Tata Steel

1.  Contingent Liabilities (a) Guarantees
 
 The Company has given guarantees aggregating Rs. 81.22 crores
 (31.03.2008 : Rs. 106.22 crores) to banks and financial institutions on
 behalf of others. As at 31st March, 2009, the contingent liabilities
 under these guarantees amounted to Rs. 81.22 crores (31.03.2008 : Rs.
 106.22 crores).
 
 (c) Claim by a party arising out of conversion arrangement - Rs. 195.82
 crores (31.03.2008 : Rs. 195.82 crores). The Company has not
 acknowledged this claim and has instead filed a claim of Rs. 139.65
 crores (31.03.2008 : Rs. 139.65 crores) on the party. The matter is
 pending before the Calcutta High Court.
 
 (d) The Excise Department has raised a demand of Rs. 235.48 crores
 (31.03.2008: Rs. 235.48 crores) denying the benefit of Notification No.
 13/2000 which provides for exemption to the integrated steel plant from
 payment of excise duty on the freight amount incurred for transporting
 material from plant to stock yard and consignment agents. The Company
 filed an appeal with CESTAT, Kolkata and the order of the department
 was set aside. The department has filed an appeal in Supreme Court
 where the matter is pending.
 
 (e) The State Government of Orissa 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 filed a Writ Petition in the High Court of Orissa,
 challenging the validity of the Act. Orissa High Court held in November
 2005 that State does not have authority to levy tax on minerals. The
 State Government of Orissa moved the Supreme Court against the order of
 Orissa High Court and the case is pending with Supreme Court. The
 liability, if it materialises, as at 31.03.2009 would be Rs. 1,041.67
 crores (31.03.2008 : Rs. 588.78 crores).
 
 (f) The Industrial Tribunal, Ranchi has passed an award on 20.10.1998
 with reference to an industrial dispute regarding permanent absorption
 of contract labourers engaged by the Company prior to 1981, directing
 the Company to absorb 658 erstwhile contract labourers w.e.f.
 22.08.1990. A single bench of the Patna High Court has upheld this
 award. The Company challenged this award before the division bench of
 the Jharkhand High Court which has set aside the order of the single
 bench of Patna High Court as well as the Tribunal and remanded back the
 case to the tribunal for fresh hearing on all issues in accordance with
 law. The Industrial Tribunal, Ranchi by its award dated 31.03.2006
 pronounced on 13.06.2006, held that the contract workers were not
 engaged by the management of the Company in the permanent and regular
 nature of work before 11.2.1981 and they are not entitled to permanent
 employment under the principal employer. The Tata Workers Union has
 filed SLP against this award in the Supreme Court. The liability, if it
 materialises, would be to the tune of Rs. 155.79 crores (31.03.2008 :
 Rs. 133.10 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 SP, 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 SP. Accordingly, the company
 realised Rs. 60.91 crores on sale of these shares resulting in a profit
 of Rs. 49.77 crores.
 
 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 find a buyer for such shares, the Company is obligated to
 acquire the shareholding of the SP, 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 SP, 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 specific
 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 2009 of Rs. 4.07 crores has been
 charged off to Profit and Loss Account. The incremental amount, if
 payable, for the period till October 2008 works out to Rs. 232.57
 crores (31.03.2008 : Nil) and has been considered as a contingent
 liability.  (i) Uncalled liability on partly paid shares and debentures
 Rs. 0.01 crore (31.03.2008 : Rs. 0.01 crore).  (j) Bills discounted Rs.
 472.14 crores (31.03.2008 : Rs. 434.52 crores).  (k) Cheques discounted
 : Amount indeterminate.  3.  The Company has given undertakings to (a)
 IDBI Bank Ltd. and IFCI not to dispose of its investment in The
 Tinplate Company of India Limited, (b) 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, (c)
 IDBI not to dispose of its investment in Wellman Incandescent India
 Ltd., (d) IDBI and ICICI Bank Ltd.  (formerly ICICI) not to dispose of
 its investment in Standard Chrome Ltd., (e) SBI, State Bank of Indore,
 State Bank of Hyderabad, State Bank of Patialaand WBIDC Ltd., not to
 dispose of its investment in Hooghly Met Coke and Power Co. Ltd., (f)
 State Bank of India not to dispose of its investment in Tata BlueScope
 Ltd. (g) Standard Chartered Bank and Hong Kong and Shanghai Banking
 Corporation, not to dispose of majority stake in Tata Steel (KZN) (Pty)
 Ltd., (h) 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),
 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 eight 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 (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 lELs paid-up
 equity share capital are pledged with Infrastructure Development
 Corporation Limited (IDFC).
 
 The Company has provided a financing commitment to the extent of £ 425
 million to Tata Steel Europe Limited, an indirect wholly-owned
 subsidiary of the Company, to enable it to meet the financial covenants
 of the Senior Facilities Agreements with its Lenders.
 
 2.  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. 25.00 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, 2009.
 
 3.  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 Re. 1/- per share; (c) converted
 Rs. 5.00 crores of dues into 50,00,000 fully paid Equity Shares at Rs.
 10 each and Rs. 10.88 crores into unsecured loan to be repaid by ISWP
 in 8 annual installments starting from FY 2004-05; (d) has an advance
 of Rs. 19.47 crores as at 31.03.2009 (31.03.2008: Rs. 27.12 crores)
 with ISWP towards one time settlement with financial institutions for
 capital expenditure and margin for working capital.
 
 4.  The Company had issued during 1992-93,1,15,50,000 Secured Premium
 Notes (SPN) of Rs. 300 each aggregating to Rs. 346.50 crores with
 Warrants attached for subscribing to one ordinary share of Rs. 10 each
 per SPN at a premium of Rs. 70 per share. The warrant holders have
 exercised their option in respect of 1,11,61,201 Detachable Warrants.
 For the balance of 3,88,799 Detachable Warrants for which option has
 not been exercised, the option is deemed to have lapsed except in
 respect of approximately 12,446 Detachable Warrants applicable to
 matters which are in dispute and for which the option is deemed to be
 kept alive for the time being. In terms of issue of SPNs, they have
 been redeemed on 24.08.1999.
 
 5.  Estimated amount of contracts remaining to be executed on Capital
 Account and not provided for : Rs. 10,152.99 crores (31.03.2008 : Rs.
 6,633.20 crores).
 
 6.  Profit and Loss Account
 
 a) i) Provision for employee separation compensation has been
 calculated on the basis of net present value of the future monthly
 payments of pension and lump sum benefits under the scheme including
 Rs. 76.93 crores (31.03.2008 : Rs. 57.31 crores) in respect of schemes
 introduced during the year, ii) The amounts payable within one year
 under the ESS aggregates to Rs. 199.93 crores (31.03.2008 : Rs. 204.73
 crores).  iii) The amount shown under Miscellaneous Expenditure on ESS
 account, represents the balance amount to be amortised over five years
 or the financial year ending 31st March, 2010, whichever is earlier.
 
 b) The manufacturing and other expenses and depreciation shown in the
 Profit and Loss Account include Rs. 37.65 crores (2007-08 : Rs. 34.47
 crores) and Rs. 2.05 crores (2007-08 : Rs. 1.90 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) notified by Government of
 India on 31st March, 2009.
 
 As a result of this change in the accounting, the exchange difference
 of Rs. 529.15 crores (net of tax) recognised in the Profit & Loss
 Account up to last financial year ended 31st March, 2008 relating to
 long term monetary items in foreign currency has been adjusted against
 opening revenue reserve. As on 31st March, 2009, Rs. 471.66 crores
 remains to be amortised in the Foreign Currency Monetary Items
 Translation Difference Account after taking a charge of Rs. 30.79
 crores in the Profit & Loss Account and Rs. 32.54 crores (net of
 deferred tax Rs. 16.76 crores) adjusted against Securities Premium
 Account during the current financial year on account of amortisation.
 Consequently the Depreciation for the year ended 31st March, 2009 is
 higher by Rs. 2.04 crores and the Profit before taxes for the year
 ended 31st March, 2009 is higher by Rs. 889.47 crores.
 
 7.  Other Significant Disclosures
 
 a) The amount due to Micro and Small Enterprises as defined in the The
 Micro, Small and Medium Enterprises Development Act, 2006 has been
 determined to the extent such parties have been identified on the basis
 of information available with the Company.  The disclosures relating to
 Micro and Small Enterprises as at 31st March, 2009 are as under:
 
 Notes :
 
 (i) The Company has disclosed Business Segment as the primary segment.
 Segments have been identified taking into account the nature of the
 products, the differing risks and returns, the organisational structure
 and internal reporting system. The Companys operations predominantly
 relate to manufacture of Steel and Ferro Alloys and Minerals business.
 Other business segments comprise Tubes and Bearings.
 
 (ii) Segment Revenue, Segment Results, Segment Assets and Segment
 Liabilities include the respective amounts identifiable to each of the
 segments as also amounts allocated on a reasonable basis. The expenses,
 which are not directly relatable to the business segment, are shown as
 unallocated corporate cost. Assets and liabilities that cannot be
 allocated between the segments are shown as unallocated corporate
 assets and liabilities respectively.
 
 FM mill was discontinued from December 2008 onwards but the actual
 production has been included in the above figure.  Licensed capacity is
 not applicable in terms of the Government of Indias Notification No.
 S.O. 477 (E) dated 25th July, 1991.
 
 (1) Excluding items intended for captive consumption.
 
 (2) As certified by the Managing Director and accepted by the Auditors.
 
 (3) Including production for works use and for conversion by the third
 parties into finished goods for sale.
 
 (4) Including semi-finished steel produced 8,32,695 tonnes (2007-08 :
 3,86,251 tonnes) and steel transferred for manufacture into Tubes/C.R.
 Strips at the Companys Tubes Division 3,31,550 tonnes
 (2007-08:3,37,987 tonnes) I steel transferred for manufacture of Cold
 Rolled Coils at the Companys Cold Rolling Mill Division (West)
 1,62,270 tonnes (2007-08:1,71,942 tonnes) and steel trans- ferred for
 manufacture of Wire Rods 2,26,475 tonnes (2007-08 :2,08,973 tonnes) at
 the Companys Wire Rod Mill (West) division.
 
 (5) Including Tubes used in manufacture of Tubular Steel Structures and
 Scaffoldings.
 (6) There is no separate installed capacity.
 (7) Previous years figures have been recast wherever necessary.
 
 8.  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 fluctuations relating to certain
 firm commitments and forecasted transactions. 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.  Outstanding Short Term Forward Exchange Contracts entered
 into by the Company on account of payables :
 
 9.  The Company raised Rs. 3,578.75 crores (US $ 875 million) through
 the issue of Foreign Currency Convertible Alternative Reference
 Securities (CARS) during FY 2007-08. The CARS will be convertible
 into either qualifying securities (which may be in the form of
 depository receipts with restricted rights of withdrawal representing
 underlying ordinary shares with differential rights as to voting) or
 ordinary shares only between 4th September, 2011 to 6th August, 2012
 and are redeemable in foreign currency only in September, 2012, if not
 converted into equity. The CARS will be convertible at a conversion
 price of Rs. 758.10 per share as adjusted for the rights issue. The
 CARS carry a coupon rate of 1% p.a. The outstanding CARS, if any, at
 maturity will be redeemable at a premium of 23.34% of the principal
 amount, with an effective YTM of 5.15%.
 
 Premium payable on redemption and the expenses related to the issue of
 CARS are adjusted against the Securities Premium Account.  Changes to
 premium payable on account of exchange fluctuation is transferred to
 Foreign Currency Monetary Items Translation Difference Account in
 line with Companies (Accounting Standards) Amendment Rules 2009
 relating to Accounting Standard 11 (AS-11) notified by Government of
 India on 31st March, 2009. Such exchange fluctuation on the premium
 payable is amortised over the balance period of CARS but not beyond
 31st March, 2011, by adjusting the same to Securities Premium Account.
 Accordingly, an amount of Rs. 32.54 crores (net of deferred tax Rs.
 16.76 crores) has been amortised and adjusted against Securities
 Premium Account during the current financial year. During 2007-08, Rs.
 10.51 crores (net of deferred tax Rs. 5.41 crores) being the gain on
 revaluation of the premium payable was adjusted against the Securities
 Premium Account. Fees to Mandated Lead Arrangers for revision in
 certain terms and conditions of standby letter of credit in the issue
 of CARS has been considered as issue expenses based on a legal opinion.
 The issue expenses of Rs. 229.74 crores (2007-08: Rs. 111.86 crores)
 has been adjusted to Securities Premium Account.
 
 10.  Previous years figures have been recast/restated wherever
 necessary.
 
 11.  Figures in italics are in respect of the previous year.