a) Nature of Operation
Company is engaged in the business of manufacturing and trading of
Ferro Alloys and generation and supply of Wind Power.
b) Basis of Accounting
The financial statements have been prepared under historical cost
convention, on accrual basis and in accordance with generally accepted
accounting principles in India. The accounting policies are
consistently followed by the Company.
The financial statements comply, in all material respects, with
accounting standards as notified by Companies Accounting Standards
Rules, 2006 and the relevant provisions of the Companies Act, 1956.
c) Use of Estimates
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Difference
between the actual results and estimates are recognised in the period
in which the results are known/materialized.
d) Fixed Assets
Fixed Assets are stated at cost less accumulated depreciation and
impairment loss, if any. The cost of an asset comprises its purchase
price net of Cenvat credit plus any directly attributable costs of
bringing the asset to the working condition for it’s intended use. Pre
-operative expenses for major projects are also capitalised, where
e) Intangible Assets
Intangible Assets are stated at cost of acquisition less accumulated
amortization/ depletion. All costs, including financing costs till
commencement of production, net of charges on foreign exchange
contracts and adjustments arising from exchange rate variations
attributable to the intangible assets are capitalised.
i) Depreciation on Fixed Assets is provided on Straight Line Method in
the manner and the rates specified in Schedule XIV to the Companies
Act, 1956 over their useful life, except on additions made to Building
and Plant & Machineries of Ferro Alloys Units with effect from 1st
April 2006 on which depreciation has been provided on Written Down
Value method over their useful life.
ii) Intangible assets such as softwares, etc. are amortised based upon
their estimated useful lives of 5 years.
An asset is treated as impaired when the carrying cost of assets
exceeds its recoverable value. An impairment loss is charged to the
Profit and Loss Account in the year in which asset is identified as
impaired. The impairment loss recognized in prior accounting period is
reversed if there has been a change in the estimate of recoverable
Long term Investments are stated at cost. Provision for diminution in
the value of each long term investment is made to recognise a decline,
other than that of temporary in nature.
Inventories are valued at lower of cost or estimated net realisable
value. Cost of inventories comprises of cost of purchase, cost of
conversion and other costs including manufacturing overheads incurred
in bringing them to their respective present location and condition.
Raw Materials : At Weighted Average Cost
Finished Goods : At Standard Cost
Trading Stock and
Stock-in-Transit : At Acquisition Cost
and Stores and Spares : At Weighted Average Cost
Standard Cost of inventories approximates actual cost.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
Cost of finished goods includes excise duty.
j) Revenue Recognition
Revenue is recognised only when it can be reliably measured and it is
reasonable to expect ultimate collection.
i) Sale of Goods:
Revenue is recognised when the significant risks and rewards of
ownership of goods have passed to the buyer, which generally coincides
with delivery. It includes excise duty but excludes value added
tax/sales tax. Excise Duty deducted from turnover (gross) is the amount
that is included in the amount of turnover (gross) and not the entire
amount of liability that arose during the year.
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
iii) Export Benefits:
Export Entitlements in the form of Duty Drawback and Duty Entitlement
Pass book (DEPB) scheme are recognised in the Profit and Loss Account
when right to receive credit as per the terms of the scheme is
established in respect of exports made and when there is no significant
uncertainty regarding the ultimate collection of the relevant exports
Purchases are inclusive of freight and net of Cenvat Credit, trade
discount and claims.
k) Excise Duty and Sales Tax/Value Added Tax
Excise Duty is accounted on the basis of both, payments made in respect
of goods cleared as also provision made for goods lying in bonded
warehouse. Sales tax / Value Added Tax paid is charged to profit and
l) Cenvat Credit
Cenvat Credit on excise duty paid goods /Fixed Assets is accounted for
by reducing the acquisition cost of the related goods/ Fixed Assets.
m) Employee Benefits
Short term employee benefits are recognized as an expense at the
undiscounted amount in the profit and loss account of the year in which
the related service is rendered.
Post employment and other long term employee benefits are recognized as
an expense in the profit and loss account for the year in which the
employee has rendered services. The expense is recognized at the
present value of the amount payable determined using actuarial
valuation techniques. Actuarial gains and losses in respect of post
employment and other long term benefits are charged to the profit and
In respect of Employee Stock Option, the excess of fair price on the
date of grant, over the exercise price, is recognized as Deferred
Compensation cost and amortised over vesting period.
n) Foreign Currency transaction
i) Initial Recognition
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 prevailing at the
date of the transaction or that approximates the actual rate at the
date of the transaction..
Monetary items denominated in foreign currencies at the year end are
restated at the year end rates. 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;
Foreign currency assets and liabilities as on the Balance Sheet date
are revalued in the accounts on the basis of exchange rates prevailing
at the close of the period and exchange loss/gain arising there from,
is adjusted to the cost of fixed assets or charged to the Profit & Loss
Account, as the case may be.
iii) Forward Exchange Contracts
In case of transactions covered by forward contracts, the difference
between the contract rate and exchange rate prevailing on the date of
transaction, is adjusted to the cost of fixed assets or charged to the
Profit & Loss Account, as the case may be, proportionately over the
life of the contract.
o) Borrowing Cost
Borrowing costs relating to acquisition or construction of fixed assets
which takes substantial period of time to get ready for its intended
use are included in the cost of fixed assets to the extent they relate
to the period till such assets are ready to be put to use. Other
Borrowing costs are recognized as an expense in the year in which they
Current tax is determined as the amount of tax payable in respect of
taxable income for the period based on applicable tax rate and laws.
Deferred tax is recognised subject to consideration of prudence in
respect of deferred tax asset on timing differences being the
difference between taxable income and accounting income that originate
in one period and are capable of reversal in one or more subsequent
period and is measured using tax rates and laws that have been enacted
or substantively enacted by the Balance Sheet date. Deferred tax assets
are reviewed at each Balance Sheet date to re-assess realization.
q) Financial derivatives and Commodity Hedging Transactions
In respect of derivative contracts , premium paid and gains / losses on
settlement are recognised in the profit and loss account except in case
where they relate to the acquisition or construction of Fixed assets,
in which case, they are adjusted to the carrying cost of such assets.
r) Government grants and subsidies
Grants and subsidies from the government are recognised when there is
reasonable assurance that the grant/subsidy will be received and all
attaching conditions will be complied with.
When the grant or subsidy relates to an expense item, these are
deducted from related expense which it is intended to compensate. Where
the grants or subsidy relates to an asset, its value is deducted in
arriving at the carrying amount of the related asset.
s) Segment Reporting Policies
i) Identification of Segments:
The Company’s operating businesses are organised and managed separately
according to the nature of products, with each segment representing a
strategic business unit that offers different products and serves
different markets. The Identified segments are manufacturing of
ferro-alloys and wind power.
The analysis of geographical segment is based on the geographical
location of customers.
The geographical segments considered for disclosure are as follows:
- Sales within India include sales to customers located within India.
- Sales outside India include sales to customers located outside India.
ii) Allocation of common Costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
iii) Unallocated Items:
The corporate and other segment include general corporate income and
expense items, which are not allocated to any business segment.
t) Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognised but are disclosed in the
notes. Contingent Assets are neither recognized nor disclosed in the
u) Earnings Per Share
Basic earning per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period.
For the purpose of calculating diluted Earning Per Share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average no. of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
v) Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before
tax is adjusted for the effects of transactions of a non- cash nature
and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from regular revenue generating, financing and
investing activities of the Company are segregated. Cash and cash
equivalents in the balance sheet comprise cash at bank, cash/ cheques
in hand and short-term investments with an original maturity of three
months or less.
w) Lease Transaction
Where the Company is the lessee: Leases where the lessor effectively
retains substantially all the risks and benefits of ownership of the
leased term, are classified as operating leases. Operating lease’s
payments are recognized as an expense in the profit & loss Account.
Where the Company is a lessor: Assets subject to operating leases are
included in fixed assets. Lease income is recognized in the Profit &
Loss Account. Costs including depreciation are recognized as an expense
in the Profit & Loss Account.