan is/are as under : (As Certified by the Management]
(b) None of the loanee have made, per se, investment in the shares of
the company.
(c) (i) Investments made by Sterlite Infra Limited in THL Zinc Ventures
Limited- 1,00,001 Equity Shares and 70,00,000 Optionally Convertible
Redeemable Preference Shares and in THL Zinc Holding B.V. - 37,38,000
Equity Shares & 55,00,000 Optionally Convertible Redeemable Preference
Shares.
(ii) Investments made by Sterlite Ports Limited in Maritime Ventures
Private Limited - 10,000 equity shares.
d) The above loans and advances to subsidiary fall under the category
of loans and advances in the nature of loans where there is no
repayment schedule and are repayable on demand and are free from
interest except Loan to Sterlite Iron and Steel Company Limited which
is repayable on May 12, 2014 with an interest rate of 10%
e) As per the Company''s policy, loan to employees are not considered in
(a) above.
16. The company considers its investment in and loans to subsidiaries as
strategic and long term in nature and accordingly, in the view of the
management, any decline in the value of such long term investments in
subsidiaries is considered as temporary in nature and hence no
provision for dimunition in value is considered necessary.
17. The Board of Directors in its meeting held on April 29, 2014, has
approved the merger of Goa Energy Limited and Sterlite Infra Limited
with the Company. With effect from the appointed date of April 1, 2014,
both Goa Energy Limited and Sterlite Infra Limited are wholly owned
subsidiaries of the Company and accordingly no shares are proposed to
be issued under the merger. The merger is subject to the approval of
jurisdictional High Courts and other statutory authorities as may be
applicable.
18. Consequent to the effectiveness of the Scheme of Amalgamation and
Arrangement, and acquisition of VALs power business through slump sale
(Refer note no 31 and 32), the current year''s figures are not
comparable with the previous year''s figures. Previous year''s figures
have been regrouped/reclassified wherever necessary to conform with the
current year''s classification / disclosure.
Mar 31, 2013
1. corporate information
Sesa Goa Limited (''Sesa'' / ''the Company'') is a major producer
and exporter of iron ore in the private sector in India and has been in
operation for more than six decades. The Company is a majority owned
and controlled subsidiary of Vedanta Resources plc, the London listed
FTSE 100 diversified metals and mining major. Sesa has been involved in
iron ore exploration, mining, beneficiation and exports. Sesa has iron
ore mining operations in Goa and Karnataka. It has 100% stake in
Western Cluster Limited, a Liberia based company engaged in developing
the Western Cluster Iron Ore Deposits into a large integrated iron ore
project. Sesa is also into manufacturing pig iron and metallurgical
coke.
a. There has been no movement in the equity shares outstanding at the
beginning and at the end of the year.
b. Rights, preferences and restrictions attached to equity shares
The Company has only one class of shares referred to as equity shares
having a par value of Rs. 1 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 the shareholders in the ensuing Annual
General Meeting, except in case of interim dividend which is paid as
and when declared by the Board. Repayment of capital, if any, will be
in proportion to the number of equity shares held.
During the year ended March 31, 2010, the Company had issued 5,000
Foreign Currency Convertible Bonds (''FCCBs'') aggregating USD 500
million at a coupon rate of 5% (net to bondholder).
The bondholders have an option to convert these FCCBs into shares, at a
conversion price of Rs. 346.88 per share and at a fixed rate of
exchange on conversion of Rs. 48.00 per USD 1.00 at any time on or
after December 9, 2009. The conversion price is subject to adjustment
in certain circumstances. Unless previously converted, redeemed or
repurchased and cancelled, the FCCBs fall due for redemption on October
31, 2014 at par.
Upto March 31, 2013, 2,832 FCCB''s have been converted into 39,188,159
equity shares. No conversion has been made during the year.
2. The Shareholders at the Court convened meeting held on June 19,
2012, have approved a Scheme of Amalgamation and Arrangement amongst
Sterlite Industries (India) Limited, The Madras Aluminum Company
Limited, Sterlite Energy Limited, Vedanta Aluminium Limited, and Sesa
Goa Limited (''the Company'') and their respective shareholders and
creditors (the ''Scheme'') and also a Concurrent Scheme of
Amalgamation of Ekaterina Limited with the Company and their respective
shareholders and creditors (the ''Concurrent Scheme''). The Scheme
and the Concurrent Scheme are inter-conditional and the Concurrent
Scheme coming into effect is a condition precedent to the effectiveness
of the Scheme. Further, the name of the Company is proposed to be
changed from Sesa Goa Limited to Sesa Sterlite Limited pursuant to the
Scheme of Amalgamation and Arrangement.
The High Court of Bombay at Goa, based on the petitions filed by the
Company, has approved the Scheme vide its Order dated April 3, 2013.The
Scheme is also subject to approval of the Honourable High Court of
Madras wherein the hearings have been completed and the order is
awaited.
Pending the above Court approval and also pending Court approvals in
respect of other entities involved in the Scheme, no accounting impact
of the Scheme has been given in these financial statements.
3. During the year, the Company, through its wholly owned subsidiary,
Bloom Fountain Limited has acquired the remaining 49% stake in Western
Cluster Limited, Liberia (''WCL'') for a cash consideration of Rs.
183.68 crore. Post this acquisition, WCL has become a wholly owned
subsidiary. WCL will develop the Western Cluster Iron Ore Project in
Liberia which includes development of iron ore deposits, necessary
transportation and shipping infrastructure for export of iron ore.
4. a) The Honourable Supreme Court of India has given clearance for
resumption of mining operations for ''A'' and ''B'' category mines in
Karnataka subject to statutory clearances, vide its Order dated April
18, 2013. The Company''s Karnataka mines fall under the ''B'' category
of mines in Karnataka and is in process of securing the necessary
statutory clearance to resume mining shortly.
b) The Government Authorities have ordered suspension of mining
operations of all mining leases in the State of Goa, stoppage of mining
transport across the State of Goa and suspension of environmental
clearance in September, 2012. In October, 2012, the Supreme Court has
ordered suspension of all mining operations and transportation of iron
ore of the mines in the State. In view of the foregoing, operations at
the Company''s mines in Goa remain suspended. The Company has filed an
application before the Supreme Court seeking modification or vacation
of the aforesaid Order. Based on the favourable verdict of the Supreme
Court lifting the suspension of iron ore mining in the State of
Karnataka and the affidavit filed by the Government of Goa in the
matter of resumption of mining in Goa, the Company expects a favourable
outcome in the matter.
5. Exceptional items for the current year pertain to expenditure in
connection with the Company''s Voluntary Retirement Scheme and for the
previous year pertain to advisory fees, taxes thereon and other
expenses incurred for the strategic investment in Cairn India Limited.
6. The Company had acquired assets of Bellary Steel and Alloys Limited
in 2010-11 for a consideration of Rs. 220 crore, on an ''As is where
is'' basis.
The above acquisition has been challenged by JSW Limited in the Supreme
Court. The Court has directed both the parties to maintain status quo
till the matter is decided. In the meanwhile, freehold land at Rs.
121.12 crore continues to be included in fixed assets and balance Rs.
98.88 in capital work-in-progress.
7. CONTINGENT LIABILITIES:
i) Guarantees (excluding the liability for which provisions have been
made) amounting to Rs. 20.38 crore (Previous year Rs. 23.22 crore)
given by the bankers in favour of various parties.
ii) Letters of Credit opened by the banks in favour of suppliers
amounting to Rs. 86.87 crore (Previous year Rs. 138.19 crore).
iii) Bonds executed in favour of customs authorities in respect of
export of iron ore Rs. 2,807.75 crore (Previous year Rs. 2,474.82
crore).
iv) Claims by custom authorities (under dispute) relating to
differential export duty on export shipments Rs. 34.41 crore (Previous
year Rs. 34.41 crore). The said amount is also included under bonds
executed detailed in (iii) above.
v) Bills discounted under letters of credit with banks Rs. 16.13 crore
(Previous year Rs. 137.03 crore).
vi) There are disputed income tax demands lying at appellate
authorities for assessment years 2004-05 to 2011-12, aggregating Rs.
1,522.47 crore (Previous year Rs. 245.38 crore) including interest Rs.
322.36 crore (Previous year Rs. 62.36 crore) and penalty Rs. 200 crore
(Previous year Nil). The Company has received a favourable order in
respect of assessment year 2009-10 from the Income Tax Appellate
Tribunal (''ITAT'') allowing the claim of the company on all the
major matters and with direction to the Assessing Officer (AO) to
re-compute the taxable income.
Most of the pending assessment years have similar matters as covered in
the aforesaid order.
vii) Disputed forest development tax amounting to Rs. 195.36 crore
(Previous year Rs. 195.36 crore) levied by Government of Karnataka
challenged by writ petition filed in the High Court of Karnataka.
Hearing of writ petition before the High Court of Karnataka is pending.
A bank guarantee amounting to Rs. 45.00 crore (Previous year Rs. 45.00
crore) has been furnished against this demand. Also, an amount of Rs.
40.23 crore (Previous year Rs. 40.23 crore) has been deposited against
the aforesaid demand and same is included under Short term loans and
advances.
viii) Cess on transportation of Ore, coal and coke within Goa levied by
Government of Goa under the Goa Rural Development and Welfare Cess Act,
2000 (Goa Act 29 of 2000) amounting to Rs. 105.33 crore (Previous year
Rs. 98.35 crore) challenged by way of writ petition in the High Court
of Bombay, Panjim Bench.
ix) Guarantees issued to a bank in respect of facilities granted to a
subsidiary Rs. 27.19 crore (Previous year Rs. Nil).
x) Other claims against the Company not acknowledged as debts:
a) Dead rent on deemed mining leases for the period from 20.12.1962 to
23.5.1987 amounting to Rs. 0.10 crore (Previous year Rs. 0.10 crore)
and royalty for the period from 20.12.1961 to 30.9.1963 amounting to
Rs. 0.12 crore (Previous year Rs. 0.12 crore) sought to be levied by
the Government pursuant to the Goa, Daman & Diu Mining Concessions
(Abolition & Declaration as Mining Leases) Act 1987, challenged by
Special Leave Petition before Supreme Court of India.
b) Claims related to commercial and employment contracts Rs. 5.69 crore
(Previous year Rs. 4.26 crore).
c) Demand from Railway authorities towards stacking charges amounting
to Rs. 4.09 crore (Previous year Rs. 4.09 crore) appealed before
Kolkata High court and stay obtained. A bank guarantee amounting to Rs.
4.09 crore (Previous year Rs. 4.09 crore) has been furnished against
this demand.
d) Others Rs. 13.83 crore (Previous year Rs. 3.32 crore).
The above amounts are based on the demand notices or assessment orders
or notification by the relevant authorities, as the case may be, and
the Company is contesting these claims wih the respective authorities.
Outflows, if any, arising out of these claims would depend on the
outcome of the decisions of the appellate authorities and the Company''s
rights for future appeals before the judiciary.
8. COMMITMENTS:
a) Estimated amount of contracts remaining to be executed on capital
account Rs. 43.91 crore (Previous year Rs. 145.29 crore).
b) Letter of support issued to Bloom Fountain Limited, wholly owned
subsidiary, to provide financial support in order to allow it to meet
its liabilities as they fall due for a period of not less than one
year.
9. EMPLOYEE BENEFITS PLANS:
Defined benefit plans:
The Company offers its employees defined benefit plans in the form of
gratuity schemes. Gratuity Scheme covers all employees as statutorily
required under the Payment of Gratuity Act 1972. The Company has three
gratuity schemes for different categories of employees. The Company
contributes funds to Life Insurance Corporation of India and ICICI
Prudential Life Insurance Company Limited, which are irrevocable.
Commitments are actuarially determined at the year end. The actuarial
valuation is done using ''Projected Unit Credit'' method. Gains and
losses of changed actuarial assumptions are charged to the Statement of
Profit and Loss.
Defined contribution plans:
The Company offers its employees benefits under defined contribution
plans in the form of provident fund, family pension fund and annuity
fund. Provident fund, family pension fund and annuity fund cover
substantially all regular employees. Contributions are paid during the
year into separate funds under certain statutory / fiduciary type
arrangements. While both the employees and the Company pay
predetermined contributions into the provident fund and pension fund,
the contribution to annuity fund are made only by the Company. The
contributions are normally based on a certain proportion of the
employee''s salary prescribed in the respective scheme.
The Company''s provident fund is exempted under section 17 of the
Employees Provident Fund Act, 1952. Conditions for grant of exemption
stipulates that the employer shall make good deficiency, if any,
between the return guaranteed by the statute and actual earning of the
Fund.
Based on a Guidance Note from The Institute of Actuaries - Valuation of
Interest Guarantees on Exempt Provident Funds under AS 15 (Revised
2005) for actuarially ascertaining such interest liability, there is no
interest shortfall that is required to be met by the Company as at
March 31, 2013.
10. SEGMENT INFORMATION
As required by Accounting Standard No.17 on Segment Reporting
i) The Company is collectively organised into three main business
segments namely:
- Iron ore
- Metallurgical coke
- Pig iron
Segments have been identified and reported taking into account the
nature of the product and services, the organisation structure and
internal financial reporting system.
11. RELATED PARTY INFORMATION:
Related party information as required by AS 18 is given below:
A. Names of the related parties and their relationships:
i) Ultimate holding company and its intermediaries
Ultimate Holding company
Vedanta Resources plc
Intermediaries
Finsider International Company Limited
Twin Star Holdings Limited
Westglobe Limited
ii) Subsidiaries
Sesa Resources Limited
Sesa Mining Corporation Limited
Bloom Fountain Limited
Western Cluster Limited
Goa Energy Limited
iii) Associate (and an indirect subsidiary of the ultimate holding
company)
Cairn India Limited
iv) Jointly Controlled Entity:
Goa Maritime Private Limited
v) Fellow Subsidiaries:
(With whom transactions have taken place during the year)
Bharat Aluminium Company Limited
Hindustan Zinc Limited
Konkola Copper Mines
Sterlite Industries (India) Limited
Sterlite Iron and Steel Company Limited
Talwandi Sabo Private Limited
The Madras Aluminium Company Limited
Twin Star Mauritius Holdings Limited
Vedanta Aluminum Limited
Vizag General Cargo Berth Private Limited
vi) Details of Key Management Personnel
Mr. P.K. Mukherjee, Managing Director
Mr. A.K. Rai (Retired on July 31, 2011), Wholetime Director
Mr. A. Pradhan, Wholetime Director
vii) Enterprise in which significant influence is exercised by Key
Management Personnel
Sesa Community Development Foundation
12. In terms of the Mineral Concession Rules 1960 and Mineral
Conservation and Development Rules (MCDR) 1988, the Company has
provided a ''financial assurance'' in the form of a bank guarantee to
the Regional Controller of Mines, towards its mine closure obligation.
The Company has made a provision for expense to the extent of the bank
guarantees provided.
13. The Company offers equity-based award plans to its employees,
officers and directors through its ultimate holding company, Vedanta
Resources Plc., the Vedanta Resources Long- Term Incentive Plan (the
''LTIP'').
The LTIP is the primary arrangement under which share-based incentives
are provided to the defined management group. The maximum value of
shares that can be awarded to members of the defined management group
is calculated by reference to the balance of basic salary and
share-based remuneration consistent with local market practice. The
performance condition attaching to outstanding awards under the LTIP is
that of Vedanta''s performance, measured in terms of Total Shareholder
Return (''TSR'') compared over a three year period with the
performance of the companies as defined in the scheme from the date of
grant.
Under this scheme, initial awards under the LTIP were granted in
February 2004 and subsequently further awards were granted in the
respective years. The awards are indexed to and settled by Vedanta
shares. The awards provide for a fixed exercise price denominated in
Vedanta''s functional currency at 10 US cents per share, the performance
period of each award is three years and the same is exercisable within
a period of six months from the date of vesting beyond which the option
lapse. Under the scheme, Vedanta is obligated to issue the shares.
During the year, Vedanta has granted a new LTIP tranche that shall vest
based on the achievement of business performance in the performance
period. The vesting schedule is staggered over a period of three years.
Further, in accordance with the terms of agreement between Vedanta and
the Company, on the grant date, fair value of the awards is recovered
by Vedanta from the Company.
Amount recovered by Vedanta and recognised by the Company in the
Statement of Profit and Loss for the financial year ended March 31,
2013 is Rs. 11.87 crore (Previous year Rs. 10.61 crore).
The Company considers these amounts as not material and accordingly has
not provided further disclosures.
14. Previous year''s figures have been regrouped / reclassified, to
correspond with the current year''s classification/ disclosure.
Mar 31, 2012
1 CORPORATE INFORMATION
Sesa Goa Limited ("Sesa" / "the Company") is India's largest
producer and exporter of iron ore in the private sector.
The Company is a majority owned and controlled subsidiary of Vedanta
Resources plc, the London listed FTSE 100 diversified metals and mining
major. For more than five decades, Sesa has been involved in iron ore
exploration, mining, beneficiation and exports. Sesa has iron ore
mining operations in Goa and Karnataka. It has recently acquired 51%
stake in Western Cluster Limited, a Liberia based company engaged in
developing the Western Cluster Iron Ore Deposits into a large
integrated iron ore project. Sesa is also into manufacturing pig iron
and metallurgical coke.
2. SHARE Capital (CoNTD.)
b. Terms/rights attached to equity shares
The Company has only one class of equity shares having a par value of Rs
1. The equity shares have rights, preferences and restrictions which
are in accordance with the provisions of law, in particular the
Companies Act,1956.
All the above entities are subsidiaries of Vedanta Resources Plc.
Accordingly, Vedanta Resources Plc. is the ultimate holding company.
During the year ended March 31, 2010, the Company had issued 5,000
Foreign Currency Convertible Bonds ("FCCBs'') aggregating US$ 500
million at a coupon rate of 5% (net to bondholder).
The bondholders have an option to convert these FCCBs into shares, at a
conversion price of Rs 346.88 per share and at a fixed rate of exchange
on conversion of Rs 48.00 per U.S. $ 1.00 at any time on or after
December 9, 2009.
The conversion price is subject to adjustment in certain circumstances.
The FCCBs may be redeemed in whole, but not in part, on or after
October 30, 2012, subject to certain conditions. Unless previously
converted, redeemed or repurchased and cancelled, the FCCBs fall due
for redemption on October 31, 2014 at par.
Upto March 31, 2012, 2,832 FCCB's have been converted into 39,188,159
equity shares.
A part of the FCCB proceeds aggregating Rs 1,040.86 crores (March 31,
2011 Rs 775.28 crores) has been utilised for the Company's capital
projects.
3. During the year, the Company has made the following business
acquisitions /strategic investments -
a) along with its subsidiary Sesa Resources Limited, an equity stake
aggregating 20% for Rs 13,074.84 crores in the equity share capital of
Cairn India Ltd ("CIL").
b) through its wholly owned subsidiary, Bloom Fountain Limited, a 51%
stake in Western Cluster Limited, Liberia ("WCL'') for a cash
consideration of Rs 411.20 crores. WCL will develop the western cluster
Iron Ore Project in Liberia which includes development of iron ore
deposits, necessary transportation and shipping infrastructure for
export of iron ore; and
c) acquisition on March 2, 2012 of a 100% stake in the equity share
capital of Goa Energy Private Limited ("GEPL'') for an enterprise value
of Rs 104.18 crores on cash-free, debt-free basis including working
capital of Rs 5.93 crores. GEPL owns a 30 MW power plant in Goa which
utilises the waste heat gases from Sesa's coke making and pig iron
facilities."
4. The Board of Directors at their meeting held on February 25, 2012,
has approved a Scheme of Amalgamation and Arrangement amongst Sterlite
Industries (India) Limited, The Madras Aluminium Company Limited,
Sterlite Energy Limited, Vedanta Aluminium Limited, and Sesa Goa
Limited ("the Company") and their respective shareholders and
creditors (the "Scheme") and also a Concurrent Scheme of Amalgamation
of Ekaterina Limited with the Company and their respective shareholders
and creditors (the "Concurrent Scheme"). The Scheme and the
Concurrent Scheme are inter-conditional and the Concurrent Scheme
coming into effect is a condition precedent to the effectiveness of the
Scheme. Further, the name of the Company is proposed to be changed from
Sesa Goa Limited to Sesa Sterlite Limited. The schemes are subject to
regulatory approvals.
5. Exceptional items pertains to advisory fees, taxes thereon and
other expenses incurred for the strategic investment in Cairn India
Limited.
6. During the previous year the Company had acquired assets of
Bellary Steel and Alloys Limited for a consideration of Rs 220 crores,
on an "As is where is" basis.
The above acquisition has been challenged by JSW Limited in the Supreme
Court. The Court has directed both the parties to maintain status quo
till the matter is decided. In the meanwhile, freehold land at Rs 121.12
crores continues to be included in fixed assets and balance Rs 98.88 in
capital work-in-progress.
7. During the year ended March 31, 2010, the Company had issued
33,274,000 equity shares of Rs 1 each at a premium of Rs 160.46 per share
for cash to Twin Star Holdings Limited on a preferential basis under
the applicable provisions of The Securities and Exchange Board of India
(Disclosure and Investor Protection) Guidelines 2000 (the
"Guidelines"). Entire proceeds aggregating Rs 537.24 crores (Previous
year to the extent of Rs 101.47 crores) has been utilized for the
Company's capital projects.
8. CONTINGENT LIABILITIES:
i) Guarantees (excluding the liability for which provisions have been
made) amounting to Rs 23.22 crores (Previous year Rs 7.83 crores) given
by the bankers in favour of various parties.
ii) Letters of Credit opened by the banks in favour of suppliers
amounting to Rs 138.19 crores (Previous year Rs 363.13 crores).
iii) Bonds executed in favour of customs authorities in respect of
export of iron ore Rs 2,474.82 crores (Previous year Rs 1,627.71 crores).
iv) Claims by custom authorities (under dispute) relating to
differential export duty on export shipments Rs 34.41 crores (Previous
year Rs 49.13 crores). The said amount is also included under bonds
executed detailed in (iii) above.
v) Bills discounted under letters of credit with banks Rs 137.03 crores
(Previous year Rs 353.90 crores).
vi) Disputed income tax demands of Rs 245.38 crores (Previous year Rs
19.51 crores) including interest and penalty of Rs 62.36 crores
(Previous year Rs 1.71 crores), where the Company is in appeal before
Appellate Authority
vii) Disputed forest development tax amounting to Rs 195.36 crores
(Previous year Rs 173.96 crores) levied by Government of Karnataka
challenged by writ petition filed in the High Court of Karnataka.
Hearing of writ petition before the High Court of Karnataka is pending.
A bank guarantee amounting to Rs 45.00 crores (Previous year Rs 35.00
crores) has been furnished against this demand. Also, an amount of
Rs40.23 crores (Previous year Rs 32.97 crores) has been deposited against
the aforesaid demand and same is included under Short term loans and
advances.
viii) Cess on transportation of Ore, coal and coke within Goa levied by
Government of Goa under the Goa Rural Development and Welfare Cess Act,
2000 (Goa Act 29 of 2000) amounting to Rs 98.35 crores (Previous year Rs
73.16 crores) challenged by way of writ petition in the High Court of
Bombay, Panjim Bench.
ix) Other claims against the Company not acknowledged as debts:
a) Dead rent on deemed mining leases for the period from 20.12.1962 to
23.5.1987 amounting to Rs 0.10 crores (Previous year Rs 0.10 crores) and
royalty for the period from 20.12.1961 to 30.9.1963 amounting to Rs 0.12
crores (Previous year Rs 0.12 crores) sought to be levied by the
Government pursuant to the Goa, Daman & Diu Mining Concessions
(Abolition & Declaration as Mining Leases) Act 1987, challenged by
Special Leave Petition before Supreme Court of India.
b) Claims related to commercial and employment contracts Rs 4.26 crores
(Previous year Rs 7.40 crores).
c) Demand from Railway authorities towards stacking charges amounting
to Rs 4.09 crores (Previous year Rs 4.09 crores) appealed before Kolkata
High court and stay obtained. A bank guarantee amounting to Rs 4.09
crores (Previous year Rs 4.09 crores) has been furnished against this
demand.
d) Others Rs 3.32 crores (Previous year Rs 3.32 crores).
The above amounts are based on the demand notices or assessment orders
or notification by the relevant authorities, as the case may be, and
the Company is contesting these claims wih the respective authorities.
Outflows, if any, arising out of these claims would depend on the
outcome of the decisions of the appellate authorities and the Company's
rights for future appeals before the judiciary.
9. Commitments:
a) Estimated amount of contracts remaining to be executed on capital
account Rs 145.29 crores (Previous year Rs 319.16 crores).
b) Letter of support issued to Bloom Fountain Limited, wholly owned
subsidiary, to provide financial support in order to allow it to meet
its liabilities as they fall due for a period of not less than one
year.
10. EMPLoYEE Benefits PLANS:
Defined benefit plans:
The Company offers its employees defined benefit plans in the form of
gratuity schemes. Gratuity Scheme covers all employees as statutorily
required under Payment of Gratuity Act 1972. The Company has three
gratuity schemes for different categories of employees. The Company
contributes funds to Life Insurance Corporation of India and ICICI
Prudential Life Insurance Company Limited, which are irrevocable.
Commitments are actuarially determined at the year end. The actuarial
valuation is done based on the "Projected Unit Credit" method. Gains
and losses of changed actuarial assumptions are charged to the
Statement of Profit and Loss.
The Plan assets of the Company are managed by the Life Insurance
Corporation of India and ICICI Prudential Life Insurance Company
Limited and the composition of the Investment relating to these assets
is not available with the Company.
The estimates of future salary increases considered in the actuarial
valuation, take account of inflation, seniority, promotion and other
relevant factors on a long term basis.
Defined contribution plans:
The Company offers its employees benefits under defined contribution
plans in the form of provident fund, family pension fund and annuity
fund. Provident fund, family pension fund and annuity fund cover
substantially all regular employees. Contributions are paid during the
year into separate funds under certain statutory / fiduciary type
arrangements. While both the employees and the Company pay
predetermined contributions into the provident fund and pension fund,
the contribution to annuity fund are made only by the Company. The
contributions are normally based on a certain proportion of the
employee's salary prescribed in the respective scheme.
The Company's provident fund is exempted under section 17 of the
Employees Provident Fund Act, 1952. Conditions for grant of exemption
stipulates that the employer shall make good deficiency, if any,
between the return guaranteed by the statute and actual earning of the
Fund.
Based on a Guidance Note from The Institute of Actuaries - Valuation of
Interest Guarantees on Exempt Provident Funds under AS 15 (Revised
2005) for actuarially ascertaining such interest liability, there is no
interest shortfall that is required to be met by the Company as at
March 31, 2011 and March 31, 2012.
11. segment information
As required by Accounting Standard No.17 on Segment Reporting
i) The Company is collectively organised into three main business
segments namely:
- Iron ore
- Metallurgical coke
- Pig iron
Segments have been identified and reported taking into account the
nature of the product and services, the organisation structure and
internal financial reporting system.
12. RELATED PARTY INFORMATIoN:
Related party information as required by AS 18 is given below: A. Names
of the related parties and their relationships:
i) Ultimate holding company and its intermediaries Ultimate Holding
company Vedanta Resources Plc Intermediaries
Finsider International Company Limited Twin Star Holdings Limited
Westglobe Limited
ii) Subsidiaries
Sesa Resources Limited Sesa Mining Corporation Limited Bloom Fountain
Limited Western Cluster Limited
Goa Energy Private Limited (from March 2, 2012)
iii) Associate (and an indirect subsidiary of the ultimate holding
company)
Cairn India Limited
iv) Jointly Controlled Entity:
Goa Maritime Private Limited
v) Fellow Subsidiaries:
(With whom transactions have taken place during the year)
Bharat Aluminum Company Limited
Hindustan Zinc Limited
Konkola Copper Mines
Sterlite Industries (India) Limited
Sterlite Iron and Steel Company Limited
Sterlite Technologies Limited
Talwandi Sabo Private Limited
The Madras Aluminum Company Limited
Twin Star Mauritius Holdings Limited
Vedanta Aluminum Limited
Vizag General Berth Cargo Private Limited
vi) Details of Key Management Personnel
Mr. P.K. Mukherjee, Managing Director
Mr. A.K. Rai (Retired on July 31, 2011), Wholetime Director
Mr. A. Pradhan, Wholetime Director
vii) Enterprise in which significant influence is exercised by Key
Management Personnel
Sesa Community Development Foundation
13. In terms of the Mineral Concession Rules 1960 and Mineral
Conservation and Development Rules (MCDR) 1988, the Company has
provided a "financial assurance" in the form of a bank guarantee to
the Regional Controller of Mines, towards its mine closure obligation.
The Company has made a provision for expense to the extent of the bank
guarantees provided.
Footnote: Fx = Foreign currency; USD = US Dollar; JPY= Japanese Yen;
GBP= Great Britain Pound; CNY= Chinese Yuan; SGD= Singapore Dollar;
14. The Company offers equity-based award plans to its employees,
officers and directors through its ultimate holding company, Vedanta
Resources Plc.,the Vedanta Resources Long-Term Incentive Plan (the
"LTIP").
The LTIP is the primary arrangement under which share-based incentives
are provided to the defined management group. The maximum value of
shares that can be awarded to members of the defined management group
is calculated by reference to the balance of basic salary and
share-based remuneration consistent with local market practice. The
performance condition attaching to outstanding awards under the LTIP is
that of Vedanta's performance, measured in terms of Total Shareholder
Return ("TSR") compared over a three year period with the performance
of the companies as defined in the scheme from the date of grant.
Under this scheme, initial awards under the LTIP were granted in
February 2004 and subsequently further awards were granted in the
respective years. The awards are indexed to and settled by Vedanta
shares. The awards provide for a fixed exercise price denominated in
Vedanta's functional currency at 10 US cents per share, the performance
period of each award is three years and the same is exercisable within
a period of six months from the date of vesting beyond which the option
lapse. Under the scheme, Vedanta is obligated to issue the shares.
Further, in accordance with the terms of agreement between Vedanta and
the Company, on the grant date, fair value of the awards is recovered
by Vedanta from the Company.
Amount recovered by Vedanta and recognised by the Company in the
Statement of Profit and Loss for the financial year ended March 31,
2012 is Rs 10.61 crores (Previous year Rs 5.86 crores) . The Company
considers these amounts as not material and accordingly has not
provided further disclosures.
15. The Revised Schedule VI has become effective from April 1, 2011
for the preparation of financial statements. This has significantly
impacted the disclosure and presentation made in the financial
statements. Previous year's figures have accordingly been regrouped /
reclassified, to correspond with the current year's classification /
disclosure.
Mar 31, 2011
1. Amalgamation of Sesa Industries Limited with the Company:
a) The Honourable Supreme Court of India, by an Order dated 7th
February, 2011, approved the Scheme of Amalgamation (the ÃSchemeÃ) of
Sesa Industries Limited (engaged in the manufacture and sale of Pig
Iron and hereinafter referred to as SIL) (erstwhile subsidiary of Sesa
Goa Limited) with the Company effective from the appointed date i.e.
1st April, 2005, by setting aside the Order dated 21st February, 2009,
passed by the Division Bench of the High Court of Bombay at Goa not
sanctioning the Scheme passed by the Single Bench of the Honourable
High Court of Bombay, at Goa vide its Order dated 18th December, 2008.
The Scheme has accordingly been given effect to in these financial
statements. The effective date of amalgamation is 14th February, 2011.
b) In accordance with the Scheme approved by the Court:
i) SIL stands dissolved without winding up with effect from 1st April,
2005.
ii) All assets, debts and liabilities of SIL have been deemed
transferred to and vested in the Company with effect from 1st April,
2005.
iii) 9,398,864 equity shares of Rs.1 each have been issued in the ratio
of 20 fully paid equity shares of Rs.1 each (after adjustment for stock
split and bonus shares) in the Company for 5 fully paid equity shares
of Rs.10 each held by the shareholders of SIL except that 17,650,284
equity shares held by the Company in SIL stand cancelled.
iv) Dividend on the aforesaid 9,398,864 equity shares of Rs.1 each
amounting to Rs.12.88 crore has been paid to the shareholders of
erstwhile SIL for the financial years from 31st March, 2006 to 31st
March, 2010 at the rates declared in the relevant years. The aforesaid
amount of Rs.12.88 crore includes dividend tax of Rs. 1.83 crore.
c) The amalgamation has been accounted using the ÃPooling of InterestsÃ
method whereby:
i) The assets, liabilities and reserves (excluding share premium) of
SIL have been recorded at their book values. The excess of net assets
over the face value of shares allotted after eliminating the carrying
value of the investment held in erstwhile SIL has been credited to
Amalgamation Reserve. Accordingly, the balance of share premium in
erstwhile SIL also stands eliminated.
ii) The balance in the Profit and Loss account of SIL as of 1st April,
2005 Rs. 6.60 crore and the incremental balance of Rs. 276.88 crore
until 31st March, 2010 being the profits for the period from 1st April,
2005 to 31st March, 2010 has been included in the balance in Profit and
Loss Account.
d) In view of the above amalgamation, the figures for the current year
are not comparable with those of the previous year.
3. The Company has proposed to acquire upto 20% of the equity share
capital of Cairn India Ltd (ÃCILÃ), subject to requisite approvals. For
the said acquisition, the Company is acting as a Person in Concert with
its ultimate holding company Vedanta Resources Plc ( ÃVedantaÃ), and/or
any of VedantaÃs subsidiaries for acquiring majority of equity shares
of CIL. The Company has received clearance from Securities and Exchange
Board of India (ÃSEBIÃ) to proceed with an open offer of up to 20% of
the shares of CIL. The Company has launched the Open Offer from 11th
April, 2011 at a price of Rs. 355 per share of CIL which will close on
30th April, 2011.
In April 2011, the Company acquired 200 million shares amounting to
10.4% stake in CIL from Petronas International Corporation Ltd.
(ÃPetronasÃ) at a price of Rs. 331 per share. The acquisition is in
addition to the Open Offer launched by the Company on 11th April, 2011.
4. The Company has acquired assets of the upcoming Steel Plant Unit of
Bellary Steel and Alloys Ltd. (ÃBSALÃ) for an all cash consideration of
Rs. 220.00 crore. BSAL was in the process of putting up a 0.5 mtpa
Steel Plant Project at Bellary. The properties of the under
construction plant acquired are freehold land of ~700 acres, building
and structures, plant and machinery and other assets of the Steel
Plant. The Assets have been transferred on an ÃAs is where isà basis to
the Company as of 22nd March, 2011.
The above acquisition has been challenged by JSW Ltd. in the Supreme
Court. The court has asked both the parties to maintain status quo till
the matter is decided.
5. During the previous year 2009-10, the Company had issued 33,274,000
equity shares of Rs. 1 each at a premium of Rs. 160.46 per share for
cash to Twin Star Holdings Limited on a preferential basis under the
applicable provisions of The Securities and Exchange Board of India
(Disclosure and Investor Protection) Guidelines 2000 (the
ÃGuidelinesÃ). A part of the proceeds aggregating Rs. 101.47 crore
(Previous year Rs. 101.47 crore) has been utilised for the CompanyÃs
capital projects. The unutilised portion of the issue proceeds
amounting to Rs. 435.77 crore (Previous year Rs. 435.77 crore) has been
invested in Mutual Funds.
6. During the previous year 2009-10 the Company issued 5000 Foreign
Currency Convertible Bonds (ÃFCCBsÃ) aggregating US$ 500 million at a
coupon rate of 5% (net to bondholder). The bondholders have an option
to convert these FCCBs into shares, at a conversion price of Rs. 346.88
per share at a fixed rate of exchange on conversion of Rs. 48.00 per
US$ 1.00 at any time on or after 9th December, 2009. The conversion
price is subject to adjustment in certain circumstances. The FCCBs may
be redeemed in whole, but not in part, on or after 30th October, 2012,
subject to certain conditions. Unless previously converted, redeemed or
repurchased and cancelled, the FCCBs fall due for redemption on 31st
October, 2014 at par. As at 31st March, 2011, 2,832 FCCBÃs have been
converted into 39,188,159 equity shares.
A part of the proceeds aggregating Rs. 775.28 crore (Previous year Rs.
21.70 crore) has been utilised for the CompanyÃs capital projects, the
construction of which is in progress. The unutilised portion of the
FCCB proceeds aggregating Rs. 1,607.22 crore (Previous year Rs.
2,360.80 crore) have been placed in term deposits/ mutual funds/
current accounts with a scheduled bank, pending utilisation. Interest
aggregating Rs. 4.72 crore (Previous year Rs. 0.17 crore) in respect of
amounts utilised for the construction of capital projects has been
capitalised and included as part of Capital Work in Progress. The
balance interest amounting to Rs. 2786 crore (Previous year Rs. 45.36
crore) has been charged to the Profit and Loss Account.
7. Contingent Liabilities:
i) Guarantees (excluding the liability for which provisions have been
made) amounting to Rs. 783 crore (Previous year Rs. 9.04 crore) given
by the Bankers in favour of various parties - none invoked.
ii) Letters of Credit opened by the banks in favour of suppliers
amounting to Rs. 363.13 crore (Previous year Rs. 174.52 crore).
iii) Bonds executed in favour of customs authorities in respect of
export of iron ore Rs. 1,627.71 crore (Previous year Rs. 1,003.23
crore).
iv) Claims by custom authorities (under dispute) relating to
differential export duty on export shipments Rs. 49.13 crore (Previous
year Rs. 49.13 crore). The said amount is also included under bonds
executed detailed in point 7 (iii) above.
v) Bills discounted under letters of credit with banks Rs. 353.90
crore. (Previous year Rs. 471.08 crore).
vi) Provisions have also not been made in the accounts in respect of
the following liabilities not acknowledged as debts for the reasons
stated against them:
a) Dead rent on deemed mining leases for the period from 20.12.1962 to
23.5.1987 amounting to Rs. 0.10 crore (Previous year Rs. 0.10 crore)
and royalty for the period from 20.12.1961 to 30.9.1963 amounting to
Rs. 0.12 crore (Previous year Rs.0.12 crore) sought to be levied by the
Government pursuant to the Goa, Daman & Diu Mining Concessions
(Abolition & Declaration as Mining Leases) Act, 1987, challenged by
Special Leave Petition before Supreme Court of India.
b) Claims related to commercial and employment contracts Rs. 740 crore
(Previous year Rs. 706 crore).
c) A civil suit claiming a damage of a minimum amount of Rs. 3750 crore
(Previous year Rs. 3750 crore) towards infringement of patent has been
filed against the Company.
d) Disputed sales tax demand of Rs. 0.45 crore (Previous year Rs. 0.45
crore) including interest and penalty of Rs. 0.09 crore (Previous year
Rs. 0.09 crore) appealed before Appellate Authority.
e) Disputed income tax demand of Rs. 19.51 crore (Previous year Rs.
9.24 crore) including interest and penalty of Rs. 1.71 crore (Previous
year Rs. 0.56 crore), appealed before Appellate Authority.
f) Disputed demand from customs authorities towards fine and penalty of
Rs. 0.35 crore (Previous year Rs. 0.35 crore) for improper
documentation of equipment loaded/unloaded to/from the companyÃs vessel
M.V. Orissa and its improper use.
g) Disputed demand from customs authorities of Rs. 1.60 crore including
penalty of Rs. 0.80 crore, for transferring imported metallurgical coke
at concessional rate of duty under the provisions of Customs (Import of
Goods at Concessional rate of Duty for manufacture of Excisable Goods)
Rules 1996 to the erstwhile M/s. Sesa Kembla Coke Company Limited,
appealed before the Appellate Authority.
h) Disputed forest development tax amounting to Rs. 173.96 crore
(Previous year Rs. 164.12 crore) levied by Government of Karnataka
challenged by writ petition filed in the High Court of Karnataka.
Hearing of writ petition before the High Court of Karnataka is pending.
A bank guarantee amounting to Rs. 35.00 crore (Previous year Rs. 74.00
crore) has been furnished against this demand. Also an amount of Rs.
32.97 crore (Previous year Rs. 5.00 crore) has been deposited against
aforesaid demand and same is included under Loans and Advances
i) A Notice issued by the Deputy Conservator of Forest, Chitradurga,
demanding registration of a supplemental forest lease agreement by
payment of stamp duty calculated on the net present value which has
been challenged in the High Court of Karnataka. Estimated liability is
Rs. 0.92 crore (Previous year Rs.0.92 crore). A bank guarantee
amounting to Rs. 0.45 crore (Previous year Rs. 0.45 crore) has been
furnished against this demand.
j) Cess on transportation of Ore, coal and coke within Goa levied by
Government of Goa under the Goa Rural Development and Welfare Cess Act,
2000 (Goa Act, 29 of 2000) amounting to Rs. 73.16 crore (Previous year
Rs. 49.31 crore) challenged by way of writ petition in the High Court
of Bombay, Panjim Bench.
k) A demand from Railway authorities towards stacking charges amounting
to Rs. 4.09 crore appealed before Kolkata High Court and stay obtained.
A bank guarantee amounting to Rs. 4.09 crore has been furnished against
this demand.
The Company does not expect devolvement of any liability in respect of
the above.
8. Estimated amount of contracts (net of advances) remaining to be
executed on capital account Rs. 319.16 crore (Previous year Rs. 402.21
crore).
The above information has been compiled in respect of parties to the
extent to which they could be identified as micro or small enterprises
on the basis of intimation received from the Ãsuppliersà regarding
their status under the Micro Small and Medium Enterprises Development
Act, 2006.
14. Research and development expenditure of Rs. 0.29 crore (Previous
year Rs. 0.29 crore) has been charged to Profit and Loss Account under
specific heads of accounts, while Rs. Nil (Previous year Rs. Nil) has
been incurred as capital cost for research and development.
15. Employee benefits obligations:
Defined benefit plans:
The Company offers its employees defined benefit plans in the form of
gratuity schemes. Gratuity Scheme covers all employees as statutorily
required under Payment of Gratuity Act, 1972. The Company has three
gratuity schemes for different categories of employees. The Company
contributes funds to Life Insurance Corporation of India and ICICI
Prudential Life Insurance Company Limited, which are irrevocable.
Commitments are actuarially determined at the year end. The actuarial
valuation is done based on the ÃProjected Unit Credità method. Gains
and losses of changed actuarial assumptions are charged to the Profit
and Loss Account under the head ÃPersonnelÃ.
The contributions expected to be made by the Company during the
financial year 2011-12 are Rs. 5.19 crore.
The above information is actuarially determined.
Defined Contribution Plans:
The Company offers its employees benefits under defined contribution
plans in the form of provident fund, family pension fund and annuity
fund. Provident fund, family pension fund and annuity fund cover
substantially all regular employees. Contributions are paid during the
year into separate funds under certain statutory / fiduciary type
arrangements. While both the employees and the Company pay
predetermined contributions into the provident fund and pension fund,
the contribution to annuity fund are made only by the Company. The
contributions are normally based on a certain proportion of the
employeeÃs salary.
Footnotes:
1. Net of processing and handling loss on ore handled and
processed/reprocessed during the year.
2. The closing stock of ore excludes 0.053 million metric ton
(Previous year 0.081 million metric ton) received on loan basis.
3. Figures in brackets relate to previous year.
4. Quantities are in dry metric tons (DMT).
5. Hitherto, the quantities were stated in wet metric tons (WMT);
accordingly the quantities in respect of previous year have been
restated in DMT to conform to current yearÃs measurement.
Footnotes:
1. Excludes 0.312 million metric ton of Iron Ore used for captive
consumption.
2. Figures in brackets relate to previous year.
3. Quantities are in dry metric tons (DMT).
4. Hitherto, the quantities were stated in wet metric tons (WMT);
accordingly the quantities in respect of previous year have been
restated in DMT to conform to current years measurement.
iii) Services rendered to third parties towards repair of barges and
machinery etc. amount to Rs. 13.04 crore (Previous year Rs. 23.76
crore)
19. Segment Information As required by Accounting Standard No. 17 on
Segment Reporting
i) The Company is collectively organised into three main business
segments namely:
- Iron Ore
- Metallurgical coke
- Pig iron
Segments have been identified and reported taking into account the
nature of the product and services, the organisation structure and
internal financial reporting system.
21. Foreign Currency Exposures:
The year end foreign currency exposures that were not hedged by a
derivative instrument or otherwise are given below.
26. Related party information:
Related party information as required by AS 18 is given below:
A. Names of the related parties and their relationships:
i) Holding Companies:
- Finsider International Company Limited Holding Company
- Richter Holding Limited Holding Companies of
Finsider International
Company Limited
- Westglobe Limited
- Vedanta Resources Plc Ultimate Holding Company
ii) Subsidiaries of the Company:
- Sesa Industries Limited (amalgamated during the year, Refer Note No.
2)
- Sesa Resources Limited (formerly V. S. Dempo & Co. Limited)
- Sesa Mining Corporation Limited (formerly Dempo Mining Corporation
Limited)
iii) Fellow Subsidiaries:
With whom transactions have taken place during the year
- Bharat Aluminium Company Limited
- Hindustan Zinc Limited
- Konkola Copper Mines
- The Madras Aluminium Company Limited
- Sterlite Industries (India) Limited
- Sterlite Iron and Steel Company Limited
- Sterlite Technologies Limited
- Twin Star Holdings Limited
- Vedanta Aluminium Limited
- Vizag General Berth Cargo Private Limited
iv) Jointly Controlled Entity:
- Goa Maritime Private Limited
v) Details of Key Management Personnel
Executive directors
- Mr. P. K. Mukherjee
- Mr. A. K. Rai
- Mr. A. Pradhan
- Mr. H. P. U. K. Nair (Retired on 01.10.2009)
- Mr. M. D. Phal (Retired on 30.04.2009)
vi) Enterprise in which significant influence is exercised by Key
Management Personnel
- Sesa Community Development Foundation
* Inter-corporate deposits have been placed at an interest rate of 8%
from April 2010 to September 2010, 9% from October 2010 to December
2010 and 11% p.a. from January 2011 to March 2011 and are secured
against a corporate guarantee from Vedanta Resources Plc., the ultimate
holding company. As no cash and cash equivalents were involved in the
roll-over of this Inter-corporate deposit, the same has been excluded
from the Cash Flow Statement.
** Inter-corporate deposits have been placed at an interest rate of 8%.
27. The ultimate holding company viz, Vedanta Resources Plc,
(ÃVedantaÃ) offers equity-based award plans to its employees, officers
and directors based on the performance conditions as set out in the
scheme, duly approved by the board of directors and by the shareholders
of Vedanta on 24th December, 2003 and 20th January, 2004 respectively.
The performance condition attached to outstanding awards under the Long
Term Incentive Plan (LTIP) is that of VedantaÃs performance, measured
in terms of Total Shareholder Return (ÃTSRÃ) compared over a three year
period or such period as the Board of Vedanta may determine with the
performance of the companies as defined in the scheme from the date of
grant. Under this scheme, initial awards under the LTIP were granted in
February 2004 with further awards being made in June 2004, November
2004, February 2006, November 2007, February 2009, August 2009 and
January 2010.
The fair values were calculated using a Monte Carlo model with suitable
modifications to allow for the specific performance conditions of the
LTIP. The inputs to the model include the share price at date of grant,
exercise price, expected volatility, expected dividends and the risk
free rate of interest. A progressive dividend growth policy is assumed
in all fair value calculations. Expected volatility has been calculated
using historical share prices over the period to date of grant that is
commensurate with the performance period of the option. The share
prices of the mining companies in the Adapted Comparator Group have
been modelled based on historical price movements over the period to
date of grant which is also commensurate with the performance period
for the option. The history of share prices is used to determine the
volatility and correlation of share prices for the companies in the
Adapted Comparator Group and is needed for the Monte Carlo simulation
of their future TSR performance relative to the CompanyÃs TSR
performance. All options are assumed to be exercised six weeks after
vesting.
The awards are indexed to and settled in Vedanta shares. The awards
provide for a fixed exercise price denominated in VedantaÃs functional
currency at 10 US cents per share. Vedanta is obligated to issue the
shares. On the grant date, fair value of the awards is recovered by
Vedanta from the Company to the extent the awardees have been deployed
at the Company.
Accordingly, Vedanta, on the basis of fair value of options granted to
such employees charged a proportionate cost to the Company in the
amount of Rs. 5.86 crore (Previous year Rs. 5.34 crore) which is
charged to the Profit and Loss Account under the head ÃSalaries, Wages,
bonus and allowancesà in Schedule 16 to the financial statements.
Vedanta has obtained an overall valuation of the options granted by it
to the awardees. Information related to options granted to the eligible
resources deployed at the Company is not readily available and
accordingly the movements in options have not been disclosed.
28. ÃOther current assetsà comprise interest accrued on term deposits.
29. Previous yearÃs figures have been regrouped and rearranged
wherever necessary to conform to current yearÃs classification.
Mar 31, 2010
1. By Order dated 18th December, 2008 the Single Bench of the
Honourable High Court of Bombay, at Goa, Panaji (Bombay High Court) had
approved the Scheme of Amalgamation (the ÃSchemeÃ) of Sesa Industries
Limited (SIL) with the Company effective from the appointed date i.e.
1st April 2005. Consequent to an appeal filed by an aggrieved
shareholder the Order dated 18th December, 2008 was set aside by the
Division Bench of the Bombay High Court vide order dated 21st February
2009. While SIL has filed an appeal against the Order of the Division
Bench before the Honourable Supreme Court, the financial statements
have been prepared on a standalone basis without considering the impact
of the merger with SIL.
2. The Company has pursuant to a share purchase agreement dated 11th
June 2009 acquired 1,250,000 equity shares of Rs. 10 each (being 100%
of the issued and paid up share capital) of the V. S. Dempo & Company
Private Limited (ÃVSDÃ). VSD in turn holds 1,150,000 equity shares of
Rs. 100 each (being 100% of the issued and paid up share capital) of
Dempo Mining Corporation Private Limited and also hold 5,000 equity
shares of Rs. 10 each (being 50% of the issued and paid up share
capital) of Goa Maritime Private Limited.
The cost of the CompanyÃs investment in VSD i.e. Rs. 1,713.24 crores
(including deferred and contingent components) is included as part of
Investments in Schedule 7.
3. To meet its growth objectives, during the year, the Company issued
33,274,000 equity shares of Re. 1 each at a premium of Rs. 160.46 per
share for cash to Twin Star Holdings Limited on a preferential basis
under the applicable provisions of Securities and Exchange Board of
India (Disclosure and Investor Protection) Guidelines 2000 (the
ÃGuidelinesÃ). A part of the proceeds aggregating Rs 101.47 crore has
been utilised for the CompanyÃs capital projects. The unutilised
portion of the issue proceeds amounting to Rs 435.77 crore has been
invested in Mutual Funds.
4. During the year, the Company issued 5000 Foreign Currency
Convertible Bonds (ÃFCCBsÃ) aggregating US$ 500 million (corresponding
INR value Rs. 2,400.50 crores) at a coupon rate of 5% (net to
bondholder) The bondholders have an option to convert these FCCBs into
shares, at a conversion price of Rs. 346.88 per share at a fixed rate
of exchange on conversion of Rs. 48.00 per U.S. $ 1.00 at any time on
or after 9th December, 2009. The conversion price is subject to
adjustment in certain circumstances. The FCCBs may be redeemed in
whole, but not in part, on or after 30th October, 2012, subject to
certain conditions. Unless previously converted, redeemed or
repurchased and cancelled, the FCCBs fall due for redemption on 31st
October, 2014 at par. As at 31st March, 2010, 755 FCCBÃs have been
converted into equity shares.
The expenses incurred on the issue of the FCCBÃs aggregating Rs. 19.93
crores have been adjusted against the Share Premium Account of the
Company.
The changes to the liability on account of foreign exchange rate
fluctuation amounting to Rs. 121.91 crores have been credited to the
Profit and Loss Account. A part of the proceeds aggregating Rs. 21.70
crore has been utilised for the CompanyÃs capital projects, the
construction of which is in progress. The unutilised portion of the
FCCB proceeds aggregating Rs. 2,360.80 crore have been placed in term
deposits/current accounts with a scheduled bank, pending utilization.
Interest aggregating Rs.0.17 crores in respect of amounts utilised for
the construction of capital projects has been capitalized and included
as part of Capital Work in Progress. The balance interest amounting to
Rs. 45.36 crores has been charged to the Profit and Loss Account.
5. Contingent liabilities:
i) Guarantees (excluding the liability for which provisions have been
made) amounting to Rs. 9.04 crore (Previous year Rs. 13.31 crore) given
by the Bankers in favour of various parties à none invoked.
ii) Letters of Credit opened by the banks in favour of suppliers
amounting to Rs. 174.52 crore (Previous year Rs. 62.63 crore).
iii) Bonds executed in favour of customs authorities in respect of
export of iron ore Rs. 1,003.23 crore (Previous year Rs. 1,281.97
crore).
iv) Claims by custom authorities (under dispute) relating to
differential export duty on export shipments Rs. 49.13 crore (Previous
year Rs. 49.13 crore). The said amount is also included under bonds
executed detailed in point 6 (iii) above.
v) Bills discounted under letters of credit with banks Rs. 471.08
crore. (Previous year Rs. 269.68 crore)
vi) Provisions have also not been made in the accounts in respect of
the following liabilities not acknowledged as debts for the reasons
stated against them:
a) Dead rent on deemed mining leases for the period from 20.12.1962 to
23.5.1987 amounting to Rs. 0.10 crore (Previous year Rs. 0.10 crore)
and royalty for the period from 20.12.1961 to 30.9.1963 amounting to
Rs. 0.12 crore (Previous year Rs. 0.12 crore) sought to be levied by
the Government pursuant to the Goa, Daman & Diu Mining Concessions
(Abolition & Declaration as Mining Leases) Act 1987, challenged by
Special Leave Petition before Supreme Court of India.
b) Claims related to commercial and employment contracts Rs. 7.06 crore
(Previous year Rs. 6.08 crore.)
c) Claims by Chennai Port Trust related to shortfall of throughput from
Chennai Port Rs. 1.13 crore (previous year Rs. 1.13 crore).
d) A civil suit claiming a damage of a minimum amount of Rs. 37.50
crore (Previous year Rs. 37.50 crore) towards infringement of patent
has been filed against the Company.
e) Disputed sales tax demand of Rs. 0.45 crore (Previous year Rs. 0.98
crore) including interest and penalty of Rs. 0.09 crore (Previous year
Rs. 0.14 crore) appealed before
Appellate Authority.
f) Disputed income tax demand of Rs. 9.24 crore (Previous year Rs. 3.85
crore) including interest of Rs. 0.56 crore (Previous year including
interest and penalty of Rs. 0.01 crore), appealed before Appellate
Authority.
g) Disputed demand from customs authorities towards fine and penalty of
Rs. 0.35 crore (previous year Rs. 0.35 crore) for improper
documentation of equipments loaded/unloaded to/from the companyÃs
vessel M.V. Orissa and its improper use.
h) Disputed forest development tax amounting to Rs. 164.12 crore
(Previous year Rs. 29.88 crore) levied by Government of Karnataka
challenged by writ petition filed in the High Court of Karnataka.
Hearing of writ petition before the High Court of Karnataka is pending.
i) A Notice issued by the Deputy Conservator of Forest, Chitradurga,
demanding registration of a supplemental forest lease agreement by
payment of stamp duty calculated on the net present value which has
been challenged in the High Court of Karnataka. Estimated liability is
Rs. 0.92 crore (Previous year Rs. 0.92 crore).
j) Cess on transportation of Ore, coal and coke within Goa levied by
Government of Goa under the Goa Rural Development and Welfare Cess Act,
2000 (Goa Act 29 of 2000) amounting to Rs. 49.31 crore (Previous year
Rs. 21.17 crore) challenged by way of writ petition in the High Court
of Bombay, Panjim Bench.
k) Claim for non performance of contract of affreightment amounting to
Rs. 3.74 crore (Previous year Rs. 12.74 crore) under arbitration.
The Company does not expect devolvement of any liability in respect of
the above.
6. Estimated amount of contracts (net of advances) remaining to be
executed on capital account Rs. 402.21 crore (Previous year Rs. 19.14
crore).
7. In terms of the Mineral Concession Rules 1960 and Mineral
Conservation and Development Rules (MCDR) 1988, the Company has
provided a Ãfinancial assuranceà in the form of a bank guarantee to the
Regional Controller of Mines, towards its mine closure obligation. The
Company has made a provision for expense to the extent of the bank
guarantees provided.
8. Research and development expenditure of Rs. 0.29 crore (Previous
year Rs. 1.95 crore) has been charged to Profit and Loss Account under
specific heads of accounts, while Rs. Nil (Previous year Rs. 0.65
crore) has been incurred as capital cost for research and development.
9. Employee benefits obligations:
Defined benefit plans:
The Company offers its employees defined benefit plans in the form of
gratuity schemes. Gratuity Scheme covers all employees as statutorily
required under Payment of Gratuity Act 1972. The Company has three
gratuity schemes for different categories of employees. The Company
contributes funds to Life Insurance Corporation of India and ICICI
Prudential Life Insurance Company Limited, which are irrevocable.
Commitments are actuarially determined at the year end. The actuarial
valuation is done based on the ÃProjected Unit Credità method. Gains
and losses of changed actuarial assumptions are charged to the Profit
and Loss Account under the head ÃPersonnelÃ.
Defined Contribution Plans:
The Company offers its employees benefits under defined contribution
plans in the form of provident fund, family pension fund and annuity
fund. Provident fund, family pension fund and annuity fund cover
substantially all regular employees. Contributions are paid during the
year into separate funds under certain statutory/fiduciary type
arrangements. While both the employees and the Company pay
predetermined contributions into the provident fund and pension fund,
the contribution to annuity fund are made only by the Company. The
contributions are normally based on a certain proportion of the
employeeÃs salary.
10. Segment Information
As required by Accounting Standard No.17 on Segment Reporting
i) The Company is collectively organised into two main business
segments namely:
à Iron Ore
à Metallurgical Coke
Segments have been identified and reported taking into account the
nature of the product and services, the organisation structure and
internal financial reporting system.
11. Related party information:
Related party information as required by AS 18 is given below:
A. Names of the related parties and their relationships:
i) Holding Companies:
à Finsider International Company Limited Holding Company
à Richter Holding Limited Holding Companies of Finsider International
Company Limited
à Westglobe Limited
à Vedanta Resources Plc Ultimate Holding Company
ii) Subsidiaries of the Company Sesa Industries Limited V. S. Dempo
Limited w.e.f. 11-Jun-2009 Dempo Mining Corporation Limited w.e.f.
11-Jun-2009
iii) Fellow Subsidiaries:
With whom transactions have taken place during the year
à Sterlite Industries (India) Limited
à The Madras Aluminum Company Limited
à Vedanta Aluminum Limited
à Hindustan Zinc Limited
à Talwandi Sabo Power Limited
à Sterlite Technologies Limited
à Twin Star Holdings Limited
iv) Jointly Controlled Entity: Goa Maritime Private Limited
v) Details of Key Management Personnel
Executive directors
à Mr. P.K. Mukherjee
à Mr. A.K. Rai
à Mr. A. Pradhan
à Mr. H.P.U.K. Nair (Retired from 01.10.2009)
à Mr. M.D. Phal (Retired from 01.05.2009)
vi) Enterprise in which significant influence is exercised by Key
Management Personnel à Sesa Community Development Foundation
12. The ultimate holding company viz, Vedanta Resources Plc,
(ÃVedantaÃ) offers equity-based award plans to its employees, officers
and directors based on the performance conditions as set out in the
scheme, duly approved by the board of directors and by the shareholders
of Vedanta on 24th December 2003 and 20th January 2004 respectively.
The performance condition attached to outstanding awards under the Long
Term Incentive Plan (LTIP) is that of VedantaÃs performance, measured
in terms of Total Shareholder Return (ÃTSRÃ) compared over a three year
period or such period as the Board of Vedanta may determine with the
performance of the companies as defined in the scheme from the date of
grant. Under this scheme, initial awards under the LTIP were granted in
February 2004 with further awards being made in June 2004, November
2004, February 2006, November 2007, February 2009, August 2009 and
January 2010.
The fair values were calculated using a Monte Carlo model with suitable
modifications to allow for the specific performance conditions of the
LTIP. The inputs to the model include the share price at date of grant,
exercise price, expected volatility, expected dividends and the risk
free rate of interest. A progressive dividend growth policy is assumed
in all fair value calculations. Expected volatility has been calculated
using historical share prices over the period to date of grant that is
commensurate with the performance period of the option. The share
prices of the mining companies in the Adapted Comparator Group have
been modeled based on historical price movements over the period to
date of grant which is also commensurate with the performance period
for the option. The history of share prices is used to determine the
volatility and correlation of share prices for the companies in the
Adapted Comparator Group and is needed for the Monte Carlo simulation
of their future TSR performance relative to the CompanyÃs TSR
performance. All options are assumed to be exercised six weeks after
vesting.
The awards are indexed to and settled in Vedanta shares. The awards
provide for a fixed exercise price denominated in VedantaÃs functional
currency at 10 US cents per share. Vedanta is obligated to issue the
shares. On the grant date, fair value of the awards is recovered by
Vedanta from the Company to the extent the awardees have been deployed
at the Company.
Accordingly, Vedanta, on the basis of fair value of options granted to
such employees charged a proportionate cost to the Company in the
amount of Rs. 5.34 Crore (Previous year Rs. 2.37 Crore) which is
charged to the Profit & Loss Account under the head ÃSalaries, Wages,
bonus and allowancesà in Schedule 16 to the financial statements.
Vedanta has obtained an overall valuation of the options granted by it
to the awardees. Information related to options granted to the eligible
resources deployed at the Company is not readily available and
accordingly the movements in options have not been disclosed.
13. ÃOther current assetsà comprise interest accrued on term deposits.
14. Previous yearÃs figures have been regrouped and rearranged wherever
necessary to conform to current yearÃs classification.