1.1 Basis of preparation of financial statements
The Financial Statements are prepared in accordance with Generally
Accepted Accounting Principles (GAAP) in India under the historical
cost convention on accrual basis except certain tangible fixed assets
which are carried at revalued amount.
GAAP comprises mandatory Companies (Accounting Standards) Rules, 2006
notified by the Central Government of India under Section 211(3C) of
the Companies Act, 1956, other pronouncements of the Institute of
Chartered Accountants of India, the provisions of the Companies Act,
1956 and guidelines issued by the Securities and Exchange Board of
Accounting policies have been consistently applied except where a newly
issued Accounting Standard is initially adopted or a revision to an
existing Accounting Standard requires a change in the accounting policy
hitherto in use.
All Assets and Liabilities have been classified as current or
non-current as per the Company''s normal operating cycle and other
criteria set out in the Schedule VI to the Companies Act, 1956. Based
on the nature of operations and time between the procurement of raw
material and realisation in cash and cash equivalents, the Company has
ascertained its operating cycle as 12 months for the purpose of current
and non-current classification of assets and liabilities.
1.2 Use of estimates
The preparation of the Financial Statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported balances of assets and liabilities and disclosures relating to
contingent liabilities as at the date of the financial statements and
reported amounts of income and expenditure during the period. Actual
results might differ from the estimates. Difference between the actual
results and estimates are recognised in the period in which the results
are known/ materialised.
1.3 Fixed assets, intangible assets and capital work-in-progress
a) Fixed Assets are stated at their original cost (net of accumulated
depreciation and impairments) adjusted by revaluation of Land,
Building, Plant & Machinery, Railway Siding and Tube well of the
Balrampur Unit as at 30th June, 1988; Land, Building and Plant &
Machinery of Tulsipur Unit as at 31st March, 1999. Cost, net of cenvat,
includes acquisition price, import duties, other non-refundable taxes
and levies, attributable expenses and pre-operational expenses
including finance charges, wherever applicable.
b) Intangible assets expected to provide future enduring economic
benefits are recorded at the consideration paid for acquisition of such
assets and are carried at cost of acquisition less accumulated
amortisation and impairment, if any.
c) Expenditure during construction period: Expenditure (including
financing cost relating to borrowed funds for construction or
acquisition of fixed assets) incurred on projects under implementation
are treated as Pre-operative expenses pending allocation to the assets
and are shown under Capital work-in-progress. Capital
work-in-progress is stated at the amount expended upto the date of
Balance Sheet for the cost of fixed assets that are not yet ready for
their intended use.
1.4 Depreciation and amortisation
a) Depreciation on Fixed Assets is provided on Straight Line method in
accordance with the rates as specified in Schedule XIV to the Companies
Act, 1956 (as amended) other than on Power Transmission lines and
Mobile Phones. Power Transmission Lines are depreciated over a period
of five years and Mobile Phones over a period of three years on
straight line basis.
b) Depreciation/amortisation on assets added, sold or discarded during
the year has been provided on pro-rata basis.
c) Lease hold land in the nature of perpetual lease is not amortised.
Other lease hold land are amortised over the period of the lease.
d) Computer Software (Acquired) are amortised on straight line basis
over a period of five years.
Investments are either classified as current or long-term based on
Management''s intention at the time of purchase. Long-term investments
are carried at cost less provisions for diminution recorded to
recognise any decline, other than temporary, in the carrying value of
each investment. Current investments are carried at the lower of cost
and fair value, category wise. Cost for overseas investments comprises
of the Indian Rupee value of the consideration paid for the investment
translated at the exchange rate prevalent at the date of investment.
Cost includes acquisition charges such as brokerage, fee and duties.
a) Inventories (other than By-products and Standing crop) are valued at
lower of cost and net realisable value after providing for
obsolescence, if any. Cost of inventory comprises of purchase price,
cost of conversion and other cost that have been incurred in bringing
the inventories to their respective present location and condition.
Interest costs are not included in value of inventories. The cost of
Inventories is computed on weighted average basis.
b) Assets identified and technically evaluated as obsolete and held for
disposal are valued at their estimated net realisable value.
c) By-products and Standing Crop are valued at net realisable value.
1.7 Revenue recognition
a) Sale of goods is recognised at the time of transfer of substantial
risk and rewards of ownership to the buyer for a consideration.
b) Gross turnover includes excise duty but excludes sales tax / VAT.
c) Dividend income is recognised when the Company''s right to receive
dividend is established.
d) Interest income is recognised on time proportion basis taking into
account the amount outstanding and rate applicable.
e) All other income are accounted for on accrual basis.
All the expenses are accounted for on accrual basis.
1.9 Government grants
a) Government grants related to specific fixed assets are adjusted with
the value of the fixed asset. If not related to a specific fixed asset,
it is credited to Capital Reserve.
b) Government grants related to revenue items are adjusted with the
related expenditure. If not related to a specific expenditure, it is
taken as income.
1.10 Provisions, contingent liabilities and contingent assets
Provision is recognised in respect of obligations where, based on the
evidence available, their existence at the Balance Sheet date is
A provision is recognised if, as a result of a past event, the Company
has a present legal obligation that can be estimated reliably, and it
is probable that an outflow of economic benefits will be required to
settle the obligation. Provisions are determined by the best estimate
of the outflow of economic benefits required to settle the obligation
at the balance sheet date.
Provisions, contingent liabilities and contingent assets are reviewed
at each balance sheet date.
Re-imbursement expected in respect of expenditure to settle a provision
is recognised only when it is virtually certain that the re-
imbursement will be received.
A Contingent Asset is not recognised in the Accounts.
1.11 Impairment of assets
Impairment loss, if any, is recognised to the extent, the carrying
amount of assets exceed their recoverable amount. Recoverable amount is
higher of an asset''s net selling price and its value in use. Value in
use is the present value of estimated future cash flows expected to
arise from the continuing use of an asset and from its disposal at the
end of its useful life.
Impairment losses recognised in prior years are reversed when there is
an indication that the impairment losses recognised no longer exist or
have decreased. Such reversals are recognised as an increase in
carrying amount of assets to the extent that it does not exceed the
carrying amount that would have been determined (net of amortisation or
depreciation) had no impairment loss been recognised in previous years.
After impairment, depreciation or amortisation on assets is provided on
the revised carrying amount of the respective asset over its remaining
1.12 Foreign currency transactions
a) Transactions in Foreign currency are initially recorded at the
exchange rate at which the transaction is carried out.
b) Monetary Assets and Liabilities related to foreign currency
transactions remaining outstanding at the year end are translated at
the year end rate.
Non-monetary items which are carried at historical cost denominated in
a foreign currency are reported using the exchange rate at the date of
c) In case of items which are covered by forward exchange contracts,
the difference between the year end rate and the rate on the date of
the contract is recognised as exchange difference. The premium or
discount on forward exchange contracts is recognised over the period of
the respective contract.
d) Any income or expense on account of exchange difference either on
settlement or on translation at the year end is recognised in the
Statement of Profit and Loss.
1.13 Borrowing costs
Borrowing costs that are attributable to the acquisition or
construction of a qualifying asset is capitalised as part of the cost
of such asset till such time the asset is ready for its intended use. A
qualifying asset is one that necessarily takes a substantial period of
time to get ready for its intended use. All other borrowing costs are
charged to Statement of Profit and Loss in the period in which they are
1.14 Insurance claims
Insurance claims are accounted for on the basis of claims
admitted/expected to be admitted and to the extent that there is no
uncertainty in receiving the claims.
1.15 Employee benefits
a) Short-term employee benefits are recognised as an expense at the
undiscounted amount in the Statement of Profit and Loss for the year in
which the related service is rendered.
b) Long-term employee benefits are recognised as an expense in the
Statement of Profit and Loss for the year in which the employees have
rendered services. The expense is recognised at the present value of
the amount payable as per actuarial valuations. Actuarial gains and
losses in respect of such benefits are recognised in the Statement of
Profit and Loss.
1.16 Employee stock option scheme
In respect of employee stock options granted pursuant to the Company''s
Employee Stock Option Scheme, the intrinsic value of the option (excess
of market price of the share on the date of grant over the exercise
price of the option) is treated as discount and amortised as employee
compensation cost on a straight line basis over the vesting period.
1.17 Taxes on income
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Income Tax Act, 1961. Deferred
tax is recognised, subject to the consideration of prudence in respect
of deferred tax assets, on timing differences, being the difference
between taxable income and accounting income that originate in one
period and are capable of reversal in one or more subsequent periods.
Deferred tax assets are recognised only to the extent there is
reasonable certainty that the assets can be realised in future;
however, when there is a brought forward loss or unabsorbed
depreciation under taxation laws, deferred tax assets are recognised
only if there is virtual certainty of realisation of such assets.
Deferred tax assets are reviewed as at each Balance Sheet date and
written down or written up to reflect the amount that is
reasonably/virtually certain to be realised.
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 Minimum Alternate
tax (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
1.18 Derivative contracts
The Company uses derivative contracts to hedge the interest rate and
currency risks. The Company does not use these contracts for trading or
1.19 Segment reporting
Segments are identified based on the dominant source and nature of
risks and returns and the internal organisation and management
structure.The accounting policies adopted for segment reporting are in
line with the accounting policies of the Company. In addition, the
following specific accounting policies have been followed for segment
a) Inter segment revenue is accounted for based on the transaction
price agreed to between segments which is primarily market led.
b) Revenue and expenses are identified to segments on the basis of
their relationship to the operating activities of the segment. Revenue
and expenses, which relate to the enterprise as a whole and are not
allocable to segments on a reasonable basis, have been disclosed as
1.20 Earnings per share
Basic earnings per share is computed by dividing the profit/(loss)
after tax (including the post tax effect of extra ordinary items, if
any) by the weighted average number of equity shares outstanding during
Diluted earnings per share is computed by dividing the profit/(loss)
after tax (including the post tax effect of any extra ordinary items,
if any) by the weighted average number of equity shares considered for
deriving basic earnings per share and also the weighted average number
of equity shares which could be issued on the conversion of all
dilutive potential equity shares.
1.21 Cash flow statement
Cash flows are reported using the indirect method, whereby profit
before tax is adjusted for the effects of transactions of a non-cash
nature, any deferrals or accruals of past or future operating cash
receipts or payments and item of income or expenses associated with
investing or financing flows. The cash flows from operating, investing
and financing activities of the Company are segregated.
d) The Company has only one class of equity shares. The Company
declares and pays dividend in Indian rupees. The holders of equity
shares are entitled to receive dividend as declared from time to time
and are entitled to one vote per share.
e) In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive remaining assets of the Company,
after distribution of all preferential dues. The distribution will be
in proportion to the number of equity shares held by the shareholders.
g) The Company has issued an aggregate of 44048 upto 31.03.2012
(previous period 44048 upto 31.03.2011) fully paid up equity shares of
par value Rs 1/- each without payment being received in cash in the last
5 years immediately preceding the balance sheet date.
h) The Company has bought back an aggregate of 15410135 upto 31.03.2012
(Previous period 4678678 upto 31.03.2011) equity shares in the last 5
years immediately preceding the balance sheet date. 1229531 equity
shares bought back during the previous period but not extinguished as
on 31.03.2011, were extinguished during the year [Refer note no.