1. Accounting Policies (A) BASIS FOR ACCOUNTING The financial statements are brpared under the historical cost convention on an accrual basis of accounting in accordance with the Generally Accepted Accounting Principles. Accounting Standards notified under Section 133 of the Companies Act. 2013 and the relevant provisions thereof. (B) USE OF ESTIMATES AND JUDGEMENTS In brparation of the financial statements. the Company makes judgements. estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and the associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and the underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and future periods affected. Significant judgements and estimates relating to the carrying amounts of assets and liabilities include useful lives of tangible and intangible assets. impairment of tangible assets. intangible assets. employee benefits and other provisions and recoverability of deferred tax assets. Long term investments are tested for decline in value which is other than temporary when there are any indicators of impairment. Any change in the underlying assumptions used such as discount rate or growth rate may have an impact on the carrying value of such long term investments. (C) REVENUE RECOGNITION (i) Revenue from sale of goods is recognised net of rebates and discounts on transfer of significant risks and rewards of ownership to the buyer. Sale of goods is recognised gross of excise duty but net of sales tax and value added tax. (ii) Export incentive under various schemes notified by the Government has been recognised on the basis of amount received. (iii) Dividend is recorded when the right to receive payment is established. Interest income is recognised on time proportion basis taking into account the amount outstanding and the rate applicable. (D) EMPLOYEE BENEFITS (i) Short-term employee benefits are recognised as an expense at the undiscounted amount in the Statement of Profit and Loss of the year in which the employee has rendered services. (ii) For defined-benefit plans. the amount recognised in the Balance Sheet is the brsent value of the defined-benefit obligation less the fair value of any plan assets and any past service costs not yet recognised. The brsent value of the defined-benefit obligation is the brsent value of expected future payments required to settle the obligation resulting from employee service in the current and prior periods. The discount rate used is the market yields on government bonds at the Balance Sheet date with remaining terms to maturity approximating those of the Company's obligations. (iii) Other long-term employee benefits are recognised as an expense in the Statement of Profit and Loss of the year in which the employee has rendered services. Estimated liability on account of long-term benefits is discounted to the brsent value. using the market yield on Government Bonds. as on the date of Balance Sheet. (iv) Actuarial gains and losses in respect of post employment and other long-term benefits are charged to the Statement of Profit and Loss. (v) In respect of the Employee Separation Scheme. the increase in the net brsent value of the future liability for pension payable to employees. who have opted for retirement under the Employee Separation Scheme of the Company. is charged to the Statement of Profit and Loss. (E) TANGIBLE ASSETS Tangible assets are stated at cost less accumulated debrciation and net of impairment. if any. Trial run expenses (net of revenue) are capitalised. Borrowing costs during the period of construction is added to the cost of eligible tangible assets. Major expenses on relining of furnace are capitalised. The written down value of the asset consisting of lining/relining expenditure embedded in the cost of the furnace is written off in the year of fresh relining. (F) INTANGIBLE ASSETS Intangible assets are stated at cost less accumulated amortisation and net of impairments. if any. An intangible asset is recognised if it is probable that the expected future economic benefits that are attributable to the asset will flow to the Company and its cost can be measured reliably. Intangible assets having finite useful lives are amortised on a straight-line basis over their estimated useful lives. (G) DEbrCIATION AND AMORTISATION Debrciation is provided on a straight line basis over the useful lives of assets. which is as stated in Schedule II of Companies Act 2013 or based on technical estimate made by the Company. However. assets value upto Rs.25.000 are fully debrciated in the year of acquisition. The details of estimated life for each category of asset are as under: (i) Buildings – 30 to 60 years (ii) Roads – 5 years (iii) Plant and Machinery used in manufacturing of Steel – 20 years* (iv) Other Plant and Machinery – 6 to 40 years* (v) Railway Sidings – 20 years* (vi) Vehicles and Aircraft – 5 to 20 years (vii) Furniture, Fixtures and Office Equipments – 4 to 6 years (viii) Computer Software – 5 years (ix) Assets covered under Electricity Act (life as brscribed under the Electricity Act) – 3 to 34 years (x) Development of property for development of mines and collieries are amortised over the useful life of the mine or lease period whichever is lower. (xi) Major furnace relining expenses are debrciated over a period of 10 years (average expected life). (xii) Freehold land is not debrciated. (xiii) Leasehold land and other leasehold assets are amortised over the life of the lease. *For these class of assets. based on internal assessment and independent technical evaluation carried out by external valuers the Company believes that the useful lives as given above best rebrsent the period over which Company expects to use these assets. Hence the useful lives for these assets are different from the useful lives as brscribed under Part C of Schedule II of the Companies Act 2013. (H) IMPAIRMENT Fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss is recognised in the Statement of Profit and Loss if the carrying amount of an asset exceeds its recoverable amount. Recoverable amount is the higher of an asset's net selling price and value in use. An impairment loss recognised on asset is reversed when the conditions warranting impairment provision no longer exists. (I) LEASES A lease is classified at the inception date as finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. The Company as a lessee (i) Operating lease - Rentals payable under operating leases are charged to the statement of profit and loss on a straight line basis over the term of the relevant lease. (ii) Finance lease - Finance leases are capitalised at the commencement of lease. at the lower of the fair value of the property or the brsent value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income over the period of the lease. 1. Accounting Policies (contd.) The Company as a lessor (i) Operating lease - Rental income from operating leases is recognised in the statement of profit and loss on a straight line basis over the term of the relevant lease. (ii) Finance lease - Amounts due from lessees under finance leases are recorded as receivables at the Company's net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease. (J) FOREIGN CURRENCY TRANSACTIONS Transactions in foreign currency are recorded at the rate of exchange brvailing on the date of transaction. Year-end balance of foreign currency monetary item is translated at the year-end rates. Exchange differences arising on settlement of monetary items or on reporting of monetary items at rates different from those at which they were initially recorded during the period or reported in brvious financial statements are recognised as income or expense in the period in which they arise. The Company has elected to account for exchange differences arising on reporting of long-term foreign currency monetary items in accordance with Companies (Accounting Standards) Amendment Rules, 2009 pertaining to Accounting Standard 11 (AS-11) notified by Government of India on 31st March, 2009 (as amended on 29th December, 2011). Accordingly, the effect of exchange differences on foreign currency loans of the Company is accounted by addition or deduction to the cost of the assets so far it relates to debrciable capital assets and in other cases by transfer to "Foreign Currency Monetary Item Translation Difference Account" to be amortised over the balance period of the long-term monetary items. Exchange differences relating to monetary items that are in substance forming part of the Company's net investment in non-integral foreign operations are accumulated in Foreign Exchange Fluctuation Reserve Account. Foreign currency monetary items that are used as hedge instruments or hedged items are accounted as per accounting policy on derivative financial instruments. (K) DERIVATIVE FINANCIAL INSTRUMENTS (i) The Company uses derivative financial instruments such as forwards, swaps and options, to hedge its risks associated with foreign exchange fluctuations. Such derivative financial instruments are used as risk management tools and not for speculative purposes. (ii) Derivative financial instruments entered into for hedging foreign exchange risks of recognised foreign currency monetary items are accounted for as per the principles laid down in Accounting Standard - 11 "The effects of changes in Foreign Rates" (iii) For derivative financial instruments and foreign currency monetary items designated as Cash Flow hedges, the effective portion of the fair value of the derivative financial instruments are recognised in Cash Flow Hedge Reserve and reclassified in the period in which the Statement of Profit and Loss is impacted by the hedged items. In cases where the exposure gives rise to a non-financial asset, the effective portion is reclassified from Hedging Reserve to the initial carrying amount of the non-financial asset as a 'basis adjustment' and recycled to the Statement of Profit and Loss when the respective non-financial asset affects the Statement of Profit and Loss in future periods. The ineffective portion of the change in fair value of such instruments is recognised in the Statement of Profit and Loss in the period in which they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in Cash Flow Hedge Reserve is retained there until the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss recognised in Cash Flow Hedge Reserve is immediately transferred to the Statement of Profit and Loss. (iv) If no hedging relationship is designated, the fair value of the derivative financial instruments is marked to market through the Statement of Profit and Loss. (L) INVESTMENTS Long-term investments are carried at cost less provision for diminution other than temporary. if any. in value of such investments. Current investments are carried at lower of cost and fair value. (M) INVENTORIES Finished and semi-finished products produced and purchased by the Company are carried at lower of cost and net realisable value. Work-in-progress is carried at lower of cost and net realisable value. Coal. iron ore and other raw materials produced and purchased by the Company are carried at lower of cost and net realisable value. Stores and spare parts are carried at cost. Necessary provision is made and expensed in case of identified obsolete and non-moving items. Cost of inventories is generally ascertained on the 'weighted average' basis. Work-in-progress and finished and semi-finished products are valued on full absorption cost basis. (N) RELINING EXPENSES Relining expenses other than major expenses on furnace relining are charged as an expense in the Statement of Profit and Loss in the year in which they are incurred. (O) RESEARCH AND DEVELOPMENT Research and Development costs (other than cost of fixed assets acquired) are charged as an expense in the Statement of Profit and Loss in the year in which they are incurred. P) DEFERRED TAX Deferred Tax is accounted for by computing the tax effect of timing differences. subject to the consideration of prudence in respect of deferred tax assets. which arise during the year and reverse in subsequent periods. Deferred tax is measured at substantively enacted tax rates by the Balance Sheet date. 2. Exceptional Items [Item No. 4, Page 155] (a) 'Profit on sale of non-current investments' rebrsents profit of Rs.104.29 crore on sale of investments held by the Company in its subsidiaries, associates and others. The brvious year amount of Rs.806.10 crore rebrsents profit on divestment in The Dhamra Port Company Limited and Lanka Special Steels Ltd. (b) The brvious year amount of 'Profit on sale of non-current assets' rebrsents profit on sale of a land at Borivali, Mumbai. Consequently, an amount of Rs.126.04 crore majorly on account of exposure in Tayo Rolls Limited (a subsidiary), Adityapur Toll Bridge Company Limited (a subsidiary), Tata Korf Engineering Services Ltd (a subsidiary) and Strategic Energy Technology Systems Private Limited (an associate) has been provided for. Further, a provision of Rs.72.99 crore has been created on account of the Company's exposure in its Chhattisgarh Project. (c) During the year, the Company carried out impairment testing of its exposure in some of its affiliate companies due to the existence of factors indicating probable impairment. The brvious year provision of Rs.198.40 crore relates to provision on account of investment exposure in subsidiaries, Tayo Rolls Limited and Adityapur Toll Bridge Company Limited. (d) ' Provision for impairment on non-current assets' of Rs.51.51 crore rebrsents non-cash write down of fixed assets and inventory in certain non-performing business units. (e) 'Provisions for demands and claims' of Rs.880.05 crore rebrsents provisions created during the year for certain demands and claims. The brvious year reversal of impairment loss of Rs.136.29 crore was in respect of land acquired in Gopalpur. (f) 'Employee Separation Compensation' rebrsents the charge of Rs.556.25 crore taken on Employee Separation Scheme. 3. The Company has given undertakings to: (a)IDBI not to dispose of its investment in Wellman Incandescent India Ltd., (b) IDBI and ICICI Bank Limited (formerly ICICI) not to dispose of its investment in Standard Chrome Ltd.,(c) Mizuho Corporate Bank Limited and Japan Bank for International Co-operation, not to dispose of its investments in Tata NYK Shipping Pte Limited (to retain minimal stake required to be able to provide a corporate guarantee towards long-term debt), (d) ICICI Bank Limited to directly or indirectly continue to hold at least 51 % shareholding in Jamshedpur Continuous Annealing & Processing Company Private Limited, (e) Sumitomo Mitsui Banking Corporation not to dispose of the management control in Tata Metaliks DI Pipes Limited (Formerly known as Tata Metaliks Kubota Pipes Limited) held through Tata Metaliks Ltd. so long as the dues to Sumitomo Mitsui Banking Corporation is subsisting. The Company has furnished a security bond in respect of its immovable property to the extent of Rs.20 crore in favour of the Registrar of the Delhi High Court and has given an undertaking not to sell or otherwise dispose of the said property. The Promoters of Tata BlueScope Steel Limited (TBSL) (i.e. Bluescope Steel Asia Holdings Pty Limited, Australia and Tata Steel Limited) have given an undertaking to IDBI Trusteeship Services Ltd., Debenture Trustees, and State Bank of India not to reduce collective shareholding in TBSL, below 51 % without prior consent of the Lender. Further, the Company has given an undertaking to State Bank of India to intimate them before diluting its shareholding in TBSL below 50%. The Company, as a promoter, has pledged 4,41,55,800 equity shares of Industrial Energy Limited with Infrastructure Development Finance Corporation Limited. The Company has agreed, if requested by Tata Steel UK Holdings Limited (TSUKH) (an indirect wholly owned subsidiary), to procure an injection of funds to reduce the outstanding net debt in TSUKH and its subsidiaries, to a mutually accepted level. The Company along with TS Alloys Limited (Promoters) has given an undertaking to Power Finance Corporation Limited (PFC) and Rural Electrification Corporation Limited (REC) (Lenders) not to dispose off /transfer their equity holding of 26% of total equity in Bhubaneshwar Power Private Limited (BPPL) without prior written approval of lenders. Such shareholding of promoters may be transferred to the Company or its affiliates subject to compliance of applicable laws. The Company along with TS Alloys Limited has pledged 60% of their equity contribution in BPPL to PFC and REC. The Company has given guarantees aggregating Rs.11,741.71 crore (31.03.2015: Rs.13,761.45 crore). (a) In favour of Timken India Limited for Rs.80.00 crore (31.03.2015: Rs.80.00 crore) against renewal of lease of land pending with State Government and further Rs.1.07 crore (31.03.2015: Rs.1.07 crore) on behalf of Timken India Limited to Commissioner of Customs in respect of goods imported. (b) In favour of Mizuho Corporate Bank Ltd., Japan for Rs.65.04 crore (31.03.2015: Rs.78.89 crore) against the loan granted to Tata NYK Shipping Pte. Ltd. (c) . n favour of The President of India for Rs.177.18 crore (31.03.2015: Rs.177.18 crore) against performance of export obligation under the various bonds executed by Jamshedpur Continuous Annealing & Processing Company Private Limited. (d) In favour of the Note holders against due and punctual repayment of the 100% amounts outstanding as on 31st March, 2016 towards issued Guaranteed Notes by ABJA Investment Co. Pte. Ltd for Rs.9,937.88 crore (31.03.2015: Rs.11,718.75 crore) and Rs.1,480.39 crore (31.3.2015: Rs.1,705.41 crore). The guarantee is capped at an amount equal to 125% of the outstanding principal amount of the Notes as detailed in "Terms and Conditions" of the Offering Memorandum. (e) I n favour of President of I ndia for Rs.0.15 crore (31.03.2015: Rs.0.15 crore) as bank guarantee against advance license. 4. Odisha legislative assembly issued an amendment to Indian Stamp Act on 9th May, 2013 and inserted a new provision (Section 3a) in respect of stamp duty payable on grant/ renewal of mining leases. As per the amended provision, stamp duty is levied equal to 15% of the average royalty that would accrue out of the highest annual extraction of minerals under the approved mining plan multiplied by the period of such mining lease. The Company had filed a writ petition challenging the constitutionality of the Act on 5th July, 2013. The Hon'ble High Court, Cuttack passed an order on 9th July, 2013 granting interim stay on the operation of the Amendment Act, 2013. As a result of the stay, as on date, the Act is not enforceable and any demand received by the Company is not liable to be proceeded with. Meanwhile, the Company received demand notices for the various mines at Odisha totalling to Rs.5,579 crore. On the basis of external legal opinion, the Company has concluded that it is remote that the claim will sustain on ultimate resolution of the legal case by the courts. I n April, 2015 the Company has received an intimation from Government of Odisha, granting extension of validity period for leases under the MMDR Amendment Act, 2015 up to 31st March, 2030 in respect of eight mines and up to 31st March, 2020 for two mines subject to execution of supplementary lease deed within 3 months from the date of the intimation. Liability has been provided in the books of accounts as on 31st March, 2016 as per the existing provisions of the Stamp Act 1899 and the Company has since paid the stamp duty and registration charges totalling Rs.353.08 crore for supplementary deed execution in respect of eight mines out of the above mines. 5. Demand notices have been raised by Deputy Director of Mines, Odisha amounting to Rs.3,828 crore for the excess production over the quantity permitted under the mining plan scheme, environment clearance or consent to operate, during the period 2000-01 to 2009-10. The demand notices have been raised under Section 21(5) of the Mines & Minerals (Development and Regulations) Act (MMDR). However, the Act specifies that demand can be raised only when the land is occupied without lawful authority. The Company is of the view that Section 21(5) of the MMDR Act is not applicable as the mining is done within the sanctioned mining lease area and accordingly the Company has filed revision petitions before the Mines Tribunal against all such demand notices. Consequent to it stay has been granted by the Mines Tribunal against the entire demand of Rs.3,828 crore and directed the State that no coercive action should be taken for recovery of demand. Based on the judgment of Hon'ble High court of Jharkhand on 11th December, 2014 in the matter of our writ petition for renewal of lease and continuation of operation at Noamundi iron mine, the Government of Jharkhand approved the renewal of lease of Noamundi Mines by an exbrss order on 31st December, 2014. Exbrss Order also held that the mining operation carried out between 1st January, 2012 to 31st August, 2014 to be unlawful and computed an amount of Rs.3,568 crore on account of such alleged unlawful mining. The Mines and Minerals Development and Regulation (MMDR) Amendment Ordinance 2015 promulgated on 12th January, 2015 provides for renewal of the above mines. Based on the new Ordinance, Jharkhand Government revised the Exbrss Order on 12th February, 2015 for lease renewal up to 31st March, 2030 with following terms and conditions: • Value of Iron Ore produced by alleged unlawful mining during the period 1.1.12 to 20.04.2014 for Rs.2,994.49 crore to be decided on the basis of disposal of our writ petition before Hon'ble High Court of Jharkhand. • Value of Iron Ore produced from 21.4.2014 to 17.7.2014 amounting to Rs.421.83 crore to be paid in maximum 3 installments. • Value of Iron Ore produced from 18.7.2014 to 31.08.2014 i.e. Rs.152 crore to be paid immediately. The Company paid Rs.152 crore under protest. District Mining 36. Officer Chaibasa on 16th March, 2015 has issued demand note for payment of Rs.421.83 crore, payable in three monthly installments. The Company replied on 20th March, 2015, since the lease has been extended till 31st March, 2030, the above demand is not tenable. The Company paid Rs.50 crore under protest on 27th July, 2015. A writ petition was filed before Hon'ble High Court of Jharkhand and heard on 9th September, 2015. An interim order has been given by Hon'ble High Court of Jharkhand on 18th September, 2015 wherein court has directed the company to pay outstanding amount of Rs. 371.83 crore in 3 equal installments, first installment by 15th October, 2015, second installment by 15th November, 2015 and third installment by 15th December, 2015. I n view of the order of Hon'ble High Court of Jharkhand Rs.124 crore was paid on 28th September, 2015, Rs.124 crore was paid on 12th November, 2015 and Rs.123.83 crore on 14th December, 2015 under protest. 6 In Financial Year 2014-15, the Income Tax department had reopened assessments of earlier years on account of excess mining and raised cumulative demand for Rs.1,086 crore. During the current financial year, the Commissioner of Income Tax (Appeals) has adjudicated the matter in favour of the Company and quashed the entire demand on account of reopened assessments. The demand outstanding as on 31st March, 2016 is Nil (31.03.2015: Rs.1,086 crore). 7. The Committee of Directors (Committee) in April 2013 had approved the scheme of amalgamation of Tata Metaliks Ltd. and Tata Metaliks Kubota Pipes Limited (Scheme) with the Company, subject to the approval of the High Courts of Judicature at Bombay and Calcutta. The Bombay High Court vide its Order dated August 21, 2015 (Order) had approved the Scheme subject to similar approval being obtained from the Calcutta High Court. However, on May 17, 2016 the Committee, after careful consideration of various factors, approved the proposal of the Company to file appropriate application before the Hon'ble High Court of Bombay seeking recall of the said Order. 8. The Board recommended dividend of Rs.8.00 per Ordinary Share (2014-15: Rs.8.00 per Ordinary Share) of Rs.10 each for the year ended 31st March, 2016. The dividend is subject to the approvals of the shareholders at the Annual General Meeting. The total dividend payout (including tax on dividend) works out to Rs.926.27 crore (2014-15: Rs.929.99 crore) for the Company. 9. Previous year's figures have been recast/restated where necessary. For and on behalf of the Board of Directors sd/- CYRUS P. MISTRY Chairman(DIN: 00010178) sd/- NUSLI N. WADIA Director(DIN: 00015731) sd/- ISHAAT HUSSAIN Director (DIN: 00027891) sd/- SUBODH BHARGAVA Director (DIN: 00035672) sd/- JACOBUS SCHRAVEN Director (DIN: 01462126) sd/- D. K. MEHROTRA Director (DIN: 00142711) sd/- O. P. BHATT Director(DIN: 00548091) sd/- ANDREW ROBB Director(DIN: 01911023) sd/- KOUSHIK CHATTERJEE Group Executive Director(Finance & Corporate) (DIN: 00004989) sd/- T. V. NARENDRAN Managing Director(DIN: 03083605) sd/- PARVATHEESAM K.Company Secretary(ACS: 15921) Mumbai, May 25, 2016 |