Nature and Purpose of the Reserves:-Capital Share Redemption Reserve
Capital redemption reserve is created due to redemption of preference share capital in earlier years as per the requirement of the Companies Act.
Securities Premium
Security premium reserve is created when shares are issue at premium.The reserve is utilised in accordance with the provisions of the companies Act, 2013.
Capital Reserve
The Capital reserve was created to recognis the gain due to CDR scheme to the extent of Rs.44.51 cr approved by Asset Reconstruction Company of India Ltd. as on 31st March 2008 and gain due to increse in the value of Tangible asstes of Rs.74.13 cr as on 31st March 2015 and same was transferred to retained earning.
General Reserve
The Company has transferred a portion of Net Profits of the Company before declaring Dividends to General Reserve pursuant to the earlier provision of The Companies Act, 1956. Mandatory transfer to General Reserve, is not required under the Companies Act, 2013.
A Term Loans Banks
1 Loans from Yes Bank @ 7.20% p.a. interest are secured against hypothecation of motor vehicles. These loans are repayable in 60 equated monthly months installment of Rs.0.41 lakhs.
2 The Company has during the year availed a loan of Rs. 80 lakhs from Kotak Mahindra Bank Ltd. under the Emergency Credit Line Guarantee Scheme (ECLGS) of National Credit Guarantee Trustee Company Ltd (NCGTC) in order to meet its working capital requirements. The tenure of the loan is 48 months (Including the 12 month moratorium period) carrying an interest rate of 8.00% p.a. repayable in 48 equated monthly installments. The said loan is secured by way of first and second charge on the entire present and future current and movable assets with DNS Bank, first and second charge moveable fixed assets Equitable/ Registered on immovable properties, i.e. Land and Building and structure and P&M located in Zenith Compound, Khopoli, District Raigad, Maharashtra - 410203 owned by the India Steel Works Limited.
B Unsecured Loan :-
1 Unsecured Loan from Related Parties does not have a definite repayment schedule and is repayable at the option of the company. Interest rate for above loans are range between 0.00% to 12.00 %
**Effect of settlement deed/ addendum to the settlement deed with a creditor resulting in reduction of liability is accounted for on a proportionate basis and the same is considered as other income. Considering the current Global Pandemic situation, negotiations are going on with the said creditor for a longer repayment schedule starting after 12 months hence the liability has been reclassified as "Non Current Financial Liability -Trade Payable" as per the Management Policy.
A Loans Repayable on Demand / Term Loan (Banks)
1 Kotak Mahindra Bank Ltd. & Dombivli Nagari Sahakari Bank Ltd. has sanctioned Cash Credit facilities against the security by way of first pari passu charge on the fixed assets of the company, hypothication of stock and book debts of the company and personal guarantees of some of the promoter directors of the Company.
2 Kotak Mahindra Bank Ltd. has sanctioned Letter of Credit facilities against the security by way of first pari passu charge on the fixed assets of the company, hypothication of stock and book debts of the company and personal guarantees of some of the promoter directors of the Company.
3 FITL Loan from Dombivli Nagari Sahakari Bank Ltd. @ 15.75% p.a. interest are secured against Stock and Books Debts, Plant & Machinery and Factory Land & Building. This loan is repayable in 7 monthly installments. Said loan was to be repaid before 31.03.2021. However the company has defaulted in repaying the same as per the agreed sanctioned terms.
4 FITL Loan from Kotak Mahindra Bank Ltd. @ 19.00% p.a. interest are secured against Stock and Books Debts, Plant & Machinery and Factory Land & Building. This loan is repayable in 7 monthly installments. Said loan was to be repaid before 31.03.2021. However the company has defaulted in repaying the same as per the agreed sanctioned terms.
B Term Loans Financial Institutions (NBFC)
1 Loans from Kotak Mahindra Prime Ltd. @ 9.75% p.a. interest are secured against hypothecation of motor vehicles. However the company has defaulted in repaying the same as per the agreed sanctioned terms.
2 Loans from Sundaram Finance Ltd. @ 7.10% p.a. interest are secured against hypothecation of komatsu hydraulic excavator machine. However the company has defaulted in repaying the same as per the agreed sanctioned terms.
C Unsecured Loan :-
1 Unsecured Loan from other corporate are repayable on demand. Interest rate @ 8.00 % p.a.
b) Terms of Issue of Preference Shares
i) 14% Cumulative Redeemable Shares are redeemable in the year 2018.
ii) 0.01% Cumulative Redeemable Shares are redeemable 25% in the year 2017, 25% in the year 2018, & 50% in the year 2019.
iii) 0.01% Cumulative Redeemable Shares ( Option Series) are redeemable 25% in the year 2017, 25% in the year 2018, & 50% in the year 2019.
iv) The company is in the negotiations with the preference shareholders for revised terms of redemption.
v) Interest accrued but not due includes proposed dividend payable on cumulative redeemable preference shares. As the company is in a process of negotiation with the said preference shareholder for revised terms of redemption, no provision for dividend has been made.
i. Based on the information in possession with the Company, no supplier has been identified as being covered under Micro, Small and Medium Enterprise Development Act, 2006 ("the Act"). Accordingly, no amount of dues outstanding as at 31st March 2021 have been identified as relating to Micro and Small Enterprises referred to in the said Act.
ii. The balances of trade payable for the amount due to some of them are subject to reconciliation. Necessary adjustment if any, may be made when the accounts are settled
iii. Trade Payables Includes related party refer Note No. 41.
(i) It is not practicable for the Company to estimate the timings of cash outflows, if any, in respect of the above pending resolution of the respective proceedings as it is determinable only on receipt of judgments/decisions pending with various forums/authorities
(ii) The Company does not expect any reimbursements in respect of the above contingent liabilities.
(iii) Most of the issues of litigation pertaining to Central Excise/Sales Tax/Customs/Income Tax are based on interpretation of the respective Law & Rules thereunder. Management has been opined by its counsel that many of the issues raised by revenue will not be sustainable in law as they are covered by judgments of respective judicial authorities which supports its contention.
(iv) The Company’s pending litigation comprise of proceeding pending related to Property tax. The Management has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its financial statements. The Management does not expect the outcome of these proceedings to have a materially adverse effect on its financial results.
NOTE 37: CAPITAL MANAGEMENT
The Company's objective for Capital Management is to maximise shareholder value, safeguard business continuity, and support the growth of the Company. Capital includes, Equity Capital, Securities Premium and other reserves and surplus attributable to the equity shareholders of the Company. The Company determines the capital requirement based on annual operating plans and long term and strategic investment and capital expenditure plans. The funding requirements are met through a mix of equity, operating cash flows generated and debt. The operating management, supervised by the Board of Directors of the Company regularly monitors its key gearing ratios and other financials parameters and takes corrective actions wherever necessary. The relevant quantitative information on the aforesaid parameters are disclosed in these financial statements.
NOTE 38: FINANCIAL RISK MANAGEMENT AND POLICIES
The Company's financial risk management is an integral part of how to plan and execute its business strategies. The Company's financial risk management policy is set by the managing board. The details of different types of risk and management policy to address these risks are listed below:
(a) 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, 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 loans and borrowings. The objective of market risk management is to avoid excessive expsoure in our foreign currency revenues and costs.
(a) (i) Market Risk - Interest Rate Risk
Interest rate risk is the risk that the fair value of future cash flows of the financial instruments will fluctuate because of changes in market interest rates. The company's exposure to the risk of changes in market interest rates primarily to the Company's borrowings, both short term and long term obligations with floating interest rates.
The company is also exposed to interest rate risk on its financial assets that include fixed deposits (which are part of cash and cash equivalents) since all these are generally for short durations, there is no significant interest rate risks pertaining to these deposits.
The company is also exposed to interest rate risk on its financial assets that include fixed deposits (which are part of cash and cash equivalents) since all these are generally for short durations, there is no significant interest rate risks pertaining to these deposits.
Sensitivity analysis to interest rate risk
The company doesn’t account for any fixed rate financial assets or financial liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss.
(a)(ii) Market Risk - Price Risk
The Company has no surplus for investment in debt mutual funds, deposits etc. The Company does make deposit with the banks to provide security against gurantee issued by bank to companys trade payables. Deposit is made in fixed rate instrument. In view of this it is not susceptible to market price risk, arising from changes in interest rates or market yields which may impact the return and value of the investments.
(a)(iii) Market Risk - Currency Risk
The fluctuation in foreign currency exchange rates may have a potential impact on the statement of profit and loss and equity, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the Company. The company is exposed to currency risk on account of its trade payables in foreign currency. The functional currency of the company is Indian Rupees. The Company follows a natural hedge driven currency risk mitigation policy to the extent possible.
(b) Credit Risk
Credit Risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from customers. The carrying amount of Financial Assets represents the maximum credit exposure.
Trade Receivables
The Company has established a credit policy under which each new customer is analysed individually for creditworthiness before the payment and delivery terms and conditions are offered. The Company’s review includes external ratings, if they are available, financial statements, industry information, business intelligence and in some cases bank references.
Trade Receivables of the Company are typically unsecured ,except to the extent of the security deposits received from the customers or financial guarantees provided by the market organizers in the business. Credit Risk is managed through credit approvals and periodic monitoring of the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company performs ongoing credit evaluations of its customers’ financial condition and monitors the creditworthiness of its customers to which it grants credit terms in the normal course of business. The Company has no concentration of Credit Risk as the customer base is geographically distributed in India.
Expected credit loss for trade receivable:
The allowance for impairment of Trade receivables is created to the extent and as and when required, based upon the expected collectability of accounts receivables. On account of adoption of Ind AS 109, the Company uses lifetime Expected Credit Loss (ECL) model for assessing the impariment loss. For this purpose, the Company uses a provision matrix to compute the expected credit loss amount for trade receivables. Loss rates are based on actual credit loss experience and past trends. The provision matrix takes into account external and internal credit risk factors and historical experience / current facts available in relation to defaults and delays in collection thereof.
Other Financial Assets
The company maintains its Cash and Cash equivalents and Bank deposits with banks having good reputation, good past track record and high quality credit rating and also reviews their credit-worthiness on an on-going basis.
Expected credit loss on financial assets other than trade receivable:
With regards to all financial assets with contractual cash flows other than trade receivable, management believes these to be high quality assets with negligible credit risk. The management believes that the parties from whom these financial assets are recoverable, have strong capacity to meet the obligations and where the risk of default is negligible and accordingly no provision for expected credit loss has been provided on such financial assets. Break up of financial assets other than trade receivables have been disclosed on balance sheet.
The Company’s maximum exposure to credit risk as at 31st March, 2021 and 31st March, 2020 is the carrying value of each class of financial assets.
(c) Liquidity Risk
Liquidity Risk is the risk that the Company will face in meeting its obligation associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company's approach in managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. Any short term surplus cash generated, over and above the amount required for working capital and other operational requirements is retained as Cash and Cash Equivalents (to the extent required).
Exposure to Liquidity Risk
The following table shows the maturity analysis of the Company's Financial Liabilities based on contractually agreed undiscounted cash flows along with its carrying value as at the Balance Sheet Date
(d) Collateral
The Company has pledged its Non-Current as well as Current Assets to a consortium of lenders as collateral towards borrowings by the Company. Refer Note No. 16 and Refer Note No. 20 for the detailed terms and conditions of the collaterals pledged.
Retirement Benefits
As per Ind AS 19 the Company has recognized “Employees Benefits” ,in the financial statements in respect of Employee Benefits Schemes as per Actuarial Valuation as on 31st March 2021.
43 Segment Information :
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker of the Company is responsible for allocating resources and assessing performance of the operating segments.
44 Impact of COVID-19
Covid-19 virus has impacted the entire global economy severely, resulting into many restrictions, including free movement of people, thereby hampering businesses and day to day functioning of the Companies. Consequently, in compliance of the orders of the Government, the company’s manufacturing plants and corporate office had to be closed down for some time.
The Company continues to monitor any material changes to future economic/ business conditions and its consequential impact on financial results.
45 Figures in Brackets indicate previous years figures. Previous periods figure have been regrouped, rearranged, reclassified wherever necessary to correspond with those of the current period.
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