i) Accounting of Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. Contingent liabilities are recognised only when there is a possible obligation arising from past events, due to occurrence or non-occurrence of one or more uncertain future events, not wholly within the control of the Company, or where any present obligation cannot be measured in terms of future outfl ow of resources, or where a reliable estimate of the obligation cannot be made. Obligations are assessed on an ongoing basis and only those having a largely probable outflow of resources are provided for. Contingent assets are not disclosed in the financial statements unless an inflow of economic benefits is probable.
j) Revenue Recognition
Revenue is recognised to the extent it is probable that the economic benefits will flow to the company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government.
Domestic sales are recognised at the time of dispatch of materials to the buyer. Export sales are recognised on the issue of bill of lading. Export Incentives arising out of Export Sales are accounted for on accrual basis.
Purchases are inclusive of freight and net of Input Tax Credit, Trade Discount and Claims.
k) Recognition of Dividend Income, Commission Income, Interest Income or Expenses
Dividend income is recognised in profit or loss on the date on which the Company's right to receive payment is established.Income from commission is recognised based on agreements/arrangements with the customers as the service is performed using the proportionate completion method, when no significant uncertainty exists regarding the amount of the consideration that will be derived from rendering the service. Interest income or expense is recognised using the effective interest method.
l) Leases
Leases of property, plant and equipment that transfer to the Company substantially all the risks and rewards of ownership are classified as finance leases. The leased assets are measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments. The minimum lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in the Statement of Profit and Loss. Assets held under leases that do not transfer to the Company substantially all the risks and rewards of ownership (i.e. operating leases) are not recognised in the Company's Balance Sheet. Payments made under operating leases are recognized in the Statement of Profit or Loss on a straight-line basis over the term of the lease unless the payments to the lessor are structured to increase in line with general inflation.
m) Income Tax
Income Tax expense comprises of current and deferred tax. Current tax and deferred tax is recognized in the statement of profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.
i. Current Tax
Current Tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted at the Balance sheet date.
ii. Deferred Tax
Deferred Tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The carrying amount of Deferred tax liabilities and assets are reviewed at the end of each reporting period.
n) Borrowing Costs
Borrowing Costs are interest and other costs incurred in connection with the borrowing of funds. Borrowing costs directly attributable to acquisition or construction of an asset which necessarily take a substantial period of time to get ready for their intended use are capitalised as part of the cost of that asset. Other borrowing costs are recognised as an expense in the period in which they are incurred. Where there is an unrealised exchange loss which is treated as an adjustment to interest and subsequently there is a realised or unrealised gain in respect of the settlement or translation of the same borrowing, the gain to the extent of the loss previously recognised as an adjustment is recognised as an adjustment to interest.
o) Earnings per Share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
p) Segment Reporting
The Company has identified Iron & Steel as the sole business segment and the same has been treated as primary business segment. The Company sells mostly within India and does not have operations in economic environments with different risks and returns, it is considered operating in single geographical segment. Hence, no further disclosure as required under the Indian Accounting Standard -108 " Operating Segments " as issued by the 'The Institute of Chartered Accountants of India'.
q) Expenditure on new projects & substantial expansion
Preliminary project expenditure, capital expenditure, indirect expenditure incidental and related to construction/ implementation, interest on term loans to finance fixed assets and expenditure on start-up of the project are capitalised upto the date of commissioning of project to the cost of the respective assets.
(B) Nature of Security
(i) Project Term Loans , Working Capital Term Loans, Funded Interest Term Loans and Working Capital Loan are pooled together and secured as under:
a) First pari-passu charge on fixed assets by way of equitable mortgage of the land & building / shed along with all movable and immovable plant & machinery and other fixed assets thereon at Chhatna Dist. Bankura.
b) First pari-passu charge on the entire Current Assets of the Company comprised of stock of raw materials, semi finished and finished goods and book debts, outstanding moneys, receivables, both present and future pertaining to the Company's manufacturing units/divisions at Chhatna Dist. Bankura
c) Collateral Security equitable mortgage on office space at 20A Thacker House 35, C. R. Avenue, Kolkata standing in the name of Sarita Patni & Corporate office of the group at SKP House, 132A, S.P. Mukherjee Road, Kolkata - 700 026 being 1st,2nd,3rd and 5th Floor standing in the name of Marble Arch Properties Pvt Ltd on pari passu basis.
d) Personal guarantee of Promoters / Director - Mr. Suresh Kumar Patni, Mr. Rohit Patni, Mr. Ankit Patni & Mrs. Sarita Patni.
e) Corporate guarantee of the group companies - Vasupujaya Enterprises Pvt Ltd, Poddar Mech-Tech Services Pvt Ltd, Suanvi Trading & Investment Co. Pvt Ltd, Sarita Steel & Power Limited, Marble Arch Properties Pvt Ltd & pledge of 811.80 Lacs shares of Company in the name of promoters & group associates.
(ii) Unsecured Loans from Related Parties will be converted into equity shares in due course. The conversion price will be determined in accordance with the SEBI (Issue of Capital and Disclosure Requirements) Regulations.
(C) Various credit facilities availed from UBI, IOB, SBI, IDBI and Allahabad Bank have been assigned by the respective banks in favour of Asset Reconstruction Companies under various assignment agreements between the respective banks and Asset Reconstruction Companies. In absence of information about the terms of assignments, the Company is carrying the various credit facilities as appearing in the books and as per the previous terms with the respective banks.
On the basis of settlement agreement, the credit facilities availed from Andhra Bank (CC, WCTL, FITL) has been assigned to Alchemist Assets Reconstruction Company and it is appearing in the books of accounts as per the agreement.
(D) Pursuant to restructuring of the Company's debts, the CDR Proposal as recommended by SBI was approved by CDR EG on 9th September, 2014 and communicated vide Letter of Approval dated 17th September, 2014, as amended/modified from time to time. Under CDR package, additional credit facilities have been sanctioned as set out in the said Letter of Approval. The CDR Package included reliefs/measures such as reduction in interest rates, funding of interest, rearrangement of securities etc.
During the past years, performance of the Company has been adversely affected mainly because of external factors beyond management control, due to which the Company was not able to meet the repayment terms as per the CDR Package. The Working Capital of the Company has been substantially depleted due to servicing of interest and repayment to the Banks and F inancial Institutions in earlier years. The same has also resulted in the ballooning of loan. As a result, the lenders of the Company have decided to exit the CDR scheme. Hence, the outstanding dues to Corporation Bank, Syndicate Bank and UCO Bank has been shown under "Current Maturities of Long Term Borrowings".
ADDITIONAL NOTES
Note: 28 The lenders have stopped charging interest on debts, since the dues from the Company have been categorised as Non-Performing Assets. In view of the above, pending finalization of the restructuring plan, the Company has not provided accrued interest in its books during the year and reversed interest provided in earlier period pertaining to the period the account was declared NPA by the respective lenders. Interest amounting to ' 15,563.02 Lakhs (penal interest and charges thereof remains unascertained) for the year ended 31st March, 2023 has not been provided for. The unprovided accumulated liability in respect of interest on Long term and Short term borrowings as on 31st March, 2023 amounted to K 95,913.89 Lakhs. The same have consequential impact on the reported figures.
In respect of credit facility availed from Andhra Bank assigned to Alchemist Asset Reconstruction Company Ltd (AARC), the company has defaulted in making repayment of loan as per the Restructuring Package. The company has written back ' 1,572.99 Lacs in earlier years on account of Restructuring Package. As per the terms of the agreeement, the restructuring package stands revoked without any notice if payment not made till 12th December, 2022. However, the company is in active discussion with the respective party regarding revival of the Restructuring Package. Accordingly, the company has not recognised liability in respect of principal amounting to ' 991.85 Lacs and in respect of Interest accrued till 31st March, 2023 amounting to ' 1389.35 Lacs.( including ' 43.37 lacs for the quarter ended 31st March, 2023).During the year UCO bank and Asset Care Reconstruction Company has filed application to National Company Law Tribunal (NCLT), Kolkata Bench under Section 7 of IBC Act,2016. The company is in active negotations with them to withdraw the applications and arrive at a mutual settlement.
Since the aforesaid known accounts had been declared Non-Performing Assets, the statement of stock and book debts are not submitted to banks or financial institution.
Note: 29 The Company has incurred loss of K 9,746.24 Lakhs for the year ended 31st March, 2023 and accumulated loss as on 31st March, 2023 is K 1,32,863.84 Lakhs which is in excess of the entire net worth of the Company. With the substantial improvement in raw material availability, improvement in market scenario with notification of Minimum Import Price on steel, it is expected that the overall financial health would improve considerably. Considering the above developments and favorable impact thereof on the Company's operations and financials, the Company has prepared the financial results on the basis of 'Going Concern' assumption.
Note: 30 Contingent Liabilities not provided for in the Books of Accounts :
a) Right to Recompense to CDR Lenders for the relief and sacrifice extended, subject to provisions of CDR Guidelines, amounting to ' 48,176.00 Lakhs (P.Y K 48,176.00 Lakhs).
b) Relating to earlier assessment years a demand of K 26,594.57 Lakhs (P.Y K 62,672.38 Lakhs) was raised by the Income Tax Department against which the Company has filed appeals.
c) Relating to earlier financial years a demand of K 3,676.78 Lakhs (P.Y K 3,676.78 Lakhs) were raised by the CESTAT department against which appeals has been filed by the Company.
d) Relating to earlier financial years a demand of K 8,207.82 Lakhs (P.Y K 8,207.82 Lakhs) respectively were raised by the Sales Tax Department against which appeals has been filed by the Company.
e) Claims against the Company not acknowledged as debts K 2,559.86 Lakhs (P.Y K 2,688.83 Lakhs).
f) The Ministry of Railway issued a Show Cause Notice in respect of Evasion of Freight on loading of Iron-ore at a concessional rate & the penalty on such thereof amounting to K 4,162.19 Lakhs (P.Y K 4,162.19 Lakhs). The Company has filed a writ petition in the High Court in the year 2013 for issuing an unjustified notice.
Note: 31 In the opinion of the management, current and non current asset have a value of realisation in the ordinary course of business at least equal to the amount at which they are stated in the accounts.
Note: 32 Certain balances of "Trade Receivables", "Trade Payables", "Borrowings", "Advances from Customers", "Advances Recoverable In Cash or Kind" and "Advance to Suppliers and Other Parties" includes balances remaining outstanding for a substantial period. The balances are subject to confirmations and reconciliations. The Balance with revenue authorities are subject to final assessment order and/or submission of returns .The reported financials might have consequential impact once the confirmations are received and reconcilition if any is made. Pending such confirmations and reconciliations, the management has made a provision/(reversal) for doubtful debts for K188.79 Lakhs (P.Y. K 10.73) Lacs on trade recievables/ advances recoverable in cash or kind as per the expected credit loss policy.
Note: 33 As per consistent practice, the Company has charged off the expenses incurred for captive power generation in the natural heads of account.
Note: 34 Disclosure pursuant to Ind AS- 19 ” Employee Benefits” :
a. Defined Benefits - Gratuity
The Company's gratuity benefit scheme for its employees in India is a defined benefit plan (funded).
The Company provides for gratuity from employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of completed service.
The present value of obligation is determined based on the actuarial valuation using the Projected Unit Credit Method as on 31st March, 2023 which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The Company's gratuity expense is recognized under the head - "Employee Benefit Expense" in Note No. 24.
These defined benefit plans expose the Company to actuarial risks, such as interest rate risk, liquidity risk, salary escalation risk and regulatory risk.
The Company's principal financial liabilities comprise loans and borrowings, trade payables and other payables in domestic currency. These financial liabilities are incurred mainly to finance the Company's operations. The Company's principal financial assets include investments, loans, trade and other receivables and cash and other bank balances that derive directly from its operations.
The Company has exposure to the following risks from financial instruments presently in use:
- Credit Risk
- Liquidity Risk
- Market Rate Risk
The Board of Directors has overall responsibility for the Company's risk management framework. The Company's risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed by the management regularly to reflect changes in the working conditions.
Credit Risk Management
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. In addition, credit risk arises from finance guarantees.
Company's credit risk arises principally from the trade receivables and cash & cash equivalents.
Customer credit risk is managed centrally by the Company through credit approvals establishing credit limits and continuously monitoring the credit worthiness of the customers to whom the credit is extended in the normal course of business. The concentration of credit risk is limited due the fact that the customer base is large and unrelated. The Company estimates the Expected Credit Losses on the basis of its evaluation of each case. Provision is being made as per the Company's expected credit loss policy in the manner mentioned below:
Overdue for more than 1 year but not more than 2 years: 5%
Overdue for more than 2 years but not more than 4 years: 15%
Overdue for more than 4 years: 50%
followed by further provision on year to year basis based on the management evaluation of each case.
Credit risks from balances with banks are managed in accordance with the Company's policy.
The fundamental goals of capital management are to:
- safeguard their ability to continue as a going concern, subject to Note No. 29 so that they can continue to provide returns for shareholders and benefits for other stakeholders, and
- maintain an optimal capital structure to reduce the cost of capital.
The Board of Directors has the primary responsibility to maintain a strong capital base and reduce the cost of capital through prudent management of deployed funds and leveraging opportunities in domestic and international financial markets so as to maintain investor, creditor and market confidence and to sustain future development of the business.
For the purpose of Company's capital management, capital includes issued capital and all other equity reserves. The Company manages its capital structure in light of changes in the economic and regulatory environment and the requirements of the financial covenants. The Company applied the same capital risk management strategy that was applied in the previous period.
The Company manages its capital on the basis of net debt to equity ratio which is net debt (total borrowings net of cash and cash equivalents) divided by total equity.
Note: 45 Previous year's figures have been regrouped/restated wherever necessary to confirm with this year's classification.
As per our report of even date.
For J.B.S & Company For and on behalf of Board of Directors
Chartered Accountants FRN.: 323734E
Subham Bhagat
(Chairman cum Managing Director)
Gouranga Paul
Partner
Membership No. 063711
Place: Kolkata Vishal Shah Vipul Jain
Date: 30th June, 2023. (Company Secretary) (Chief Financial Officer)
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