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Tata Steel

BSE: 500470|NSE: TATASTEEL|ISIN: INE081A01012|SECTOR: Steel - Large
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Notes to Accounts Year End : Mar '19

1. Company information

Tata Steel Limited (“the Company”) is a public limited Company incorporated in India with its registered office in Mumbai, Maharashtra, India. The Company is listed on the BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE).

The Company has presence across the entire value chain of steel manufacturing from mining and processing iron ore and coal to producing and distributing finished products. The Company offers a broad range of steel products including a portfolio of high value added downstream products such as hot rolled, cold rolled, coated steel, rebars, wire rods, tubes and wires.

The functional and presentation currency of the Company is Indian Rupee (“Rs.”) which is the currency of the primary economic environment in which the Company operates.

As on March 31, 2019, Tata Sons Private Limited owns 31.64 % of the Ordinary Shares of the Company, and has the ability to influence the Company’s operations.

The financial statements for the year ended March 31, 2019 were approved by the Board of Directors and authorised for issue on April 25, 2019.

(i) Rs.88.68 crore (2017-18: Rs.75.96 crore) of borrowing costs has been capitalised during the year on qualifying assets under construction using a capitalisation rate of 9.00% (2017-18: 9.00%).

(ii) Rupee liability has increased by Rs.106.56 crore (March 31, 2018: Rs.44.33 crore) arising out of re-translation of the value of long-term foreign currency loans and liabilities for procurement of property, plant and equipment, generally plant and machinery. This increase is adjusted against the carrying cost of assets and depreciated over their remaining useful life. The depreciation for the current year is higher by Rs.3.50 crore (2017-18: Rs.1.39 crore) on account of this adjustment.

(iii) Property, plant and equipment (including capital work-in-progress) were tested for impairment during the year where indicators of impairment existed. During the year ended March 31, 2019, the Company has recognised an impairment charge of Rs.8.54 crore (2017-18: Rs.33.99 crore) in respect of expenditure incurred (included within capital work-in-progress) at one of its mining sites. The impairment recognised is included within other expenses in the statement of profit and loss.

(vii) Property, plant and equipment includes capital cost of in-house research facilities as below:

(viii) Details of property, plant and equipment pledged against borrowings is presented in note 19, page 258.

2. Leases

The Company has taken certain land, buildings, plant and machinery under operating and/or finance leases. The following is a summary of the future minimum lease rental payments under non-cancellable operating leases and finance leases entered into by the Company.

A. Operating leases:

Significant leasing arrangements include lease of land for periods ranging between 12 to 99 years renewable on mutual consent, lease of office space and assets dedicated for use under long-term arrangements. Payments under long-term arrangements involving use of dedicated assets are allocated between those relating to the right to use of assets, executory services and for output based on the underlying contractual terms and conditions. Any change in the allocation assumptions may have an impact on lease assessment and/or lease classification. Payments linked to changes in inflation index under the lease arrangements have been considered as contingent rent and recognised in the statement of profit and loss as and when incurred.

Future minimum lease payments under non-cancellable operating leases is as below:

During the year ended March 31, 2019, total operating lease rental expense recognised in the statement of profit and loss was Rs.222.76 crore, (2017-18: Rs.252.12 crore) including contingent rent of Rs.49.27 crore (2017-18: Rs.31.20 crore).

B. Finance leases:

Significant leasing arrangements include assets dedicated for use under long-term arrangements. The arrangements cover a substantial part of the economic life of the underlying assets and generally contain a renewal option on expiry. Payments under long-term arrangements involving use of dedicated assets are allocated between those relating to the right to use of assets, executory services and for output based on underlying contractual terms and conditions. Any change in the allocation assumptions may have an impact on lease assessment and/or lease classification.

The minimum lease payments and such payments excluding future finance charges in respect of arrangements classified as finance leases is as below:

(i) Mining assets represent expenditure incurred in relation to acquisition of mines, mine development expenditure post establishment of technical and commercial feasibility and restoration obligations as per applicable regulations.

(ii) The Company has recognised an impairment charge of Rs.5.17 crore (including intangible under development) (2017-18 Nil) for expenditure incurred in respect of certain mines which are not in operation.

(iii) Software costs related to in-house development included within software costs is Rs.0.28 crore (2017-18: Rs.0.27 crore).

(i) The Company holds 51% of the equity share capital in TM International Logistics Limited, Jamshedpur Continuous Annealing & Processing Company Private Limited and T M Mining Company Limited. However, decisions in respect of activities which significantly affect the risks and rewards of these businesses, require unanimous consent of all the shareholders. These entities have therefore been considered as joint ventures.

(ii) Carrying value and market value of quoted and unquoted investments are as below:

(iii) During the year ended March 31, 2019, the Company acquired 51% stake in Creative Port Development Private Limited (CPDPL) a proposed greenfield port project. Consequent to the acquisition, Subarnarekha Port Private Limited became a subsidiary of the Company.

(iv) During the year ended March 31, 2019, the Company through its wholly owned subsidiary Bamnipal Steel Limited, completed the acquisition of Tata Steel BSL Limited (formerly Bhushan Steel Limited) pursuant to a corporate insolvency resolution process implemented under the Insolvency and Bankruptcy Code, 2018.

(v) The Hon’ble National Company Law Tribunal (NCLT), Kolkata vide order dated April 5, 2019 has admitted the initiation of Corporate Insolvency Resolution Process (CIRP) in respect of Tayo Rolls Limited, a subsidiary of the Company.

(ii) Cumulative gain on de-recognition of investments during the year which were carried at fair value through other comprehensive income amounted to Rs.1.49 crore (2017-18: Rs.3,427.46 crore). Fair value of such investments as on the date of de-recognition was Rs.1.97 crore (2017-18: Rs.3,782.76 crore).

# Cost of unquoted equity instruments has been considered as an appropriate estimate of fair value because of a wide range of possible fair value measurements and cost represents the best estimate of fair value within that range.

(i) Security deposits are primarily in relation to public utility services and rental agreements. It includes deposit with a subsidiary Rs.14.00 crore (March 31, 2018: Rs.14.00 crore) and deposit with Tata Sons Private Limited Rs.1.25 crore (March 31, 2018: Rs.1.25 crore).

(ii) Non-current loans to related parties represent loans given to subsidiaries Rs.571.95 crore (March 31, 2018: Rs.558.95 crore), out of which Rs.558.95 crore (March 31, 2018: Rs.558.95 crore) is impaired.

(iii) Current loans to related parties represent loans/advances given to subsidiaries Rs.92.06 crore (March 31, 2018: Rs.90.69 crore) andjoint ventures Rs.28.67 crore (March 31, 2018: Rs.46.82 crore) out of which Rs.67.65 crore (2017-18: Rs.67.65 crore) and Rs.1.07 crore (2017-18: Rs.0.60 crore) respectively is impaired.

(iv) Other loans primarily represent loans given to employees.

(v) Disclosure as per Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Section 186(4) of the Companies Act, 2013.

(a) Loans/advances in the nature of loan outstanding from subsidiaries, associates and joint ventures for the year ended March 31, 2019:

Figures in italics represents comparative figures of previous year.

(i) The above loans have been given for business purpose.

(ii) As at March 31, 2019, loans given to Tayo Rolls Limited, Tata Steel (KZN) (Pty) Ltd. and S & T Mining Company Private Limited were fully impaired.

(b) Details of investments made and guarantees provided are given in note 6, page 232, note 7, page 235 and note 36B, page 278.

(vi) There are no outstanding debts from directors or other officers of the Company.

3. Other financial assets

[Item No. I(f)(iv) and II(b)(vii), Page 210]

A. Non-current

B. Current

(i) Non-current earmarked balances with banks represent deposits and balances in escrow account not due for realisation within 12 months from the balance sheet date. These are primarily placed as security with government bodies, margin money against issue of bank guarantees.

(ii) Non-current other financial assets include advance against purchase of equity shares in subsidiaries Rs.275.19 crore (of which Rs.258.69 crore has been contributed by way of transfer of assets) (March 31, 2018: Rs.2.00 crore) out of which Nil (March 31, 2018: Rs.2.00 crore) is impaired.

(iii) Current other financial assets include amount receivable from post-employment benefit funds Rs.755.95 crore (March 31, 2018: Rs.296.38 crore) on account of retirement benefit obligations paid by the Company directly.

4. Income tax

[Item No. IV(e), Page 210]

A. Income tax expense/(benefit)

The Company is subject to income tax in India on the basis of its standalone financial statements. The Company can claim tax exemptions/deductions under specific sections of the Income-tax Act, 1961 subject to fulfilment of prescribed conditions, as may be applicable. As per the Income-tax Act, 1961, the Company is liable to pay income tax based on higher of regular income tax payable or the amount payable based on the provisions applicable for Minimum Alternate Tax (MAT). MAT paid in excess of regular income tax during a year can be carried forward for a period of fifteen years and can be offset against future tax liabilities arising from regular income tax.

Business loss can be carried forward for a maximum period of eight assessment years immediately succeeding the assessment year to which the loss pertains. Unabsorbed depreciation can be carried forward for an indefinite period.

The reconciliation of estimated income tax to income tax expense is as below:

(i) During the year ended March 31, 2018, the Company re-measured deferred tax balances expected to reverse in future periods based on changes in statutory tax rate made by the Finance Act, 2018.

(ii) Deferred tax assets amounting to Rs.8,112.23 crore as at March 31, 2019 (March 31, 2018: Rs.8,112.23 crore) on fair value adjustment recognised in respect of investments held in a subsidiary on transition to Ind AS has not been recognised due to uncertainty surrounding availability of future taxable income against which such loss can be offset.

(i) Advances with public bodies primarily relate to input credit entitlements and amounts paid under protest in respect of demands and claims from regulatory authorities.

(ii) Prepaid lease payments for operating leases relate to land leases classified as operating as the title is not expected to transfer at the end of the lease term and considering that the land has an indefinite economic life.

(iii) Others include advances against supply of goods/services and advances paid to employees.

In determining allowance for credit losses of trade receivables, the Company has used the practical expedient by computing the expected credit loss allowance based on a provision matrix. The provision matrix takes into account historical credit loss experience and is adjusted for forward looking information. The expected credit loss allowance is based on ageing of the receivables and rates used in the provision matrix.

(i) Movements in allowance for credit losses of receivables is as below:

(ii) Ageing of trade receivables and credit risk arising therefrom is as below:

(iii) The Company considers its maximum exposure to credit risk with respect to customers as at March 31, 2019 to be Rs.1,363.04 crore (March 31, 2018: Rs.1,875.63 crore), which is the carrying value of trade receivables after allowance for credit losses.

The Company’s exposure to customers is diversified and no single customer contributes more than 10% of the outstanding receivables as at March 31, 2019 and March 31, 2018.

(iv) There are no outstanding receivables due from directors or other officers of the Company.

(i) Earmarked balances with banks include balances held for: unpaid dividends Rs.64.88 crore (March 31, 2018: Rs.55.00 crore), bank guarantees and margin money Rs.66.11 crore (March 31, 2018: Rs.36.89 crore).

(ii) Earmarked balances with banks are denominated and held in Indian Rupees.

(a) 690 Ordinary Shares of face value Rs.10 each were allotted at a premium of Rs.290 per share to the shareholders whose shares were kept in abeyance in the Rights Issue of 2007.

(b) 11 Ordinary Shares of face value Rs.10 each were allotted at a premium of Rs.590 per share in lieu of Cumulative Convertible Preference Shares of Rs.100 each to the shareholders whose shares were kept in abeyance in the Rights Issue of 2007.

(c) 4,164 fully paid Ordinary Shares of face value Rs.10 each were allotted at a premium of Rs.500 per share to the shareholders whose shares were kept in abeyance in the Rights Issue of 2018.

(d) 2,080 partly paid Ordinary Shares of face value Rs.10 each (Rs.2.504 paid up) were allotted at a premium of Rs.605 (Rs.151.496 paid up) per share to the shareholders whose shares were kept in abeyance in the Rights Issue of 2018.

(iii) The balance proceeds which remained unutilised as at March 31, 2018 from the Rights Issue, 2018 have been fully utilised during the year as below:

(iv) As at March 31, 2019, 2,99,188 Ordinary Shares of face value Rs.10 each (March 31, 2018: 3,00,395 Ordinary Shares) are kept in abeyance in respect of Rights Issue of 2007.

As at March 31, 2019, 1,21,460 fully paid Ordinary Shares of face value Rs.10 each (March 31, 2018: 1,25,624 fully paid Ordinary Shares) and 60,575 partly paid Ordinary Shares of face value Rs.10 each, Rs.2.504 paid up (March 31, 2018: 62,655 partly paid Ordinary Shares, Rs.2.504 paid up) are kept in abeyance in respect of Rights Issue of 2018.

(v) Details of shareholders holding more than 5 percent shares in the Company is as below:

(vi) 1,34,73,958 shares (March 31, 2018: 1,27,40,651 shares) of face value of Rs.10 per share represent the shares underlying GDRs which were issued during 1994 and 2009. Each GDR represents one underlying Ordinary Share.

(vii) The rights, powers and preferences relating to each class of share capital and the qualifications, limitations and restrictions thereof are contained in the Memorandum and Articles of Association of the Company. The principal rights are as below:

A. Ordinary Shares of Rs.10 each

(i) In respect of every Ordinary Share (whether fully paid or partly paid), voting right and dividend shall be in the same proportion as the capital paid up on such Ordinary Share bears to the total paid up Ordinary Capital of the Company.

(ii) 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.

(iii) In the event of liquidation, the Shareholders of Ordinary Shares are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

B. ’A’ Ordinary Shares of Rs.10 each

(i) (a) The holders of ‘A’ Ordinary Shares shall be entitled to such rights of voting and/or dividend and such other rights as per the terms of the issue of such shares, provided always that:

- i n the case where a resolution is put to vote on a poll, such differential voting entitlement (excluding fractions, if any) will be applicable to holders of ‘A’ Ordinary Shares.

- i n the case where a resolution is put to vote in the meeting and is to be decided on a show of hands, the holders of ‘A’ Ordinary Shares shall be entitled to the same number of votes as available to holders of Ordinary Shares.

(b) The holders of Ordinary Shares and the holders of ‘A’ Ordinary Shares shall vote as a single class with respect to all matters submitted for voting by shareholders of the Company and shall exercise such votes in proportion to the voting rights attached to such shares including in relation to any scheme under Sections 391 to 394 of the Companies Act, 1956.

(ii) The holders of ‘A’ Ordinary Shares shall be entitled to dividend on each ‘A’ Ordinary Share which may be equal to or higher than the amount per Ordinary Share declared by the Board for each Ordinary Share, and as may be specified at the time of the issue. Different series of ‘A’ Ordinary Shares may carry different entitlements to dividend to the extent permitted under applicable law and as prescribed under the terms applicable to such issue.

C. Preference Shares

The Company has two classes of Preference Shares i.e. Cumulative Redeemable Preference Shares (CRPS) of Rs.100 per share and Cumulative Convertible Preference Shares (CCPS) of Rs.100 per share.

(i) Such shares shall confer on the holders thereof, the right to a fixed preferential dividend from the date of allotment, at a rate as may be determined by the Board at the time of the issue, on the capital for the time being paid up or credited as paid up thereon.

(ii) Such shares shall rank for capital and dividend (including all dividend undeclared upto the commencement of winding up) and for repayment of capital in a winding up, pari passu inter se and in priority to the Ordinary Shares of the Company, but shall not confer any further or other right to participate either in profits or assets. However, in case of CCPS, such preferential rights shall automatically cease on conversion of these shares into Ordinary Shares.

(iii) The holders of such shares shall have the right to receive all notices of general meetings of the Company but shall not confer on the holders thereof the right to vote at any meetings of the Company save to the extent and in the manner provided in the Companies Act, 1956, or any re-enactment thereof.

(iv) CCPS shall be converted into Ordinary Shares as per the terms, determined by the Board at the time of issue; as and when converted, such Ordinary Shares shall rank pari passu with the then existing Ordinary Shares of the Company in all respects.

The Company had issued hybrid perpetual securities of Rs.775.00 crore and Rs.1,500.00 crore in May 2011 and March 2011 respectively. These securities are perpetual in nature with no maturity or redemption and are callable only at the option of the Company. The distribution on these securities are 11.50% p.a. and 11.80% p.a. respectively, with a step up provision if the securities are not called after 10 years. The distribution on the securities may be deferred at the option of the Company if in the six months preceding the relevant distribution payment date, the Company has not made payment on, or repurchased or redeemed, any securities ranking pari passu with, or junior to the instrument. As these securities are perpetual in nature and the Company does not have any redemption obligation, these have been classified as equity.

5. Other equity

[Item No. III(c), Page 210]

A. Retained earnings

The details of movement in retained earnings is as below:

(i) Represents profit on sale of investments carried at fair value through other comprehensive income reclassified from investment revaluation reserve.

B. Items of other comprehensive income

(a) Cash flow hedge reserve

The cumulative effective portion of gains or losses arising from changes in fair value of hedging instruments designated as cash flow hedges are recognised in cash flow hedge reserve. Such changes recognised are reclassified to the statement of profit and loss when the hedged item affects the profit or loss or are included as an adjustment to the cost of the related non-financial hedged item.

The Company has designated certain foreign currency forward contracts and interest rate swaps as cash flow hedges in respect of foreign exchange and interest rate risks.

The details of movement in cash flow hedge reserve is as below:

(i) The details of other comprehensive income recognised during the year is as below:

During the year, ineffective portion of cash flow hedges recognised in the statement of profit and loss amounted to Nil (2017-18: Nil)

(ii) The amount recognised in cash flow hedge reserve (net of tax) is expected to impact the statement of profit and loss as below:

- within the next one year: loss Rs.2.17 crore (2017-18: gain Rs.1.39 crore)

- later than one year: gain Rs.0.40 crore (2017-18: gain Rs.3.75 crore)

(b) Investment revaluation reserve

The cumulative gains and losses arising from fair value changes of equity investments measured at fair value through other comprehensive income are recognised in investment revaluation reserve. The balance of the reserve represents such changes recognised net of amounts reclassified to retained earnings on disposal of such investments.

C. Other reserves

(a) Securities premium

Securities premium is used to record premium received on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.

The details of movement in securities premium is as below:

(b) Debenture redemption reserve

The Companies Act, 2013 requires that a company which has issued debentures, shall create a debenture redemption reserve out of profits of the company available for payment of dividend. The company is required to maintain a debenture redemption reserve of 25% of the value of debentures issued, either by a public issue or on a private placement basis. The amounts credited to the debenture redemption reserve cannot be utilised by the company except to redeem debentures.

The details of movement in debenture redemption reserve during the year is as below:

(c) General reserve

Under the erstwhile Companies Act, 1956, a general reserve was created through an annual transfer of net profit at a specified percentage in accordance with applicable regulations. Consequent to the introduction of the Companies Act, 2013, the requirement to mandatory transfer a specified percentage of net profit to general reserve has been withdrawn.

The details of movement in general reserve during the year is as below:

(d) Capital redemption reserve

The Companies Act, 2013 requires that when a company purchases its own shares out of free reserves or securities premium account, a sum equal to the nominal value of the shares so purchased shall be transferred to a capital redemption reserve account and details of such transfer shall be disclosed in the balance sheet. The capital redemption reserve account may be applied by the Company, in paying up unissued shares of the Company to be issued to shareholders of the Company as fully paid bonus shares. The Company established this reserve pursuant to the redemption of preference shares issued in earlier years.

The details of movement in capital redemption reserve during the year is as below:

(e) Others

Others primarily represent amount appropriated out of the statement of profit and loss for unforeseen contingencies. Such appropriations are free in nature.

The details of movement in others during the year is as below:

D. Share application money pending allotment

The details of movement in share application money pending allotment during the year is as below:

(i) As at March 31, 2019, Rs.2,572.19 crore (March 31, 2018: Rs.2,528.86 crore) of the total outstanding borrowings were secured by a charge on property, plant and equipment, inventories and receivables.

(ii) The security details of major borrowings as at March 31, 2019 is as below:

(a) Loans from Joint Plant Committee-Steel Development Fund

It is secured by mortgages on, all present and future immovable properties wherever situated and hypothecation of movable assets, excluding land and building mortgaged in favour of Government of India under the deed of mortgage dated April 13, 1967 and in favour of Government of Bihar under two deeds of mortgage dated May 11, 1963, immovable properties and movable assets of the Tube Division, Bearing Division, Ferro Alloys Division and Cold Rolling Complex (West) at Tarapur and all investments and book debts of the Company subject to the prior charges created and/or to be created in favour of bankers for securing borrowing for working capital requirement and charges created and/or to be created on specific items of machinery and equipment procured/to be procured under deferred payment schemes/bill re-discounting schemes/asset credit schemes.

The loan is repayable in 16 equal semi-annual instalments after completion of four years from the date of the tranche.

The Company has filed a writ petition before the High Court at Kolkata in February 2006 claiming waiver of the outstanding loan and interest and refund of the balance lying with Steel Development Fund and the matter is subjudice.

The loan includes funded interest Rs.924.77 crore (March 31, 2018: Rs.855.09 crore).

It includes Rs.1,639.33 crore (March 31, 2018: Rs.1,639.33 crore) representing repayments and interest on earlier loans for which applications of funding are awaiting sanction and is not secured by charge on movable assets of the Company.

(iii) The details of major unsecured borrowings as at March 31, 2019 is as below:

(a) Non-convertible debentures

(i) 9.84% p.a. interest bearing 43,150 debentures of face value Rs.10,00,000 each are redeemable at par in 4 equal annual instalments commencing from February 28, 2031.

(ii) 10.25% p.a. interest bearing 25,000 debentures of face value Rs.10,00,000 each are redeemable at par in 3 equal annual instalments commencing from January 6, 2029.

(iii) 10.25% p.a. interest bearing 5,000 debentures of face value Rs.10,00,000 each are redeemable at par in 3 equal annual instalments commencing from December 22, 2028.

(iv) 8.15% p.a. interest bearing 10,000 debentures of face value Rs.10,00,000 each are redeemable at par on October 1, 2026.

(v) 2.00% p.a. interest bearing 15,000 debentures of face value Rs.10,00,000 each are redeemable at a premium of 85.03% of the face value on April 23, 2022.

(vi) 9.15% p.a. interest bearing 5,000 debentures of face value Rs.10,00,000 each are redeemable at par on January 24, 2021.

(vii) 11.00% p.a. interest bearing 15,000 debentures of face value Rs.10,00,000 each are redeemable at par on May 19, 2019.

(viii) 10.40% p.a. interest bearing 6,509 debentures of face value Rs.10,00,000 each are redeemable at par on May 15, 2019.

(b) Term loans from banks/financial institutions

(i) Rupee loan amounting Rs.2,500.00 crore (March 31, 2018: Rs.4,450.00 crore) is repayable in 9 quarterly instalments commencing from March 31, 2023.

(ii) Rupee loan amounting Rs.1,047.50 crore (March 31, 2018: Rs.1,485.00 crore) is repayable in 10 semi-annual instalments, the next instalment is due on November 29, 2022.

(iii) Rupee loan amounting Rs.584.58 crore (March 31, 2018: Rs.823.84 crore) is repayable in 8 semi-annual instalments, the next instalment is due on June 15, 2021.

(iv) Rupee loan amounting Rs.750.00 crore (March 31, 2018: Rs.750.00 crore) is repayable in 3 equal annual instalments commencing from May 21, 2021.

(v) USD 7.86 million equivalent to Rs.54.38 crore (March 31, 2018: USD 7.86 million equivalent to Rs.51.24 crore) is repayable on March 1, 2021.

(vi) Rupee loan amounting Rs.1,600.00 crore (March 31, 2018: Rs.2,000.00 crore) is repayable in 8 semi-annual instalments, the next instalment is due on April 30, 2020.

(vii) USD 200.00 million equivalent to Rs.1,383.55 crore (March 31, 2018: USD 200.00 million equivalent to Rs.1,303.65 crore) loan is repayable in 3 equal annual instalments commencing from February 18, 2020.

(viii) Rupee loan amounting Rs.640.42 crore (March 31, 2018: Rs.646.16 crore) is repayable in 16 semi-annual instalments, the next instalment is due on August 14, 2019.

(ix) Euro 16.21 million equivalent to Rs.125.96 crore (March 31, 2018: Euro 21.62 million equivalent to Rs.174.68 crore) loan is repayable in 6 equal semi-annual instalments, the next instalment is due on July 8, 2019.

(x) Euro 66.87 million equivalent to Rs.519.58 crore (March 31, 2018: Euro 85.98 million equivalent to Rs.694.80 crore) loan is repayable in 7 equal semi-annual instalments, the next instalment is due on April 30, 2019.

(xi) Rupee loan amounting Rs.1,485.00 crore (March 31, 2018: Nil) is repayable in 19 semi-annual instalments, the next instalment is due on April 16, 2019.

(c) Finance lease obligations

The Company has taken certain plant and machinery on lease for business purpose. In addition, the Company has entered into long-term arrangements whose fulfilment is dependent on the use of dedicated assets. Some of the arrangements have been assessed as being in the nature of lease and have been classified as finance lease.

Finance lease obligations represent the present value of minimum lease payments payable over the lease term. The arrangements have been classified as secured or unsecured based on the legal form.

(iii) Currency and interest exposure of borrowings including current maturities at the end of the reporting period is as below:

(iv) Majority of floating rate borrowings are bank borrowings bearing interest rates based on LIBOR and EURIBOR. Of the total floating rate borrowings as at March 31, 2019, Rs.1,037.66 crore (March 31, 2018: Rs.977.74 crore) has been hedged using interest rate swaps and collars, with contracts covering period of more than one year.

(v) Maturity profile of borrowings including current maturities is as below:

(vi) Some of the Company’s major financing arrangements include financial covenants, which require compliance to certain debt-equity and debt coverage ratios. Additionally, certain negative covenants may limit the Company’s ability to borrow additional funds or to incur additional liens, and/or provide for increased costs in case of breach.

(i) Non-current and current creditors for other liabilities include:

(a) creditors for capital supplies and services Rs.1,582.88 crore (March 31, 2018: Rs.1,725.31 crore).

(b) liability for employee family benefit scheme Rs.189.87 crore (March 31, 2018: Rs.184.39 crore).

(i) Non-current and current provision for employee benefits include provision for leave salaries Rs.999.39 crore (March 31, 2018: Rs.984.33 crore) and provision for early separation scheme Rs.843.14 crore (March 31, 2018: Rs.1,019.98 crore).

(ii) As per the leave policy of the Company, an employee is entitled to be paid the accumulated leave balance on separation. The Company presents provision for leave salaries as current and non-current based on actuarial valuation considering estimates of availment of leave, separation of employee etc.

(iii) Non-current and current other provisions include:

(a) provision for compensatory afforestation, mine closure and rehabilitation obligations Rs.791.62 crore (March 31, 2018: Rs.626.01 crore). These amounts become payable upon closure of the mines and are expected to be incurred over a period of 1 to 33 years.

(b) provision for legal and constructive commitments provided by the Company in respect of a loss making subsidiary Rs.47.33 crore (March 31, 2018: Rs.50.33 crore). The same is expected to be settled within one year from the reporting date.

(iv) The details of movement in other provisions is as below:

6. Retirement benefit obligations

[Item No. IV(c) and V(c), Page 210]

A. Non-current

B. Current

(i) Detailed disclosure in respect post-retirement defined benefit schemes is provided in note 35, page 269.

(ii) Other defined benefits include post-retirement lumpsum benefits, long service awards, packing and transportation, farewell gifts etc.

(i) Grants relating to property, plant and equipment relate to duty saved on import of capital goods and spares under the EPCG scheme. Under the scheme, the Company is committed to export prescribed times of the duty saved on import of capital goods over a specified period of time. In case such commitments are not met, the Company would be required to pay the duty saved along with interest to the regulatory authorities. Such grants recognised are released to the statement of profit and loss based on fulfilment of related export obligations.

During the year, an amount of Rs.618.38 crore (2017-18: Rs.519.31 crore) was released from deferred income to the statement of profit and loss on fulfilment of export obligations.

(i) 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 is as below:

7. Other income

[Item No. II, Page 211]

(i) Dividend income includes income from investments carried at fair value through other comprehensive income Rs.18.25 crore (2017-18: Rs.17.20 crore).

(ii) Interest income includes:

(a) income on financial assets carried at amortised cost Rs.874.36 crore (2017-18: Rs.61.06 crore).

(b) income on financial assets carried at fair value through profit and loss Rs.752.88 crore (2017-18: Rs.8.50 crore).

8. Other expenses

[Item No. IV(g), Page 211 ]

(i) Others include: net foreign exchange loss Rs.134.41 crore (2017-18: gain Rs.122.31 crore), loss on fair value changes of financial assets carried at fair value through profit and loss Rs.111.31 crore (2017-18: gain of Rs.387.93 crore) and donations to electoral trusts Rs.175.00 crore (2017-18: Nil).

(ii) Details of auditors’ remuneration and out-of-pocket expenses is as below:

* Other services includes Nil (2017-18: Rs.0.45 crore) in respect of rights issue which has been charged to securities premium.

(iii) As per the Companies Act, 2013, amount required to be spent by the Company on Corporate Social Responsibility (CSR) activities during the year was Rs.82.40 crore (2017-18: Rs.85.62 crore).

During the year ended March 31, 2019, in respect of CSR activities the Company incurred revenue expenditure which was recognised in the statement of profit and loss amounting to Rs.271.62 crore (Rs.270.12 crore has been paid in cash and Rs.1.50 crore is yet to be paid). During the year ended March 31, 2018, similar expense incurred was Rs.189.96 crore (Rs.188.96 crore was paid in cash and Rs.1.00 crore was unpaid).

During the year ended March 31, 2019, capital expenditure incurred on construction of capital assets under CSR projects is Rs.43.32 crore (Rs.30.92 crore paid in cash and Rs.12.40 crore is yet to be paid). During the year ended March 31, 2018, similar expense incurred was Rs.41.66 crore (Rs.24.25 crore was paid in cash and Rs.17.41 crore was unpaid).

(iv) During the year ended March 31, 2019, revenue expenditure charged to the statement of profit and loss in respect of research and development activities undertaken was Rs.212.97 crore (2017-18: Rs.159.22 crore) including depreciation of Rs.7.80 crore (2017-18: Rs.7.67 crore). Capital expenditure incurred in respect of research and development activities during the year was Rs.21.45 crore (2017-18: Rs.22.42 crore).

9. Exceptional items

[Item No. VI, Page 211]

Exceptional items are those which are considered for separate disclosure in the financial statements considering their size, nature or incidence. Such items included within the statement of profit and loss are detailed below:

(a) Profit/(loss) on sale of non-current investments Rs.262.28 crore (2017-18: Nil) relates to profit recognised on sale of investment in TRL Krosaki Refractories Limited, an associate of the Company.

(b) Provision for impairment of investments/doubtful advances Rs.12.53 crore (2017-18: Rs.36.27 crore) relates to provision recognised for impairment of investments in subsidiaries and joint ventures. During the year ended March 31, 2018 the Company recognised provision in respect of advances paid for repurchase of equity shares in Tata Teleservices Limited from NTT Docomo Inc Rs.26.65 crore.

(c) Provision for demands and claims Rs.328.64 crore (2017-18: Rs.3,213.68 crore) relates to provision recognised in respect of certain statutory demands and claims relating to environment and mining matters.

(d) Employee separation compensation Rs.35.34 crore (2017-18: Rs.89.69 crore) relates to provisions recognised in respect of employee separation scheme of employees.

10. Employee benefits

A. Defined contribution plans

The Company participates in a number of defined contribution plans on behalf of relevant personnel. Any expense recognised in relation to these schemes represents the value of contributions payable during the period by the Company at rates specified by the rules of those plans. The only amounts included in the balance sheet are those relating to the prior months contributions that were not due to be paid until after the end of the reporting period.

The major defined contribution plans operated by the Company are as below:

(a) Provident fund and pension

The Company provides provident fund benefits for eligible employees as per applicable regulations wherein both employees and the Company make monthly contributions at a specified percentage of the eligible employee’s salary. Contributions under such schemes are made either to a provident fund set up as an irrevocable trust by the Company to manage the investments and distribute the amounts entitled to employees or to state managed funds.

Benefits provided under plans wherein contributions are made to state managed funds and the Company does not have a future obligation to make good shortfall if any, is treated as a defined contribution plan.

(b) Superannuation fund

The Company has a superannuation plan for the benefit of its employees. Employees who are members of the superannuation plan are entitled to benefits depending on the years of service and salary drawn.

Separate irrevocable trusts are maintained for employees covered and entitled to benefits. The Company contributes up to 15% of the eligible employees’ salary or Rs.1,50,000, whichever is lower, to the trust every year. Such contributions are recognised as an expense as and when incurred. The Company does not have any further obligation beyond this contribution.

The contributions recognised as an expense in the statement of profit and loss during the year on account of the above defined contribution plans amounted to Rs.191.18 crore (2017-18: Rs.145.40 crore).

B. Defined benefit plans

The defined benefit plans operated by the Company are as below:

(a) Provident fund and pension

Provident fund benefits provided under plans wherein contributions are made to an irrevocable trust set up by the Company to manage the investments and distribute the amounts entitled to employees are treated as a defined benefit plan as the Company is obligated to provide the members a rate of return which should, at the minimum, meet the interest rate declared by Government administered provident fund. A part of the Company’s contribution is transferred to Government administered pension fund. The contributions made by the Company and the shortfall of interest, if any, are recognised as an expense in profit and loss under employee benefits expense.

In accordance with an actuarial valuation of provident fund liabilities based on guidance issued by Actuarial Society of India and based on the assumptions as mentioned below, there is no deficiency in the interest cost as the present value of the expected future earnings of the fund is greater than the expected amount to be credited to the individual members based on the expected guaranteed rate of interest of Government administered provident fund.

(b) Retiring gratuity

The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for a lump-sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 to 30 days salary payable for each completed year of service. Vesting occurs upon completion of five years of service. The Company makes annual contributions to gratuity funds established as trusts or insurance companies. The Company accounts for the liability for gratuity benefits payable in the future based on an year-end actuarial valuation.

(c) Post-retirement medical benefits

Under this unfunded scheme, employees of the Company receive medical benefits subject to certain limits on amounts of benefits, periods after retirement and types of benefits, depending on their grade and location at the time of retirement. Employees separated from the Company under an early separation scheme, on medical grounds or due to permanent disablement are also covered under the scheme. The Company accounts for the liability for post-retirement medical scheme based on an year-end actuarial valuation.

(d) Other defined benefits

Other benefits provided under unfunded schemes include post-retirement lumpsum benefits, pension payable to directors of the Company on their retirement, farewell gifts and reimbursement of packing and transportation charges to the employees based on their last drawn salary.

The defined benefit plans expose the Company to a number of actuarial risks as below:

(i) Investment risk: The present value of the defined benefit plan liability is calculated using a discount rate determined by reference to government bond yields. If the return on plan asset is below this rate, it will create a plan deficit.

(ii) Interest risk: A decrease in the bond interest rate will increase the plan liability. However, this will be partially offset by an increase in the value of plan’s debt investments.

(iii) 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 salary of the plan participants will increase the plan’s liability.

(iv) Longevity risk: The present value of the defined benefit plan liability is calculated by reference 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.

The Company’s investment policy is driven by considerations of maximising returns while ensuring credit quality of debt instruments. The asset allocation for plan assets is determined based on prescribed investment criteria and is also subject to other exposure limitations. The Company evaluates the risks, transaction costs and liquidity for potential investments. To measure plan assets performance, the Company compares actual returns for each asset category with published benchmarks.

(iii) Key assumptions used in the measurement of retiring gratuity is as below:

(iv) Weighted average duration of the retiring gratuity obligation is 9 years (March 31, 2018: 9 years).

(v) The Company expects to contribute Rs.80.21 crore to the plan during the financial year 2019-20.

(vi) The table below outlines the effect on retiring gratuity obligation in the event of a decrease/increase of 1% in the assumptions used.

The above sensitivities may not be representative of the actual change as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

(b) Post-retirement medical benefits and other defined benefits:

(i) The following table sets out the amounts recognised in the financial statements in respect of post-retirement medical benefits and other defined benefit plans.

11. Contingencies and commitments

A. Contingencies

I n the ordinary course of business, the Company faces claims and assertions by various parties. The Company assesses such claims and assertions and monitors the legal environment on an on-going basis with the assistance of external legal counsel, wherever necessary. The Company records a liability for any claims where a potential loss is probable and capable of being estimated and discloses such matters in its financial statements, if material. For potential losses that are considered possible, but not probable, the Company provides disclosure in the financial statements but does not record a liability in its accounts unless the loss becomes probable.

The following is a description of claims and assertions where a potential loss is possible, but not probable. The Company believes that none of the contingencies described below would have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

It is not practicable for the Company to estimate the timings of the cash outflows, if any, pending resolution of the respective proceedings. The Company does not expect any reimbursements in respect of the same.

Litigations

The Company is involved in legal proceedings, both as plaintiff and as defendant. There are claims which the Company does not believe to be of a material nature, other than those described below.

Income tax

The Company has ongoing disputes with income tax authorities relating to tax treatment of certain items. These mainly include disallowance of expenses, tax treatment of certain expenses claimed by the Company as deduction and the computation of or eligibility of the Company’s use of certain tax incentives or allowances.

Most of these disputes and/or disallowances, being repetitive in nature, have been raised by the income tax authorities consistently in most of the years.

As at March 31, 2019, there are matters and/or disputes pending in appeals amounting to Rs.3,160.64 crore (March 31, 2018: Rs.1,443.29 crore).

The details of demands for more than Rs.100 crore is as below:

(a) Interest expenditure on loans taken by the Company for acquisition of a subsidiary has been disallowed in assessments with tax demand raised for Rs.1,791.29 crore (inclusive of interest) (March 31, 2018: Rs.1,250.16 crore).

(b) I nterest expenditure on “Hybrid perpetual securities” has been disallowed in assessments with tax demand raised for Rs.459.13 crore (inclusive of interest) (March 31, 2018: Nil)

I n respect of above demands, the Company has deposited an amount of Rs.1,065.00 crore (March 31, 2018: Rs.665.00 crore) as a precondition for obtaining stay. The Company expects to sustain its position on ultimate resolution of the said appeals.

Customs, excise duty and service tax

As at March 31, 2019, there were pending litigations for various matters relating to customs, excise duty and service taxes involving demands ofRs.682.53 crore (March 31, 2018: Rs.669.48 crore).

Sales tax/VAT

The total sales tax demands that are being contested by the Company amounted to Rs.717.02 crore (March 31, 2018: Rs.567.85 crore).

The details of demands for more than Rs.100 crore is as below:

(a) The Company stock transfers its goods manufactured at Jamshedpur works plant to its various depots/branches located outside the state of Jharkhand across the country without payment of Central Sales Tax as per the provisions of the Act and submits F-Form in lieu of the stock-transfers made during the period of assessment. These goods are then sold to various customers outside the states from depots/branches and the value of these sales are disclosed in the periodical returns filed as per the Jharkhand Vat Act 2005. The Commercial Tax Department has raised demand of Central Sales tax by levying tax on the differences between value of sales outside the states and value of F-Form submitted for stock transfers. The amount involved for various assessment years beginning 2011-12 to 2015-16 is amounting to Rs.127.00 crore (March 31, 2018: Rs.125.00 crore).

(b) The Commercial Tax Department of Jharkhand has rejected certain Input tax credit claimed by the Company on goods purchased from the suppliers within the State of Jharkhand. The Department has alleged that the goods have not been used in accordance with the provisions of Jharkhand VAT Act, 2005. The potential exposure on account of disputed tax and interest for the period beginning 2012-2013 to 2015-2016 as on March 31, 2019 is Rs.104.00 crore (March 31,2018: Rs.93.00 crore).

Other taxes, dues and claims

Other amounts for which the Company may contingently be liable aggregate to Rs.11,639.19 crore (March 31, 2018: Rs.9,925.20 crore).

The details of demands for more than Rs.100 crore are as below:

(a) Claim by a party arising out of conversion arrangement Rs.195.79 crore (March 31, 2018: Rs.195.79 crore). The Company has not acknowledged this claim and has instead filed a claim of Rs.141.23 crore (March 31, 2018: Rs.141.23 crore) on the party. The matter is pending before the Calcutta High Court.

(b) 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 filed a writ petition in the High Court of Orissa challenging the validity of the Act. Orissa High Court held in December 2005 that the State does not have authority to levy tax on minerals. The State of Odisha filed an appeal in the Supreme Court against the order of Orissa High Court and the case is pending in Supreme Court. The potential liability, as at March 31, 2019 is Rs.7,573.53 crore (March 31, 2018: Rs.6,521.05 crore).

(c) The Company pays royalty on iron ore on the basis of quantity removed from the leased area at the rates based on notification issued by the Ministry of Mines, Government of India and the price published by Indian Bureau of Mines (IBM) on a monthly basis.

Demand ofRs.411.08 crore has been raised by Deputy Director of Mines, Joda, claiming royalty at sized ore rates on despatches of ore fines. The Company has filed a revision petition on November 14, 2013 before the Mines Tribunal, Government of India, Ministry of Mines, New Delhi, challenging the legality and validity of the demand raised and to grant refund of royalty paid in excess by the Company. Mines Tribunal has granted stay on the total demand with directive to Government of Odisha not to take any coercive action for realisation of this demanded amount. Likely demand of royalty on fines at sized ore rates as on March 31, 2019 is Rs.1,630.16 crore (March 31, 2018: Rs.1,036.53 crore).

(d) Demand notices were originally issued by the Deputy Director of Mines, Odisha amounting to Rs.3,827.29 crore for excess production over the quantity permitted under the mining plan, environment clearance or consent to operate, pertaining to 2000-01 to 2009-10. The demand notices have been raised under Section 21(5) of the Mines and Minerals (Development and Regulations) Act (MMDR). The Company filed revision petitions before the Mines Tribunal against all such demand notices. Initially, a stay of demands was granted, later by order dated October 12, 2017, the issue has been remanded to the state for reconsideration of the demand in the light of Supreme Court judgement passed on August 2, 2017.

The Hon’ble Supreme Court pronounced its judgement in the Common Cause case on August 2, 2017 wherein it directed that compensation equivalent to the price of mineral extracted in excess of environment clearance or without forest clearance from the forest land be paid.

In pursuance to the Judgement of Hon’ble Supreme Court, demand/show cause notices amounting to Rs.3,873.35 crore have been issued during 2017-18 by the Deputy Director of Mines, Odisha and the District Mining Office, Jharkhand.

In respect of the above demands:

- as directed by the Hon’ble Supreme Court, the Company has provided and paid for iron ore and manganese ore an amount of Rs.614.41 crore during 2017-18 for production in excess of environment clearance to the Deputy Director of Mines, Odisha.

- the Company has provided and paid under protest an amount ofRs.56.97 crore during 2017-18 for production in excess of environment clearance to the District Mining Office, Jharkhand.

- the Company has challenged the demands amounting to Rs.132.91 crore during 2017-18 for production in excess of lower of mining plan and consent to operate limits raised by the Deputy Director of Mines, Odisha before the Mines Tribunal and obtained a stay on the matter. Mines Tribunal, Delhi vide order dated November 26, 2018 disposed of all the revision applications with a direction to remand it to the State Government to hear all such cases afresh and pass detailed order. The demand amount of Rs.132.91 crore is considered contingent.

- the Company has made a comprehensive submission before the Deputy Director of Mines, Odisha against show cause notices amounting to Rs.694.02 crore received during 2017-18 for production in violation of mining plan, Environment Protection Act, 1986 and Water (Prevention and Control of Pollution) Act, 1981. A demand amounting to Rs.234.74 crore has been received in April 2018 from the Deputy Director of Mines, Odisha for production in excess of the Environmental Clearance. The Company has challenged the demand and obtained a stay on the matter from the Revisionary Authority, Mines Tribunal, New Delhi. The demand of Rs.234.74 crore has been provided and Rs.694.02 crore is considered contingent.

- The Company based on its internal assessment has provided an amount of Rs.1,412.89 crore against demand notices amounting to Rs.2,140.30 crore received from the District Mining Office, Jharkhand during 2017-18 for production in excess of environment clearance. The balance amount of Rs.727.41 crore is considered contingent. The Company has however been granted a stay by the Revisional Authority, Ministry of Coal, Government of India against such demand notices.

(e) An agreement was executed between the Government of Odisha (GoO) and the Company in December, 1992 for drawal of water from Kundra Nalla for industrial consumption. In December 1993, the Tahsildar, Barbil issued a show-cause notice alleging that the Company has lifted more quantity of water than the sanctioned limit under the agreement.

While the proceedings in this regard were in progress, the Company had applied for allocation of fresh limits.

Over the years, there has also been a steep increase in the water charges against which the Company filed writ petitions before the Hon’ble High Court of Odisha. In this regard, the Company has received demands of Rs.118.70 crore for the period beginning January 1996 to December 2018. The potential exposure as on March 31, 2019 is Rs.125.98 crore (March 31, 2018: Rs.99.34 crore) is considered contingent.

B. Commitments

(a) The Company has entered into various contracts with suppliers and contractors for the acquisition of plant and machinery, equipment and various civil contracts of capital nature amounting to Rs.7,265.82 crore (March 31, 2018: Rs.4,275.79 crore).

Other commitments as at March 31, 2019 amount to Rs.0.01 crore (March 31, 2018: Rs.0.01 crore).

(b) The Company has given undertakings to:

(i) IDBI not to dispose of its investment in Wellman Incandescent India Ltd.

(ii) IDBI and ICICI Bank Ltd. (formerly ICICI) not to dispose of its investment in Standard Chrome Ltd.

(iii) Mizuho Corporate Bank Limited and Japan Bank for International Co-operation, not to dispose of its investments in Tata NYK Shipping Pte Limited (to retain minimal stake required to be able to provide a corporate guarantee towards long-term debt)

(iv) ICICI Bank Limited to directly or indirectly continue to hold atleast 51 % shareholding in Jamshedpur Continuous Annealing & Processing Company Private Limited.

(c) The Company and BlueScope Steel Limited have given undertaking to State Bank of India not to reduce collective shareholding in Tata BlueScope Steel Private Limited (TBSPL) (formerly Tata BlueScope Steel Limited), below 51% without prior consent of the lender. Further, the Company has given an undertaking to State Bank of India to intimate them before diluting its shareholding in TBSPL below 50%.

(d) The Company, as a promoter, has pledged 4,41,55,800 (March 31, 2018: 4,41,55,800) equity shares of Industrial Energy Limited with Infrastructure Development Finance Corporation Limited.

(e) The Company has agreed, if requested by Tata Steel UK Holdings Limited (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.

(f) The Company has given guarantees aggregating Rs.12,096.24 crore (2018: Rs.11,478.00 crore) details of which are as below:

(i) in favour of Commissioner of Customs Rs.1.07 crore (March 31, 2018: Rs.1.07 crore) given on behalf of Timken India Limited in respect of goods imported.

(ii) i n favour of Mizuho Corporate Bank Ltd., Japan for Rs.9.60 crore (March 31, 2018: Rs.27.33 crore) against the loan granted to a joint venture Tata NYK Shipping Pte. Limited.

(iii) in favour of The President of India for Rs.177.18 crore (March 31, 2018: Rs.177.18 crore) against performance of export obligation under the various bonds executed by a joint venture Jamshedpur Continuous Annealing & Processing Company Private Limited.

(iv) i n favour of the note holders against due and punctual repayment of the 100% amounts outstanding as on March 31, 2019 towards issued Guaranteed Notes by a subsidiary, ABJA Investment Co. Pte Ltd. for Rs.10,376.63 crore (March 31, 2018: Rs.9,777.37 crore) and Rs.1,531.61 crore (March 31, 2018: Rs.1,494.90 crore). The guarantee is capped at an amount equal to 125% of the outstanding principal amount of the Notes as detailed in “Terms and Conditions” of the Offering Memorandum.

(v) in favour of President of India for Rs.0.15 crore (March 31, 2018: Rs.0.15 crore) against advance license.

12. Other significant litigations

(a) Odisha Legislative Assembly issued an amendment to Indian Stamp Act, 1889, on May 9, 2013 and inserted a new provision (Section 3A) in respect of stamp duty payable on grant/renewal of mining leases. As per the amended provision, stamp duty is levied equal to 15% of the average royalty that would accrue out of the highest annual extraction of minerals under the approved mining plan multiplied by the period of such mining lease. The Company had filed a writ petition challenging the constitutionality of the Act on July 5, 2013. The Hon’ble High Court, Cuttack passed an order on July 9, 2013 granting interim stay on the operation of the Amendment Act, 2013. Because of the stay, as on date, the Act is not enforceable and any demand received by the Company is not liable to be proceeded with. Meanwhile, the Company received demand notices for the various mines at Odisha totalling to Rs.5,579.00 crore (March 31, 2018: Rs.5,579.00 crore). The Company has concluded that it is remote that the claim will sustain on ultimate resolution of the legal case by the court.

I n April 2015, the Company has received an intimation from Government of Odisha, granting extension of validity period for leases under the MMDR Amendment Act, 2015 up to March 31, 2030 in respect of eight mines and up to March 31, 2020 for two mines subject to execution of supplementary lease deed. Liability has been provided in the books of accounts as on March 31, 2019 as per the existing provisions of the Stamp Act 1899 and the Company had paid the stamp duty and registration charges totalling Rs.413.72 crore for supplementary deed execution in respect of eight mines out of the above mines.

(b) Noamundi Iron Ore Mine of TSL was due for its third renewal with effect from January 1, 2012. The application for renewal was submitted by the Company within the stipulated time, but it remained pending consideration with the State and the mining operations were continued in terms of the prevailing law.

By a judgement of April 2014 in the case of Goa mines, the Supreme Court took a view that second and subsequent renewal of mining lease can be effected once the State considers the application and decides to renew the mining lease by issuing an express order. State of Jharkhand issued renewal order to the Company on December 31, 2014. The State, however, took a view on interpretation of Goa judgement that the mining carried out after expiry of the period of second renewal was ‘illegal’ and hence, issued a demand notice of Rs.3,568.31 crore being the price of iron ore extracted. The said demand has been challenged by the Company before the Jharkhand High Court.

The mining operations were suspended from August 1, 2014. Upon issuance of an express order, the Company paid Rs.152.00 crore under protest, so that mining can be resumed.

The Mines and Minerals Development and Regulation (MMDR) Amendment Ordinance 2015 promulgated on January 12, 2015 provides for extension of such mining leases whose applications for renewal have remained pending with the State(s). Based on the new Ordinance, Jharkhand Government revised the Express Order on February 12, 2015 for extending the period of lease up to March 31, 2030 with the following terms and conditions:

- value of iron ore produced by alleged unlawful mining during the period January 1, 2012 to April 20, 2014 for Rs.2,994.49 crore to be decided on the basis of disposal of our writ petition before Hon’ble High Court of Jharkhand.

- value of iron ore produced from April 21, 2014 to July 17, 2014 amounting to Rs.421.83 crore to be paid in maximum 3 instalments.

- value of iron ore produced from July 18, 2014 to August 31, 2014 i.e. Rs.152.00 crore to be paid immediately.

District Mining Officer Chaibasa on March 16, 2015 issued a demand notice for payment of Rs.421.83 crore, in three monthly instalments. The Company on March 20, 2015 replied that since the lease has been extended by application of law till March 31, 2030, the above demand is not tenable. The Company, however, paid Rs.50.00 crore under protest on July 27, 2015, because the State had stopped issuance of transit permits.

The Company filed another writ petition before the Hon’ble High Court of Jharkhand which was heard on September 9, 2015. An interim order was given by the Hon’ble High Court of Jharkhand on September 2015 wherein the Court has directed the Company to pay the amount of Rs.371.83 crore in 3 equal instalments, first instalment by October 15, 2015, second instalment by November 15, 2015 and third instalment by December 15, 2015.

In view of the interim order of the Hon’ble High Court of Jharkhand Rs.124.00 crore was paid on September 28, 2015, Rs.124.00 crore on November 12, 2015 and Rs.123.83 crore on December 14, 2015 under protest.

The case is pending at Hon’ble High court for disposal. The State issued similar terms and conditions to other mining lessees in the State rendering the mining as illegal. Based on the Company’s assessment of the Goa mines judgement read with the Ordinance issued in the year 2015, the Company believes that it is remote that the demand of the State would sustain.

13. Capital management

The Company’s capital management is intended to create value for shareholders by facilitating the achievement of long-term and short-term goals of the Company.

The Company determines the amount of capital required on the basis of annual business plan coupled with long-term and short-term strategic investment and expansion plans. The funding needs are met through equity, cash generated from operations, long-term and short-term bank borrowings and issue of non-convertible debt securities.

The Company monitors the capital structure on the basis of net debt to equity ratio and maturity profile of the overall debt portfolio of the Company.

Net debt includes interest bearing borrowings less cash and cash equivalents, other bank balances (including non-current and earmarked balances) and current investments.

The table below summarises the capital, net debt and net debt to equity ratio of the Company.

(i) Net debt to equity ratio as at March 31, 2019 and March 31, 2018 has been computed based on average of opening and closing equity.

14. Disclosures on financial instruments

This section gives an overview of the significance of financial instruments for the Company and provides additional information on balance sheet items that contain financial instruments.

The details of significant accounting policies, including the criteria for recognition, basis of measurement and the basis on which income and expenses are recognised in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 2(n), page 221 to the financial statements.

(a) Financial assets and liabilities

The following tables present the carrying value and fair value of each category of financial assets and liabilities as at March 31, 2019 and March 31, 2018.

(i) Investments in mutual funds and derivative instruments (other than those designated in a hedging relationship) are mandatorily classified as fair value through profit and loss.

(b) Fair value hierarchy

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Level 1 to Level 3, as described below:

Quoted prices in an active market (Level 1): This level of hierarchy includes financial assets that are measured by reference to quoted prices (unadjusted) in active markets for identical assets or liabilities. This category consists of investment in quoted equity shares and mutual funds.

Valuation techniques with observable inputs (Level 2): This level of hierarchy includes financial assets and liabilities, measured using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices). This level of hierarchy includes the Company’s over-the-counter (OTC) derivative contracts.

Valuation techniques with significant unobservable inputs (Level 3): This level of hierarchy includes financial assets and liabilities measured using inputs that are not based on observable market data (unobservable inputs). Fair value is determined in whole or in part, using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. This level includes investment in unquoted equity shares and preference shares.

(i) Current financial assets and liabilities are stated at carrying value which is approximately equal to their fair value.

(ii) Derivatives are fair valued using market observable rates and published prices together with forecasted cash flow information where applicable.

(iii) Investments carried at fair value are generally based on market price quotations. Investments included in Level 3 of the fair value hierarchy have been valued using the cost approach to arrive at their fair value. Cost of unquoted equity instruments has been considered as an appropriate estimate of fair value because of a wide range of possible fair value measurements and cost represents the best estimate of fair value within that range. Fair value of investment in preference shares is estimated by discounting the expected future cash flows using a discount rate equivalent to the expected rate of return for a similar instrument and maturity as on the reporting date.

(iv) Fair value of borrowings which have a quoted market price in an active market is based on its market price which is categorised as Level 1. Fair value of borrowings which do not have an active market or are unquoted is estimated by discounting expected future cash flows using a discount rate equivalent to the risk-free rate of return adjusted for credit spread considered by lenders for instruments of similar maturities which is categorised as Level 2 in the fair value hierarchy.

(v) Management uses its best judgement in estimating the fair value of its financial instruments. However, there are inherent limitations in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates presented above are not necessarily indicative of the amounts that the Company could have realised or paid in sale transactions as of respective dates. As such, fair value of financial instruments subsequent to the reporting dates may be different from the amounts reported at each reporting date.

(vi) There have been no transfers between Level 1 and Level 2 for the years ended March 31, 2019 and March 31, 2018.

(c) Derivative financial instruments

Derivative instruments used by the Company include forward exchange contracts, interest rate swaps, currency swaps, options and interest rate caps and collars. These financial instruments are utilised to hedge future transactions and cash flows and are subject to hedge accounting under Ind AS 109 “Financial Instruments” wherever possible. The Company does not hold or issue derivative financial instruments for trading purposes. All transactions in derivative financial instruments are undertaken to manage risks arising from underlying business activities.

(d) Transfer of financial assets

The Company transfers certain trade receivables under discounting arrangements with banks/ financial institutions. Some of such arrangements do not qualify for de-recognition due to recourse arrangements being in place. Consequently, the proceeds received from transfer are recorded as short-term borrowings from banks and financial institutions.

(e) Financial risk management

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 risk management policy is approved by the Board of Directors. The risk management framework aims to:

(i) create a stable business planning environment by reducing the impact of currency and interest rate fluctuations on the Company’s business plan.

(ii) achieve greater predictability to earnings by determining the financial value of the expected earnings in advance.

(i) Market risk:

Market risk is the risk of any loss in future earnings, in realisable fair values 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 interest rates, foreign currency exchange rates, equity price fluctuations, liquidity and other market changes. Future specific market movements cannot be normally predicted with reasonable accuracy.

(a) Market risk - Foreign currency exchange rate risk:

The fluctuation in foreign currency exchange rates may have a potential impact on the statement of profit and loss 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 Company.

The Company, as per its risk management policy, uses foreign exchange and other derivative instruments primarily to hedge foreign exchange and interest rate exposure. Any weakening of the functional currency may impact the Company’s cost of imports and cost of borrowings and consequently may increase the cost of financing the Company’s capital expenditures. Such movements may also impact the fair value of preference shares investments held by the Company in its foreign subsidiaries.

A 10% appreciation/depreciation of foreign currencies with respect to functional currency of the Company would result in an increase/decrease in the Company’s net profit/equity before considering tax impacts by approximately Rs.1,352.48 crore for the year ended March 31, 2019 (March 31, 2018: Rs.514.89 crore) and an increase/decrease in carrying value of property, plant and equipment (before considering depreciation impact) by approximately Rs.31.87 crore as at March 31, 2019 (2017-18: Rs.148.81 crore).

The foreign exchange rate sensitivity is calculated by assuming a simultaneous parallel foreign exchange rates shift of all the currencies by 10% against the functional currency of the Company.

The sensitivity analysis has been based on the composition of the Company’s financial assets and liabilities as at March 31, 2019 and March 31, 2018 excluding trade payables, trade receivables, other derivative and non-derivative financial instruments (except investment in preference shares) not forming part of debt and which do not present a material exposure. The period end balances are not necessarily representative of the average debt outstanding during the period.

(b) Market risk - Interest rate risk:

Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rates. Any movement in the reference rates could have an impact on the Company’s cash flows as well as costs.

The Company is subject to variable interest rates on some of its interest bearing liabilities. The Company’s interest rate exposure is mainly related to debt obligations.

Based on the composition of debt as at March 31, 2019 and March 31, 2018 a 100 basis points increase in interest rates would increase the Company’s finance costs (before considering interest eligible for capitalisation) and thereby consequently reduce net profit/equity before considering tax impacts by approximately Rs.128.33 crore for the year ended March 31, 2019 (2017-18: Rs.143.71 crore).

The risk estimates provided assume a parallel shift of 100 basis points interest rate across all yield curves. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The period end balances are not necessarily representative of the average debt outstanding during the period.

(c) Market risk - Equity price risk:

Equity price risk is related to change in market reference price of investments in equity securities held by the Company.

The fair value of quoted investments held by the Company exposes the Company to equity price risks. In general, these investments are not held for trading purposes.

The fair value of quoted investments in equity, classified as fair value through other comprehensive income as at March 31, 2019 and March 31, 2018 was Rs.448.61 crore and Rs.497.21 crore, respectively.

A 10% change in equity prices of such securities held as at March 31, 2019 and March 31, 2018, would result in an impact of Rs.44.86 crore and Rs.49.72 crore respectively on equity before considering tax impact.

(ii) Credit risk:

Credit risk is the risk of financial loss arising from counter-party 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 credit worthiness as well as concentration risks.

The Company has a policy of dealing only with credit worthy counter parties and obtaining sufficient collateral, where appropriate as a means of mitigating the risk of financial loss from defaults.

Financial instruments that are subject to credit risk and concentration thereof principally consist of trade receivables, loans receivables, investments in debt securities and mutual funds, balances with banks, bank deposits, derivatives and financial guarantees provided by the Company. None of the financial instruments of the Company result in material concentration of credit risk except preference shares investments, the Company made in its subsidiary companies.

The carrying value of financial assets represents the maximum credit risk. The maximum exposure to credit risk was Rs.37,584.12 crore and Rs.27,217.13 crore, as at March 31, 2019 and March 31, 2018 respectively, being the total carrying value of trade receivables, balances with bank, bank deposits, investments in debt securities, mutual funds, loans, derivative assets and other financial assets.

The risk relating to trade receivables is presented in note 13, page 248.

The Company’s exposure to customers is diversified and no single customer contributes to more than 10% of outstanding trade receivables as at March 31, 2019 and March 31, 2018.

I n respect of financial guarantees provided by the Company to banks/financial institutions, the maximum exposure which the Company is exposed to is the maximum amount which the Company would have to pay if the guarantee is called upon. Based on the expectation at the end of the reporting period, the Company considers that it is more likely than not that such an amount will not be payable under the guarantees provided.

(iii) Liquidity risk:

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.

The Company has obtained fund and non-fund based working capital lines from various banks. Furthermore, the Company has access to funds from debt markets through commercial paper programs, non-convertible debentures and other debt instruments. The Company invests its surplus funds in bank fixed deposits and in mutual funds, which carry no or low market risk.

The following table shows a maturity analysis of the anticipated cash flows including interest obligations for the Company’s derivative and non-derivative financial liabilities on an undiscounted basis, which therefore differ from both carrying value and fair value. Floating rate interest is estimated using the prevailing interest rate at the end of the reporting period. Cash flows in foreign currencies are translated using the period end spot rates.

15. Segment reporting

The Company is primarily engaged in the business of manufacture and distribution of steel products and is operated out of India. In accordance with Ind AS 108 “Operating Segments”, the Company has presented segment information on the basis of its consolidated financial statements which forms part of this report.

16. Related party transactions

The Company’s related parties primarily consist of its subsidiaries, associates, joint ventures and Tata Sons Private Limited including its subsidiaries and joint ventures. The Company routinely enters into transactions with these related parties in the ordinary course of business at market rates and terms.

The following table summarises related party transactions and balances included in the financial statements of the Company for the year ended as at March 31, 2019 and March 31, 2018:

Figures in italics represent comparative figures of previous year.

(i) The details of remuneration paid to key managerial personnel is provided in note 29, page 266.

During the year ended March 31, 2019, value of shares subscribed by key managerial personnel and their relatives under rights issue is Nil (2017-18: Rs.2,87,476.00)

The Company has paid dividend of Rs.32,345.87 (2017-18: Rs.27,420.00) to key managerial personnel and Rs.3,895.10 (2017-18: Rs.3,310.00) to relatives of key managerial personnel during the year ended March 31, 2019.

(ii) During the year ended March 31, 2019, the Company has contributed Rs.281.57 crore (2017-18: Rs.431.35 crore) to post-employment benefit plans.

As at March 31, 2019, amount receivable from post-employment benefit fund is Rs.755.95 crore (March 31, 2018: Rs.296.38 crore) on account of retirement benefit obligations paid by the Company directly.

(iii) Details of investments made by the Company in preference shares of its subsidiaries, associates and joint ventures is disclosed in note 7, page 235.

(iv) Commitment with respect to subsidiaries, associates and joint ventures is disclosed in note 36B, page 278.

(v) Transaction with joint ventures have been disclosed at full value and not at their proportionate share.

17. The Company is in the process of evaluating the impact of the recent Supreme Court Judgement in case of”Vivekananda Vidyamandir and Others Vs The Regional Provident Fund Commissioner (II) West Bengal” and the related circular (Circular No. CI/ 1(33)2019/Vivekananda Vidya Mandir/284) dated March 20, 2019 issued by the Employees’ Provident Fund Organisation in relation to non-exclusion of certain allowances from the definition of “basic wages” of the relevant employees for the purposes of determining contribution to provident fund under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. In the assessment of the management which is supported by legal opinion, the aforesaid matter is not likely to have a significant impact and accordingly no provision has been considered in the financial statements.

18. The Board of Directors of the Company have considered and approved a merger of Bamnipal Steel Limited and Tata Steel BSL Limited (formerly Bhushan Steel Limited) into the Company by way of a composite scheme of amalgamation and have recommended a merger ratio of 1 equity share of Rs.10/-each fully paid up of the Company for every 15 equity shares of Rs.2/- each fully paid up held by the public shareholders of Tata Steel BSL Limited. As part of the scheme, the equity shares held by Bamnipal Steel Limited and the preference shares held by the Company in Tata Steel BSL Limited shall stand cancelled. The equity shares held by the Company in Bamnipal Steel Limited shall also stand cancelled. The merger is subject to shareholders and other regulatory approvals.

19. Dividend

The dividend declared by the Company is based on profits available for distribution as reported in the standalone financial statements of the Company. On April 25, 2019, the Board of Directors of the Company have proposed a dividend of Rs.13.00 per Ordinary Share of Rs.10 each and Rs.3.25 per partly paid Ordinary Share of Rs.10 each (paid up Rs.2.504 per share) in respect of the year ended March 31, 2019 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in a cash outflow of Rs.1,795.87 crore inclusive of dividend distribution tax of Rs.306.21 crore.

20. Previous year figures have been recasted/restated wherever necessary.

Source : Dion Global Solutions Limited
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