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National Aluminium Company

BSE: 532234|NSE: NATIONALUM|ISIN: INE139A01034|SECTOR: Aluminium
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Notes to Accounts Year End : Mar '18

Note No. 1. Corporate Background

National Aluminium Company Limited is a Navaratna Central Public Sector Enterprise (CPSE) under Ministry of Mines, Government of India, incorporated under the relevant provisions of the Companies Act and is listed in the stock exchanges in India. The Company is engaged in the business of manufacturing and selling of Alumina and Aluminium. The Company is operating a 22.75 lakh TPA Alumina Refinery plant located at Damanjodi in Koraput district of Odisha and 4.60 lakh TPA Aluminum Smelter located at Angul, Odisha. The Company has a captive bauxite mines adjacent to refinery plant to feed the bauxite requirement of Alumina Refinery and also a 1200 MW captive thermal power plant adjacent to Smelter plant to meet the power requirement of Smelter. Besides, the Company is also operating four wind power plants with total capacity of 198.40 MW located in the state of Andhra Pradesh (Gandikota), Rajsthan (Jaisalmer & Devikot) and Maharashtra (Sangli) to harness the renewable energy and to comply with its Renewable Purchase Obligation.

The company has made strategic investments in one associates and two joint venture company also.

Note No.2. Statement of Compliance:

All the Indian Accounting Standards issued and notified by the Ministry of Corporate Affairs under the Companies (Indian Accounting Standards) Rules, 2015 (as amended) and are applicable for the year and relevant to the Company have been taken into consideration and complied with without any exception while preparing the standalone financial statements of the Company.

Note No. 3 : Critical accounting judgments and key sources of estimation uncertainty

The preparation of the financial statements requires the management to make complex and/or subjective judgements, estimates and assumptions about matters that are inherently uncertain. These estimates and assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent liabilities and assets at the date of the financial statements and also revenues and expenses during the reported period.

The estimates and associated assumptions are based on past experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised.

3.1 Critical accounting judgments:

Apart from those involving estimations that the management have made in the process of applying the Company’s accounting policies that have the most significant effect on the amounts recognised in the financial statements, management has decided that reporting of Company’s financial assets at amortised cost would be appropriate in the light of its business model and have confirmed the Company’s positive intention and ability to hold these financial assets to collect contractual cash flows.

3.2 Key sources of estimation uncertainty:

The following are the key assumptions concerning the future, and other key sources of estimation of uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:

3.2.1 Impairment

Investments in Associates and other investments, loans and advances, property, plant and equipment and intangible assets are reviewed for impairment whenever events and changes in circumstances indicate that the carrying value may not be fully recoverable or atleast annually. Future cash flow estimates of Cash Generating Units which are used to calculate the asset’s fair value are based on expectations about future operations primarily comprising estimates about production and sales volumes, commodity prices, reserves and resources, operating rehabilitations and restoration costs and capital expenditure.

3.2.2 Useful lives of property, plant and equipment

The Company reviews the useful life of property, plant and equipment at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods.

3.2.3 Assessment of Mining Reserve

Changes in the estimation of mineral reserves where useful lives of assets are limited to the life of the project, which in turn is limited to the life of the probable and economic feasibility of reserve, could impact the useful lives of the assets for charging depreciation. Bauxite reserves at Mines is estimated by experts in extraction, geology and reserve determination and based on approved mining plan submitted to Indian Bureau of Mines (IBM).

3.2.4 Obligation for post-employment benefit Liability

Liability for post-employment benefit and long term employee benefit is based on valuation by the actuary which is in turn based on realistic actuarial assumptions.

3.2.5 Provisions & Contingent Liabilities

The amount recognised as a provision, including tax, legal, restoration and rehabilitation, contractual and other exposures or obligations is the best estimate of the consideration required to settle the related liability, including any interest charges, taking into account the risks and uncertainties surrounding the obligation. The Company assess its liabilities and contingent liabilities based upon the best information available, relevant tax and other laws, contingencies involved and other appropriate requirements.

3.2.6 Fair value measurements and valuation processes

For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date;

- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

- Level 3 inputs are unobservable inputs for the asset or liability.

4.1. Title deeds have been executed for freehold land acquired through Govt. of Odisha, except for land measuring 66.92 acres. The Company is in the process of conversion of freehold land for Industrial use and has taken-up matter with Revenue Authorities.

4.2. Registration formalities in respect of office space of 6,459 Sq.ft at Kolkata purchased from Kolkata Municipal Development Authority with a carrying amount of Rs.5.50 crore is under progress.

4.3. During the year the Company has acquired leasehold land of 715.89 acre at a cost of Rs. 105.95 crore for its Coal Mines Division. Being an operating lease, the cost of such acquisition has been recognised as prepaid expenses to be amortised over the period of lease. Besides an amount of Rs. 17.12 crore has been paid towards stamp duty and registration fees for leasehold land for Bauxite mines.

5.1 The Company has 2245.55 acres of leasehold land in respect of which lease deeds are yet to be executed. However, the Company has been permitted by the concerned authorities to carry on its operation on the said land.

5.2 Consequent to introduction of Goods and Services Tax Law w.e.f. 01.07.2017, the undisputed amount of indirect tax credit (Cenvat, Service Tax, CVD, OVAT) amounting to Rs. 95.78 crore as on the transition date has been adjusted with the GST liability. The disputed amount of tax credit of pre GST regime aggregating to Rs.209.99 crore is continuing in the books as current assets out of which an amount of Rs. 200.27 crore being doubtful of realisation has been provided for.

Note:

6.1 Cost of inventories recognised as expenses during the year is Rs. 4,143.52 crore (previous year : Rs. 3,403.89 crore).

6.2 Cost of inventories recognised as expenses includes Rs. 5.47 crore (previous year: Rs. 13.02 crore) in respect of write-downs of inventory for non moving items.

6.3 Inventories are hypothecated/pledged against cash credit facility.

6.4 Method of valuation of inventories is stated in note 3.10 of Significant Accounting Policies.

7 A.1 Earmarked balance with scheduled banks represents amount deposited towards unclaimed dividend amounting to Rs.1.70 crore and deposit of Rs.155.02 crore (including accrued interest) under court’s directive towards disputed electricity duty.

7.A.2 Amount due for credit to Investor’s Education and Protetion Fund at the end of the current year Rs. Nil. (previous year Rs. Nil)

(i) The Company has only one class of equity shares having a par value of Rs. 5 each. Each holder of equity shares is entitled to one vote per share and carries proportionate right to dividends declared by the Company based on their holdings.

(ii) During 2016-17 Company bought back 64,43,09,628 numbers of equity shares of Rs. 5 each which has led to decrease in the equity share capital from Rs. 1,288.62 crore to Rs. 966.46 crore.

(iii) Goverment of India has divested 27,77,65,383 Nos. fully paid equity shares (through OFS 17,80,69,927 Nos, through employee offer 76,17,057 Nos and through ETF 9,20,78,399 Nos), consequent to which the holding of Government of India has come down from 1,44,14,82,490 Nos (74.58%) as on 31.03.2017 to 1,16,37,17,107 Nos (60.20%) as on 31.03.2018.

8.1 The Company had bought back its own equity shares on Septmeber 26, 2016 at a premium utilising general reserve amounting to Rs. 2,834.97 crore and consequently a sum equal to the nominal value of the shares so bought back amounting to Rs. 322.16 crore had been transferred to the capital redemption reserve account in terms of section 69 of the Companies Act, 2013.

8.2 During the year the Company has paid interim dividend @ Rs.4.7 per equity share amounting in total Rs. 908.48 crore. During the preceeding year, Company paid interim dividend of Rs. 541.22 crore for financial year 2016-17 and final dividend of Rs. 144.97 crore for financial year 2015-16. Dividend tax of Rs. 184.94 crore, Rs. 110.18 crore and Rs. 29.51 crore on these respective amounts of dividend have been paid by the Company.

8.3 The Board has recommended a final dividend of Re. 1.00 per share (20% on the eaquity shares of Rs. 5 each) amounting to Rs. 193.29 crore for approval of shareholders in the ensuing Annual General Meeting. Considering the applicable dividend distribution tax the amount of dividend payout works out to Rs. 232.64 crore.

9.1 Accrued wages and salaries includes liability provision of Rs.279.15 crore towards impending pay revision of non-executive employees effecting from 01.01.2017 besides oustanding dues of Rs.96.68 crore towards performance related pay and Rs. 36.80 crore for settlement of differential gratuity liability to emloyees superannuated during the period 01.01.2017 to 28.02.2018 arising due to enhancement of gratuity limit from Rs.10 lakh to Rs.20 lakh.

9.2 Dues payable to Micro and Small Enterprises as defined in the Micro, Small and Medium Enterprises Development Act, 2006 have been determined to the extent such parties have been identified on the basis of information available with the Company. The disclosure pursuant to said Act in respect of such dues included in trade paybales (note-21) and other financial liabilites (note-22) is as under:

10.1 Provision related to retirement and other long term employee benefits are provided, in the case of gratuity as per the Gratuity Act, and for other benefits as per Company rules. Liability for the same is recognised on the basis of actuarial valuation by independent actuary.

10.2 Provision for asset restoration obligation and constructive obligation is made based on management estimation in line with Ind AS 16 and Ind AS 37 respectively.

10.3 Provision for CSR expenditure is the unspent CSR obligation of the Company prior to introduction of Companies Act, 2013.

11.1 The Energy Department of Govt. of Odisha vide its notification dated May 12, 2017 has enhanced the rate of electricty duty from Rs.0.30 paise per unit to Rs.0.55 paise per unit of consumption. Aggrieved by the said notification, Confederation of Captive Power Plants, Odisha of which the Company is a member, has challenged the order in the Hon’ble High Court of Orissa. As an interim measure, the Hon’ble High Court in its order dated 01.06.2017 has directed the petitioner to deposit the differential electricity duty in a sepatrate interest bearing bank account which shall be subject to the result of writ petition. Accordingly, the Company provided for electricity duty expenditure at the enhanced rate and deposited the money into a separate interest bearing bank account as per direction of the Court. Interest earned on such deposits is not recognised as income but treated as liability along with the unpaid enhanced electricity duty. The liability including accrued interest on such deposits as at reporting date is Rs. 155.02 crore. Besides, the amount also includes undisputed liability for the month of Mar-18 to be paid in Apr. 18.

11.2 As per the provisions of Odisha Electricity Regulatory Commission (OERC) notification dated 1st August 2015, the Company, being an obligated entity has the obligation to generate power equal to 7.5% (previous year 4.5%) of its total consumption from renewable sources comprising of 3% (previous year 1.50%) from solar renewable source and 4.5% (previous year 3%) from non-solar renewable sources Cumulative non-solar obligation as on 31.3.2018 is Rs.16.42 crore (as on 31.03.2017 Rs.3.16 crore) towards 1,09,444 (previous year 21,066) nos. of non-solar Renewabe Energy Certificates (REC) valued @ Rs. 1,500 (previous year Rs 1,500) per certificate. During the year 1,49,829 nos. (previous year 1,14,493 nos) of non-solar REC has been retained by the Company as a compliance to Renewable Purchase Obligation.

Due to non-fulfillment of the obligation to generate required quantum of power from renewable source of solar energy, the Company has provided cumulative liability upto 31.03.2018 for Rs. 130.45 crore (previous year Rs. 57.18 crore) towards 3,72,716 (previous year 1,63,371) nos. of solar REC value at Rs. 3,500 (previous year Rs. 3,500) per certificate.

Claims against the Company not acknowleged as debt includes:

i. Demand from various statutory authorities towards income tax, sales tax, excise duty, custom duty, service tax, entry tax and other government levies. The Company is contesting the demands before the respective appellate authorities. It is expected that the ultimate outcome of these proceedings will be in favour of the Company and will not have any material adverse effect on the Company’s financial position and results of operation.

ii. Claims of contractors for supply of materials/services pending with arbitration/courts have arisen in the ordinary course of business. The Company reasonably expects that these legal actions will be concluded and determined in favour of the Company and will not have any material adverse effect on the Company’s results of operation or financial position.

12.1 Domestic sale of alumina and alumnium includes excise duty amounting to Rs.4.22 crore and Rs.124.74 crore considered upto 30.06.2017 (previous year Rs.15.88 crore and Rs.478.63 crore respectively for full year). Goods and service taxes collected under Goods and Service Tax Act are not included in sales.

Note:

13.1 Unclaimed deposits lying in books for a period of more than 3 years as on the reporting date are written back and recognized as income.

Notes:

14.A. Employee benefits

i) Pay revision of executive employees effective from 01.01.2017 has been implemented in the month of January, 2018. Differential expenditure over and above the liability provided till 31.03.2017 for the period from 01.01.2017 to 31.03.2017 is charged off in the current year.

ii) Pay revision of non-executive employees is due from 01.01.2017 for which Long Term Wage Settlement is awaited. The Company has provided liability for pay revision for the current year Rs.223.72 crore (Previous year Rs.55.43 crore for the period 01.01.2017 to 31.03.2017).

iii) Consequent upon the Govt of India notification dated 29.03.2018 in respect of the Payment of Gratuity Act, 1972 for enhancement of ceiling limit of gratuity from Rs. 10.00 lakh to Rs.20 lakh per employee, the Company has considered the enhanced gratuity limit for valuation of gratuity liability of its employees on roll as on 31.03.2018 based on actuarial valuation. In addition an amount of Rs. 36.80 crore has been provided towards differential gratuity to be settled directly by the Company to the employees superannuated during the period from 01.01.2017 to 31.03.2018.

iv) In terms of approval accorded by the Board of Directors in their 299th meeting held on 10th May, 2017, the Company has revised its Post Retirement Medical Benefit Scheme (PRMBS) w.e.f. 01.04.2017. The benefits as available by the ammended scheme has been considered in the valuation of liability by actuary.

14.B. Employee benefit plans

14.B.1 Defined contribution plans

a) Provident fund: The Company pays fixed contribution to Provident Fund at predetermined rates, to a separate trust,which invests the funds in permitted securities. On contributions, the trust is required to pay a minimum rate of interest, to the members, as specified by Govt. of India.

b) Pension fund: The Company pays fixed contribution to the trustee bank of PFRDA, which in turn invests the money with the insurers as specified by the employee concerned. The company’s liability is limited only to the extent of fixed contribution.

14.B.2 Defined benefit plans

a) Gratuity: Gratuity payable to employees as per The Payment of Gratuity Act subject to a maximum of Rs.20,00,000/. The gratuity scheme is funded by the Company and is managed by a separate trust. The liability for gratuity under the scheme is recognised on the basis of actuarial valuation.

b) Post retirement medical benefit: The benefit is available to retired employees and their spouses who have opted for the benefit. Medical treatment as an in-patient can be availed from the Company’s hospital/Govt.Hospital/ hospitals as per company’s rule. They can also avail treatment as out patient subject to ceiling limit of expenses fixed by the Company. The liability under the scheme is recognised on the basis of actuarial valuation.

c) Settling-in-benefit: On superannuation/retirement/termination of service, if opted for the scheme, the transfer TA is admissible to the employees and / or family from the last head quarters to the hometown or any other place of settlement limited to distance of home town. Transport of personal conveyance shall also be admissible. The liability for the same is recognised on the basis of actuarial valuation.

d) NALCO Benevolent Fund Scheme : The objective of the scheme is to provide financial assistance to families of the members of the scheme who die while in employement of the Company. As per the scheme there will be contribution by members @ Rs.30/- per member per death, in the event of death of a member while in the service of the company and matching contribution by the Company. The liability for the same is recognised on the basis of actuarial valuation.

e) NALCO Retirement Welfare Scheme : The objective of the scheme is to provide financial assistance as a gesture of goodwill for post retirement support to employees retiring from the services of the company. As per the scheme the recovery form each employee member would be Rs. 10/- per retiring member. The Company would provide equivalent sum as matching contribution. The liability for the same is recognised on the basis of actuarial valuation.

f) Superannuation gift scheme:The objective of the scheme is to recognise the employees superannuating or retiring on medical ground from the services of the Company. The scheme includes a gift item worth of Rs. 25000/- per retiring employees to be presented on superannuation/ retirement. The liability for the same is recognised on the basis of actuarial valuation.

14.B.3 Other long term employees benefits

a) Compensated absences :The accumulated earned leave, half pay leave & sick leave is payble on separation, subject to maximum permissible limit as prescribed in the leave rules of the Company. During the service period encashment of accumulated leave is also allowed as per company’s rule.The liability for the same is recognised on the basis of actuarial valuation.

b) Long Service Reward : The employee who completes 25 years of service are entitled for a long service reward which is equal to one month basic pay and DA. The liability for the same is recognised on the basis of actuarial valuation.

c) NEFFARS : In the event of disablement/death, the Company pays monthly benefit to the employee/ nominee at their option and on deposit of prescribed amount as stipulated under the scheme upto the date of notional superannuation. The liability for the same is recognised on the basis of actuarial valuation.

The employee benefit plans typically expose the Company to actuarial risks such as actuarial risk, investment risk, interest risk, longevity risk and salary risk:-

i. Actuarial risk: It is the risk that benefits will cost more than expected. This can arise due to one of the following reasons: Adverse Salary Growth Experience: Salary hikes that are higher than the assumed salary escalation will result into an increase in obligation at a rate that is higher than expected.

Variability in mortality rates: If actual mortality rates are higher than assumed mortality rate assumption than the gratuity benefits will be paid earlier than expected. Since there is no condition of vesting on the death benefit, the acceleration of cashflow will lead to an actuarial loss or gain depending on the relative values of the assumed salary growth and discount rate.

Variability in withdrawal rates: If actual withdrawal rates are higher than assumed withdrawal rate assumption then the gratuity benefits will be paid earlier than expected. The impact of this will depend on whether the benefits are vested as at the resignation date.

ii. Investment risk: For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may not be the fair value of instruments backing the liability. In such cases, the present value of the assets is independent of the future discount rate. This can result in wide fluctuations in the net liability or the funded status if there are significant changes in the discount rate during the inter-valuation period.

iii. Interest risk: The defined benefit obligation calculated uses a discount rate based on government bonds. If bond yields fall, the defined benefit obligation will tend to increase.

iv. Longevity risk: The present value of the defined benefit plan liability is calculated by refernce to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.

v. Salary risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.

14.C Sensitivity analysis of defined benefit plans

Signficant acturial assumption for determination of defined benefit plan are discount rate, expected salary growth, attrition rate and moratlity rate. The sensitivity analysis below have been based on reasonably possible changes of the respective assumptions occuring at the end of the reporting period while holding all other assumptions constant.

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of defined benefit obligation has been calculated using projected unit credit method at the end of the reporting period, which is same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.

There is no change in the methods and assumptions used in preparing the senstivity analysis from prior years.

15.1 Expenditure on Corporate Social Responsibility.

a) Gross amount to be spent by the company during the year ended March 31, 2018 is Rs.27.88 crore (March 31, 2017 Rs.27.56 crore)

b) Amount spent during the year ended March 31, 2018

i) Construction/acquisition of assets Rs. Nil crore (previous year Rs. 0.32 Crore)

ii) On purpose other than (i) above Rs. 29.01 crore (previous year Rs. 29.69 crore) Total Rs. 29.01 crore (previous year Rs.30.01 crore)

16.1 Dispute with the Department of Water Resources, Govt. of Odisha over interest claim on water charges dues have been settled during the year. In terms of the settlement, the Company paid Rs.58.18 crore at one go discharging the liability accrued till 31.10.2017. Consequent to the settlement excess liability of Rs. 785.71 crore provided for in the books till 31.03.2017 has been written back and considered as an exceptional item.

16.2 In conformity with DPE guidelines, the Board of Directors of the Company, in their meeting held on 5th of May 2018, approved amendment to the old pay revision circular of 2007 withdrawing the item of “Interest Subsidy” from the cafeteria of perks. Accordingly, the value of interest subsidy on loans to employees, hitherto kept as advance recoverable from them reducing employee benefits expenditure by the corresponding amount, stands not realisable. Since the matter was challanged by the employees in Court, provisions were duly made against such advance considering the same as doubtful of recovery. The development subsequent to the balance sheet date is considered as an adjusting event and accordingly the interest subsidy amount earlier converted into advance is treated as employee benefit expenditure of the current year. The corresponding provision held there against is written back in the current year and taken to income. Both the expenditure and write back of provision have been taken as exceptional items.

16.3 The Central Government introduced Mines and Minerals (Contribution to District Mineral Foundation) Rules by which the Company is liable to contribute @30% of royalty on minerals and coals as Contribution to District Mineral Foundation (DMF). As per the Rules, contribution to be made was made effective from 12.01.2015. The date of applicability was challanged by Federation of Indian Mineral Industries of which the Company is a member. As per Hon’ble Supreme Court verdict dated 13.10.2017, contribution to DMF for minerals and coals will be effective from 17.09.2015 and 20.10.2015 respectively, the dates when the rates were prescribed by the Central Government or with effect from the date on which the DMF was established by the State Government whichever is later. Accordingly, the Company reversed the liability provided for the period from 12.01.2015 to 16.09.2015 for minerals and claimed refund of DMF contribution paid on coal procurement during the period from 12.01.2015 to 19.10.2015. The reversal of liabilty and claim of refund is taken into income of the current year as an exceptional item.

17. Segment information

17.1 Products from which reportable segments derive their revenues

Information reported to the chief operating decision maker (CODM) for the purpose of resource allocation and assessment of segment performance focuses on the types of goods delivered. The directors of the company have chosen to organise the Company around differences in products. No reporting segment have been aggregated in arriving at the reportable segments in the Company. Specifically, the Company’s reportable segment under Ind AS 108- Operating Segments are as follows:

i) Chemical segment

ii) Aluminium segment

The Company has considered Chemicals and Aluminium as the two primary operating business segments. Chemicals include Calcined Alumina, Alumina Hydrate and other related products. Aluminium includes aluminium ingots, wire rods, billets, strips, rolled and other related products. Bauxite produced for captive consumption for production of alumina is included under chemicals and power generated for captive consumption for production of Aluminium is included under Aluminium segment. Wind Power Plant commissioned primarily to harness the potential renewable energy sources is included in the unallocated Common segment.

17.2 Segment revenues and results

The following is an analysis of the Company’s revenue and results from operations by reportable segment

i) Inter-segment transfer of Calcined Alumina is considered at average sales realization from export sales during the period less freight from Refinery to Port at Vizag plus export incentive. Transfer of power from Aluminium segment to Chemical segment is considered at the annual / periodic average purchase price of power from State Grid at Alumina Refinery.

ii) Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities. Revenue, expenses, assets and liabilities, which relate to the enterprise as a whole and are not allocable on a reasonable basis, have been included under Unallocated Common segment.

17.2 Financial risk management objectives

In the course of its business, the Company is exposed primarily to fluctuations in foreign currency exchange rates, interest rates, equity prices, liquidity and credit risk, which may adversely impact the fair value of its financial instruments. The Company has a risk management policy which not only covers the foreign exchange risks but also other risks associated with the financial assets and liabilities such as interest rate risks and credit risks.

The objectives of the Company’s risk management policy are, inter-alia, to ensure the following:

i) Sustainable business growth with financial stability;

ii) Provide a strategic framework for Company’s risk management process in alignment with the strategic objectives including the risk management organisation structure;

iii) That all the material risk exposures of Company, both on and off-balance sheet are identified, assessed, quantified, appropriately mitigated and managed and

iv) Company’s compliance with appropriate regulations, wherever applicable, through the voluntary adoption of international best practices, as far as may be appropriate to the nature, size and complexity of the operations.

The risk management policy is approved by the board of directors. The Internal Control Team would be responsible to evaluate the efficacy and implementation of the risk management system. It would present its findings to the Audit Committee every quarter. The Board is responsible for the Company’s overall process of risk management. The Board shall, therefore, approve the compliance and risk management policy and any amendments thereto, and ensure its smooth implementation.

17.3 Market risk

Market risk is the risk of any loss in future earnings (spreads), in realizable fair values (economic value) or in future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, liquidity and other market changes. The Company may also be subjected to liquidity risk arising out of mismatches in the cash flows arising out of sales proceeds and funds raised and loan repayments/prepayments. Future specific market movements cannot be normally predicted with reasonable accuracy.

17.4 Foreign currency risk management

Foreign currency risk emanates from the effect of exchange rate fluctuations on foreign currency transactions. The overall objective of the currency risk management is to protect the Company’s income arising from changes in foreign exchange rates. The policy of the Company is to avoid any form of currency speculation. Hedging of currency exposures shall be effected either naturally through offsetting or matching assets and liabilities of similar currency, or in the absence of thereof, through the use of approved derivative instruments transacted with reputable institutions. The Currency risk is measured in terms of the open positions in respective currencies vis-a-vis the Company’s operating currency viz. INR. A currency gap statement shall be prepared to find the gap due to currency mismatch.

The fluctuation in foreign currency exchange rates may have impact on the income statement and equity, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the respective consolidated entities.

The Company undertakes transactions denominated in foreign currency; consequently, exposures to exchange rate fluctuations arise. Exchange rate are managed within approved policy parameters utilising forward foreign exchange contracts.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:

17.4.1 Foreign currency sensitivity analysis

The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in accordance with its risk management policies.

The foreign exchange rate sensitivity is calculated for each currency by aggregation of the net foreign exchange rate exposure of a currency and a simultaneous parallel foreign exchange rates shift in the foreign exchange rates of each currency by 10%.

The following analysis is based on the gross exposure as of the relevant balance sheet dates, which could affect the income statement. There is no exposure to the income statement on account of translation of financial statements of consolidated foreign entities.

The following table sets forth information relating to foreign currency exposure as at March 31, 2018 and March 31, 2017.

17.5 Other price risks

17.5.1 Equity price sensitivity analysis

The Company is not exposed to equity price risk arising from equity instruments as all the equity investments are held for strategic rather than trading purposes.

17.6 Credit risk management

Credit risk is the risk of financial loss arising from counterparty failure to repay or service debt according to the contractual terms or obligations. Credit risk encompasses both the direct risk of default and the risk of deterioration of creditworthiness as well as concentration risks. There is no signficant credit exposure as advance collection from customer is made.

Financial instruments that are subject to concentrations of credit risk, principally consist of investments classified as loans and receivables, trade receivables, loans and advances and derivative financial instruments. None of the financial instruments of the Company result in material concentrations of credit risks.

17.7 Liquidity risk management

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements.

Company has established an appropriate liquidity risk management framework for the management of the Company’s short-term, medium-term and long-term funding liquidity management requirements. The Company manages liquidity risk by maintaing adequate reserves and banking facilities by continuously monitoring forecast and actual cashflows and by matching the maturity profiles of financial assets and financial laibilities.

18. Related party disclosures

18.1 Related parties

A. Key Managerial Personnel:

I) Whole time Directors

(a) Dr. T K Chand Chairman-Cum-Managing Director

(b) Shri K C Samal Director (Finance)

(c) Shri V Balasubramanyam Director (Production)

(d) Shri B K Thakur Director (HR)

(e) Shri S K Roy Director (Proj & Tech)

Others

Shri K N Ravindra Executive Director-Company Secretary (upto 31.05.2017)

Shri N K Mohanty Company Secretary (w.e.f 01.06.2017)

II) Part time Official Directors: (Nominee of Govt. of India):

(a) Shri Subhash Chandra, IFS (upto 16.02.2018)

(b) Dr N K Singh, IFS (upto 27.03.2018)

(c) Dr. K Rajeswara Rao, IAS (w.e.f 19.02.2018)

(d) Shri Anil Kumar Nayak, IOFS (w.e.f 27.03.2018)

III) Part time non official (Independent) Directors:

(a) Shri Dipankar Mahanta

(b) Shri S Sankararaman

(c) Shri Pravat Keshari Nayak

(d) Prof.Damodar Acharya

(e) Shri Maheswar Sahu

(f) Smt. Kiran Ghai Sinha

(g) Shri N N Sharma (w.e.f 06.09.2017)

(h) Smt. Achla Sinha (w.e.f 08.09.2017)

B. Joint Ventures & associates

(a) Angul Aluminium Park Pvt. Ltd.

(b) NPCIL-NALCO power company Ltd.

(c) GACL NALCO Alkalies & Chemicals Pvt. Ltd.

C. Post Employment Benefit Plan

(a) Nalco Employees Provident Fund Trust

(b) Nalco Employees Group Gratuity Trust

D. Entity controlled by a person identified in (A) as KMP (a) Nalco Foundation

E. Government that has control or significance influence:

(a) Govt. Of India

F. Entities on which Govt. of India has control or significant influence (CPSEs)

The Company has major business transactions during the year with the following CPSEs.

i) Purchase of Goods and Services

a) Indian Oil Corporation Ltd.

b) Bharat Petroleum Corporation Ltd.

c) Hindustan Petroleum Corporation Ltd.

d) Mahanadi Coalfields Ltd.

e) Northern Coalfields Ltd.

f) Singareni Collieries Ltd.

g) Western Coalfields Ltd.

h) Eastern Coalfields Ltd.

i) Numaligarh Refinery Ltd. j) Bharat Earthmovers Ltd.

k) Bharat Heavy Electrical Ltd.

l) Mineral Exploration Corporation Ltd.

m) Balmer Lawrie & Co.

n) East Coast railways

o) Vizag Port Trust

p) MECON Limited.

q) Engineers India Ltd.

ii) Sale of Goods

a) National Small Industries Corporation (NSIC)

b) Steel Authority of India Ltd.

c) Rashtriya Ispat Nigam Ltd.

d) National Thermal Power Corporation Ltd.

19. Regrouping of previous year’s figures

Previous year’s figures have been regrouped/rearranged wherever necessary to make them comparable

Source : Dion Global Solutions Limited
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