A) Basis of Preparation
The Financial Statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) and comply in all material respects with the Accounting
Standards notified under the Companies (Accounting Standards) Rules,
2006, (as amended) and the relevant provisions of the Companies Act,
1956. The Financial Statements have been prepared under the historical
cost convention on an accrual basis except in respect of fixed assets
for which revaluation is carried out. Further, insurance & other
claims, on the ground of prudence or uncertainty in realisation, are
accounted for as and when accepted / received. The accounting policies
adopted in the preparation of Financial Statements are consistent with
those used in the previous year except for the changes explained below:
Presentation and disclosure of financial statements
During the fifteen months period ended 30th June 2012, the revised
Schedule VI notified under the Companies Act 1956, has become
applicable to the Company, for preparation and presentation of its
financial statements. The adoption of revised Schedule VI does not
impact recognition and measurement principles followed for preparation
of financial statements. However, it has significant impact on the
presentation and disclosures made in the financial statements. The
company has also reclassified the previous year figures in accordance
with the requirements of the Revised Schdule VI, applicable in the
Dividend on Investment in subsidiary companies
Till the year ended 31st March 2011, the Company, in accordance with
the pre - revised Schedule VI requirement , was recognising dividend
declared by the subsidiary companies after the reporting date in the
current year''s statement of profit and loss if such dividend pertained
to the period ending on or before the reporting date. The revised
schedule VI , applicable for financial years commencing on or after 1
April 2011, does not contain this requirement. Hence, to comply with
Accounting Standard 9 Revenue Recognition, the company has changed its
accounting policy for recognition of dividend income from subsidiary
companies. In accordance with the revised policy , the company
recognises dividend as income only when the right to receive the same
is established by the reporting date. However, there is no impact of
such change in the accounting policy on the current period''s financial
statements as no such dividend has been declared by the subsidiary
companies pertaining to the period ended on or before 30th June 2012.
B) Use of Estimates
The preparation of financial statements in conformity with the
generally accepted accounting principles requires the management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent liabilities at the
date of the financial statements and the results of operations during
the reporting period. Although these estimates are based upon the
management''s best knowledge of current events and actions, actual
results could differ from these estimates.
C) Tangible Fixed Assets :
(i) Fixed Assets are stated at cost of acquisition inclusive of duties
(net of CENVAT / VAT), taxes, incidental expenses,
erection/commissioning expenses and interest, etc. up to the date the
asset is ready to be put to use. In case of revaluation of fixed
assets, the cost as assessed by the valuer is considered in the
accounts and the differential amount is transferred to revaluation
(ii) Machinery spares which can be used only in connection with an item
of fixed assets and whose use as per technical assessment is expected
to be irregular, are capitalized and depreciated over the residual
useful life of the respective assets.
(iii) Expenditure on new projects and substantial expansion:
Expenditure directly relating to construction activity are capitalized.
Indirect expenditure incurred during construction period are
capitalized as part of the indirect construction cost to the extent to
which the expenditure are related to construction activity or are
incidental thereto. Other indirect expenditure (including borrowing
costs) incurred during the construction period which are not related to
the construction activity nor are incidental thereto, are charged to
the Statement of Profit and Loss. Income earned during construction
period is deducted from the total of the indirect expenditure.
D) Depreciation :
(i) The classification of Plant and Machinery into continuous and
non-continuous process is done as per technical certification and
depreciation thereon is provided accordingly.
(ii) Depreciation on Fixed Assets is provided on Straight Line Method
(SLM) at the rates and in the manner prescribed in Schedule XIV of the
Companies Act, 1956 except in case of road, boundary wall, drains and
culverts on which depreciation has been provided @ 6.67% p.a. as
compared to Schedule XIV rate of 3.34% p.a.
(iii) Leasehold land is amortised on a straight line method over the
period of respective leases.
(iv) Depreciation on fixed assets added / disposed off during the
period, is provided on pro-rata basis with reference to the month of
addition / disposal.
(v) Discarded Fixed Assets awaiting disposal are valued at estimated
realisable value and disclosed separately.
(vi) Depreciation on Insurance Spares / standby equipments is provided
over the remaining useful life of the respective mother assets.
(i) Acquired computer softwares and licenses are capitalized on the
basis of costs incurred to bring the specific intangibles to its
intended use. These costs are amortized on a straight line basis over
their estimated useful life of three years.
(ii) Net Present Value paid to the various State Governments for
restoration of forest as a pre-condition of granting license for mining
in non- broken forest area (Mining Rights) are capitalized and
amortized prospectively on a straight line basis over the remaining
F) Foreign Currency Transactions :
i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency by
applying to the foreign currency amount the exchange rate between the
reporting currency and the foreign currency at the date of the
Foreign currency monetary items are reported using the exchange rate
prevailing at the reporting date. Non-monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Non-monetary items, which are measured at fair value or other similar
valuation denominated in a foreign currency, are reported using the
exchange rate at the date when such value was determined.
iii) Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting of such monetary items at rates different from those at which
they were initially recorded during the year or reported in previous
financial statements are recognized as income or as expenses in the
year in which they arise.
iv) Forward Exchange Contracts not intended for trading or speculation
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognized in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognized as income or as expense for the
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognise a
decline ''other than temporary'' in the value of the investments.
(i) Raw materials, stores and spares and trading goods are valued at
lower of cost computed on moving weighted average basis and net
realisable value. However, materials and other items held for use in
the production of inventories are not written down below cost if the
finished products in which they will be incorporated are expected to be
sold at or above cost.
(ii) Finished goods, work in progress and by products are valued at the
lower of cost computed on weighted average basis and net realizable
value. Cost includes direct materials and labour and a part of
manufacturing overheads based on normal operating capacity. Cost of
finished goods includes excise duty.
(iii) The Closing stock of materials inter-transferred from one unit to
another is valued at cost of the transferor unit or net realizable
value, whichever is lower.
(iv) Net realizable value mentioned above is the estimated selling
price in the ordinary course of business less estimated costs of
completion and estimated cost necessary to make the sale.
I) Borrowing Costs
Borrowing costs relating to the acquisition / construction of
qualifying assets are capitalized until the time all substantial
activities necessary to prepare the qualifying assets for their
intended use are complete. A qualifying asset is one that necessarily
takes substantial period of time to get ready for its intended use. All
other borrowing costs are charged to revenue.
J) Excise Duty & Custom Duty
Excise duty is accounted for at the point of manufacture of goods and
accordingly is considered for valuation of finished goods stock lying
in the factories as on the balance sheet date. Similarly, customs duty
on imported materials in transit / lying in bonded warehouse is
accounted for at the time of import / bonding of materials.
K) Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
L) Revenue Recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
Sale of Goods
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership of the goods have passed to the buyer, which
generally coincides with delivery. Sales are net of returns, claims,
trade discounts, Sales Tax and VAT etc. Export turnover includes
related export benefits.
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Dividends are recognized when the shareholders'' right to receive
payment is established by the balance sheet date.
M) Retirement and other Employee Benefits
i) Retirement benefit in the form of Provident Fund is a defined
contribution scheme and is charged to the Statement of Profit and Loss
of the year when the contributions to the respective fund is due. The
Company has no obligation other than the contribution payable to
ii) Gratuity liability is a defined benefit obligation and is provided
for on the basis of an actuarial valuation, as per projected unit
credit method made at the balance sheet date.
iii) Short term compensated absences are provided for based on
estimates. Long term compensated absences are provided for based on
actuarial valuation, as per projected unit credit method.
iv) Actuarial gains/losses are immediately taken to the Statement of
Profit and Loss and are not deferred.
i) Tax expense comprises of Current and Deferred Tax. Current income
tax is measured at the amount expected to be paid to the tax
authorities in accordance with the provisions of the Indian Income Tax
ii) Deferred income taxes reflect the impact of current year timing
differences between taxable income and accounting income for the period
and reversal of timing differences of earlier years. Deferred tax is
measured using income tax rates enacted or substantively enacted at the
Balance Sheet date. Deferred tax assets are recognised only to the
extent that there is reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realised. In situations where the Company has unabsorbed
depreciation or carry forward tax losses, all deferred tax assets are
recognised only if there is virtual certainty supported by convincing
evidence that they can be realised against future taxable profits.
iii) The carrying amounts of deferred tax assets are reviewed at each
balance sheet date. The Company writes-down the carrying amount of
deferred tax asset to the extent that it is no longer reasonable
certain or virtually certain, as the case may be, that sufficient
future taxable income will be available against which deferred tax
asset can be realized. Any such write-down is reversed to the extent
that it becomes reasonable certain or virtually certain, as the case
may be, that sufficient future taxable income will be available.
iv) Minimum Alternative tax (MAT) credit is recognised as an asset only
when and to the extent there is convincing evidence that the company
will pay normal income tax during the specified period. In the year in
which the MAT credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in guidance note issued
by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the Statement of Profit and Loss and
shown as MAT Credit Entitlement. The company reviews the same at each
balance sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the
effect that the company will pay normal income tax during the specified
O) Segment Reporting
Identification of Segments
The Company has identified Iron & Steel products as its sole operating
segment and the same has been treated as primary segment. The Company''s
secondary geographical segments have been identified based on the
location of customers and then demarcated into Indian and overseas
i) Finance Lease :
Assets acquired under finance leases, which effectively transfer to the
Company substantially all the risks and benefits incidental to the
ownership of the leased items, are capitalized at the lower of the fair
value and present value of the minimum lease payments after discounting
them at an interest rate implicit in the lease at the inception of the
lease term and disclosed as leased assets. Lease payments are
apportioned between the finance charges and reduction of the lease
liability so as to achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are charged directly to
Leased assets capitalized are depreciated over the shorter of the
estimated useful life of the asset or the lease term.
ii) Operating Lease:
Leases where the lessor effectively retains substantially all the risks
and rewards incidental to the ownership of the leased assets are
classified as operating leases. Operating lease payments are recognized
as an expense in the Statement of Profit and Loss on straight line
basis over the lease term.
Q) Cash and Cash Equivalents
Cash and cash equivalents as indicated in cash flow statement comprise
cash at bank and in hand and short-term investments with an original
maturity of three months or less.
R) Impairment of Assets
The carrying amounts of assets are reviewed at each Balance Sheet date
to determine if there is any indication of impairment based on
external/internal factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount which
represents the greater of the net selling price and ''Value in use'' of
the repective assets. The estimated future cash flows considered for
determining the value in use, are discounted to their present value at
the pre tax discount rate that reflects current market assessments of
the time value of money and risks specific to the asset.
After impairment, depreciation is provided on the revised carrying
amount of the assets over its remaining useful life.
S) Derivative instruments
In accordance with the ICAI announcement, derivative contracts, other
than foreign currency forward contracts covered under Accounting
Standard 11, are marked to market on a portfolio basis, and the net
loss, if any, after considering the offsetting effect of gain on the
underlying hedged item, is charged to the Statement of Profit and Loss.
Net gain, if any, after considering the offsetting effect of loss on
the underlying hedged item, is ignored.
A provision is recognized when the company has a present obligation as
a result of past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to its present value and are determined
based on best estimate required to settle the obligation at the balance
sheet date. These are reviewed at each balance sheet date and adjusted
to reflect the current best estimates.
U) Contingent Liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. The company does not recognize a
contingent liability but discloses its existence in the financial
V) Measurement of EBITDA
As permitted by the Guidance Note on Revised Schedule VI to the
Companies Act, 1956, the Company has elected to present earnings before
interest, tax, depreciation and amortisation (EBITDA) as a separate
line item on the face of the Statement of Profit and Loss.