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You can view the entire text of Notes to accounts of the company for the latest year

BSE: 532538ISIN: INE481G01011INDUSTRY: Cement

BSE   ` 4138.00   Open: 4129.05   Today's Range 4118.40
4154.50
+13.15 (+ 0.32 %) Prev Close: 4124.85 52 Week Range 3774.00
4594.30
Year End :2017-03 

The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 43.

B) 1. Fixed Assets include assets with net block of ' 320.06 Crores (Previous Year ' 276.61 Crores) not owned by the Company.

2. Buildings include Rs, 12.13 Crores (Previous year Rs, 12.13 Crores) being cost of Debentures and Shares in a company entitling the right of exclusive occupancy and use of certain premises.

3. Opening Gross Block includes Research and Development Assets (Building, Plant and Equipment, Furniture and Fixtures, Office Equipment and Intangible Assets) of Rs, 30.75 Crores (Previous year Rs, 26.89 Crores) and Net Block of Rs, 26.73 Crores (Previous year Rs, 26.89 Crores). Addition for the Research and Development Assets during the year is Rs, 2.90 Crores (Previous year Rs, 4.17 Crores).

4. Immovable properties having Gross Block of Rs, 793.43 Crores and Net Block of Rs, 782.23 Crores is yet to be transferred in the name of the Company.

(f) The Company has only one class of Equity Shares having a par value of ? 10 per share. Each shareholder is eligible for one vote per share held except for Global Depository Receipts. 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. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

(c) Guarantees:

The Company has issued corporate guarantees as under:

(i) In favour of the Bankers / Lenders on behalf of some of its Subsidiaries and Joint Venture (JV), as mentioned below, for the purposes of replacing old loans, acquisition financing, working capital and other general corporate purposes:

- Bhaskarpara Coal Company Limited (JV) Rs, 4.00 Crores (March 31, 2016 Rs, 4.00 Crores, April 1, 2015 Rs, 4.00 Crores).

- UltraTech Cement Middle East Investment Limited and its subsidiaries: Equivalent to USD 381.91 Million (Rs, 2,476.69 Crores) {March 31, 2016 USD 250.63 Million (Rs, 1,660.35 Crores), April 1, 2015 USD 486.62 Million (Rs, 3,041.26 Crores)}.

(These Corporate Guarantees are issued in different currencies viz. US$, UAE Dirham, Bangladesh Taka, Omani Rial, etc.)

(ii) In favour of the Government Authority on behalf of one of the CompanyRs,s Unit of an amount not exceeding Rs, 3.00 Crores (March 31, 2016 Rs, 3.00 Crores, April 1, 2015? 3.00 Crores) towards exemption from payment of excise duty.

(iii) In favour of the Bank, for assistance in arrangement of interest bearing loan of Rs, 500 Crores (March 31, 2016 Rs, 500 Crores, April 1, 2015 Rs, 500 Crores) to Jaiprakash Associates Limited.

Note 5 - Capital and other commitments:

Estimated amount of contracts remaining to be executed on capital account, not provided for (net of advances) Rs, 943.28 Crores (March 31, 2016 Rs, 700.26 Crores, April 1, 2015 Rs, 1,239.25 Crores).

Note 6 :

The Supreme Court of India has allowed an appeal filed by the State of Rajasthan in a matter relating to transfer of mining lease in the name of the Company's wholly-owned subsidiary, Gotan Lime Stone Khanij Udyog Private Limited ("GKUPL") and has directed the State of Rajasthan to frame and notify its policy relating to transfer of mining lease and thereafter pass appropriate order in respect of the mining lease of GKUPL. State Government has notified the new policy related to transfer of new mining lease, based on which the Company is in the process of making an application for the transfer of mines.

Note 7 - Acquisition of identified cement units of Jaiprakash Associates Limited:

The Board of Directors of the Company has approved a Scheme of Arrangement between the Company, Jaiprakash Associates Limited ("JAL"), JCCL and their respective shareholders and creditors ("the Scheme") for the acquisition of identified cement plants situated in the states of Madhya Pradesh, Uttar Pradesh, Himachal Pradesh, Uttarakhand and Andhra Pradesh, having a capacity of 21.20 mtpa at an enterprise value of ' 16,189 Crores. The Scheme has received the sanction of the National Company Law Tribunal, Mumbai Bench and the Allahabad Bench and also by the Securities and Exchange Board of India. The Scheme will be made effective by the Board of Directors of the Company, JAL and JCCL upon receipt of the remaining approvals.

Note 8 - Employee Benefits (Ind AS 19):

(A) Defined Benefit Plans:

Gratuity:

The gratuity payable to employees is based on the employee's service and last drawn salary at the time of leaving the services of the Company and is in accordance with the rules of the Company for payment of gratuity.

Inherent Risk

The plan is defined benefit in nature which is sponsored by the Company and hence it underwrites all the risks pertaining to the plan. In particular, this exposes the Company to actuarial risk such as adverse salary growth, change in demographic experience, inadequate return on underlying plan assets. This may result in an increase in cost of providing these benefits to employees in future. Since the benefits are lump sum in nature, the plan is not subject to any longevity risks.

Pension:

The Company considers pension for some of its employees at senior management based on the period of service and contribution for the Company.

Post-Retirement Medical Benefits:

On account of cement business acquired from transferor under a scheme of amalgamation, there are certain ex-employees of such company who are entitled for post-retirement medical benefits as per the scheme of such company, other employees are not entitled for these benefits.

* These Sensitivities have been calculated to show the movement in defined benefit obligation in isolation and assuming there are no other changes in market conditions at the accounting date. There have been no changes from the previous periods in the methods and assumptions used in preparing the sensitivity analyses.

@ The plan does not invest directly in any property occupied by the Company nor in any financial securities issued by the Company.

(xi) Basis used to determine Expected Rate of Return on Plan Assets:

Expected rate of return on Plan Assets is based on expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligations.

(xii) Salary Escalation Rate:

The estimates of future salary increases are considered taking into account inflation, seniority, promotion and other relevant factors.

(xiii) Asset Liability matching strategy:

The money contributed by the Company to the Gratuity fund to finance the liabilities of the plan has to be invested.

The trustees of the plan have outsourced the investment management of the fund to an Insurance Company. The Insurance Company in turn manages these funds as per the mandate provided to them by the trustees and the asset allocation which is within the permissible limits prescribed

Note 9 - Employee Benefits (Ind AS 19): (Contd.)

in the insurance regulations. Due to the restrictions in the type of investments that can be held by the fund, it is not possible to explicitly follow an asset liability matching strategy.

There is no compulsion on the part of the Company to fully prefund the liability of the Plan. The Company's philosophy is to fund these benefits based on its own liquidity and the level of underfunding of the plan.

(xiv) The Company's expected contribution during next year is Rs, Nil Crores (March 31, 2016 Rs, 21.06 Crores).

(B) Defined Contribution Plans:

Amount recognized as an expense and included in Note 27 under the head "Contribution to Provident and other Funds" of Statement of Profit and Loss Rs, 71.02 Crores (March 31, 2016 Rs, 65.41 Crores).

(C) Amount recognized as an expense in respect of Compensated Absences is Rs, 27.85 Crores (March 31, 2016 Rs, 29.37 Crores).

(D) Amount recognized as expense for other long-term employee benefits is Rs, 0.77 Crores (March 31, 2016 Rs, 0.67 Crores).

Note 10 - Segment Reporting (Ind AS 108):

The Company is exclusively engaged in the business of cement and cement related products primarily in India. As per Ind AS 108 "Operating Segments", specified under Section 133 of the Companies Act, 2013, there are no reportable operating or geographical segments applicable to the Company.

The weighted average share price at the date of exercise for options was Rs, 3,621.29 per share (March 31, 2016 Rs, 2,845.53 per share) and weighted average remaining contractual life for the share options outstanding as at March 31, 2017 was 4.5 years (March 31, 2016 : 4.2 years).

(D) Fair Valuation:

Weighted Average Fair value of the options granted during the year Rs, 2,366.93 (March 31, 2016 Rs, 2,033.15)

The fair value of option have been done by an independent firm of Chartered Accountants on the date of grant using the Black-Scholes Model. The Key assumptions in the Black-Scholes Model for calculating fair value as on the date of grant:

(a) For ESoS 2006:

1. Risk Free Rate - 8% (Tranche I-V), 8.14% (Tranche VI)

2. Option Life - Vesting period (1 Year) Average of exercise period

3. Expected Volatility* - Tranche I: 0.49, Tranche II: 0.52, Tranche III: 0.30,

Tranche IV: 0.30, Tranche V: 0.30, Tranche VI: 0.25

4. Expected Growth in Dividend - 20%

(b) For ESoS 2013:

1. Risk Free Rate - 8.5% (Tranche I), 7.8% (Tranche II-III), 8.56% (Tranche IV)

7.6% (Tranche V), 6.74% (Tranche VI)

2. Option Life - (a) For Options - Vesting period (1 Year) Average of exercise period

(b) For RSU - Vesting period (3 Years) Average of exercise period

3. Expected Volatility* - Tranche I: 0.29, Tranche II: 0.27, Tranche III: 0.28, Tranche IV: 0.60

Tranche V: 0.60, Tranche VI: 0.61

4. Expected Growth in Dividend - Tranche I: 20%, Tranche II-III: 15%, Tranche IV: 5%, Tranche V: 5%,

Tranche VI: 5%

*Expected volatility on the Company's stock price on National Stock Exchange based on the data commensurate with the expected life of the options/RSU's up to the date of grant.

The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The Company has established the following fair value hierarchy that categorizes the values into 3 levels. The inputs to valuation techniques used to measure fair value of financial instruments are:

Level 1: This hierarchy uses quoted (unadjusted) prices in active markets for identical assets or liabilities. The fair value of all bonds which are traded in the stock exchanges is valued using the closing price or dealer quotations as at the reporting date.

Level 2: The 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 company specific estimates. The mutual fund units are valued using the closing Net Asset Value. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.

Note 11 (B) - Fair Value measurements (Ind AS 113): (Contd.)

The management assessed that cash and bank balances, trade receivables, trade payables, cash credits, commercial papers and other financial assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

The following methods and assumptions were used to estimate the fair values:

(a) The fair values of the quoted investments/units of mutual fund schemes are based on market price/net asset value at the reporting date.

(b) The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves.

(c) The fair value of forward foreign exchange contracts is calculated as the present value determined using forward exchange rates and interest rate curve of the respective currencies.

(d) The fair value of currency swap is calculated as the present value determined using forward exchange rates, currency basis spreads between the respective currencies and interest rate curves.

(e) The fair value of foreign currency option contracts is determined using the Black Scholes valuation model.

(f) The fair value of commodity swaps is calculated as the present value determined using the forward price and interest rate curve of the respective currency.

(g) The fair value of the remaining financial instruments is determined using discounted cash flow analysis. The discount rates used is based on management estimates.

The significant unobservable inputs used in the fair value measurement of the fair value hierarchy together with a quantitative sensitivity analysis as at March 31, 2017, March 31, 2016 and April 01, 2015 are as shown below:

Note 12 - Financial Risk Management Objectives (Ind AS 107):

The Company's principal financial liabilities, other than derivatives, comprises of borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the company's operations. The company's principal financial assets, other than derivatives include trade and other receivables, investments and cash and cash equivalents that derive directly from its operations.

The Company's activities exposes it to market risk, liquidity risk and credit risk. Company's overall risk management focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance of the company. The company uses derivative financial instruments, such as foreign exchange forward contracts, foreign currency option contracts, principal only swaps that are entered to hedge foreign currency risk exposure, interest rate swaps to hedge variable interest rate exposure and commodity fixed price swaps to hedge commodity price risks. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments.

The Company has standard operating procedures and investment policy for deployment of surplus liquidity, which allows investment in debt securities and mutual fund schemes of debt categories only and restricts the exposure in equity markets.

Compliances of these policies and principles are reviewed by internal auditors on periodical basis.

The Corporate Treasury team updates to the Audit Committee on a quarterly basis about the implementation of the above policies. It also updates to the Internal Risk Management Committee of the Company on periodical basis about the various risk to the business and status of various activities planned to mitigate the risk.

Market Risk:

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivables, payables and borrowings.

Foreign Currency Risk:

Foreign currency risk is the risk of impact related to fair value or future cash flows of an exposure in foreign currency, which fluctuate due to changes in foreign exchange rates. The Company's exposure to the risk of changes in foreign exchange rates relates primarily to the foreign currency borrowings, import of fuels, raw materials and spare parts, capital expenditure, exports of cement and the Company's net investments in foreign subsidiaries. When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure.

The Company evaluates exchange rate exposure arising from foreign currency transactions. The Company follows established risk management policies and standard operating procedures. It uses derivative instruments like foreign currency swaps and forwards to hedge exposure to foreign currency risk.

(B) Cash Flow Hedges:

The Company has raised foreign currency external commercial borrowings and to mitigate the risk of foreign currency and floating interest rates the Company has taken forward contracts, currency swaps, interest rates swaps and principal only swaps. The Company is following Hedge accounting for all the foreign currency borrowings raised on or after April 01, 2015 based on qualitative approach. The Company assesses hedge effectiveness based on following criteria:

(i) an economic relationship between the hedged item and the hedging instrument;

(ii) the effect of credit risk ; and

(iii) assessment of the hedge ratio

The Company designates the forward exchange contracts to hedge its currency risk and generally applies a hedge ratio of 1:1. The Company's policy is for the critical terms of the forward exchange contracts to match with the hedged item.

Credit Risk Management:

Credit risk arises when a customer or counterparty does not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing/ investing activities, including deposits with banks, mutual fund investments and investments in debt securities, foreign exchange transactions and financial guarantees. The Company has no significant concentration of credit risk with any counterparty.

Trade receivables:

Trade receivables are consisting of a large number of customers. The Company has credit evaluation policy for each customer and based on the evaluation credit limit of each customer is defined. Wherever the Company assesses the credit risk as high the exposure is backed by either bank guarantee / letter of credit or security deposits.

Total Trade receivable as on March 31, 2017 is Rs, 1,276.17 Crores (March 31, 2016 Rs, 1,414.89 Crores, April 01, 2015 Rs, 1,203.19 Crores)

The Company does not have higher concentration of credit risks to a single customer. Single largest customers have total exposure in sales 2.2% (March 31, 2016 2.3%) and in receivables 7.7% (March 31, 2016 9.8%, April 01, 2015 5.5%).

As per simplified approach, the Company makes provision of expected credit losses on trade receivables using a provision matrix to mitigate the risk of default payments and makes appropriate provision at each reporting date wherever outstanding is for longer period and involves higher risk.

Investments, Derivative Instruments, Cash and Cash Equivalent and Bank Deposit:

Credit Risk on cash and cash equivalent, deposits with the banks/financial institutions is generally low as the said deposits have been made with the banks/financial institutions who have been assigned high credit rating by international and domestic rating agencies.

Credit Risk on Derivative Instruments are generally low as Company enters into the Derivative Contracts with the reputed Banks and Financial Institutions. Investments of surplus funds are made only with approved Financial Institutions/ Counterparty. Investments primarily include investment in units of mutual funds, Quoted Bonds, Non-Convertible Debentures issued by Government/ Semi Government Agencies/ PSU Bonds/ High Investment grade corporate etc. These Mutual Funds and Counterparties have low credit risk.

Total Non-current and current investments as on March 31, 2017 is Rs, 7,408.67 Crores (March 31, 2016 Rs, 5,793.18 Crores; April 01, 2015 Rs, 5,648.29 Crores)

Liquidity risk:

Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at reasonable price. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of credit facilities to meet obligations when due. The Company's treasury team is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management. Management monitors the Company's liquidity position through rolling forecasts on the basis of expected cash flows.

The table below provides details regarding the remaining contractual maturities of financial liabilities and investments at the reporting date based on contractual undiscounted payments.

In addition the Company has financial covenants relating to the borrowing facilities that it has taken from the lenders like interest coverage service ratio, Debt to EBITDA, etc. which is maintained by the Company.

Note 13 - Research and Development:

Revenue expenditure on Research and Development included in different heads of expenses in the Statement of Profit and Loss is Rs, 13.31 Crores. (March 31, 2016 Rs, 14.27 Crores).

Note 14 - Corporate Social Responsibility:

Expenditure incurred on Corporate Social Responsibility activities, included in different heads of expenses in the Statement of Profit and Loss is Rs, 54.15 Crores (March 31, 2016 Rs, 46.27 Crores) and on account of capital expenditure is Rs, Nil Crores (March 31, 2016 Rs, 4.62 Crores).

The amount required to be spent under Section 135 of the Companies Act, 2013 for the year ended March 31, 2017 is Rs, 53.36 Crores (March 31, 2016 Rs, 57.82 Crores) i.e. 2% of average net profits for last three financials years, calculated as per section 198 of the Companies Act, 2013.

Note15 - Government Grant (Ind AS 20):

(a) Other Operating Revenues include Incentives against capital investments, under State Investment Promotion Scheme of Rs, 126.38 Crores (March 31, 2016 Rs, 135.86 Crores).

(b) Interest, Wages Expenses and Repairs to plant and machinery are net of subsidy received, under State Investment Promotion Scheme of Rs, 26.91 Crores (March 31, 2016 Rs, 65.10 Crores), Rs, 3.70 Crores (March 31, 2016 Rs, 7.11 Crores) and Rs, 1.55 Crores (March 31, 2016 Rs, Nil) respectively.

(c) Sales Tax deferment loan granted under State Investment Promotion Scheme has been considered as a government grant and the difference between the fair value and nominal value as on date is recognized as an income. Accordingly, an amount of Rs, 17.82 Crores (March 31, 2016: Rs, 2.24 Crores) has been recognized as an income. Every year charge in fair value is accounted for as an interest expense.

Note 16 - Assets held for Disposal (Ind AS 105):

The Company has identified certain assets to be disposed off like Packaging Plant, DG Set, Vertical Roller Press Mill, etc. which are not in use by the Company. The Company is in the process of discussion with various potential buyers and expects the same to be disposed off within next twelve months.

(b) Operating lease payment recognized in the Statement of Profit and Loss amounting to Rs, 130.35 Crores (March 31, 2016 Rs, 130.63 Crores)

(c) General Description of leasing agreements:

- Leased Assets: Land, Godowns, Offices, Flats, Machinery and Others.

- Future Lease rentals are determined on the basis of agreed terms.

- At the expiry of lease terms, the Company has an option to return the assets or extend the term by giving notice in writing.

- Lease agreements are generally cancellable and are renewable by mutual consent on mutually agreed terms.

Note 17:

In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, 'Statement of cash flows' and Ind AS 102, 'Share-based payment.' These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, 'Statement of cash flows' and IFRS 2, 'Share-based payment,' respectively. The amendments are applicable to the company from April 1, 2017. The Company is evaluating the requirements of the amendment and the effect on the consolidated financial statements is being evaluated.

(A) Amendment to Ind AS 7:

The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.

(B) Amendment to Ind AS 102:

The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes.

Note 18 - First-time adoption of Ind AS (Ind AS 101):

As stated in Note 1, these financial statements, for the year ended March 31, 2017, are the first the Company has prepared in accordance with Ind AS. For periods up to and including the year ended March 31, 2016, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (IGAAP). Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on March 31, 2017, together with the comparative period data as at and for the year ended March 31, 2016, as described in the summary of significant accounting policies. In preparing these financial statements, the Company's opening balance sheet was prepared as at April 01, 2015, the Company's date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its IGAAP financial statements, including the balance sheet as at April 01, 2015 and the financial statements as at and for the year ended March 31, 2016 and how the transition from IGAAP to Ind AS has affected the Company's financial position, financial performance and cash flows.

Exemptions Availed:

Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has availed the following exemptions:

(a) Past Business Combinations:

The Company has elected not to apply Ind AS 103- Business Combinations retrospectively to past business combinations that occurred before the transition date of April 1, 2015. Consequently, the Company has kept the same classification for the past business combinations as in its previous GAAP financial statements.

(b) Deemed cost for property, plant and equipment and intangible assets:

The Company has elected to continue with the carrying value of all of its plant and equipment and intangible assets as recognized as of April 01, 2015 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.

(c) Share-Based Payments:

The Company has opted not to apply Ind AS 102, Share based payment to equity instruments that vested before date of transition to Ind AS and to liabilities arising from share-based payment transactions that were settled before the date of transition to Ind ASs.

(d) Investment in Subsidiary, Joint ventures and Associates:

The Company has elected to carry its investment in subsidiary, joint venture and associates at deemed cost which is its previous GAAP carrying amount at the date of transition to Ind AS.

(e) Decommissioning liabilities included in the cost of property, plant and equipment:

The Company has measured the liability as at the date of transition to Ind AS as per Ind AS 37 to the extent that the liability is within the scope of Ind AS 16, estimated the amount that would have been included in the cost of the related asset when the liability first arose, by discounting the liability to that date using its best estimate of the historical risk-adjusted discount rate that would have applied for that liability over the intervening period and calculated the accumulated depreciation on that amount, as at the date of transition to Ind AS, on the basis of the current estimate of the useful life of the asset, using the depreciation policy adopted by the entity in accordance with Ind AS.

(f) Sales Tax Deferment Loan:

The Company has elected to use the previous GAAP carrying amount of the Sales Tax Deferment Loan existing at the date of transition to Ind AS as the carrying amount of the loan in the opening Ind AS Balance Sheet.

(g) Fair Value of Financials Assets and Liabilities:

As per Ind AS exemption the Company has not fair valued the financial assets and liabilities retrospectively and has measured the same prospectively.

Notes to the Reconciliation of equity as at April 1, 2015 and March 31, 2016 and Total Comprehensive Income for the year ended March 31, 2016:

(a) Property, Plant and Equipment:

(i) As per Ind AS 16, spare parts, stand- by equipment and servicing equipment are recognized as Property, Plant and Equipment ('PPE') when they meet the following criteria:

- Are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and

- Are expected to be used during more than one period.

Based on the above provision, stores and spares satisfying above criteria are de-recognized from Inventory and capitalized as PPE from the date of purchase.

(ii) Under IGAAP, Leasehold Land were classified as Fixed Assets as the standard on leases excluded Land. However, as per Ind AS 17, where the substantial risks and rewards incidental to ownership of an asset has not been transferred in the name of Company, the Company has classified such land under Operating Leases. The amount paid towards such leases has been shown as Prepayments under Other noncurrent assets.

(iii) As per Ind AS 38, right to use jetty has been classified as Intangible asset as on the date of transition.

(iv) As per Appendix A to Ind AS 16, the cost of an item of property, plant and equipment includes the initial estimate of the cost of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.

(b) Investments:

The Company has designated investments other than Investment in Subsidiary, Joint Arrangements and Associates at Fair Value through Profit and Loss (FVTPL). Ind AS requires FVTPL investments to be measured at fair value. At the date of transition to Ind AS, difference between the fair value of investment and IGAAP carrying amount has been recognized in Retained Earnings.

(c) Fixed deposit with maturity greater than twelve months shown in IGAAP under other non-current assets have been reclassified as other noncurrent financial assets as per Schedule III to Companies Act, 2013.

(d) Fixed deposit with maturity less than twelve months and those earmarked for debentures redemption and specific purpose have been reclassified from Cash and Cash equivalents to Other Bank Balances as per Schedule III to Companies Act, 2013.

(e) Financial Instruments:

The Company uses derivative financial instruments, such as forward currency contracts, interest rate swaps, currency swaps, principal only swaps and commodity fixed price swap contracts, to hedge its foreign currency risks, interest rate risks and commodity price risks, respectively and Hedge accounting as permitted under Ind AS 109 and as per Company accounting policy is applied for the purpose of Accounting in the financial statements.

Note 19 - First-time adoption of Ind AS (Ind AS 101): (Contd.)

As per Ind AS 109, such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

(f) loans/other Financial Assets/ other Current Assets:

(i) As per Schedule III, Security Deposits are to be classified under Loans or Other Non-current/Current Assets respectively.

Accordingly, Security Deposits which are financial in nature are classified under Loans and other deposits are classified under Non-current/ Current Assets respectively.

(ii) Under IGAAP, Loans and Advances were shown together under Loans and Advances. However, as per Schedule III, Loans are classified under other Non-current/Current Assets.

(g) Borrowings:

As per Ind AS 109, the Company has classified Foreign Currency Loans as financial liabilities to be measured at amortized cost. The Company has executed derivative contracts to hedge foreign currency risk of borrowings. The borrowings have been restated as at the date of transition.

(h) Provisions:

Under IGAAP, Provision for Asset Retirement Obligation is initially measured at the undiscounted amount to settle the obligation, however, Ind AS 37, requires that where the effect of time value of money is material, the amount of provision should be the present value of the expenditures expected to be required to settle the obligation.

(i) For Forward Covers and Commodity Derivatives, MTM reclassified to Derivative Liability as on the date of transition. The resulting gains or losses as on the date of transition are included in Retained earnings.

(j) Deferred Tax:

(i) IGAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required under IGAAP.

In addition, the various transitional adjustments lead to temporary differences. According to the accounting policies, the Company has to account for such differences. Deferred Tax adjustments are recognized in correlation to the underlying transaction either in retained earnings or profit and loss respectively.

(ii) As per Ind AS 12, the Company has considered MAT entitlement credit as deferred tax asset being unused tax credit entitlement.

(k) Proposed Dividend:

Under IGAAP, proposed dividends including DDT are recognized as a liability in the period to which they relate, irrespective of when they are declared. Under Ind AS, proposed dividend is recognized as a liability in the period in which it is declared (on approval of shareholders in a general meeting) or paid. In case of the Company, the declaration of dividend occurs after period end. Accordingly, proposed dividend has been reversed as at the date of transition and for financial year 2015-16 respectively and adjusted in retained earnings in financial year 2015-16 and 2016-17 respectively when paid.

(l) Sales Tax Deferment Loan:

Under IGAAP, sales tax deferment loan is recognized at the original amount without imputing interest and disclosed as borrowings. As per Ind AS 109 and Ind AS 20, Sales Tax Deferment Loan results into an interest-free loan from the government. Accordingly, the Company has prospectively measured the Sales Tax Deferment Loan at its fair value which is the discounted amount of the loan computed using the market rate of interest for a similar loan for the period for which the entity is not required to deposit the sales tax amount with the government.

(m) Revenue from operations:

(i) Under IGAAP, cash discounts and other discounts directly attributable to sales was recognized as part of other expenses which has been adjusted against the revenue under Ind AS during the year ended March 31, 2016.

(ii) Under IGAAP, revenue was presented net of excise duty. However, as per Schedule III to the Companies Act, 2013, revenue from operations is to be shown inclusive of excise duty. Accordingly, excise duty has been included in revenue from operations and shown separately as an expense.

(n) Sales Tax Deferment Loan:

The Company has recognized the difference between the amount payable for Sales Tax Deferment Loan and its present value in Profit and Loss Account.

(o) Fair Valuation of Investments other than Investment in Subsidiary, Joint Arrangements and Associates:

The Company has recognized the difference between the fair value of investments and IGAAP carrying amount in Other Income.

(p) Mines Restoration Expenses:

Under IGAAP, Mines Restoration expense booked in financial year 2015-16 has been now reversed as it is accounted for as per Ind AS 16.

(q) Share Based Payments:

Under IGAAP, the Company opted for the option to recognize the intrinsic value of the long-term incentive plan as an expense. Ind AS 102 requires the fair value of the share options to be determined using an appropriate pricing model recognized over the vesting period.

(r) Defined Benefit Liabilities:

Both under IGAAP and Ind AS, the Company recognized costs related to its post-employment defined benefit plan on an actuarial basis. Under IGAAP, the entire cost, including actuarial gains and losses, are charged to Statement of Profit and Loss. Under Ind AS, remeasurements (comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets excluding amounts included in net interest on the net defined benefit liability) are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI.

(s) Other Expenses and Depreciation:

(i) Stores and Spares:

With reference to Point (a), Stores and Spares consumption has been reversed from Profit & Loss which has been capitalized as PPE. Depreciation on capitalized stores and spares till the date of transition has been accounted for in Retained Earnings and has been charged to Statement of Profit and Loss for the year ended March 31, 2016.

(ii) Derivative Instruments:

- In continuation to Point (e), the method of recognizing the resulting gain or loss on fair valuation of derivative instruments depends on whether the derivative is designated as a hedging instrument, and if so, on the nature of the item being hedged. The resulting gains or losses arising from changes in the fair value of derivatives as on the date of transition is included in Retained earnings and for the year ended March 31, 2016 in Statement of Profit and Loss.

- With reference to Point (i), the resulting gain or loss on Forward Covers is credited in Statement of Profit and Loss for the year ended March 31, 2016.

(iii) leasehold land Prepayments:

With reference to Point (aii), depreciation on leasehold land is reversed and charged as Rent expense in Statement of Profit and Loss for the year ended March 31, 2016.

(iv) Asset Retirement obligation:

With reference to Point (a), depreciation is charged in Statement of Profit and Loss for the year ended March 31, 2016.

(t) Finance Costs:

With reference to Point (a-iv), Ind AS 37 provides that where discounting is used, the carrying amount of a provision increases in each period to reflect the passage of time. This increase is recognized as finance cost in Statement of Profit and Loss for the year ended March 31, 2016. (u) other Comprehensive Income:

In accordance with Ind AS, Movement in Other Comprehensive Income includes effective portion of gains and loss on hedging instruments in a cash flow hedge and remeasurements on defined benefit liability which was charged to Statement of Profit and Loss as per the IGAAP.

Note 20:

Figures less than Rs, 50,000 have been shown at actual, wherever statutorily required to be disclosed, as the figures have been rounded off to the nearest Rs, in lakhs.