1. Segment Reporting:
A. Primary Segment Reporting (by Business Segment):
(a) The Company has two reportable segments, viz., Aluminium and
Copper, which have been identifi ed 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 segment are as
(i) Aluminium: Hydrate & Alumina, Aluminium and Aluminium Products
(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 as
2. Employee Share Based Payment:
Employee Stock Option Scheme-2006 (ESOS 2006)
On 7th December, 2006, the Board of Directors approved the Employee
Stock Option Scheme 2006 (ESOS 2006) for issue of 3,475,000 stock
options to its permanent employees in the management cadre, in one or
more tranches, whether working in India or out of India, including the
Managing/Deputy Managing Directors of the Company. 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 from the date of grant. The maximum period
of exercise is 5 years from the date of vesting and 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 modifi ed and by which the Company may issue 6,475,000
options to its eligible employees.
Employee Stock Option Scheme 2013 (ESOS 2013)
During FY 2013-14, the Company has instituted Employee Stock Option
Scheme 2013 (ESOS 2013), under which the Company may grant 5,462,000
stock options and restricted stock units (RSU) to the permanent
employees in the management cadre and Managing/Whole-time Directors of
the Company and its subsidiary companies in India and abroad, in one or
more tranches. The ESOS 2013 is administered by the Compensation
Committee of the Board of Directors of the Company (the Committee).
The option exercise price would be determined by the Committee whereas
the RSU exercise price shall be the face value of the equity shares of
the Company as on the date of grant of RSUs. Each option and each RSU
entitles the holders to apply for and be allotted one fully paid-up
equity share of Rs. 1/- each of the Company upon payment of exercise
price during exercise period. The options will vest in 4 equal annual
instalments after one year of the date of grant whereas RSU will vest
at the end of three years from the date of grant. The maximum period of
exercise is 5 years from the date of vesting and these option/RSU do
not carry rights to dividends or voting rights till the date of
exercise. Further, cancelled/lapsed options and RSU are also available
3. The Hon''ble Supreme Court of India, in its judgment dated 25th
August, 2014, and order dated 24th September, 2014, has declared all
allocations of the coal blocks made through Screening Committee route
since 1993 as illegal and has quashed the allocation of coal blocks,
(a) Mahan, Tubed and Talabira II & III Coal Blocks allocated to joint
venture companies Mahan Coal Limited (Mahan Coal), Tubed Coal Mines
Limited (Tubed Coal) and MNH Shakti Limited (MNH Shakti), respectively.
The Company holds equity of 50%, 60% and 15%, respectively, in these
joint venture companies. In view of, said judgement, Mahan Coal and
Tubed Coal have reported that the going concern concept has been
vitiated and, accordingly, these companies have made necessary
provisions in their fi nancial statements to bring down the assets and
liabilities to their realisable value. Considering these facts, the
Company has made appropriate provisions for diminution in the value of
investments in these companies.
(b) Talabira I Coal Block held and operated by the Company stands
cancelled with effect from 1st April, 2015, following deallocation of
coal blocks by the Hon''ble Supreme Court. However, an additional levy
of Rs. 295/- per MT of coal extracted since beginning till 31st March,
2015, has been paid, as per direction of the Hon''ble Supreme Court.
4. The Company has been awarded four coal blocks in the auction
conducted by the Nominated Authority of the Ministry of Coal.
5. Labour Commissioner of Administration of Dadra and Nagar Haveli
has approved closure of Silvassa Foil & Packaging plant on 27th
January, 2015. All 186 permanent workers at the plant have opted for
voluntary retirement during the current year. Total amount incurred on
this account is Rs. 14.37 crore which is included in Employee Benefi ts
6. During this year, the Company has received an amount of Rs.
1,393.96 crore from its wholly owned subsidiary A V Minerals
(Netherlands) N. V. towards return of capital by reducing nominal value
of shares from EURO 643.76 to EURO 567.83 per share. The amount of Rs.
1,032.85 core has been adjusted in carrying cost of investments, and
the foreign exchange gain of Rs. 361.11 crore on this transaction have
been accounted for as Exceptional Income.
7. The Company had formulated a scheme of fi nancial 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 the 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 had transferred Rs. 8,647.37 crore from
Securities Premium Account to BRR and till 31st March, 2014, Rs. 153.04
crore have been adjusted against BRR. During the year, following
expenses has been adjusted with BRR:
(a) Impairment loss of Rs. 62.29 crore (Net of deferred tax Rs. 32.97
crore) arising on deteriorating operating performance in one of its
cash generating units of Aluminium Business. (refer Note No. 32 (a))
(b) Provision of Rs. 35.00 crore towards diminution in the value of
investments of Mahan Coal Limited, joint venture of the Company, and
Tubed Coal Mines Limited, subsidiary of the Company, made following
deallocation of coal blocks by the Hon''ble Supreme Court. (refer Note
No. 24 (c))
Had the Scheme not prescribed aforesaid treatment, the impact on
results and Earnings Per Share (EPS) would have been as under:
Profit for the year lower by Rs. 97.29 crore
Basic EPS lower by Rs. 0.47
Diluted EPS lower by Rs. 0.47
B. In respect of defi ned 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 carried out actuarial valuation to
ascertain shortfall in interest, if any, payable to the members of
Provident Fund and has 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 and debited to the Statement of Profi t and Loss. In view of
typical nature of such the Provident Fund scheme involving defi ned
benefi t underpin in respect of interest payable to members as declared
by the Employees, Provident Fund Organisation, the defi ned benefi t
obligation relating to interest shortfall is considered to be Other
Long Term Employee Benefi ts. The amount debited to the Statement of
Profi t and Loss during the year was Rs. 87.29 crore (Previous year Rs.
(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 the Statement of Profi t and Loss during the year
was Rs. 13.27 crore (previous year Rs. 13.05 crore).
(b) In the ordinary course of business, the Company is exposed to risks
resulting from changes in prices of commodity, exchange rate fl
uctuation and interest rate movements. It manages its exposure to these
risks through derivative fi nancial instruments. It uses derivative
instruments such as forwards, futures, swaps and options to manage
these risks. These derivative instruments reduce the impact of both
favourable and unfavourable fl uctuations.
The Company''s risk management activities are subject to the management,
direction and control of Risk Management Board (RMB). The RMB is
composed of three directors including Managing Director, Deputy
Managing Director and at least two offi cers, one being the Chief
Financial Offi cer. The RMB reports to the Board of Directors on the
scope of its activities.
The decision of whether and when to execute derivative fi nancial
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 no 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 defi ned formula. The objective of risk
management is to attempt to use derivatives to match the price fl
uctuations arising out of the timing mismatch in pricing the input and
output to make the margins immune to the fl uctuations 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 the 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.
Both green fi eld and brown fi eld expansion has increased the power
requirement mainly for smelting and other associated operations. Power
is mostly supplied to these smelters through captive power generation
units which are coal based. In order to meet the gap between
requirement of coal and availability in the domestic market as also
from own sources, at times coal is also imported . The domestic price
are not linked to any internationally traded price whereas the imported
coal is linked to internationally traded prices. Hence, the imported
coal price fl uctuates in line with the international prices. To
mitigate this risk, coal commodity derivatives are taken.
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 fl ow 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 the case of conversion business,
the objective is to match the exchange rate of outfl ows and related
infl ows through derivative fi nancial instruments. With respect to
Aluminium business where costs are predominantly in INR, the
strengthening of INR against USD adversely affects the profi tability
of the business and benefi ts when INR depreciates against USD. The
Company enters into various foreign exchange contracts to protect profi
tability. 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. Also,
certain foreign exchange future derivatives are taken for arbitrage
between exchange and OTC.
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
identifi ed 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 Profi t and Loss due to
change in value of un-priced inventory with response to LME/LBMA.
8. Contingent Liabilities and Commitments:
A. Contingent Liabilities
(a) Claims against the Company not
acknowledged as debt:
Following demands are disputed by the
Company and are not provided for:
(i) Demand of interest on past dues of the
Aluminium Regulation account up to 31st
December, 1987. 6.33 6.33
* The demand is in dispute with Controller
of Aluminium Regulation Account.
(ii) Retrospective Revision of Water Rates
by UP Jal Vidyut Nigam Limited (April 1989
to June 1993 & January 2000 to January 2001). 4.08 4.08
* Writ petition pending with Lucknow Bench of
Allahabad High Court. The demand for arrears
stayed vide order dated 11/05/2001.
(iii) Transit fees levied by Divisional Forest
Officer, Renukoot, on Coal and Bauxite. 117.63 106.65
* Appeal pending with the Hon''ble High Court
of Allahabad and payment of transit fee has
been stayed. According to the legal opinion
received by the Company, the Forest Department
has no authority to levy such fees. The Company
has filed a transfer application before the
Hon''ble Supreme Court. The Hon''ble Supreme
Court of India, while issuing notice on our
Transfer Petition, stayed the further
proceedings of the Company''s Writ Petition
pending before the Hon''ble Allahabad High
(iv) M. P. Transit Fee on Coal demanded by
Northern Coal Fields Limited. 24.51 23.77
* Company had challenged the demand towards
M. P. transit Fee on Coal and filed Writ
Petition before the Hon''ble Jabalpur High
Court. The Hon''ble High Court has struck
down the levy and also ordered for refund
of the amount paid under protest. The State
government has filed an Appeal before the
Hon''ble Supreme Court of India against the
said order and the Hon''ble Supreme Court
has been stayed the order of Hon''ble High
Court. The Counter affidavit in the matter
has been filed. The rejoinder has also
been filed by the state. To be listed along
withthe similar matter before the Supreme
Court of India.
(v) Imposition of Cess on Coal by
Shaktinagar Special Area Development Authority. 3.98 11.17
*Writ pending before the Allahabad High Court,
Allahabad. Demand and levy stayed. However,
the company has moved a transfer petition before
the Hon''ble Supreme Court of India for tagging
the matter with CA No. 1883 of 06 (ORISED
Matter). The matter is tagged with ORISED and
to be heard by the Nine Judges Bench of the
Hon''ble Supreme Court.
(vi) Demand of Royalty on Vanadium by
District Mining Officer, Lohardaga. 7.96 7.96
* Appeal is pending with the Hon''ble High
Court of Allahabad. The demand has been
stayed on certain conditions.
(vii) The demand of Excise Duty on gold. 155.31 155.31
* Part of the demand was confi rmed against
which our ROM request is pending at CESTAT
Department''s appeal is pending before the
Hon''ble Supreme Court for the part of the
demand and penalty that was dropped.
(viii) Demand raised on assessment under
CST Act and UP Sales Tax Act. - 6.39
* Demand has been quashed at fi rst appeal
and second appeal stage. Department has gone
in the revision before the Hon''ble High Court,
Allahabad which has rejected the Department
(ix) Revision of surface rent on land by
Government of Jharkhand w.e.f. 16th June, 2005. 29.97 26.18
* Matter is in dispute at Hon''ble High Court
(x) Demand made by Nayab Tehsildar Kusmi/
Collector under Chhattisgarh as per Adhosanrachna
Vikas evam Parayavaran Upkar Adhiniyam, 2005 @ 5%
as environment tax on royalty plus 5% as
development tax. 7.37 6.60
* The Writ petition fi led by the Company
before Hon''ble High Court of Chhattisgarh at
Bilaspur has been transferred to the Hon''ble
Supreme Court and tagged with other Civil Appeals.
(xi) Service tax paid on Goods Transport Agency
and Business Auxiliary Services. 11.27 11.27
* Commissioner has confi rmed the demand. Appeal
is being filed at CESTAT New Delhi.
(xii) M.P. Transit Fee on Bauxite. 1.30 1.30
* Company has fi led Writ Petition before the
Hon''ble Jabalpur High Court. The Hon''ble High
Court has struck down the levy and also ordered
for refund of the amount paid under protest.
The State government has filed an appeal against
the order of the Hon''ble High Court.
(xiii) Demand for Entry Tax relating to valuation
dispute of 2004-05 to 2005-06, for which appeals
have been filed. 1.18 1.18
* Appeal has been fi led with Additional CCT,
(xiv) CST demand on reopening of assessments
for 1999-00 to 2003-04. 5.01 8.81
* Appeals have been filed.
(xv) Demand of penalty on excess CENVAT
Credit taken. 0.10 1.09
* Appeal pending with CESTAT, Mumbai.
(xvi) Demand for Sales Tax u/s 15B for
A.Y. 2001-02 & 2002-03. 7.96 7.96
* Appeal is pending with J. C. Appellate
(xvii) Service Tax on insurance policy
attributable to Renusagar. 3.97 3.97
* Commissioner has confi rmed the demand.
Appeal is pending before the CESTAT, New Delhi.
(xviii) Disallowance of CENVAT credit. 5.29 5.29
* The matter is pending with CESTAT, Ahmedabad.
(xix) Demand raised on assessment under
CST Act and APGST Act for various years. 5.89 5.77
* Appeals have been fi led with appropriate
(xx) Demand for Service Tax on Consulting
Engineer Services and Scientifi c & Tech Service. 3.84 3.84
* Appeal pending with Commissioner (Appeals),
(xxi) Excise Duty on Dross. - 19.78
* Favourable order of Hon''ble Bombay High Court
received during the year, quashing circulars
issued by CBEC regarding Excise Duty on Dross.
(xxii) Alleged Cenvat taken without receipt of
Alumina Hydrate inside the factory. 3.46 3.46
* Appeal filed with CESTAT.
(xxiii) Alleged CENVAT availed on the Input
services at captive Mines. 36.05 36.05
* Appeal pending with CESTAT
(xxiv) CENVAT of Service Tax Credit availed
on Supplementary Invoices. 11.05 3.12
* Pending with appropriate Authority
(xxv) Clearence of Silver at Nil Rate of
Duty under Notification No.5/2006. - 8.96
* CESTAT has given favorable judgement.
(xxvi) Excess rebate has been sanctioned to
the extent duty paid by supplementary invoices 5.08 5.08
* Appeal pending with Commissioner of Customs
(xxvii) Disallowance of CENVAT on input services. 7.74 6.79
* Pending with appropriate Authority.
(xxviii) Parallel operation charges on capacity
of Captive Power Plant by Madhya Pradesh
Electricity Regulatory Commission. - 7.05
* Matter is pending before Hon''ble High court
of Madhya Pradesh at Jabalpur. The Hon''ble
High Court passed an order on 20.9.2013 and
stayed the operation of order passed by MPERC
subject to deposit of 50% of the amount
(xxix) Water Tariff revision demand for
previous years. 10.86 -
* Matter is pending in Hon''ble High Court
(xxx) Demand for Sales Tax under KVAT Act
2003 for Tax period 2011-2012 & 2012-13. 16.46 -
* Appeal pending with Commissioner,
Appellate Authority, Bengaluru.
(xxxi) Demand for Sales Tax under MPVAT
Act, 2002, for Tax period 2010-11. 7.64 -
* Appeal pending with Commissioner,
Appellate Authority, Indore
(xxxii) Demand for Sales Tax under CST
Act, 1969, for Tax Period 2009-10 1.21 -
* Appeal pending with Commissioner,
Appellate Authority, Bengaluru.
(xxxiii) Other Contingent Liabilities in
respect of Excise, Customs, Sales
Tax, etc., each being for less than Rs. 1 Crore. 17.72 15.51
* The demands are in dispute at various
legal forums. 520.22 510.72
(b) Corporate Guarantees Outstandings 5,270.76 5,287.03
(Rs. 5,229.70 crore* (previous year
Rs. 5246.47 crore) given on behalf of
* Includes Rs. 5,181.28 crore (Previous
year Rs. 5,198.05 crore) given to
lenders against loan provided to various
subsidiaries , amount of loan outstanding
as on 31st March 2015 is Rs. 4,887.43
crore (Previous Year Rs. 4,950.00 crore).
(c) Other money for which the Company is
(i). Bills discounted with Banks 0.87 3.53
(ii). Customs duty on Capital Goods and
Raw Materials imported under EPCG Scheme/
Advance License, against which export
obligation is to be fulfi lled (excluding
cenvatable portion). 328.03 368.51
(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 the order dated 18th November,
2002, of the Hon''ble High Court of Allahabad approving the 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 the 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 malafi de. The
Company has fi led a writ petition before the Hon''ble High Court of
Allahabad, inter alia, on the above said grounds, which is pending
(iv). The assessing offi cer, while framing the assessment for AY
2008-09, made adjustment, inter alia, amounting to Rs. 270.32 crore, to
total income on account of purported arm''s length fee for corporate
guarantee provided to foreign banks for granting loan to a wholly owned
subsidiary of the Company, viz., AV Minerals (Netherlands) N.V. The
Company has fi led appeal before the Income Tax Tribunal.
(v). The Company has an agreement with Uttar Pradesh Power Corporation
Limited (UPPCL), under which banking of surplus energy with UPPCL is
permitted and such banked energy may be drawn as and when required at
free of cost. However, UPPCL has raised demand of Rs. 55.42 crore with
retrospective effect from 1.4.2009 on the alleged ground that drawal of
energy against the banked energy is not permissible during peak hours.
The Company has challenged the demand by fi ling a petition on
27.12.2013 under Section 86(i)(f) read with other relevant provisions
of Electricity Act, 2003, seeking quashing/setting aside the demand.
The matter has been heard on 12.2.2014 and the Hon''ble Uttar Pradesh
Electricity Regulatory Commission (UPERC), vide its order dated
24.2.2014, has directed the UPPCL to restrain from taking any coercive
action till final order of UPERC. The Company believes that it has a
strong case and no provision towards this is required.
(a) Estimated amount of contracts remaining
to be executed on capital account and not
provided for net of advances 574.76 1,181.44
(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 affi liates holding more than 25% of the equity
capital of Idea.
(c) The Company, has given the following undertakings in connection
with the loan of Utkal Aluminium International Limited (UAIL), a wholly
i. To hold minimum 51% equity shares in UAIL.
ii. To ensure to meet the Financial Covenants, except Fixed Asset
Coverage Ratio, as provided in the loan agreements.
9. As per Section 135 of the Companies Act, 2013, a Corporate Social
Responsibility committee has been formed by the Company. The Company
has incurred expenses amounting to Rs. 32.42 crore in alignment with
the CSR Policy of the Company, which is in confi rmity with the
activities specified in Schedule VII to the Companies Act, 2013.
10. Previous year figures have been reclassifi ed/regrouped to conform
to this year''s classification.