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Scan Steels

BSE: 511672|ISIN: INE099G01011|SECTOR: Steel - Sponge Iron
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Dec 13, 16:00
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Scan Steels is not listed on NSE
Mar 15
Notes to Accounts Year End : Mar '18

*The Company has allotted in earlier years 12,849,605 Number of 1% Non - Convertible & Non-Cumulative Redeemable Preference Shares(NCRPS) , at face value of Rs. 10 each fully paid up with a premium of Rs. 30 each . The preference shareholders have preferential right over payment of dividend and settlement of principal amount upon liquidation, over common shareholders. The dividend shall be paid out upon availability of profits. The preference shares shall be redeemed out of profits or out of the proceeds of fresh issue of shares after the end of the Fifth year but within a period of 20 years either in one or on more trenches as may be determined by the board of directors of the company in its absolute discretion at such price as may be decided but in any case not less than price of Rs.44.

*Post the applicability of Goods & Service Tax ( GST ) with effect from July 01, 2017, revenue from operations is disclosed net of GST. Accordingly, revenue from operations and other expenses for the year ended on March 31, 2018 are not comparable with the previous year figures.

**Other Operating Income includes sale of services alongwith gain or loss from Commodity/Equity Derivative transactions under F&O segment of various commodities through Stock Exchange. The profit/(Loss) on the settlement date is recognised in the financial statement and the fair value of derivative instruments measured at FVTOCI of the instruments in hand as on the reporting date and shown under Reserves for fair valuation of derivative instruments to be reclassified to profit & loss account on future settlement date.

NOTE-1 Additional Disclosures As per Ind AS 108 Operating Segments

(i) Revenue From Customers Exceeding 10% of Total revenue

As per Para 34 of Ind AS 108 ,if revenues from transactions with a single external customer amounts to 10 per cent or more of an entity''s revenue, the company is required to disclose, the total amount of revenue from each such customer, and the identity of the segment or segments reporting the revenue.The company''s revenue from any single customer doesnt exceed 10% of the total revenue and hence the disclosure requirement is not applicable

(ii) Extent of Reliance on Major Customers

Extent of Reliance on Major Customers of the company can be depicted by assessing their sales chunck compared to total revenue of the operation. The percentage of group of major customer to its total revenue is as below :

NOTE -2 Recognition of Corporate Gurantee as Financial Liability

Financial gurantee is a contractual right of the lender to receive cash from the guarantor, and a corresponding contractual obligation of the guarantor to pay the lender, if the borrower defaults. The contractual right and obligation exist because of a past transaction or event (assumption of the guarantee), even though the lender''s ability to exercise its right and the requirement for the guarantor to perform under its obligation are both contingent on a future act of default by the borrower. A contingent right and obligation meet the definition of a financial asset and a financial liability, even though such assets and liabilities are not always recognised in the financial statements. Based on the measurement principles laid down under Ind AS 109 Financial Instrument Recognition and Measurement, the fair value of all those financial gurantee contracts are resonable below to the materiality threshhold limit set by the company. Accordingly the entity has made appropriate disclosure in Note -28 without additionally recognising any financial assets or liability.

NOTE -3 Micro, Small and Medium Enterprises (MSME) Dues Disclosure

There are no Micro and Small enterprises to whom the Company owes dues which are outstanding for a period of more than 45 days as at the balance sheet date. The above information and that given under Current liabilities regarding Micro, Small and Medium enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company.

(ii) Fair value Hierarchy:

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are

(a) recognised and measured at fair value, and

(b) measured at amortised cost and for which fair values are disclosed in the financial statements.

To provide an indication about the reliability of the inputs used in determining fair value, the company has classified its financial instruments into three levels prescribed under the Ind AS 113 Fair Value Measurements . An explanation of each level follows underneath the table.

Level 1 : This hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments and mutual funds that have quoted price. The fair value of all equity instruments(including bonds) which are traded in the stock exchange is valued using the closing price as at the reporting period.

Level 2 :Fair value of financial instruments that are not traded in an active market (for example, traded bonds, over the counter derivatives) is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument is observable, the insturment is included in level 2.

Level 3 : If one or more of the significant inputs is not based on observable data, the instrument is included in level 3. This is the case for unlisted equity securities, contigent consideration and indemnification assets.

(iii) As per Ind AS 107 Financial Instrument: Disclosure, fair value disclosures are not required when the carrying amounts reasonably approximate the fair value. Accordingly fair value disclosures have not been made for the following financial instruments:-

Note -4 : Financial Risk Management

The company''s few portion of activities are exposed to variety of financial risks i.e. market risk, credit risk and liquidity risk. The company''s primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the company is foreign exchange risk. The company''s financial instruments (excluding receivables from related parties) are influenced mainly by the individual characteristics of each customer.The company''s exposure to credit risk is the concentration of risk from the top few customers and the demographics of the customers.

This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the impact of hedge accounting in the financial statements

(A) Credit Risk

Credit risk refers to the risk of default on its obligation by the counter party resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily trade receivables from customers other than goverment entities .These Trade receivables are typically unsecured and are derived from revenue earned from domestic and foreign customers. Credit risk is managed through credit approvals, establishing credit limits and continously monitoring the credit worthiness of customers to which the company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the company uses expected credit loss model to assess impairment loss or gain. the company uses a matrix to compute the expected credit loss allowance for trade receivable .

(i) Credit Risk Management

Credit risk is managed on instrument basis.For Banks and financial institutions ,only high rated banks /institutions are accepted.For other financial instruments, the company assesses and maintains an internal credit rating system.The finance function consists of a separate team who assesses and maintain internal credit rating system. Internal credit rating is performed on a company level basis for each class of financial instrument with different characterstics.

VL1 : High-quality assets, negligible credit risk

VL2 : Quality assets, low credit risk

VL3 : Standard assets, moderate credit risk

VL4 : Sub-standard assets, relatively high credit risk

VL5 : Low-quality assets, very high credit risk

VL6 : Doubt full assets, credit-impaired

The company consideres the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the company compares the risk of a default occuring on the asset as at the reporiting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forward- looking information. Especially the following indicators are incorporated:

1. Internal credit rating

2. External credit rating (as far as available)

3. Actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the borrower''s ability to meet the obligation.

4. Actual or expected significant changes in the operating results of the borrower.

5. Significant increase in credit risk on other financial instruments of the same borrower

6. Significant changes in the value of the collateral supporting the obligation or in the quality of the third-party guarantees or credit enhancements.

7. Significant changes in the expected performance and behaviour of the borrower, including changes in the payment status of borrowers in the group and changes in the operating results of the borrower.

8. Macro economic information (such as regulatory changes, market interest rate or growth rate) is incorporated as part of the internal rating model.

In general , it is presumed that credit risk has significantly increased since intial recognition if the payments are more than 30 days past due.

A default on a financial asset is when the counterparty fails to make contractual payment within 180 days of when they fall due. This definition of default is determined by considering the business environment in which entity operates and other-economic factors.

(B) Liquidity Risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, the company treasury maintains flexibility in funding by maintaining available under committed credit lines.

Management monitors rolling forecasts of the company''s liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows. This is generally carried out at local level in accordance with practice and limits set by the company. These limits vary by locations to take into account the liquidity of the market in which the entity operates. In addition, the company''s liquidity management policy involves, projecting cash flows in major currencies, considering the level of liquid assets necessary , monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.

(ii) Maturities of financial liabilities

The tables below analyse the group''s financial liabilities into relevant maturity groupings based on their contractual maturities for :

1. All non-derivative financial liabilities and

2. Net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of cash flows.

The amounts disclosed in the table are the contractual undiscounted cash flows.

(C) Market Risk

The company is not an active investor in equity market.I t continues to hold certain investments in equity for long term value accretion which are accordingly measured at fair value through other comprehensive income. The value of investments in such equity instruments as at 31st March,2018 is INR 120.49 lakhs (as at 31st March, 2017 -INR 216.36 lakhs). Accordingly, fair value fluctuations arising form market volatitlity is recognised in other comprehensive income.

The company is an active trader in Commodity/Equity Derivative transactions under F&O segment of various commodities through Stock Exchange. The profit/(Loss) on the settlement date is recognised in the financial statement and the fair value of derivative instruments measured at FVTOCI of the instruments in hand as on the reporting date is shown under Reserves for fair valuation of derivative instruments to be reclassified to profit & loss account on future settlement date.

(i) Foreign Currency Risk

The company''s exposure to foreign currency risk & Derivative financial Instruments as on March 31, 2018

The Company don''t have foreign currency exposure hence no foreign exchange forward contracts are required to hold and to mitigate the risk of foreign exchange fluctuation.

(ii) Cash flow and fair value interest rate risk

The company''s main interest rate risk arises from long term borrowings with variable rates, which exposes the company to cash flow interest rate risk. Group policy is to maintain most of its borrowings at fixed and variable rate using interest rate swaps to achieve this when necessary. During 31 march 2018 and 31 march 2017 the company''s borrowings at variable rate were mainly denominated in INR.

The company''s fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.

(a) Interest rate risk exposure

The exposure of the company''s borrowing from banks and financial institutions to interest rate changes at the end of the reporting period are as follows:

(iii) Price risk

The company''s exposure to equity securities price risk arises from investments held by the company and classified in the balance sheet either as fair value through OCI or at fair value through profit or loss.

Profit for the period would increase/ decrease as a result of gains/losses on equity securities classified as at fair value through profit or loss. Other components of equity would increase/decrease as a result of gains/losses on equity securities classified as fair value through other comprehensive income.

NOTE-5 : Capital Mangement Risk management

The company''s objectives when managing capital are to:

(a) safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and

(b)maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the company may adjust the amount of dividends paid to shareholders, return on capital to shareholders or issue new shares.The company monitors capital using gearing ratio, which is net debt divided by total Equity. Net debt comprises of long term and short term borrowings less cash and bank balances. Equity includes equity share capital and reserves that are managed as capital. The gearing at the end of reporting period was as follows:

During the year the lead banker State Bank of India has restructured the credit facilities sanctioned earlier and the other consortium members are in the process of restructuring their facilitites for the substance of which the previous year comparitives are not disclosed.

NOTE -6

During the year, the lead banker State Bank of India has approved the restructuring proposal and has executed all related documents for restructuring of the facility and has filed with the Ministry of Corporate Affairs towards creation/modification of charges in its favour. The State Bank of India has recovered all the scheduled repayments alongwith overdues (till the date of recovery) as per proposal approved vide letter dated March 17 , 2018. The interest component of Rs. 16.92 crores, from the date of NPA to the cut off date i.e March 31, 2017 has been converted to FITL and same has been charged to current year''s financial statement. Other members to the consortium are in the process of restructuring as at the end of reporting date.

Further, the company has provided interest cost on borrowings for all the member banks except IDBI Bank Limited for the FY 2017-18 as per interest rate approved by the lead banker i.e State Bank of India. IDBI Bank Limited has recalled the loan vide letter dated October 31, 2017 for which no interest has been provided for.

NOTE -7

As per the requirements of Ind AS, the company has implemented / adopted the following policies and procedures for accounting:

i Componentisation.

As per prevailing practice, company compontises fixed assets as detailed in the Invoice. It does not have a separate componetisation policy. Accordingly, components identified ( as mentioned above ) are also depreciated based on the useful lives prescribed under Schedule-II ( of the Companies Act. ) for the main asset.

The company is in the process of identification of the major components significant to the total cost of the asset accordingly necessary requirements to be complied.

ii Stores and Spares

The company on purchases of stores and spares,if it relates to an item of PPE, the same are capitalised on the date of issue, and which are issued for revenue expenditure purpose, are charged to Profit & Loss Account on the date of consumption.

The company is in the process of identifying the doubtful debtors to make provision for impairment to iii be recognised as per the Expected Credit Loss Method.

NOTE -8

The company has allotted on Preferential basis 8,00,000 no of equity shares at a premium as decided by the Board of Directors out of the conversion of warrants allotted earlier.

NOTE -9

The company has not received any intimation from the suppliers regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006. and hence disclosures, relating to amount unpaid as at the year end together with the interest paid /payable as required under the said act have not been given.

NOTE -10

Previous year figures have been regrouped and/or rearranged wherever necessary, confirming to current year. Figures in bracket represent previous year figure.

Source : Dion Global Solutions Limited
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