2.19 Provisions, Contingent Liabilities & Contingent Assets
Provisions are recognized when the company has a present obligation (legal or constructive) as a result of a past event and it is probable that the company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
Wherever no reliable estimate could be made, a disclosure is made as contingent liability. A disclosure for a contingent liability is also made when there is a possible obligation or a present obligation that may but probably will not require an outflow of resources.
When there is a possible obligation or a present obligation in respect of which likelihood of outflow of resources is remote, no provision or disclosure is made.
Contingent Liabilities are disclosed in the General Notes forming part of the accounts.
Contingent Assets are not recognised in the financial statements but are disclosed in Notes to the Accounts. Such assets occur when the inflow of economic benefits is probable. Such contingent assets are assessed continuously, if it's virtually certain that inflow of economic benefits will arise then such assets and the relative income will be recognised in the financial statements.
2.20 Financial Instruments Non-Derivative Financial Instruments i) Initial Recognition
Financial assets and financial liabilities are recognized when the company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs
directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.
ii) Subsequent Recognition
a) Financial assets
Financial assets are subsequently measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss.
b) Financial Liabilities
Financial liabilities are subsequently measured at amortized cost using Effective Interest Rate (EIR) method except for derivatives, which are measured at fair value.
Derivative Financial Instruments
All derivatives are recognized and measured at fair value with changes in fair value being recognized in profit or loss for the period.
Impairment of financial assets
At each reporting date, assessment is made whether the credit risk on a financial instrument has increased significantly or not since initial recognition.
If the credit risk on a financial instrument has not increased significantly since initial recognition, the loss allowance is measured for that financial instrument at an amount equal to 12 month expected credit losses. If the credit risk on that financial instrument has increased significantly since initial recognition, the loss allowance is measured for a financial instrument at an amount equal to the lifetime expected credit losses.
The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date is recognised as an impairment gain or loss in the statement of profit and loss.
2.21 Events Occurring after the Reporting Period
The company adjusts the amount recognized in its financial statements to reflect adjusting material events after the reporting period and does not adjust the amount to reflect non-adjusting events after the reporting period. However where retrospective
restatement is not practicable for a particular prior period then the circumstances that lead to the existence of that condition and the description of how and from where the error is corrected are disclosed in Notes on Accounts.
2.22 Dividends
Final dividend on shares are recorded as a liability on the date of approval by the shareholders in general meeting and interim dividends are recorded as a liability on the date of declaration by the directors in the meeting of the Board of Directors.
2.23 Cash and Cash Equivalents
Cash and cash equivalent in the Balance Sheet comprise cash at bank and on hand and short-term deposit with an original maturity of three months or less which are subject to insignificant risk of changes in value.
2.24 Rounding of amounts
Amounts in these financial statements have, unless otherwise indicated, have been rounded off to ‘Rupees in lakh' upto two decimal points.
VAT/CST/ENTRY TAX & Other Taxes
There are demand notices totaling to Gross Demand of ^ 9312.22 lakh (Previous Year ^8494.74 lakh) from various State Revenue Authorities regarding VAT/CST/Entry Tax/Other Taxes against which the company has deposited under protest ^ 78.55 lakh (Previous Year ^ 433.50 lakh) shown under Note No. 16-Other Current Assets. The company is contesting the demands and the management as well as the legal advisors/consultants are of the opinion that its contention will likely to be upheld by the Appellate Authorities. The company also believes that ultimate outcome of these proceedings will not have a material adverse impact on the financial position of the company.
EXCISE DUTY
There are demand notices totaling to Gross Demand of ^ 4607.05 lakh (Previous Year ^ 5282.31 lakh) from Central Excise Authorities regarding Excise Duty against which the company has deposited under protest ^ 117.87 lakh (Previous Year ^ 77.94 lakh) shown under Note No. 16 Other Current Assets. The company is contesting the demands and the management as well as the legal advisors/consultants are of the opinion that its contention will likely to be upheld by the Appellate Authorities. The company also believes that ultimate outcome of these proceedings will not have a material adverse impact on the financial position of the company.
INCOME TAX
There are Income Tax demand notices totaling to Gross Demand of ^ 13131.12 lakh (Previous Year ^ 23084.40 lakh) against which the company has deposited under protest ^ Nil (Previous Year ^ Nil) shown under Note No. 29-Current Tax Liabilities (Net of Current Tax Assets). The management as well as the income tax consultant are of the opinion that its contention will likely to be upheld by the Appellate Authorities/High Court. The company also believes that ultimate outcome of these proceedings will not have a material adverse impact on the financial position of the company.
OTHER DEMAND
The pending litigation cases totaling to ^ 103010.93 lakh (Previous Year ^ 114870.12 lakh) which the company is contesting before different Legal Forums / Courts. The management as well as the legal advisors/consultants are of the opinion that its position will likely to be upheld in the appellate proceedings. The company also believes that ultimate outcome of these proceedings will not have a material adverse impact on the financial position of the company.
2. Lease premium paid for land for mining purposes including payment for Net Present Value (NPV) of forest area paid to forest department and amount paid towards wildlife conservation plan are capitalized under the head “Other Intangible Assets” shown under Note No. 3(C&D)
3. Surda Mining Lease period has been extended by Directorate of Mines & Geology; Govt. of Jharkhand vide order dated
06.01.2022 for a period of 20 years w.e.f 01.04.2020 to 31.03.2040. Validity of Kendadih Mining Lease period was till
02.06.2023 and Rakha Mining Lease was till 28.08.2021. However, application for extension of Mining Lease period for a period of 20 years for both Kendadih and Rakha Mining Leases have been submitted to Govt. of Jharkhand on 16.03.2022 and 30.04.2020 respectively within due time. Presently both the applications are in process as per regulation. The mined-out ore kept at pit-top of Surda Mine could not be transported to the concentrator plant because of non-issuance of challan/permit by State Authorities, Jharkhand due to non-receipt of Surda Lease Deed, which is under process. HCL has taken exploration activity in Rakha mine in phase wise manner to complete G2 exploration within the Mine lease area.
4. KCC : The commercial operation of Smelter, Refinery and Sulphuric Acid Plant at Khetri Copper Complex (KCC) were suspended since December 2008. The Company suffered loss on account of impairment of the said plants valued by an independent consultant in earlier years and consequently a total sum of ^ 464.01 lakh was provided in the accounts for impairment loss in compliance with the guidelines of IND AS 36 on “Impairment of Assets”, out of which some impaired assets has been sold/ written off and net impairment of ^ 461.88 lakh is appearing in books of accounts as on 31.03.2024.
ICC : The company has recently carried out valuation work of Moubhandar Plant,Sulphuric Acid Plant & Nickel Plant at Indian Copper Complex (ICC) by an external Agency and as per valuation report, a provision for impairment loss of ^ 1509.44 lakh has been made during the current year for carrying value of assets.
17. GRATUITY AND OTHER POST-EMPLOYMENT BENEFIT PLANS IN TERMS OF Ind AS 19 :
The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded through Life Insurance Corporation of India, SBI Life Insurance Co. Ltd, India First Life Insurance, Kotak Mahindra Life Insurance, ICICI Prudential Life Insurance, Aditya Birla Life Insurance, and managed by a separate trust. The Company has also funded through Life Insurance Corporation of India and SBI Life Insurance Co. Ltd towards leave encashment. Expenses recognized in Statement of Profit & Loss and Other Comprehensive Income amounting to ^ 2150.01 lakh in respect of Gratuity, Leave Encashment which have been provided for as stated below.
The following tables summarize the components of net benefit expense recognized in the Statement of Profit and Loss, Other Comprehensive Income and Mine Development Expenditure and the funded status and amounts recognized in the balance sheet for the respective plans.
1. Derivatives not designated as hedging instruments
The Company uses Commodity Futures Contracts to manage its commodity price risk . The Commodity Futures Contracts are not designated as hedging instrumnets and are entered into for periods consistent with commodity price risk exposure of the underlying transactions, generally from one to four months. However in the year FY 23-24, the Company has not entered into any Commodity Futures Contract.
The Company uses foreign exchange forward contracts to manage some of its transaction exposures. The foreign exchange forward contracts are not designated as cash flow hedges and are entered into for periods consistent with foreign currency exposure of the underlying transactions, generally from one to four months.
Commodity price risk
In the year FY 23-24, the Company has not purchased any such copper blister/ anode for its plant in GCP.
Hedging the price volatility of copper purchases is in accordance with the Risk Management Policy approved by the Board of Directors. The hedging relationships are for a period between 1 and 4 months based on existing purchase agreements. The Company designated only the spot-to-spot movement of the entire commodity purchase price as the hedged risk. It has been decided by the company not to follow the hedge accounting for these instruments.
As at 31 March 2024, the fair value of the open position of commodity future contracts is nil.
2 . Financial Instruments by Categories
The carrying value and fair value of financial instruments by categories were as follows:
Set out below, is a comparison by class of the carrying amounts and fair value of the Company's financial instruments, other than those with carrying amounts that are reasonable approximations of fair values:
3. The Management considered the total of Upfront fees & Other charges of K 245.33 lakh paid on the SBI ECB loan amounting to K 17734.75 lakh drawn during July 2018 to January 2019 as immaterial, as the amount of such fees/ charges was only 0.15% of the Turnover of the company and hence the same was not considered as a transaction cost in terms of fair valuation at initial recognition under INDAS 109. Further, the Management assessed that for the purpose of IND AS 109, the carrying value of loan is considered as its fair value as no loan could be provided at a rate lower that the rate of interest of SBI ECB loan for similar terms and conditions of the loan at that point of time.
The Management assessed that cash and cash equivalents, trade receivables, trade payables, bank overdrafts and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:
The Company enters into derivative financial instruments with various counterparties, principally with financial institutions having Investment grade credit ratings. Foreign exchange forward contracts and commodity futures contracts are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing .
4. Fair Value Hierarchy
Level 1 - Level 1 hierarchy includes financial instruments measured using quoted prices (unadjusted) in active markets.
Level 2 - Level 2 hierarchy includes financial instruments 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).
Level 3 - Level 3 hierarchy includes financial instruments measured using inputs that are not based on observable market data (unobservable inputs).
Credit risk relating to cash and cash equivalents is considered negligible because our counterparties are scheduled banks. We consider the credit quality of Term deposits with such banks as good as these banks are under the regulartory framework of Reserve Bank of India. We review these banking relationships on an ongoing basis.
c) Liquidity Risk
Our liquidity needs are monitored on the basis of monthly and yearly projections. The company's principal sources of liquidity are cash and cash equivalents and cash generated from operations.
We manage our liquidity needs by continuously monitoring cash inflows and by striving to maintain adequate cash and cash equivalents. Net cash requirements are compared to available cash in order to determine any shortfall.
Short term liquidity requirements consists mainly of Loans, Sundry creditors, Expense payable, Employee dues arising during the normal course of business as of each reporting date. We strive to maintain a sufficient balance in cash and cash equivalents to meet our short term liquidity requirements.
The table below provides details regarding the contractual maturities of financial liabilities. The table has been drawn up based on the undisclosed cash flows of financial liabilities based on the earliest date on which the company can be required to pay.
6. Capital Management
For the purpose of the Company's capital management, capital includes issued equity capital and all other equity reserves attributable to the Company. The primary objective of the Company's capital management is to maximise the shareholder value.
25. The value of assets, other than fixed assets and non-current assets, have realizable value at least equal to the amount at which they are stated.
26. The commercial operation of Gujarat Copper Project was suspended since August 2019 due to non-availability of feed material at economical price. Accordingly, the company had assessed the loss on account of impairment of the said plant excluding land, building, roads etc. valued by an Independent consultant & consequently a sum of ^ 9708.21 lakh had been provided in the accounts of FY 2020-21. During the FY 2021-22, the Company had further re-assessed the impairment study of the said plant excluding land, building, roads etc by an independent consultant and a sum of ^ 5194.00 lakh had been booked as impairment loss. Total cumulative amount of ^ 14902.21 lakh had been provided in the accounts for impairment loss in compliance with the guidelines of IndAS-36 on “Impairment of Assets” as per notification under section 133 of the Companies Act, 2013. The Asset Monetization plan (Sale) has been sent to Ministry of Mines who in turn has recommended the proposal to DIPAM for approval.
27. The Board of Directors of the Company has recommended payment of dividend at rate of ^ 0.92 per share on ?5/- face value for the year 2023-24 for approval of shareholders in the upcoming Annual General Meeting. The outgo on this account will be ^ 8896.62 lakh (approx.)
28. Consequent upon the Judgment of Common Cause dated 02.08.2017, which is applicable only to the mining leases of iron and manganese ore, passed by the Apex court in the case of Common Cause Vs UOI and others, a demand of ^ 4353.78 lakh was raised by the District Mining Officer of Jamshedpur for running the Surda mine without valid environment clearance (EC) although Surda mine has a valid mining lease, forest clearance and it has adhered to the terms of approved mining plan and it was working on valid Consent to Operate. Based on the Revision Application filed by the Company, the Revisional Authority of the Ministry of Mines, after hearing at length both parties had issued specific direction against the demand of District Mining Officer (DMO) not to take any coercive measures in terms of recovery of the said demand. On revision of demand from ^ 4353.78 lakh to ^ 12690.49 lakh by the office of the District Mining Officer and subsequently revised to ^ 92940.06 lakh by the State Government, the Company again appealed before the Revisional Authority and the last hearing was held on 30.11.2023 interim stay, granted earlier, is continued by the Revisional Authority till the next date of hearing. Further, MMDR Amendment Act, 2021 has come into force w.e.f. 28.03.2021 which clearly explained the expression “raising, transporting or causing to raise or transport any mineral without any lawful authority” shall mean raising, transporting or causing to raise or transport any mineral by a person without prospecting license, mining lease or composite license. Based on the clarification, the Company believes that the judgement of the case will be in favour of the Company and is of the view that the same has not to be shown as Contingent Liability as on 31.03.2024. On the hearing dated 30.11.2023 before Honourable Revisionary Authority, Ministry of Mines, GOI, State Government has been directed to file written submission in response to the affidavit filed by the Revisionist dated 28.09.2022. These documents are not yet filed by State Government as such the interim stay given in this case is continuing till the next date of hearing. The updated status in this regard is stated in Director's Report.
29. The previous year's figures have been regrouped / rearranged, wherever necessary.
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