1. Impairment Loss/(Reversal) (Net):
Certain assets of copper business have been impaired as a result of
uneconomical operation. Accordingly, an amount of Rs. 17.25 crore
(Previous year Rs. Nil) has been recorded as impairment loss during the
2. 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.
(c) The details of the revenue, results, assets, liabilities and other
information from operations by reportable business segments are under:
B. Secondary Segment Reporting (by Geographical demarcation):
(a) The secondary segment is based on geographical demarcation i.e.
India and Rest of the World.
(b) The Company''s revenue from external customers and information about
its assets and others by geographical location are as under:
3. 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
4. For the year ended 31st March, 2013, the Board of Directors of the
Company have recommended dividend of Rs. 1.40 per share (Previous year
Rs. 1.55 per share) to equity shareholders aggregating to Rs. 313.60
crore (Previous year Rs. 344.89 crore) including Dividend Distribution
5. 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 lime Directors of
the Company. The shareholders have also approved giving discount up to
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/expired 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 (Previous year 3,545,550 options) to its eligible
employees in three tranches out of which 880,145 options (Previous year
706,901 options) have been forfeited/expired 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. 0.27 crore (Previous year Rs.
1.29 crore) being the amortization of intrinsic value for the year
ending 31st March, 2013.
6. Operating Lease
The total of future minimum lease payment commitments under
non-cancellable operating lease agreement for a period of twenty years
expiring in 2022 to use railway tracks along with locomotives for
transportation of materials are as under:
7 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 our
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.
8. Information related to Micro, Small and Medium Enterprises, as
defined in the Micro, Small and Medium Enterprises Development Act,
2006 (MSME Development Act), are given below. The information given
below have been determined to the extent such enterprises have been
identified on the basis of information available with the Company:
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 Hindalco Guinea SARL
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. (dissovled w.e.f. 23rd April 2012)
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 Novelis MEA Ltd (Dubai)
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 Sheet Ingot GmbH
31 Novelis Lamines France SAS
32 Novelis PAE SAS
33 Novelis Aluminum Beteiligungs GmbH
34 Novelis Deutschland GmbH
35 Novelis Aluminum Holding Company
36 Novelis Italia SpA
37 Novelis (Shanghai) Aluminum Trading Company
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 Aluminum 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 Novelis (China) Aluminum Products Company Ltd.
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)
63 Novelis Vietnam Company Ltd.
(b) Other Related Parties:
1 Aditya Birla Science and Technology Company Limited
2 Idea Cellular Limited
3 Aluminum Norf GmbH
4 Consorcio Candonga
5 MiniMRF LLC (Delaware)
6 Deutsche Aluminum Verpackung Recycling GmbH
7 France Aluminum 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. Previous year figures have been reclassified/regrouped to conform
to this year''s classification.