I. a) METHOD OF ACCOUNTING
The Financial Statements are prepared as per historical cost convention
and in accordance with the Generally Accepted Accounting Principles in
India, the provisions of the Companies Act 1956 , and the applicable
Accounting Standards notified under the Companies (Accounting
Standards) Rules, 2006. All Income and Expenditures having material
bearing on the Financial Statements are recognized on accrual basis.
b) USE OF ESTIMATES
The presentation of the Financial Statements in conformity with the
Generally Accepted Accounting policies requires, the management to make
estimates and assumptions that affect the reported amount of Assets and
Liabilities, Revenues and Expenses and disclosure of contingent
liabilities. Such estimation and assumptions are based on management''s
evaluation of relevant facts and circumstances as on date of Financial
Statements. Difference between the actual results and estimates are
recognized in the period in which the results are known / materialized.
II. REVENUE RECOGNITION
The Company recognizes Sales at the point of transfer of significant
risks and rewards of ownership to the customers. Sales are inclusive
of Excise Duty and Sales Tax and net of returns.
Revenue in respect of excise duty refund is recognized on accrual
Sales tax / Value added tax paid is charged to Profit and Loss
Accounts. Dividend income is recognized when right to receive is
established. Interest income is recognized on time proportion basis
taking into account, the amount outstanding and rate applicable.
III. EXCISE DUTY
Excise Duty recovered are included in sales. Excise Duty in respect of
increase / decrease in Finished Goods are shown separately as an item
of Manufacturing & Other Expenses and included in Valuation of Finished
IV. FIXED ASSETS
(a) Fixed assets are stated at cost (net of Cenvat), less accumulated
depreciation [other than freehold land where no depreciation is
(b) Capital Work in progress including capital advances are stated at
(c) Cost of Trial run Production incurred during the initial period of
production has been capitalized amongst the various heads of fixed
(d) Pre-operative expenditure incurred on projects has been / will be
capitalized amongst the various heads of fixed assets on the
commencement of the projects.
(e) All costs including financing costs, till commencement of
commercial production are capitalized
(f) Intangible assets are stated at cost of acquisition less
V. VALUATION OF INVENTORIES
Raw Materials, Trading Goods, - At Lower of Cost or Net Realizable
Stores & Spares & Semi Finished Value after considering credit
Goods of Vat and Cenvat.
Finished goods & By-Product - At Lower of the Cost or Net real
-izable value. finished (Includi
-ng excise duty in respect of
Cost of Finished Goods is determined using the absorption costing
principle. Cost includes cost of material consumed, labour and
systematic allocation of variable and fixed production overheads,
including Excise Duty at applicable rates.
VI. CASH FLOW STATEMENT
The Cash Flow Statement is prepared by the indirect method set out in
Accounting Standard 3 on Cash Flow Statements and presents the cash
flows by operating, investing and financing activities of the Company.
Cash and Cash equivalents presented in the Cash Flow Statement consist
of cash on hand and deposits with banks.
Investments are classified as Long Term & Current Investments. Long
Term Investments are valued at cost less provision for diminution other
than temporary, in value, if any. Current Investments are valued at
cost or fair value whichever is lower.
VIII. EMPLOYEE BENEFITS
(a) Short Term
Short Term employee benefits are recognized as an expense at the
undiscounted amount expected to be paid over the period of services
rendered by the employees to the company.
(b) Long Term
The Company has both defined contribution and defined benefit plans.
(c) Defined Contribution Plans
These are plans in which the Company pays pre-defined amounts to
separate funds and does not have any legal or informal obligation to
pay additional sums. These comprise of contributions to Employees
Provident Fund. The Company''s payments to the defined contribution
plans are reported as expenses during the period in which the employee
performs the services that the payment covers.
(d) Defined Benefit Plans
Expenses for defined benefit gratuity payment plans are calculated as
at the balance sheet date by independent actuaries in the manner that
distributes expenses over the employees working life. These commitments
are valued at the present value of the expected future payments, with
consideration for calculated future salary increases, using a
discounted rate corresponding to the interest rate estimated by the
actuary having regard to the interest rate on Government Bonds with a
remaining term i.e. almost equivalent to the average balance working
period of employees.
(e) Other Employee Benefit
Compensated absences which accrue to employees and which can be carried
to future periods but are expected to be encashed or availed in twelve
months immediately following the year end are reported as expenses
during the year in which the employees perform the services that the
benefit covers and the liabilities are reported at the undiscounted
amount of the benefits after deducting amounts already paid.
Income tax expenses comprise current tax and Deferred Tax charge or
credit. Provision for current tax is made on the basis of the
assessable income at the tax rate applicable to the relevant assessment
year. The Deferred Tax Assets and Deferred Tax Liability is calculated
by applying tax rate and tax laws that have been enacted or
substantively enacted by the Balance Sheet date. Deferred Tax Assets
arising mainly on account of brought forward losses and unabsorbed
depreciation under tax laws, are recognized, only if there is a virtual
certainty of its realization, supported by convincing evidence.
Deferred Tax Assets on account of other timing differences are
recognized only to the extent there is a reasonable certainty of its
realization. At each Balance Sheet date, the carrying amounts of
Deferred Tax Assets are reviewed to reassure realization.
X. METHOD OF DEPRECIATION
A. Depreciation on fixed assets [other than land where no depreciation
is provided] has been provided on straight-line method in accordance
with the provisions of section 205(2)(b) of the Companies Act, 1956, at
the rates specified in Schedule XIV to the Companies Act, 1956.
B. Depreciation in respect of plant and machineries has been provided
on the basis of triple shift working (except for Plant and Machineries
of Sponge Iron & Ferro Alloys Project on which depreciation has been
provided on continuous process plant working and depreciation on
Rolling Mill Plant has been provided on single shift working on the
basis of certificate received from management). Depreciation in respect
of fixed assets acquired / put to use during the years is charged on
pro-rata basis with reference to the date of installation of fixed
C. No Depreciation has been provided in respect of Capital Work in
D. Intangible assets (Software) are amortized for a period of 5 years.
XI. FOREIGN CURRENCY TRANSACTIONS
Transactions in the foreign currency, which are covered by forward
contracts, are accounted for at the contracted rate; the difference
between the forward rate and the exchange rate at the date of
transaction is recognized in the Profit and Loss Accounts over the life
of the contract. Transactions in the foreign currency other than those
covered by forward contract rates are recorded at rate of exchange in
force at the time of occurrence of transactions. Gain or Loss due to
fluctuation in exchange rates is dealt with through Profit and Loss
Account. Monetary Assets and Liabilities related to foreign currency
transactions remaining unsettled at the end of the year are translated
at the year-end rate. The difference in transactions of monetary
liabilities and related gains or losses on foreign exchange
transactions is recognized in the Profit and Loss Account.
XII. BORROWING COST
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying asset are capitalized as part
of cost of such asset. Other borrowing costs are recognized as an
expense in the period in which they are incurred
XIII. EARNING PER SHARE
Basic earning per share is calculated by dividing the net profit after
tax for the year attributable to Equity Shareholders of the Company by
the weighted average number of Equity Shares in issue during the year.
Diluted earning per Share is calculated by dividing net profit
attributable to equity Shareholders (after adjustment for diluted
earnings) by average number of weighted equity shares outstanding
during the year.
XIV. IMPAIRMENT OF ASSETS
The carrying value of assets of the Company''s cash generating units are
reviewed for impairment annually or more often if there is an
indication of decline in value based on internal/external factors. If
any indication of such impairment exists, the recoverable amounts of
those assets are estimated and impairment loss is recognized, if the
carrying amount of those assets exceeds their recoverable amount. The
recoverable amount is the greater of the net selling price and their
value in use. Value in use is arrived at by discounting the estimated
future cash flows to their present value based on appropriate discount
XV. PROVISIONS, CONTINGENT LIABILITY AND CONTINGENT ASSETS
(a) Provision involving substantial degree of estimation in measurement
is 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.
(b) Contingent liabilities are not recognized but are disclosed in the
(c) Contingent Assets are neither recognized nor disclosed in the
XVI. MISCELLANEOUS EXPENDITURE
Preliminary & Public Issue expenses are amortized to Profit and Loss
Account over a period of 5 years in equal installments.