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

BSE: 526371ISIN: INE584A01023INDUSTRY: Mining/Minerals

BSE   ` 115.25   Open: 115.15   Today's Range 114.70
117.20
+0.75 (+ 0.65 %) Prev Close: 114.50 52 Week Range 86.45
124.30
Year End :2018-03 

1.1 Basis of preparation

(a) Statement of compliance

The standalone financial statements has been prepared in accordance with Indian Accounting Standards (“Ind AS”) notified under the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016 and 2017 and other relevant provisions of the Act.

(b) Basis of measurement

The standalone financial statements have been prepared on a historical cost convention and on an accrual basis, except for the following material items that have been measured at fair value as required by relevant Ind AS:

i) Certain financial assets and liabilities measured at fair value (refer accounting policy on financial instruments);

ii) Defined benefit and other long-term employee benefits.

(c) Functional and presentation currency The standalone financial statements are presented in Indian rupees, which is the functional currency of the Company and the currency of the primary economic environment in which the entity operates. All financial information presented in Indian rupees has been rounded to the nearest crore except share and per share data.

(d) Use of estimates and judgement

The preparation of standalone financial statements in conformity with Ind AS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on a periodic basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

1.2. Reconciliation of Depreciation and Amortisation as per Statement of Profit and Loss:

1. Lease hold land measuring 3021.35 sq. mtrs. (Previous year 3021.35 sq mtrs) has been taken from Vizag Port Trust authorities for construction of Regional Office Building and the Lease Deed has expired on 11.07.2012. Lease hold land measuring 1431.32 sq. mtrs. (Previous year 1431.32 sq. mtrs) has been taken from Vizag Port Trust authorities for construction of Screening Plant at Port Area and the lease deed has expired on 17.06.2010. Action is on hand to renew the lease periods of the above lands. However, the rents have been accounted till 31-03-2018.

2. The value of land of 155.55 hectares taken over from District Industries Centre, Jagdalpur for construction of Steel Plant near Nagarnar has not been brought into the books as the amount payable is not ascertainable in the absence of any demand from the concerned authorities.

3. Formal agreements / Transfer deeds remain to be executed in respect of the following:

(a) Renewal of Mining Leases at Deposit 10 (Float Ore) & Panna (supplementary lease) & Donimalai.

(b) Lease deeds in respect of parts of land for township at Bacheli Complex, Kirandul Complex and Panna Project.

(c) Mining lease to the extent of 33.58 hectares (Mining area) and 19.42 hectares (Plant area) of Silica Sand Plant near Lalapur (Allahabad).

(d) Lease in respect of a portion of the total land at R&D Center measuring 9.12 acres has expired during Feb 07 (6.66 acres) and the balance in Feb 2010 (2.46 acres). The process of renewal of the lease is under progress.

(e) Only Provisional allotment letters issued for the land to the extent of 13.43 acres purchased from M/s APIIC at Industrial park, Paloncha. However, on physical survey found only 11.35 acres of land. No effect is given in books, pending confirmation from M/s APIIC.

(f) Land to the extent of 26.39 acres purchased at Patancheru, Hyderabad from the Official Liquidator of Allwyn Watches Ltd. However, on physical survey found only 24.23 acres of land.

No effect is given in books, pending confirmation from the Official Liquidator of Allwyn Watches Ltd.

(g) Land at Raipur to the extent of 57,432.99 Sq. Ft. has been acquired from Chhattisgarh Housing Board, however as per the actual land measurement taken by surveyor the total land

5. During the year following are the major capitalization :

a) Rs.508.91 crore in respect of the Pellet plant at Donimalai Iron Ore Mines in Karnataka. Total capitalisation upto the current year Rs.575.18 crore.

b) Rs.359.24 crore in respect of the Kumar Swamy Iron Ore Mines at Donimalai in Karnataka. Total Capitalisation upto the year Rs.425.88 Crore.

6. During the year 2017-18 a review of residual and useful life of PPE was done and as per the review there is no change recommended. The Useful life of all the PPE is as per schedule II except for the following PPE whose life as given under is determined as per technical assessment.

Addl. Notes :

1) No new shares were issued, during the current year.

2) Board of Directors of the company in its meeting held on 7th June 2016 approved buyback of 80,08,25,526 equity shares @ Rs.94/- for an aggregate consideration of Rs.7,527.76 crore. The buyback offer of shares was closed on 30th September 2016 and the process for buyback was completed on 10th October 2016. The buyback offer was fully subscribed.

3) Terms/Rights attached to equity shares :

The company has only one class of equity shares having par value of Re.1/- each and each holder of equity shares is entitled to one vote per share.

4) The details of shares in the company held by each shareholder holding more than 5% shares :

The Company has issued letter of comfort in favour of International Coal Venture (P) Limited (ICVL) in furtherance for providing Corporate Guarantee of US$ 30 Mn by them to EXIM Bank on behalf of Minas De BengaLimitada, Mozambique (Borrower), a downstream operating subsidiary of ICVL, New Delhi in respect of short term working capital loan. The said letter of comfort does not in any way constitute the guarantee or security by the Company of the duties of the borrower to meet its obligation under the said facility.

1.3: Disputed Claims under Income Tax Act.

The Hon’ble ITAT has delivered the orders in favour of the company on the subject matter of alleged under invoicing pertaining to the Financial Years 2006-07 to 2009-10. The Department has filed appeals before the Hon’ble High Court and pending its decision, the amount of demands Rs.1,207.14 Crore (Previous year Rs.1,207.14 Crore including interest) is included under contingent liability.

1.4: Disputed claims under ‘ Karnataka Forest Act:

Government of Karnataka had introduced Forest Development Tax (FDT), to pay @ 12% on the sale value of iron ore with effect from 27.08.2008. NMDC preferred an appeal before Hon’ble High Court of Karnataka and the court passed an interim order directing the Company to pay 50% of FDT, consisting of 25% in cash and balance 25% in the form of Bank Guarantee. As against the total FDT demand of Rs.487.27 Crore ( from August 2008 to Sep-2011), the Company has deposited an amount of Rs.121.84 Crore (25%) in cash which has been shown as amount recoverable and submitted a bank guarantee for similar amount. An amount of ‘365.43 Crore (balance 50% amount of Rs.243.69 Crore plus Rs.128.84 Crore paid and accounted as amount recoverable) is included under disputed claims at 1.1.A. The amount of Rs.121.84 Crore for which BG was given is included under contingent liability on BGs’ at 1.2.

Hon’ble High Court of Karnataka vide order dated 03.12.2015 has quashed the orders of Government of Karnataka levying the FDT and ordered refund of the tax collected within three months and accordingly the Company has lodged refund claims. However, Government of Karnataka has filed a Special Leave Petition with Hon’ble Supreme Court of India, challenging the orders of Hon’ble High Court of Karnataka. Hon’ble Supreme Court of India has accepted the same and imposed stay on refund of the FDT amount.

Meanwhile Karnataka State Govt. had enacted Karnataka Forest (Amendment) Act 2016 vide Gazette notification dated 27.07.2016. The amendment substituted the word ‘Tax’ in the principal act to ‘Fee’ w.e.f 16th day of Aug 2008. Based on this the Monitoring Committee had started billing the Forest Development Fee in its invoices. Meanwhile consumers in Karnataka had filed separate Writ Petitions in Hon’ble High Court of Karnataka on the above. Karnataka High Court vide its order dated 20th Sept. 2016, had ordered that State Govt may restrain from collecting FDF during the pendency of the writ petition, subject to the condition of furnishing bank guarantee in respect of 25% of the demand in relation to future transactions. Karnataka State Govt. had approached Hon’ble Supreme Court on this. Hon’ble Supreme Court vide its order dated 13.02.2017 modified the order of High Court of Karnataka and ordered for payment of 50% of the demanded amount and furnish Bond for balance amount.

The amount billed by the monitoring committee amounting to ‘93.85 crore (previous year Rs.110.28 crore) towards newly introduced FDF has been accounted under sales revenue. However, the Karnataka High Court vide its judgement dated 4th October 2017 has declared the Karnataka Forests (Amendment) Act, 2016 which was introduced for collection of Forest Development Fee (FDF) as unconstitutional. No FDF is collected nor paid with effect from 5th October 2017.

2.1.1. Segment Reporting as per Ind - AS-108

A. Basis for segmentation

An operating segment is a component of the company that engages in business activities from which it may earn revenues and incur expenses and for which discrete financial information is available. All operating segments’ operating results are reviewed regularly by the Board of Directors to make decisions about resources to be allocated to the segments and assess their performance.

The company has two reportable segments, as described below, which are the company’s strategic business units. These business units offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the business units, the company’s Board reviews internal management reports on a periodic basis.

The following summary describes the operations in each of the company’s reportable segments:

B. Information about reportable segments

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit (before tax), segment revenue and segment capital employed as included in the internal management reports that are reviewed by the board of directors. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arm’s length basis.

2.1.2 Accounting policies, change in Accounting Estimates and Errors ( As per Ind-AS 8):

I. Revision to existing Accounting Policies

a. Change proposed in the existing Accounting Policy on ‘Revenue Recognition’ Para 1(1.2)(xi)(b): In case of spot auction under electronic mode, the sale is recognized on conclusion of the auction and receipt of money as against the earlier practice of recognizing sales on conclusion of auction.

The said revision has an impact of reduction in turnover of Rs.8.79 crore along with the reduction in the profit to the extent of Rs.5.96 crore.

b. Treatment of Enabling Assets: Under PPE 1.2(v)(b)

“Expenditure incurred on any facility, the ownership of which is not vested with the company, but the incurrence of which is essential in bringing an asset/projects of NMDC to the location and condition necessary to be capable of operating in the manner intended by the management, shall be capitalized as a part of the overall cost of the said asset/project. Else the same shall be charged to revenue.”

No impact in the financials as the treatment of enabling assets as mentioned in the policy is already in practice. The same is added to Accounting Policy to bring in clarity.

c. Prepaid Expenses: 1.2(xix)

Expenses are accounted under prepaid expenses only when the amount relating to the unexpired period exceeds rupees Two crore in each case.

The addition of the said policy has resulted in increase in the current year expenses by Rs.8.16 crores with a corresponding decrease in profit.

d. Restatement of earliest prior period financials on material error/omissions 1.2 (xx)

The value of error and omissions is construed to be material for restating the opening balances of assets and liabilities and equity for the earliest prior period presented if the amount in each case of earlier period income/expenses exceeds 1.0% of the previous year turnover of the company.

This policy is introduced for more clarity on recognising material prior period errors. During the current year there is nil impact in the financials as there are no material prior period errors and omissions recognised.

II. Ind AS issued but not yet effective: The Companies (Indian Accounting Standards) Amendment Rules, 2018 has been notified containing the following:

a. Ind AS 115- Revenue from Contracts with Customers : The Ministry of Corporate Affairs has notified this standard to be effective from 1st April 2018. The objective of this standard is to give enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The core principle of this Standard is that an entity shall recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The Company intends to adopt this standard w.e.f 1st April 2018. The effect on adoption of this standard is expected to be insignificant.

b. Appendix B to Ind AS 21, foreign currency transactions and advance consideration: The Ministry of Corporate Affairs has notified this standard to be effective from 1st April 2018. This standard clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency.

The Company intends to adopt this standard w.e.f 1st April 2018. The effect of this on financial statements is expected to be insignificant.

D: Key Management Personnel: (Directors) as on 31/03/2018 Directors :

1. Shri N.Baijendra Kumar CMD w.e.f 6th Sep. 2017

2. Shri R. Sridharan CMD w.e.f 7th Dec 2016 to 5th Sep. 2017

3. Dr. Narendra K Nanda Director (Technical)

4. Dr T R K Rao Director (Commercial)

5. Shri P K Satpathy Director (Production)

6. Shri D S Ahluwalia Director (Finance) up to 30th April 2018

7. Shri Sandeep Tula Director (Personnel)

Company Secretary :

Sri A.S Pardha Saradhi

The Company has so far deposited an amount of ‘639.61 Crore (previous year 638.64 crore) with Karnataka Industrial Area Development Board (KIADB) for acquisition of land for setting up of Steel plant at Karnataka. The amount is included under Advances to Subsidiaries under the note 2.4.2.

Board in its meeting held on 28/11/2014 deliberated that the land purchased in respect of Karnataka Steel plant shall be purchased in the name of new subsidiary company to be floated for the purpose of setting up of Steel Plant.Subsequent to the incorporation of wholly owned subsidiary Karnataka Vijayanagar Steel Limited, (KVSL) based on request, the Government of Karnataka vide its order no. CI 264 SPI 2009, Bengaluru dated 10/07/2015 has approved the proposal of the Company to transfer the Project in favour of Karnataka Vijayanagar Steel Limited (KVSL) a wholly owned subsidiary of the Company.

KIADB has vide its letter dated KIADB/BALLARI/D0/PC/714/2017-18 dated 11.01.2018 handed over the possession of land measuring 2857.54 acres to KVSL. However, KIADB has not considered the extent of land utilised for the widening work of existing NH-63 by concerned authority which is passing through few survey numbers of our acquired private land. Subsequent to this rectification, the execution of agreement and registration of private land shall be taken up. Pending rectification, the land is capitalised in the books of KVSL.

2.1.3 Accounting for Deferred Taxes on income (Ind-As-12) : Necessary details have been disclosed in note no: 2.5.

2.1.4 Discontinuing Operations (IndAS-105) :

On 25/02/2008 the Board of directors had announced a plan to dispose off the plant and machinery of Silica Sand Project, Lalapur which is included in the segment of “Other minerals and services.” Pending disposal, the unit is kept under care & maintenance.

2.1.5 Intangible Assets (IndAS-38) : R&D

The Research & Development expenditure, charged to Statement of Profit & Loss during the year is Rs.22.03 crore (previous year Rs.20.30 crore), including expenditure of Rs.0.83 crore (previous year Rs.1.47crore) on feasibility studies.

The amount of revenue expenditure incurred at Research & Development unit, Hyderabad is as under:

2.1.6 Impairment of Assets (IndAS - 36):

The impairment of assets has been reviewed during the year in respect of the following cash generating units, included under the segment ‘Other Minerals and Services’ and decided to maintain same status:

1. The Recoverable amount of the assets of SSP, Lalapur unit has been arrived at considering the ‘value in use’. Since the value in use has resulted in negative cash flows, the recoverable amount has been taken as nil without applying any discount rate.

2. In the case of SAF plant at the Sponge Iron Unit, the impairment is based on net selling price as assessed by the approved Valuer.

3. The validity of the forest clearance of Panna Supplementary mining lease is up to 30-06-2015. As per the provisions of Mines and Mineral (Development and Regulation) Amendment Act 2015 and circular dated 01-04-2015 issued by MoEFCC the above mining lease shall be deemed to have been extended up to 30-06-2020 and accordingly the operations of the project are continued beyond 30-06-2015.

2.1.7 Provisions, Contingent Liabilities and Contingent Assets (IndAS-37) :

Necessary details in regard to provisions have been disclosed in notes 2.14,2.17 & 2.31.

2.2 :Disclosure as required under Regulation 34(3) and 53(f) of SEBI (LODR) Regulations, 2015

2.2.1 Loans and advances in the nature of loans to Subsidiaries/Jvs’ where there is no repayment schedule or no interest :

2.2.2 There are no Investments by the loanees as mentioned in 2.36.1 in the shares of NMDC Ltd.

2.2.3 No Loans and Advances were given to the Associate Companies.

2.2.4 There are no loans and advances in the nature of loans to firms/companies in which directors are interested except as stated above.

2.3. Others:

2.3.1 Service tax on Royalty:

The Central Govt vide circular dated 13th April 2016 (Sl no 9) clarified the applicability of service tax payable on Royalty wef 1.4.2016. The company has contended before the Hon’ble High Courts of Karnataka ,Chhattisgarh & Madhyapradesh. The Chhattisgarh High Court has permitted NMDC to withdraw the case with liberty to pursue the matter before the concerned authority by filing a reply. The Madhya Pradesh High court has granted stay. The Karnataka High Court, initially granted stay but subsequently vacated the stay and dismissed the petition.

Considering the stay given by Supreme court in one of the cases on similar matter, the company has filed fresh ‘Writs’ in the High Courts of Chhattisgarh & Karnataka. The company has also filed transfer petitions before Hon’ Supreme Court seeking transfer of the cases with Chhattisgarh High Court & Madhya Pradesh High Court. Hon’ble Supreme Court has not admitted the transfer petition with respect to the case with Chhattisgarh High Court. However with regard to case with Madhya Pradesh High Court, Hon’ble Supreme Court has granted permission to withdraw the transfer petition with liberty to draw the attention of the High Court to the pendency of similar matter(s) before the Hon Supreme Court.

Pending the outcome of above actions, the company has provided for the liability of Rs.249.82 crore (previous year Rs.166.65 crore) towards Service Tax on Royalty and interest.

2.3.2. Mine Closure Obligation:

The liability to meet the obligation of mine closure and restoration of environment as per Mines & Minerals (Development and Regulation) Act 1957 (MMDR 1957) at the time of closure of the mine has been estimated on the basis of technical assessment and charged to Statement of Profit and Loss on the basis of Run of Mine ore production of the mine. The Liability is been remitted to a fund maintained for this purpose.

A review of the mine closure obligation has been made during the year 2017-18 and the Liability of Rs.103.64 crore (previous year Rs.258.50 crore) has been provided during the year.

2.3.3 Enabling Facilities:

During the year the Company has paid Rs.150 crore towards doubling of Railway lines owned by Railways between Kirandul-Jagdalpur and Rs.140 crore towards Jagdalpur-Ambagon , which is required for augmentation of evacuation facility of Bailadila Sector. In addition to above certain amounts were also paid to Railways for other works on railway properties. An amount of Rs.172.80 Crore utilised for the above purpose during the year 2017-18 (previous year Rs.176.72 Crore) is included in ‘Other Expenses’.

2.3.4 Impairment of Investment in JKMDC Ltd

A decision was earlier taken to go ahead with setting up of 30000TPA dead burnt magnesite plant at Panthal, Jammu. Environment clearance was granted vide Ministry of Environment & Forests (MOEF) vide their letter dated 03.05.2011. Major works were awarded during 2015-16. However MOEF vide their letter dated 28.10.2016 had withdrawn the environment clearance granted earlier and all the works have been suspended. As there appears to be no immediate sign of resumption of activity, the Equity amount of Rs.28.51 crore and Advances to an extent of Rs.13.86 crore (adjusted for free cash & bank balance) has been provided for during the previous year 2016-17. Status quo maintained for 2017-18.

2.3.5 Disinvestment of NISP:

The Govt of India has accorded ‘in principle’ approval for strategic disinvestment of Nagarnar Steel Plant of NMDC Limited on 27.10.2016.Transaction Advisor (TA), Legal Advisor (LA) & Asset Valuer (AV) are appointed. However, the process of disinvestment has been deferred.

2.3.6 Property, Plant & Equipment (PPE)

As per Ind AS 16 items such as spare parts, stand by equipment’s and service equipment’s are to be capitalized when they meet the definition of PPE and are expected to be used for more than one accounting year. After review of the inventory values and its consumption patterns in the major production Units, Company based on materiality has fixed a threshold limit of Rs.20 Lakhs for such spare parts, stand by equipment’s and service equipment’s meeting the definition of PPE. On issue of said PPE, the WDV is charged to depreciation and the life is restricted to the life of the principal asset.

2.3.7 DMF & NMET:

As per the Gazette Notification dated 27th March 2015 enacting the Mines and Minerals (Development and Regulation) (Amendment) Act, 2015 and subsequent notifications dated 17th Sept 2015 and 14th Aug 2015 for contribution to District Mineral Foundation (DMF) & National Mineral Exploration Trust (NMET), the Company was required to pay 30% of royalty towards DMF and 2% of royalty towards NMET with effect from 12th Jan 2015 respectively.

The Hon’ble Supreme Court of India has in its judgement dated 13.10.2017 clarified that “DMF is required to be made by the holder of a mining lease or a prospecting licence-cum-mining lease in the case of minerals other than coal, lignite and sand for stowing with effect from 17th September, 2015 when the rates were prescribed by the Central Government”. Subsequent to this, Company has withdrawn the excess provision made towards DMF for the period from 12th Jan 2015 to 16th September 2015 and returned/adjusted the amount collected from customers. On account of this a net amount of Rs.144.30 Croreis shown as Exceptional item in Profit and Loss Account.

With regard to NMET, Company has made the payment w.e.f 12.01.2015. Moreover, the judgement of Supreme court dated 13.10.2017 is silent hence status quo is maintained. Since the rates for NMET were declared in the MMDR Act itself and Supreme court judgement is silent on its applicability, payment made by the Company with effect from 12.01.2015 is deemed to be in order.

In the State of Karnataka Central Empowered Committee (CEC) constituted by the Hon’ble Supreme court of India, has vide letter no. 01.12.2015, directed Monitoring Committee, conducting e-auctions not to recover the above levies from the buyers in the e-auction and accordingly the amounts not been accounted as part of sales.

2.3.8 Mining issues at Donimalai complex in Karnataka:

The monitoring Committee has retained 10% of sale proceeds for the period from 04/10/2011 to 31/03/2018 amounting to Rs.1,685.22 crore (previous year Rs.1,350.01 Crore) pending finalisation of R&R plan. The amount is included under “Trade Receivables”.

The Rehabilitation and Reclamation (R&R) plan prepared by ICFRE and submitted to Central Empowered Committee appointed by the Hon’ble Supreme Court of India was considered and approved. However the Monitoring Committee has not yet released the balance payment as the issue is still pending with the Hon’ble supreme court of India. Based on the subsequent events, Company has reviewed the reasonability of realization of the 10% of the sales proceeds considered under the trade receivables from Monitoring Committee and under Ind AS 109, has provided for 100% of the said amount.

2.3.9 GST issue on Sales through Monitoring Committee

Post GST 1st July 2017, for sales through Monitoring Committee (MC), GST invoices were raised by Donimalai unit on MC as per the requirement of the GST Act. It was expected that MC shall raise GST invoices on the customers and utilize the input tax credit of the GST billed by NMDC and payback the GST to NMDC. However, for the period from 1st July 2017 to 30th Sept 2017 MC has not acknowledged the invoices raised by NMDC and has paid the GST of Rs.45.73 Crore collected from customers to the Exchequer without utilizing the input tax credit of GST billed by NMDC. This amount stands receivable in the books of Donimalai. Efforts are on to recover the amount from MC. Pending clarity on the issue of recovery of this amount, no provision has been made in the books of accounts of the year 2017-18. However, from 1st October 2017 Donimalai has been raising bill directly on the customers as per the Hon’ble Supreme Court direction.

2.3.10 Other issues:

The Company has been legally advised that there is no impact of the Hon’ble Supreme Court of India judgement with reference to the writ petition (Civil) no. 114 of 2014 dated 2nd August 2017 on NMDC. However, in case it is found applicable to NMDC at a later date, it may impact the profits of the company.

2.3.11 CSR Expenditure :

a) Gross amount required to be spent by the company during the year is Rs.121.02 crore (2% of the last three years average PBT ‘6050.93 crore).(Previous Year Rs.160.22 crore (2% of the last three years average PBT Rs.8010.77 crore).

b) Amount spent during the year on account of CSR activities is Rs.169.37 crore.( Previous Year Rs.174.18 crore)

2.3.12 General:

i. The company owns certain office space at New Delhi. It is not the company’s intention to hold the property for a long term for capital appreciation nor for rental purpose. Hence the same is not treated as Investment Property and included under PPE.

ii. Some of the balances appearing under Trade receivables, Trade payables, advances, Security deposits and other payables are subject to confirmations.

iii. Figures for the previous year have been regrouped/ rearranged wherever considered necessary so as to confirm to the classification of the current year.

(1) Assets that are not financial assets (such as receivables from statutory authorities, prepaid expenses, advances paid and certain other receivables) as of 31 March 2018, and 1 April 2017, respectively, are not included.

(2) Other liabilities that are not financial liabilities (such as statutory dues payable, advances from customers and certain other accruals) as of 31 March 2018, and 1 April 2017, respectively, are not included.

The carrying amounts of above financial assets and liabilties are considered to be same as their fair values, due to their short-term nature.

Note No: 2.3.13 Financial Risk Management a) Risk management framework

The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board of Directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The committee reports regularly to the Board of Directors on its activities.

The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Board of Directors monitors the compliance with the Company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.

The Company has exposure to the following risks arising from financial instruments:

A. Credit risk

Credit risk is the risk that counterparty will 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 deposits with banks.

(a) Trade receivables

The Company sales are generally based on advance payments and through LC’s. The trade receivables in the books are mainly on account of credit sales to M/s RINL Limited, CPSE under the Ministry of Steel and the Sales of Iron Ore in the State of Karantaka which is through Montoring Committee (MC) appointed by Hon’ble Supreme Court of India.

Expected credit loss for trade receivables under simplified approach is detailed as per the below tables

The impairment provisions for trade receivables disclosed above are based on assumptions about risk of default and expected loss rates.

(b) Financial instruments and cash deposits

Credit risk from balances with banks is managed by the Company’s treasury department in accordance with DPE guidelines & Company’s policy. Investments of surplus funds are made only with scheduled commercial banks having a minimum networth of Rs.500 Crore within limits assigned to each bank and Debt based mutual funds of public sector AMCs. The limits are reviewed by the Company’s Board of Directors on an annual basis. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments.

B. Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

Typically the Company ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. In addition, the Company has taken fund based limits with banks to meet its short term financial obligations.

i. Financing arrangements

The Company has access to the following undrawn borrowing facilities at the end of reporting period

C. Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

(i) Foreign currency risk

Since majority of the company’s operations are being carried out in India and since all the material balances are denominated in its functional currency, the company does not carry any material exposure to currency fluctuation risk.

The Company’s exposure to foreign currencies is minimal and hence no sensitivity analysis is presented.

(ii) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The company quite often bridges its short term cash flow mismatch by availing working capital loans from banks against its fixed deposits. Such loans have a very short tenure and the interest rate on such loans is based upon the rates offered by banks on fixed deposits , increased by a few basis points. Since the interest rates on fixed deposits are fixed, the company does not have any interest rate risk on such loans availed on a loan to loan basis.

The Company’s exposure to interest rate risk is minimal and hence no sensitivity analysis is presented.

Note No. : 2.3.14 Capital Management

a) Risk management

The primary objective of the Company’s capital management is to maximise the shareholder value. The Company’s objectives when managing the capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders.

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors and senior management monitors the return on capital, which the Company defines as result from operating activities divided by total shareholders’ equity.

For the purpose of the Company’s capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders the company has no external borrowings as on 31st March 2018.