Corporate Information

Jindal Drilling & Industries Limited (JDIL) is a company limited by shares, incorporated on 17th October; 1983 under the Companies Act,l956 and has its registered office at Raigad (Maharashtra) and head office at Delhi. JDILs shares are listed on National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). JDIL is engaged in providing services to entities involved in exploration of Oil & Gas.

Note 1: Estimates

The presentations of financial statements is in conformity with the generally accepted accounting principles which requires estimates and assumptions to be made that affect the reportable amount of assets and liabilities on the date of financial statements and the reportable amount of revenue and expenses during the reporting period. Differences between the actual results and estimates are recognised in the year in which the results are known / materialized.

* Non-current investments are recognised initially at carrying value while short term investments except investments in quoted equity share are recognised initially at fair value through FVTPL .

* Short term investments in quoted equity shares are recognised at fair value through FVOCI.

* Religare credit investment trust has been classified as current investment from non-current investments in current year

Terms and rights attached to equity shares

Equity shares have a par value of INR 5. They entitle the holder to participate in dividends, and to share in the proceeds of winding up of the company in proportion to the number of amounts paid on the shares held. Every holder of equity shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

Note 2: Property, plant & equipment

The company adopted at initial and subsequent recognition of all of its property, plant and equipment at deemed cost method. Refer note 1(b) for depreciation method used, depreciation rate and useful life of PPE. Refer note 3 for gross carrying value, accumulated depreciation value, additions, deletions, depreciation for the period and other changes in PPE.

Property Plant and Equipment are pledged/ hypothecated as collateral/security against the borrowings of the company

Contractual obligations

The company is under obligation for major repair and maintenance of investment property, if any required. In ordinary course of business, all day to day repair and maintenance shall be borne by the tenant. Further the tenant is not permitted to carry out any alteration, construction or development of investment property.

Leasing Arrangement

The properties are leased to tenants under long-term and short term operating leases with rental payable monthly All the lease arrangements are cancellable in nature.

Estimation of fair value

The company is encouraged but not required to measure the fair value on the basis of a valuation done by an independent valuer The market for comparable properties is inactive and alternative measurements of fair value based on discounted cash flow projections are not available. Hence the investment properties fair value taken at its cost of acquisition as per management estimation.

Note 3: Other Intangible assets

Refer to Note 1(c) for useful lives, method of amortisation used. Refer to Note 4 for Gross carrying value, accumulated amortisation and reconciliation.

Note:

a) LC / Bank Guarantee issued by the banks are provided as contingent liability against the contractual / legal performance of the company towards services being rendered to the customer It is not predictable for the company to estimate the timings of cash outflows in respect of above as no event occurred in the history of the company.

b) Corporate Guarantee issued by the company is provided as contingent liability against the contractual / legal performance of the Discovery Drilling Pte. Ltd. JV Company towards financial obligation to IndusInd Bank. It is not predictable for the company to estimate the timings of cash outflows in respect of above as no event occurred in the history of the company

c) In the matter of custom demand, an appeal filed by the company and the same is pending at Hon’ble Mumbai Court. The company deposited security amount of Rs. 60 Lakhs against demand with the authority. It is not predictable for the company to estimate the timings of cash outflows in respect of above as it is determinable only on receipt of judgement / decisions pending with various forums / authorities.

d) From the assessment year 2008-09 to 2013-14, are pending before ITAT and for assessment year 2014-15 appeal is pending before CIT (Appeals). It is not predictable for the company to estimate the timings of cash outflows in respect of above as it is determinable only on receipt of judgement / decisions pending with various forums / authorities. The year wise demands details are as under;

Note 4: Employee Benefits

As per As per Indian Accounting Standard 19 “Employee benefits”, the disclosures as defined are given below: Defined Contribution Plans

Contribution to Defined Contribution Plans, recognised as expense for the year is as under:

Defined Benefit Plans

The Company pays gratuity to the employees whoever has completed five years of service with the Company at the time of resignation/superannuation. The gratuity is paid @ 15 days salary for every completed year of service as per the Payment of Gratuity Act 1972. The gratuity liability amount is contributed to the approved scheme of LIC formed exclusively for gratuity payment to the employees. The gratuity fund has been approved by respective IT authorities.

Valuations are based on certain assumptions, which are dynamic in nature and vary over time. As such company is exposed to various risks as follow -

A) Salary Increases - Actual salary increases will increase the Plan’s liability. Increase in salary increase rate assumption in future valuations will also increase the liability.

B) I nvestment Risk - If Plan is funded then assets liabilities mismatch & actual investment return on assets lower than the discount rate assumed at the last valuation date can impact the liability

C) Discount Rate - Reduction in discount rate in subsequent valuations can increase the plan’s liability.

D) Mortality & disability - Actual deaths & disability cases proving lower or higher than assumed in the valuation can impact the liabilities.

E) Withdrawals - Actual withdrawals proving higher or lower than assumed withdrawals and change of withdrawal rates at subsequent valuations can impact Plan’s liability.

Other Long Term Benefits Leave Encashment

The total actuarial earned leave liability, consisting, of encashment, availment, lapse and compensated absence, while in services and on exit, as per rules of the company, in accordance with IND AS-19 is as under

Note 5: Segment reporting

All undertaking of the company is engaged in similar activities of providing services to Oil & Gas Companies. Therefore there is only one reportable segment - Drilling and related services under Segment Reporting. The company operates in a single geographical segment - India.

Note 6: Related parties disclosures (as per Ind As 24)

A. List of related parties where control exist and also related parties with whom transactions have taken place and relationships:

**Shri Hemant Kumar Khanna resigned from the office of Director as well as Whole Time Director on 22nd September; 2017 and Shri Radhey Shyam Gupta appointed as CEO w.e.f 2nd February, 2018.

Note 7: Derivative Financial Instruments

The Company uses forward contracts to manage some of its transaction exposure. The details of such contracts as on the balance sheet date are as follows:

Foreign Currency Forward Contracts

The Company is having long term chartered hire income contract with ONGC. Since the service contract is under international competitive bidding. The company receives revenue in USD. The company has hedged future receivables by selling USD under the forward contracts.

The foreign currency forward contracts are designated as cash flow hedges and are entered into for periods consistent with foreign currency exposure of the underlying transactions, generally within one year

Outstanding notional amount for forward contracts is USD 9 Lakhs (Previous year USD 9 Lakhs).

The gain due to fluctuation in foreign currency exchange rates on derivative contract, recognized as Other Comprehensive Income of Rs. 29.78 lakhs (Previous year gain of Rs. 367.99).

Note 8: Financial reporting of Interest in Joint Ventures

Discovery Drilling Pte Ltd (DDPL) and Virtue Drilling Pte Ltd (VDPL) continued to be Joint Ventures of the company

Note 9: Trade Receivable, Loans & advances & Trade Payable

(i) An amount of Rs 44.09 lacs is recoverable from ONGC relating Rig PN-3. This matter is under the arbitration. The Management is confident to win the case and considered good for recovery

(ii) Trade receivable includes a sum of USD 147.72 lakhs (In Indian rupees Rs. 6585.54 lakhs restated on 31-03-201 1) as on 31.03.2018, which is outstanding from ONGC Ltd for more than 10 years. Against this company had already made a provision for bad and doubtful debt of Rs. 1500 Lakhs. Till date decision of Hon’ble Bombay High Court is in favour of the company. Against this order ONGC has filed the appeal in Supreme Court which is pending for its decision. The management of company is of view that case would be decided in favour of the company. In view of this, the company has written back the provision of bad debts of Rs. 1500 Lakhs. The other income and trade receivables increased by Rs. 1500 Lakhs due to effect of change in above estimate.

(iii) The Loan and advance includes Rs. 891.44 Lakhs relate to Marine Oil Gas Private Limited (MOGL) in respect of which no realisation could be made. No interest income has been recognised since financial year 2011-12. The Company has initiated legal proceeding for recovery of the same by filing a civil suit in Hon’ble Delhi High Court in September 2013 against this company along with related persons and Ex-Managing Director of the company. However in view of Ind As 113, the company has made a provision of Rs. 98.05 Lakhs under expected credit loss on MOGL loan.

(iv) Loans & Advances includes an interest free loan of Rs. 432.02 lakhs (Previous year Rs. 1048 lakhs), paid to Jindal Drilling & Industries Limited Employees Welfare Trust, which had been formed with the sole objective of employee’s welfare. The management is considering the same as good and fully recoverable. The amount of loan is discounted at 9.5% p.a. to arrive at fair value.

(v) Under the arbitration award relating to Noble Edholt Jack up RIG and subsequent out of the court settlement dated 28th February 2018 the company has paid USD 9,10,310 (Rs. 5841 Lakhs) as claim paid and USD 36,41,862 (Rs. 2,367 Lakhs) against existing liability in the books. Further the company has to written off Rs. 1140 Lakhs which was recoverable from Paragon on account of reimbursement of expenses which could not be recovered under arbitration award and out of the court settlement.

Note 10: Details of Loan given, Investment made and Guarantee given as covered u/s 186 (4) of the Companies Act, 2013

The details of loans given, investments made, guarantee given or security provided are as under;

All the above loans and advances given are for the Business purposes.

- Loans and advances mentioned supra have been shown under “Non-Current Loans & Advances”.

- Loans to employee/welfare trusts as per the Company’s policy are not considered. None of the Loan and Associate Companies have per se,made investments in shares of the company

The above details are as per Regulation 34(3) and 53(f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

Note 11: Capital Management

The primary objective of the Company’s capital management is to ensure availability of funds at competitive cost for its operational and development needs and maintain a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value.

The Company manages its capital structure and makes changes in view of changing economic conditions. No changes were made in the objectives, policies or process during the year ended 31.03.2018 and 31.03.2017. There have been no breaches of the financial covenants of any interest bearing loans and borrowings for the reported period.

The Company monitors capital structure on the basis of debt to equity ratio. For the purpose of Company’s capital management, equity includes paid up equity share capital and reserves and surplus and effective portion of cash flow hedge and Debt comprises of long term borrowings including current maturities of these borrowings.

Fair Value Techniques:

The fair value of the financial assets and liabilities are included at the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

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

a). Fair value of cash and short term deposits, trade receivables, trade payables, non-current loans, other current financial assets, short term borrowings and other current financial liabilities approximate to their carrying amount largely due to the short term maturities of these instruments.

b) Long term fixed rate and variable rate receivables / borrowings are evaluated by the Company based on parameters such as interest rate, specific country risk factors, credit risk and other risk characteristics. Fair value of variable interest rate borrowings approximates their carrying values. For fixed interest rate borrowings fair value is determined by using Discounted Cash Flow (DCF) method using discount rate that reflects the issuer’s borrowings rate. Risk of non-performance for the company is considered to be insignificant in valuation.

c) The fair value of derivatives are estimated by using pricing models, where the inputs to those models are based on readily observable market parameters basis contractual terms, period to maturity and market parameters such as interest rates, foreign exchange rates and volatility These models do not contain a high level of subjectivity as the valuation techniques used do not require significant judgement and inputs thereto are readily observable from actively quoted market prices. Management has evaluated the credit and non-performance risks associated with its derivatives counterparties and believe them to be significant and warranting a credit adjustment.

Fair Value Hierarchy

The following table provides the fair value measurement hierarchy of Company’s asset and liabilities grouped into Level 1 to Level 3 as described below:

Quoted prices / published Net Asset Value (NAV) in an active markets (Level 1): This level of hierarchy includes financial assets that are measured by reference to quoted prices (unadjusted) in active markets for identical assets or liabilities and financial instruments like mutual funds for which NAV is published by mutual funds. This category consist mutual fund investments and equity share instrument of other companies / JV’s.

Valuation techniques with observable inputs (Level 2): This level of hierarchy includes financial assets and liabilities, measured using inputs 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).

Valuation techniques with significant unobservable inputs (Level 3): This level of hierarchy includes financial assets and liabilities measured using inputs that are not based on observable market data (that is, unobservable inputs). Fair values are determined in whole or in part, using a valuation model based on assumption that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.

The following table provides the fair value measurement hierarchy of Company’s asset and liabilities grouped into Level 1 to Level 3 as described below:

During the year ended 31.03.2018 and 31.03.2017, there were no transfers between Level 1 and level 2 fair value measurements and no transfer into and out of Level 3 fair value measurements. There is no transaction/balance under level 3.

The fair values of the financial assets and financial liabilities included in the level 2 categories above have been determined in accordance with generally accepted pricing models based on a discounted cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk of counterparties. Following table describes the valuation techniques used and key inputs to valuation for level 2 of the fair value hierarchy as at 31.03.2018 and 31.03.2017;

Note 12: Financial Risk Management Objectives and Policies

The company’s activities expose it to market risk, liquidity risk and credit risk. In order to minimise any adverse effects on the financial performance of the company derivative financial instruments, such as foreign exchange forward contracts are entered to hedge certain foreign currency risk exposures to hedge variable interest rate exposures. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments. This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the impact of hedge accounting in the financial statements.

The company’s risk management is carried out by a treasury department under policies approved by the board of directors. Company treasury identifies, evaluates and hedges financial risks in close co-operation with the company’s operating units. The board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk and credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity

Credit risk

Credit risk is the risk that the counter party will not meet its obligation under a financial instruments or customer contract, leading to a financial loss. The Company is exposed to credit risk from its cash and cash equivalents, loans, investments at amortised cost and deposits with banks and financial institutions, as well as credit exposures to customers including outstanding receivables.

Credit Risk Management

Credit risk for banks and financial institutions, only high rated banks/institutions are accepted.

For other financial assets, the company assesses and manages credit risk based on internal credit rating system. The finance function consists of a team who assess and maintain an internal credit rating system. The company assigns the following credit ratings to each class of financial assets based on the assumptions, inputs and factors specific to the class of financial assets.

Liquidity risk

Liquidity risk is the risk that the company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses.

The Company monitors its risk to a shortage of funds using a recurring liquidity planning tool. This tool considers the maturity of both its financial investments and financial assets (i.e. trade receivables, other financial assets) and projected cash flows from operations. The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of working capital loans, letter of credit facility bank loans and credit purchases.

The bank cash credit facilities may be drawn at any time and may be terminated by the bank without notice. The corporate loan facilities may be drawn at any time in INR and have an average maturity of 2 years.

Maturity profile of financial liabilities

The tables below analyse the company’s financial liabilities into relevant maturity groupings based on their contractual maturities for all non-derivative and derivative financial liabilities, if any

The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

Market risk and sensitivity

Market risk is the risk that the fair value or future cash flow of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk: currency rate risk and interest rate risk. Financial instruments affected by market risk include loans and borrowings, deposits, investments and derivatives financial instruments. Foreign currency risk is the risk that the fair value or future cash flows of financial instrument will fluctuate because of changes in foreign exchange rates. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. This is based on the financial assets and liabilities held as at 31.03.2018 and 31.03.2017.

Foreign currency risk exposure

The company exposure to foreign currency risk at the end of the reporting period expressed in INR, are as follows;

Sensitivity

The sensitivity analyses exclude the impact of movement in market variables on the carrying value of post-employment benefit obligations, provisions and on non-financial assets and liabilities. The sensitivity of the relevant statement of profit and loss item is the effect of the assumed changes in respective market rates. The company’s activities expose it to a variety of financial risk including the effect of changes in foreign currency exchange rates and interest rates. The company uses derivatives financial instruments such as foreign exchange forward contracts of varying maturity depending upon the underlying contract and risk management strategy to manage its exposures to foreign exchange fluctuation and interest rates.

Note 13: Operating leases

The Company has taken office premises on cancellable lease. These are cancellable and are renewable by mutual consent on mutually agreed terms.

Note 14: Rounding off

Figures less than 500 have been shown at actuals wherever statutorily required to be disclosed, as the figures have been rounded off to the nearest lacs.

Note 15: Collaterals

Inventory, Trade Receivables, Other Financial Assets, Property, Plant and Equipment are pledged/ hypothecated as collateral/security against the borrowings of the company The investment in Joint Venture companies are pledged as collaterals as per note 6(A)(1).

Note 16: Miscellaneous

i) Dues to micro and small enterprises have been determined as per information collected by the management & have been relied upon by the auditors.

ii) In the opinion of the Management and to the best of their knowledge and belief, the value of current assets, loans and advances, if realised in the ordinary course of business would not be less than the amount at which they are stated in the Balance Sheet.

iii) Previous year’s figures have been re-grouped/ re-arranged/ re-classified wherever considered necessary