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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   ` 146.20   Open: 144.50   Today's Range 143.25
+2.35 (+ 1.61 %) Prev Close: 143.85 52 Week Range 102.80
Year End :2017-03 

The Company’s standalone financial statements for the quarter ended June 30, 2016 are the first interim standalone financial statements prepared in accordance with Ind AS.

The adoption of Ind AS was carried out in accordance with Ind AS 101, using April 1, 2015 as the transition date. Ind AS 101 requires that all Ind AS standards and interpretations that are effective for the first Ind AS Standalone Financial Statements for the quarter ended June 30, 2016, be applied consistently and retrospectively for all fiscal years presented.

All applicable Ind AS have been applied consistently and retrospectively wherever required. The resulting difference between the carrying amounts of the assets and liabilities in the standalone financial statements under both Ind AS and Indian GAAP as of the transition date have been recognized directly in equity at the transition date.

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 other relevant provisions of the Act.

For all the periods up to and including the year ended March 31, 2016 the Company prepared its financial statements in accordance with accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP). These financial statements are the first, the Company has prepared in accordance with Ind AS. Refer to note on transition to Ind AS for information on how the Company adopted Ind AS.

(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. Lease hold land measuring 3021.35 sq. mtrs. (Previous year 3,021.35 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 31-03-2017.

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 (Miming 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 comes to 62,205.96 Sq. Ft. The registration formalities are in the process for the total land.

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

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 been 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 Rs.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 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 1207.14 Crore (Previous year Rs.1,652.54 Crore including interest) is included under contingent liability.

1.1: 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. Accordingly the Company has deposited an amount of Rs.121.84 Crore (previous year Rs.121.84 Crore) in cash against the said demand which has been shown under Short term Loans and Advances and submitted bank guarantee of similar amount. The balance liability of Rs.243.69 Crore (previous year Rs.243.69 Crore) is included under disputed claims -taxes etc., under 1.1A - Contingent Liabilities.

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’ wef 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 the 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 had modified the order of Hon’ble 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 Rs.110.28 Crore towards newly introduced FDF has been accounted under Sales revenue. With regard to the earlier amounts the amount of Rs.243.69 Crore was included under disputed claims 1.1A. Since Rs.121.84 Crore paid was accounted under ‘Loans and Advances’, the same is now added to disputed claims under 1.1A totalling to Rs.365.53 Crore. The amount of Rs.121.84 Crore for which BG was given the same is included under ‘Contingent Liability on BG’s’ at 1.2.

Note-2.1 : Mining Issues at Donimalai Complex in Karnataka:

The Monitoring Committee has retained 10% of sale proceeds for the period from 04/1 0/201 1 to 31/03/2017 amounting to Rs.1,350 Crore (previous year Rs.1,105.05 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.

Interest on Outstanding Dues: As per the direction of Hon’ble Supreme Court, Monitoring Committee initially was to pay interest at the rate of 6% on the outstanding dues. However, Monitoring Committee vide its letter dt. 20.01.16 informed that it reduced the interest rate from 6% to 3% which is applicable retrospectively. Accordingly, the Company made reversal of Rs.47.66 Crore towards reduction in interest rate in the books. Thereby the total interest income receivable from Monitoring Committee as on 31.3.2017 is Rs.42.35 Crore which is included other financial assets.

Note-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.

* In the process of liquidation. Public notice has been issued by GOI, Ministry of Corporate affairs vide their notice dated 27.04.2017 to remove/strike off the name of the Company from the Registrar of Companies unless a cause is shown to the contrary within 30 days from the date of notice.

D: Key Management Personnel: (Directors) as on 31/03/2017

Directors :

1. Sri R. Sridharan (CMD w.e.f 7th Dec 2016 ) (*)

2. Smt. Bharathi S. Sihag (CMD up to 30th Nov 2016) (**)

3. Dr. Narendra K Nanda (Dir. Tech)

4. Dr. T R K Rao (Dir. Commercial) (***)

5. Sri P K Satpathy (Dir. Production)

6. Sri D S Ahluwalia (Dir. Finance)

7. Sri Sandeep Tula (Dir. Personnel w.e.f 3rd Aug 2016)

(*) Holding Additional Charge as CMD along with Member Finance, ISRO, Dept of Space

(**) Held Additional Charge as CMD along with SS &FA, MoS

(***) Held Additional Charge as Director (Personnel) upto 2nd Aug 2016

Company Secretary :

Sri A.S. Pardha Saradhi

Company has deposited an amount of Rs.1.44 Crore during the year aggregating to Rs.638.65 Crore with Karnataka Industrial Area Development Boards (KIADB) for acquisition of land for setting up of Steel Plant at Karnataka. The amount was shown as Capital advance under the head Long term loans and advances as on 31/03/2015. 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, 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 being set up in favour of Karnataka Vijayanagar Steel Limited a wholly owned subsidiary of the Company.

In view of the approval of Government of Karnataka, the advance of Rs.637.20 Crore deposited with KIADB for acquiring the land for setting up of steel plant in Karnataka has been shown as Loans and Advances to Subsidiary under the head Long term loans and advances as on 31/03/2016. An additional amount of Rs.1.44 Crore was paid during the year and the amount under Advances as on 31.3.2017 is Rs.638.65 Crore.

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

2.1.3 Discontinuing Operations (Ind AS-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.

2.1.4 Intangible Assets (Ind AS-38) : R&D

The Research & Development expenditure, charged to Statement of Profit & Loss during the year is Rs.20.30 Crore (previous year Rs.22.21 Crore), including expenditure of Rs.1.47 Crore (previous year Rs.5.32 Crore) on feasibility studies.

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

2.1.5 Impairment of Assets (Ind AS - 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 30-06-201 5.

2.1.6 Provisions, Contingent Liabilities and Contingent Assets (Ind AS-37) : Necessary details in regard to provisions have been disclosed in notes 2.14,2.17 & 2.31.

Note-2.2 : Disclosure as required under Regulation 34(3) and 53(f) of SEBI (LODR)

2.2.1 Loans and advances in the nature of loans to Subsidiary companies where there is no repayment schedule or no interest :

2.2.2 There are no Investments by the loanees as mentioned in 2.34.1 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.

Note-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 Court of Karnataka and Hon’ble High Court of Madhya Pradesh and Stay has been granted from both the Hon’ble High Courts. However based on the expert opinion, the Company has provided for the liability of Rs.158.60 Crore and included under ‘Royalty & other levies’.

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 2016-17 and the Liability of Rs.258.66 Crore has been provided during the year.

2.3.3 Enabling Facilities:

The Company has paid certain amounts for doubling of Railway lines owned by Railways between Kirandul-Jagdalpur and Jagdalpur- Ambagon which is required for augmentation of evacuation facility of Bailadila Sector. In addition certain amounts were paid to railways for certain works on railway properties at Kirandul and Bacheli. An amount of Rs.176.72 Crore incurred during the year 2016-17 has been charged during the current period and included in ‘Other Expenses’. The impact in respect of amounts pertaining to previous periods has been considered through retained earnings on transition date and the subsequent periods.

2.3.4 Mining Lease -Deposit-13:

NMDC has incurred an expenditure of Rs 44.25 Crore towards registration & stamp duty charges towards grant of Mining Lease of Bailadila Iron Ore Deposit-13 in favour of NMDC Limited. As per the Agreement with the subsidiary Company ‘NMDC-CMDC Ltd’, and the lease deed, the mining lease is required to be transferred at cost to the subsidiary Company’ NMDC-CMDC Ltd’. Pending transfer of the mining lease, the said asset has been shown under “Assets held for Sale”. Action for transfer has already been initiated by NMDC.

2.3.5 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 03.05.201 1. 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.

2.3.6 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. The process of appointment of Transaction Advisor (TA), Legal Advisor (LA) & Asset Valuer (AV) has been initiated. It is premature to comment on the valuation as the outcome of the Asset Valuer may vary. The expenditure incurred during the year 2016-17 was Rs.2,904.92 Crore and upto 31.3.2017 was Rs.12,066.97 Crore.

2.3.7 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.

2.3.8 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 is required to pay 30% of royalty towards DMF and 2% of royalty towards NMET with effect from 12th Jan 2015 respectively.

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 . The Company has filed a writ petition in this regard. In the State of Chhattisgarh the levy of DMF & NMET from retrospective dates has been challenged in the Courts of law. Orders have been passed by the Court not to take coercive actions for recovery of retrospective amounts from the customers. As such, to the extent of the amount realised only has been accounted as sales income.

2.3.9 CSR Expenditure :

a) Gross amount required to be spent by the Company during the year is Rs.160.22 Crore (2% of the last three years average PBT Rs.8,010.77 Crore). (Previous Year Rs.193.28 Crore (2% of the last three years average PBT Rs.9,664.05 Crore).

b) Amount spent during the year on account of CSR activities is Rs.174.18 Crore. (Previous Year Rs.210.09 Crore).

2.3.10 General:

i. Expenses are accounted under prepaid expenses only where the amounts relating to unexpired period are material.

ii. 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.

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

iv. 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 2017, and 1 April 2016, 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 2017, and 1 April 2016, respectively, are not included.

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

2.3.11 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.

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 Karnataka which is through Monitoring Committee (MC) appointed by Hon’ble Supreme Court of India.”

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 (after adjustment of NPAs) within limits assigned to each bank. 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.

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 in 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 in minimal and hence no sensitivity analysis is presented.

2.3.12 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 2017.

2.3.13 First Time Adoption of Ind AS

Explanation of Transition to Ind AS

These are the Company’s first standalone financial statements prepared in accordance with Ind AS. The accounting policies set out in Note 1 have been applied in preparing the financial statements for the year ended 31 March 2017, the comparative information presented in these financial statements for the year ended 31 March 2016 and in the preparation of the opening Ind AS balance sheet as at 1 April 2015 (the Company’s date of transition). In preparing its opening Ind AS balance sheet, the Company has adjusted amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (Indian GAAP or previous GAAP). An explanation of how the transition from previous GAAP to Ind AS has affected the Company’s Balance Sheet, Statement of Profit and Loss and Statement of Cash Flows is set out in the following tables and the notes that accompany the tables.

A. Exemptions and exceptions availed

Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.

A.1 Ind AS optional exemptions

A.1.1 Deemed Cost

Ind AS 101 permits a first-time adopter to continue with the carrying value for all its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making the necessary adjustments for the de-commissioning liabilities. This exemption can also be used for intangible assets covered by the Ind AS 38 intangible assets and investments in subsidiaries, associates and joint ventures. Accordingly, the Company has elected to measure all of its property, plant and equipment, intangible assets and investments in subsidiaries and associates at their previous GAAP carrying value.

A.1.2 Decommissioning liabilities included in the cost of property, plant and equipment

Appendix ‘A’ to Ind AS 16 Changes in Existing Decommissioning, Restoration and Similar Liabilities requires specified changes in a decommissioning, restoration or similar liability to be added to or deducted from the cost of the asset to which it relates; the adjusted depreciable amount of the asset is then depreciated prospectively over its remaining useful life. A first-time adopter need not comply with these requirements for changes in such liabilities that occurred before the date of transition to Ind AS. In other words, a firsttime adopter will not need to estimate what provision would have been calculated at earlier reporting dates. Instead, the decommissioning liability is calculated at the date of transition and it is assumed that the same liability (adjusted only for the time value of money) existed when the asset was first acquired/constructed.

A.1.3 Stripping Costs

The Company in accordance with Appendix B of Ind AS 16 has developed an accounting policy whereby expenditure towards overburden and other mine waste material removal during the initial development of a mine in order to access mineral deposit would be capitalised as an Intangible asset. Para D32 of Ind AS 101 provides that the first time adopter may apply the requirements of Appendix B of Ind AS 16 prospectively from the date of transition to Ind ASs.

A.2 Ind AS mandatory exemptions

A.2.1 Estimates

An entity’s estimates in accordance with Ind AS’ at the date of transition to Ind AS shall be consistant with the estimates made for the same date in accordance with the previous GAAP (after adjustments to reflect any difference in accounting policies) unless there is an objective evidence that those estimates were in error.

“Ind AS estimates as at 1 April 2015 are consistent with the estimates as at the same date made in conformity with the previous GAAP. The Company made estimates for the following items in accordance with Ind AS at the date of transition as there were not required under previous GAAP. Impairment of financial assets (Trade Receivables) based on the expected credit loss model.

A.2.2 Classification and measurement of financial assets (other than equity instruments)

Ind AS 101 requires an entity to assess classification and measurement of financial assets on the basis of the facts and circumstances that exists at the date of transition to Ind AS.

A.2.3 De-recognition of financial assets and financial liabilities

Ind AS 101 requires a first time adopter to apply the de-recognition provisions for Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows first time adopter to apply the derecognition requirements provided that the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognised as a result of past Ind AS 101 retrospectively from the date of entity’s choosing, transactions was obtained at the time of initially accounting for the transactions.

The Company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind-AS.

B. Reconciliation between previous GAAP and Ind AS

Ind AS 101 requires an entity to reconcile equity, total comprehensive income and cashflows for prior periods. The following tables represent the reconciliations from previous GAAP to Ind AS.

B.1 Reconciliation of equity as at the date of transition (1 April 2015)

B.2 Reconciliation of equity as at 31 March 2016

B.3 Reconciliation of total comprehensive income for the year ended 31 March 2016

B.4 Impact of Ind AS adoption on the statements of cash flows for the year ended 31 March 2016:

C. Notes to first-time adoption Note 1 : Spares

As per Ind AS 16, spares meeting the definition of Property, Plant and Equipment have been capitalised on the date such spares were ready for their intended use. As a result, inventories as on 31st March 2016 decreased by Rs.14.91 Crore (1st April 2015 : Rs.9.15 Crore), property plant and equipment as on 31st March 2016 increased by Rs.2.64 Crore (1st April 2015 : decreased by Rs.1.77 Crore) and depreciation for the year ended 31st March 2016 increased by Rs.8.81 Crore. Under the previous GAAP, such spares were charged to statement of profit and loss account under ‘cost of materials consumed’ as and when such spares were issued on the floor. The amount of Rs.6.76 Crore charged to consumption account for the year ended 31st March 2016 in respect of above spares was reversed upon transition to IND AS resulting in a net decrease in equity by Rs.2.09 Crore as on 31st March 2016 (decreased for Rs.7.37 Crore as on 1st April 2015).

Note 1 : Asset Retirement Obligation

The cost of an item of property plant and equipment under Ind AS 16 includes an initial estimate of the obligation in respect of costs of dismantling and removing the item and restoring the site on which such item is located (“decomissioning liabilities” or “asset retirement obligation”). Accordingly on transition to Ind AS as on 1st April 2015, property plant and equipment was increased by Rs.0.69 Crore with a corresponding increase in provision representing the discounted value of the aforementioned obligation. Additional depreciation for the year ended 31st March 2016 on account of asset retirement obligation was Rs.0.04 Crore. Further, impact on finance cost for the year ended 31st March 2016 due to unwinding of the above provision was Rs.0.11 Crore.

Note 2 : Deferred Tax

Deferred Tax has been recognised on the adjustments made on transition to Ind AS.

Note 3 : Funding of Mine Closure Obligation

Under the previous GAAP, mine closure obligation estimated by the company as on the reporting date was relected net off the fund maintained with LIC for financing such expenditure in future on closure of mines in the absence of any specific guidance in this regard. Appendix A of Ind AS 37 states that the contributor shall recognize its obligation to pay decommissioning costs as a liability and recognize its interest in the fund separately unless the contributor is not liable to pay decommissioning costs even if the fund fails to pay. Accordingly, the fund balance with LIC as on 31st March 2016 of Rs.324.97 Crore (1st April 2015 : Rs.299.51 Crore) was shown under ‘Other Non Cuurent Assets’ and consequently the non current provisions was grossed up to this extent, thus having no resultant impact on total equity.

Note 4 : Expenditure on Enabling Facilities

The Company has charged off expenditure incurred by it towards enabling facilities such as doubling of railway line as the control criteria for recognition of asset was not being met. This has resulted in a decrease in total equity as on 31st March 2016 by Rs.166.44 Crore (1st April 2015 : Rs.102.12 Crore).

Note 5 : Impairment of Financial Assets - Trade Receivables

As per Ind AS 109, the company is required to apply expected credit loss model for recognising the allowance for doubtful debts. As a result, the allowance for doubtful debts increased by Rs.295.50 Crore as at 31 March 2016 (1 April 2015 - Rs.804.51 Crore). Consequently, the total equity as at 31 March 2016 decreased by Rs.295.50 Crore (1 April 2015 - Rs.804.51 Crore) and profit for the year ended 31 March 2016 decreased by Rs.295.50 Crore.

Note 6 : Grossing up of assets and liabilities

Ind AS 1 states that an entity shall not offset assets and liabilities unless required by other Ind AS or when offsetting reflects substance of the transaction or event. The company by virtue of order/notice was required to pay FDT under protest to the regulatory authority. A portion of such amount was recovered from the suppliers and the net amount was disclosed under loans and advances under the previous GAAP. Applying the above guidance, the company has disclosed the amounts received from the suppliers March 2016 : Rs.114.70 Crore (April 2015 : Rs.114.70 Crore) separately from amounts paid under protest. Accordingly, other non current assets and other financial liabilities under Ind AS as at 31st March 2016 and 1st April 2015 increased by Rs.114.70 Crore.

Note 7 : Proposed dividends

Under the previous GAAP, dividends proposed by the board of directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly, provision for proposed dividend including dividend tax was recognised as a liability. Under Ind AS, such dividends including dividend tax are recognised when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend including dividend tax of Rs.620.34 Crore as at 1st April 2015 included under provisions has been reversed with corresponding adjustment to retained earnings. Consequently, the total equity increased by an equivalent amount.

Note 8 : Prior Period Items

Under previous GAAP, prior period items identified in a particular period were disclosed separately in computing the net profit for that period. Under Ind AS, prior period items are recognised by restating the comparative amounts for the period to which the error pertains. Where the error pertains to a period prior to the earliest reporting period, adjustments are made to the opening balances of assets, liabilities and equity of the earliest reporting period. As a result as on March 16 on account of prior period items, other equity stands increase by Rs 16.04 Crore (April 15 : reduced Rs.16.04 Crore), assets have decrease by Rs.14.26 Crore (April 15 : increase Rs.14.26 Crore) and liabilities have been reduced by Rs.1.78 Crore (April.15 : increased by Rs.1.78 Crore).

Note 9 : Excise Duty

Under the previous GAAP, revenue from sale of products was presented exclusive of excise duty. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty as the excise duty is collected by the company as a principal unlike other indirect taxes. The excise duty paid is presented on the face of the statement of profit and loss as part of expenses. This change has resulted in an increase in total revenue and total expenses for the year ended 31 March 2016 by Rs.1.47 Crore. There is no impact on the total equity and profit.

Note 10 : Fair Valuation of accommodation given to employees on concessional rent

The company has allotted staff quarters to some of its employees at nominal rent. Employee benefits as per Ind AS 19 also include non monetary benefits like housing provided to the employees in relation to their service. Accordingly Employee benefit expense on this account has increased by Rs.9.40 Crore with a corresponding increase in notional rental income.

Note 11 : Remeasurement of post employment benefit obligations

Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognised in other comprehensive income instead of profit or loss. Under the previous GAAP, these remeasurements were forming part of the profit or loss for the year. As a result of this change, the profit for the year ended March 31, 2016 decreased by Rs.22.63 Crore. There is no impact on the total equity as at 31 March 2016.

Note 12 : Discontinued Operation

Under the previous GAAP, the concept of disposal group held for sale did not exist. Accordingly, assets and liabilities of disposal group had not been presented as held for sale. The Company had disclosed land and vehicles held for sale under ‘Other current assets’ in accordance with AS 10 Accounting for Fixed Assets. Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations requires disposal group to be identified as held for sale if the carrying amount will recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. Ind AS 105 lays down detailed guidelines and criteria in this regard. Based on the assessment performed by the management, it has been determined that the assets and liabilities of Lalapur unit should be presented as held for sale under Ind AS. Consequently, the assets and liabilities of disposal group held for sale have been presented separately from the other assets and other liabilities respectively in the balance sheet. There is no impact on the total equity or profit as a result of this adjustment. Further, the operations of this business have been presented as discontinued operations under both Ind AS and previous GAAP in the statement of profit and loss.