| ANNUAL REPORT 2005-2006
NOTES ON ACCOUNTS
1. SIGNIFICANT ACCOUNTING POLICIES:
a. Accounts have been prepared under the historical cost in accordance with
generally accepted accounting principles and provisions of the Companies
Act, 1956 as applicable to this Company.
b. Accounting policies not specifically referred to otherwise are
consistent and in consonance with generally accepted accounting principles
followed by the Company.
c. Revenue Recognition :
Revenue from sale of goods is recognised when significant risks and rewards
in respect of ownership of the products are transferred to the customer.
Revenue from product sales is stated inclusive of excise duty and exclusive
of returns, sales tax and applicable sales discounts and allowances.
d. Fixed Assets :
All Fixed Assets are stated at cost, Depreciation was not provided for the
period 1993-94 to 2004-2005. Such unprovided depreciation till 31.03.2006
is Rs. 1197322 thousands and to this extent the accumulated loss is
understated.
e. Inventories:
Inventories are valued at lower of cost and net realisable value. Cost of
Inventories comprises all cost of purchases, cost of conversion and other
costs incurred in bringing the inventories today present location and
condition. The methods of determining cost of various categories of
inventories are as follows.
1) Raw materials are valued at cost. Cost is determined on FIFO basis.
2) Stores, Spares and Consumables valued at cost. Cost is determined on
weighted average basis.
3) Finished goods are valued at cost or market value whichever is lower.
f. Interest
Interest on Term Loans has been provided as per the debt. restructure
sanctions issued by Financial Institutions. OTS sanctions were received
from SBI, SBH and BOB for working capital Loans /Term Loan (SBI).
Accordingly the payments were made as per sanctions.
g. The Hon'ble BIFR has ordered for winding up of the Company. However, the
Company filed an appeal against the said order to AAIFR and the same has
been stayed. IDBI (OA) has filed draft rehabilitation scheme as per
sanctions received from the participating Financial Institutions with
AAIFR. Honourable Members of AAIFR in their meeting held on 10.08.2005 have
considered the affidavit of DRS package and remanded back to BIFR for their
consideration and approval. The company has submitted Debt restructure
application to IDBI (Lead Managers) for the consideration of all
participating Financial Institutions. In terms of the decision taken by the
Financial Institutions in their joint meeting held on 05.12-2003, IDBI,
ICICI and IFCI have issued sanctions for restructuring of the debt.
h. The value of finished goods includes excise duty.
i. In the opinion of the management there is no indication that any of the
asset of the Company has been impaired. Accordingly no loss on account of
impairment has been recognized during the year in terms of Accounting
Standard - 28 impairment of assets.
2. SECURED LOANS
The Term Loans from the Financial Institutions and banks are secured by
(i) a. First charge by way of mortgage by deposit of title deeds relating
to the Company's immovable properties situated at Sreerampuram, Malliveedu
Village, L Kota Mandal, Vizianagaram District; and
b. A first charge by way of hypothecation of the movable assets of the
company situated thereon, subject to charges created/to be created on
specified movable assets in favour of the company's Bankers to secure
borrowings for working capital. All the Mortgages and charges rank pari
passu interse.
ii) The Working Capital facilities are secured by hypothecation of stocks
and book debts and are further secured by the guarantee of the Managing
Director in his personal capacity.
iii) On fresh working capital of Rs. 13.54 Crores sanctioned by IDBI / IFCI
/ ICICI first charge on the incremental current assets from 22.09.2000 and
further secured by extension of mortgage on the fixed assets of the Company
on pari passu basis and also by way of hypothecation of Shares, personal
guarantee and mortgage of 18.96 acres of Mango Grove belonging to the
Promoters.
A first charge on incremental current assets from 22.09.2000 and further
secured by mortgage of landed property, and by way of hypothecation of
shares and further by way of pari passu charge along with other Financial
Institutions in respect of charges already created.
3. The Registration formalities in respect of part of land purchased by the
Company have not yet been completed. However the Company is in physical
possession of the land.
4. No provision has been made for accrued liability towards Gratuity and
other retirement benefits. The same are being provided on cash basis. This
is contrary to the accounting standard No. 15.
5. Contingent Liabilities not provided for :
As at 31.03.2006 As at 31.03.2005
(Rs. in Thousands) Rs. in Thousands)
i) Guarantee issued by
Bankers on behalf of the Company 25 325
ii) Claims against the Company not
acknowledged as debt 4876 9285
6. Managerial Remunerations :
Directors other than Managing Director Nil Nil
Note : The computation of profits required for the purpose in terms of the
provisions of Companies act is not necessary since no commission is payable
to the Managerial Personnel.
7. Statutory Auditor Remuneration
(Rs. in Thousands) (Rs. in Thousands)
Auditors Fee 45 45
Out of Pocket Expenses 5 5
TOTAL 50 50
Additional information in pursuant to the provisions of 3,4C and 4 D of
Part-II of Schedule VI of the Companies Act, 1956 (as certified by the
Management).
8. Particulars of capacity &
Production (as certified by Management) Qty. (MTs) Qty. (MTs)
Licenced capacity (TPA) 800000 800000
Installed capacity (TPA) 220000 220000
Production of Sponge Iron (MT) 24678 68967
Qty. Value Qty. Value
9. Raw-material consumed (Rs. in
Thousands) (Rs. in
Thousands)
Iron ore 51469 117101 158808 275524
Coal 55044 87972 149947 180901
Others 1470 1174 2738 3403
10. Sales and Stock of
Sponge Iron
Sales 25576 192349 66965 637611
Stock - - 5194 25557
11. Details of
Imported and Indigenous
Materials consumed
Indigenous 16622 47540
(100%) (100%)
Imported - -
12. Expenditure in foreign currency
13. There are no outstanding payable to Small Scale Industries on the basis
of information available with the Company.
14. Related Party Disclosure :
In accordance with accounting standard - 18, Related Party Disclosures,
issued by the Institute of Chartered Accountants of India, the disclosures
are as follows :
I. Related Parties
1.1 Associates
SRI CHAKRA CEMENTS LIMITED
1.2 Key Management Personnel :
N. KRISHNA MOHAN
Managing Director
II. Related Party Transactions (Rs. In Thousands)
2.1 Sales :
Sales to Sri Chakra Cements Limited 5692
2.2 Purchases :
Purchase from Sri Chakra Cements Limited 752
2.3 Remuneration to key management Personnel
N.Krishna Mohan Nil
15. Segment Reporting :
The Company is a single process company and operates only in the Domestic
Segment. Hence, the information required to be disclosed as per AS-17 on
segment reporting is not applicable
16. Deferred Taxes
a) The Company has adopted the Accounting Standard - 22 accounting for
taxes on income issued by the Institute of Chartered Accountants of India.
The components of the deferred Tax balance as on 31.03-2006 and 31.03.2005
is as follows :
(Amt. in Thousands)
Deferred Tax Liability 31.03.2006 31.03.2005
Depreciation 405225 440526
Deferred Tax Asset
Adjustment u/s 43B of IT Act. 513355 54,3139
Net Deferred Tax Liability 108130 102613
As there is no virtual certainity no adjustment for Deferred Tax Asset
arising out of and the carry forward losses under Tax Laws have been made
in the books of accounts.
17. Earnings per Share (Amount in Rupees)
31.03.2006 31.03.2005
Basic Earnings per share - -
Diluted Earnings per share - -
Nominal value per share 10.00 10.00
Earnings per share is calculated by dividing the Profit/Loss attributable
to the Equity Shareholders by the weighted average number and Equity Shares
outstanding, during the period. The basis adopted in calculating the Basic
Earnings per Equity Share are as stated below :
(Rs. in Thousands)
31.03.2006 31.03.2005
Profit / (Loss) for the year (107881) (38274)
Weighted average number of shares 104407300 104407300
outstanding during the year
18. Previous Year's figures have been regrouped wherever necessary.
19. The stocks of material as on 31.08.2005 transferred to Sri Bhava Steel
and Power Limited.
20. Figures in the Balance Sheet and Profit & Loss Account have been
rounded to nearest Thousands.
As per our Report of Even Date For and on behalf of the Board
attached to Balance Sheet
For LAKSHMINARAYANA ASSOCIATES
Chartered Accountants N. KRISHNA MOHAN
Managing Director
N. LAKSHMINARAYANA
Partner
Place : Hyderabad K. VIJAYA KUMAR
Date : 26.05.2006 Director |