a. Change in Presentation of financial statement:
During the year ended 31st march 2012, the revised schedule VI notified
under the Companies Act1956, 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
principals followed for preparation of financial statements, however it
has significant impact on presentation and disclosures made in the
financial statements. The company has also reclassified the previous
year figures in accordance with the requirement applicable in the
b. Basis of Preparation of Financial Statements
The financial statement are prepared under historical cost
conversion,in accordance with the generally accepted accounting
principles in Indian and the provisions of the Companies Act, 1956.
c. Use of estimates.
The preparation of financial statements in conformity with Indian GAAP
requires the management to make estimates and assumptions that affect
the reported amounts of revenues, expenses, assets and liabilities and
the disclosure of contigent liabilities, at the end of 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. Uncertainty about these assumptions and estimates
could result in the outcomes requiring a material adjustment to the
carrying amounts of assets or liabilities in future periods.
d. Tangible fixed assets.
Fixed assets, acquired are stated at cost, net of accumulated
depreciation and accumulated impairment losses, if any. The cost
comprises purchase price, borrowing costs if capitalization criteria
are met and directly attributable of bringing the asset to its working
condition for the intended use. Any trade discounts and rebates are
deducted in arriving at the purchase price.
Subsequent expenditure related to an item of fixed assets is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard performance. All
other expenses on existing fixed assets, including day to day repair
and maintenance expenditure and cost of replacing parts, are charged to
the statement of profit and loss for the period during which such
expenses are incurred.
e. Depreciation on tangible fixed assets
Depreciation on fixed assets is calculated pro rata from the date of
addition using Straight Line Method (SLM) based upon the useful lives
estimated by the management or those prescribed under the Schedule XIV
to the Companies Act, 1956.
f. Borrowing costs
Borrowing cost includes interest. Borrowing costs directly attribute to
the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its
intended use or sale are capitalized as part of the cost of the
respective asset. All other borrowing costs are expensed in the period
Raw materials, components, store and spares are valued at lower of cost
and net realizable 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. Cost of raw materials, components and
stores and spares is determined on a weighted average basis.
Work in progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials and labour and a
proportion of manufacturing overheads based on normal operating
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the site.
h. Revenue Recognition
Revenue from sale of products is recognized when practically all
significant risks and rewards of ownership of the goods have been
passed to the buyer, usually on delivery of the goods. The Company
collects central sales taxes and value added taxes (VAT) on behalf of
the government and, therefore, these are not economic benefits
following to the Company. Hence, they are excluded from revenue.
Excise duty deducted from revenue (gross) is the amount that is
included in the revenue (gross) and not the entire amount of liability
arising during the year. This usually occurs upon dispatch and
collection of the receivable is reasonably certain.
Interest income is recognized on a time proportion basis, taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head ''other income'' in the
statement of profit and loss.
i. Employee Benefits
Liability for employee benefits, both short and long term, which are
due as per the terms of employment, are recorded in accordance with
Accounting Standard -15(Revised) Employee Benefits notified by the
Companies (Accounting Standards) Rules,2006.
a. In respect of Gratuity, the Company offers a non contributory
defined benefit plan to its employees. Year end accrued liabilities of
gratuity payable to employees are provided for Rs 3,82,800/ - based on
the liability as estimated by the management. This policy is not in
accordance with the Revised Accounting Standard AS-15 Employees
b. Contribution to Provident Fund and other recognized fund is charged
to profit and loss account.
c. Provision for Leave Encashment is not made as per Revised
Accounting Standard AS-15 Employees Benefits.
j. Income Taxes
Current tax is determined in accordance with the provisions of Income
Tax Act, 1961.
Deferred tax resulting from timing difference between taxable and
accounting income is accounted for using the tax rates and laws that
are enacted or substantively enacted as on the balance sheet date.
Deferred tax asset is recognized and carried forward only to the extent
that there is a virtual certainty that the assets will be realized in
k. Segment reporting
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. The company primarily operates
in single business segment which is Steel Tube (Skelp, Black pipe and
GI pipe), and accordingly there are no primary segments to be reported
as per Accounting Standard 17 Segment Reporting.
l. Earning per share
Basic earnings per equity share is computed by dividing the net profit
or loss for the period attributable to the equity shareholders by the
weighted average number of equity shares outstanding during the
reporting period .
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity share holders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
m. Foreign currency transactions
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 on the date of the
Foreign currency monetary items are reported using the closing rate.
Non monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction and non-monetary items which are carried
at fair value or other similar valuation denominated in a foreign
currency are reported using the exchange rates that existed when the
values were determined.
Exchange differences arising on the settlement of monetary items or on
reporting company''s 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.
n. Custom & Excise Duty
Excise Duty on finished goods lying at the factory is accounted at
point of sale or dispatch. Custom Duty on imported material lying in
bonded warehouse is accounted for at the time of bonding materials.
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 their present value and are determined
based on the best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting date and
adjusted to reflect the current best estimates.
p. 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 recognised because it is not probable that an outflow of
resources will be required to settle the obligation. A contingent
liability also arises in extremely rare cases where there is a
liability that cannot be recognized because it cannot be measured
reliably. The Company does not recognize a contingent liability but
discloses its existence in the final statement.
q. Cash and cash equivalents
Cash and cash equivalents for the purpose of cash flow statement
comprises cash at bank and in hand and short-term investments with an
original maturity of three months or less.
r. Measurement of EBITDA
As permitted by the Guidance Note on the Revised Schedule VI to the
Companies Act, 1956, the company has elected to present earnings before
interest, tax, depreciation and amortization (EBITDA) as a separate
line item on the face of the statement of profit and loss. The company
measures EBITDA on the basis of profit/ (loss) from continuing
operations. In its measurement, the company does not include
depreciation and amortization expense, finance cost and tax expense.