The fair value of the property, plant and equipment (PPE) is determined on the basis of valuation carried out at the reporting date by independent valuer. The fair value measurement for PPE has been categorized as Level 3 based on the valuation techniques used and inputs applied. The main inputs considered by the valuer are government rates, property location, market research, market trend, contracted rentals, terminal yields, discount rates and comparable values, as appropriate. In estimating the fair value of the PPE, the highest and best use of the properties is their current use.
Impairment of Assets (Ind AS 36)
The Company is having following two cash generated Units:
Pellet Plant Unit: The Pellet Plant Unit is continuously in operation and resulted in positive cash flow.
Pig Iron Plant Unit: Due to un-economic price of Pig Iron, Pig Iron Plant / Blast Furnace Unit (BFU) could not be operated during the year. After impairment test based on the net selling price as assessed by Approved Valuer, the recoverable amount in each class of assets in BFU are found to be more than the respective carrying amount. Hence, there is no impairment loss to be recognized during the year.
a) Terms and rights attached to Equity Shares - The Company has only one class of equity shares having a par value of H 10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholder in ensuing Annual General Meeting except in case of interim dividend. In the event of liquidation of the Company, the shareholders will be eligible to receive remaining assets of the Company, after distribution of all preferential amounts, in proportion to their shareholding.
a) General reserve:
The general reserve is a free reserve which is used from time to time to transfer profits from retained earnings for appropriation purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the general reserve will not be reclassified subsequently to statement of profit and loss.
b) Capital redemption reserve
As per Companies Act, 2013, capital redemption reserve is created when company purchases its own shares out of free reserves or securities premium. A sum equal to the nominal value of the shares so purchased is transferred to capital redemption reserve. The reserve is utilized in accordance with the provisions of Section 69 of the Companies Act, 2013.
c) Retained Earnings:
This reserve represents undistributed accumulated earnings of the Company as on balance sheet date.
Term loan availed from Canara bank for setting of non recovery coke oven and ductile iron spun pipe at BFU Mangalore with exclusive charge hypothecation on project assets currently, structure assets, civil work, structure work and plant & equipment's, financed out of the term loan. Applicable rate of interest is 3 months MCLR with annual reset. Loan tenure is 12 years (door to door tenure) including 4 years moratorium period, repayable in 32 quarterly instalments and intertest to be served as and when due. The loan has been utilized for the purpose for which it was availed.
1. Sale of Products are generally against advance payment by customers or are against letters of credit/ cash against documents and proceeds are realised within one month period. Accordingly, the amount of consideration does not contain any significant financing component.
2. Sale of Services are rendered to Departments of Central Government/State Government / Central PSUs/ State PSUs/ Corporates with short term credit period of one- two months and does not contain any significant financing component.
3. As per the terms of the contract with its customers, the Company has a right to receive consideration from its customers for all completed performance obligations. Accordingly, the Company has availed the practical expedient available under paragraph 121 of Ind AS 115 and dispensed with the additional disclosures with respect to performance obligations that remained unsatisfied (or partially unsatisfied) at the balance sheet date. Further, since the terms of the contracts directly identify the transaction price for each of the completed performance obligations there are no elements of transaction price which have not been included in the revenue recognized in the financial statements. Further, there is no material difference between the contract price and the revenue from contract with customers.
28.1.2 Contingent liabilities and capital commitments A. Contingent liabilities
|
1.1 Claims against the company not acknowledged as Debt
|
|
(H in Lakhs)
|
|
S.
No
|
Particulars
|
As on 31st March, 2023
|
As on 31st March, 2022
|
|
A
|
Disputed claims under Excise Duty, Service Tax and Income Tax
|
|
|
|
(i)
|
Excise Duty
(Demand for Special additional duty on DTA sales of Pellet for the FY 201011 & 2011-12, order passed by Hon'ble CESTAT on 17th Feb, 2022 upholding the benefit of Notification No 23/2003-CE dated 31.03.2003 with condition to produce proof of payment of VAT. The Company has filed a rectification of mistake (ROM) application and the same has been heard on 19th May, 2023 without rectification except the correction of clerical error. On receipt of the certified order copy the Company will prefer the further appeal to Hon'ble High Court of Karnataka.)
|
5,848.31
|
5,848.31
|
|
(ii)
|
Service Tax
Service Tax demand on dispatch money for the FY 2012-13 & 2013-14, the department has filed appeal before CESTAT against the order of the Commissioner (Appeal).
|
60.77
|
60.77
|
|
(iii)
|
Income Tax
The Company has filed appeal against Income Tax assessment order for Assessment Year 2018-19 in CIT (A).
Note- Disputed Liability for the AY 2013-14 and 2014-15 for H 633.28 Lakhs has been withdrawn during the year as final favorable order has been passed by CIT(A). As per the order, the CIT(A) has directed the Assessing Officer for verification and to pass revised order.
|
4,973.66
|
5,606.94
|
|
B
|
Claims by parties under Dispute/Arbitration/ Court Proceedings
|
|
|
|
(i)
|
Demand raised by Forest Department, Govt of Karnataka for raising height of Lakya dam, Kudremukh, arrear lease rent, permit & supervision charges and afforestation charges & penalty.
(An amount of H 1675.01 lakhs reduced from the current year and previous year as equal amount of provision exists in the books)
|
16,377.36
|
16,377.36
|
|
(ii)
|
Distance based charges claimed by East Coast Railways and penalty thereon (refer Note no. 28.3.1)
|
34,704.58
|
34,704.58
|
|
(iii)
|
Forest Development Tax (NMDC)*
|
11,057.62
|
11,057.62
|
|
(iv)
|
M/s Haryana Khanak project- (HSIDC)
(Bank Guarantee submitted towards security deposit, invoked by M/s HSIDC, the Company filed appeal before the Hon'ble Civil Court, Panchkula, Haryana and favorable order has been passed. M/s HSIDC filed appeal against order of Civil Court Panchkula, Haryana)
|
1,500.00
|
1,500.00
|
|
(v)
|
Others
(Includes claims by employees, stock exchanges, contractors etc)
Note: Additional disputed claims raised during the years has been included.
|
1,340.34
|
414.06
|
|
Total
|
75,862.64
|
75,569.64
|
|
* Includes H 11,057.62 Lakhs (Previous year H 11,057.62 Lakhs) towards Forest Development Tax (FDT) at the rate of 12% of basic price of iron ore. The supplier
|
NMDC Limited has filed a writ petition before the Hon'ble High Court of Karnataka challenging the levy of the same. The case was disposed of vide order dated 3rd December, 2015 directing the Govt. of Karnataka to refund the FDT within three months. However, the Govt. of Karnataka has filed Special Leave Petition before the Hon'ble Supreme Court of India. The matter was listed on 9th August, 2019 and the Hon'ble Supreme court directed to list the appeal for hearing.
Further, out of H 11,057.62 Lakhs, an amount of H 2,617.43 Lakhs (Previous year H 2,617.43 Lakhs) (equivalent to 25% of FDT) collected earlier by NMDC as per the interim order of Hon'ble Court is shown under "Other Non-Current Assets" in Books of Accounts and the Bank Guarantee equivalent to H 2,734.87 Lakhs (Previous year H 2,734.87 Lakhs) furnished to NMDC in this regard has not been included under the contingent liabilities against Bills discounted/Letter of Credits/ Bank guarantees.
|
1.2 Contingent liabilities against Bills discounted/Letter of Credits/ Bank guarantees
|
(H in Lakhs)
|
|
Particulars
|
As on 31st March, 2023
|
As on 31st March, 2022
|
|
Contingent liabilities against Bills discounted/Letter of Credits/ Bank guarantees
|
2,813.70
|
1,713.91
|
|
B. Capital commitments.
|
|
(H in Lakhs)
|
|
Particulars
|
As on 31st March, 2023
|
As on 31st March, 2022
|
|
Estimated amount of the contracts to be executed on capital account and not provided for (net of advances)
|
20,710.18
|
23,534.31
|
(i) The Company is exempted under Section 17 of the EPF & MP Act, 1952 and the PF corpus is managed by a Trust. The plan assets of the Trust are managed by Board of Trustees.
(ii) Discount rate is based on the prevailing market yield of Indian Government securities as at the balance sheet date for the estimated term of the obligation.
(iii) The salary escalation rate is arrived taking into consideration the seniority in the promotion and other relevant factors, such as demand supply in employment market.
b) Gratuity:
Liability with regard to gratuity benefits payable in future is determined by actuarial valuation at the end of the year using the projected unit method. Net provision towards Gratuity fund for the year is H 329.72 Lakhs (Previous year H 366.82 Lakhs (net)). The Company operates a gratuity plan administered by LIC under Group Gratuity Life Assurance Scheme of LIC of India. Every employee is entitled to a benefit equivalent to fifteen days salary last drawn for each completed year or part thereof in excess of 6 months of service subject to a maximum of H 20 Lakhs as per the Payment of Gratuity Act, 1972, as adopted by the Company through resolution in 257th meeting of the Board held on 26th March 2019. The same is payable at the time of separation from the company or retirement, whichever is earlier. Net Assets recognized in Balance Sheet is H 81.02 Lakhs under Note no 7 (Previous year Net Liability of H 67.81 Lakhs).
i. The plan assets of the Company are managed by Life Insurance Corporation of India through a trust managed by the company in terms of an insurance policy taken to fund obligations of the Company with respect to its gratuity plan. The categories of plan assets as a percentage of total plan assets is based on information provided by Life Insurance Corporation of India. Information on categories of plan assets as at 31 March, 2023 and 31 March, 2022 has not been provided by Life Insurance Corporation of India.
ii. The plan assets have been primarily invested in insurer managed funds. The Company contributes all ascertained liabilities towards gratuity to the Fund. The Gratuity plan provides a lump sum payment to the vested employees at retirement, death, incapacitation or termination of employment based on the respective employees salary and tenure of the employment with the company.
iii. Expected Contribution in respect of Gratuity for next year will be H 20 Lakhs (For the year ended March 31, 2022 H 18.53 Lakhs).
iv. Discount rate is based on the prevailing market yield of Indian Government securities as at the balance sheet date for the estimated term of the obligation.
v. The salary escalation rate is arrived taking into consideration the seniority in the promotion and other relevant factors, such as demand supply in employment market.
28.2.5 Leases (Ind AS 116)
As Lessee
The Company's significant leasing arrangements are in respect of operating leases for land and buildings. These arrangements generally range between 3 years and 30 years, except for certain land leases where the lease term ranges up to 99 years. In case of land taken on lease from New Mangalore port trust, termination option is exercisable only by the lessor. Hence, the management has considered the full term of the contract as the lease term, since the Company is liable to pay the lease rental as they do not have the right to terminate the contract.
The Company holds nine tracts of Land totaling 386,691 Sq. Mtrs. on long term lease from New Mangalore Port Trust (MNPT). Lease of the following four tracts of land, pending for registration of lease deeds, are considered as "Lease continuing" in view of company's request for extension of lease with NMPT and the same being under their consideration and continuing in paying annual lease rent and the same is duly acknowledged and accepted by NMPT:
a) 213,783 Sq Mtrs of land taken for Port facilities
b) 9,120 Sq Mtrs of land taken for storage of iron ore fines
c) 27,008 Sq Mtrs of land taken for pellet storage yard and
d) 21,270 Sq Mtrs of land taken for Captive Power Plant
The Company has submitted Security Deposit of H 2,104.00 Lakhs during Jan, 2023 and May, 2023 in the form of Bank Guarantee of for Sl no (a), (c) and (d) for execution of the Lease Deed.
There are no sale and lease back transactions.
The Company does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they become due.
Rental expenses recorded for short- term leases were H 110.88 Lakhs for the year ended 31st March, 2023 (Previous year H 147.94 Lakhs).
As lessor
Rental income on assets given on operating leases was H 182.36 Lakhs for the year ended 31st March, 2023 (Previous year H 164.64 Lakhs).
The Company has leased out its land under operating lease for periods ranging up to 7 years. Lease payments are structured with periodic escalations consistent with the prevailing market conditions. There are no variable lease payments to be received.
28.3 Others:
28.3.1 With the suspension of mining operations at Kudremukh mine site, the Company is procuring the iron ore fines from NMDC mines in Chhattisgarh state and transporting to its plant at Mangalore by rail cum sea route and from open market.
Railways vide letter No. H/C.474 Classification/11 dated 21st October, 2011 raised an issue regarding the applicability of distance-based charge (DBC) over and above normal freight on Iron ore transported through railway network for manufacture of pellets and their subsequent export. Both South Western Railway (SWR) and East Coast Railway (ECR) have raised demand of H 14,463.93 Lakhs and H 10,361.38 Lakhs respectively towards distance-based charge (DBC) over and above normal freight on Iron ore transported.
As per the Company's view, DBC should attract only for iron ore fines and lumps which are directly exported and not on the Iron Ore so moved and utilized in the steel plants for manufacture of finished product and exported thereafter. The same is also not applicable to Pig iron and Sponge Iron Industry.
Accordingly, against the demand of H 14,463.93 Lakhs of SWR, KIOCL had filed writ petition before the Hon'ble High Court of Karnataka. The writ petition was dismissed and KIOCL filed writ appeal challenging the dismissal of the writ petition. The Hon'ble High Court has granted interim order staying DBC, subject to the condition that 50% of the demand excluding penalty is to be deposited. Thus, H 8,325.16 Lakhs was paid and for the balance amount of H 6,138.77 Lakhs provision has been made in the books in the FY 2013-14.
Similarly, against the demand of H 10,361.38 Lakhs for DBC and H 31,084.14 Lakhs towards penalty, of ECR which after considering the freight already paid, DBC worked out to be H 6,740.94 Lakhs. KIOCL has filed WRIT petition before High Court of Orissa and High Court granted stay subject to deposit of 50% amount excluding the penalty. Against the worked-out liability, the Company paid H 5,188.86 Lakhs and the balance amount of H 1,552.08 Lakhs provision has been made in the books FY 2013-14. The balance demand toward DBC and penalty of H 3,4704.58 Lakhs has been included in contingent liabilities.
Both the cases are not listed so far. Railway has filed transfer petition before Hon'ble Supreme Court and both the cases are stayed by Supreme Court. The transfer petition is still pending before the Hon'ble Supreme Court.
28.3.2 During the FY 2008-09, the Company has claimed refund of congestion surcharge amounting to H 6,877.86 Lakh from South Western Railway (SWR) in respect of 573 rakes moved during 1st April, 2007 to 21st May, 2008 through the Company's private Railway Siding at Panambur, Mangalore which was commissioned in January 2006. SWR refunded only H 2,725.39 Lakh till FY 2013-14 which includes H 206.70 Lakh adjusted by SWR towards DBC. During the FY 2014-15, the Company had approached Railway Claims Tribunal (RCT), Bangalore for refund of the balance amount of H 4,152.70 Lakh with interest. The Tribunal allowed the claim by its order dated 7th December, 2018 and directed SWR to compute and pay the amount together with interest at 6% per annum and in case SWR fails to comply with the order, interest at 9% per annum is payable from 1st April, 2019. SWR has filed petition against the order of Tribunal in Hon'ble High Court of Karnataka on 11th April, 2019 vide case no MFA/3165/2019. KIOCL filed cross objection in the appeal and the case is still pending. The Company has not recognized the above as income in line with the Company's significant accounting policy No.1.5, pending realization.
The Konkan Railway offered concessional freight to the Company for movement of rakes through Konkan route instead of shorter route i.e., Hassan-Mangaluru, which has been accepted by the Company and 110 rakes were booked for the Konkan route. Subsequently, Konkan Railway allowed concessional freight for 92 rakes only and balance 18 rakes were moved through shorter routes i.e., Hassan-Mangaluru. Hence, during the FY 200809 the Company claimed refund of H 254.45 Lakhs from SWR towards differential freight. However, SWR has not refunded the amount. Hence, during the FY 2014-15 the Company approached RCT, Bengaluru and has claimed H 254.45 Lakhs with interest. The Tribunal dismissed the claim and the Company filed appeal before Hon'ble High Court of Karnataka during the FY 2018-19 and the same is pending.
East Coast Railway have collected 100% congestion surcharge instead of 30% for the rakes moved during the period from 15th April, 2008 to 21st May, 2008. During the FY 2008-09, the Company requested ECR for refunding H 436.83 Lakhs being 70% excess congestion surcharge collected in respect of 26 rakes. As ECR failed to refund the amount, the Company has filed a petition before the RCT, Bhubaneswar during the FY 2014-15 for refund of H 436.83 Lakhs with interest. The Tribunal dismissed the claim and the Company filed appeal before Hon'ble High Court of Odisha during the FY 2018-19 and the same is pending.
28.3.3. In pursuance of the directive of the Hon'ble Supreme Court, mining activities at Kudremukh were stopped with effect from 1st January 2006. Indian Bureau of Mines (IBM) has approved final mine closure plan (FMCP) of Kudremukh Iron Ore Mine and the same was communicated vide letter no. MS/CMG/Fe-38-52 dated 6th May, 2005. At the time of closure of the mine, the Company filed a petition with prayers for direction, inter-alia, to permit utilization of 54.01 hectares of land required for the purpose of safety and slope stability of the mine.
The Hon'ble Supreme Court, in its judgment (December 2006), directed IIT Delhi to issue global tender for, inter-alia, re-analyzing the stability of slopes, drawing up of mine closure plan, implementation of the above plan and drawing up of detailed terms for the work to be done, consistent with basic paradigm of "no or minimal disturbance to un-broken area".
The expenditure for this purpose was to be met out of H 1,900 Lakhs paid by the company before closure of mining i.e. 31st December, 2005, which is presently lying with the adhoc Compensatory Afforestation Fund Management and Planning Authority (CAMPA).
The Hon'ble Supreme Court has also directed that if any funds are required in excess of H 1,900 Lakhs, the agency or the designated officer shall move to the Court for necessary direction.
Ministry of Mines Government of India, vide letter dated 7th February, 2014, nominated the Regional Controller of Mines, IBM Bangalore as the 'Designated Officer' to take possession of Kudremukh Iron Ore Mines. Accordingly, the Company has handed over the possession of the Kudremukh Iron Ore Mines on 3rd April, 2014 to the Regional Controller of Mines, IBM Bangalore.
Subsequently, officials of IBM Bangalore and IIT, Delhi inspected the mine site on 20th May, 2014, in which IIT Delhi opined that, keeping in view of the environment and safety concerns, the residual task of mine closure is relatively minor as compared to what was originally envisaged. Hence, the amount of H 1,900 Lakhs paid by the company to Central Empowered Committee (CEC) already lying with the CAMPA would be utilized for restoration of Kudremukh iron ore mine. In addition to above, the Company has also made provision to the extent of H 600 Lakhs during the FY 2003-04 to 2005-06.
28.3.4. Total mining lease areas of 4,605.02 hectares of land at Kudremukh include an extent of 1,220.03 hectares of government revenue land, apart from forest land as well as the Company's free hold land. Regional Controller of Mines IBM, the designated officer has taken over the entire mining lease area on 3rd April, 2014 for carrying out the mine closure activities in compliance with Hon'ble Supreme Court orders dated 15th December, 2006. However, the infrastructure and buildings located on Revenue land and other lands being the property of the Company shall continue to remain in their physical possession till the cessation of mine closure activities. Till the year 2013-14, the land records of revenue land were in the name of the Company. Meanwhile Government of Karnataka has changed the revenue records removing the Company's name. Hence the Company was constrained to file a suit before Civil Judge Court, Mudigere for an injunction against Government and others, restraining them from dispossessing the Company from the said revenue land. The court heard the arguments and passed an interim order on 5th November, 2013 restraining the defendants or anybody under them from dispossessing the Company from the schedule property (i.e. Revenue land) in any manner till the disposal of the suit or till the modalities have been worked out and implemented as directed by the Hon'ble Supreme court. The suit was dismissed on 20th November, 2017.
Taking into consideration of taking over the entire mining lease area of 4,605.02 hectors comprising forest land, revenue land, Company's own land and other lands by the designated officer IBM for carrying out the mine closure activities in the mine in compliance with the Hon'ble Courts direction, although their physical possession held with the Company, the Company depreciated all its township assets in full during the year 2014-15 as a prudent measure.
28.3.5. Govt. of Karnataka vide its Gazette notification dated 23.01.2017 reserved an area of 470.40 ha in Devadari Range in Bellary District for iron ore and manganese ore mining lease in favour of KIOCL under the provisions of Section 17A (2) of Mines and Minerals (Development and Regulation) Act, 1957.
KIOCL obtained statutory clearances viz Mining Plan approval by Indian Bureau of Mines, Environment Clearance by MoEF&CC, GoI, Consent for Establishment by KSPCB and Forest Clearance by MoEF&CC, GoI. Company paid H 174.14 Crores on 29.10.2021 towards NPV, CA charges and H 20.21 Crores on 23.09.2022 to Karnataka CAMPA fund towards differential CA charges etc as per the Stage I FC condition.
KIOCL executed mining lease deed of Devadari Iron Ore Mine with Director, Mines and Geology, Govt. of Karnataka on 02.01.2023 for 388 ha area for a period of 50 years for Iron Ore and Manganese Ore (ML No. 020 of 2023). KIOCL has registered the Mining Lease Deed of Devadari Iron Ore Mine on 18.01.2023 at the Office of Sub-Registrar, Sandur Taluk, Ballari Dist and paid H 329.18 Crores towards stamp duty, cess and registration charges. Govt. of Karnataka issued Government Order on 11.04.2023 for diversion of forest land for Devadari Iron Ore Mine.
KIOCL will enter into an agreement with Dy. Conservator of Forests, Ballari will for handing over the forest land. On handing over the forest land to KIOCL by forest dept., KIOCL will undertake exploration, mine development activities development of internal roads, preparation/ development of approach roads to waste dump areas, development of benches, establishment of crushing & screening units, establishment of weigh bridge, development of approach road to railway siding for evacuation of iron ore etc.
KIOCL appointed M/s MECON Limited for providing consultancy services for Devadari Iron Ore Mine. KIOCL has planned to produce the iron ore by mid of April 2024 from Devadari Iron Ore Mine.
28.3.6. Since the closure of mining activities, consequent upon the judgment of Hon'ble Supreme Court w.e.f. 1st January, 2006, Mangalore Pellet Plant and also Blast Furnace Unit continue to draw the required water from Lakya Dam at Kudremukh. Hence, dam maintenance activity from the safety point of view and maintenance of water drawal system which include electrical and pipeline maintenance are
still continuing. Therefore, Kudremukh installation is a working unit as on date as an integral part of Mangalore unit.
28.3.7. In order to utilize the Blast Furnace Unit, the company has made a project proposal for Backward and Forward Integration of the Unit involving capital expenditure of H 836.90 Crore and the same has been approved by the Board in its 255th meeting held on 13th November 2018. The same has been approved by Public Investment Bureau (PIB). Environment clearance has been granted by MOEF&CC, GOI on 27th February, 2020. M/s MECON has been appointed as EPCM contractor for the project.
The installation & commissioning of Coke oven under backward integration project has been entrusted to M/s Tuaman Engineering Limited, Kolkata as a EPC contractor on lumpsum turnkey basis with technology provided by M/s CIMFR, GoI, Dhanbad. The construction works of coke oven are under progress and scheduled to be commissioned by 31.03.2024 as against the original scheduled date of commissioning by 21.05.2023.
The contracts for the balance packages under backward & forward viz., Ductile Iron Spun Pipe plant, Co-Gen Power Plant, Upgradation of Blast furnace, Pulverized Coal Injection system, Oxygen plant and Nitrogen plant could not be concluded due to high cost and change in public procurement policy. Hence, further process of re-tendering is kept on hold. The Joint Venture (JV) option is being explored for setting up of facilities for value added products in Blast Furnace Unit. Some of the prospective JV partners have responded to KIOCL's Intention of Interest (IOI) and are under discussion.
During the year the Company has incurred H 16.84 Lakhs (Previous year H 10.87 Lakhs) towards Excavation and loading of 3,510.47 MT (Previous year 1,215.96 MT) of auxiliary material of Pig Iron at BFU. The said materials of 4,085.47 MT worth H 470.91 Lakhs were sold during the year (Previous year 544.96 MT worth H 114.60 Lakhs). As at the end of the year, Company was holding a physical stock of 780 MT (Opening 1,355 MT plus excavated 3,510.47 MT less 4,085.47 MT sold) of the same (Previous year 1355 MT). As the cost of production of the same had been accounted for in earlier years, the same is valued at nil cost as at the end of the year, although the market value of the same is H 89.91 Lakhs (Previous year H 284.94 Lakhs) as per last sale
price of similar product. As a prudent accounting measure, no value has been assigned to the stock in the Books of Accounts.
28.3.8. (a) Expenses incurred towards generation of
power being a significant cost of production have been included under the primary heads of account.
(b) Expenses incurred towards Stores, Spares, Consumables and Additives being a significant cost of production have been included under the primary heads of account.
28.3.9. Financial Risk Management
The Company's business activities expose it to a variety of financial risks, namely liquidity risk, market risk, credit risk and currency risk. The Company's senior management has overall responsibility for the establishment and oversight of the Company's risk management framework. The Company has constituted a Risk Management Committee, which is responsible for developing and monitoring the Company's risk management policies. The key financial risks and mitigating
actions are also placed before the Risk Management Committee / Audit Committee of the Company. The Company's risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits, to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company's activities.
The Risk Management Committee of the Company is supported by the Finance team and experts of respective business divisions that provides assurance that the Company's financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company's policies and risk objectives. The activities are designed to:
• Protect the Company's financial results and position from financial risks.
• Maintain market risks within acceptable parameters, while optimizing returns
• Protect the Company's financial investments, while maximizing returns.
The investment committee is responsible for maximizing the return on Company's internally generated funds.
I. Management of Liquidity Risk
Liquidity risk is the risk that the Company faces in meeting its obligations associated with its financial liabilities. The Company's approach to managing liquidity is to ensure that it has sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions. A material and sustained shortfall in our cash flow could undermine the Company's credit rating and impair investor confidence. The following table shows the maturity analysis of the Company's financial liabilities based on contractually agreed undiscounted cash flows as at the Balance Sheet date:
II. Management of Market Risk
Market risks comprises of Price risk & Interest rate risk. The Company does not designate any fixed rate financial assets as fair value through Profit and Loss nor at fair value through OCI. Therefore, Company is not exposed to any interest rate risks. Similarly, the Company does not have any financial instrument which is exposed to change in price.
III. Management of Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to customers and other receivables. The Company applies prudent credit acceptance policies, performs ongoing credit portfolio monitoring as well as manages the collection of receivables in order to minimize the credit risk exposure.
The maximum exposure to credit risk for each class of financial instruments is the carrying amount of that class of financial instruments presented in the notes to the Financial Statements. The Company's major classes of financial assets are cash and cash equivalents, term deposits and trade receivables. For banks and financial institutions, only high rated banks / institutions are accepted.
Trade Receivables
Concentrations of credit risk with respect to trade receivables are limited, since the Company's most of the sales (more than 95%) are secured against Letter of Credit and/or Bank Guarantee. Accordingly, based expected credit loss (ECL) experience, the Company has grouped the trade receivable into secured and unsecured.
The Company has applied the simplified approach for calculating ECL for both secured and unsecured trade receivables. During the year ECL assessed for secured and unsecured trade receivables are Nil and H 80 Lakhs respectively (Previous year Nil and H 75 Lakhs) and provision made in the books is included in Note no 9.1.
The carrying value of the financial assets represents the maximum credit exposure. The Company's maximum exposure to credit risk is H 35,422.40 Lakhs and H 29,186.18 Lakhs as at 31 March 2023 and 31 March 2022 respectively.
IV. Foreign Currency Risk
The Company being an EOU, is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar (USD), Euro (EUR), and Japanese Yen (JPY). Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities denominated in a currency that is not the Company's functional currency (H). The currency risk of the said underlying asset is managed by entering into foreign currency forward contracts (only on need basis).
28.3.10 Capital Management
The Company considers the following components of its Balance Sheet to be managed capital:
Total equity as shown in the Balance Sheet includes Retained Earnings and Share Capital. The Company aim to manage its capital efficiently so as to safeguard its ability to continue as a going concern and to optimize returns to our shareholders. The capital structure of the Company is based on management's judgement of the appropriate balance of key elements in order to meet its strategic and day-to-day needs. The Company considers the amount of capital in proportion to risk and manages the capital structure in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.
The Company's policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain future development and growth of its business. The Company takes appropriate steps in order to maintain, or if necessary, adjust, its capital structure. Company is not subject to financial covenants in any of its significant financing agreements.
(ii) Fair Value Hierarchy
The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and consists of the following three levels:
Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 — Inputs are other than quoted prices included within 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 are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
Valuation Process
Forward contracts - Future cash flows are estimated based on forward exchange rates (from observable forward exchange rates at the end of the reporting period) and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties.
Trade receivables, cash and cash equivalents, other bank balances, loans, other financial assets, current borrowings, trade payables and other current financial liabilities: fair values approximate their carrying amounts largely due to the short-term maturities of these instruments.
For all other financial instruments, the carrying amount is either the fair value, or approximates the fair value.
28.3.12Derivative financial instruments
The Company uses derivative instruments as part of its management of exposure to fluctuations in foreign currency exchange rates. The Company does not acquire or issue derivative financial instruments for trading or speculative purposes. The derivative transactions are normally in the form of forward contracts, and these are subject to the Company guidelines and policies.
The fair values of all derivatives are separately recorded in the balance sheet within current and non-current assets and liabilities.
The use of derivatives can give rise to credit and market risk. The Company tries to control credit risk as far as possible by only entering into contracts with reputable banks and financial institutions. The use of derivative instruments is subject to limits,
authorities and regular monitoring by appropriate levels of management. The limits, authorities and monitoring systems are periodically reviewed by management and the Board.
The market risk on derivatives is mitigated by changes in the valuation of the underlying assets, liabilities or transactions, as derivatives are used only for risk management purposes.
Note: Previous year figures are in bracket.
The total H 5,549.00 Lakhs (Previous year H 5,557.15 Lakhs) consists of H 242.95 Lakhs (Previous year H 1,234.98 Lakhs) and H 5,305.62 Lakhs (Previous year H 4,322.17 Lakhs) towards LC and BG respectively.
In addition to above, value of matching Forward Cover outstanding with Banks is H 33,156.88 Lakhs out of which H 11,358.26 Lakhs booked with ICICI Bank and H 21798.62 Lakhs booked with Indusind Bank (Previous year H 27,843.88 Lakhs out of which H 9,927.45 Lakhs booked with ICICI Bank and H 17,916.43 Lakhs with Yes Bank).
1. Previous year figures are in bracket.
2. The Company utilize the secured overdraft limit (with lien on fixed deposits) during the year to meet its short-term working capital requirements.
28.3.15. During the current year, Company has declared final dividend @ H 0.79 per share for the Financial Year 2021-22 (Previous year H 1.64 per Shares for the Financial Year 2020-21) and paid H 4801.23 Lakhs (Previous year H 9,967.12 Lakhs).
Further, the Company has not declared any interim dividend for the financial year 2022-23 (Previous year H 0.98 per Shares for the financial year 2021-22), paid an amount Nil (Previous year 5,955.96 Lakhs).
Proposed Dividend:
The Company has approach DIPAM, Ministry of Finance through Ministry of Steel for seeking exemption from 'Payment of Dividend' for the Financial Year 2022-23 in line with the O.M dated 27th May 2016. Ministry of Steel vide its Office Memorandum dated 03-05-2023 recommended DIPAM to exempt KIOCL from payment of Dividend for FY 202223. Accordingly, no dividend has been proposed for the current year (Previous year total dividend H 1.77 per Shares including interim and final dividend.)
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