Nature of Reserves
Capital Reserve Represents the amount on cancellation of share capital in terms of Composite Scheme of Arrangement.
Securities Premium :- Represents the amount received in excess of par value of securities. Premium on redemption of securities is accounted in security premium reserve available. Where security premium reserve is not available, premium on redemption of securities is accounted in statement of profit and loss. Section 52 of Companies Act, 2013 specify restriction and utilisation of security premium reserve.
Other Comprehensive Income Reserve :- Represents the balance in equity for items to be accounted in Other Comprehensive Income. OCI is classified into i). Items that will not be reclassified to profit and loss ii). Items that will be reclassified to profit and loss.
Secured Borrowings
The term loan facility from banks amounting to '1,158.68 Crore (' 1,249.76 Crore) are repayable in quarterly installments. '34.04 Crore during 2022-23 (one Installment of ' 5.54Crore, two installments of '7.28 Crore each and one installment of '13.94 Crore), ' 136.97 Crore during 2023-24 (four installments of ' 16.36 Crore, '36.85 Crore, '39.55 Crore and '44.21 Crore), ' 211.44 Crore during 2024-25 (four installments of '52.86 Crore each), '298.05 Crore during 2025-26 (one installments of '72.10 Crore, two installments of '75.07 crores and one installment of '75.81 Crore), '312.76 Crore during 2026-27 (three installments of '77.00 crores each and one installment of '81.76 Crore), ' 149.55 Crore during 2027-28 (four installments of '81.76 Crore, ' 53.01 Crore, '6.65 Crore and '8.13 Crore) ' 15.87 Crore during FY 2028-29 (two installments of ' 8.13 crores and '7.74 Crore ).
The term loan facility from financial institutions amounting to '46.25 Crore ('Nil) are repayable in quarterly installments. '5.00 Croreduring 2022-23 (four Installment of '1.25 Crore each), ' 8.75 Crore during 2023-24 (one installments of '1.25 Crore, and three installments of '2.50 Crore each), '10.00 Crore during 2024-25 (four installments of '2.50 Crore each), ' 10.00 Crore during 2025-26 (four installments of '2.50 Crore each), '8.50 Crore during 2026-27 (one installments of '2.50 Crore, three installments of '2.00 crores each), '4.00 Crore during 2027-28 (two installments of ' 2.00 Crore each).
Theterm loan facility is secured/ to be secured (partial charge in process of execution) by first pari-passu charge by way of mortgage of Company's immovable properties and hypothecation of moveable fixed assets both present & future and second pari-passu charge by way of hypothecation and/or pledge of current assets including finished goods, raw materials, work-inprogress, consumable stores and spares, book debts, bills receivable, etc both present and future. The stated term loanfacility are further secured/ to be secured by a first ranking pari-passu charge by way of hypothecation or assignment in relation to loans and advances advanced by the Company to JSL. (read with note no. 36)
The above term loans amounting to ' 1,057.19 Crore bear a fioafing rate of interest linked with State bank of India marginal cost of funds based lending rate or benchmark of respective banks plus applicable spread ranging from 10 bps to 210 bps. Balance facility of '147.74 Crore is linked to repo rate plus spread of 375 bps.
Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is '88.55 Crore (' 34.31 Crore).
Exceptional items for the year ended 31 March 2021 includes gain (net) ' 26.32 Crore on translation/settlement of foreign currency monetary items (including borrowing), gain (net) of '16.06
Crore upon marked to market of derivatives contracts and loss (net) of ' 2.31 Crore on forward cover cancellation.
The term loan facility and working capital facility of the Company are also secured/ to be secured by the following additional securities:
(i) Unconditional & irrevocable personal guarantee of Mr. Ratan Jindal;
(ii) Unconditional & irrevocable corporate guarantee of Jindal Stainless Limited (JSL);
(iii) Pledge of 87.7% of Promoter's shareholding, as determined on the basis of the filings of the Borrower with the Securities Exchange Board of India (SEBI);
(iv) Pledge of 8,98,68,647 shares of JSL (out of 16,82,84,309 shares) held by the Company in favour of lenders of the Company. Balance 7,84,15,662 no. shares have been pledged in favour of lenders of JSL;
(v) Pledge over investments of the Company in subsidiaries as listed below:
• JSL Lifestyle Limited; and
• JSL Logistics Limited
(a) On 29 December 2020, the Board of Directors of the Company had approved a Composite Scheme of Arrangement (the 'Scheme') under Sech'on 230 to 232 (read with Sech'on 66 and other applicable provisions) of Companies Act, 2013 amongst the Company, Jindal Stainless Limited, JSL Lifestyle Limited, Jindal Lifestyle Limited, JSL Media Limited and Jindal Stainless Corporate Management Services Private Limited. The Scheme having appointed date of 01 April 2020 is subject to necessary statutory and regulatory approvals under applicable laws, including approval of the Hon'ble Nah'onal Company Law Tribunal, Chandigarh Bench ("NCLT").
The Company has received the approval of Hon'ble NCLT on its first mofi on applicafion for convening the meefing of the Shareholders and Creditors on 25 February 2022. Further, the Shareholders and Creditors of the Company, in meefing held on 23 April 2022, have approved the Scheme with overwhelming majority. Currently, the Company is in process of filing the second motion application before the Hon'ble NCLT.
(b) The Company has assessed the possible impact of COVID-19 pandemic on its financial results based on the information available up to the date of approval of these financial statements. The Company is closely monitoring the impact of this pandemic and believes this pandemic may not have significant adverse impact on the long term operations and performance of the Company.
(b) Details of Loans given, investment made and guarantees given, covered U/S 186 (4) of the Companies Act ,2013:-
(i) Loans given and investment made are given under respective heads.
(ii) Corporate guarantee given and pledge of shares by the Company on behalf of parties covered u/s 186(4). Refer note no 33 D, 36 and 49.
(a) Research and Development expenses for the year amounting to ' 6.65 Crore (' 10.25 Crore) on account of revenue expenditure charged/debited to respective heads of accounts.
(b) Certain balances of trade receivable and trade payable are in process of confirmation and/or reconciliation. In the opinion of the management, on confirmation / reconciliation, there will not be any material impact.
(c) The Company has given inter corporate deposits to its two subsidiaries namely Green Delhi BQS Limited & JSL Media Limited, amounting to ' 22.60 Crore (' 22.60 Crore) {also investment of ' 0.10 Crore (' 0.10 Crore)} where the subsidiary companies has accumulated losses\negative net worth. In
view of the long term involvement of the Company and future prospects, in the opinion of the management, these are good and realizable hence no provision has been considered necessary.
The Company had challenged the legality of LADT Act / Entry Tax Act in the state of Haryana before the Hon'ble Punjab and Haryana High Court / Supreme Court of India. Subsequently, on the SLP of the Haryana Government, Constitutional Bench of the Hon'ble Supreme vide its judgement dated 11 November 2016 held the applicability of entry tax valid on compensatory ground and directed its Divisional/ Regular Bench for examining the provisions of the state legislation on the issue of discrimination with respect to the parameters of Article 304 (a) of the Constitution and competence of state legislatures to levy entry tax on goods entering the landmass of India from another country. The division bench of Hon'ble Supreme Court vide its order dated 21 March 2017 (declared on 20 May 2017) remanded back the matter and permitted the petitioners to file petition before respective High Court to decide on factual background or any other constitutional/ statutory issues arises for consideration. The company accordingly filed Civil Writ Petition before Hon'ble High Court of Punjab & Haryana on 30 May 2017. The Hon'ble High Court granted interim relief by order for stay of demand on 31 May 2017 till any further direction.
In the meanwhile, the division bench of Hon'ble Supreme Court of India vide its order dated 09 October 2017 has upheld the legislative competence of the State Legislatures to levy Entry Tax on Import of goods from any territory outside India while examining the Entry Tax legislations of the State of Odisha, Kerala and Bihar.
The Company has made necessary provisions in this regard based on own assessment and calculation.
In view of above, Interest/ penalty if any, will be accounted for as and when this is finally determined/ decided by the Hon'ble Court.
Financial risk management42.1 Financial risk factors
The Company's principal financial liabilities, other than derivafives, comprise borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilifies is to manage finances for the Company's operafions. The Company has loan, Investment, trade receivables, other receivables, cash and short-term deposits that arise directly from its operafions. The Company also enters into derivative transactions. The Company's activities expose it to a variety of financial risks:
(i) Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risk: currency rate risk, interest rate risk and other price risks, such as equity price risk and commodity risk. Foreign currency risk is the risk that the fair value or future cash flows of a 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 financial liabilities held as at 31 March 2022 and 31 March 2021.
(ii) Credit risk
Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss.
(iii) 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's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company's financial performance. The Company uses derivative financial instruments to hedge certain risk exposures. The Company does not acquire or issue derivative financial instruments for trading or speculative purposes.
Risk management is carried out by the treasury department under policies approved by the board of directors. The treasury team identifies, evaluates and hedges financial risks in close co-operation with the Company's operating units. The board provides principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, and credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
(i) Market risk
The sensitivity analysis excludes the impact of movements in market variables on the carrying value of post-employment benefit obligations provisions and on the non-flnancial assets and liabilities. The sensitivity of the relevant statement of profit and loss item is the effect of the assumed changes in the respective market risks. The Company's activities expose it to a variety of financial risks, including the effects of changes in foreign currency exchange rates and interest rates. The Company uses derivative financial instruments such as foreign exchange forward contracts depending upon the underlying
contract and risk management strategy to manage its exposures to foreign exchange fluctuations and interest rate.
Foreign exchange risk and sensitivity
An exposure can be defined as a contracted cash flow (trade receivables, trade payables, loans, purchase order placed or sales order received) denominated in a currency other than Indian Rupees. The Company may have foreign currency exposure on account of the following items:
Exposure against working capital -
i) Export trade receivables and export sales orders received;
ii) Imports trade payables and purchase orders raised;
iii) Packing credit in foreign currency (PCFC),
iv) Borrowings against FCNR(B) deposits of the banks;
v) Advances from customers;
vi) Any other kind of foreign currency borrowings as permitted by RBI for financing working capital of the Company.
viii) Exposure against long term financing/relating to projects:
i. Foreign currency borrowings for capital and project expansion;
ii. Payments due against imported capital equipment for projects;
iii. Purchase orders for capital expenditure;
iv. Any kind of foreign currency borrowing used for long term financing requirements of the Company.
The assumed movement in exchange rate sensih'vity analysis is based on the currently observable market environment.
The Company transacts business primarily in Indian Rupee, USD, EURO, GBP, JPY CHF and CAD. The Company has obtained foreign currency loans and has foreign currency trade payables and receivables and is therefore, exposed to foreign exchange risk. Certain transach'ons of the Company act as natural hedge as a porh'on of both assets and liabilities are denominated in similar foreign currencies. For the remaining exposure to foreign exchange risk, the Company adapts the policy of selech've hedging based on risk perceph'on of management. Foreign exchange hedging contracts are carried at fair value.
Interest rate risk and sensitivity
The Company will have Interest rate exposure on all interest bearing financial assets and liabilities. These could be broadly categorized as under:
a) Interest bearing trade receivables and trade payables;
b) Working capital borrowings;
c) Long term borrowings.
All interest bearing assets and liabilities need to be captured, first based on the currency denomination e.g., INR, USD & EURO. Further classification needs to be done based on whether these are against floating rate benchmarks or fixed rate
With all other variables held constant, the following table demonstrates the impact of borrowing cost on floating rate portion of borrowings and borrowings on which interest rate swaps are taken.
Price Risk and sensitivity
The Company is exposed to the movement in price of key raw materials in domestic and international markets. The Company has in place policies to manage exposure to fluctuations in the prices of the key raw materials used in operations. The Company enters into contracts for procurement of material, most of the transactions are short term fixed price contract and a few transactions are long term fixed price contracts.
The Company is not facing any exposure to equity price risk as all of its equity investments are within the group and its associates.
ii) Credit risk
The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions and other financial instruments.
Trade receivables
The Company extends credit to customers in normal course of business. The Company considers factors such as credit track record in the market and past dealings for extension of credit to customers. Outstanding trade receivables are regularly monitored. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets. The Company has also taken advances and security deposits from its customers, which mitigate the credit risk to an extent.
In determining the allowances for doubtful trade receivables, the Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and is adjusted for forward looking information. The expected credit loss allowance is based on the ageing of the receivables that are due and rates used in the provision matrix.
Financial instruments and cash deposits
The Company considers factors such as track record, size of the institution, market reputation and service standards to select the banks with which balances and deposits are maintained. The bank balances are maintained with the institutions with which the Company has also availed borrowings. The Company does not maintain significant cash and deposit balances other than those required for its day to day operations.
iii) Liquidity risk
The Company's objective is to at all times maintain optimum levels of liquidity to meet its cash and collateral requirements. The Company relies on a mix of borrowings, capital infusion and excess operating cash flows to meet its needs for funds. The current committed lines of credit are sufficient to meet its short to medium term expansion needs. The Company monitors rolling forecasts of its liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Company does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities.
The table below provides undiscounted cash flows towards non-derivative financial liabilities and net-settled derivative financial liabilities into relevant maturity based on the remaining period at the balance sheet date to the contractual maturity date.
The Company is required to maintain ratios (including total debt to EBITDA / net worth, EBITDA to gross interest, debt service coverage ratio and secured coverage ratio) as mentioned in the loan agreements at specified levels. In the event of failure to meet any of these ratios these loans become callable at the option of lenders, except where exemption is provided by lender.
42.2 Competition and price risk
The Company faces competition from domestic and international competitors. Nevertheless, it believes that it has competitive edvantage in terms of high quality products and by continuously upgrading its expertise and range of products and trustworthy and innovative solution to meet the needs of its custom ers.
42.3 Capital risk management
The Company m anages its capital structure and makes a djustments in light of changes in economic conditions and the requirements of the onancial «:>penants. To maintain or adjust the capital structure, she Company may adjust the dividend payment to shaoeholders, redeem or b uy back capital to oil areholders or issue new shares. The Company‘s primary objective when managing capital is to ensure that it maintains an efficient capital structure and healthy capital ratios and safeguard the Company‘s abil ity to continue as a goimg concern in ormer to support its bus iness and provide maximum returns for shareholders. Thy Company also proposes to maintain an optimal ca pital structure to reduce the cost of capital.
For the purpose of the Companyis capital management, capital includes issued capital, share premium and other equity. Net debt includes, interest bearing loans and borrowings less cash and cash equivalents excluding discontinued operations.
Fair values of financial assets and liabilities and hierarchy
The Company maintains policies and procedures to value financial assets or financial liabilities using the best and most relevant data available. The fair values 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:
1. Fair value of cash and deposits, trade receivables, trade payables, and other current financial assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
2. Long-term fixed-rate and variable-rate receivables / borrowings are evaluated by the Company based on parameters such as interest rates, 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 borrowing fair value is determined by using the discounted cash flow (DCF) method using discount rate that reflects the issuer's borrowings rate. Risk of nonperformance for the Company is considered to be insignificant in valuation.
3. The fair values 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 judgment, and inputs thereto are readily observable from actively quoted market prices. Management has evaluated the credit and non-performance risks associated with its derivative counterparties and believe them to be insignificant and not warranting a credit adjustment.
Fair value hierarchy
The following table provides the fair value measurement hierarchy of Company's financial asset and
financial liabilities, grouped into Level 1 to Level 3 as described below:
Level 1- Quoted price (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2- Inputs other than quoted prices include within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3- Unobservable inputs for the asset or liability.
There were no significant changes in the classification and no significant movements between the fair value hierarchy of assets and liabilities during financial year 2021-22.
Fair valuation of financial guarantees
Financial guarantees issued by the company on behalf of Jindal Stainless Limited have been measured at fair value through profit and loss. Fair value of said guarantees as at 31 March 2022, and 31 March 2021 have been considered at nil as estimated by the management and an independent professional.
Leases
The Company adopted Ind AS 116 "Leases" and applied the standard to all lease contracts existing on April 1, 2019 using the modified retrospective method. The Company has leases for office building, warehouses and related facilities.
The following is the movement in lease liabilities and corresponding Right to use asset for leases classified under lease arrangements during the year ended March 31, 2022.
Information related to consolidated financial statements
The Company is listed on stock exchange in India, the Company has prepared consolidated financial statements as required under IND AS 110 Consolidated Financial Statements, Sections 129 of Companies Act, 2013 and listing requirements. The consolidated financial statements is available on Company's web site for public use.
Segment Reporting
As per IND AS 108 Operating Segment, segment information has been provided in notes to consolidated financial statements.
Assets are tested for impairment whenever there are any internal or external indicators of impairment. Impairment test is performed at the level of each Cash Generah'ng Unit ('CGU') within the Company at which the goodwill or other assets are monitored for internal management purposes, within an operah'ng segment.
The impairment assessment is based on higher of value in use and fair value less costs of disposal.
B. Other regulatory informations
i) The Company does not have any benami property, where any proceeding has been initiated or pending against the Company for holding any benami property.
ii) The Company has not traded or invested in crypto currency or virtual Currency during the financial year.
iii) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (intermediaries) with the understanding that the intermediary shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (ultimate beneficiaries) or
(b) provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries
iv) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (funding party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the funding party (ultimate beneficiaries) or
(b) provide any guarantee, security or the like on behalf of the ultimate beneficiaries.
v) The Company does not have any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).
vi) The Company is not declared willful defaulter by and bank or financials institution or lender during the year.
vii) The Company does not have any charges or satisfaction which is yet to be registered with registrar of companies beyond the statutory period.
viii) The company has been sanctioned working capital limit in excess of '5.00 crore, in aggregate, during the year from banks on the basis of security of current assets. The quarterly returns or statements of current assets filed by the Company with banks are generally in agreement with the unaudited books of accounts of the company.
ix) The Company has used the borrowings from banks and financial institutions for the specific purpose for which it was obtained.
x) The Company does not have any transactions with companies which are stuck off.
56 No adjusting or significant non adjusting events have occurred between the reporting date and date of authorization of financial statements.
57 Previous years' figures have been re-arranged and regrouped wherever considered necessary. Figures less than Rs. 50000 have been shown as absolute number. Figures in bracket indicate previous year figures.
58 Note 1 to 58 are annexed to and form an integral part of the balance sheet and statement of profit & loss.
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