1. Contingent Liabilities
(a) Guarantees
The Company has given guarantees aggregating 991.11 crores (31.03.2010
: 355.28 crores) to banks and financial institutions on behalf of
others. As at 31st March, 2011, the contingent liabilities under these
guarantees amounted to 991.11 crores (31.03.2010 : 355.28 crores).
(b) Claims not acknowledged by the Company
As at As at
31.03.2011 31.03.2010
crores crores
Rs. Rs.
(i) Excise 313.26 296.59
(ii) Customs 13.68 13.68
(iii) Sales Tax and VAT 494.54 587.97
(iv) State Levies 187.28 173.62
(v) Suppliers and Service Contract 72.21 71.02
(vi) Labour Related 38.84 36.92
(vii) Income Tax 119.79 143.44
(c) Claim by a party arising out of conversion arrangement - 195.82
crores (31.03.2010 : 195.82 crores). The Company has not acknowledged
this claim and has instead fi led a claim of 139.65 crores (31.03.2010
: 139.65 crores) on the party. The matter is pending before the
Calcutta High Court.
(d) The Excise Department has raised a demand of 235.48 crores
(31.03.2010 : 235.48 crores) denying the benefi t of Notifi cation
No. 13/2000 which provides for exemption to the integrated steel plant
from payment of excise duty on the freight amount incurred for transpor
ting material from plant to stock yard and consignment agents. The
Company fi led an appeal with CEST A T , K olkata and the order of the
department was set aside. The department has fi led an appeal in
Supreme Court where the matter is pending.
(e) TMT bars and rods in coil form are sent to external processing
agents (EPA) for decoiling and cutting into specifi ed lengths before
the products are despatched for sale. Excise department demanded duty
from the EPA, holding the activity as manufacture and ignoring the
payment of duty made by Tata Steel. An appeal against the order of the
Commissioner of Central Excise, Jamshedpur was fi led in CEST A T , K
olkata and was allowed in favour of the EPA. Subsequently, the
department challenged the same in Jharkhand High Court, Ranchi, which
is still pending for hearing. Subsequent demands in this regard have
not been adjudicated. The liability till
31st March 2011, if materialises, will be to the tune of 298.87 crores
(31.03.2010 : 291.22 crores). However, the company has already paid
duty amounting to 196.48 crores (2009-10: 189.52 crores) till date
based on the fi nal sale price of the material.
(f) The State Government of Odisha introduced Orissa Rural
Infrastructure and Socio Economic Development Act 2004 with effect
from February 2005 levying tax on mineral bearing land computed on the
basis of value of minerals produced from the mineral bearing land. The
Company had fi led a Writ Petition in the High Court of Odisha,
challenging the validity of the Act. Odisha High Court held in November
2005 that State does not have authority to levy tax on minerals. The
State Government of Odisha moved the Supreme Court against the order of
Odisha High Court and the case is pending with Supreme Court. The
liability, if it materialises, as at 31.03.2011 would be 1,562.72
crores (31.03.2010 : 1,277.74 crores).
(g) In terms of the agreements entered into between Tata Teleservices
Ltd. (TTSL), Tata Sons Ltd. (TSL) and NTT DoCoMo, Inc. of Japan
(Strategic Partner-SP), the Company was given by Tata Sons an option to
sell 52,46,590 equity shares in TTSL to the S P, as part of a secondary
sale of 25,31,63,941 equity shares effected along with a primary issue
of 84,38,79,801 shares by TTSL to the S P. Accordingly, the company
realised Rs. 60.91 crores on sale of these shares resulting in a Profit
of Rs. 49.77 crores during the year ended March 31, 2009.
Pursuant to the Rights Issue made in 2010-11, SPs shareholding in TTSL
has increased from 1,09,70,43,742 equity shares of Rs.10 each to
1,17,26,17,866 equity shares of Rs. 10 each as on March 31, 2011. The
shareholding of SP represents 26.27% of the paid up equity share
capital of TTSL on a fully diluted basis as against 26.01% prior to the
issuance and allotment of Rights Shares to them. If certain
performance parameters and other conditions are not met, should the SP
decide to divest its entire shareholding in TTSL, acquired under the
primary issue and the secondary sale, and should TSL be unable to fi nd
a buyer for such shares, the Company is obligated to acquire the
shareholding of the S P, at the higher of fair value or 50 percent of
the subscription purchase price, in proportion of the number of shares
sold by the company to the aggregate of the secondary shares sold to
the S P, or if the SP divests the shares at a lower price pay a
compensation representing the difference between such lower sale price
and the price referred to above. Further, in the event of breach of
the representations and warranties (other than title and tax) and
covenants not capable of specifi c performance, the Company is liable
to reimburse TSL, on a pro rata basis, upto a maximum sum of Rs. 78.75
crores. The exercise of the option by SP being contingent on several
variables the liability, if any, is remote and indeterminable. (h) The
Company has been paying royalty on coal extracted from its quarries
pursuant to the judgement and order dated 23.07.2002 passed by the
Jharkhand High Court. However, the State Government demanded royalty on
processed coal at rates applicable to processed coal. Though the
Company has contested the above demand, it has started paying, under
protest, royalty on processed coal from November 2008. The incremental
royalty, paid under protest, during November 2008 to March 2011 of
54.22 crores has been charged off to Profit and Loss Account. The
incremental amount (including interest), if payable, for the period
till October 2008 works out to 355.95 crores (31.03.2010 : 344.19
crores) and has been considered as a contingent liability.
(i) Uncalled liability on partly paid shares and debentures 0.01 crore
(31.03.2010 : 0.01 crore).
(j) Bills discounted 212.38 crores (31.03.2010 : 274.55 crores).
2. The Company has given undertakings to: (a) ICICI Bank Ltd.
(formerly ICICI), IFCI and IIBI not to dispose of its investment in the
Indian Steel Rolling Mills Ltd. (ISRM). The ISRM is under liquidation.
(b) IDBI not to dispose of its investment in Wellman Incandescent India
Ltd. (c) IDBI and ICICI Bank Ltd. (formerly ICICI) not to dispose of
its investment in Standard Chrome Ltd. (d) Standard Chartered Bank,
Hong Kong and Shanghai Banking Corporation not to dispose of majority
stake in Tata Steel (KZN) (Pty) Ltd. (e) Mizuho Corporate Bank
Limited, not to dispose of its investments in Tata NYK Shipping Pte.
Limited, (minimal stake required to be able to provide a corporate
guarantee towards long term debt). (f) Bank of America, NA and the
Royal Bank of Scotland, NV not to dispose of the management control
(indirectly held) in Tata Steel Global Procurement Co. Pte Ltd. (g)
State Bank and others not to dispose of its investment in Centennial
Steel Company Ltd. (CSCL) below 51% of CSCLs paid up equity share
capital. (h) State Bank of India not to dispose of the management
control (indirectly held) in Tata Steel UK Holdings Ltd. and Tata Steel
Netherlands Holding B V and other companies (the borrower group),
without the prior consent of the respective financial
institutions/banks so long as any part of the loans/facilities
sanctioned by the institutions/banks to these companies remains
outstanding.
The Company has furnished a Security Bond in respect of its immovable
property to the extent of Rs. 20 crores in favour of the Registrar of the
Delhi High Court and has given an undertaking not to sell or otherwise
dispose of the said property.
The Promoters of Tata BlueScope Limited (TBSL) (i.e. BlueScope Steel
Limited, Australia and Tata Steel Ltd.) have given an undertaking to
IDBI Trusteeship Services Ltd., Debenture Trustees, not to dispose of
the management control in TBSL.
The Promoters (i.e. L & T Infrastructure Development Projects Ltd. and
Tata Steel Ltd.) combined investments in The Dhamra Port Company Ltd.,
(DPCL) representing 51% of DPCLs paid-up equity share capital are
pledged with IDBI Trusteeship Services Ltd.
The Promoters (i.e. The Tata Power Company Limited and Tata Steel
Ltd.) combined investments in Industrial Energy Limited, (IEL)
representing 51% of IELs paid-up equity share capital are pledged with
Infrastructure Development Corporation Limited (IDFC).
The Company has agreed, if requested by Tata Steel UK Holdings Ltd.
(TSUKH), an indirect wholly owned subsidiary, to procure an injection
of funds to reduce the outstanding net debt in TSUKH and its
subsidiaries, to a mutually accepted level.
3. The Company had, on 20th August, 2005, signed an agreement with the
Government of Jharkhand to participate in a special health insurance
scheme to be formulated by the Government of Jharkhand for the purpose
of providing medical facilities to the families of the people below
poverty line. The state government would develop a suitable scheme and
the Company has agreed to contribute to such scheme, when operational,
a sum of Rs. 25 crores annually for a period of 30 years or upto the year
of operation of the scheme whichever is less. The scheme is yet to be
formed and no contribution has been made till 31st March, 2011.
4. The Board of Industrial and Financial Reconstruction (BIFR)
sanctioned a scheme for rehabilitation of The Indian Steel and Wire
Products Limited (ISWP), a sick company in FY 2003-04. In terms of the
scheme, the Company –
(a) took management control of ISWP; (b) acquired 4,74,130 Equity
Shares from the existing promoters at 1/- per share;
(c) converted 5.00 crores of dues into 50,00,000 fully paid Equity
Shares at 10 each and 10.88 crores into unsecured loan to be Rs.Rs. repaid
by ISWP in 8 annual installments starting from FY 2004-05; (d) has an
advance of 11.50 crores as at 31.03.2011 (31.03.2010 :
14.91 crores) with ISWP towards one time settlement with financial
institutions for capital expenditure and margin for working capital.
5. Estimated amount of contracts remaining to be executed on Capital
Account and not provided for : 9,605.46 crores (31.03.2010 : 10,698.54
crores).
6. Profit and Loss Account
a) i) Provision for employee separation compensation (ESS) has been
calculated on the basis of net present value of the future monthly
payments of pension and lump sum benefi ts under the scheme including Rs.
27.53 crores (31.03.2010 : Rs. 46.34 crores) in respect of schemes
introduced during the year. ii) The amounts payable within one year
under the ESS aggregates to Rs. 175.27 crores (31.03.2010 : Rs. 192.85
crores).
b) The manufacturing and other expenses and depreciation shown in the
Profit and Loss Account include Rs. 72.90 crores (2009- 10 : Rs. 39.49
crores) and Rs. 2.79 crores (2009-10 : Rs. 1.94 crores) respectively in
respect of Research and Development activities undertaken during the
year.
c) The company has opted for accounting the exchange differences
arising on reporting of long term foreign currency monetary items in
line with Companies (Accounting Standards) Amendment Rules 2009
relating to Accounting Standard 11 (AS-11) notifi ed by Government of
India on 31st March, 2009 which allows foreign exchange difference on
long-term monetary items to be capitalised to the extent they relate to
acquisition of depreciable assets and in other cases to amortise over
the period of the monetary asset/ liability or the period up to 31st
March, 2011, whichever is earlier.
As on 31st March, 2011, Rs.Nil (31.03.2010 : Credit of Rs.206.95 crores)
remains to be amortised in the Foreign Currency Monetary Items
Translation Difference Account after taking a credit of Rs.261.44
crores (2009-10 : Charge of Rs. 85.67 crores) in the Profit & Loss
Account and Rs. 2.07 crores (net of deferred tax Rs. 3.57 crores) [2009-10
: Rs.47.35 crores (net of deferred tax Rs. 24.38 crores)] adjusted against
Securities Premium Account during the current financial year on
account of amortisation. The Depreciation for the year ended 31st
March, 2011 is higher by Rs.0.48 crore (2009-10 : Rs.0.41 crore) and the
Profit before taxes for the year ended 31st March, 2011 is higher by RS.
208.99 crores (2009-10 : Lower by Rs. 561.60 crores).
D. Promoters holding together with its subsidiary is more than 20%
Tata Sons Ltd.
E. Key Management Personnel – Whole time Directors
Mr. H. M. Nerurkar
24. Earnings in Foreign Exchange
(i) Export of steel and other materials (at F.O.B. value) 2,252.37
crores (2009-10 : 2,034.81 crores) [including value of exports through
export houses].
(ii) Interest received 57.90 crores (2009-10 : 20.60 crores).
(iii) Others 63.70 crores (2009-10 : 44.07 crores).
25. Derivative Instruments
I) The Company has entered into the following derivative instruments :
a) The Company uses foreign currency forward contracts to hedge its
risks associated with foreign currency fl uctuations. The use of
foreign currency forward contracts is governed by the Companys
strategy approved by the Board of Directors, which provide principles
on the use of such forward contracts consistent with the Companys Risk
Management Policy. The Company does not use forward contracts for
speculative purposes.
26. Previous years figures have been recast/restated where
necessary.
27. Figures in italics are in respect of the previous year.
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