1. For the year ended 31st March, 2016, the Board of Directors of the
Company have recommended dividend of Rs. 1.00 per share (Previous year
Rs. 1.00 per share) to equity shareholders aggregating to Rs. 248.54
crore (Previous year Rs. 246.09 crore) including Dividend Distribution
2. The Company has furnished bank guarantees to Nominated Authority
of Ministry of Coal towards fulfilment of certain conditions of the
agreements signed by it in respect of the four coal blocks awarded to
it through auction. Some of the conditions could not be fulfilled
despite best efforts for reasons beyond its control as certain
approvals/clearances that are under the purview of the concerned State
Governments have been delayed. The Company has made representation with
the Nominated Authority in this regard and is confident that its
request will be considered favourably. Accordingly, no provision has
been made for this.
3. 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.
4. 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 and Alumina, Aluminium and Aluminium Product
(ii) Copper : Continuous Cast Copper Rods, Copper Cathode, Sulphuric
Acid, DAP and 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
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:
5. 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/Whole-time 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 modified and by which the Company may issue 6,475,000 options
to its eligible employees.
According to ESOS-2006, so far the Company has granted 4,328,159
options (Previous year 4,328,159 options) to its eligible employees out
of which 1,774,296 options (Previous year 1,386,213 options) has been
cancelled/lapsed, and are available for grant as per the term of the
Scheme. A summary of the activity in the stock options granted under
ESOS 2006 for the year ended 31st March, 2016 is as follows:
During the year ended 31st March, 2016, the Company has allotted 3,185
fully paid-up equity shares of Rs. 1/- each of the Company (Previous
year 373,666) on exercise of options under ESOE-2006, for which the
Company has realised Rs. 0.03 crore (Previous year Rs. 3.83 crore) as
exercise money. The weighted average share price at the exercise date
was Rs. 134.70 per share (Previous year Rs. 168.73 per share).
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 the 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
options/RSUs do not carry rights to dividends or voting rights till the
date of exercise. Further, cancelled/lapsed options and RSUs are also
available for grant.
In terms of ESOS-2013, so far, the Company has granted 2,173,824 stock
options and 2,175,272 RSUs (Previous year 2,062,564 stock options and
2,063,938 RSUs) to the eligible employees of the Company and some of
its subsidiary companies. Further, 204,161 stock options and 215,772
RSUs (Previous year 100,421 stock options and 111,960 RSUs) have been
cancelled/lapsed and are available for grant as per term of the Scheme.
A summary of the activity in the stock options and RSUs granted under
ESOS-2013 for the year ended 31st March, 2016, is as follows:
During the year ended 31st March, 2016, the Company has allotted 2,193
fully paid-up equity share of Rs. 1/- each of the Company (Previous
year 18,848) on exercise of options under ESOS-2013 for which the
Company has realised Rs. 0.03 crore (Previous year Rs. 0.22 crore) as
exercise money. The weighted-average share price at the exercise date
was Rs. 114.30 per share (Previous year Rs. 154.54 per share).
The Fair Value of the options used to compute net Profit and earnings
per share have been done by an independent valuer using Black and
Scholes Model. The details of options granted during the year ended
31st March, 2016, the key assumptions and the Fair Value on the date of
grant are as under:
The expected volatility was determined based on the historical share
price volatility over the past period depending on life of the options
For the year ended 31st March, 2016, the Company determined Rs. 7.05
crore (Previous year Rs. 7.28 crore) as amortized compensation cost for
stock options granted including Rs. 0.14 crore (Previous year Rs. 0.06
crore) expenses relating to options granted to employees of a
subsidiary of the Company which has been realised from that company.
The Company measures compensation cost for the stock options granted
using intrinsic value method. Had the compensation cost been determined
in a manner consistent with fair value approach, the Company''s net
Profit and earnings per share as reported would have been as under:
6. 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 had transferred Rs. 8,647.37 crore from
Securities Premium Account to BRR, and till 31st March, 2015, Rs.
250.33 crore have been adjusted against BRR. During the year, following
expenses has been adjusted with BRR:
(a) Rs. 279.46 crore towards expenses on exited Projects
(b) Impairment loss of Rs. 367.31 crore (Net of deferred tax Rs. 194.39
(c) Provision of Rs. 35.50 crore towards diminution in value of
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. 682.27 crore
Basic EPS lower by Rs. 3.30
Diluted EPS lower by Rs. 3.30
7. Gain or (Loss) on foreign currency transaction and translation has
been accounted for under respective head of accounts depending upon the
nature of transaction. The details of net gain or (loss) included in
various head of accounts are as under:
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 instruments reduce the impact of
both favourable and unfavourable fluctuations.
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 officers, one being the Chief
Financial Officer. The RMB reports to the Board of Directors on the
scope of its activities.
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 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
fluctuations arising out of the timing mismatch in pricing the input
and output 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.
Coal and Furnace Oil
Smelting and other associated operations of aluminium require
significantamount of power. Such power is mostly supplied through
captive power generation units which are coal based. In order to meet
the gap between requirement of coal and its availability domestically,
sometimes coal is also imported. The domestic prices of coal are not
linked to any internationally traded price whereas the imported coal is
linked to internationally traded prices. Hence the imported coal price
fluctuates in line with the international prices. To mitigate this
risk, coal commodity derivatives are taken. Similarly, Furnace Oil is
also an important input for manufacturing alumina which is the input
for aluminium production. Furnace oil is sourced mainly from domestic
market but the price is linked to international crude price movement.
Hence, to mitigate this risk, furnace oil commodity derivatives are
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. Also, certain foreign
exchange future derivatives are taken for arbitrage between exchange
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.
9. Related Party Disclosures as per Accounting Standard (AS)-18:
A. List of Related Parties:
(a) Enterprises where control exists:
1 Hindalco Guinea SARL
2 Minerals & Minerals Limited
3 Utkal Alumina Technical & General Services Limited
4 Suvas Holdings Limited
5 Utkal Alumina International Limited
6 Aditya Birla Chemicals (India) Limited (Merged with Grasim Industries
Limited w.e.f. 1st April, 2015)
7 Aditya Birla Chemicals (Belgium) BVBA (Merged with Grasim Industries
Limited w.e.f. 1st April, 2015)
8 Renukeshwar Investments & Finance Limited
9 Renuka Investments & Finance Limited
10 Dahej Harbour and Infrastructure Limited
11 Lucknow Finance Company Limited
12 Hindalco - Almex Aerospace Limited
13 Hindalco do Brasil Indústria e Comércio de Alumina Ltda.
14 Tubed Coal Mines Limited
15 East Coast Bauxite Mining Company Private Limited
16 Mauda Energy Limited
17 Birla Resources Pty. Limited
18 Aditya Birla Minerals Limited
19 Birla Maroochydore Pty. Limited
20 Birla Nifty Pty. Limited
21 Birla Mt. Gordon Pty. Limited (Disposed of on 27th October, 2015)
22 AV Minerals (Netherlands) N.V.
23 AV Metals Inc.
24 Novelis Inc.
25 Novelis (India) Infotech Ltd.
26 4260848 Canada Inc.
27 4260856 Canada Inc.
28 8018227 Canada Inc.
29 8018243 Canada Limited (Amalgamated with Novelis Inc. w.e.f. 31st
30 Novelis Corporation
Aluminum Upstream Holdings LLC (Amalgamated with Novelis South America
31 w.e.f. 2nd December, 2015)
32 Eurofoil Inc. (USA) (Amalgamated with Novelis PAE Corporation w.e.f.
1st November, 2015)
33 Logan Aluminium Inc.
34 Novelis Acquisitions LLC
35 Novelis Global Employment Organization Inc. (Formerly known as
Novelis PAE Corporation change w.e.f. 15th December, 2015)
36 Novelis Holdings Inc.
37 Novelis South America Holdings LLC
38 Novelis Delaware LLC (Amalgamated with Novelis Inc. w.e.f. 31st
39 Albrasilis - Aluminio do Brasil Indústria e Comércio Ltda.
(Dissolved 18th November, 2015)
40 Novelis do Brasil Ltda.
41 Novelis Laminés France SAS
42 Novelis PAE SAS
43 Novelis Aluminium Beteiligungs GmbH
44 Novelis Deutschland GmbH
45 Novelis Sheet Ingot GmbH
46 Novelis Aluminium Holding Company
47 Novelis Italia SpA
48 Al Dotcom Sdn. Berhad (Dissolved w.e.f. 21st January, 2016)
49 Alcom Nikkei Specialty Coatings Sdn. Berhad
50 Aluminum Company of Malaysia Berhad
51 Novelis de Mexico SA de CV
52 Novelis Korea Limited
53 Novelis AG
54 Novelis Switzerland SA
55 Novelis UK Ltd.
56 Novelis Europe Holdings Limited
57 Novelis Services Limited
58 Novelis (Shanghai) Aluminum Trading Company
59 Novelis (China) Aluminum Products Co., Ltd.
60 Novelis MEA Ltd.
61 Novelis Vietnam Company Limited
62 Novelis Asia Holdings (Singapore) Pte. Ltd. (struck off w.e.f. 17th
63 Brecha Energetica Ltda.
64 Brito Energetica Ltda.
65 Novelis Services (North America) Inc.
(b) Other Related Parties:
1 Aditya Birla Science & Technology Company Private Limited
2 Idea Cellular Limited
3 Aluminium Norf GmbH
4 Deutsche Aluminium Verpackung Recycling GmbH
5 France Aluminium Recyclage SA
ii. Joint Ventures:
1 Mahan Coal Limited
2 Hydromine Global Minerals (GmbH) Limited
3 MNH Shakti Limited
iii. Trust of the Company:
1 Trident Trust
iv. Key Managerial Personnel:
Mr. D. Bhattacharya - Managing Director
Mr. Satish Pai - Deputy Managing Director
10. Previous year figures have been reclassified/regrouped to conform
to this year''s classification.