Note -01 General information

1 General corporate information

Gallantt Ispat Limited (‘the Company’ / ‘GIL’), incorporated in the year 2005, is engaged in the business of Iron & Steel, Agro, Power and Real Estate. The Company was promoted by M/s. Gallantt Metal Limited, Mr. Chandra Prakash Agrawal, Mr. Prem Prakash Agrawal, Mr. Nitin Mahavir Prasad Kandoi and M/s. Chandra Prakash Agrawal & Sons (HUF). Company floated its capital base by coming out with Initial Public Offerings of Equity Shares in the year 2010. Company is listed on both the premier stock exchanges viz. Bombay Stock Exchange Limited and National Stock Exchange of India Limited.The Company is engaged in manufacturing of Steel and Steel products and having its manufacturing unit at GIDA, Sahajanwa, Dist Gorakhpur in the State of Uttar Pradesh.

2 First time adoption of Ind AS

These financial statement have been prepared in accordance with the generally accepted accounting principles in India under the historical cost convention(except for certain financial instruments that are measured at fair values at the end of each reporting period) on accural basis to comply in all material aspects with the Indian Accounting Standards (herein after referred to as the ‘Ind AS’) as notified by Ministry of Corporate Affairs pursuant to section 133 of the Companis Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment rules, 2016.

These financial statements for the year ended March 31, 2018 has been prepared under Ind AS first time for the Company . For all periods upto and including the year ended March 31, 2017, the Company prepared its financial statements in accordance with the accounting standards notified under the Section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (hereinafter referred to as ‘Previous GAAP’) used for its statutory reporting requirement in India immediately before adopting Ind AS. The financial statements for the year ended March 31, 2017 and the opening Balance Sheet as at April 01, 2016 have been restated in accordance with Ind AS for comparative information.

The financial statements have been prepared on accrual and going concern basis. The accounting policies are applied consistently to all the periods presented in the financial statements, including the preparation of the opening Ind AS Balance Sheet as at April 01, 2016 being the ‘date of transition to Ind AS’. All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria as set out in the Division II of Schedule III to the Companies Act, 2013. Based on the nature of products and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or noncurrent classification of assets and liabilities.

The financial statements for the year ended March 31, 2018 were approved by the Board of Directors and authorised for issue on May 21, 2018.

3 Basis of measurement

These financial statements are prepared under the historical cost convention otherwise indicated.

4 Functional and presentation currency

The functional currency and presentation currency of the Company is Indian Rupee (“‘“) which is the currency of the primary economic environment in which the Company operate. All amounts have been rounded to the nearest lakhs, unless otherwise indicated.

5 Key estimates and assumptions

The preparation of separate financial statements in conformity with the recognition and measurement principles of Ind AS requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities, disclosures relating to contingent liabilities as at the date of the separate financial statements and the reported amounts of income and expense for the periods presented.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods are affected.

In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are included in the notes.

6 Measurement of fair values

The Company’s accounting policies and disclosures require the measurement of fair values for financial instruments.

“The Company has an establishedcontrol framework with respect to the measurement of fair values. The management regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the management assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which such valuations should be classified.”

When measuring the fair value of a financial asset or a financial liability, the Company uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Rights, preferences and restrictions attached to shares Equity Shares

The company has one class of equity shares having a par value of Rs. 10 per share. Each shareholder is entitled for one vote per share held. The dividend proposed by the board of directors is subject to the approval of the shareholders in the ensuing annual general meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are entitled to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to the number of equity shares held by the shareholders.

During the year company has been sanctioned and disbursed a term loan of Rs. 3000.00 lacs from HDFC Bank Ltd for plant and machineries for expansion of its capacity at GIDA, Sahjanwa, Gorakhpur.

Security:

* Primary Security : Term loan is securd by way of first pari passu charge by way of hypothecation of Plant & machineries and equipment acquired for expansion of project of the company.

* Collateral Security: Term loan is further secured by way of first pari passu charge with consortium banking arrangement member ban (SBI) by way equitable mortgage of the company’s immovable property viz; Factory Land & Building at GIDA, Sahjanwa, Gorakhpur

* Loan is further secured by personal guarantee of Directors namely Mr. Chandra Prakash Agrawal, Mr. Santosh Kumar Agrawal, Mr. Prem Prakash Agrawal and Mr. Nitin Mahavir Prasad Kandoi.

Repayment:

Term loan is repayable in 72 equal monthly installments of Rs. 53.26 lakh(including interest) starting from 07th December 2017.

1. The above working capital loan from bank( SBI & HDFC) is secured by first pari Passu charge by hypothecation over all the current assets including stocks of raw materials, Stock in process, Finished Goods and book debts-present and future.

The loan is further secured by way of hypothecation of plant & machineries and equipment of the company alongwith consortium banking arrangement member bank (SBI)

2. The above working capital loan is further secured by the personal guarantee of Sri C. P. Agrawal, Sri P.P Agarwal, Shri S.K. Agarwal and Shri Nitin Mahavir Prasad Kandoi.

7 Segment information

7.01 Products and services from which reportable segment derives their revenues

Information reported to the Chief operating decision maker (CODM) for the purpose of resource allocation and assessment of segment performance focuses based on products and services. Accordingly, directors of the Company have chosen to organise the segment based on its product and services as follows:

- Steel

- Power

- Agro

- Real Estate

The Company’s chief operating decision maker is the Chairman & Managing Director.

Revenue ad expenses directly attributable to segment are reported under each reportable segment. All other expenses which are not allocable to segments have been disclosed as Unallocable expenses.

Assets and liabilities that are directly attributable or allocable to segments are disclosed under each reportable segment. All other assets and liabilities are disclosed as Unallocable.

The company’s financing and income taxes are managed on a company level and are not allocated to operating segment.

8 Employee Benefit plans

8.01 Defined contribution plans

Employee benefits in the form of Providend Fund is considered as defined contribution plan and the contributions to Employees providend Fund organisation established under the Employee’s Providend fund and Misc. Provision Act 1952 charges to the statement of Profit and Loss when the contribution to the respective funds are due.

8.02 Defined benefit plans Gratuity

The Company participates in the Employees’ Group Gratuity-cum-Life Assurance Scheme of SBI Life Insurance Co. Ltd., a funded defined benefit plan for qualifying employees. Gratuity is payable to all eligible employees on death or on separation / termination in terms of the provisions of the Payment of Gratuity Act, 1972 (as amended from timt to time), or as per the Company’s scheme whichever is more beneficial to the employees.

The liability for the Defined Benefit Plan is provided on the basis of a valuation, using the Projected Unit Credit Method, as at the Balance Sheet date, carried out by an independent actuary.

Assumed discount rates are used in the measurement of the present value of the obligation.

9 Capital management

The Company manages its capital to ensure that entities will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Capital structure of the Company consists of net debt (borrowings as detailed in notes [16] and [19] offset by cash and bank balances) and the total equity of the Company.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, long term-term borrowings, short-term borrowings, less cash and short-term deposits.

10 Financial risk management objectives and policies

The Company’s principal financial liabilities, other than derivatives, comprise loans and borrowings and trade and other payables. The Company’s principal financial assets include loans, trade and other receivables, and cash and short-term deposits that derive directly from its operations. The Company also holds FVTOCI investments and enter into derivative transactions. The Company is exposed to market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

The Company seeks to minimise the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives is governed by the Company’s policies approved by the board of directors, which provide written principles on foreign exchange risks, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments. The Company does not enter into or trade financial instruments including derivative financial instruments, for speculative purposes.

10.01 Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Company enters into derivative financial instruments to manage its exposure to foreign currency risk and interest rate risk.

Foreign currency risk management

The Company is exposed to currency risk on account of its borrowings, Receivables for Exports and Payables for Imports in foreign currency. The functional currency of the Company is Indian Rupee. The Company manages currency exposures within prescribed limits, through use of forward exchange contracts. Foreign exchange transactions are covered with strict limits placed on the amount of uncovered exposure, if any, at any point in time.

Exposure to currency Risk

The currency profile of financial liabilities as at Balance Sheet dates are as below:

Interest rate risk management

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of change in market interest rates. The company’s exposure to the risk of changes in market interest rates relates primarily to the company’s short-term debt obligations with floating interest rates.

Interest rate sensitivity analysis

The Company does not account for any fixed-rate financial assets or financial liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss.

10.02 Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and loans and advances.

The carrying amount of following financial assets represents the maximum credit exposure:

Trade receivables and loans and advances.

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer and the geography in which it operates. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.

The Company monitors each loans and advances given and makes any specific provision wherever required.

Based on prior experience and an assessment of the current economic environment, Management believes there is no credit risk provision required. Also Company does not have any significant concentration of credit risk.

10.03 Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

Management monitors rolling forecasts of the Company’s liquidity position on the basis of expected cash flows. This monitoring includes financial ratios and takes into account the accessibility of cash and cash equivalents.

The Company has access to funds from debt markets through loan from banks and other Debt instrument. The Company invests its surplus funds in bank fixed deposits.

Amount shown in bracket () denotes previous year figures.

11 First Time Adoption of IND AS

11.01 Transition to IND AS

The Company has adopted Indian Accounting Standards (Ind AS) as notified by the Ministry of Corporate Affairs with effect from April 01, 2017, with a transition date of April 01, 2016. These financial statements for the year ended March 31, 2018 are the first financial statements the Company has prepared under Ind AS. For all periods upto and including the year ended March 31, 2017 , the Company prepared its financial statements in accordance with the accounting standards notified under the Section 133 of the Companies Act 2013, read together with the relevant Rules thereunder (‘Previous GAAP’).

The adoption of Ind AS has been carried out in accordance with Ind AS 101, First-time Adoption of Indian Accounting Standards. Ind AS 101 requires that all Ind AS standards and interpretations that are issued and Effective for the first Ind AS financial statements be applied retrospectively and consistently for all financial years presented. Accordingly, the Company has prepared financial statements which comply with Ind AS for year ended March 31, 2018, together with the comparative information as at and for the year ended March 31, 2017 and the opening Ind AS Balance Sheet as at April 01, 2016, the date of transition to Ind AS.

In preparing these Ind AS financial statements, the Company has availed certain exemptions and exceptions in accordance with Ind AS 101, as explained below. The resulting difference between the carrying values of the assets and liabilities in the financial statements as at the transition date under Ind AS and Previous GAAP and have been recognised directly in equity (retained earnings or another appropriate category of equity). This note explains the adjustments made by the Company in restating its financial statements prepared under previous GAAP, including the Balance Sheet as at April 01, 2016 and the financial statements as at and for the year ended March 31, 2017.

11.02 Optional Exemption Availed

(i) Deemed Cost

The Company has elected to continue with the carrying value for (wriiten down value) all of its property, plant and equipment, intangible assets and investment property as recognised in the financial statements as the deemed cost at the date of transition to Ind AS, measured as per the previous GAAP

(ii) Deemed cost for investments in Associates

The Company has elected to continue with the carrying value of its investments in associates as recognised in the financial statements as at the date of transition to Ind AS. Accordingly, the Company has measured all its investments in associates at their previous GAAP carrying value.

(iii) Business Combination

Ind AS 101 provided the option to apply Ind AS 103 prospectively from the transition date or specific date prior to the transition date. The Company has elected to apply Ind AS 103 prospectively to business combination occurring after its transition date. Business combination prior to the transition date have not been restated.

11.03 Mandatory Exceptions from retrospective application

(i) Estimates

On assessment of the estimates made under the Previous GAAP financial statements, the Company has concluded that there is no necessity to revise the estimates under Ind AS, as there is no objective evidence of an error in those estimates. However, estimates that were required under Ind AS but not required under previous GAAP are made by the Company for the relevant reporting dates reflecting conditions existing as at that date.

(ii) De-recognition of financial assets and liabilities

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

(iii) Classification and measurement of financial assets

The Company has classified and measured the financial assets on the basis of the facts and circumstances that exist at the date of transition to Ind AS

12 First Time Adoption of IND AS Fair value measurements

The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimare the fair values:

Fair value of cash and short term deposits, trade and other short term receivables, trade payables, other current liabilities, working capital loan from banks approximate their carrying amounts largely due to the short term maturities of these instruments.

Financial instruments other than above are carried at amortised cost except certain assets which are carried at fair value.

The company uses the following hierarchy for determining and disclosing the fair value of finnacial instruments by valuation technique

Level -1 : Quoted prices in active markets for identical assets or liabilities

Level -2 : Other techniques for which all inputs which have a significants effects on the recorded fair value are observable

Level -3 : Techniques using inputs having significant effect on the recorded fair value that are not based on observable market data.

Sub Notes:

1 The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial results.

2 It is not practicable for the Company to estimate the timings of cash outflows, if any, in respect of the above pending resolution of the respective proceedings as it is determinable only on receipt of judgements/ decisions pending with various forums/authorities.

13 Subsequent Events

There are no significant subsequent events that would require adjustments or disclosures in the financial statements as on the balance sheet date.

14 Balances under Trade receivables, Trade Payables, Loans and Advances payable or receivable are subject to confirmation to be received from some of the parties.

15 Disclosure as per Section 22 of the Micro, Small and Medium Enterprises Development Act, 2006

The company has not received any intimation from “suppliers” regarding status under the Micro, Small and medium Enterprises Development Act 2006 and hence disclosures, if any, relating to amount unpaid as at the year end together with the interest paid/payable as required under the said act have not been furnished.

16 As per incentive scheme of State Government of Uttar Pradesh vide Government Order No. 1502/77-6-200610 tax/04 dated 1st June 2006 and which have been elaborated in Government Order No. 2941/77-6-2006-10 tax/04 dated 30th November 2006 and amended from time to time, the company is eligible for Interest free loan equivalent to the amount of VAT & CST liability for 15 years and which shall be re-payable after 15 years. The company has claimed Rs. 10828.03 lacs up to 30th June 2017 (upto previous year Rs. 10373.96 Lacs) on account of Interest Free Loan from State Government of Uttar Pradesh. Out of total claim of ‘10828.03 lacs, Rs. 9255.64 lacs has not been deposited to Commercial Tax department in accordance with an order of Hon’ble High Court of Allahabad in writ petition no. 8886/2011, and order in writ petition no. 21103 dated 16.11.2016. However, Rs. 1572.39 Lacs have already been deposited upto August, 2011.

Further as the GST act has replaced the VAT and CST w.e.f. 01.07.2017, the amount of SGST paid to the Governemnt account will be eligible for interest free loan under the scheme. company has already deposited Rs. 1180.85 lacs against SGST for the period 1st July 2017 to 31st March 2018 against the quantity produced from the old unit, which is refundable as interest free loan.

17 As per incentive scheme of State Government of Uttar Pradesh vide Government Order No. 1502/77-6-2006-10 tax/04 dated 1st June 2006 and which have been elaborated in Government Order No. 2941/77-6-2006-10 tax/04 dated 30th November 2006 and amended from time to time, the company is eligible for incentives i.e. Capital investment subsidy @ 20% of fixed capital investment, infrastructure subsidy @ 10% of total fixed capital investment and 5% additional capital subsidy being the first unit in Purvanchal region. Company has claimed for Rs. 12262.00 lacs against the capital investment made upto 31st May 2012. The incentive received of Rs. 2428.00 Lacs has been credited in fixed assets in the ratio of capital investment made. No provision has been made for the unrealized claim of Rs. 9834.00 lacs in the books.

18 As per incentive scheme of State Government of Uttar Pradesh vide Government Order No. 1502/77-6-200610 tax/04 dated 01st June 2006 and which have been elaborated in Government Order No. 2941/77-6-2006 10 tax/04 dated 30th November 2006 and amended from time to time the company is eligible for incentives including freight subsidy on Iron Ore equivalent to the freight paid to Railway and local handling expenses upto maximum of 5% of the railway freight. The total amount of freight subsidy is restrcited to 65% of the total capital investment under the scheme that comes Rs. 22775.00. Since company has already claimed Rs. 18776.84 lacs till March 2017 as such only Rs. 3998.16 lacs is available to be claimed as freight subsidy. During the year company has paid a total freight amount of Rs. 4211.71 Lacs but company has provided only Rs. 3998.16 lacs (Previous year Rs. 3223.77 lacs).This has been adjusted with freight paid on Iron Ore in Profit Loss account and shown as Advance recoverable in Balance sheet. The total amount receivable against the freight subsidy as on 31.03.2018 was Rs. 22775.00 lacs (Previous year Rs. 18776.84 Lacs).

19 During the year company has started commercial production from its new expansion project at GIDA Sahjanwa, which has been established under Industrial Development Policy 2012 of State Government of Uttar Pradesh. Under the scheme company is eligible to get refund of 80% of the SGST amount deposited in Government account. Company has commenced its commercial production of expanded capacity covered under this scheme from 01.12.2017. A total amount of Rs. 1931.61 Lacs has been paid as SGST from December 2017 to March 2018. Out of this amount Rs. 1175.85 Lacs is related to quantity produced from old unit and Rs. 755.76 Lacs is related to the quantity produced from expansion. As per scheme company is entitled for refund of 80% of the amount deposited as SGST which comes to Rs. 604.61 Lacs for this period.

20 By its order dated January 08, 2018, the Office of Regional Director (ER), Ministry of Corporate Affairs has sanctioned and approved the Scheme of Amalgamation of Shikharji Rolling Mills Private Limited, Shikharji Steel & Agro Products Private Limited, Bhavika Steel Agencies Private Limited, Shrinu Agro Private Limited, Shrinu Steel Works Private Limited, Gyanika Flour Mills Private Limited, Satlaj Ispat Private Limited and Satlaj Flour Mills Private Limited with Gallantt Ispat Limited. Pursuant to the Scheme sanctioned as above, Company has acquired four Wholly Owned Subsidiaries viz, M/s. Antarmukh Steel Manufacturer Private Limited, Bhavika Smeltors and Food Products Private Limited, Shrinu Rolls and Milling Private Limited AND Satlaj Rolls and Milling Private Limited. At their meeting held on January 24, 2018, Board of Directors of the Company has approved Scheme of Amalgamation of these four Subsidiary Companies with the Company. Company has one Associate Gallantt Metal Limited in which Company holds more than twenty percent shares.

21 In the Quarter ended on December 31, 2017 Company had made provision for exceptional income of Rs. 1,032.69 Lacs arising out of and based on the Order of Honorable Supreme Court in matter of electricity duty rebate dispute pending with Uttar Pradesh Power Corporation Limited (hereinafter referred to as the “UPPCL”). As per the Order of Honorable Supreme Court, Company is eligible to avail electricity duty rebate which comes at Rs. 1,032.69 Lacs. In compliance with order of the Hon’ble Supreme Court, Department of Energy, Govt. of UP has issued a notification dated 05.02.2018 which specifies that amount of electricity duty rebate for prior period shall be adjusted against electricity duty only after 21.01.2020. Since, the company expands the capacity of Power Plants and hence, the Company will not require purchasing electricity from Government bodies and hence, the amount of electricity duty cannot be adjusted against the electricity rebate. Therefore, the amount of Electricity duty rebate has been reversed in books which were provided as exceptional income.

22 Figures for the previous years have been regrouped / restated wherever necessary to conform to current year’s presentation.