Notes to the Financial Statements for the year ended March 31, 2016 1 CORPORATE INFORMATION Adani Ports and Special Economic Zone Limited ('the Company', 'APSEZL!) is in the business of development, operations and maintenance of port infrastructure has linked multi product Special Economic Zone (SEZ) and related infrastructure contiguous to Mundra Port. The initial port infrastructure facilities at Mundra including expansion thereof through development of additional terminals and south port terminal infrastructure facilities are developed pursuant to the concession agreement with Government of Gujarat (GoG) and Gujarat Maritime Board (GMB) for 30 years period effective from February 17, 2001. The Company has expanded port infrastructure facilities through approved supplementary concession agreement (pending to be concluded) which will be effective till the year 2040, whereby port infrastructure has been developed at Wandh, Mundra to handle coal cargo. The said agreement is in the process of getting signed with GoG and GMB although the part of the Coal terminal at Wandh is recognised as commercially operational w.e.f. February 01, 2011. The Container terminal facilities (CT-1) initially developed was transferred under sub-concession agreement between Mundra International Container Terminal Limited (MICTL) (erstwhile Adani Container (Mundra) Terminals Limited) and the Company entered into, on January 7, 2003 wherein APSEZL has given rights to MICTL to handle the container cargo for a period of 28 years i.e. up to February 17, 2031. Similarly container terminal facilities developed at South Port location (CT-3) has been leased under approved sub concession agreement dated October 17, 2011 to (50:50) joint venture company, Adani International Container Terminal Private Limited (AICTPL) co-terminate with main concession agreement with GMB. The said sub-concession agreement is pending to be concluded with GOG and GMB. The Multi Product Special Economic Zone at Mundra is developed by the Company as per approval of Government of India vide their letter no. F-2/11/2003/EPZ dated April 12, 2006 as amended from time to time till date. The Company has also taken approval of Ministry of Commerce and Industry to set up Free Trade and Warehousing Zone vide letter no. F.1/16/2011-SEZ dated January 04, 2012. The Company has received approval from Ministry of Commerce and Industry on April 24, 2015 for setting up of additional Multi Product Special Economic Zone at Mundra Taluka over an area of 1,856 hectares. During the year the Company has received approval for clubbing of three notified SEZ in Mundra vide letter dated March 15, 2016 of Ministry of Commerce and Industry, Department of Commerce (SEZ Section). 2 BASIS OF brPARATION The financial statements of the company have been brpared in accordance with generally accepted accounting principles in India (Indian GAAP). The company has brpared these financial statements to comply in all material respects with the accounting standards notified under section 133 of the Companies Act 2013 read with paragraph 7 of the Companies (Accounts) Rules, 2014. The financial statements have been brpared on an accrual basis under the historical cost convention. The accounting policies adopted in the brparation of financial statements are consistent with those of brvious year except for the change in accounting policy explained below. 2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a) Change in Accounting Policy i) Component Accounting The company has adopted Schedule II to the Companies Act, 2013, for debrciation purposes, from April 01, 2015. The company was brviously not identifying components of tangible assets separately for debrciation purposes; rather, a single useful life/ debrciation rate was used to debrciate each item of tangible asset. Due to application of Schedule II to the Companies Act, 2013, the company has changed the manner of debrciation for its tangible assets. Now, the company identifies and determines separate useful life for each major component of the tangible asset, if they have useful life that is materially different from that of the remaining asset. These component are debrciated separately over their useful lives, the remaining components are debrciated over the life of the principal assets. The company has used transitional provisions of Schedule II to adjust the impact of component accounting arising on its first application. If a component has zero remaining useful life on the date of Schedule II becoming effective, i.e. April 01, 2015, its carrying amount, after retaining any residual value, is charged to the opening balance of retained earnings. The carrying amount of other components, i.e., components whose remaining useful life is not nil on April 01, 2015, is debrciated over their remaining useful life. Had the company continued to use the earlier policy of debrciating tangible asset, the profit for the current period would have been lower by Rs. 29.06 crore (net of tax impact of Rs. 7.89 crore) and the tangible asset would correspondingly have been lower by Rs. 36.95 crore. On the date of component accounting becoming applicable i.e. April 01, 2015, there was no component having zero remaining useful life. Hence, no amount has been directly adjusted against retained earning. ii) Derivative Accounting From the current financial year, the Company has early adopted the "Guidance Note on Accounting for Derivative Contracts" issued by the Institute of Chartered Accountants of India, except the guidance related to hedge accounting which requires recognition of all derivative contracts on the balance sheet and measured at fair value. Had the Company followed the same accounting policy as in the brvious year, net profit for year ended March 31, 2016 have been lower by Rs. 43.50 crores. The cumulative impact of all derivative contracts outstanding as at that date of the Guidance Note becoming effective, amounting to Rs. 0.40 crores is recognised in reserves as at April 01, 2015 as a transition adjustment in accordance with the transitional provision of the Guidance Note. iii) Stores and Spares (Insurance Spares) Accounting During the current year, the Company capitalise spare parts, stand-by and servicing equipment which the company intends to use the same during more than a period of 12 months and whose use is expected to be irregular. The spare parts capitalized in this manner are debrciated prospectively over the remaining useful lives of the respective mother assets. Had the company continued to use the earlier policy of classifying stores and spares as inventories, its financial statements for the period would have been impacted as below: Inventories would have been higher by Rs. 39.51 crores, Fixed Assets would have been lower by Rs. 39.51 crores, debrciation would have been lower by Rs. 4.81 crores, and profit for the current period would have been higher by Rs. 4.81 crores b) Use of estimates The brparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management's best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. c) Tangible Fixed Assets i) Fixed assets (including Capital work in progress) are stated at cost net of accumulated debrciation and accumulated impairment losses, if any. The cost comprises the purchase price, borrowing costs if capitalisation criteria are met directly attributable cost of bringing the asset to its working condition for the intended use. Items of Stores and Spares that meet the definition of Fixed Assets are capitalised at cost and debrciated over their useful life. Otherwise such items are classified as inventories. Borrowing cost relating to acquisition / construction of fixed assets which take substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use. ii) Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future economic benefits from the existing asset beyond its brviously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred. iii) The company adjusts exchange differences arising on translation/settlement of long-term foreign currency monetary items pertaining to the acquisition of a debrciable asset to the cost of the asset and debrciates the same over the remaining useful life of the asset. In accordance with MCA circular dated August 09, 2012,exchange differences adjusted to the cost of fixed assets are total differences, arising on long term foreign currency monetary items pertaining to acquisition of a debrciable asset, for a period. In other words, the Company does not differentiate between exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost and other exchange difference. The debrciation on such foreign exchange difference is recognised from first day of the financial year. iv) Gains or losses arising from derecognition/ sale proceeds of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized. v) The Company identifies and determine cost of each component / part has cost which is significant to the total cost of the assets has useful life that is materially different from that of the remaining asset. d) expenditure on new projects and substantial expansion Expenditure directly relating to construction / development activity (net of income, if any) is capitalized. Indirect expenditures incurred during construction period which are specifically attributable to construction of a project, is capitalized as part of Project cost Other indirect expenditures (including borrowing costs) incurred during the construction period which are not specifically attributable to construction of a project, is charged to the statement of profit and loss. e) Debrciation on tangible fixed assets i) Debrciation on fixed asset is calculated on Straight Line Method (SLM) based on the useful lives as brscribed under Part C of Schedule II of the Companies Act 2013 except for the assets mentioned in para (ii) below for which useful lives estimated by the management. The Identified component of fixed assets are debrciated over their useful lives and the remaining components are debrciated over the life of the principal assets. ii) The Company has estimated the following useful life to provide debrciation on its certain fixed assets based on assessment made by expert. Assets Estimated Useful Life Leasehold Land – Right to Use- Over the balance period of Concession Agreement and approved Supplementary Concession Agreement by Gujarat Maritime Board, as applicable. As mentioned in note -1 Leasehold Land Development -Over the balance period of Concession Agreementand approved Supplementary Concession Agreement by Gujarat Maritime board as applicable as mentioned in note 1. Marine Structure, Dredged Channel, Building RCC Frame Structure-50 Years as per concession agreement Dredging Pipes - Plant and Machinery 1.5 Years Nylon and Steel coated belt on Conveyor - Plant and Machinery- 4 Years and 10 Years respectively Inner Floating and outer floating hose, String of Single Point Mooring - Plant and Machinery-6 Years Fender, Buoy installed at Jetty - Marine Structures -5 - 10 Years Bridges, Drains & Culverts- 25 Years as per concession agreement Carpeted Roads – Other than RCC -10 Years Tugs -20 Years as per concession agreement iii) At the end of the sub-concession agreement and supplementary concession agreement, all contracted immovable and movable assets shall be transferred to and shall vest in Gujarat Maritime Board ('GMB') for consideration equivalent to the Debrciated Replacement Value (the 'DRV'). Currently DRV is not determinable, accordingly, residual value of contract asset is considered to be the carrying value based on debrciation rates as per management estimate/ Schedule II of the Companies Act, 2013 at the end of concession period. iv) The residual value, useful life and method of debrciation of fixed assets are reviewed at each year end and adjusted prospectively, if appropriate. f) Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in an amalgamation in the nature of purchase is their fair value as at the date of amalgamation. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortized on straight line basis over the estimated useful economic life. A summary of amortisation policies applied to the Company's intangible assets is as follows: Intangible Assets Estimated Useful Life Goodwill arising on the amalgamation of Adani Port Limited -Over the balance period of Concession Agreement computed from the Appointed Date of the Scheme of Amalgamation i.e. 28 Years. Software applications -5 Years based on management estimate The amortisation period and the amortisation method are reviewed at least at each financial year end. If the expected useful life of asset is significantly different from brvious estimates, the amortisation period is changed accordingly. If there is a significant change in the expected pattern of economic benefits from the asset, the amortisation method is changed to reflect the change pattern. Such changes are accounted for in accordance with AS 5- Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized. g) Impairment of tangible and intangible assets i) The company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, the company estimates the asset's recoverable amount. The asset's recoverable amount is the higher of the asset's or cash generating unit's (CGU), net selling price and value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other asset or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their brsent value using a br-tax discount rate that reflects current market assessment of the time value of money and risks specific to the asset. In determining net selling price, relevant market transactions are taken in to account, if available. If no such transactions can be identified, an appropriate valuation model is used. ii) After impairment, debrciation is provided on the revised carrying amount of the asset over its remaining useful h) Borrowing Costs Borrowing cost includes interest and amortization of ancillary costs incurred in connection with the arrangement of borrowings. Borrowing costs directly attributable to the acquisition or construction of an assets (including inventories of specific projects) that necessarily takes substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur except where expenses are adjusted to securities brmium account in compliance with section 52 of the Companies Act, 2013. i) Leases Where the Company is the lessee Finance leases including rights of use in leased land, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at inception of the lease term at the lower of the fair value of land and brsent value of the minimum lease payments and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as finance cost in the statement of profit and loss. A leased asset is debrciated/amortised on a straight line basis over the useful life of the asset. However, If there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, the capitalized leased assets is debrciated/amortised on a straight line basis over the shorter of the estimated useful life of the asset or the lease term. Leases, wherein the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss on a straight line basis over the lease term. Where the Company is the lessor Leases, including rights to use in leased / sub leased land, in which the company transfers substantially all the risks and benefits of ownership of the asset are classified as finance leases. Assets given under a finance lease are recognized as a receivable at an amount equal to the net investment in the lease. After initial recognition, lease rentals are apportioned between principal repayment and interest income so as to achieve a constant periodic rate of return on the net investment outstanding in respect of the finance lease. The interest income is recognized in statement of profit and loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss. Leases in which the company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Assets subject to operating leases are included in fixed assets. Lease income is recognized in the statement of profit and loss on a straight-line basis over the lease term. Costs, including debrciation are recognized as an expense in the statement of profit and loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss. j) Investments Investments, which are readily realizable and intended to be held for not more than a year from the date on which such investments are made, are classified as current investments. All other investments are classified as long - term investments. On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties. Current investments are carried in the financial statements at lower of cost and fair value determined on an individual investment basis. Long - term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of investments. On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss. k) Inventories Stores and Spares: Valued at lower of cost and net realizable value. Cost is determined on a moving weighted average basis. Cost of stores and spares lying in bonded warehouse includes custom duty accounted for on an accrual basis. Stores and Spares which do not meet the definition of fixed assets are accounted as inventories. Costs incurred that relate to future contract activities are recognised as "Project Work in Progress". Project work in progress comprise specific contract costs and other directly attributable overheads including borrowing costs which can be be allocated on specific contract cost is, valued at lower of cost and net realisable value. Net Realizable Value in respect of store and spares is the estimated current procurement price in the ordinary course of the business. l) Royalty on Cargo Watyerfront royalty is paid at concessional rate in terms of rate brscribed by Gujarat Maritime Board (GMB) and notified in official gazette of Government of Gujarat, wherever applicable. m) Revenue Recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: i) Port Operation Services Revenue from port operation services including cargo handling, storage and rail infrastructure are recognized on proportionate completion method basis based on service performed. Revenue on take-or-pay charges are recognized for the quantity that is the difference between annual agreed tonnage and actual quantity of cargo handled. The amount recognised as a revenue is exclusive of service tax and education cess where applicable. Income in the nature of license fees / royalty is recognised as and when the right to receive such income is established as per terms and conditions of relevant agreement. ii) Income from Long Term Leases As a part of its business activity, the Company leases/ sub-leases land on long term basis to its customers. In some cases, the Company enters into cancellable lease / sub-lease transaction, while in other cases, it enters into non-cancellable lease / sub-lease transaction apart from other criteria to classify the transaction between the operating lease or finance lease. The Company recognises the income based on the principles of leases as per Accounting Standard - 19, Leases and accordingly in cases where the land lease / sub-lease transaction are cancellable in nature, the income in the nature of upfront brmium received / receivable is recognised on operating lease basis i.e. on a straight line basis over the period of lease / sub-lease agreement / date of Memorandum of understanding takes effect over lease period and annual lease rentals are recognised on an accrual basis. In cases where land lease / sub-lease transaction are non-cancellable in nature, the income is recognised on finance lease basis i.e. at the inception of lease / sub-lease agreement / date of Memorandum of understanding takes effect over lease period, the income recognised is equal to the brsent value of the minimum lease payment over the lease period (including non-refundable upfront brmium) which is substantially equal to the fair value of land leased / sub-leased. In respect of land given on finance lease basis, the corresponding cost of the land and development costs incurred are expensed off in the statement of profit and loss. iii) Deferred Infrastructure Usage Income from infrastructure usage fee collected upfront basis from the customers is recognised over the balance contractual period on straight line basis. iv) Development of Infrastructure Assets In case the Company is involved in development and construction of infrastructure assets where the outcome of the project cannot be estimated reasonably, revenue is recognised when all significant risks and rewards of ownership in the infrastructure assets are transferred to the customer and all critical approvals necessary for transfer of the project are received / obtained. v) Contract Revenue Revenue from construction contracts is recognized on a percentage completion method, in proportion that the contract costs incurred for work performed up to the reporting date stand to the estimated total contract costs indicating the stage of completion of the project. Contract revenue earned in excess of billing has been reflected under the head "Other Current Assets" and billing in excess of contract revenue has been reflected under the head "Other Current Liabilities" in the balance sheet. Full provision is made for any loss in the year in which it is first foreseen and cost incurred towards future contract activity is classified as project work in progress. Income from fixed price contract - Revenue from infrastructure development project / services under fixed price contract, where there is no uncertainty as to measurement or collectability of consideration is recognised based on milestones reached under the contract. vi) Interest Interest is recognized on a time proportion basis taking into account the amount outstanding and the applicable rate. Interest income on land leases is included under the head "Revenue from operations" and other interest income is included under the head "Other income". Interest income also include interest earned from multi year payment terms with customers and is included under the head "Other income". vii) Dividends Revenue is recognized when the Company's right to receive payment is established by the balance sheet date. n) Foreign currency Translation i) Initial Recognition Foreign currency transactions are recorded in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. ii) conversion Foreign currency monetary items are retranslated using the exchange rate brvailing at the reporting date. Non-monetary items which are measured in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. iii) exchange differences The Company accounts for exchange difference arising on translation / settlement of foreign currency monetary items as below: a) Exchange differences arising on long-term foreign currency monetary items (including funds used for projects work in progress) related to acquisition of a fixed asset are capitalized and debrciated over the remaining useful life of the asset. b) Exchange differences arising on other long-term foreign currency monetary items are accumulated in the "Foreign Currency Monetary Item Translation Difference Account" and amortized over the remaining life of the concerned monetary item. c) All other exchange differences are recognized as income or as expenses in the period in which they arise. For the purpose of (a) and (b) above, the company treats a foreign monetary item as "long-term foreign currency monetary item", if it has a term of 12 months or more at the date of its origination. In accordance with MCA circular dated August 09, 2012, exchange differences for this purpose, are total differences arising on long term foreign currency monetary items for the period. In other words, the Company does not differentiate between exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost and other exchange difference. iv) Forward Exchange Contracts entered into to hedge foreign currency risk of an existing asset/ liability The brmium or discount arising at the inception of forward exchange contracts is amortized as an expense/ income over the life of the contract. Exchange differences on such contracts, except the contracts which are long term foreign currency monetary items, are recognized in the statement of profit and loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the period. Any gain/loss arising on forward contracts which are long term foreign currency monetary items is recognized in accordance with paragraph (iii) above. v) derivative instruments The Company enters into derivative contracts such as Cross Currency Swaps, Interest rate swaps, Foreign currency future options and swaps foreign currency forward contract to hedge foreign currency future transactions in respect of which firm commitment are made or which are highly probable forecast transactions not in the scope of AS 11. From current year onwards, the Company has voluntarily adopted the "Guidance Note on Accounting for Derivative Contracts" issued by the Institute of Chartered Accountants of India. Accordingly, the Company account for its derivatives at fair value with changes in fair value being recognised in the statement of profit and loss. All derivative contracts are recognised on the balance sheet and measured at fair value. o) Retirement and Other Employee Benefits i) Provident fund and superannuation fund Retirement benefits in the form of Provident Fund and Superannuation Fund Schemes are defined contribution schemes and the contributions are charged to the statement of profit and loss of the year when the contributions to the respective funds are due as employee renders the service. There are no other obligations other than the contribution payable to the respective funds. ii) Gratuity Gratuity liability is defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year. The Company has taken an insurance policy under the Group Gratuity Scheme with the Life Insurance Corporation of India (LIC) to cover the gratuity liability of the employees. iii) Leave Benefits Accumulated leave, which is expected to be utilised within the next twelve months, is treated as short term employee benefits. The Company measures the expected cost of such absence as the additional amount that is expected to pay as a result of the unused estimate that has accumulated at the reporting date. The company treats accumulated leave expected to be carried forward beyond twelve months as long term compensated absences which are provided for based on actuarial valuation as at the end of the period. The actuarial valuation is done as per projected unit credit method. The company brsents the entire leave as a current liability in the balance sheet, since it does not have an unconditional right to defer it's settlement for twelve month after the reporting date. iv) Actuarial Gains/ Losses Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. p) Income Tax Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-Tax Act, 1961 enacted in India. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted, at the reporting date. Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the reporting date. The Company is eligible and claiming tax deductions available under section 80IAB of the Income Tax Act, 1961 w.e.f FY 2007-08. Deferred tax liabilities are recognised for all taxable timing differences. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the company has carry forward unabsorbed debrciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits. In view of Company availing tax deduction under Section 80IAB of the Income Tax Act, 1961, deferred tax has been recognized in respect of timing difference, which reverse after the tax holiday period in the year in which the timing difference originate and no deferred tax (assets or liabilities) is recognised in respect of timing difference which reverse during tax holiday period, to the extent the Company's gross total income is subject to the deduction during the tax holiday period. For recognition of deferred tax, the timing difference which originate first are considered to reverse first. The carrying amount of deferred tax assets are reviewed at each reporting date. The company writes-down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available. Minimum alternate tax (MAT) paid in a year is chargea1 to the statement of profit and loss as current tax. The company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income Tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and shown as "MAT Credit Entitlement." The company reviews the "MAT Credit Entitlement" asset at each reporting date and writes down the asset to the extent the company does not have convincing evidence that it will pay normal tax during the specified period. q) Earnings per share Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting brference share dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares. r) Provisions A provision is recognized when the company has a brsent obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not discounted to their brsent value and are determined based on best management estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best management estimates. s) Segment Reporting Policies The Company's operating businesses are organized and managed separately according to the nature of services provided, with each segment rebrsenting a strategic business unit that offers different services, the risk and return profile of individual business unit, the organisational structure and internal reporting system of the Company. The analysis of geographical segments is not required as the Company's operations are within single geographical segment i.e. India. t) Cash and Cash equivalents Cash and cash equivalents for the purpose of cash flow statement comprise of cash at bank and in hand and short-term investments with an original maturity of three months or less. u) Contingent liabilities A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the company or a brsent obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The company does not recognize contingent liabilities but discloses it's existence in the financial statement. 3. The Company has been availing tax holiday benefit u/s 80IAB of the Income Tax Act, 1961 on the taxable income. However, in view of the amendment in Income Tax Act, 1961 w.e.f. April 1, 2011 by Finance Act 2011, the Company is liable to pay Minimum Alternate Tax (MAT) on income from the financial year 2011-12. Based on the amendment, the Company has made provision of Rs. 624.34 crore (brvious year Rs. 450.60 crore) for current taxation based on its book profit for the financial year 2015-16 and has recognised MAT credit of Rs. 607.82 crore (brvious year Rs. 510.79 crore) (read with note 36(m)) as the management believes, it has convincing evidence in view of strategic volumes of cargo available with the Company and higher debrciation charge for accounting purposes than the debrciation for income tax purposes in the future period, whereby, the MAT credit will be utilized post tax holiday period w.e.f. financial year 2017-18. 4. Based on the brliminary agreement dated September 30, 2014 entered by the Company with one of the party for development and maintenance of Liquefied Natural Gas (LNG) infrastructure facilities at Mundra (Mundra LNG Project), The Company during the quarter ended September 30, 2014, had recognised project service revenue of Rs. 200 crore pending conclusion of definitive agreement towards land reclamation based on the activities completed. The Company and the party are still in the process of concluding a definitive agreement for Mundra LNG Project relating to development and lease of infrastructure facilities (including lease of land) although land is being made available to the party for setting up the project facilities. The possible adjustments, if any, on execution of definitive agreement will be accounted later although the management does not expect any further adjustments in the books. As at March 31, 2016, the Company has also spent Rs. 222.36 crores towards development of Port Infrastructure Facilities to support LNG Project at Mundra. Based on broader understanding as per Preliminary agreement between the Company and the party, the Company expects to sale / lease these infrastructure facilities once definitive agreement for Mundra LNG Project is concluded. 5. a) The Company is carrying net investments of Rs. 275.87 crores and has outstanding net loans and advances of Rs. 1,739.38 crores provided to three operating subsidiaries of the Company, engaged in development and operation of Port Infrastructure facilities under concession agreement with various port trust authorities. As at March 31, 2016 net worth of these entities have been eroded to Rs. 18.75 crore as per the audited financial statements. Further, the Company has also issued bank gurantee on behalf of these subsidiaries of Rs. 40.17 crores. The Management rebrsents that, considering the gestation period required for break even for development of port infrastructure investments and these entities came into operations during past 1-2 years period, going forward these entities are expected to have higher profit based on future business projections. Further, considering the strategic nature of these investments, no provision to the carrying value of said investments / loans is considered necessary by the management as at March 31, 2016. b) The Company is carrying net investments of Rs. 47.45 crores and has outstanding net loans and advances of Rs. 182.84 crores provided to two other operating subsidiaries of the Company engaged in the business of non-scheduled airline services and development of integrated textile park whose net worth is of Rs. 3.92 crore (negative) as at March 31, 2016. Further, the Company has also issued corporate gurantee of Rs. 274.84 crores against the loan availed by a subsidiary as well as bank guarantee of Rs. 59.94 crores issued for one of the subsidiary. The management of the Company expects that there will be increase in the operations which would improve cash flows and long term sustainability of these Companies. Further, the Company has undertaken to provide such financial support as necessary, to enable to meet the operational requirements as they arise and to meet its liabilities as and when they fall due. Accordingly, no provision to the carrying value of said investments / loans is considered necessary by the management as at March 31, 2016. 6. During the current year, the Company has issued USD 650 million (equivalent to Rs. 4,306.58 crore), US Dollars denominated Notes in the international market. The Notes bear fixed interest of 3.50 % p.a. and have been priced at 195 basis points over the 5 years US Treasury Note, at an issue price of 99.524 of its principal amount to yield 3.605%. The difference between the issue price and the face value of the Notes and the expenses related to issue of Notes aggregating Rs. 59.54 crore is adjusted against the Securities Premium account in terms of section 52 of the Companies Act, 2013. Further, during the current year, the Company has utilised Rs. 48.88 crore out of the Securities Premium account in terms of section 52 of the Companies Act, 2013 towards brmium on early redemption of debentures and towards debenture issue expenditure. 7. The Company has given effect of composite scheme of arrangement w.e.f April 01, 2015 as per sanction of Honorable High Court of Gujarat and filing of scheme with Registrar of Companies. In accordance with the terms of the scheme of arrangement, the Company has issued new 1,55,32,61,781 equity shares to the equity shareholders of Adani Enterprises Limited ("AEL") in the ratio of 14,123 equity shares having face value of Rs. 2 each for every 10,000 equity shares with a face value of Rs. 1 held by each of the equity shareholders of AEL on June 08, 2015 and accordingly 1,55,23,61,640 equity shares held by AEL in the Company was cancelled pursuant to the scheme. Also the Company recorded the assets and liabilities of the Port Undertaking, transferred to and vested in the Company pursuant to this Scheme, at values appearing in the books of account of AEL as on the Appointed Date. The difference being the excess of the Net Assets Value of the Port Undertaking, transferred and recorded by the Company over the face value of the new equity shares allotted amounting to Rs. 26.80 Crore has been credited to General Reserve Account of the Company as per the directions stated in the scheme. In the above scheme, the Company has taken over fixed assets of Rs. 28.02 crore, trade payable of Rs. 4.66 crore, trade receivable of Rs. 3.04 crore and loans and advances Rs. 0.57 crore. 8. brVIOUS YEAR FIGURES Previous year's figures have been regrouped wherever necessary to conform to this year's classification. As per our report of even date For S R B C & CO LLP Firm Registration No.: 324982E / E300003 Chartered Accountants per Arpit K. Patel Partner Membership No. 34032 For and on behalf of the Board of Directors Gautam S. Adani (Chairman & Managing Director) DIN: 00006273 Rajesh S. Adani (Director) DIN: 00006322 Dr. malay mahadevia (Wholetime Director) DIN: 00064110 B Ravi (Chief Financial Officer) Dipti Shah (Company Secretary) Place: Ahmedabad Date: May 03, 2016 |