(a) Basis of Accounting :
The Financial Statements are prepared as a going-concern under
historical cost convention on an accrual basis and in accordance with
the Companies Act, 1956 except those items covered under Accounting
Standard - 30 on Financial instruments : Recognition and Measurement
which have been measured at their fair value . Accounting policies not
stated explicitly otherwise are consistent with generally accepted
(b) Use of Estimates:
The presentation 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 the estimates are recognised in the
period in which the results are known/materialized.
(c) Borrowing Cost:
Borrowing Cost attributable to the acquisition or construction of
qualifying assets are capitalised as part of the cost of such assets
upto the date when such assets are ready for intended use. Other
borrowing costs are charged as expense in the year in which they are
(d) Fixed Assets:
Fixed Assets are stated at cost (net of Modvat/Cenvat/Value Added Tax)
less accumulated depreciation and impairment loss.
(e) Expenditure During Construction Period:
All pre-operative project expenditure (net of income accrued) incurred
upto the date of commercial production is capitalised.
(i) Depreciation has been provided on Fixed Assets on straight line
method at the rates and in the manner specified in Schedule XIV to the
Companies Act, 1956, except in respect of additions arising on account
of Insurance spares, on additions/extensions forming an integral part
of existing plants and on the revised carrying amount of the assets
identified as impaired on which depreciation has been provided over
residual life of the respective fixed assets.
(ii) Amortisation of leasehold land and buildings has been done in
proportion to the period of lease.
(iii) Fixed Assets where ownership vests with the Government/Local
authorities are amortised at the rates of depreciation specified in
Schedule XIV to the Companies Act, 1956.
(g) Intangible Assets:
Intangible Assets are stated at cost of acquisition less accumulated
amortisation. Technical know-how is amortised over the useful life of
the underlying plant. Amortisation is done on straight line basis.
Software is amortised on Straight Line basis over the useful life of
the asset or 5 years which ever is earlier.
(i) Investments are classified as investments in Subsidiaries (valued
at cost), Associates (valued at cost except for investments in
redeemable cumulative preference shares of associate which are at
amortised cost), Available for Sale, Held for Trading and Held To
Maturity within the meaning of Accounting Standard 30 on Financial
Instruments: Recognition and measurement read with the limited
revisions of Accounting Standard 21 on Consolidated Financial
Statements & Accounting Standard 23 on Accounting for Investments in
(ii) Investments are recorded as Long Term Investments unless they are
expected to be sold within one year. Investments in subsidiaries and
associates are valued at cost except for investments in redeemable
cumulative preference shares of associate which are at amortised cost
less any provision for impairment. Investments are reviewed for
impairment if events or changes in circumstances indicate that the
carrying amount may not be recoverable.
(iii) Investments classified as Available for Sale are initially
recorded at cost and then remeasured at subsequent reporting dates to
fair value. Unrealised gains/losses on such investments are recognised
directly in Investment Revaluation Reserve Account. At the time of
disposal, derecognition or impairment of the investments, cumulative
gain or loss previously recognised in the Investment Revaluation
Reserve Account is recognised in the Statment of Profit and Loss.
(iv) Investments classified as Held for Trading that have a market
price are measured at fair value & gain/loss arising on account of fair
valuation is routed through Statement of Profit and Loss and those that
do not have a market price and whose fair value cannot be reliably
measured are carried at cost.
(v) Investments classified as Held to Maturity are measured at
amortised cost using an effective interest rate method.
(i) Inventories are valued at lower of cost or net realisable value
except for scrap and by-products which are valued at net realisable
(ii) Cost of inventories of finished goods and work-in-process includes
material cost, cost of conversion and other costs.
(iii) Cost of inventories of raw material and material cost of finished
goods and work-in-process is determined on First In First Out (FIFO)
basis except Rock phosphate and stores and spare parts which are valued
at weighted average cost.
(j) Premium on Redemption of Debentures:
Premium on redemption of debentures is provided for on an accrual basis
and charged to Statement of Profit and Loss using an effective interest
(k) Foreign Currency Transactions:
(i) Transactions denominated in foreign currencies are normally
recorded at the exchange rate prevailing on the date of the
(ii) Monetary items denominated in foreign currencies at the year end
are restated at year end rates. In case of monetary items which are
hedged by derivative instruments, the valuation is done as per
Accounting Standard - 30, Financial Instruments: Recognition and
Measurement read with accounting policy on derivative instruments. The
fair value of foreign currency contracts are calculated with reference
to current forward exchange rates for the contracts with similar
(iii) Non monetary foreign currency items are carried at cost.
(iv) Any income or expense on account of exchange difference either on
settlement or on translation is recognised in the Statement of Profit
and Loss except in respect of long term Foreign Currency monetary Items
which are not covered by Accounting Standard (AS 30) on Financial
instruments; Recognition and Measurement relatable to acquisition of
depreciable fixed assets, such difference is adjusted to the carrying
cost of the depreciable fixed assets. In respect of other long term
Foreign Currency Monetary items, the same is transferred to Foreign
Currency Monetary Translation Difference Account and amortised over
the balance period of such long term Foreign Currency Monetary items
but not beyond March 31, 2020.
(l) Issue expenses:
Expenses of Debenture/Bond/Floating Rate Note issues are charged to
Statement of Profit and Loss using an effective interest rate method.
Expenses related to equity & equity related instruments are adjusted
against the security premium account.
(m) Employee Benefits:
(i) Short term employee benefits are recognised as an expense at the
undiscounted amount in the Statement of Profit and Loss of the year in
which the related service is rendered. Provision for compensated
absences to employees is on actual basis for the portion of accumulated
leave which an employee can encash.
(ii) Post employment and other long term employee benefits are
recognised as an expense in the Statement of Profit and Loss for the
year in which the employee has rendered services. The expense is
recognised at the present value of the amounts payable determined using
actuarial valuation techniques. Actuarial gains and losses in respect
of post employment and other long term benefits are charged to the
Statement of Profit and Loss.
(n) Revenue Recognition:
(i) Revenue is recognised only when it can be reliably measured and it
is reasonable to expect ultimate collection. Revenue from operations
includes sale of goods, services, scrap, excise duty, export incentives
and are net of sales tax/Value Added Tax, rebates and discounts.
Dividend income is recognised when right to receive the payment is
established by the Balance Sheet Date. Interest income is recognised on
time proportion basis taking into account the amount outstanding and
(o) Export incentives:
Duty drawback is recognised at the time of exports and the benefits in
respect of advance license received by the company against export made
by it are recognised as and when goods are imported against them.
(p) Import of copper concentrate and sale of copper and slime:
In accordance with the prevailing international market practice,
purchase of Copper Concentrate and sale of Copper and Slimes are
accounted for on provisional invoice basis pending final invoice in
terms of Purchase Contract/Sales Contract respectively. The cases where
quotational period price are not finalised as at the year end are
restated at forward LME/LBMA rates as on the date of year end and
adjustments are made based on the metal contents as per laboratory
assessments done by the company pending final invoice.
(q) Derivative Instruments:
In order to hedge its exposure to foreign exchange, interest rate and
commodity price risks, the company enters into forward, option, swap
contracts and other derivative financial instruments. The company
neither hold nor issue any derivative financial instruments for
Derivative financial instruments are initially recorded at their fair
value on the date of the derivative transaction and are re- measured at
their fair value at subsequent balance sheet dates.
Changes in the fair value of derivatives that are designated and
qualify as fair value hedges are recorded in the Statement of Profit
and Loss. The hedged item is recorded at fair value and any gain or
loss is recorded in the Statement of Profit and Loss and is offset by
the gain or loss from the change in the fair value of the derivative.
Changes in the fair value of derivatives that are designated and
qualify as cash flow hedges and are determined to be an effective hedge
are recorded in Hedging Reserve account. Any cumulative gain or loss on
the hedging instrument recognised in Hedging Reserve is kept in Hedging
Reserve until the forecast transaction occurs. Amounts deferred to
Hedging Reserve are recycled in the Statement of Profit and Loss in the
periods when the hedged item is recognised in the Statement of Profit
and Loss or when the portion of the gain or loss is determined to be an
Derivative financial instruments that do not qualify for hedge
accounting are marked to market at the balance sheet date and gains or
losses are recognised in the Statement of Profit and Loss immediately.
Hedge accounting is discontinued when the hedging instrument expires or
is sold, terminated or exercised, or no longer qualifies for hedge
accounting. If a hedged transaction is no longer expected to occur, the
net cumulative gain or loss recognised in Hedging Reserve is
transferred to net profit or loss for the year.
Derivatives embedded in other financial instruments or other host
contracts are treated as separate derivatives when their risks and
characteristics are not closely related to those of host contracts and
the host contracts are not carried at fair value with unrealised gains
or losses reported in the Statement of Profit and Loss.
(r) Convertible notes:
Convertible notes issued in foreign currency are convertible at the
option of the holder into ordinary shares of the Company as per the
terms of the issue. Conversion option which is not settled by
exchanging a fixed amount of cash for a fixed number of shares is
accounted for separately from the liability component as derivative and
initially accounted for at fair value. The liability component is
recognized initially at the difference between the fair value of the
note and the fair value of the conversion option. Directly attributable
costs are allocated to the liability component and the conversion
option in proportion to their initial carrying amounts. Subsequent to
initial recognition, the liability component of a compound financial
instrument is measured at amortized cost using the effective interest
rate method. The conversion option is subsequently measured at fair
value at each reporting date, with changes in fair value recognized in
the Statement of Profit and Loss. The conversion option is presented
together with the related liability.
Provision for current tax is made after taking into consideration
benefits admissible under the provisions of the Income Tax Act, 1961.
Deferred tax resulting from timing differences between book and
taxable profit is accounted for using the tax rates and laws that have
been enacted or substantively enacted as on the balance sheet date. The
deferred tax asset is recognised and carried forward only to the extent
that there is reasonable/virtual certainty that asset will be realised
(t) Impairment of Assets:
The carrying amount of assets are reviewed at each Balance Sheet date
if there is any indication of impairment based on internal/external
factors. An asset is treated as impaired when the carrying cost of
assets exceeds its recoverable value. An impairment loss is recognised
in the Statement of Profit and Loss where the carrying amount of an
asset exceeds its recoverable amount. The impairment loss recognised in
prior accounting periods is reversed if there has been a change in the
estimate of recoverable amount.
(u) Provision, Contingent Liabilities and Contingent assets:
Provisions involving substantial degree of estimation in measurement
are recognised 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
Financial Statements. Contingent Assets are neither recognised nor
disclosed in the financial statements.
(v) Segment Reporting:
The Company identifies primary business segment based on the different
risks and returns, the organization structure and the internal
reporting systems. The operating segments are the segments for which
separate financial information is available and for which operating
profit/loss amounts are evaluated regularly by the Board of Directors
in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. Segment revenue, segment
results, segment assets and segment liabilities have been identified to
segments on the basis of their relationship to the operating activities
of the segment.
Inter-segment revenue is accounted on the basis of transactions which
are primarily determined based on market / fair value factors.
Revenue, expenses, assets and liabilities which relates to the Company
as a whole and are not allocable to segments on reasonable basis have
been included under unallocated revenue / results / assets /
(w) Cash Flow Statement:
Cash flows are reported using indirect method, whereby profit/(loss)
before extraordinary items and tax is adjusted for the effects of
transactions of non-cash nature and any deferrals or accruals of past
or future cash receipts or payments. The cash flows from operating,
investing and financing activities of the Company are segregated based
on the available information.
ii) 1,671,144,924 (Previous year 1,671,144,924) equity Shares are held
by Twinstar Holdings Limited, the holding company (Excluding shares
against which ADRs are issued).
119,750,659 Equity Shares (Previous year 102,453,600) are held by The
Madras Aluminium Company Limited, fellow subsidiary. Vedanta Resources
Plc is the ulitmate holding company and doesnot hold any equity shares
of the company.
v) Other disclosures
(a) The company has one class of equity shares having a par value of
Rs.1 per share. Each shareholder is eligible for one vote per share
held. The dividend proposed by the Board of Directors is subject to the
approval of the shareholders in the ensuing Annual General Meeting,
except in case of interim dividend. In the event of liquidation of
company, the holders of equity shares will be entitled to receive any
of the remaining assets of the company, after distribution of all
preferential amounts, in proportion to their shareholding.
(b) ADS shareholders do not have right to attend the General meeting in
person and also do not have right to vote. They are represented by
depository, CITI Bank N.A. New York.
(c) For terms of conversion of 4% Convertible Senior Notes of 00
each, Refer Note no.5(c)
vi) In terms of Scheme of Arrangement (Scheme) as approved by the
Hon''ble High Court of Judicature at Mumbai, vide its order dated April
19, 2002 the company during 2002-2003 reduced its paid up share capital
by X 10.03 Crore. There are 3,75,544 equity shares of RS. 1 each
(Previous year 3,75,544 equity shares of Rs. 1 each) pending clearance
from NSDL/CDSL. A Special Leave Petition filed in the Hon''ble Supreme
Court of India against the judgement of Hon''ble High Court of Mumbai by
SEBI and Department of Company Affairs has been inter-alia dismissed.
The Company has filed application in Hon''ble High Court of Mumbai to
cancel these shares, the decision on which is pending.