Notes to the Financial Statements

1 Background:

1.1 Sathavahana Ispat Limited (SIL), (the ‘company’) is a public limited company incorporated under the provisions of erstwhile Companies Act, 1956 having its registered office at Hyderabad in the state of Telangana, India. The Equity Shares of the Company are listed with Stock Exchanges in India viz., BSE Limited, Mumbai (Stock Code:526093) and the National Stock Exchange of India Limited, Mumbai (Stock Code: SATHAISPAT”).

1.2 ’Sathavahana Ispat Limited (the Company) is engaged in the manufacture of ferrous products, Metallurgical Coke with Co-generation of Power. The ferrous products plant is in Anantapuram District of Andhra Pradesh and the Metallurgical Coke with Co-generation Power facility is in Bellary District, Karnataka. A major portion of Metallurgical Coke is captively used for manufacture of ferrous products. The Company’s turnover is mainly from domestic markets.

1.3 The Financial statements are approved for issue by the Company’s Board of Directors on May 30, 2018

Note:

i) Capital work in progress mainly consist of cost incurred for the New Boiler at Kudithini Plant.

ii) The Company has elected the option of fair value as deemed cost for Freehold Land, as on the date of transition to Ind AS. Fair value of the freehold land was determined by using the market comparable method. This means that valuations performed by the valuers are based on active market prices, significantly adjusted for difference in the nature, location or condition of the properties. As at the date of revaluation April 01, 2016 , the properties fair values are based on valuations performed by G.P Sankaram & Associates, Hyderabad an accredited independent valuers who has relevant valuation experience.

iii) Under the agreement with the KIADB, at the expiry of sale cum lease the Company owns the leasehold land at the expiry of stipulated period subject to conditions provided in agreement and the company is expected to fulfil the conditions stipulated in the agreement /-

iv) Refer Note 37 for assets pledged as security in favour of the Lenders.

v) Capitalised borrowing costs - Adjustment made (net of Depreciation ) to Buildings Rs. 60,18,267/- & Plant & Equipment Rs. 4,46,62,793/- on account of borrowing costs capitalised during the installation period as per Para D7AA of Ind AS 101.

Note:

i) Raw Material & Finished goods Includes stock lying with the third party as on March 31 ,2018 : Rs.2,08,37,906/-(March 31 ,2017 : Rs.14,13,22,404, April 01, 2016: Rs.26,24,57,432/- )

ii) Inventories are hypothecated to banks under working capital financing. (Refer Note :37)

ii) Terms/rights attached to equity shares :

The company has only one class of equity shares having a par value of Rs.10 per share. Each Holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

* Pledge on 153651 equity shares for an amount of Rs. 27,31,534/- invoked and sold by IFCI after the balance sheet date due to default in repayment of principal and service of interest.

Secured borrowings and assets pledged as security

i. Term Loan borrowings from banks are secured by first mortgage and charge on entire fixed assets, both present and future, and second charge on current assets and guaranteed by two Promoter Directors of the Company. The Principal amount on these term loans are generally repayable in 32 equated quarterly instalments after moratorium period of one year with interest payable on monthly rests. The interest rates vary from 12.5% to 13.75% p.a. Borrowing from IFCI Limited is secured by first mortgage and charge on immovable properties including movable assets, both present and future, ranking pari passu with the existing lenders and guaranteed by one Promoter Director of the Company and further secured by pledge of twenty five percent of equity shares held by the promoters in the company. The borrowing from IFCI Limited is repayable in sixteen equated quarterly instalments after a moratorium period of one year from the date of first disbursement with interest 13.55% payable on monthly rests.

ii. The period of maturity with reference to five term Loan Borrowings from Balance Sheet date are: (a) Loan 1 comprises of 5 quarterly instalments of Rs.12550000/- each, one quarterly instalment of Rs.11746778/-; (b) Loan 2 comprises of 1 quarterly instalment of Rs.15750000/- , 1 instalment of Rs.9000000/-, 6 quarterly instalments of Rs.7875000/- each and 1 quarterly instalment of Rs.7846976/- (c) Loan 3 comprises of 19 quarterly instalments of Rs.85625000/- each, and 1 quarterly instalment of Rs.9873486/- (d) Loan 4 comprises of 20 quarterly instalments of Rs.42000000/- each and 1 quarterly instalment of Rs.17983203/-, and 19 quarterly instalments of Rs.18000000/- each (e) Loan 5 comprises of 14 quarterly instalments of Rs.56250000/- each and one quarterly instalment of Rs.29618877/-.

iii. Other loans from banks and other party are on hypothecation of assets and guaranteed by the Managing Director of the Company. These loans are mostly repayable in 36 equated monthly instalments including interest. The interest rates vary from 9.50% to 11.5% p.a. The future maturities from the Balance Sheet date comprises (a) loan 1 comprises two instalments of Rs.618929/- each and (b) loan 2 comprises thirty eight instalments of Rs.93012/- each (c) loan 3 comprises forty instalments of Rs.20112/-each; (d) loan 4 comprises thirty nine instalments of Rs.14799/- each and (e) loan 5 comprises thirty instalments of Rs.143870/- each. All instalments includes interest.

iv. The above borrowings and interest due thereon have not been paid as on balance sheet date are stated below:

v. The carrying amounts of financial and non-financial assets pledged as security for the above borrowing are disclosed in note 37.

Secured borrowings and assets pledged as security

i) Working capital loans from banks and Buyer’s credit are secured by first charge on the entire current assets and further secured by second charge on entire fixed assets of the Company and guaranteed by two Promoter Directors of the Company. The rate of interest on working capital loans varies from 14.50% to 15.25% p.a.

The rate of interest in respect of Buyer’s credit varies from 6m LIBOR 70 bps to 6m LIBOR 120 bps p.a.

ii) The carrying amounts of financial and non-financial assets pledged as security are disclosed in note no. 37 Defaults in repayment of Long Term Borrowings and interest thereon which are paid and unpaid as at balance sheet date:

i) Company had non fund based limit of Rs. 592,00,00,000/- sanctioned by above bankers as at March 31, 2018. Overdrawn balance includes amount of Rs. 436,00,44,527/- arising on devolvement of letters of credit.

ii) No defaults on working capital borrowings as at March 31, 2017 and April 01, 2016.

Note 2.1 : Unpaid dividend account represents dividend amount unclaimed and no amount is due for deposit in Investor Education and Protection Fund

Note 3(a):

(i) Defined Contribution plans:

Employer’s Contribution to Provident Fund: Contributions are made to provident fund in India for employees at the rate of 12% of basic salary as per regulations. The contributions are made to registered provident fund administered by the government. The obligation of the company is limited to the amount contributed and it has no further contractual nor any constructive obligation.

Employer’s Contribution to State Insurance Scheme: Contributions are made to State Insurance Scheme for employees at the rate of 4.75%. The Contributions are made to Employee State Insurance Corporation(ESI) to the respective State Governments of the Company’s location. This Corporation is administered by the Government and the obligation of the company is limited to the amount contributed and it has no further contractual nor any constructive obligation.

ii) Defined Benefits plans:

i) Post-employment obligations- Gratuity:

The company provides for gratuity for employees in India as per the payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 day’s salary multiplied for the number of years of service. The gratuity plan is a funded plan and the Company makes contributions to recognized funds in India. The company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.

The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

Defined benefit liability and employer contributions:

The weighted average duration of the defined benefit obligation is 13.38 years. The expected cash flows over the next years is as follows:

Risk Management

Through its defined benefit plans, the company is exposed to a number of risks, the most significant of which are detailed below: Salary Cost Inflation Risk: The present value of the Defined Benefit Plan liability is calculated with reference to the future salaries of participants under the Plan. Increase in salary due to adverse inflationary pressures might lead to higher liabilities.

Note 3(b): Details of Operating Lease:

The Company’s significant leasing arrangements are in respect of operating leases for office building premises. These leasing arrangements which are not non-cancellable for a period of 11 months and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as ‘Rent’.

Note 3(c): Corporate Social Responsibility (CSR):

In terms of provisions of sub section 5 to section 135 of the Companies Act, 2013 the company is not required to earmark any fund for corporate social responsibility activities in view of past losses.

Note 4: Income tax expense:

This note provides an analysis of the company’s income tax expense, show amounts that are recognised directly in equity and how the tax expense is affected by non-assessable and non-deductible items. It also explains significant estimates made in relation to the company’s tax positions.

Deferred Tax:

In the absence of reasonable certainty Company has recognized deferred tax assets arising on account of carried forward tax losses and unabsorbed depreciation to the extent of the deferred tax liability. In the absence of probable tax profits against which the same can be utilised. Company is incurring losses since two years and doesn’t expect the future taxable income in the near future.

Note:

i) Mat Credit Entitlement will be carried forward up to the Assessment year 2025-26 under the Income Tax Act, 1961

ii) Unabsorbed depreciation does not have any expiry period under the Income Tax Act, 1961

Note 5 : First-time adoption of Ind AS:

Transition to Ind AS:

These are the Company’s first financial statements prepared in accordance with Ind AS.

The accounting policies set out in Note 2 have been applied in preparing the financial statements for the year ended March 31, 2018, the comparative information presented in these financial statements for the year ended March 31, 2017 and in the preparation of an opening Ind AS balance sheet at April 01, 2016 (company’s date of transition). In preparing its opening Ind AS balance sheet, the Company has adjusted the 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 (previous GAAP or Indian GAAP). An explanation on how the transition from previous GAAP to Ind AS has effected the Company’s financial position, financial performance and cash flows is set out in the following tables and notes.

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 elect to continue with the carrying value for all of 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 necessary adjustments for de-commissioning liabilities except for certain class of assets i.e. Freehold land which are measured on its fair value at carrying value as deemed cost.

A.2 Ind AS mandatory exceptions:

A.2.1 Estimates:

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

Ind AS estimates as at April 01, 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP. The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:- Investments in equity instruments at FVPL-Impairment of financial asset based on expected credit loss model.

A.2.2 Classification and measurement of financial asset:

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

B. Reconciliations between previous GAAP and Ind AS ( as at April 01, 2016 and March 31, 2017):

(i) Reconciliation of equity as at transition dated: April 01, 2016:

Notes to the Financial Statements

C: Notes to first-time adoption:

Note 1: Remeasurements of post-employment benefit obligations:

Under Ind AS, remeasurements i.e. Actuarial gains and losses are recognised in Other Comprehensive Income as compared to being recognised in the statement of profit and 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, 2017 decreased by Rs.56,50,057/-. There is no impact on the total equity as at March 31, 2017.

Note 2: Fair valuation of investments :

Under the previous GAAP, investments in equity instruments and mutual funds were classified as long term investments or current investments based on the intended holding period and realizability. Long term investments were carried at cost less provision for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under Ind AS, these investments are required to be measured at fair value. The resulting fair value changes of these investments has been recognised in retained earnings as at the date of transition and subsequently in the profit and loss for the year ended March 31, 2017. This increased the retained earnings by Rs.7,96,629/-as at March 31, 2017 (April 01, 2016- Rs.11,89,919/-).

Note 3 (i): 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. The excise duty paid is presented inclusive of excise duty. 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 March 31, 2017 by Rs.35,99,63,800/-There is no impact on the total equity and profit.

Note 3(ii): Movement of Excise Duty in Finished goods:

Movement of excise duty in finished goods, reclassified from changes in inventories to other expenses amounting to Rs.57,78,515/-. There is no impact on the profit or (Loss) for the year.

Note 4: Reserves and Surplus:

Retained earnings as at April 01, 2016 has been adjusted consequent to the above Ind AS transition adjustments.

The Company had received a Government grant towards State Investment Subsidy with an outstanding amount of Rs.20,00,000/- These amounts have been transferred to retained earnings since the assets related to the grant have been fully depreciated as at April 01, 2016.

Note 5: Property, Plant and Equipment:

The Company have considered fair value for property, viz land admeasuring over 271.51 acres, situated in India, with impact of Rs.55,35,92,639/-in accordance with stipulations of Ind AS 101 with the resultant impact being accounted for in the reserves.

Note 6: Borrowings:

Under previous GAAP, transaction costs incurred in connection with borrowings are accounted upfront and either charged to profit or loss for the period or capitalised to fixed assets in which such transaction costs is incurred. Ind AS requires Finance Liabilities consisting of Long Term Borrowings to be designated and measured at amortised cost based on Effective Interest Rate (EIR) method. The transaction costs incurred towards origination of borrowings are required to be deducted from the carrying amount of borrowings on initial recognition. These costs are recognized in profit or loss over the tenure of the borrowing as part of the interest expense by applying the effective interest rate method. Resultant impact being accounted for in the reserves & borrowings .This change has also resulted in an increase in finance cost for the year ended March 31, 2017 by Rs.86,00,750/- and also decrease in depreciation charge of Rs.21,49,576/- on account of reversal of processing costs of Rs.5,06,81,060/- from property, plant and equipment, as per the clarification given in Ind AS Transition facilitation group (ITFG).

Note 7: Taxation:

MAT credit entitlement is in the nature of deferred tax, accordingly, on transition, the company has reclassified such MAT Credit to deferred tax. However due to lack of reasonable certainty in recognition of deferred tax asset the company derecognised the MAT. This change has decreased the retained earnings by Rs.58,73,858/Note 8: Other Comprehensive Income:

Under Ind AS, all items of income and expense recognized in a period should be included in the profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognised in profit or loss but are shown in the statement of profit or loss as ‘other comprehensive income’ includes remeasurements of defined benefit plans. The concept of ‘other comprehensive income’ did not exist under previous GAAP.

Note 8: Prior year errors:

Under Ind AS 8 , adjustments to material prior period errors are made retrospectively by restating the comparative amounts for the prior period to retained earnings at the beginning of the earliest period presented, in the first set of financial statements after the error is discovered.

The retained earnings as at April 01, 2016 stand corrected from (Rs.22,44,95,072) to (Rs.23,80,33,640) i.e. by Rs.1,35,38,568 which represents the net impact of the restatement due to correction of the errors.

Note 6:Fair value Hierarchy:

Fair value of the financial instruments is classified in various fair value hierarchies based on the following three levels: Level 1: Quoted prices (unadjusted) in active market for identical assets or liabilities.

Level 2: Inputs other than quoted price including within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.

Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case with listed instruments where market is not liquid and for unlisted instruments.

Note:

(i) The carrying amounts of trade payables, other financial liabilities, borrowings, cash and cash equivalents, other bank balances, trade receivables and other financial assets are considered to be the same as their fair values due to their short term nature and recoverability from the parties.

Set out below, is a comparison by class of the carrying amounts and fair value of the Company’s financial instruments, other than those with carrying amounts that are reasonable approximations of fair values.

Note 7: Financial Risk Management:

The Company’s principal financial liabilities, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also holds FVTPL investments. Company is exposed primarily to Credit Risk, Liquidity Risk and Market risk (fluctuations in foreign currency exchange rates and interest rate) which may adversely impact the fair value of its financial instruments.

(A) Credit Risk:

Credit risk is the risk or potential of loss that may occur due to failure of counterparty to meet the obligation on agreed terms and conditions of the financial contract. Credit risk arises from financial assets such as cash and cash equivalents, trade receivables and other financial assets. The company has a credit risk management policy in place to limit credit losses due to non-performance of financial counterparties and customers. Management of the Company monitors exposure to credit risk on an ongoing basis at various levels.

a) Trade receivables:

An impairment analysis is performed at each reporting date on an individual basis for major receivables. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively based on historical data and payment statistics. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets.

The ageing analysis of the trade receivables (gross of provisions) has been considered from the date the invoice :

b) Cash and cash equivalents and other financial assets:

All of our cash equivalents and other bank balances are carried at fair value. Cash and cash equivalents are deposited with financial institutions that management believes are of high credit quality and accordingly, minimal credit risk exists. With respect to six non operative bank accounts the company doesn’t have sufficient evidence for the balance outstanding and impairment is made of Rs 47,606/- (Previous year Rs Nil) . In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks by the Company. The Company’s maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on. Refer Note 30 (i).

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 always 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.

However, in view of various unfavourable factors as set out in Note 35, the Company has been experiencing stressed liquidity condition. In order to overcome such situation, the Company has been taking measures to ensure that the Company’s cash flow from business borrowing or financing is sufficient to meet the cash requirements for the Company’s operations. As discussed in the aforesaid note management believes deep restructuring plan will be considered by consortium of bankers, accordingly Term loans had been disclosed as per terms of present loan covenant with bankers.

(C) Market Risk:

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as commodity risk. Financial instruments affected by market risk include loans and borrowings, deposits, FVTPL Investments.

- Interest Rate Risk

Interest rate risk is the risk that the future cash flows or the fair value of a financial instrument will fluctuate because of changes in market interest rates. The Company policy is to obtain favourable interest rates available . The Company is significantly exposed to interest rate risks that relates primarily to interest bearing financial liabilities.

Interest rate risk is managed by the company with primary objective of limiting the extent to which interest expense could be affected by an adverse movement in interest rates.

Interest Rate risk- Sensitivity analysis

An increase / decrease of 50 basis points in the interest rate at the end of the reporting period for the variable financial instruments would (decrease)/ increase profit after taxation for the year by the amounts shown below.

- Foreign Currency Risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense is denominated in a foreign currency). The exposure of entity to foreign currency risk is very limited on account of limited transactions in foreign currency which is not material. i) Foreign Currency Risk - Sensitivity

The following tables demonstrate the sensitivity to a reasonably possible change in USD exchange rates, with all other variables held constant. The impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities.The analysis is based on the assumption that the Foreign Currency has increased/(decreased) by2. 5% with all other variables held constant.

- Other price risk Commodity Risk

Commodity price risk is the threat that a change in the price of a production input will adversely impact a producer who uses that input. Factors that can affect commodity prices include political and regulatory changes, seasonal variations, weather, technology and market conditions. The company has commodity price risk, primarily related to the purchases of coal, iron ore and the management monitors its purchases closely to optimise the price. However, in case of power segment the management do not bear significant exposure to earnings risk, as such changes are included in the rate-recovery mechanisms with the customers.

Our company is basically engaged in Ductile Iron Pipe Market and the company’s turnover depends on the market risk of price volatility of the these products. The prices of the Ductile Iron pipe are determined by the market factors. The revenue/price of the DI Pipe products of the company are basically impacted by the cost of raw material inputs, production cost, and international and regional market conditions. Any positive and negative changes in any of the above factors can increase and reduce the revenue of the company generated from such products.

Note 8: Capital Management:

The fundamental goal of capital management 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, and - maintain an optimal capital structure to reduce the cost of capital. For the purpose of company’s capital management, capital includes issued capital and all other equity reserves.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. The company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The company’s policy is to keep the gearing ratio at an optimum level to ensure that the debt related covenant are complied with.

However in view of certain adverse factors and challenges being faced by the Company over past few years as explained in Note 35, the net worth of the Company has been eroded and the Company has initiated certain measures/been actively engaging with the lenders for restructuring of its debts at sustainable level and thereby continuing to operate as a going concern. The Company has not declared any dividend since financial year 2010-11.

In order to achieve this overall objective, the Company’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit certain banks to immediately call loans and borrowings. Pending restructuring plan with consortium banker, management believes consortium banker consider restructuring of loan along with additional working capital facilities.

The Company has delayed in repayment of dues to banks and financial institutions during the year. (Refer note no :13 )

Note 9 : Payables to Micro, Small & Medium Enterprises:

Information pertaining to Micro and Small Enterprises as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 (Act) as given below has been determined to the extent such parties have been identified on the basis of information available with the Company:

Note :The list of undertakings covered under MSMED was determined by the Company on the basis of information available with the Company and has been relied upon by the auditors.

Note 10: Disclosure as required under Ind As 108 - Operating Segments :

Operating Segments:

1. Ferrous Products, which includes Pig Iron & Ductile Iron Pipes

2. Metallurgical Coke with Co-generation Power Identification of Segments:

The Managing Director has been identified as being Chief Operating Decision Maker (CODM). The CODM monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit and loss of the segment and is measured consistently with profit or loss in the financial statements. Operating segments have been identified on the basis of the nature of products for which discrete financial information is available.

Segment revenue and results :

The expenses and income which are not directly attributable to any business segment are shown as unallocable expenditure (net of unallocable income).

Segment assets and liabilities:

Assets used by the operating segment and mainly consist of property plant and equipment, trade receivable, cash and cash equivalents and inventories. Segment Liabilities include trade payables and other liabilities. Common assets and liabilities which cannot be allocated to any of the segments are shown as a part of unallocable assets/liabilities.

Note 11: Going Concern:

“As at March 31, 2018, the company had negative other equity of Rs.1,99,31,87,179/- and the company incurred losses during the preceding two years. The company has delayed payment of loans and interest and loan accounts have been classified as non-performing assets by banks. Due to tight cash flows and non-availability of working capital limits the operations at ferrous division have been impacted and the plant was under shut down since 12th June 2017. The operations at Kudithini works too were impacted where Metallurgical Coke facility is running partially on job work basis and power generation is also partially operated. This impact is likely to continue until the restructuring of the debt is done by the financing institution and banks. Notwithstanding the above, the financial results of the company have been prepared on going concern basis as management believes that the shortage of working capital funds will be temporary and lenders will consider the request for deep restructuring of the debt and arrive at the resolution plan at the earliest. Presently lead banker of consortium in-principally agreeable to the request of the company for restructuring of the debt and its sanction is awaited. Management believes remaining banks will take same view as decided in the lender meetings. The Company views that the deep restructuring will help to restart and establish profitable operations of the company and it would be able to meet commitments and reduce debt. The auditors of the company had drawn an emphasis of matter relating to “Material uncertainty related to Going Concern” in their Audit Report for the year in this regard.

Note 12: Note on Balances:

Trade receivables, supplier advances and capital advances as at March 31, 2018 includes of Rs.46,71,24,493/-, Rs.4,40,72,265/- and Rs.2,70,23,201/- respectively due for a period of more than one year for which no provision has been made in the books of account, as the management considers these receivables as good and recoverable. The management assesses the recoverability of trade receivables on regular basis and there is no uncertainty at present on recoverability of these receivables. legal cases were preferred where required to ensure recoverability. Based on the review during the year Rs.15,71,23,644/- , were written off as bad debts, Rs.15,40,64,913/- were written of as bad advances. Also provisions were made against debtors for Rs.7,94,61,861/-, against capital advances Rs.97,54,976/-, and other deposits Rs.2,70,89,738/- wherever management believes doubtful of recovery. With regard to other long outstanding capital and supplier advances management is confident of recoverability and no provision at present is required to be made. This is a subject matter of qualification in the audit report for the year ended March 31, 2018.

Confirmation letters have been issued in respect of trade receivables and other receivables, loans and advances and trade payables and other payables of the company. Balances where confirmations are not forthcoming such balances are subject to reconciliation and consequential adjustment required, if any, would be determined/made on receipt of confirmation. However, in the opinion of the Board, assets other than Fixed Assets and non-current investments have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated and provision for all known liabilities have been made.