(a) Rights, preferences and restrictions attached to Equity Shares:
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.
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. In the event of liquidation, the
equity shareholders are eligible to receive the remaining assets of the
Company after distribution of all preferential amounts, in proportion
to their shareholding.
(b) Shares reserved for issue under options:
The Company has reserved equity shares for issue under the Employee
Stock Option Scheme. The Company has also reserved equity shares for
issue against warrants allotted on preferential basis to the Promoter
Please refer Note 38 on Share Based Payment for details of Employee
Stock Option Scheme and Note 4 on Money received against Share
Warrants for details of share warrants allotted to the Promoter Group.
(i) During the year ended 31st March, 2009, the Company has allotted
376 Equity Shares of Rs. 1/- each and 2,032,734 6% Redeemable Cumulative
Preference Shares of Rs. 2/- each fully paid-up to the shareholders of
erstwhile Indian Aluminium Company, Limited pursuant to a Scheme of
Amalgamation without payment being received in cash. However, 2,032,734
6% Redeemable Cumulative Preference Shares, allotted as above, has been
redeemed on 1st April, 2009.
1. Money received against Share Warrants:
During the year, the Company has allotted 150,000,000 warrants on a
preferential basis to the Promoter Group on 22nd March, 2012 entitling
them to apply for and obtain allotment of one equity share of Rs. 1 /-
each fully paid-up at a price of Rs. 144.35 per share against each such
warrant at any time after the date of allotment but on or before the
expiry of 18 months from the date of allotment in one or more tranches.
The Company has received Rs. 541.31 crore being 25% against these
warrants. The entire amount so received is being utilised for various
greenfield and brownfield projects expenditure.
(a) Term Loans from Banks Rs. 5,142.99 crore (Previous year Rs. 5,142.99
crore) is secured by the first ranking pari-passu charge on all
immovable properties (except greenfield projects i.e. Mahan Aluminium
Project, Aditya Aluminium Project, and Aluminium project in the state
of Jharkhand) of the company both present and future, and hypothecation
of all movable assets (except book debt & current assets and movable
assets of greenfield projects) both present and future of the Company.
This loan carries interest at the rate of IDBI Bank''s base rate plus
As per original loan agreement Rs. 2,146.66 crore, Rs. 2571.49 crore and Rs.
424.84 crore are repayable in FY14, FY15 and FY16, respectively.
However, in exercise of its prepayment option without payment of any
fees or penalty, the Company has served a notice on all lenders to
prepay this loan on June 29, 2012.
(b) Term Loans from Banks Rs. 5,890.77 crore (Previous year Rs. Nil) and
from other parties Rs. 78.35 crore (Previous year Rs. Nil) are secured by a
first ranking charge / mortgage/ security interest in respect of all
the immovable and movable properties and assets and all intangible
assets for the Mahan Aluminium Project, both present and future, except
Current Assets, Cash and investments and a second ranking charge /
mortgage/ security interest, in respect of the Current Assets and Cash.
Above loans carries interest at the rate of State Bank of India''s base
rate plus 1.75% and is repayable in 42 quarterly instalments commencing
from September 30, 2013 and ending on December 31, 2023. The repayment
in each financial year in percentage is 4.25, 7.75, 9, 9, 10, 10, 10,
10, 10.75, 11 and 8.25 of the loan amount.
Post Commercial Operation Date of the Mahan Project, the Company will
have an option to prepay all or any portion of this Loan, without
payment of Prepayment Penalty within 15 (fifteen) days after any annual
Margin Reset Date.
(c) Deferred Payment Liabilities represent sales tax deferral which is
payable in yearly instalment by FY 2018.
(a) Cash Credit, Export Credit etc. granted under the Consortium
Lending Arrangement are secured by a first pari passu charge in the
form of hypothecation of the entire stocks of raw materials, work-in-
process, finished goods, consumable stores & spares and book debts
pertaining to the Company''s Aluminium business. Working Capital Loan of
State Bank of India for the Copper business is secured by a first
charge by way of hypothecation of stocks of raw materials,
work-in-process, finished goods and consumable stores & spares of
Copper business, both present and future, and second charge on the
immovable properties of the Copper business.
(b) Payable under Trade Financing Arrangements comprise of unsecured
credit availed from Banks for payment to suppliers for raw materials
purchased by the Company. The arrangements are interest- bearing and
are normally payable within 180 days.
(b) Although the book/market value of certain investments (amount not
ascertained) is lower than cost, considering the strategic and long
term nature of the investments and asset base of the investee
companies, in the opinion of the management such decline is temporary
in nature and no provision is necessary for the same.
(i) Sales of Continuous Cast Copper Rod and Copper Cathode are
accounted for provisionally, pending finalization of price. Variations
are accounted for in the year of settlement. Final price receivable from
sale of Copper for which quotational price was not finalized in
previous year, were realigned at year end rate based on LME Rate and
additional Sale of Rs. 8.86 crore (Previous year reversal of sales of Rs.
4.99 crore) were accounted for. During the Year final price was settled
at Rs. 13.20 crore (Previous year Rs. 13.35 crore) and further sales of Rs.
4.33 crore (Previous year credit for further sales 7 8.36 crore) was
taken into account. As on 31st March, 2012, sale of Copper, Gold,
Silver and Anode Slime amounting to Rs.737.22 crore (Previous year Rs.
649.40 crore) pending for price finalization were realigned at year-end
rate of LME and reversal of sales of Rs. 8.21 crore (Previous year
additional sales Rs. 8.86 crore) was accounted for. Actual inflow or
outflow is expected on finalization of price.
(ii) Include sales of DAP including nutrient based subsidy of P&K Rs.
421.97 crore (Previous year Rs. 367.98 crore).
2. For the year ended 31st March, 2012, the Board of Directors of the
Company have recommended dividend of Rs. 1.55 per share (Previous year Rs.
1.50 per share) to equity shareholders aggregating to Rs. 344.89 crore
(Previous year Rs. 333.75 crore) including Dividend Distribution Tax.
3. Segment Reporting
A Primary Segment Reporting (by Business Segment):
(a) The Company has two reportable segments viz. Aluminium and Copper
which have been identified in line with the Accounting Standard 17 on
Segment Reporting, taking into account the organizational structure as
well as differential risk and return of these segments. Details of
products included in each segments are as under:
(i) Aluminium : Hydrate & Alumina, Aluminium and Aluminium Product.
(ii) Copper : Continuous Cast Copper Rods, Copper Cathode, Sulphuric
Acid, DAP & Complexes, Gold and Silver.
(b) Inter-segment transfers are based on market rates.
4. Share Based Payment
Employee Stock Option Scheme
The shareholders of the Company has approved on 23rd January, 2007 an
Employee Stock Option Scheme (ESOS 2006), formulated by the Company,
under which the Company may issue 3,475,000 options to its permanent
employees in the management cadre, in one or more tranches, whether
working in India or out of India, including the Whole Time Directors of
the Company. The shareholders have also approved giving discount upto
30% of the average price of the equity shares of the Company in the
immediate preceding seven day period on the stock exchange. The ESOS
2006 is administered by the Compensation Committee of the Board of
Directors of the Company (the Committee). Each option when exercised
would be converted into one fully paid-up equity share of Rs. 1/- each of
the Company. The options will vest in 4 equal annual instalments after
one year of the grant. The maximum period of exercise is 5 years from
the date of vesting. Further, forfeited/ lapsed options are available
to the Committee for grant. These options do not carry rights to
dividends or voting rights till the date of exercise. Further, on 23rd
September, 2011 the ESOS 2006 has been partially modified by which the
Company may now issue 6,475,000 options.
However, under the ESOS 2006, so far the Committee has granted
3,545,550 options to its eligible employees in three tranches out of
which 706,901 options have been forfeited/ lapsed and are available to
the Committee for grant as per term of the Scheme.
The compensation cost of stock options granted to employees have been
accounted by the Company using the intrinsic value method. Accordingly,
Employee benefits expenses includes Rs. 1.29 crore (Previous year Rs. 1.34
crore) being the amortization of intrinsic value for the year ending
31st March, 2012.
The weighted average share price at the date of exercise of stock
options exercised during the year ended 31st March, 2012 and 31st
March, 2011 was Rs. 149.92 and Rs. 206.45 respectively.
At grant date, the estimated fair value of stock options granted in
Tranche I, Tranche II and Tranche III under ESOS 2006 was Rs. 65.78, Rs.
57.11 and Rs. 102.96 respectively. The fair valuation of stock options
have been done by an independent valuer using Black and Scholes Model.
For fair valuation, expected volatility is based on the historical
share price volatility over the past 5 years. The details of stock
options granted and the key assumptions taken into account for fair
valuation are as under:
5. The Company had formulated a scheme of financial restructuring
under Sections 391 to 394 of the Companies Act 1956 (the Scheme)
between the Company and its equity shareholders approved by the High
Court of Judicature of Bombay to deal with various costs associated
with its organic and inorganic growth plan.
Pursuant to this, a separate reserve account titled as Business
Reconstruction Reserve (BRR) was created during the year 2008-09 by
transferring balance standing to the credit of Securities Premium
Account of the Company for adjustment of certain expenses as prescribed
in the Scheme. Accordingly, the Company has transferred Rs. 8,647.37
crore from Securities Premium Account to BRR and so far Rs. 66.98 crore
adjusted against BRR.
6. The Company has terminated Joint Venture with Almex USA Inc.
(Almex) on 10th August, 2011 and Almex has sold 8,011,000 equity
shares of Hindalco-Almex Aerospace Limited (HAAL) to the Company.
HAAL has further issued 133,745,744 equity shares of Rs. 10/- each to the
Company towards advance of Rs. 110.19 crore, conversion of unsecured loan
Rs. 21.00 crore and interest accrued thereon amounting to Rs. 2.56 crore on
12th September, 2011. Consequently, the Company holds 97.18% of shares
in the HAAL and the balance 2.82% is held by Almex.
7. The Company has received a net amount of Rs. 69.81 crore on 9th
February, 2012 from its wholly owned subsidiary A V Minerals
(Netherlands) B. V. towards return of capital by reducing nominal value
of shares from EURO 778.20 to EURO 773.24 per share. The said amount
has been adjusted in carrying cost of investment and the foreign
exchange gain of Rs. 2.95 crore on this transaction has been netted off
from Miscellaneous Expenses under Other Expenses.
The Company has various schemes (funded/unfunded) for payment of
gratuity to all eligible employees calculated at specified number of
days (ranging from 15 days to 1 month) of last drawn salary depending
upon the tenure of service for each year of completed service subject
to minimum service of five years payable at the time of separation upon
superannuation or on exit otherwise.
B. In respect of defined Contribution Schemes:
(a) As required under Guidance Note on Implementation of Accounting
Standard 15 (revised! issued by the ICAI in respect of exempted
Provident Fund, the Company has ascertained shortfall in interest
payable to the members of Provident Fund based on actuarial valuation
and made appropriate provision in the books. The Company contributes
12% of salary for all eligible employees towards Provident Fund managed
either by approved trusts or by the Central Government. The amount
debited to statement of profit and loss during the year was Rs. 58.30
crore (previous year Rs. 55.00 crore). In view of typical nature of such
Provident fund scheme involving defined benefit underpin in respect of
interest payable to members as declared by The Employees Provident Fund
Organisation, the defined benefit obligation relating to interest
shortfall is considered to be Other Long Term Employee Benefits.
(b) The Company contributes a certain percentage of salary for all
eligible employees in managerial cadre towards Superannuation Funds
managed by approved trusts or by Life Insurance Corporation of India.
The amount debited to Statement of Profit and Loss during the year was
Rs. 11.92 crore (previous year Rs. 10.41 crore).
8. Derivative Financial Instruments
(a) The Company has adopted Accounting Standard 30, Financial
Instruments: Recognition and Measurement issued by The institute of
Chartered Accountants of India so far as it relates to derivative
(b) In the ordinary course of business, the Company is exposed to risks
resulting from changes in prices of commodity, exchange rate
fluctuation and interest rate movements. It manages its exposure to
these risks through derivative financial instruments. It uses
derivative instruments such as forwards, futures, swaps and options to
manage these risks. These derivative financial instruments reduce the
impact of both favourable and unfavourable fluctuations. Except where
noted, the derivative contracts are marked- to-market (MTM) and the
related gains and losses are included in the Statement of Profit and
Loss in the current accounting period.
The Company''s risk management activities are subject to the management,
direction and control of Risk Management Board (RMB). The RMB is
composed of two directors including Managing Director, Chief Financial
Officer and other officers and employees selected by the Managing
Director. The RMB reports to the Board of Directors on the scope of its
The decision of whether and when to execute derivative financial
instruments along with its tenure can vary from period to period
depending on market conditions and the relative costs of the
instruments. The tenure is always linked to the timing of the
underlying exposure, with the connection between the two being
regularly monitored. The Company is exposed to losses in the event of
non-performance by the counterparties to the derivative contracts. All
derivative contracts are executed with counterparties that, in our
judgment, are creditworthy. The credit levels are reviewed to ensure
that there is not an inappropriate concentration of outstanding to any
Commodity Price Risk
Copper and Precious Metals
This business is conducted under a conversion model. The prices of
input and output are derived from the same benchmark and/or are linked
to each other through a defined formula. The objective of risk
management is to attempt to use derivatives to match the price
fluctuations arising out of the timing mismatch in pricing the input
and output so as to ''pass through'' the change in input cost to
customers to make the margins immune to the fluctuations in prices of
the input and output.
This business is vertically integrated. The main raw material viz.
bauxite (mostly mined from own mines) and other purchased raw materials
do not have any linkage with the output price which is Aluminium LME
prices. When the prices of input(s) and output(s) do not follow the
above condition, then risk management attempts to use derivatives so as
to protect the margins from adverse movements in prices on either side,
i.e. from a rise in input cost or from a fall in output price.
As a condition of sale, customers often require the Company to enter
into fixed price commitments. These commitments expose the Company to
the risk of fluctuating aluminum prices between the time the order is
committed and the time that the material is shipped. The Company may
enter into derivative financial instruments to mitigate the risk
arising out of the fixed price commitments. Consequently, the gain or
loss resulting from movements in the price of aluminum on these
contracts would generally be offset by an equal and opposite impact on
the net sales and purchases being hedged.
Foreign Currency Exchange Risk
Exchange rate movements, particularly the United States Dollar (USD)
and Euro (EUR) against Indian Rupee (INR), have an impact on operating
results. In addition to the foreign exchange flow from exports, the
commodity prices in the domestic market are derived based on the landed
cost of imports in India where LME prices and USD/INR exchange rate are
the main factors. In case of conversion business, the objective is to
match the exchange rate of outflows and related inflows through
derivative financial instruments. With respect to Aluminium business
where costs are predominantly in INR, the strengthening of INR against
USD adversely affects the profitability of the business and benefits
when INR depreciates against USD. The Company enters into various
foreign exchange contracts to protect profitability. The Company also
enters into various foreign exchange contracts to mitigate the risk
arising out of foreign currency exchange rate movement in foreign
currency contracts executed with foreign suppliers to procure capital
items for its project activities.
Copper concentrate is purchased on future pricing model based on
month''s average LME (in case of copper) / LBMA (in case of gold and
silver). Since the value of the concentrate changes with response to
change in commodity pricing indices, embedded derivatives (ED) is
identified and segregated in the contract. The ED so segregated, is
treated like commodity derivative and qualify for hedge accounting.
These derivatives are put into a Fair Value hedge relationship with
The objective of hedge designation of the embedded commodity derivative
is to offset the volatility in the Statement of Profit and Loss due to
change in value of un-priced inventory with response to LME / LBMA.
iii. The Company has received a notice dated 24th March, 2007 from
collector (Stamp) Kanpur, Uttar Pradesh alleging that stamp duty of Rs.
252.96 crore is payable in view of order dated - 18th November, 2002 of
Hon''ble High Court of Allahabad approving scheme of arrangement for
merger of Copper business of Indo Gulf Corporation Limited with the
Company. The Company is of the opinion that it has a very strong case
as there is no substantive/computation provision for levy/calculation
of stamp duty on court order approving scheme of arrangement under
Companies Act, 1956 within the provisions of Uttar Pradesh Stamp Act,
moreover the properties in question are located in the State of Gujarat
and thus the collector (stamp) Kanpur has no territorial jurisdiction
to make such a demand. It is pertinent to note that the Company in
2003-04 has already paid stamp duty which has been accepted as per the
provisions of the Bombay Stamp Act 1958 with regard to transfer of
shareholding of Indo Gulf Corporation Limited as per the Scheme of
Arrangement. Furthermore, the demand made is on an incorrect
assumption. The Company''s contention amongst the various other grounds
made is that the demand is illegal, against the principles of natural
justice, incorrect, bad in law and malafide. The Company has filed a
writ petition before the Hon''able High Court of Allahabad, inter alia,
on the above said grounds, which is pending determination.
iv. Against the notifications issued by the State Electricity
Regulatory Commissions of Uttar Pradesh and Odisha States under the
provisions of Electricity Act, 2003 in respect of Renewable Purchase
Obligation (RPO), the Company has filed writ petitions before
jurisdictional high courts on the ground, inter alia, that RPO cannot
be made applicable to captive users and the High Court(s) at Allahabad
and Cuttack have granted stay on the applicability of the RPO. Pending
disposal of these, no provision has been considered necessary at this
v. As per the draft assessment order dated 27th December, 2011 for the
Assessment Year 2008- 09 under the provisions of the Income-tax Act,
1961, the Assessing Officer has proposed an addition of Rs. 1,156 crore
to the total income of the Company by considering guarantee as
provision of service and has imputed a Guarantee Fee at the rate of
10.70% per annum on the loan amount on account of purported arm''s
length fee of corporate guarantee provided to foreign banks for
granting loan to wholly-owned foreign subsidiary for funding
acquisition of Novelis Inc. The Company has filed objections before
Dispute Resolution Panel (DRP) against the said order which is pending.
As on date no demand has been raised.
(b) The Company, along with Aditya Birla Nuvo Limited, Grasim
Industries Limited and Birla TMT Holdings Pvt. Limited (the Sponsors),
being promoters of Idea Cellular Limited (Idea) has given the following
undertakings to the Facility Agent:
i. The Sponsors shall collectively continue to hold at least 33% of
the equity capital of Idea till the end of FY 2015-16 and shall not
without prior written approval of the Facility Agent, divest, transfer,
assign, dispose of, pledge, charge, create any lien or in any way
encumber 33% of shareholdings in Idea. Consequent upon the infusion of
fresh equity capital of Idea, if the Sponsors'' stake gets diluted from
40% to 33% in the equity capital of Idea, the Sponsors agree and
undertake to obtain the prior consent of the Rupee Facility Agent and
in other circumstances, the Sponsors agree and undertake to obtain the
prior consent of the secured lenders representing 51 % of the aggregate
outstanding secured loans.
ii. The Sponsors shall collectively continue to hold 26% of the equity
capital of Idea after FY 2015-16 and shall not without the prior
written approval of the Rupee Facility Agent, divest, transfer, assign,
dispose of, pledge, charge, create any lien or in any way encumber 26%
shareholdings in the capital of Idea.
iii. Not without prior approval of the Facility Agent in writing divest
shareholdings in the equity capital of Idea that may result in a single
investor along with its affiliates holding more than 25% of the equity
capital of Idea.
(c) As the Sponsor, the Company has executed a Common Rupee Loan
Agreement (CRLA) to avail financing of Rs. 4,906 crore for project
undertaken by Utkal Alumina International Limited (Utkal), a
wholly-owned subsidiary of the Company. Under the CRLA, the Company has
i. To infuse base equity of Rs. 2,103 crore in Utkal.
ii. To ensure that debt: equity ratio in Utkal is always maintained at
iii. To hold minimum 51% equity shares in Utkal.
iv. To bring funds for meeting cost overrun of the project.
v. If Utkal exercises its right or requires to replace any lender
under the CRLA and to enable to bring other lender to replace such a
lender within the permitted time, the Company is required to infuse
funds for prepayment of the loan to such lender and for undrawn portion
of such rupee lender.
9 The Company is one of the promoter members of Aditya Birla
Management Corporation Private Limited (ABMCPL), a Company limited by
guarantee which has been formed to provide common facilities and
resources to its members, with a view to optimize the benefits of
specialization and minimize cost for each member. The Company is one of
the participants in the common pool and shares the expenses incurred by
ABMCPL and accounted for under appropriate heads.
10 Related Party Disclosures:
A List of Related Parties:
(a) Enterprises where control exists:
1 Indal Exports Limited (dissolved on 4th March, 2011)
2 Minerals & Minerals Limited
3 Aditya Birla Chemicals (India) Limited
4 Utkal Alumina International Limited
5 Suvas Holdings Limited
6 Renukeshwar Investments & Finance Limited
7 Renuka Investments & Finance Limited
8 Dahej Harbour and Infrastructure Limited
9 Lucknow Finance Company Limited
10 Hindalco-Almex Aerospace Limited
11 HAAL USA Inc.
12 Tubed Coal Mines Limited
13 East Coast Bauxite Mining Company Private Limited
14 Mauda Energy Limited
15 Birla Resources Pty Limited
16 Aditya Birla Minerals Limited
17 Birla Maroochydore Pty Limited
18 Birla Nifty Pty Limited
19 Birla Mt. Gordon Pty Limited
20 AV Minerals (Netherlands) B.V.
21 AV Metals Inc.
22 AV Aluminum Inc. (merged with Novelis Inc. w.e.f. 29th September,
23 Novelis Inc.
24 Albrasilis - Aluminio do Brazil Industria e Comercia Ltda
25 Novelis do Brasil Ltda.
26 4260848 Canada Inc.
27 4260856 Canada Inc.
28 Novelis Cast House Technology Ltd.
29 Novelis No. 1 Limited Partnership
30 Novelis Foil France SAS
31 Novelis Lamines France SAS
32 Novelis PAE SAS
33 Novelis Aluminium Beteiligungs GmbH
34 Novelis Deutschland GmbH
35 Novelis Aluminium Holding Company
36 Novelis Italia SpA
37 Novelis Luxembourg SA
38 Aluminum Company of Malaysia Berhad
39 Alcom Nikkei Specialty Coatings Sdn Berhad
40 Al Dotcom Sdn Berhad
41 Novelis (India) Infotech Ltd.
42 Novelis de Mexico SA de CV
43 Novelis Korea Ltd.
44 Novelis AG
45 Novelis Switzerland SA
46 Novelis Europe Holdings Limited
47 Novelis UK Ltd.
48 Aluminum Upstream Holdings LLC (Delaware)
49 Eurofoil, Inc. (USA) (New York)
50 Logan Aluminium Inc. (Delaware)
51 Novelis Corporation (Texas)
52 Novelis Madeira, Unipessoal, Limited ''
53 Novelis Services Limited
54 Novelis Brand LLC (Delaware)
55 Novelis PAE Corp (Delaware)
56 Novelis South America Holdings LLC
57 Evermore Recycling LLC
58 8018227 Canada Inc.
59 8018243 Canada Limited
60 Novelis Acquisitions LLC (Delaware)
61 Novelis North America Holdings Inc. (Delaware)
62 Novelis Delaware LLC (Delaware)
(b) Other Related Parties:
1 Aditya Birla Science and Technology Company Limited
2 Idea Cellular Limited
3 Aluminium Norf GmbH
4 Consorcio Candonga
5 MiniMRF LLC (Delaware)
6 Deutsche Aluminium Verpackung Recycling GmbH
7 France Aluminium Recyclage SA
ii. Joint Ventures:
1 Mahan Coal Limited
2 Hydromine Global Minerals (GMBH) Limited
iii. Trust of the Company:
1 Trident Trust
iv. Key Managerial Personnel:
Mr. D. Bhattacharya -Managing Director
11 The financial statements for the year ended 31st March, 2011 had
been prepared as per the then applicable, pre-revised Schedule VI to
the Companies Act, 1956. Consequent to the notification of Revised
Schedule VI under the Companies Act, 1956, the financial statements for
the year ended 31st March,2012 are prepared as per Revised Schedule VI.
Previous year figures have been reclassified/regrouped to conform to
this year''s classification. The adoption of Revised Schedule VI for
previous year figures does not impact recognition and measurement
principles followed for preparation of financial statements except for
accounting for dividend on investments in subsidiaries.