1. CONTINGENT LIABILITIES not provided for 
                                                        (Rupees'000)
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                                          Current Year Previous Year
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Capital Commitment
(on contracts pending execution)               4626101       1820774

Claims against the company not
acknowledged as debt                           1575535        476100

Advance to suppliers for lease
of equipment by IFCI as lessor                   36799         40183

Material received on lease from
IFCI, yet to install                            750919        716003

Demand from Excise Department On Modvat disallowance, contested in Appeal 76657 7893

2. SHARE CAPITAL

i) Out of the Share capital of the Company, 294760390 (294760390) fully paid equity shares of Rs. 10/- each are held by Usha (India) Limited, the holding company and 80020000(80020000) equity shares of Rs. 10/- each are held by Usha Ferro Metals Holdings Ltd., a promoter company. During the year Nil (188790000) equity shares of Rs. 10/- each have been alloted at par in cash to Usha (India) Limited and Nil (14520000) equity shares of Rs. 10/- each at par in cash to Usha Ferro Metals Holdings Limited on preferential basis as per Securities and Exchange Board of India Guidelines.

ii) Share application money aggregating to Rs. 215600 thousands (Rs. 198300 thousands) has been received from promoter company. Usha Ferro Metals Holdings Limited, and also Rs. 21350 thousand (Rs. Nil) received from holding company, Usha India Ltd., pending for allotment.

iii) Employee Stock Option Scheme : The Company had made the first grant of Employee Stock Options to its 349 employees/directors on 14th April, 2000 aggregating to 1884680 options entitling the holders thereto equal number of equity shares for cash at par vesting over period of 3 years from the date of grant. The scheme had been formulated as per the relevant Securities and Exchange Board of India Guidelines.

iv) During the year Authorised Share Capital of the company has increased by Rs. 7000000 thousand - being 700000000 equity shares of Rs. 10 and by Rs. 3000000 thousand - being 30000000 Preference Share Capital of Rs. 100 each total aggregating to Rs. 10000000 thousand.

3. RESERVE AND SURPLUS

The Debenture Redemption Reserve is not being created as per the requirements of Trust Deed(s) due to absence of profit.

4. SECURED LOAN

a) DEBENTURES:

i) 2700000 16% fully paid up Non-Convertible Debentures (NCD) of Rs. 1000/- each aggregating to Rs. 2700000 thousands were allotted to Indian Financial Institutions on 27.12.94. The NCDs are secured by way of a pari-pasu charge on all assets given as security for term loans as mentioned in para (b) below. The Industrial Finance Corporation of India Limited is trustee as per trust deed dated 11.03.96.

ii) 140000 18.5% Fully paid up Non-Convertible Debentures (NCD) of Rs. 1000 each aggregating to Rs. 140000 thousands were allotted to Unit Trust of India on 10.09.96. The NCDs are secured by way of pari-pasu charge on all assets given as securities for term loans mentioned in para (b) below. The IFCI Limited is trustee as per trust deed dated 31.01.97.

iii) 5500000 18% fully paid up Non-Convertible Debentures of Rs. 100 each aggregating to Rs. 550000 thousands were allotted to Unit Trust of India, on 17.03.98 Rs. 350000 thousands, on 24.04.98 Rs. 70000 thousands and on 15.02.99 Rs. 130000 thousands. These NCD are secured by way of a pari-pasu charge on all assets given as securities for Term loans as mentioned in para (b) below. The Industrial for Term loans as mentioned in para (b) below. The Industrial Development Bank of India is trustee as per trust deed dated 04.05.99.

iv) 7016710 18% Non-Convertible fully paid up Debentures of Rs. 100/- each aggregating to Rs. 701671 thousands were allotted to Unit Trust of India on 29th June 2000. These NCD are secured by way of a pari Pasu charge on all assets given as securities for Term loans as mentioned in para (b) below. The Industrial Development Bank of India has given its consent to act as the Trustee. Trust Deed is pending for execution.

The Debentures mentioned at (i) to (iii) above are redeemable in 36 equal quarterly installments commencing from April 2002, as per the letter of sanction no Oprs (Engg)/1890/98-63923 dated 14.12.98 of IFCI Limited. However Debentures mentioned at (iv) above are redeemable in 32 equal quarterly installments commencing from April 2004.

b) TERM LOAN

The term loans from Financial Institutions are secured by way of first mortgage and charge on all immovable and movable assets, present and future of the Company, subject to the prior charge on specified movable assets created/ to be created in favour of company's bankers by way of security for borrowings for working capital, ranking pari-pasu with the charges created/to be created in favour of other participating institutions for their Term Loan/Non Convertible Debenture and personally guaranteed by two directors of the company and by the corporate guarantee given by its holding company, Usha (India) Limited.

c) SHORT TERM LOAN

i) The working capital / short term loans from bankers of the company are secured by way of prior charge on the specified goods and stocks of raw material, semi finished and finished goods etc. of the company and also secured by the corporate guarantee provided by Usha (India) Ltd., the holding company.

ii) Bank of Tokyo-Mitsubishi Limited had filled a suit with Debt Recovery Tribunal for an amount of Rs. 182220 thousands including interest for development of foreign letter of credit, which has been contested by the company. However the company has provided interest during the year on the amount outstanding at the rate of 16.5% per annum and interest tax as applicable.

5. LOANS AND ADVANCES

i) Loans and advances includes a sum of Rs. 109410 thousands on account OF modvat credit recoverable on cement and steel used in construction of Plant and Machinery. On disallowance of this claim by Excise department, the same has been excluded from excise records. However the company has filled a writ petition with Delhi High Court against judgment of Central Excise and Gold Appellate Tribunal (CEGAT) on this disallowance. The effect of the same on capitalisation of assets and depreciation thereon will be considered on the decision of the case.

6. Sundry debtors aggregating Rs. 455971 thousand and advance aggregating Rs. 91697 thousand relating to trading activities remain unconfirmed by the respective parties. The trading activities stopped in October, 2000 and the relevant records were not available. Efforts are being made for obtaining confirmation.

(a) The Company is erecting Integrated Steel Making Plant which inter-alia would include two blast furances for production of pig Iron (Hot Metal) for being processed further in steel making plant for the manufacturer of rolled products viz, were rods etc. The expenditure incurred on the blast furances since 01.07.97 in regard to their integration with Man Steel Plant and on their trial run has been shown in Capital-work-in-progress under the head "Expenditure on Blast furance for their integration with Main Steel Making Plant under erection including their trial runs" as shown above. Substantial technical & administrative work is being carried out and delay is necessary part of the process of getting Blast Furances ready for its intended use for Integration with the main steel plant.

7. During the year fixed assets comprising Computer, Vehicles, Air Conditioners & Coolers, Furniture & Fixtures etc [original cost Rs. 34436 thousand and Written Down Value Rs. 17684 thousand] were sold at a loss of Rs. 9884 thousand based upon their written down value.

8. Provision of Rs. 74592 thousand towards rental charges of equipment lying at bonded warehouse has not been made.

9. Additional information pursuant to the provision founder Paragraph 3, 4C & 4D Part II of Schedule VI to the Companies Act, 1956.

10. The Company has a captive power plant with generation capacity of 68328000 Kwh and during the year 647984 units (578960) are generated and consumed.

11. As per the information available with the company, the names of small scale industrial undertakings, included under the head sundry creditors in schedule "K" of Current Liabilities and Provisions, to whom the amount payable exceeds Rs. 1 Lac each and outstanding for more than thirty days at year ended are as under:-

a) Universal Agro Industries

b) Indian Communication Cable Company

c) Aqua treat Engineering Company Ltd.

d) Virak Switchgears Pvt Ltd.

e) Bhilai Cement

12. During the year Income Tax department had conducted the search and seizure operation under section 132 of Income tax 1961 on 14.02.01 and they had seized some of the books of accounts of the company and the investments scrips held by the company. The certified copies of books seized have not been made available by the Income Tax department till the date of audit.

13. Provision for Income Tax has not been made in view of the losses as per accounts for the year ended as on 31st March, 2001. On account of search and seizure operation by Income tax department there is no demand outstanding which is payable, however the matter is pending with the Income Tax department and Income Tax liability will be considered, when the matter is finally decided.

14. Interest @ 14% is provided on 16%, 18% & 18.5% NCD's and on secured term loan taken from all financial institutions on the basis of letter of intent dated 26.07.2001 given by IFCI.

15. Previous year figures have been regrouped, recasted, rearranged and reclassified wherever considered necessary.