KIOCL Ltd. के अकाउंट के लिये नोट

Mar 31, 2025

1.14 Provisions, contingent liabilities and contingent
assets

Provisions for legal claims, service warranties, volume
discounts and returns are recognized when the
Company has a present legal or constructive obligation
as a result of past events, it is probable that an outflow
of resources will be required to settle the obligation and
the amount can be reliably estimated. Provisions are not
recognized for future operating losses.

Where there are a number of similar obligations, the
likelihood that an outflow will be required in settlement
is determined by considering the class of obligations as
a whole. A provision is recognized even if the likelihood
of an outflow with respect to any one item included in
the same class of obligations may be small.

Provisions are measured at the present value of
management''s best estimate of the expenditure
required to settle the present obligation at the end
of the reporting period. The discount rate used to
determine the present value is a pre-tax rate that reflects
current market assessments of the time value of money
and the risks specific to the liability. The increase in the
provision due to the passage of time is recognized as
interest expense.

A contingent liability is a possible obligation that arises
from past events whose existence will be confirmed
by the occurrence or non-occurrence of one or more
uncertain future events beyond the control of the
Company or a present obligation that is not recognised
because it is not probable that an outflow of resources
will be required to settle the obligation. A contingent
liability also arises in extremely rare cases where there is
a liability that cannot be recognised because it cannot
be measured reliably. The Company does not recognize
a contingent liability but discloses its existence in the
notes to financial statements.

Contingent assets are not recognised but disclosed in
the financial statements when an inflow of economic
benefit is probable.

The Company has significant capital commitments
in relation to various capital projects which are
not recognised but disclosed in the notes to
financial statements.

1.15. Employee benefits

Short term obligations: Liabilities for wages and salaries,
including non-monetary benefits that are expected
to be settled wholly within 12 months after the end of
the period in which the employees render the related
service are recognized in respect of employees service
up to the end of the reporting period and are measured
at the amounts expected to be paid when the liabilities
are settled. The liabilities are presented as current
Employee benefits payable in the balance sheet.

Other long term employee benefit obligations: The

liabilities for earned leave and sick leave are not
expected to be settled wholly within 12 months after
the end of the period in which the employees render
the related service. They are therefore measured as the
present value of expected future payments to be made
in respect of services provided by employees up to the
end of the reporting period using the projected unit
credit method. The benefits are discounted using the
market yields at the end of the reporting period that
have terms approximating to the terms of the related
obligation. Re-measurements as a result of experience
adjustments and changes in actuarial assumptions are
recognized in Profit or Loss.

The obligations are presented as current liabilities
in the Balance Sheet if the entity does not have an
unconditional right to defer settlement for at least
twelve months after the reporting period, regardless of
when the actual settlement is expected to occur.

Termination benefit

Compensation to employees under Voluntary
Retirement Scheme is charged to Statement of Profit
and Loss in the year of accrual.

Defined benefit plan

Gratuity: The liability or asset recognized in the Balance
Sheet in respect of defined benefit gratuity plans is the
present value of the defined benefit obligation at the end
of the reporting period less the fair value of plan assets.
The defined benefit obligation is calculated annually by
actuaries using the projected unit credit method.

Provident fund: The Company''s provident funds are
administered by Trust set up by the Company where
the Company''s obligation is to provide the agreed
benefit to the employees and the actuarial risk and
investment risk if any fall in substance on the Company
is treated as a defined benefit plan. Liability with regard
to such provident fund plans are accrued based on
actuarial valuation, based on Projected Unit Credit

Method, carried out by an independent actuary at the
Balance Sheet date.

The present value of the defined benefit obligation
denominated in Indian Rupees is determined by
discounting the estimated future cash outflows by
reference to market yields at the end of the reporting
period on government bonds that have terms
approximating to the terms of the related obligation.

The net interest cost is calculated by applying the
discount rate to the net balance of the defined benefit
obligation and the fair value of plan assets. This cost is
included in employee benefit expense in the statement
of Profit and Loss.

Re-measurement gains and losses arising from
experience adjustments and changes in actuarial
assumptions are recognized in the period in which they
occur, directly in other comprehensive income. They
are included in retained earnings in the Statement of
Changes in Equity and in the Balance Sheet.

Changes in the present value of the defined benefit
obligation resulting from plan amendments or
curtailments are recognized immediately in Profit or
Loss as past service cost.

Defined contribution plans

These are plans in which the Company pays pre-defined
amounts to separate funds and does not have any legal
or informal obligation to pay additional sums. These
comprise of contributions to the Employees'' Pension
Scheme, 1995 with the Government, superannuation fund
and certain state plans like Employees'' State Insurance
and Employees'' Pension Scheme. The Company''s
payments to the defined contribution plans are
recognized as expenses during the period in which the
employees perform the services that the payment covers.

1.16. Borrowing cost

Borrowing costs consists of interest expense and other
cost incurred in connection with the borrowing of funds.
Interest expense are recognized in the statement of
profit and loss using the effective interest method.

Borrowing cost that are attributable to the acquisition
or construction of the qualifying asset are capitalised as
part of the cost of such asset. Where the funds used
to finance a project form part of general borrowings,
the amount capitalised is calculated using a weighted
average of rates applicable to relevant general
borrowings of the Company during the year. A qualifying
asset is one that necessarily takes substantial period of

time to get ready for intended use. All other borrowing
costs are recognised in the Statement of Profit and Loss
in the period in which the same are incurred.

1.17. Income tax

The Income tax expense or credit for the period is the
tax payable on the current period''s taxable income
based on the applicable Income Tax rate adjusted by
changes in deferred tax assets and liabilities attributable
to temporary differences and to unused tax losses.

The current Income tax charge is calculated on the
basis of the tax laws enacted or substantively enacted at
the end of the reporting period in the countries where
the Company operate and generate taxable income.
Management periodically evaluates positions taken in
tax returns with respect to situations in which applicable
tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.

Deferred Income tax is provided in full using the
Balance sheet method, on temporary differences arising
between the tax bases of assets and liabilities and their
carrying amounts in the Financial Statements.

However, deferred tax liabilities are not recognized
if they arise from the initial recognition of goodwill.
Deferred income tax is also not accounted for if it
arises from initial recognition of an asset or liability in
a transaction other than a business combination that at
the time of the transaction affects neither accounting
profit nor taxable profit (tax loss). Deferred Income
Tax is determined using tax rates (and laws) that have
been enacted or substantially enacted by the end of the
reporting period and are expected to apply when the
related deferred income tax asset is realized or deferred
income tax liability is settled.

Deferred Tax Assets are recognized for all deductible
temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available
to utilize those temporary differences and losses.
Deferred tax is not to be recognized in respect of non¬
taxable government grant where the grant is deducted
from carrying amount of asset.

The carrying amount of deferred tax assets is reviewed
at each reporting date and reduced to the extent that
it is no longer probable that sufficient taxable profit will
be available in future to allow all or part of the deferred
tax assets to be utilised. Unrecognised deferred tax
assets are re-assessed at each reporting date and are
recognised to the extent that it has become probable

that future taxable profits will allow the deferred tax
assets to be recovered.

Deferred tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets
and liabilities and when the deferred tax balances relate
to the same taxation authority. Current tax assets and
tax liabilities are offset where the entity has a legally
enforceable right to offset and intends either to settle
on a net basis, or to realize the asset and settle the
liability simultaneously.

Current and deferred tax is recognized in Profit or Loss,
except to the extent that it relates to items recognized in
Other Comprehensive Income or directly in Equity. In this
case, the tax is also recognized in Other Comprehensive
Income or directly in Equity, respectively.

1.18. Government grants

Grants from the government are recognised at their fair
value where there is a reasonable assurance that the
grant will be received and the Company will comply
with all attached conditions.

Government grants relating to income are deferred and
recognised in the Profit or Loss over the period necessary
to match them with the costs that they are intended to
compensate and presented within other income.

Monetary Government grant related to assets shall be
presented by deducting the grant from the carrying
amount of the asset and non-monetary grant shall be
recognized at a nominal amount.

1.19. Foreign currency translation

a) Functional and presentation currency:

Items included in the financial statement of the
Company are measured using currency of the
primary economic environment in which the entity
operates (''the functional currency''). India being the
primary economic environment of the company,
the Financial Statements are presented in Indian
Rupee (INR), which is Company''s functional and
presentation currency.

b) Transactions and Balances: Foreign currency
transactions are translated into the functional
currency using the exchange rates at the dates
of the transactions. Foreign exchange gains
and losses resulting from the settlement of
such transactions and from the translation of
monetary assets and liabilities denominated in
foreign currencies at year end exchange rates are
recognized in Profit or Loss.

1.20. Segment reporting

Operating segments are reported in a manner
consistent with the internal reporting provided to the
Chief operating decision maker (CODM). The Chairman
cum Managing Director (CMD) assesses the financial
performance and position of the Company and makes
strategic decisions. Accordingly, the Chairman cum
Managing Director has been identified as the Chief
operating decision maker of the Company.

1.21. Earnings per share

Basic earnings per share: Basic earnings per share are
calculated by dividing:

i. The profit attributable to owners of the Company

ii. By the weighted average number of Equity Shares
outstanding during the Financial Year, adjusted for
bonus elements in Equity Shares issued during the
year and excluding treasury shares.

Diluted earnings per share: Diluted earnings per Share
adjusts the figures used in the determination of basic
Earnings per Share to take into account:

i. The after-income tax effect of interest and other
financing costs associated with dilutive potential
Equity Shares, and

ii. The weighted average number of additional
Equity Shares that would have been outstanding
assuming the conversion of all dilutive
potential Equity Shares.

1.22. Non-current assets (or disposal groups) held for
sale and discontinued operations

Non-current assets (or disposal groups) are classified as
held for sale if their carrying amount will be recovered
principally through a sale transaction rather than through
continuing use and a sale is considered highly probable.
They are measured at the lower of their carrying amount
and fair value less costs to sell, except for assets such
as deferred tax assets, assets arising from employee
benefits, financial assets and contractual rights under
insurance contracts, which are specifically exempt from
this requirement.

Non-current assets classified as Held for Sale and the
assets of a disposal group classified as held for sale
are presented separately from the other assets in
the Balance Sheet. The liabilities of a disposal group
classified as held for sale are presented separately from
other liabilities in the Balance Sheet.

Non-current assets (including those that are part of
a disposal group) are not depreciated or amortized
while they are classified as held for sale. Interest and
the other expenses attributable to the liabilities of a
disposal group classified as held for sale continue to
be recognized. An impairment loss is recognized for
any initial or subsequent write-down of the asset (or
disposal group) to fair value less costs to sell. A gain
is recognized for any subsequent increases in fair value
less costs to sell of an asset (or disposal group), but not
in excess of any cumulative impairment loss previously
recognized. A gain or loss not previously recognized by
the date of the sale of the non-current asset (or disposal
group) is recognized at the date of de-recognition.

A discontinued operation is a component of the entity
that has been disposed of or is classified as held for sale
and that represents a separate major line of business or
geographical area of operations, is part of a single co¬
ordinate plan to dispose of such a line of business or area
of operations, or is a subsidiary acquired exclusively with a
view to resale. The results of discontinued operations are
presented separately in the statement of Profit and Loss.

1.23. Exceptional items

Exceptional items are disclosed separately in the
Financial Statements where it is necessary to do so
to provide further understanding of the financial
performance of the company. They are material items
of income or expense that have been shown separately
due to the significance of their nature or amount.

2. Summary of significant judgements and
assumptions

The application of Accounting Standards and Policies
requires the Company to make estimates and assumptions
about future events that directly affect its reported financial
condition and operation performance. The accounting
estimates and assumptions discussed are those that the
Company considers to be most critical to its Financial
Statements. An accounting estimate is considered critical if
both (a) the nature of estimates or assumptions is material
due to the level of subjectivity and judgement involved, and
(b) the impact within a reasonable range of outcomes of the
estimates and assumptions is material to the Company''s
financial condition or operating performance.

Revenue recognition

The Company uses the percentage of completion method
using the input (cost expended) method to measure progress
towards completion in respect of fixed price contracts.
Percentage of completion method accounting relies on

estimates of total expected contract revenue and costs. This
method is followed when reasonably dependable estimates
of the revenues and costs applicable to various elements of
the contract can be made. Key factors that are reviewed in
estimating the future costs to complete include estimates of
future labour costs, materials and productivity efficiencies.

As the financial reporting of these contracts depends on
estimates that are assessed continually during the term of
these contracts, recognized revenue and profit are subject
to revisions as the contract progresses to completion. When
estimates indicate that a loss will be incurred, the loss is
provided for in the period in which the loss becomes probable.
The preparation of financial statements in conformity with Ind
AS requires management to make judgments, estimates and
assumptions that affect the application of accounting policies
and the reported amounts of assets, liabilities, income and
expenses. Actual results may differ from these estimates.

Defined benefit plan assumption

The measurement of the Company''s defined benefit
obligation to its employees and net periodic defined
benefit cost/income requires the use of certain assumptions,
including, among others, estimates of discount rates
and expected return on plan assets. Changes in these
assumptions may affect the future funding requirements of
the plans and actuarial gain/loss recognized in the statement
of comprehensive income.

Net realizable value and client demand: The Company
reviews the net realizable value of and demand for its
inventory on a quarterly basis to ensure recorded inventory
is stated at the lower of cost or net realizable value and that
obsolete inventory is written off.

Depreciation

Depreciation on property, plant and equipment has been
provided on Straight Line Method except certain assets
for which higher rates were considered based on their
estimated useful life as per the provisions of Schedule II of
Companies Act, 2013.

Depreciation on property, plant and equipment other than
Roads, Bridges and Culverts, Township, Furniture & Fittings,
Computers, Vehicles are provided for their remaining value
reduced by residual value over its remaining useful life
as technically assessed. The residual values are reviewed
periodically. As on 1st April, 2022 the remaining useful life
of assets Pellet Plant and Port facility was estimated for 5
years, the useful left over life of Captive Power Plant is 15
years from 1st April, 2014 and Blast Furnace Unit is 10 years
from 1st April, 2016. Additions during the year to Plant
Machinery except Components/ Machinery whose useful life

is different and capable of independent use, and limited to those useful life. Components/ Machinery whose useful life is different
from respective plant and machinery and capable of independent use depreciated with respective useful life.

Temporary Structures has been provided for in full, retaining a nominal value of H1 per item.

Depreciation on accounting software SAP S4/HANA made based on estimated useful life of 5 years from the date of use .

The value of assets and the rate of depreciations adopted vis-a-vis the life and rate of depreciation as per Companies Act, 2013
are as follows:

In respect of other assets i.e. Township Building, Roads-RCC and other than RCC, Furniture & Fittings - General, Furniture & Fittings
- Canteen & Guest House, Motor Vehicles, Office Equipment''s, Computers - Normal & Computers -Servers, the useful life as per
Schedule II of the Companies Act, 2013 has been adopted.

Component accounting of tangible assets being mandatory, where cost of part of the asset significant to total cost of the asset and
useful life of that part is different from useful life of principal asset, the useful life of that significant part determined separately for
computation of depreciation charge.

Application of new and amended standards

Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards under Companies (Indian
Accounting Standards) Rules as issued from time to time. For the year ended March 31, 2025, MCA has notified Ind AS - 117
Insurance Contracts and amendments to Ind AS 116 - Leases, relating to sale and leaseback transactions, applicable to the Company
w.e.f. April 1, 2024. The Company has reviewed the new pronouncements and based on its evaluation has determined that it does
not have any significant impact in its financial statements.

Standards notified but not yet effective

There are no new standards that are notified, but not yet effective, upto the date of issuance of the Company''s financial statements.
For and on behalf of Board of Directors

Sd/- Sd/- as per our report of even date

G. V. Kiran B. K. Mahapatra for M/s G Balu Associates LLF

Chairman-cum-Managing Director & Director (Commercial) Chartered Accountants

Director (Finance)-Addl. Charge (DIN 09613777) (FRN: 000376S/S200073)

(DIN 07605925)

Sd/- Sd/- Sd/-

Ram Krishna Mishra Clafton Siddharth CA. R. Ravishankar

(Chief Financial Officer) Company Secretary Partner

(PAN AAVPM8846M) (PAN : BCMPC5447C) (Membership No: 026819)

Place: Bengaluru
Date: 28^th May 2025

---

Mar 31, 2024

The fair value of the property, plant and equipment (PPE) is determined on the basis of valuation carried out at the reporting date by independent valuer. The fair value measurement for PPE has been categorized as Level 3 based on the valuation techniques used and inputs applied. The main inputs considered by the valuer are government rates, property location, market research, market trend, contracted rentals, terminal yields, discount rates and comparable values, as appropriate. In estimating the fair value of the PPE, the highest and best use of the properties is their current use.

Impairment of Assets (Ind AS 36)

The Company is having following two cash generated Units:

Pellet Plant Unit: The Pellet Plant Unit is continuously in operation and resulted in positive cash flow.

Pig Iron Plant Unit: Due to un-economic price of Pig Iron, Pig Iron Plant / Blast Furnace Unit (BFU) could not be operated during the year. After impairment test based on the net selling price as assessed by Approved Valuer, the recoverable amount in each class of assets in BFU are found to be more than the respective carrying amount. Hence, there is no impairment loss to be recognized during the year.

* The ROU of land includes 17,483 sq. mtrs 99 years leasehold land which was acquired by the Company from Karnataka Industrial Areas Development Board (KIADB) on payment of upfront lease premium at the time of commencement of lease and subsequesnt lease premium provided during the FY 2023-24 (paid in April 2024). The aggregate depreciation expense on ROU assets is included under depreciation and amortization expense in the Statement of Profit and Loss. The land allotted by KIADB at Doddaballapur to construct an R & D center, however due to certain pending approvals the R&D project yet to be commenced. The land alloted by KIADB is under ligation by 3^rd party due to encrochment. We have already intimated to KIADB ON 12^th September 2023 to settle the land dispute at the earliest for construction of balance portion of boundry wall.

*52.87 acres land valuing H 657.25 lakhs taken under 20 years lease from KIADB, for the purpose of constructing a railway siding, the lease is valid till 29.12.2028 and thereafter sale deed to be executed in favour of the Company. This land has been classified under ROU. Due to technical feasibility, the construction of railway siding is kept on hold. KIADB has fixed personal hearing on 2^nd February 2024 for implimentaion od project on alloted land. Based on thepersonal hearing letter dated 8^th April 2024 submitted to KIADB for permitting another 5 years to construct railway siding which is required for transportation of Iron Ore from our captive Devdari mine to Pellet Plant. Company has retained the classification as Right to use (ROU) asset as on 31^st March 2024 and as on 31^st March 2023.

* The Company had extended H 18 Crores inter-corporate loans to Hindustan Photo Films Mfg Company Ltd (HPF Ltd) during 1992-93. HPF Ltd has been declared to be sick under Sick Industrial Companies (Special provisions) Act 1985 in January 1996. Provision towards 100% of the said loan made in the books. The NCLT, Chennai has appointed Resolution Professional. The claim lodged by the Company has been admitted by the Resolution Professional. The liquidator vide letter dated 13.04.2023 forwarded the Resolution Plan and H 64,190 has been allocated under the plan to the Company for part of the assets sold under resolution process and an amount of H 38,848 received on 18.05.2023 and H 25,342 received on 16.09.2023. (Total receipt H 64,190 shown as Note no 18.2 "Other Income- Provision no longer required". C.A.Mahalingam Suresh Kumar was appointed as Liquidator. KIOCL has also filed claim before Liquidator amounting to H 154.54 Crores. The Liquidator has fixed dates for sale of Corporate debtor as a going concern. But e auction could not be done as there was no bidders.

* Raw materials includes goods in transit amounting to H 2420.40 lakhs (H 929.71 lakhs as on 31^st March 2023)

# Stores and spares includes goods in transit amounting to H 5.71 lakhs (H 150.52 lakhs as on 31^st March 2023)

^A100% Impairment is recognised for the value of non-moving stores & spares held for 5 years and above. Net peovision recognised H 65.49 lakhs during the year included in Note No. 24" Other expenses- Provision for surplus stores, DDR and others" (Previous year net provision withdrawn H 35.78 lakhs against items which were classified as moving items on usages included in Note no 18.2 "Other Income- Provision no longer required (Net))".

-For method of valuation for each class of Inventories refer Note No. 1.13

The Company uses a provision matrix to determine impairment loss on portfolio of its trade receivable. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates. At regular intervals, the historically observed default rates are updated and changes in forward-looking estimates are analysed.

a) Terms and rights attached to Equity Shares - The Company has only one class of equity shares having a par value of H 10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholder in ensuing Annual General Meeting except in case of interim dividend. In the event of liquidation of the Company, the shareholders will be eligible to receive remaining assets of the Company, after distribution of all preferential amounts, in proportion to their shareholding.

a) General reserve:

The general reserve is a free reserve which is used from time to time to transfer profits from retained earnings for appropriation purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the general reserve will not be reclassified subsequently to statement of profit and loss.

b) Capital redemption reserve

As per Companies Act, 2013, capital redemption reserve is created when company purchases its own shares out of free reserves or securities premium. A sum equal to the nominal value of the shares so purchased is transferred to capital redemption reserve. The reserve is utilized in accordance with the provisions of Section 69 of the Companies Act, 2013.

c) Retained Earnings:

This reserve represents undistributed accumulated earnings of the Company as on balance sheet date.

Term loan availed from Canara bank for setting of non recovery coke oven and ductile iron spun pipe at BFU Mangalore with exclusive charge hypothecation on project assets currently, structure assets, civil work, structure work and plant & equipment''s, financed out of the term loan. Applicable rate of interest is 3 months MCLR with annual reset. Loan tenure is 12 years (door to door tenure) including 4 years moratorium period, repayable in 32 quarterly instalments and intertest to be served as and when due. The loan has been utilized for the purpose for which it was availed.

The Company is having arrangement with Union Bank, Canara Bank, Punjab National Bank and State Bank of India regarding secured overdraft limit (against term deposit) as at 31^st March,2024 outstanding balance was H Nil, Nil , H Nil and H 3,292.56 Lakhs respectively. (As at 31^st March, 2023 outstanding balance was H 12,856.85 lakhs, Nil , H 2,927.20 Lakhs and H 2,2298.06 Lakhs).

1. Sale of Products are generally against advance payment by customers or are against letters of credit/ cash against documents and proceeds are realised within one month period. Accordingly, the amount of consideration does not contain any significant financing component.

2. Sale of Services are rendered to Departments of Central Government/State Government / Central PSUs/ State PSUs/ Corporates with short term credit period of one- two months and does not contain any significant financing component.

3. As per the terms of the contract with its customers, the Company has a right to receive consideration from its customers for all completed performance obligations. Accordingly, the Company has availed the practical expedient available under paragraph 121 of Ind AS 115 and dispensed with the additional disclosures with respect to performance obligations that remained unsatisfied (or partially unsatisfied) at the balance sheet date. Further, since the terms of the contracts directly identify the transaction price for each of the completed performance obligations there are no elements of transaction price which have not been included in the revenue recognized in the financial statements. Further, there is no material difference between the contract price and the revenue from contract with customers.

Nature of CSR Expenditure

During the year the Company has spent H 465.67 Lakhs (Previous year 589.96 laks) including H 40 Lakhs against on- going projects (previous year H 196.10 lakhs) and H 378.17 lakhs set off out of CSR expenditure brought forward (Previous year H 34.98 Lakhs) towards health care, promotion of education, eradicating hunger and poverty nutrition, community development.

28.1.2 Contingent liabilities and capital commitments A. Contingent liabilities 1.1 Claims against the company not acknowledged as Debt			(H in Lakhs)
S.	Particulars	As on 31st March,	As on 31st March,
No		2024	2023
A	Disputed claims under Excise Duty, Service Tax and Income Tax
(i)	Excise Duty	5,848.31	5,848.31
	(Demand for Special additional duty on DTA sales of Pellet for the FY 2010-11 & 2011-12, order passed by Hon''ble CESTAT on 17th Feb, 2022 upholding the benefit of Notification No 23/2003-CE dated 31.03.2003 with condition to produce proof of payment of VAT. The Company has filed a rectification of mistake (ROM) application and the same has been heard on 19th May, 2023, the final order for the ROM passed on 10th July 2023 without rectification except the correction of clerical error. The Company has preferred an appeal before Hon''ble High Court of Karnataka. on 5th December 2023, the case has been admitted, stay has been granted on 19th February,2024 and pending for final hearing.
(ii)	Customs Duty Additional Export Duty levied by Customs department on export of pellet based on CRCL sample analysis for two shipments made during the FY 2022-23	62.12
(iii)	Service Tax	60.77	60.77
	Service Tax demand on dispatch money for the FY 2012-13 & 2013-14, the department has filed appeal before CESTAT against the order of the Commissioner (Appeal).
(iv)	Income Tax	5,754.57	4,973.66
	The Company has filed an appeal against Income Tax assessment order for Assessment Year 2018-19 in CIT (A) u/s143(1) and 143(3). Last notice u/s 250 dt 17th Nov, 2023 received and written submission to the notice has been made on 4th December, 2023.
B	Claims by parties under Dispute/Arbitration/ Court Proceedings
(i)	Demand raised by Forest Department, Govt of Karnataka for raising height of Lakya dam, Kudremukh, arrear lease rent, permit & supervision charges and afforestation charges & penalty.	16,377.36	16,377.36
(ii)	Distance based charges claimed by East Coast Railways and penalty thereon (refer Note no. 28.3.1)	34,704.58	34,704.58
(iii) Forest Development Tax (NMDC)*		11,057.62	11,057.62
(iv)	M/s Haryana Khanak project- (HSIDC) (Bank Guarantee submitted towards security deposit, invoked by M/s HSIDC, the Company filed appeal before the Hon''ble Civil Court, Panchkula, Haryana and favorable order has been passed. M/s HSIDC filed appeal against order of Civil Court Panchkula, Haryana)	1,500.00	1,500.00
(v)	Others (Includes claims by employees, stock exchanges, contractors etc) Note: Additional disputed claims raised during the years has been included.	1,688.31	1,340.34
Total		77,053.64	75,862.64

* H 11,057.62 Lakhs (Previous year H 11,057.62 Lakhs) towards Forest Development Tax (FDT) at the rate of 12% of basic price of iron ore. The supplier NMDC Limited has filed a writ petition before the Hon''ble High Court of Karnataka challenging the levy of the same. The case was disposed of vide order dated 3^rd December, 2015 directing the Govt. of Karnataka to refund the FDT within three months. However, the Govt. of Karnataka has filed Special Leave Petition before the Hon''ble Supreme Court of India. The matter was listed on 9^th August, 2019 and the Hon''ble Supreme court directed to list the appeal for hearing.

Further, against H 11,057.62 Lakhs, an amount of H 2,617.43 Lakhs (Previous year H 2,617.43 Lakhs) (equivalent to 25% of FDT) collected earlier by NMDC as per the interim order of Hon''ble Court is shown under "Other Non-Current Assets" in Books of Accounts and the Bank Guarantee equivalent to H 2,734.87 Lakhs (Previous year H 2,734.87 Lakhs) furnished to NMDC in this regard has not been included under the contingent liabilities against Bills discounted/Letter of Credits/ Bank guarantees.

1.2	Contingent liabilities against Bills discounted/Letter of Credits/ Bank guarantees		(H in Lakhs)
	Particulars	As on 31st March, 2024	As on 31st March, 2023
	Contingent liabilities against Bills discounted/Letter of Credits/ Bank guarantees	4,389.63	2,813.70
B.	Capital commitments		(H in Lakhs)
	Particulars	As on 31st March, 2024	As on 31st March, 2023
	Estimated amount of the contracts to be executed on capital account and not provided for (net of advances)	11,202.74	20,710.18

28.2.1 Employee Benefits as per Ind AS 19 a) PF interest Guarantee:

The Company''s contribution to the Provident Fund is remitted to a separate Trust based on a fixed percentage of the eligible employee''s salary and charged to Statement of Profit and Loss. Further, the Company makes good the shortfall, if any, in the return from investments of the Trust vis-a-vis the notified rate of interest, based on actuarial valuation. During the year no additional provision made towards PF interest guarantee (Previous year H 439.01 Lakhs) based on actuarial valuation report.

(i) The Company is exempted under Section 17 of the EPF & MP Act, 1952 and the PF corpus is managed by a Trust. The plan assets of the Trust are managed by Board of Trustees.

(ii) Discount rate is based on the prevailing market yield of Indian Government securities as at the balance sheet date for the estimated term of the obligation.

(iii) The salary escalation rate is arrived taking into consideration the seniority in the promotion and other relevant factors, such as demand supply in employment market.

Sensitivity Analysis Method

Sensitivity Analysis Method is determined based on the expected movement in liability if the assumptions were not proved to be true

on different count.

i) Interest Risks: A Decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on the plan''s debt investments.

ii) Liquidity Risk: This is the risk that the Company is not able to meet the short-term Provident Fund pay outs. This may arise due

to non-availability of enough cash / cash equivalent to meet the liabilities or holding of ill liquid assets not being sold in time.

iii) Market Risk: Market risk is a collective term for risks that are related to the changes and fluctuations of the financial markets.

One actuarial assumption that has a material effect is the discount rate. The discount rate reflects the time value of money. An increase in discount rate leads to decrease in Defined Benefit Obligation of the plan benefits & vice versa. This assumption depends on the yields on the corporate / government bonds and hence the valuation of liability is exposed to fluctuations in the yields as at the valuation date.

iv) Legislative Risk/Regulatory Risk: Legislative risk is the risk of increase in the plan liabilities or reduction in the plan assets due to change in the legislation / regulation. The government may amend the Payment of Provident Fund Act thus requiring the companies to pay higher benefits to the employees. This will directly affect the present value of the Defined Benefit Obligation and the same will have to be recognized immediately in the year when any such amendment is effective.

b) Gratuity:

Liability with regard to gratuity benefits payable in future is determined by actuarial valuation at the end of the year using the projected unit method. Net provision towards Gratuity fund for the year is H 376.36 Lakhs (Previous year H 329.72 Lakhs (net)). The Company operates a gratuity plan administered by LIC under Group Gratuity Life Assurance Scheme of LIC of India. Every employee is entitled to a benefit equivalent to fifteen days salary last drawn for each completed year or part thereof in excess of 6 months of service subject to a maximum of H 20 Lakhs as per the Payment of Gratuity Act, 1972, as adopted by the Company through resolution in 257^th meeting of the Board held on 26^th March 2019. The same is payable at the time of separation from the company or retirement, whichever is earlier. Net Assets recognized in Balance Sheet is H 423.11 Lakhs under Note no 7 (Previous year H 81.02 Lakhs).

i. The plan assets of the Company are managed by Life Insurance Corporation of India through a trust managed by the company in terms of an insurance policy taken to fund obligations of the Company with respect to its gratuity plan. The categories of plan assets as a percentage of total plan assets is based on information provided by Life Insurance Corporation of India. Information on categories of plan assets as at 31 March, 2024 and 31 March, 2023 has not been provided by Life Insurance Corporation of India.

ii. The plan assets have been primarily invested in insurer managed funds. The Company contributes all ascertained liabilities towards gratuity to the Fund. The Gratuity plan provides a lump sum payment to the vested employees at retirement, death, incapacitation or termination of employment based on the respective employee''s salary and tenure of the employment with the company.

iii. Expected Contribution in respect of Gratuity for next year will be H 198.80 Lakhs (For the year ended March 31,2023 H 20 Lakhs).

iv. Discount rate is based on the prevailing market yield of Indian Government securities as at the balance sheet date for the estimated term of the obligation.

v. The salary escalation rate is arrived taking into consideration the seniority in the promotion and other relevant factors, such as demand supply in employment market.

(i) Inflation Risks : In the post-retirement plans ie, gratuity, the payment is not linked to inflation, so this is a less material risk.

(ii) Life Expectancy : The post-retirement plan obligations is to provide benefits for the life of the member, so regularly significant where inflationary increases result in higher sensitivity to changes in life expectancy.

28.2.5 Leases (Ind AS 116)

As Lessee

The Company''s significant leasing arrangements are in respect of operating leases for land and buildings. These arrangements generally range between 3 years and 30 years, except for certain land leases where the lease term ranges up to 99 years. In case of land taken on lease from New Mangalore port trust, termination option is exercisable only by the lessor. Hence, the management has considered the full term of the contract as the lease term, since the Company is liable to pay the lease rental as they do not have the right to terminate the contract.

The Company holds nine tracts of Land totaling 386,691 Sq. Mtrs. on long term lease from New Mangalore Port Trust (MNPT). Lease of the following four tracts of land, pending for registration of lease deeds, are considered as "Lease continuing" in view of company''s request for extension of lease with NMPT and the same being under their consideration and continuing in paying annual lease rent and the same is duly acknowledged and accepted by NMPT:

a) 213,783 Sq Mtrs of land taken for Port facilities

b) 9,120 Sq Mtrs of land taken for storage of iron ore fines

c) 27,008 Sq Mtrs of land taken for pellet storage yard and

d) 21,270 Sq Mtrs of land taken for Captive Power Plant

The Company has submitted Security Deposit of H 2,104.00 Lakhs during Jan, 2023 and May, 2023 in the form of Bank Guarantee of for Sl no (a), (c) and (d) for execution of the Lease Deed.

There are no sale and lease back transactions.

Ind AS 116 has resulted into an increase in cash inflows from operating activities and an increase in cash outflows from financing activities on account of lease payments.

The weighted average incremental borrowing rate applied lease liabilities towards land and building is 8.20% and 8.45% respectively.

The Company does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they become due.

Rental expenses recorded for short- term leases were H 98.42 Lakhs for the year ended 31^st March, 2024 (Previous year H 110.88 Lakhs).

As lessor

Rental income on assets given on operating leases was H 208.86 Lakhs for the year ended 31^st March, 2024 (Previous year H .182.36 Lakhs).

The Company has leased out its land under operating lease for periods ranging up to 7 years. Lease payments are structured with periodic escalations consistent with the prevailing market conditions. There are no variable lease payments to be received.

28.3 Others:

28.3.1 With the suspension of mining operations at Kudremukh mine site, the Company is procuring the iron ore fines from NMDC mines in Chhattisgarh state and transporting to its plant at Mangalore by rail cum sea route and from open market.

Railways vide letter No. H/C.474 Classification/11 dated 21^st October, 2011 raised an issue regarding the applicability of distance-based charge (DBC) over and above normal freight on Iron ore transported through railway network for manufacture of pellets and their subsequent export. Both South Western Railway (SWR) and East Coast Railway (ECR) have raised demand of H 44,447.86 Lakhs and H 10,361.38 Lakhs respectively towards distance-based charge (DBC) over and above normal freight on Iron ore transported.

As per the Company''s view, DBC should attract only for iron ore fines and lumps which are directly exported and not on the Iron Ore so moved and utilized in the steel plants for manufacture of finished product and exported thereafter. The same is also not applicable to Pig iron and Sponge Iron Industry.

Both KIOCL and SWR have reconcile DBC payable amount for 14,463.93 Lakhs and signed the minutes of meeting. KIOCL had filed writ petition before the Hon''ble High Court of Karnataka. The writ petition was dismissed and KIOCL filed writ appeal challenging the dismissal of the writ petition. The Hon''ble High Court has granted interim order staying DBC, subject to the condition that 50% of the demand excluding penalty is to be deposited. Thus, H 8,325.16 Lakhs was paid (against H 7,231.97 Lakhs I.e. 50% of 14,463.93 Lakhs) and for the balance amount of H 6,138.77 Lakhs (H 14,463.93 Lakhs -H 8,325.16 Lakhs) provision has been made in the books in the FY 2013-14.

Similarly, against the demand of H 10,361.38 Lakhs for DBC and H 31,084.14 Lakhs towards penalty, of ECR which after considering the freight already paid, DBC worked out to be H 6,740.94 Lakhs. KIOCL has filed WRIT petition before High Court of Orissa and High Court granted stay subject to deposit of 50% amount excluding the penalty. The Company has paid H 5,188.86 Lakhs, adjusted the paid amount against admitted liability of H 6,740.94 Lakhs and the balance amount of H 1,552.08 Lakhs provision has been made in the books FY 2013-14. As amount paid to ECR is more than the amount to be deposited based on order of High Court of Orissa, no separate entry has been made for deposit against disputed amount and undisputed amount in the book of accounts. The balance demand toward DBC and penalty of H 34,704.58 Lakhs has been included in contingent liabilities.

Both the cases are not listed so far. Railway has filed transfer petition before Hon''ble Supreme Court and both the cases are stayed by Supreme Court. The transfer petition is still pending before the Hon''ble Supreme Court.

28.3.2. During the FY 2008-09, the Company has claimed refund of congestion surcharge amounting to H 6,877.86 Lakh from South Western Railway (SWR) in respect of 573 rakes moved during 1^st April, 2007 to 21^st May, 2008 through the Company''s private Railway Siding at Panambur, Mangalore which was commissioned in January 2006. SWR refunded only H 2,725.39 Lakh till FY 2013-14 which includes H 206.70 Lakh adjusted by SWR towards DBC. During the FY 2014-15, the Company had approached Railway Claims Tribunal (RCT), Bangalore for refund of the balance amount of H 4,152.70 Lakh with interest. The Tribunal allowed the claim by its order dated 7^th December, 2018 and directed SWR to compute and pay the amount together with interest at 6% per annum and in case SWR fails to comply with the order, interest at 9% per annum is payable from 1^st April, 2019. SWR has filed petition against the order of Tribunal in Hon''ble High Court of Karnataka on 11^th April, 2019 vide case no MFA/3165/2019. KIOCL filed cross objection in the appeal and the case is still pending.. KIOCL has filed execution case before RCT Bangalore for realization of the ordered amount and the same is also pending.

The Konkan Railway offered concessional freight to the Company for movement of rakes through Konkan route instead of shorter route i.e., Hassan-Mangaluru, which has been accepted by the Company and 110 rakes were booked for the Konkan route. Subsequently, Konkan Railway allowed concessional freight for 92 rakes only and balance 18 rakes were moved through shorter routes i.e., Hassan-Mangaluru. Hence, during the FY 2008-09 the Company claimed refund of H 254.45 Lakhs from SWR towards differential freight. However, SWR has not refunded the amount. Hence, during the FY 2014-15 the Company approached RCT, Bengaluru and has claimed H 254.45 Lakhs with interest. The Tribunal dismissed the claim and the Company filed appeal before Hon''ble High Court of Karnataka during the FY 2018-19 and the same is pending.

East Coast Railway have collected 100% congestion surcharge instead of 30% for the rakes moved during the period from 15^th April, 2008 to 21^st May, 2008. During the FY 2008-09, the Company requested ECR for refunding H 436.83 Lakhs being 70% excess congestion surcharge collected in respect of 26 rakes. As ECR failed to refund the amount, the Company has filed a petition before the RCT, Bhubaneswar during the FY 2014-15 for refund of H 436.83 Lakhs with interest. The Tribunal dismissed the claim and the Company filed appeal before Hon''ble High Court of Odisha during the FY 2018-19. The High Court of Odisha has passed order on

17^th August 2023 and allowed the appeal filed by KIOCL in part. The High court directed Union of India to refund 70% of the congestion charges received from KIOCL for the period from 24^th April 2008 to 30^th April 2008 within period of four months. Accordingly, KIOCL has sent letter dated 09^th January 2024 and 26^th March 2024 requesting ECR to pay the ordered amount which is computed for H 121.00 Lakhs.

The Company has not recognized income for above three cases (SWR, Konkan Railway and ECR) in line with the Company''s significant accounting policy No.1.4, pending realization

28.3.3. In pursuance of the directives of the Hon''ble Supreme Court, mining activities at Kudremukh were stopped with effect from 01^st January 2006. Indian Bureau of Mines (IBM) has approved Final Mine Closure Plan (FMCP) of Kudremukh Iron Ore Mine and the same was communicated vide letter no. MS/CMG/Fe-38-52 dated 06^th May, 2005. At the time of closure of the mine, the Company filed a petition with prayers for direction, inter-alia, to permit utilization of 54.01 hectares of land required for the purpose of safety and slope stability of the mine.

The Hon''ble Supreme Court, in its judgment (December 2006), directed IIT Delhi to issue global tender for, inter-alia, re-analyzing the stability of slopes, drawing up of mine closure plan, implementation of the above plan and drawing up of detailed terms for the work to be done, consistent with basic paradigm of "no or minimal disturbance to un-broken area".

The expenditure for this purpose was to be met out of H 1,900/- Lakhs paid by the Company before closure of mining i.e. 31^st December, 2005, which is presently lying with the Compensatory Afforestation Fund Management and Planning Authority (CAMPA).

The Hon''ble Supreme Court has also directed that if any funds are required in excess of H 1,900/- Lakhs, the agency or the Designated Officer shall move to the Court for necessary direction.

Ministry of Mines Government of India, vide letter dated 07^th February, 2014, nominated the Regional Controller of Mines, IBM Bangalore as the ''Designated Officer'' to take possession of Kudremukh Iron Ore Mine. Accordingly, the Company has handed over the possession of the Kudremukh Iron Ore Mines on 03^rd April, 2014 to the Regional Controller of Mines, IBM Bangalore.

Subsequently, officials of IBM Bangalore and IIT, Delhi inspected the mine site on 20^th May, 2014, in which IIT Delhi opined that, keeping in view of the environment and safety concerns, the residual task of mine closure is relatively minor as compared to what was originally envisaged. Hence, the

amount of H 1,900/- Lakhs paid by the company to Central Empowered Committee (CEC) already lying with the CAMPA would be utilized for environmental restoration at Kudremukh Iron Ore Mine. In addition to above, the Company has also made provision to the extent of H 600/- Lakhs during the FY 2003-04 to 2005-06.

28.3.4. Total Mining Lease areas of 4,605.02 hectares of land at Kudremukh included an extent of 1,220.03 hectares of government revenue land, apart from forest land as well as the Company''s free hold land. The Designated Officer has taken over the entire Mining Lease area on 03^rd April, 2014 for carrying out the mine closure activities in compliance with Hon''ble Supreme Court orders dated 15^th December, 2006. However, the infrastructure and buildings located on revenue land and other lands being the property of the Company shall continue to remain in their physical possession till the cessation of mine closure activities. Till the year 2013-14, the land records of revenue land were in the name of the Company. Meanwhile Government of Karnataka has changed the revenue records removing the Company''s name. Hence the Company was constrained to file a suit before Hon''ble Civil Judge Court, Mudigere for an injunction against Government and others, restraining them from dispossessing the Company from the said revenue land. The Hon''ble Court heard the arguments and passed an interim order on 05^th November, 2013 restraining the defendants or anybody under them from dispossessing the Company from the Schedule Property (i.e. revenue land) in any manner till the disposal of the suit or till the modalities have been worked out and implemented as directed by the Hon''ble Supreme Court. The suit was dismissed on 20^th November, 2017.

In consideration of taking over of the entire Mining Lease area of 4,605.02 hectors comprising forest land, revenue land, Company''s own land and other lands by the Designated Officer for carrying out the mine closure activities in compliance with the Hon''ble Court''s direction, although their physical possession held with the Company, the Company depreciated all its township assets in full during the year 2014-15 as a prudent measure excluding freehold land of 114.31 hectors with books value H 29.06 Lakhs. and other movable assets.

28.3.5. Govt. of Karnataka vide its Gazette Notification dated 23.01.2017 reserved an area of 470.40 ha in Devadari Range in Bellary District for iron ore and manganese ore mining in favour of KIOCL under the provisions of Section 17A (2) of Mines and Minerals (Development and Regulation) Act, 1957.

KIOCL obtained statutory clearances viz Mining Plan approval by Indian Bureau of Mines, Environment Clearance by MoEF&CC, GoI , Consent for Establishment by KSPCB and Forest Clearance by MoEF&CC, GoI. Company paid H 174.14

Crores on 29.10.2021 towards NPV, CA charges and H 20.21 Crores on 23.09.2022 to Karnataka CAMPA fund towards differential CA charges etc as per the Stage - I FC condition.

KIOCL executed Mining Lease Deed of Devadari Iron Ore Mine with Director, Mines and Geology, Govt. of Karnataka on 02.01.2023 for 388 ha area for a period of 50 years for Iron Ore and Manganese Ore (ML No. 020 of 2023) mining. KIOCL has registered the Mining Lease Deed of Devadari Iron Ore Mine on 18.01.2023 at the Office of Sub-Registrar, Sandur Taluk, Ballari Dist and paid H 329.18 Crores towards stamp duty, cess and registration charges.

Govt. of Karnataka issued Government Order on 11.04.2023 for diversion of forest land for Devadari Iron Ore Mine. KIOCL will enter into Forest Lease Agreement with Dy. Conservator of Forests, Ballari for handing over the forest land.

As per Stage II Forest Clearance of Devadari Iron Ore Mine Project and as mentioned in the GO dated 11.04.2023, issue regarding Kudremukha mines needs to be regularized. With the approval of the Board on 9^th August''2023, a proposal forwarded in this regard for seeking permission from Govt of India through Ministry of Steel for handing over of 114.31 ha own land including building and other infrastructure at Kudremukh as is where is basis to Forest Department, GoK, permission from Govt of India is awaited.

Also, Company has placed applications in the Parivesh Portal of MoEF & CC for Regularization of Forest Land Utilized at Kudremukh National Park. The proposals are under active consideration of Forest Department.

Other issues as addressed above involving financial implications are being appropriately dealt with Forest Department for amicable settlement.

Techno Economic Feasibility Report of DIOM Project has got the approval from Board on 2^nd February''2024 further for seeking approval from Govt of India for development and operationalization of DIOM Project with an estimated CAPEX of H 1,78,389 Lakhs. The project CAPEX includes expenses towards Corporate Environmental Responsibility (CER) as stipulated in the Proposal for Environmental clearance of DIOM and the same will be utilized as per the plan. The proposal has already been placed before the PIB, Ministry of Finance through Ministry of Steel. Approval from Govt of India for DIOM Project is awaited.

A comprehensive Rehabilitation and Reclamation Plan (engineering measures to prevent and mitigate possible environmental concerns associated with the Project) for DIOM, is prepared by M/s Indian Council of Forestry Research and Education, MoEF & CC, Govt of India.

On handing over the forest land diverted for Devadari Iron Ore Mine by Forest Department, GoK., Company will undertake exploration, mine development activities development of internal roads, preparation/development of approach roads to waste dump areas, development of benches, establishment of crushing & screening units, establishment of weigh bridge, development of approach road to railway siding for evacuation of iron ore etc. Company has planned to produce the iron ore by Dec 2024 from Devadari Iron Ore Mine.

Capital expenditure incurred for development of Devadari Iron ore mines upto 31^st march 2024 amounting to H 52,988.31 Lakhs including NPV, CA, stamp duty, cess, registration charges and other incidental charges are classified as mining right under other intangible assets vide note No. 4.1 upon approval of TEFR, (Previous year H 52,728.73 Lakhs was classified as mining right under acquisition under Intangible assets under development vide Note No 4.2.)

28.3.6. Since the closure of mining activities, consequent upon the judgment of Hon''ble Supreme Court w.e.f. 1^st January, 2006, Mangalore Pellet Plant and also Blast Furnace Unit continue to draw the required water from Lakya Dam at Kudremukh. Hence, dam maintenance activity from the safety point of view and maintenance of water drawal system which include electrical and pipeline maintenance are still continuing. Therefore, Kudremukh installation is a working unit as on date as an integral part of Mangalore unit.

28.3.7. In order to utilize the Blast Furnace Unit, the company has made a project proposal for Backward and Forward Integration of the Unit involving capital expenditure of H 836.90 Crore and the same has been approved by the Board in its 255^th meeting held on 13^th November 2018. The same has been approved by Public Investment Bureau (PIB). Environment clearance has been granted by MOEF&CC, GOI on 27^th February, 2020. M/s MECON has been appointed as EPCM contractor for the project.

The installation & commissioning of Coke oven under backward integration project has been entrusted to M/s Tuaman Engineering Limited, Kolkata as a EPC contractor on lumpsum turnkey basis with technology provided by M/s CIMFR, GoI, Dhanbad. The construction works of coke oven are under progress and is expected to be commissioned by 31.03.2025.

The contracts for the balance packages under backward & forward viz., Ductile Iron Spun Pipe plant, Co-Gen Power Plant, Upgradation of Blast furnace, Pulverized Coal Injection system, Oxygen plant and Nitrogen plant could not be concluded due to high cost and change in public procurement policy. Hence, further process of re-tendering is kept on hold. The Joint Venture (JV) option is being explored for setting up

of facilities for value added products in Blast Furnace Unit. Some of the prospective JV partners have responded to KIOCL''s Expression of Interest (EOI) and are under discussion.

During the year the Company has incurred H 8.52 Lakhs (Previous year H 16.84 Lakhs) towards Excavation and loading of 1,431.31 MT (Previous year 3,510.47 MT) of auxiliary material of Pig Iron at BFU. The said materials of 351.31 MT worth H 38.54 Lakhs were sold during the year (Previous year 4,085.47MT worth H 470.91 Lakhs). As at the end of the year, Company was holding a physical stock of 1,860 MT (Opening 780 MT plus excavated 1,431.31 MT less 351.31 MT sold) of the same (Previous year 780 MT). As the cost of production of the same had been accounted for in earlier years, the same is valued at nil cost as at the end of the year, although the market value of the same is H 204.02 Lakhs (Previous year H 89.91 Lakhs) as per last sale price of similar product. As a prudent accounting measure, no value has been assigned to the stock in the Books of Accounts.

28.3.8. (a) Expenses incurred towards generation of power being a

significant cost of production have been included under the primary heads of account.

(b) Expenses incurred towards Stores, Spares, Consumables and Additives being a significant cost of production have been included under the primary heads of account.

28.3.9. Financial Risk Management

The Company''s business activities expose it to a variety of financial risks, namely liquidity risk, market risk, credit risk and currency risk. The Company''s senior management has

overall responsibility for the establishment and oversight of the Company''s risk management framework. The Company has constituted a Risk Management Committee, which is responsible for developing and monitoring the Company''s risk management policies. The key financial risks and mitigating actions are also placed before the Risk Management Committee / Audit Committee of the Company. The Company''s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits, to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company''s activities.

The Risk Management Committee of the Company is supported by the Finance team and experts of respective business divisions that provides assurance that the Company''s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company''s policies and risk objectives. The activities are designed to:

• Protect the Company''s financial results and position from financial risks.

• Maintain market risks within acceptable parameters, while optimizing returns

• Protect the Company''s financial investments, while maximizing returns.

The investment committee is responsible for maximizing the return on Company''s internally generated funds.

I. Management of Liquidity Risk

Liquidity risk is the risk that the Company faces in meeting its obligations associated with its financial liabilities. The Company''s approach to managing liquidity is to ensure that it has sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions. A material and sustained shortfall in our cash flow could undermine the Company''s credit rating and impair investor confidence. The following table shows the maturity analysis of the Company''s financial liabilities based on contractually agreed undiscounted cash flows as at the Balance Sheet date:

II. Management of Market Risk

Market risks comprises of Price risk & Interest rate risk. The Company does not designate any fixed rate financial assets as fair value through Profit and Loss nor at fair value through OCI. Therefore, Company is not exposed to any interest rate risks. Similarly, the Company does not have any financial instrument which is exposed to change in price.

III. Management of Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to customers and other receivables. The Company applies prudent credit acceptance policies, performs ongoing credit portfolio monitoring as well as manages the collection of receivables in order to minimize the credit risk exposure.

The maximum exposure to credit risk for each class of financial instruments is the carrying amount of that class of financial instruments presented in the notes to the Financial Statements. The Company''s major classes of financial assets are cash and cash equivalents, term deposits and trade receivables. For banks and financial institutions, only high rated banks / institutions are accepted.

Trade Receivables

Concentrations of credit risk with respect to trade receivables are limited, since the Company''s most of the sales (more than 95%) are secured against Letter of Credit and/or Bank Guarantee. Accordingly, based expected credit loss (ECL) experience, the Company has grouped the trade receivable into secured and unsecured.

The Company has applied the simplified approach for calculating ECL for both secured and unsecured trade receivables. During the year ECL assessed for secured and unsecured trade receivables are Nil and H 480 Lakhs respectively (Previous year Nil and H 80 Lakhs) and provision made in the books is included in Note no 9.1.

The carrying value of the financial assets represents the maximum credit exposure. The Company''s maximum exposure to credit risk is H 708.23 Lakhs and H 35,422.40 Lakhs as at 31 March 2024 and 31 March 2023 respectively.

IV Foreign Currency Risk

The Company being an EOU, is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar (USD), Euro (EUR), and Japanese Yen (JPY). Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities denominated in a currency that is not the Company''s functional currency (INR). The currency risk of the said underlying asset is managed by entering into foreign currency forward contracts (only on need basis).

28.3.10 Capital Management

The Company considers the following components of its Balance Sheet to be managed capital:

Total equity as shown in the Balance Sheet includes Retained Earnings and Share Capital. The Company aim to manage its capital efficiently so as to safeguard its ability to continue as a going concern and to optimize returns to our shareholders. The capital structure of the Company is based on management''s judgement of the appropriate balance of key elements in order to meet its strategic and day-to-day needs. The Company considers the amount of capital in proportion to risk and manages the capital structure in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.

The Company''s policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain future development and growth of its business. The Company takes appropriate steps in order to maintain, or if necessary, adjust, its capital structure. Company is not subject to financial covenants in any of its significant financing agreements.

(ii) Fair Value Hierarchy

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and consists of the following three levels:

Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 — Inputs are 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 — Inputs are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.

There have been no transfers among Level 1, Level 2 and Level 3 during the period.

Valuation Process

Forward contracts - Future cash flows are estimated based on forward exchange rates (from observable forward exchange rates at the end of the reporting period) and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties.

Trade receivables, cash and cash equivalents, other bank balances, loans, other financial assets, current borrowings, trade payables and other current financial liabilities: fair values approximate their carrying amounts largely due to the short-term maturities of these instruments.

For all other financial instruments, the carrying amount is either the fair value, or approximates the fair value.

28.3.12 Derivative financial instruments

The Company uses derivative instruments as part of its management of exposure to fluctuations in foreign currency exchange rates. The Company does not acquire or issue derivative financial instruments for trading or speculative purposes. The derivative transactions are normally in the form of forward contracts, and these are subject to the Company guidelines and policies.

The fair values of all derivatives are separately recorded in the balance sheet within current and non-current assets and liabilities.

The use of derivatives can give rise to credit and market risk. The Company tries to control credit risk as far as possible by only entering into contracts with reputable banks and financial institutions. The use of derivative instruments is subject to limits, authorities and regular monitoring by appropriate levels of management. The limits, authorities and monitoring systems are periodically reviewed by management and the Board.

The market risk on derivatives is mitigated by changes in the valuation of the underlying assets, liabilities or transactions, as derivatives are used only for risk management purposes.

28.3.15 During the current year 1.91 million tons of pellet produced and plant was under shutdown for 129 days due to non-availability of raw-material and unviable market conditions ( 92 days for to non-availability of raw material and 37 days for unviable market conditions) previous year 1.51 million tons of pellet produced and plant was under shutdown 186 days due to levy of 45% export duty by GOI and non-availability of raw-material ( 172 days for levy of 45% export duty by GOI and 14 days for non-availability of raw-material). The pellet plant was under shutdown for unviable market condition from 24.02.2024 and started on 29.05.2024..

28.3.16. The Company has not declared any Interim Dividend for the FY 2023-24 (Previous year NIL) due to loss for the current year and previous year

Proposed Dividend:

The Company has approach DIPAM, Ministry of Finance through Ministry of Steel for seeking exemption from ''Payment of Dividend'' for the Financial Year 2023-24 in line with the O.M dated 27^th May 2016. Ministry of Steel vide its Office Memorandum dated F.No.12/3/2021-DIPAM-V recommended DIPAM to exempt KIOCL from payment of Dividend for FY 2023-24. Accordingly, no dividend has been proposed for the current year (Previous year total dividend Nil as per DIPAM exemption letter No.S-25016/34/2022-KIOCL including interim and final dividend.)

28.3.17. Other disclosures :

i) No proceedings have been initiated on or are pending against the company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.

ii) The company has not been declared willful defaulter by any bank or financial institution or government or any government authority.

iii) The Company has no transactions with the companies struck off under Companies Act, 2013 or Companies Act, 1956.

iv) The Company is not required to file quarterly returns or statements with the banks as the overdraft facility is drawn against

deposit with banks.

v) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period,

vi) The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.

vii) 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.

viii) 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,

ix) There is no income surrendered or disclosed as income during the current or previous year in the tax assessments under the Income Tax Act,1961, that has not been recorded in the books of account.

x) The Company has not traded or invested in crypto currency or virtual currency during the current or previous year.

xi) The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the current or previous year.

28.3.18 Figures for the previous year have been regrouped/reclassified to conform to the figures of the current year

---

Mar 31, 2023

The fair value of the property, plant and equipment (PPE) is determined on the basis of valuation carried out at the reporting date by independent valuer. The fair value measurement for PPE has been categorized as Level 3 based on the valuation techniques used and inputs applied. The main inputs considered by the valuer are government rates, property location, market research, market trend, contracted rentals, terminal yields, discount rates and comparable values, as appropriate. In estimating the fair value of the PPE, the highest and best use of the properties is their current use.

Impairment of Assets (Ind AS 36)

The Company is having following two cash generated Units:

Pellet Plant Unit: The Pellet Plant Unit is continuously in operation and resulted in positive cash flow.

Pig Iron Plant Unit: Due to un-economic price of Pig Iron, Pig Iron Plant / Blast Furnace Unit (BFU) could not be operated during the year. After impairment test based on the net selling price as assessed by Approved Valuer, the recoverable amount in each class of assets in BFU are found to be more than the respective carrying amount. Hence, there is no impairment loss to be recognized during the year.

a) Terms and rights attached to Equity Shares - The Company has only one class of equity shares having a par value of H 10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholder in ensuing Annual General Meeting except in case of interim dividend. In the event of liquidation of the Company, the shareholders will be eligible to receive remaining assets of the Company, after distribution of all preferential amounts, in proportion to their shareholding.

a) General reserve:

The general reserve is a free reserve which is used from time to time to transfer profits from retained earnings for appropriation purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the general reserve will not be reclassified subsequently to statement of profit and loss.

b) Capital redemption reserve

As per Companies Act, 2013, capital redemption reserve is created when company purchases its own shares out of free reserves or securities premium. A sum equal to the nominal value of the shares so purchased is transferred to capital redemption reserve. The reserve is utilized in accordance with the provisions of Section 69 of the Companies Act, 2013.

c) Retained Earnings:

This reserve represents undistributed accumulated earnings of the Company as on balance sheet date.

Term loan availed from Canara bank for setting of non recovery coke oven and ductile iron spun pipe at BFU Mangalore with exclusive charge hypothecation on project assets currently, structure assets, civil work, structure work and plant & equipment''s, financed out of the term loan. Applicable rate of interest is 3 months MCLR with annual reset. Loan tenure is 12 years (door to door tenure) including 4 years moratorium period, repayable in 32 quarterly instalments and intertest to be served as and when due. The loan has been utilized for the purpose for which it was availed.

1. Sale of Products are generally against advance payment by customers or are against letters of credit/ cash against documents and proceeds are realised within one month period. Accordingly, the amount of consideration does not contain any significant financing component.

2. Sale of Services are rendered to Departments of Central Government/State Government / Central PSUs/ State PSUs/ Corporates with short term credit period of one- two months and does not contain any significant financing component.

3. As per the terms of the contract with its customers, the Company has a right to receive consideration from its customers for all completed performance obligations. Accordingly, the Company has availed the practical expedient available under paragraph 121 of Ind AS 115 and dispensed with the additional disclosures with respect to performance obligations that remained unsatisfied (or partially unsatisfied) at the balance sheet date. Further, since the terms of the contracts directly identify the transaction price for each of the completed performance obligations there are no elements of transaction price which have not been included in the revenue recognized in the financial statements. Further, there is no material difference between the contract price and the revenue from contract with customers.

28.1.2 Contingent liabilities and capital commitments A. Contingent liabilities

1.1 Claims against the company not acknowledged as Debt			(H in Lakhs)
S. No	Particulars	As on 31st March, 2023	As on 31st March, 2022
A	Disputed claims under Excise Duty, Service Tax and Income Tax
(i)	Excise Duty (Demand for Special additional duty on DTA sales of Pellet for the FY 201011 & 2011-12, order passed by Hon''ble CESTAT on 17th Feb, 2022 upholding the benefit of Notification No 23/2003-CE dated 31.03.2003 with condition to produce proof of payment of VAT. The Company has filed a rectification of mistake (ROM) application and the same has been heard on 19th May, 2023 without rectification except the correction of clerical error. On receipt of the certified order copy the Company will prefer the further appeal to Hon''ble High Court of Karnataka.)	5,848.31	5,848.31
(ii)	Service Tax Service Tax demand on dispatch money for the FY 2012-13 & 2013-14, the department has filed appeal before CESTAT against the order of the Commissioner (Appeal).	60.77	60.77
(iii)	Income Tax The Company has filed appeal against Income Tax assessment order for Assessment Year 2018-19 in CIT (A). Note- Disputed Liability for the AY 2013-14 and 2014-15 for H 633.28 Lakhs has been withdrawn during the year as final favorable order has been passed by CIT(A). As per the order, the CIT(A) has directed the Assessing Officer for verification and to pass revised order.	4,973.66	5,606.94
B	Claims by parties under Dispute/Arbitration/ Court Proceedings
(i)	Demand raised by Forest Department, Govt of Karnataka for raising height of Lakya dam, Kudremukh, arrear lease rent, permit & supervision charges and afforestation charges & penalty. (An amount of H 1675.01 lakhs reduced from the current year and previous year as equal amount of provision exists in the books)	16,377.36	16,377.36
(ii)	Distance based charges claimed by East Coast Railways and penalty thereon (refer Note no. 28.3.1)	34,704.58	34,704.58
(iii)	Forest Development Tax (NMDC)*	11,057.62	11,057.62
(iv)	M/s Haryana Khanak project- (HSIDC) (Bank Guarantee submitted towards security deposit, invoked by M/s HSIDC, the Company filed appeal before the Hon''ble Civil Court, Panchkula, Haryana and favorable order has been passed. M/s HSIDC filed appeal against order of Civil Court Panchkula, Haryana)	1,500.00	1,500.00
(v)	Others (Includes claims by employees, stock exchanges, contractors etc) Note: Additional disputed claims raised during the years has been included.	1,340.34	414.06
Total		75,862.64	75,569.64
* Includes H 11,057.62 Lakhs (Previous year H 11,057.62 Lakhs) towards Forest Development Tax (FDT) at the rate of 12% of basic price of iron ore. The supplier

NMDC Limited has filed a writ petition before the Hon''ble High Court of Karnataka challenging the levy of the same. The case was disposed of vide order dated 3^rd December, 2015 directing the Govt. of Karnataka to refund the FDT within three months. However, the Govt. of Karnataka has filed Special Leave Petition before the Hon''ble Supreme Court of India. The matter was listed on 9^th August, 2019 and the Hon''ble Supreme court directed to list the appeal for hearing.

Further, out of H 11,057.62 Lakhs, an amount of H 2,617.43 Lakhs (Previous year H 2,617.43 Lakhs) (equivalent to 25% of FDT) collected earlier by NMDC as per the interim order of Hon''ble Court is shown under "Other Non-Current Assets" in Books of Accounts and the Bank Guarantee equivalent to H 2,734.87 Lakhs (Previous year H 2,734.87 Lakhs) furnished to NMDC in this regard has not been included under the contingent liabilities against Bills discounted/Letter of Credits/ Bank guarantees.

1.2 Contingent liabilities against Bills discounted/Letter of Credits/ Bank guarantees		(H in Lakhs)
Particulars	As on 31st March, 2023	As on 31st March, 2022
Contingent liabilities against Bills discounted/Letter of Credits/ Bank guarantees	2,813.70	1,713.91
B. Capital commitments.		(H in Lakhs)
Particulars	As on 31st March, 2023	As on 31st March, 2022
Estimated amount of the contracts to be executed on capital account and not provided for (net of advances)	20,710.18	23,534.31

(i) The Company is exempted under Section 17 of the EPF & MP Act, 1952 and the PF corpus is managed by a Trust. The plan assets of the Trust are managed by Board of Trustees.

(ii) Discount rate is based on the prevailing market yield of Indian Government securities as at the balance sheet date for the estimated term of the obligation.

(iii) The salary escalation rate is arrived taking into consideration the seniority in the promotion and other relevant factors, such as demand supply in employment market.

b) Gratuity:

Liability with regard to gratuity benefits payable in future is determined by actuarial valuation at the end of the year using the projected unit method. Net provision towards Gratuity fund for the year is H 329.72 Lakhs (Previous year H 366.82 Lakhs (net)). The Company operates a gratuity plan administered by LIC under Group Gratuity Life Assurance Scheme of LIC of India. Every employee is entitled to a benefit equivalent to fifteen days salary last drawn for each completed year or part thereof in excess of 6 months of service subject to a maximum of H 20 Lakhs as per the Payment of Gratuity Act, 1972, as adopted by the Company through resolution in 257^th meeting of the Board held on 26^th March 2019. The same is payable at the time of separation from the company or retirement, whichever is earlier. Net Assets recognized in Balance Sheet is H 81.02 Lakhs under Note no 7 (Previous year Net Liability of H 67.81 Lakhs).

i. The plan assets of the Company are managed by Life Insurance Corporation of India through a trust managed by the company in terms of an insurance policy taken to fund obligations of the Company with respect to its gratuity plan. The categories of plan assets as a percentage of total plan assets is based on information provided by Life Insurance Corporation of India. Information on categories of plan assets as at 31 March, 2023 and 31 March, 2022 has not been provided by Life Insurance Corporation of India.

ii. The plan assets have been primarily invested in insurer managed funds. The Company contributes all ascertained liabilities towards gratuity to the Fund. The Gratuity plan provides a lump sum payment to the vested employees at retirement, death, incapacitation or termination of employment based on the respective employees salary and tenure of the employment with the company.

iii. Expected Contribution in respect of Gratuity for next year will be H 20 Lakhs (For the year ended March 31, 2022 H 18.53 Lakhs).

iv. Discount rate is based on the prevailing market yield of Indian Government securities as at the balance sheet date for the estimated term of the obligation.

v. The salary escalation rate is arrived taking into consideration the seniority in the promotion and other relevant factors, such as demand supply in employment market.

28.2.5 Leases (Ind AS 116)

As Lessee

The Company''s significant leasing arrangements are in respect of operating leases for land and buildings. These arrangements generally range between 3 years and 30 years, except for certain land leases where the lease term ranges up to 99 years. In case of land taken on lease from New Mangalore port trust, termination option is exercisable only by the lessor. Hence, the management has considered the full term of the contract as the lease term, since the Company is liable to pay the lease rental as they do not have the right to terminate the contract.

The Company holds nine tracts of Land totaling 386,691 Sq. Mtrs. on long term lease from New Mangalore Port Trust (MNPT). Lease of the following four tracts of land, pending for registration of lease deeds, are considered as "Lease continuing" in view of company''s request for extension of lease with NMPT and the same being under their consideration and continuing in paying annual lease rent and the same is duly acknowledged and accepted by NMPT:

a) 213,783 Sq Mtrs of land taken for Port facilities

b) 9,120 Sq Mtrs of land taken for storage of iron ore fines

c) 27,008 Sq Mtrs of land taken for pellet storage yard and

d) 21,270 Sq Mtrs of land taken for Captive Power Plant

The Company has submitted Security Deposit of H 2,104.00 Lakhs during Jan, 2023 and May, 2023 in the form of Bank Guarantee of for Sl no (a), (c) and (d) for execution of the Lease Deed.

There are no sale and lease back transactions.

The Company does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they become due.

Rental expenses recorded for short- term leases were H 110.88 Lakhs for the year ended 31^st March, 2023 (Previous year H 147.94 Lakhs).

As lessor

Rental income on assets given on operating leases was H 182.36 Lakhs for the year ended 31^st March, 2023 (Previous year H 164.64 Lakhs).

The Company has leased out its land under operating lease for periods ranging up to 7 years. Lease payments are structured with periodic escalations consistent with the prevailing market conditions. There are no variable lease payments to be received.

28.3 Others:

28.3.1 With the suspension of mining operations at Kudremukh mine site, the Company is procuring the iron ore fines from NMDC mines in Chhattisgarh state and transporting to its plant at Mangalore by rail cum sea route and from open market.

Railways vide letter No. H/C.474 Classification/11 dated 21^st October, 2011 raised an issue regarding the applicability of distance-based charge (DBC) over and above normal freight on Iron ore transported through railway network for manufacture of pellets and their subsequent export. Both South Western Railway (SWR) and East Coast Railway (ECR) have raised demand of H 14,463.93 Lakhs and H 10,361.38 Lakhs respectively towards distance-based charge (DBC) over and above normal freight on Iron ore transported.

As per the Company''s view, DBC should attract only for iron ore fines and lumps which are directly exported and not on the Iron Ore so moved and utilized in the steel plants for manufacture of finished product and exported thereafter. The same is also not applicable to Pig iron and Sponge Iron Industry.

Accordingly, against the demand of H 14,463.93 Lakhs of SWR, KIOCL had filed writ petition before the Hon''ble High Court of Karnataka. The writ petition was dismissed and KIOCL filed writ appeal challenging the dismissal of the writ petition. The Hon''ble High Court has granted interim order staying DBC, subject to the condition that 50% of the demand excluding penalty is to be deposited. Thus, H 8,325.16 Lakhs was paid and for the balance amount of H 6,138.77 Lakhs provision has been made in the books in the FY 2013-14.

Similarly, against the demand of H 10,361.38 Lakhs for DBC and H 31,084.14 Lakhs towards penalty, of ECR which after considering the freight already paid, DBC worked out to be H 6,740.94 Lakhs. KIOCL has filed WRIT petition before High Court of Orissa and High Court granted stay subject to deposit of 50% amount excluding the penalty. Against the worked-out liability, the Company paid H 5,188.86 Lakhs and the balance amount of H 1,552.08 Lakhs provision has been made in the books FY 2013-14. The balance demand toward DBC and penalty of H 3,4704.58 Lakhs has been included in contingent liabilities.

Both the cases are not listed so far. Railway has filed transfer petition before Hon''ble Supreme Court and both the cases are stayed by Supreme Court. The transfer petition is still pending before the Hon''ble Supreme Court.

28.3.2 During the FY 2008-09, the Company has claimed refund of congestion surcharge amounting to H 6,877.86 Lakh from South Western Railway (SWR) in respect of 573 rakes moved during 1^st April, 2007 to 21^st May, 2008 through the Company''s private Railway Siding at Panambur, Mangalore which was commissioned in January 2006. SWR refunded only H 2,725.39 Lakh till FY 2013-14 which includes H 206.70 Lakh adjusted by SWR towards DBC. During the FY 2014-15, the Company had approached Railway Claims Tribunal (RCT), Bangalore for refund of the balance amount of H 4,152.70 Lakh with interest. The Tribunal allowed the claim by its order dated 7^th December, 2018 and directed SWR to compute and pay the amount together with interest at 6% per annum and in case SWR fails to comply with the order, interest at 9% per annum is payable from 1^st April, 2019. SWR has filed petition against the order of Tribunal in Hon''ble High Court of Karnataka on 11^th April, 2019 vide case no MFA/3165/2019. KIOCL filed cross objection in the appeal and the case is still pending. The Company has not recognized the above as income in line with the Company''s significant accounting policy No.1.5, pending realization.

The Konkan Railway offered concessional freight to the Company for movement of rakes through Konkan route instead of shorter route i.e., Hassan-Mangaluru, which has been accepted by the Company and 110 rakes were booked for the Konkan route. Subsequently, Konkan Railway allowed concessional freight for 92 rakes only and balance 18 rakes were moved through shorter routes i.e., Hassan-Mangaluru. Hence, during the FY 200809 the Company claimed refund of H 254.45 Lakhs from SWR towards differential freight. However, SWR has not refunded the amount. Hence, during the FY 2014-15 the Company approached RCT, Bengaluru and has claimed H 254.45 Lakhs with interest. The Tribunal dismissed the claim and the Company filed appeal before Hon''ble High Court of Karnataka during the FY 2018-19 and the same is pending.

East Coast Railway have collected 100% congestion surcharge instead of 30% for the rakes moved during the period from 15^th April, 2008 to 21^st May, 2008. During the FY 2008-09, the Company requested ECR for refunding H 436.83 Lakhs being 70% excess congestion surcharge collected in respect of 26 rakes. As ECR failed to refund the amount, the Company has filed a petition before the RCT, Bhubaneswar during the FY 2014-15 for refund of H 436.83 Lakhs with interest. The Tribunal dismissed the claim and the Company filed appeal before Hon''ble High Court of Odisha during the FY 2018-19 and the same is pending.

28.3.3. In pursuance of the directive of the Hon''ble Supreme Court, mining activities at Kudremukh were stopped with effect from 1^st January 2006. Indian Bureau of Mines (IBM) has approved final mine closure plan (FMCP) of Kudremukh Iron Ore Mine and the same was communicated vide letter no. MS/CMG/Fe-38-52 dated 6^th May, 2005. At the time of closure of the mine, the Company filed a petition with prayers for direction, inter-alia, to permit utilization of 54.01 hectares of land required for the purpose of safety and slope stability of the mine.

The Hon''ble Supreme Court, in its judgment (December 2006), directed IIT Delhi to issue global tender for, inter-alia, re-analyzing the stability of slopes, drawing up of mine closure plan, implementation of the above plan and drawing up of detailed terms for the work to be done, consistent with basic paradigm of "no or minimal disturbance to un-broken area".

The expenditure for this purpose was to be met out of H 1,900 Lakhs paid by the company before closure of mining i.e. 31^st December, 2005, which is presently lying with the adhoc Compensatory Afforestation Fund Management and Planning Authority (CAMPA).

The Hon''ble Supreme Court has also directed that if any funds are required in excess of H 1,900 Lakhs, the agency or the designated officer shall move to the Court for necessary direction.

Ministry of Mines Government of India, vide letter dated 7^th February, 2014, nominated the Regional Controller of Mines, IBM Bangalore as the ''Designated Officer'' to take possession of Kudremukh Iron Ore Mines. Accordingly, the Company has handed over the possession of the Kudremukh Iron Ore Mines on 3^rd April, 2014 to the Regional Controller of Mines, IBM Bangalore.

Subsequently, officials of IBM Bangalore and IIT, Delhi inspected the mine site on 20^th May, 2014, in which IIT Delhi opined that, keeping in view of the environment and safety concerns, the residual task of mine closure is relatively minor as compared to what was originally envisaged. Hence, the amount of H 1,900 Lakhs paid by the company to Central Empowered Committee (CEC) already lying with the CAMPA would be utilized for restoration of Kudremukh iron ore mine. In addition to above, the Company has also made provision to the extent of H 600 Lakhs during the FY 2003-04 to 2005-06.

28.3.4. Total mining lease areas of 4,605.02 hectares of land at Kudremukh include an extent of 1,220.03 hectares of government revenue land, apart from forest land as well as the Company''s free hold land. Regional Controller of Mines IBM, the designated officer has taken over the entire mining lease area on 3^rd April, 2014 for carrying out the mine closure activities in compliance with Hon''ble Supreme Court orders dated 15^th December, 2006. However, the infrastructure and buildings located on Revenue land and other lands being the property of the Company shall continue to remain in their physical possession till the cessation of mine closure activities. Till the year 2013-14, the land records of revenue land were in the name of the Company. Meanwhile Government of Karnataka has changed the revenue records removing the Company''s name. Hence the Company was constrained to file a suit before Civil Judge Court, Mudigere for an injunction against Government and others, restraining them from dispossessing the Company from the said revenue land. The court heard the arguments and passed an interim order on 5^th November, 2013 restraining the defendants or anybody under them from dispossessing the Company from the schedule property (i.e. Revenue land) in any manner till the disposal of the suit or till the modalities have been worked out and implemented as directed by the Hon''ble Supreme court. The suit was dismissed on 20^th November, 2017.

Taking into consideration of taking over the entire mining lease area of 4,605.02 hectors comprising forest land, revenue land, Company''s own land and other lands by the designated officer IBM for carrying out the mine closure activities in the mine in compliance with the Hon''ble Courts direction, although their physical possession held with the Company, the Company depreciated all its township assets in full during the year 2014-15 as a prudent measure.

28.3.5. Govt. of Karnataka vide its Gazette notification dated 23.01.2017 reserved an area of 470.40 ha in Devadari Range in Bellary District for iron ore and manganese ore mining lease in favour of KIOCL under the provisions of Section 17A (2) of Mines and Minerals (Development and Regulation) Act, 1957.

KIOCL obtained statutory clearances viz Mining Plan approval by Indian Bureau of Mines, Environment Clearance by MoEF&CC, GoI, Consent for Establishment by KSPCB and Forest Clearance by MoEF&CC, GoI. Company paid H 174.14 Crores on 29.10.2021 towards NPV, CA charges and H 20.21 Crores on 23.09.2022 to Karnataka CAMPA fund towards differential CA charges etc as per the Stage I FC condition.

KIOCL executed mining lease deed of Devadari Iron Ore Mine with Director, Mines and Geology, Govt. of Karnataka on 02.01.2023 for 388 ha area for a period of 50 years for Iron Ore and Manganese Ore (ML No. 020 of 2023). KIOCL has registered the Mining Lease Deed of Devadari Iron Ore Mine on 18.01.2023 at the Office of Sub-Registrar, Sandur Taluk, Ballari Dist and paid H 329.18 Crores towards stamp duty, cess and registration charges. Govt. of Karnataka issued Government Order on 11.04.2023 for diversion of forest land for Devadari Iron Ore Mine.

KIOCL will enter into an agreement with Dy. Conservator of Forests, Ballari will for handing over the forest land. On handing over the forest land to KIOCL by forest dept., KIOCL will undertake exploration, mine development activities development of internal roads, preparation/ development of approach roads to waste dump areas, development of benches, establishment of crushing & screening units, establishment of weigh bridge, development of approach road to railway siding for evacuation of iron ore etc.

KIOCL appointed M/s MECON Limited for providing consultancy services for Devadari Iron Ore Mine. KIOCL has planned to produce the iron ore by mid of April 2024 from Devadari Iron Ore Mine.

28.3.6. Since the closure of mining activities, consequent upon the judgment of Hon''ble Supreme Court w.e.f. 1^st January, 2006, Mangalore Pellet Plant and also Blast Furnace Unit continue to draw the required water from Lakya Dam at Kudremukh. Hence, dam maintenance activity from the safety point of view and maintenance of water drawal system which include electrical and pipeline maintenance are

still continuing. Therefore, Kudremukh installation is a working unit as on date as an integral part of Mangalore unit.

28.3.7. In order to utilize the Blast Furnace Unit, the company has made a project proposal for Backward and Forward Integration of the Unit involving capital expenditure of H 836.90 Crore and the same has been approved by the Board in its 255^th meeting held on 13^th November 2018. The same has been approved by Public Investment Bureau (PIB). Environment clearance has been granted by MOEF&CC, GOI on 27^th February, 2020. M/s MECON has been appointed as EPCM contractor for the project.

The installation & commissioning of Coke oven under backward integration project has been entrusted to M/s Tuaman Engineering Limited, Kolkata as a EPC contractor on lumpsum turnkey basis with technology provided by M/s CIMFR, GoI, Dhanbad. The construction works of coke oven are under progress and scheduled to be commissioned by 31.03.2024 as against the original scheduled date of commissioning by 21.05.2023.

The contracts for the balance packages under backward & forward viz., Ductile Iron Spun Pipe plant, Co-Gen Power Plant, Upgradation of Blast furnace, Pulverized Coal Injection system, Oxygen plant and Nitrogen plant could not be concluded due to high cost and change in public procurement policy. Hence, further process of re-tendering is kept on hold. The Joint Venture (JV) option is being explored for setting up of facilities for value added products in Blast Furnace Unit. Some of the prospective JV partners have responded to KIOCL''s Intention of Interest (IOI) and are under discussion.

During the year the Company has incurred H 16.84 Lakhs (Previous year H 10.87 Lakhs) towards Excavation and loading of 3,510.47 MT (Previous year 1,215.96 MT) of auxiliary material of Pig Iron at BFU. The said materials of 4,085.47 MT worth H 470.91 Lakhs were sold during the year (Previous year 544.96 MT worth H 114.60 Lakhs). As at the end of the year, Company was holding a physical stock of 780 MT (Opening 1,355 MT plus excavated 3,510.47 MT less 4,085.47 MT sold) of the same (Previous year 1355 MT). As the cost of production of the same had been accounted for in earlier years, the same is valued at nil cost as at the end of the year, although the market value of the same is H 89.91 Lakhs (Previous year H 284.94 Lakhs) as per last sale

price of similar product. As a prudent accounting measure, no value has been assigned to the stock in the Books of Accounts.

28.3.8. (a) Expenses incurred towards generation of

power being a significant cost of production have been included under the primary heads of account.

(b) Expenses incurred towards Stores, Spares, Consumables and Additives being a significant cost of production have been included under the primary heads of account.

28.3.9. Financial Risk Management

The Company''s business activities expose it to a variety of financial risks, namely liquidity risk, market risk, credit risk and currency risk. The Company''s senior management has overall responsibility for the establishment and oversight of the Company''s risk management framework. The Company has constituted a Risk Management Committee, which is responsible for developing and monitoring the Company''s risk management policies. The key financial risks and mitigating

actions are also placed before the Risk Management Committee / Audit Committee of the Company. The Company''s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits, to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company''s activities.

The Risk Management Committee of the Company is supported by the Finance team and experts of respective business divisions that provides assurance that the Company''s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company''s policies and risk objectives. The activities are designed to:

• Protect the Company''s financial results and position from financial risks.

• Maintain market risks within acceptable parameters, while optimizing returns

• Protect the Company''s financial investments, while maximizing returns.

The investment committee is responsible for maximizing the return on Company''s internally generated funds.

I. Management of Liquidity Risk

Liquidity risk is the risk that the Company faces in meeting its obligations associated with its financial liabilities. The Company''s approach to managing liquidity is to ensure that it has sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions. A material and sustained shortfall in our cash flow could undermine the Company''s credit rating and impair investor confidence. The following table shows the maturity analysis of the Company''s financial liabilities based on contractually agreed undiscounted cash flows as at the Balance Sheet date:

II. Management of Market Risk

Market risks comprises of Price risk & Interest rate risk. The Company does not designate any fixed rate financial assets as fair value through Profit and Loss nor at fair value through OCI. Therefore, Company is not exposed to any interest rate risks. Similarly, the Company does not have any financial instrument which is exposed to change in price.

III. Management of Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to customers and other receivables. The Company applies prudent credit acceptance policies, performs ongoing credit portfolio monitoring as well as manages the collection of receivables in order to minimize the credit risk exposure.

The maximum exposure to credit risk for each class of financial instruments is the carrying amount of that class of financial instruments presented in the notes to the Financial Statements. The Company''s major classes of financial assets are cash and cash equivalents, term deposits and trade receivables. For banks and financial institutions, only high rated banks / institutions are accepted.

Trade Receivables

Concentrations of credit risk with respect to trade receivables are limited, since the Company''s most of the sales (more than 95%) are secured against Letter of Credit and/or Bank Guarantee. Accordingly, based expected credit loss (ECL) experience, the Company has grouped the trade receivable into secured and unsecured.

The Company has applied the simplified approach for calculating ECL for both secured and unsecured trade receivables. During the year ECL assessed for secured and unsecured trade receivables are Nil and H 80 Lakhs respectively (Previous year Nil and H 75 Lakhs) and provision made in the books is included in Note no 9.1.

The carrying value of the financial assets represents the maximum credit exposure. The Company''s maximum exposure to credit risk is H 35,422.40 Lakhs and H 29,186.18 Lakhs as at 31 March 2023 and 31 March 2022 respectively.

IV. Foreign Currency Risk

The Company being an EOU, is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar (USD), Euro (EUR), and Japanese Yen (JPY). Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities denominated in a currency that is not the Company''s functional currency (H). The currency risk of the said underlying asset is managed by entering into foreign currency forward contracts (only on need basis).

28.3.10 Capital Management

The Company considers the following components of its Balance Sheet to be managed capital:

Total equity as shown in the Balance Sheet includes Retained Earnings and Share Capital. The Company aim to manage its capital efficiently so as to safeguard its ability to continue as a going concern and to optimize returns to our shareholders. The capital structure of the Company is based on management''s judgement of the appropriate balance of key elements in order to meet its strategic and day-to-day needs. The Company considers the amount of capital in proportion to risk and manages the capital structure in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.

The Company''s policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain future development and growth of its business. The Company takes appropriate steps in order to maintain, or if necessary, adjust, its capital structure. Company is not subject to financial covenants in any of its significant financing agreements.

(ii) Fair Value Hierarchy

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and consists of the following three levels:

Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 — Inputs are 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 — Inputs are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.

Valuation Process

Forward contracts - Future cash flows are estimated based on forward exchange rates (from observable forward exchange rates at the end of the reporting period) and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties.

Trade receivables, cash and cash equivalents, other bank balances, loans, other financial assets, current borrowings, trade payables and other current financial liabilities: fair values approximate their carrying amounts largely due to the short-term maturities of these instruments.

For all other financial instruments, the carrying amount is either the fair value, or approximates the fair value.

28.3.12Derivative financial instruments

The Company uses derivative instruments as part of its management of exposure to fluctuations in foreign currency exchange rates. The Company does not acquire or issue derivative financial instruments for trading or speculative purposes. The derivative transactions are normally in the form of forward contracts, and these are subject to the Company guidelines and policies.

The fair values of all derivatives are separately recorded in the balance sheet within current and non-current assets and liabilities.

The use of derivatives can give rise to credit and market risk. The Company tries to control credit risk as far as possible by only entering into contracts with reputable banks and financial institutions. The use of derivative instruments is subject to limits,

authorities and regular monitoring by appropriate levels of management. The limits, authorities and monitoring systems are periodically reviewed by management and the Board.

The market risk on derivatives is mitigated by changes in the valuation of the underlying assets, liabilities or transactions, as derivatives are used only for risk management purposes.

Note: Previous year figures are in bracket.

The total H 5,549.00 Lakhs (Previous year H 5,557.15 Lakhs) consists of H 242.95 Lakhs (Previous year H 1,234.98 Lakhs) and H 5,305.62 Lakhs (Previous year H 4,322.17 Lakhs) towards LC and BG respectively.

In addition to above, value of matching Forward Cover outstanding with Banks is H 33,156.88 Lakhs out of which H 11,358.26 Lakhs booked with ICICI Bank and H 21798.62 Lakhs booked with Indusind Bank (Previous year H 27,843.88 Lakhs out of which H 9,927.45 Lakhs booked with ICICI Bank and H 17,916.43 Lakhs with Yes Bank).

1. Previous year figures are in bracket.

2. The Company utilize the secured overdraft limit (with lien on fixed deposits) during the year to meet its short-term working capital requirements.

28.3.15. During the current year, Company has declared final dividend @ H 0.79 per share for the Financial Year 2021-22 (Previous year H 1.64 per Shares for the Financial Year 2020-21) and paid H 4801.23 Lakhs (Previous year H 9,967.12 Lakhs).

Further, the Company has not declared any interim dividend for the financial year 2022-23 (Previous year H 0.98 per Shares for the financial year 2021-22), paid an amount Nil (Previous year 5,955.96 Lakhs).

Proposed Dividend:

The Company has approach DIPAM, Ministry of Finance through Ministry of Steel for seeking exemption from ''Payment of Dividend'' for the Financial Year 2022-23 in line with the O.M dated 27^th May 2016. Ministry of Steel vide its Office Memorandum dated 03-05-2023 recommended DIPAM to exempt KIOCL from payment of Dividend for FY 202223. Accordingly, no dividend has been proposed for the current year (Previous year total dividend H 1.77 per Shares including interim and final dividend.)

---

Mar 31, 2022

1. Sale of Products are generally against advance payment by customers or are against letters of credit/ cash against documents and proceeds are realised within one month period. Accordingly, the amount of consideration does not contain any significant financing component.

2. Sale of Services are rendered to Departments of Central Government/State Government / Central PSUs/ State PSUs with short term credit period of one- two months and does not contain any significant financing component.

3. As per the terms of the contract with its customers, the Company has a right to receive consideration from its customers for all completed performance obligations. Accordingly, the Company has availed the practical expedient available under paragraph 121 of Ind AS 115 and dispensed with the additional disclosures with respect to performance obligations that remained unsatisfied (or partially unsatisfied) at the balance sheet date. Further, since the terms of the contracts directly identify the transaction price for each of the completed performance obligations there are no elements of transaction price which have not been included in the revenue recognized in the financial statements. Further, there is no material difference between the contract price and the revenue from contract with customers.

4. During the previous year an amount of Rs 1464.69 Lakhs has been shown as "Provision no longer Required" under "Other Operating Income" in the Statement of Profit and Loss, as while making the provisions the same was classified as Operating Expenditure in respective years

* Includes Rs.11,057.62 Lakhs (Previous year Rs 11,057.62 Lakhs) towards Forest Development Tax (FDT) at the rate of 12% of basic price of iron ore. The supplier NMDC Limited has filed a writ petition before the Hon''ble High Court of Karnataka challenging the levy of the same. The case was disposed of vide order dated 3^rd December, 2015 directing the Govt. of Karnataka to refund the FDT within three months. However, the Govt. of Karnataka has filed Special Leave Petition before the Hon''ble Supreme Court of India. The matter was listed on 9^th August, 2019 and the Hon''ble Supreme court directed to

list the appeal for hearing.

Further, out of Rs 11,057.62 Lakhs, an amount of Rs.2,617.43 Lakhs (Previous year Rs 2,617.43 Lakhs) (equivalent to 25% of FDT) collected earlier by NMDC as per the interim order of Hon''ble Court is shown under "Other Non-Current Assets" in Books of Accounts and the Bank Guarantee equivalent to Rs.2,734.87 Lakhs (Previous year Rs 2,734.87 Lakhs) furnished to NMDC in this regard has not been included under the contingent liabilities against Bills discounted/ Letter of Credits/ Bank guarantees.

28.2.1 Employee Benefits as per Ind AS 19

a) The Company’s contribution to the Provident Fund is remitted to a separate Trust based on a fixed percentage of the eligible employee’s salary and charged to Statement of Profit and Loss. Further, the company makes good the shortfall, if any, in the return from investments of the Trust vis-a-vis the notified rate of interest, based on actuarial valuation and the same is charged to Statement of Profit and Loss.

During the year, the Company has recognized Rs. 1,303.55 Lakhs (previous year Rs. 1,444.90 Lakhs) as Employer’s contribution to Provident Fund in the Statement of Profit and Loss.

The estimated interest short fall for the year is Rs. 394.76 Lakhs (previous year Rs. 305.23 Lakhs) and the same has been recognized and debited to Statement of Profit and Loss.

Provision for the year 2018-19 for Rs 220.59 Lakhs has been reversed during the year as there was no shortfall of interest payout based on notified rate of interest.

Present value of benefit obligation at period end 31^st March, 2022 is Rs. 3,847.93 Lakhs (31^st March, 2021 Rs. 3,820.42 Lakhs).

b) Liability with regard to gratuity benefits payable in future is determined by actuarial valuation at the end of the year using the projected unit method. Provision towards Gratuity fund for the year is Rs. 366.82 Lakhs (Previous year Rs. 285.21 Lakhs). The Company operates a gratuity plan administered by LIC under Group Gratuity Life Assurance Scheme of LIC of India. Every employee is entitled to a benefit equivalent to fifteen days salary last drawn for each completed year of service subject to a maximum of Rs.20 Lakhs as per the Payment of Gratuity Act, 1972, as adopted by the Company through resolution in 257^th meeting of the Board held on 26^th March 2019. The same is payable at the time of separation from the company or retirement, whichever is earlier. The benefits vest after five years of continuous service. Net Liability recognized in Balance Sheet is Rs 67.81 Lakhs (Previous year Rs 186.34 Lakhs).

i) The plan assets of the Company are managed by Life Insurance Corporation of India through a trust managed by the company in terms of an insurance policy taken to fund obligations of the Company with respect to its gratuity plan. The categories of plan assets as a percentage of total plan assets is based on information provided by Life Insurance Corporation of India. Information on categories of plan assets as at 31 March 2022 and 31 March 2021 has not been provided by Life Insurance Corporation of India.

ii) The plan assets have been primarily invested in insurer managed funds. The Company contributes all ascertained liabilities towards gratuity to the Fund. The Gratuity plan provides a lump sum payment to the vested employees at retirement, death, incapacitation or termination of employment based on the respective employees salary and tenure of the employment with the company.

iii) Expected Contribution in respect of Gratuity for next year will be Rs. 100 Lakhs (For the year ended March 31, 2021 Rs. 17.90 Lakhs)."

iv) Discount rate is based on the prevailing market yield of Indian Government securities as at the balance sheet date for the estimated term of the obligation.

v) The salary escalation rate is arrived taking into consideration the seniority in the promotion and other relevant factors, such as demand supply in employment market.

Risk Exposure : Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below :

Inflation Risks : In the post retirement plans ie, gratuity, the payment is not linked to inflation, so this is a less material risk.

Life Expectancy : The post retirement plan obligations is to provide benefits for the life of the member, so regularly significant where inflationary increases result in higher sensitivity to changes in life expectancy.

d) Voluntary Retirement Scheme

During the year, the company has incurred Nil (previous year Rs. 319.31 lakhs) towards VRS scheme included under the head “Employee benefits expense”.

28.2.2 Segment Reporting as per Ind AS 108

The Company is having two main operating segments i.e., ''Pellet'' and ''Pig Iron''. Expenses relating to Kudremukh unit and the Corporate Office have been fully allocated to Pellet segment. Segment Reporting as per Ind AS-108 is as follows:

28.2.5 Leases (Ind AS 116)

As Lessee

The Company’s significant leasing arrangements are in respect of operating leases for land and buildings. These arrangements generally range between 3 years and 30 years, except for certain land leases where the lease term ranges up to 99 years. In case of land taken on lease from New Mangalore port trust, termination option is exercisable only by the lessor. Hence, the management has considered the full term of the contract as the lease term, since the Company is liable to pay the lease rental as they do not have the right to terminate the contract.

The Company holds nine tracts of Land totaling 386,691 Sq. Mtrs. on long term lease from New Mangalore Port Trust

(MNPT). Lease of the following four tracts of land, pending for registration of lease deeds, are considered as “Lease continuing” in view of company’s request for extension of lease with NMPT and the same being under their consideration and continuing in paying annual lease rent and the same is duly acknowledged and accepted by NMPT:

a. 213,783 Sq Mtrs of land taken for Port facilities

b. 9,120 Sq Mtrs of land taken for storage of iron ore fines

c. 27,008 Sq Mtrs of land taken for pellet storage yard and

d. 21,270 Sq Mtrs of land taken for Captive Power Plant

The Company does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they become due.

Rental expenses recorded for short- term leases were Rs 147.94 Lakhs for the year ended 31^st March, 2022 (Previous year Rs 162.92 Lakhs).

As lessor

Rental income on assets given on operating leases was Rs. 164.64 Lakhs for the year ended 31^st March, 2022 (Previous year Rs 155.15 Lakhs).

The Company has leased out its land under operating lease for periods ranging up to 7 years. Lease payments are structured with periodic escalations consistent with the prevailing market conditions. There are no variable lease payments to be received.

Maturity analysis of operating lease payments to be received:

(^ in Lakhs)
Period	As at March 31, 2022	As at March 31, 2021
Year 1	155.91	148.74
Year 2	153.61	157.43
Year 3	142.53	153.61
Year 4	121.11	142.53
Year 5	44.39	121.11
Year 6 onwards	8.84	53.23
Total	626.39	776.66

28.3 Others:

28.3.1 With the suspension ofmining operations at Kudremukh mine site, the Company is procuring the iron ore fines from NMDC mines in Chhattisgarh state and transporting to its plant at Mangalore by rail cum sea route.

Railways vide letter No. H/C.474 Classification/11 dated 21^st October, 2011 raised an issue regarding the applicability of distance-based charge (DBC) over and above normal freight on Iron ore transported through railway network for manufacture of pellets and their subsequent export. Both South Western Railway (SWR) and East Coast Railway (ECR) have raised demand of Rs.14,463.93 Lakhs and Rs. 10,361.38 Lakhs respectively towards distance-based charge (DBC) over and above normal freight on Iron ore transported.

As per the Company’s view, DBC should attract only for iron ore fines and lumps which are directly exported and not on the Iron Ore so moved and utilized in the steel plants for manufacture of finished product and exported thereafter. The same is also not applicable to Pig iron and Sponge Iron Industry.

Accordingly, against the demand of Rs 14,463.93 Lakhs of SWR,

KIOCL had filed writ petition before the Hon’ble High Court of Karnataka. The writ petition was dismissed and KIOCL filed writ appeal challenging the dismissal of the writ petition. The Hon’ble High Court has granted interim order staying DBC, subject to the condition that 50% of the demand excluding penalty is to be deposited. Thus, Rs.8,325.16 Lakhs was paid and for the balance amount of Rs.6,138.77 Lakhs provision has been made in the books in the FY 2013-14.

Similarly, against the demand of Rs 10,361.38 Lakhs for DBC and Rs 31,084.14 Lakhs towards penalty, of ECR which after considering the freight already paid, DBC worked out to be Rs 6,740.94 Lakhs. KIOCL has filed WRIT petition before High Court of Orissa and High Court granted stay subject to deposit of 50% amount excluding the penalty. Against the worked-out liability, the Company paid Rs.5,188.86 Lakhs and the balance amount of Rs.1,552.08 Lakhs provision has been made in the books FY 2013-14. The balance demand toward DBC and penalty of Rs 34,704.58 Lakhs has been included in contingent liabilities.

Both the cases are not listed so far. Railway has filed transfer petition before Supreme Court and both the cases are stayed by Supreme Court.

28.3.2. During the FY 2008-09, the Company has claimed refund of congestion surcharge amounting to Rs.6,877.86 Lakhs from South Western Railway (SWR) in respect of 573 rakes moved during 1^st April, 2007 to 21^st May, 2008 through the Company’s private Railway Siding at Panambur, Mangalore which was commissioned in January 2006. SWR refunded only Rs.2,725.39 Lakhs till FY 2013-14 which includes Rs.206.70 Lakh adjusted by SWR towards DBC. During the FY 2014-15, the Company had approached Railway Claims Tribunal (RCT), Bangalore for refund of the balance amount of Rs.4,152.70 Lakhs with interest. The Tribunal allowed the claim by its order dated 7^th December, 2018 and directed SWR to compute and pay the amount together with interest at 6% per annum and in case SWR fails to comply with the order, interest at 9% per annum is payable from 1^st April, 2019. SWR has filed petition against the order of Tribunal in Hon’ble High Court of Karnataka on 11^th April, 2019 vide case no MFA/3165/2019. The Company has not recognized the above as income in line with the Company’s significant accounting policy No.1.4, pending realization.

The Konkan Railway offered concessional freight to the Company for movement of rakes through Konkan route instead of shorter route i.e., Hassan-Mangaluru, which has been accepted by the Company and 110 rakes were booked for the Konkan route. Subsequently, Konkan Railway allowed concessional freight for 92 rakes only and balance 18 rakes were moved through shorter routes i.e., Hassan-Mangaluru. Hence, during the FY 2008-09 the Company claimed refund of Rs. 254.45 Lakhs from SWR towards differential freight. However, SWR has not refunded the amount. Hence, during the FY 2014-15 the Company approached RCT, Bengaluru and has claimed Rs. 254.45 Lakhs with interest. The Tribunal dismissed the claim and the Company filed appeal before

Hon’ble High Court of Karnataka during the FY 2018-19 and the same is pending.

East Coast Railway have collected 100% congestion surcharge instead of 30% for the rakes moved during the period from 15^th April, 2008 to 21^st May, 2008. During the FY 2008-09, the Company requested ECR for refunding Rs.436.83 Lakhs being 70% excess congestion surcharge collected in respect of 26 rakes. As ECR failed to refund the amount, the Company has filed a petition before the RCT, Bhubaneswar during the FY 2014-15 for refund of Rs.436.83 Lakhs with interest. The Tribunal dismissed the claim and the Company filed appeal before Hon’ble High Court of Odisha during the FY 2018-19 and the same is pending.

28.3.3. In pursuance of the directive of the Hon’ble Supreme Court, mining activities at Kudremukh were stopped with effect from 1^st January 2006. Indian Bureau of Mines (IBM) has approved final mine closure plan (FMCP) of Kudremukh Iron Ore Mine and the same was communicated vide letter no. MS/CMG/Fe-38-52 dated 6^th May, 2005. At the time of closure of the mine, the Company filed a petition with prayers for direction, inter-alia, to permit utilization of 54.01 hectares of land required for the purpose of safety and slope stability of the mine.

The Hon’ble Supreme Court, in its judgment (December 2006), directed IIT Delhi to issue global tender for, inter-alia, reanalyzing the stability of slopes, drawing up of mine closure plan, implementation of the above plan and drawing up of detailed terms for the work to be done, consistent with basic paradigm of “no or minimal disturbance to un-broken area”.

The expenditure for this purpose was to be met out of Rs.1,900 Lakhs paid by the company before closure of mining i.e. 31^st December, 2005, which is presently lying with the adhoc Compensatory Afforestation Fund Management and Planning Authority (CAMPA).

The Hon’ble Supreme Court has also directed that if any funds are required in excess of Rs.1,900 Lakhs, the agency or the designated officer shall move to the Court for necessary direction.

Ministry of Mines Government of India, vide letter dated 7^th February, 2014, nominated the Regional Controller of Mines, IBM Bangalore as the ''Designated Officer’ to take possession of Kudremukh Iron Ore Mines. Accordingly, the Company has handed over the possession of the Kudremukh Iron Ore Mines on 3^rd April, 2014 to the Regional Controller of Mines, IBM Bangalore.

Subsequently, officials of IBM Bangalore and IIT, Delhi inspected the mine site on 20^th May, 2014, in which IIT Delhi opined that, keeping in view of the environment and safety concerns, the residual task of mine closure is relatively minor as compared to what was originally envisaged. Hence, the amount of Rs.1,900 Lakhs paid by the company to Central Empowered Committee (CEC) already lying with the CAMPA would be utilized for

restoration of Kudremukh iron ore mine. In addition to above, the Company has also made provision to the extent of Rs.600 Lakhs during the FY 2003-04 to 2005-06.

28.3.4. Total mining lease areas of 4,605.02 hectares of land at Kudremukh include an extent of 1,220.03 hectares of government revenue land, apart from forest land as well as the Company’s free hold land. Regional Controller of Mines IBM, the designated officer has taken over the entire mining lease area on 3^rd April, 2014 for carrying out the mine closure activities in compliance with Hon’ble Supreme Court orders dated 15^th December, 2006. However, the infrastructure and buildings located on Revenue land and other lands being the property of the Company shall continue to remain in their physical possession till the cessation of mine closure activities. Till the year 2013-14, the land records of revenue land were in the name of the Company. Meanwhile Government of Karnataka has changed the revenue records removing the Company’s name. Hence the Company was constrained to file a suit before Civil Judge Court, Mudigere for an injunction against Government and others, restraining them from dispossessing the Company from the said revenue land. The court heard the arguments and passed an interim order on 5^th November, 2013 restraining the defendants or anybody under them from dispossessing the Company from the schedule property (i.e. Revenue land) in any manner till the disposal of the suit or till the modalities have been worked out and implemented as directed by the Hon’ble Supreme court. The suit was dismissed on 20^th November, 2017.

Taking into consideration of taking over the entire mining lease area of 4,605.02 hectors comprising forest land, revenue land, Company’s own land and other lands by the designated officer IBM for carrying out the mine closure activities in the mine in compliance with the Hon’ble Court’s direction, although their physical possession held with the Company, the Company depreciated all its township assets in full during the year 201415 as a prudent measure.

28.3.5. Govt. of Karnataka vide its Gazette notification dated 23^rd January, 2017 reserved an area of 470.40 ha in Devadari Range in Bellary District for iron ore and manganese ore mining lease in favour of KIOCL under the provisions of Section 17A (2) of Mines and Minerals (Development and Regulation) Act, 1957.

The company is in the process of registration of Mining lease deed in its favour. During the process, the company has to obtain a prerequisite statutory clearance viz. Mining Plan, Environment Clearance (EC) and Forest Clearance (FC).

Company has obtained Mining Plan approval from Regional Controller of Mines, Indian Bureau of Mines, Bangalore and the Environment Clearance from MoEF&CC, GoI. The Company has also obtained in principle stage I forest clearance on 24.06.2021 from MOEF, Govt. of India with General and Specific Conditions for compliance. As a compliance of one of the conditions, the company paid Rs 17,414.22 Lakhs to Karnataka Campa fund on 29.10.2021 towards NPV, Compensatory Afforestation Charges and other forest dues. In addition to the above an

amount of Rs 43.40 Lakhs paid towards mining related expenditure during the year. Amount paid to Karnataka Campa and other expenditure incurred towards obtaining mining lease totaling Rs 17,457.62 Lakhs (Previous year Rs 144.90 Lakhs) is classified under Note No 4.2 “Intangible Assets under development”.

The Company has complied with the conditions of Stage I FC and submitted compliance letter/ documents on 14^th March, 2022 to Dy. Conservator of Forest, Bellary Dist for scrutiny and forwarding the same to PCCF(HoFF), GoK The Govt. of Karnataka would recommend and forward the proposal to MoEF&CC, GoI for grant of final Stage II FC.

28.3.6. Since the closure of mining activities, consequent upon the judgment of Hon’ble Supreme Court w.e.f. 1^st January, 2006, Mangalore Pellet Plant and also Blast Furnace Unit continue to draw the required water from Lakya Dam at Kudremukh. Hence, dam maintenance activity from the safety point of view and maintenance of water drawal system which include electrical and pipeline maintenance are still continuing. Therefore, Kudremukh installation is a working unit as on date as an integral part of Mangalore unit.

28.3.7. In order to utilize the Blast Furnace Unit, the company has made a project proposal for Backward and Forward Integration of the Unit involving capital expenditure of Rs.836.90 Crore and the same has been approved by the Board in its 255^th meeting held on 13^th November 2018. The same has been approved by Public Investment Bureau (PIB). Environment clearance has been granted by MOEF&CC, GOI on 27^th February, 2020. M/s MECON has been appointed as EPCM contractor for the project.

The project consists of various packages like Site Levelling, Heat recovery Coke Oven Plant, Co-Gen Power Plant, Ductile Iron Spun Pipe, Upgradation of Blast furnace, Pulverized Coal Injection system, Oxygen plant and Nitrogen plant. Site Levelling works to the extent of 80% has been completed and balance works are expected to be completed before the onset of monsoon. Work order placed on M/s Tuaman Engineering Limited, Kolkata for construction of heat recovery Coke Oven Plant on Lump sum turnkey basis. The piling and civil works for foundations for Coke oven plant are under progress at site. The tenders have been floated for balance packages and are under process. The tendering process is delayed due to COVID-19 pandemic and subsequent travel restrictions imposed. As per the changes in public procurement policy, the global tenders have been cancelled and domestic tenders are floated.

During the year the Company has incurred Rs. 10.87 Lakhs (Previous year Rs 16.06 Lakhs) towards Excavation and loading of1,215.96 MT (Previous year 3,131.28 MT) of auxiliary material of Pig Iron at BFU. The said materials of 544.96 MT worth Rs. 114.60 Lakhs were sold during the year (Previous year 3,167.28 MT worth Rs. 355.35 Lakhs). As at the end of the year, Company was holding a physical stock of 1355MT (Opening 684 MT plus excavated 1,215.96 MT less 544.96 MT sold) of the same (Previous year 684 MT). As the cost of production of the same

had been accounted for in earlier years, the same is valued at nil cost as at the end of the year, although the market value of the same is Rs. 284.94 Lakhs (Previous year Rs. 76.61 Lakhs) as per last sale price of similar product. As a prudent accounting measure, no value has been assigned to the stock in the Books of Accounts.

28.3.8. (a) Expenses incurred towards generation of power being a significant cost of production have been included under the primary heads of account..

(b) Expenses incurred towards Stores, Spares, Consumables and Additives being a significant cost of production have been included under the primary heads of account.

28.3.9. Financial Risk Management

The Company’s business activities expose it to a variety of financial risks, namely liquidity risk, market risk, credit risk and currency risk. The Company’s senior management has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company has constituted a Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The key financial risks and mitigating actions are also placed before the Audit Committee of the Company. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits, to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

The Risk Management Committee of the Company is supported by the Finance team and experts of respective business divisions that provides assurance that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. The activities are designed to:

• Protect the Company’s financial results and position from financial risks.

• Maintain market risks within acceptable parameters, while optimizing returns

• Protect the Company’s financial investments, while maximizing returns.

The investment committee is responsible for maximizing the return on Company’s internally generated funds.

I. Management of Liquidity Risk

Liquidity risk is the risk that the Company faces in meeting its obligations associated with its financial liabilities. The Company’s approach to managing liquidity is to ensure that it has sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions. A material and sustained shortfall in our cash flow could undermine the company’s credit rating and impair investor confidence.

are limited, since the Company’s most of the sales (more than 95%) are secured against Letter of Credit and/or Bank Guarantee. Accordingly, based expected credit loss (ECL) experience, the Company has grouped the trade receivable into secured and unsecured.

The company has applied the simplified approach for calculating ECL for both secured and unsecured trade receivables. During the year ECL assessed for secured and unsecured trade receivables are Nil and Rs 75 Lakhs respectively (Previous year Nil and Nil) and provision made in the books and included in Note no 9.1.

The carrying value of the financial assets represents the maximum credit exposure. The Company’s maximum exposure to credit risk is Rs 29,186.18 Lakhs and Rs 24,280.83 Lakhs as at 31 March 2022 and 31 March 2021 respectively.

IV. Foreign Currency Risk

The Company being an EOU, is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar (USD), Euro (EUR), and Japanese Yen (JPY). Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities denominated in a currency that is not the Company’s functional currency (INR). The currency risk of the said underlying asset is managed by entering into foreign currency forward contracts (only on need basis).

II. Management of Market Risk

Market risks comprises of Price risk & Interest rate risk. The Company does not designate any fixed rate financial assets as fair value through Profit and Loss nor at fair value through OCI. Therefore, Company is not exposed to any interest rate risks. Similarly, the Company does not have any financial instrument which is exposed to change in price.

III. Management of Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to customers and other receivables. The Company applies prudent credit acceptance policies, performs ongoing credit portfolio monitoring as well as manages the collection of receivables in order to minimize the credit risk exposure.

The maximum exposure to credit risk for each class of financial instruments is the carrying amount of that class of financial instruments presented in the notes to the Financial Statements. The Company''s major classes of financial assets are cash and cash equivalents, term deposits and trade receivables. For banks and financial institutions, only high rated banks / institutions are accepted.

Trade Receivables

Concentrations of credit risk with respect to trade receivables

28.3.10 Capital Management

The Company considers the following components of its Balance Sheet to be managed capital:

Total equity as shown in the Balance Sheet includes Retained Earnings and Share Capital. The Company aim to manage its capital efficiently so as to safeguard its ability to continue as a going concern and to optimize returns to our shareholders. The capital structure of the Company is based on management''s judgement of the appropriate balance of key elements in order to meet its strategic and day-to-day needs. The Company considers the amount of capital in proportion to risk and manages the capital structure in light of changes

in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to share holders or issue new shares.

The Company''s policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain future development and growth of its business. The Company takes appropriate steps in order to maintain, or if necessary, adjust, its capital structure. Company is not subject to financial covenants in any of its significant financing agreements.

(ii) Fair Value Hierarchy

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and consists of the following three levels:

Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 — Inputs are 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 — Inputs are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.

Valuation Process

Forward contracts - Future cash flows are estimated based on forward exchange rates (from observable forward exchange rates at the end of the reporting period) and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties.

Trade receivables, cash and cash equivalents, other bank balances, loans, other financial assets, current borrowings, trade payables and other current financial liabilities: fair values approximate their carrying amounts largely due to the short-term maturities of these instruments.

For all other financial instruments, the carrying amount is either the fair value, or approximates the fair value.

28.3.12 Derivative financial instruments

The Company uses derivative instruments as part of its management of exposure to fluctuations in foreign currency exchange rates. The Company does not acquire or issue

derivative financial instruments for trading or speculative purposes. The derivative transactions are normally in the form of forward contracts, and these are subject to the Company guidelines and policies.

The fair values of all derivatives are separately recorded in the balance sheet within current and non-current assets and liabilities.

The use of derivatives can give rise to credit and market risk. The Company tries to control credit risk as far as possible by only entering into contracts with reputable banks and financial institutions. The use of derivative instruments is subject to limits, authorities and regular monitoring by appropriate levels of management. The limits, authorities and monitoring systems are periodically reviewed by management and the Board.

The market risk on derivatives is mitigated by changes in the valuation of the underlying assets, liabilities or transactions, as derivatives are used only for risk management purposes.

The total Rs. 5,557.15 Lakhs (Previous year Rs 10,443.73 Lakhs) consists of Rs. 1,234.98 Lakhs (Previous year Rs 6,345.31 Lakhs) and Rs. 4,322.17 Lakhs (Previous year Rs 4,098.42 Lakhs) towards LC and BG respectively.

In addition to above, value of matching Forward Cover outstanding with Banks is Rs 27,844.16 Lakhs out of which Rs 9,927.45 Lakhs booked with ICICI Bank and Rs 17,916.71 Lakhs booked with Yes Bank (Previous year Rs 22,906.35 Lakhs with IndusInd Bank).

LC: Letter of Credit, BG: Bank Guarantee, BC: Buyers Credit.

28.3.15. During the current year, Company has declared dividend @ Rs. 1.64 per share for the Financial Year 2020-21 (Previous year Rs. 0.70 per Shares) and paid Rs. 9967.12 Lakhs (Previous year Rs 4,353.48 Lakhs).

Proposed Dividend:

The Company proposed final dividend @ Rs 0.79 per equity share for the FY 2021-22, in addition to interim dividend already paid @ Rs 0.98 per equity share during the year. With the proposed final dividend, if approved, total dividend payment would be 17.70% of equity share capital (previous year 16.40 %) amounting to Rs 10,757.19 Lakhs (previous year Rs 9,967.12 Lakhs).

Further, the Company has declared interim dividend @ Rs 0.98 per share for the financial year 2021-22 (Previous year Nil per Shares), paid an amount of Rs 5955.96 Lakhs (Previous year Nil).

---

Mar 31, 2021

a) Terms and rights attached to Equity Shares - The Company has only one class of equity shares having a par value of t 10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholder in ensuing Annual General Meeting except in case of interim dividend. In the event of liquidation of the Company, the shareholders will be eligible to receive remaining assets of the Company, after distribution of all preferential amounts, in proportion to their shareholding.

b) During the year,the Company has bought back 1,41,74,469 Equity Shares and has not issued any shares.

c) Details of Shareholders holding more than 5% Shares in the Company:

# Work order placed on M/s Metso for supply of Vertical Pressure Filter worth ^ 6274.32 Lakhs and for which 100% Letter of Credit was provided. As on 31^st March 2021, material worth ^ 293.82 Lakhs received and balance amount of ^ 5,980.50 Lakhs included in the Contingent Liability (LC) towards Capital Account, accordingly considering the above the same is not included in the Capital Commitment towards the supply of Capital Goods.

* includes ^ 11,057.62 Lakhs towards Forest Development Tax (FDT) at the rate of 12% of basic price of iron ore. The supplier NMDC Limited has filed a writ petition before the Hon’ble High Court of Karnataka challenging the levy of the same. The case was disposed of vide order dated 03.12.2015 directing the Govt. of Karnataka to refund the FDT within three months. However, it has been informed that the Govt. of Karnataka has filed Special Leave Petition before the Hon’ble Supreme Court of India. The matter was listed on 09.08.2019 and the Hon’ble Supreme court directed to list the appeal for hearing.

The amount of T 2,617.43 Lakhs (equivalent to 25% of FDT) collected earlier by NMDC as per the interim order of Hon’ble Court is shown under “Other Current Assets” in Books of Accounts and the Bank Guarantee equivalent to T 2,734.87 Lakhs furnished to NMDC in this regard has not been included under the contingent liability.

During the year, the Company has opted for Vivad Se Vishwas Scheme for Assessment Year 2017-18 with disputed tax liability amount to T 59.82 lakhs and the same has been accepted by the Department. Accordingly the appeal pending before CIT has been withdrawn.

As per Company’s assessment, there will not be additional financial implication over and above the provisions already made.

The Company sought rectification of mistake u/s 154 of Income Tax Act, 1961 in the computation of taxable income for the Assessment Year 2013-14 involving tax demand of T 383.76 Lakhs, including interest which are pending before the Assessing Authority.

2. With the suspension of mining operations at Kudremukh mine site, the Company is procuring the iron ore fines from NMDC mines in Chhattisgarh state and transporting to its plant at Mangalore by rail or rail cum sea route.

Railways vide letter No. H/C.474 Classification/11 dated 21.10.2011 raised an issue regarding the applicability of distance-based charge (DBC) over and above normal freight on Iron ore transported through railway network for manufacture of pellets and their subsequent export. Both South Western Railway (SWR) and East Coast Railway (ECR) have raised demand of ^ 14,463.93 Lakhs and ^ 10,361.38 Lakhs respectively towards distance-based charge (DBC) over and above normal freight on Iron ore transported.

DBC will attract only for iron ore fines and lumps which are directly exported and not on the Iron Ore so moved and utilized in the steel plants for manufacture of finished product and exported thereafter. The same is also not applicable to Pig iron and Sponge Iron Industry.

Against the demand of ^ 14,463.93 Lakhs of SWR, KIOCL had filed writ petition before the Hon’ble High Court of Karnataka. The writ petition was dismissed and KIOCL filed writ appeal challenging the dismissal of the writ petition. The Hon''ble High Court has granted interim order staying DBC, subject to the condition that 50% of the demand excluding penalty is to be deposited. Accordingly, ^ 8,325.15 Lakhs was paid and for the balance amount of ^ 6,138.77 Lakhs provision has been made in the books.

Similarly, against the demand of ^ 10,361.38 Lakhs of ECR which after considering the freight already paid, worked out to be ^ 6,740.94 Lakhs, KIOCL has filed WRIT petition before High Court of Orissa and High Court granted stay subject to deposit of 50% amount excluding the penalty. Against the worked-out liability, the Company paid ^ 5,188.86 Lakhs and the balance amount of ^ 1,552.08 Lakhs provision has been made in the books.

Both the cases are not listed so far. Railway has filed transfer petition before Supreme Court and both the cases are stayed by Supreme Court.

3. The Company has claimed refund of congestion surcharge amounting to ^ 6,877.86 Lakh from South Western Railway (SWR) in respect of 573 rakes moved during 01.04.2007 to 21.05.2008 through the Company’s private Railway Siding at Panambur, Mangalore which was commissioned in January 2006. SWR refunded only ^ 2,725.39 Lakh till date which includes ^ 206.70 Lakh adjusted by SWR towards DBC. The Company had approached Railway Claims Tribunal (RCT), Bangalore for refund of the balance amount of ^ 4,152.70 Lakh with interest. The Tribunal allowed the claim by its order dated 07.12.2018 and directed SWR to compute and pay the amount together with interest at 6% per annum and in case SWR fails to comply with the order interest at 9% per annum is payable from 01.04.2019. SWR has filed petition against the order of Tribunal in

Hon’ble High Court of Karnataka on 11.04.2019 vide case no MFA/3165/2019. The Company has not recognized the above as income in line with the Company’s significant accounting policy No.1.5, pending realization.

The Konkan Railway offered concessional freight to the Company for movement of rakes through Konkan route instead of shorter route i.e., Hassan-Mangaluru, which has been accepted by the Company and 110 rakes were booked for the Konkan route. Subsequently, Konkan Railway allowed concessional freight for 92 rakes only and balance 18 rakes were moved through shorter routes i.e., Hassan-Mangaluru. Hence, the Company claimed refund of ^ 254.45 Lakhs from SWR towards differential freight. However, SWR has not refunded the amount. Hence, the Company approached RCT, Bengaluru and has claimed ^ 254.45 Lakhs with interest. The Tribunal dismissed the claim and the Company filed appeal before Hon’ble High Court of Karnataka and the same is pending.

East Coast Railway have collected 100% congestion surcharge instead of 30% for the rakes moved during the period from 15/04/2008 to 21/05/2008. The Company requested ECR for refunding ^ 436.83 Lakhs being 70% excess congestion surcharge collected in respect of 26 rakes. As ECR failed to refund the amount, the Company has filed a petition before the RCT, Bhubaneswar for refund of ^ 436.83 Lakhs with interest. The Tribunal dismissed the claim and the Company filed appeal before Hon’ble High Court of Odisha and the same is pending.

4. In pursuance of the directive of the Hon’ble Supreme Court, mining activities at Kudremukh were stopped with effect from 1st January 2006. Indian Bureau of Mines (IBM) has approved final mine closure plan (FMCP) of Kudremukh Iron Ore Mine and the same was communicated vide letter no. MS/CMG/Fe-38-52 dated 06.05.2005. At the time of closure of the mine, the Company filed a petition with prayers for direction, inter-alia, to permit utilization of 54.01 hectares of land required for the purpose of safety and slope stability of the mine.

The Hon’ble Supreme Court, in its judgment (December 2006), directed IIT Delhi to issue global tender for, inter-alia, re-analyzing the stability of slopes, drawing up of mine closure plan, implementation of the above plan and drawing up of detailed terms for the work to be done, consistent with basic paradigm of “no or minimal disturbance to un-broken area”.

The expenditure for this purpose was to be met out of ^ 1,900 Lakhs paid by the company, which is presently lying with the adhoc Compensatory Afforestation Fund Management and Planning Authority (CAMPA).

The Hon’ble Supreme Court has also directed that if any funds are required in excess of ^ 1,900 Lakhs, the agency or the designated officer shall move to the Court for necessary direction.

Ministry of Mines Government of India, vide letter dated 07.02.2014, nominated the Regional Controller of Mines, IBM Bangalore as the ''Designated Officer’ to take possession of Kudremukh Iron Ore Mines. Accordingly, the Company has handed over the possession of the Kudremukh Iron Ore Mines on 03.04.2014 to the Regional Controller of Mines, IBM Bangalore.

Subsequently, officials of IBM Bangalore and IIT, Delhi inspected the mine site on 20.05.2014, in which IIT Delhi opined that, keeping in view of the environment and safety concerns, the residual task of mine closure is relatively minor as compared to what was originally envisaged. Hence, the amount of ^ 1,900 Lakhs paid by the company to Central Empowered Committee (CEC) already lying with the CAMPA would be utilized for restoration of Kudremukh iron ore mine. In addition to above, the Company has also made provision to the extent of ^ 600 Lakhs.

5. Stores & Spares not moved for 5 years or more are classified as non-moving/surplus stores for which 100% provision towards impairment made in the books of accounts and shown under Non-Current Assets in Note No 9.a. The movement of the provisions are as follows:

(^ in Lakhs)
Particulars	Non moving	Surplus	Total
Opening as on 01.04.20 (A)	2134.66	215.31	2,349.97
Adjustment of Provision towards impairment during the Year (B)	(113.79)	(204.94)	(318.73)
Closing Balance as on 31.03.21 (C=A B)	2,020.87	10.37	2,031.24

6. An amount of ^ 1464.69 Lakhs has been shown as “Provision no longer Required” under “Other Operating Income” in the Statement of Profit and Loss, as while making the Provisions the same was classified as Operating Expenditure in respective years. The details are as follows:

(a) During the current year the Board has approved to enhance perquisite of Executives and the Company implemented Non- Executive Pay revision w.e.f. 01.01.2017, accordingly the reassessment of provisions has been made and excess provisions amount to ^ 1,319.23 Lakhs has been withdrawn.

(b) Stores & Spares not moved for 5 years or more are classified as non-moving/surplus stores for which 100% provision towards impairment made in the books of accounts. In case of any movement of items from non-moving stores, the provision made against such non-moving stores is withdrawn in the year of movement. Accordingly, during the year, excess provisions of ^ 113.79 Lakhs was withdrawn.

(c) During the current year, provision of ^ 31.67 Lakhs, made in previous years towards Liability for Operating Expenditure, has been withdrawn.

7. Property, Plant & Equipment (PPE) includes land measuring 114.31 Hectares located on Kudermukh wherein the Mining operation was closed w.e.f. 01.01.2006 on the order of Hon’ble Supreme Court. The land neither qualify for Investment Property (Ind AS 40) as it is not being held for capital appreciation and nor qualify for Asset held for sale (Ind AS 105). The decision on land is pending with Central Empowered Committee (CEC), appointed by Hon’ble Supreme Court of India.

The Company has adopted Indian Accounting Standard (Ind AS) as notified by the Ministry of Corporate Affairs with Effect from April 1, 2016 with transition date of April 1, 2015. As per provision of Ind AS 101, the Company continues with carrying value for all of its “Property, Plant and Equipment” as recognized in the Financial Statements as on the date of transition to Ind As, measured as per the IGAAP and use that as deemed cost as at the date of transition after making necessary adjustments for the decommissioning liabilities.

8. Depreciation on Fixed Assets has been provided on Straight Line Method except certain assets for which higher rates were considered based on their estimated useful life as per the provisions of Schedule II of Companies Act, 2013.

Depreciation on Assets other than Roads, Bridges and Culverts, Township, Furniture & Fittings, Computers, Vehicles are provided for their remaining value reduced by residual value over its remaining useful life as technically assessed. The residual values are reviewed periodically. As on 01.04.2014 the remaining useful life for assets including plant buildings which are its integral part, in Pellet Plant and Blast Furnace Unit was estimated at 8 years, Captive Power Plant 15 years and Port Facilities including grinding and balling unit 10 years. However, the useful life of Blast Furnace Unit was technically assessed by the committee during the year 2016-17 at 10 years from 01.04.2016. Additions during the year to P&M and Buildings in the above units are also limited to those useful lives.

Other assets are depreciated in accordance with useful life of the assets as indicated in Part C of Schedule II of Companies Act, 2013.

Depreciation in respect of Assets having actual cost not exceeding ^ 5,000 each, useful life of such assets considered as less than one year and Temporary Structures has been provided for in full, retaining a nominal value of ^ 1 per item.

The value of assets and the rate of depreciations adopted vis-a-vis the life and rate of depreciation as per Companies Act, 2013 are as follows:

Type of Asset	Companies Act, 2013 (from the date of commissioning)		Technical Committee Assessment (from 01.04.2014)
	Life	Depn. %	Life	Depn. %
Plant &Machinery:
PF-Continuous process	25	3.80	10	9.50
PF-Non continuous	15	6.33	10	9.50
PP-Continuous process	25	3.80	8	11.88
PP-Non continuous	15	6.33	8	11.88
CPP	40	2.38	15	6.33
BFU	20	4.75	10	9.50

In respect of other assets i.e. Township Building, Roads-RCC and other than RCC, Furniture & Fittings - General, Furniture & Fittings - Canteen & Guest House, Motor Vehicles, Office Equipment''s, Computers - Normal & Computers -Servers, the useful life as per Schedule II of the Companies Act, 2013 has been adopted.

Component accounting of tangible fixed assets being mandatory, where cost of part of the asset significant to total cost of the asset and useful life of that part is different from useful life of principal asset, the useful life of that significant part determined separately for computation of Depreciation charge.

9. The following additional information is provided with reference to Ind AS 16, Property Plant and Equipment.

S. No	Particulars	Amount (t in Lakhs)
1	Carrying amount of temporarily idle Property, Plant and Equipment	-
2	Gross carrying amount of any fully depreciated Property, Plant and Equipment that is still in use	114.39
3	Carrying amount of Property, Plant and Equipment retired from active use and not classified as held for sale in accordance with Ind AS 105
4	The fair value of Property, Plant and Equipment, when this is materially different from the carrying amount.	84,043.44

10. During the year, Capital-Work-in-Progress increased to ^ 3,723.76 Lakhs (Previous Year ^ 2001.75 Lakhs) due to ongoing projects of 5 MW Solar Power Plant in Karnataka, Vertical Pressure Filter and Backward- Forward Integration of Blast Furnace Unit.

11. Total mining lease areas of 4,605.02 hectares of land at Kudremukh include an extent of 1,220.03 hectares of government revenue land, apart from forest land as well as the Company’s free hold land. Regional Controller of Mines IBM, the designated officer has taken over the entire mining lease area on 03.04.2014 for carrying out the mine closure activities in compliance with Hon’ble Supreme Court orders dated 15.12.2006. However, the infrastructure and buildings located on Revenue land and other lands being the property of the Company shall continue to remain in their physical possession till the cessation of mine closure activities. Till the year 201314, the land records of revenue land were in the name of the Company. Meanwhile Government of Karnataka has changed the revenue records removing the Company’s name. Hence the Company was constrained to file a suit before Civil Judge Court, Mudigere for an injunction against Government and others, restraining them from dispossessing the Company from the said revenue land. The court heard the arguments and passed an interim order on 05.11.2013 restraining the defendants or anybody under them from dispossessing the Company from the schedule property (i.e. Revenue land) in any manner till the disposal of the suit or till the modalities have been worked out and implemented as directed by the Hon’ble Supreme court. The suit was dismissed on 20.11.2017.

Taking into consideration of taking over the entire mining lease area of 4,605.02 hectors comprising forest land, revenue land, Company’s own land and other lands by the designated officer IBM for carrying out the mine closure activities in the mine in compliance with the Hon’ble Court’s direction, although their physical possession held with the Company, the Company depreciated all its township assets in full during the year 2014-15 as a prudent measure.

12. Leases

Transition to Ind AS -116

Effective from April 1, 2019, the Company adopted Ind AS 116 on Leases and applied the standard to all lease contracts existing on April 1, 2019 using the modified retrospective method and has taken the cumulative adjustment to General Reserve, on the date of initial application.

Consequently, the Company recorded the lease liability at the present value of the remaining lease payments discounted at the incremental borrowing rate and the ROU asset at its carrying amount as if the standard had been applied since the commencement date of the lease, but discounted at the Company’s incremental borrowing rate at the date of initial application.

On transition, the adoption of the new standard resulted into recognition of ''Right of Use’ asset of ^ 10,749.05 Lakhs, and a lease liability of ^ 12,675.86 Lakhs. The cumulative effect of applying the standard, amounting to ^ 2,158.10

* The ROU of land includes a 99 years leasehold land which was acquired by the company on payment of upfront lease premium at the time of commencement of lease.

The aggregate depreciation expense on ROU assets is included under depreciation and amortization expense in the Statement of Profit and Loss.

Ind AS 116 has resulted into an increase in cash inflows from operating activities and an increase in cash outflows from financing activities on account of lease payments.

The following is the summary of practical expedients elected on initial application:

1. Applied a single discount rate to a portfolio of leases of similar assets in similar economic environment with a similar end date

2. Applied the exemption not to recognize ROU assets and liabilities for leases with less than 12 months of lease term on the date of initial application

3. Excluded the initial direct costs from the measurement of the ROU asset at the date of initial application.

4. Applied the practical expedient to grandfather the assessment of which transactions are leases. Accordingly, Ind AS 116 is applied only to contracts that were previously identified as leases under Ind AS 17.

The weighted average incremental borrowing rate applied to NMPT lease liabilities is @ 8.20% and for Office and Guest house leases is @8.45%.

The Company does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they become due.

Rental expenses recorded for short- term leases were ^ 162.92 Lakhs for the year ended March 31, 2021(Previous year ^ 206.62 Lakhs).

Rental income on assets given on operating leases was ^ 155.15 Lakhs for the year ended March 31, 2021(Previous year ^ 152 Lakhs).

13. The Company holds nine tracts of Land totaling 386,691 Sq. Mtrs. on long term lease from New Mangalore Port Trust.

Lease of the following four tracts of land although expired and pending registration, are considered as “Lease continuing” in view of company’s request for extension of lease with M/s. NMPT and the same being under their consideration and continuing in paying annual lease rent and the same is duly acknowledged and accepted by M/s NMPT:

a. 213,783 Sq Mtrs of land taken for Port facilities

b. 9,120 Sq Mtrs of land taken for storage of iron ore fines

c. 27,008 Sq Mtrs of land taken for pellet storage yard and

d. 21,270 Sq Mtrs of land taken for Captive Power Plant

14. Govt. of Karnataka vide its Gazette notification dated 23.01.2017 reserved an area of 470.40 ha in Devadari Range in Ballari District for iron ore and manganese ore mining lease in favour of KIOCL under the provisions of Section 17A (2) of Mines and Minerals (Development and Regulation) Act, 1957.

The company is in the process of registration of Mining lease deed in its favour. During the process, the company has to obtain a prerequisite statutory clearance viz. Mining Plan, Environment Clearance and Forest Clearance.

Till date only the mining plan has been approved by the Regional Controller of Mines, Indian Bureau of Mines, Bangalore, and the Environment Clearance and Forest Clearance are in the process of being obtained. The Forest Ecology and Environment Department, Government of Karnataka, has recommended in principle stage-I approval to MOEF, Govt. of India. In the Last meeting of the MOEF-FAC held on 10^th March 2021 and based on the meeting a Sub-committee was setup to visit the site and to submit report thereof within one month. The Stage -I clearance from Ministry of Environment and Climate change is still awaited.

The company has contributed towards the District CSR funds by funding the purchase of vehicles based on a request of the District Administration, Bellari district during the year 2020-21 (^ 118.92 Lakhs) as a goodwill gesture. The cumulated expenditure associated with the acquisition of mining rights including related professional fee, processing fee before execution of Mining Lease Deed and contribution towards District CSR fund is ^ 229.49 Lakhs (Previous year ^ 84.59 Lakhs) are treated as “Mining rights under Acquisition” and are classified under the head “Intangible Assets under Development” vide note no.3.3

15. During the year the Company has engaged M/s Tech Mahindra to implement ERP in the Company. As on 31^st

March 2021, work was under progress and expected to be completed during the FY 2021-22. Cumulative expenditure incurred upto 31^st March 2021 was ^ 260.06 Lakhs including fees for feasibility and PMC charges (Previous Year ^ 4.25 Lakhs) are treated as “SAP Software under Devlopment/ Acqusition” and are classified under the head “Intangible Assets under Development” vide note no.3.3

L6. Inventories

As per Indian Accounting Standard (Ind AS) -2, ''Valuation of Inventories’, materials and other supplies used in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. However, when there has been a decline in the price of materials and it is estimated that the cost of the finished products will exceed net realizable value, the materials are written down to net realizable value.

Accordingly, during the year value of Inventory written down by Rs Nil (Previous year ^ 846.40 Lakhs).

7. Since the closure of mining activities, consequent upon the judgment of Hon’ble Supreme Court w.e.f. 01.01.2006, Mangalore Pellet Plant and also Blast Furnace Unit continue to draw the required water from Lakya Dam at Kudremukh. Hence, dam maintenance activity from the safety point of view and maintenance of water drawal system which include electrical and pipeline maintenance are still continuing. Therefore, Kudremukh installation is a working unit as on date as an integral part of Mangalore unit.

L8. Employee Benefits- Actuarial Valuation

(a) Liability with regard to Gratuity benefits payable in future is determined by actuarial valuation at the end of the year using the projected unit method. The Company operates a gratuity plan administered by LIC under Group Gratuity Life Assurance Scheme of LIC of India. Every employee is entitled to a benefit equivalent to fifteen days salary last drawn for each completed year of service subject to a maximum of ^ 20 Lakhs as per the Payment of Gratuity Act, 1972, as adopted by the Company through resolution in 257^th meeting of the Board held on 26^th March 2019. The same is payable at the time of separation from the company or retirement, whichever is earlier. The benefits vest after five years of continuous service. Net Asset/[Liability] recognized in Balance Sheet is [^ 186.34 Lakhs] (Previous year ^ 227.32 Lakhs).

(b) Present Value of Future Obligations (as at the Balance Sheet date) as per Actuarial Valuations are:

• Long term compensated absence - Earned Leave ^ 3,720.86 Lakhs (Previous year ^ 3,454.62 Lakhs)

• Long term compensated absence - Half pay Leave ^ 2,815.13 Lakhs (Previous year ^ 2,795.38 Lakhs)

• Provident Fund Interest Guarantee Obligation for the year: ^ 305.23 Lakhs (Previous year ^ 268.21 Lakhs)

Disclosure required as per Indian Accounting Standard (Ind AS) - 19 on ''Employee Benefits'' are appended.

19. The Company is having two operating segments i.e., ''Pellet'' and ''Pig Iron''. Expenses relating to Kudremukh unit and the Corporate Office have been fully allocated to Pellet segment. Segment Reporting as per Ind AS-108 is appended.

20. The Company had intended to restart BFU Operation during the year 2020-21, however due to un-economic price of Pig Iron, Blast Furnace Unit (BFU) could not be operated during the year. The recoverable amount in each class of assets in BFU and other Units are more than the carrying amount. Hence, there is no impairment loss to be recognized during the year.

In order to utilize the Blast Furnace Unit, the company has made a project proposal for Backward and Forward Integration of the Unit involving capital expenditure of ^ 836.90 Crore and the same has been approved by the Board in its 255^th meeting held on 13^th November 2018. The same has been approved by Public Investment Bureau (PIB). Environment clearance has been granted by MOEF&CC, GOI on 27.02.2020. M/s MECON has been appointed as EPCM contractor for the project.

The project is divided into various packages like Site Levelling, Power Plant, Oxygen plant, Nitrogen plant, Pulverized Coal Injection and Blas Furnace Unit upgradation, DISP Plant packages and Coke Oven. Site Levelling work is under execution, Coke Oven tender is at finalization stage and for other packages tenders have been floated. Tendering process is delayed due to COVID-19 pandemic and subsequent travel restrictions. As per the changes in public procurement policy, global tenders are cancelled and domestic tenders are floated.

During the year the Company has incurred ^ 16.06 Lakhs towards Excavation and loading of 3,131.28 MT of auxiliary material of Pig Iron at BFU. The said materials of 3,167.28 MT worth ^ 355.35 Lakhs were sold during the year (Previous year 1,946.30 MT worth ^ 170.06 Lakhs). As at the end of the year, Company was holding a physical stock of 684 MT (Opening 720 MT plus excavated 3,131.28 MT less 3,167.28 MT sold) of the same (Previous year 720 MT). As the cost of production of the same had been accounted for in earlier years, the same is valued at nil cost as at the end of the year, although the market value of the same ^ 76.61 Lakhs (Previous year ^ 54.00 Lakhs) as per

last sale price of similar product. As a prudent accounting measure, no value has been assigned to the stock in the Books of Accounts.

21. Under Services, the Company had been executing undertaken the following contracts during the year:

(a) Leasing and O&M of furnace oil tanks (IOCL).

(b) Completion of balance portion of the work for the New Chrome Ore Beneficiation Plant (COBP) at South Kaliapani, Odisha (OMCL).

The revenue generated from of the above has been accounted for as “Revenue from Operations” and the expenditure incurred including salaries and benefits has been accounted for under respective heads of account.

(c) The Company has been granted recognition as Mineral Exploration entity u/s 4(1) of MMDR Act 1957 to carry out Mineral Exploration activities. The Company was allotted to carry out various Mineral Exploration Blocks. During the year, total revenue earned from Mineral Exploration activities are ^ 387.43 Lakhs (Previous year ^ 823.51 Lakhs) which is accounted as Revenue from Operations under the head Sale of Services. Balance orders to be executed in the next financial year for ^ 9,526.00 Lakhs including confirmation received for carrying out G4 level of ME works for Kyanite in Kallahalli Kyanite Block, Mysore (Dist), Karnataka valuing ^ 162.71 Lakhs.

22. (a) Expenses incurred towards generation of power being a significant cost of production have been included under the primary heads of account.

(b) Expenses incurred towards Stores, Spares, Consumables and Additives being a significant cost of production have been included under the primary heads of account.

23. The Company has spent ^ 884.66 Lakhs (Pervious year ^ 331.42 Lakhs) towards CSR during the year 2020-21, as against the minimum amount required to be spent of ^ 222.59 Lakhs.

24. Micro Small and Medium Enterprise

The amount payable to micro and small enterprises registered under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED) for the year 2020-21 is ^ 868.16 Lakhs (Previous year ^ 159.72 Lakhs) and the same has been included in note 12.1.a, 12.1.b & 12.2.

No interest is paid/payable during the year to any micro or small enterprise registered under the MSMED.

The said information has been determined to the extent of such parties that could be identified on the basis of the information available with the Company regarding the status of suppliers under the MSMED.

The Company had opened Trade Receivable Discounting System (TReDS) Account with M1XCHANGE and INVOICEMART in addition to RXIL for facilitating trade receivables with MSME.

25. Financial Risk Management

The Company’s business activities expose it to a variety of financial risks, namely liquidity risk, market risk, credit risk and currency risk. The Company’s senior management has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company has constituted a Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The key financial risks and mitigating actions are also placed before the Audit Committee of the Company. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits, to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

The Risk Management Committee of the Company is supported by the Finance team and experts of respective business divisions that provides assurance that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. The activities are designed to:

• Protect the Company’s financial results and position from financial risks

• Maintain market risks within acceptable parameters, while optimizing returns

• Protect the Company’s financial investments, while maximizing returns.

The investment committee is responsible for maximizing the return on Company’s internally generated funds.

I. Management of Liquidity Risk

Liquidity risk is the risk that the Company faces in meeting its obligations associated with its financial liabilities. The Company’s approach to managing liquidity is to ensure that it has sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions. A material and sustained shortfall in our cash flow could undermine the company’s credit rating and impair investor confidence. The following table shows the maturity analysis of the company’s financial liabilities based on contractually agreed undiscounted cash flows as at the Balance Sheet date:

II. Management of Market Risk

Market risks comprises of Price risk & Interest rate risk. The Company does not designate any fixed rate financial assets as fair value through Profit and Loss nor at fair value through OCI. Therefore, Company is not exposed to any interest rate risks. Similarly, the Company does not have any financial instrument which is exposed to change in price.

III. Management of Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to customers and other receivables. The Company applies prudent credit acceptance policies, performs ongoing credit portfolio monitoring as well as manages the collection of receivables in order to minimize the credit risk exposure.

The maximum exposure to credit risk for each class of financial instruments is the carrying amount of that class of financial instruments presented in the notes to the Financial Statements. The Company’s major classes of financial assets are cash and cash

equivalents, term deposits and trade receivables. For banks and financial institutions, only high rated banks / institutions are accepted.

Trade Receivables

Concentrations of credit risk with respect to trade receivables are limited, since the Company’s sales are secured against Letter of Credit and/or Bank Guarantee. Accordingly, Company has assessed that the impact of expected credit loss on receivable is negligible.

IV. Foreign Currency Risk

The Company being an EOU, is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar (USD), Euro (EUR), and Japanese Yen (JPY). Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities denominated in a currency that is not the Company’s functional currency (INR). The currency risk of the said underlying asset is managed by entering into foreign currency forward contracts (only on need basis).

26. Capital Management

The Company considers the following components of its Balance Sheet to be managed capital:

Total equity as shown in the Balance Sheet includes Retained Earnings and Share Capital. The Company aim to manage its capital efficiently so as to safeguard its ability to continue as a going concern and to optimize returns to our shareholders. The capital structure of the Company is based on management''s judgement of the appropriate balance of key elements in order to meet its strategic and day-to-day needs. The Company considers the amount of capital in proportion to risk and manages the capital structure in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company

may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.

The Company''s policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain future development and growth of its business. The Company takes appropriate steps in order to maintain, or if necessary, adjust, its capital structure. Company is not subject to financial covenants in any of its significant financing agreements.

The management monitors the return on capital as well as the level of dividends to shareholders.

(ii) Fair Value Hierarchy

Management considers that the carrying amount of those financial assets and financial liabilities that are not subsequently measured at fair value, in the Financial Statements are approximate to their fair values.

No financial instruments are recognized and measured at fair value for which fair values are determined using the judgments and estimates.

The fair value of financial instruments referred to above has been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active market for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements). The categories used are as follows:

• Level 1: This hierarchy includes financial instruments measured using quoted prices.

• Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in this level.

• Level 3: Derived from valuation techniques that include inputs for the Asset or Liability that is not based on observable market data (unobservable inputs).

Valuation process: For level 3 financial instruments, the fair values have been determined based on present values and the discount rates used were adjusted for counterparty or own credit risk.

The carrying amounts of trade receivables, trade payables, bank deposits with more than 12 months maturity, capital creditors and Cash and Cash Equivalents are considered to be the same as their fair values.

The fair values for loans, security deposits were calculated based on cash flows discounted using a current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counterparty credit risk.

The fair values of non-current borrowings are based on discounted cash flows using a current borrowing rate. They are classified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.

For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

!8. There is no amount due and outstanding to be credited to the Investor Education and Protection Fund as at 31.03.2021 and 31.03.2020.

!9. The Company requested its debtors and creditors to confirm the balances at the year-end in respect of trade payables, trade receivables, advances and loans directly to the Statutory Auditors.

The total ^ 10,443.73 Lakhs consists of ^ 6,345.31 Lakhs and ^ 4,098.42 Lakhs towards LC and BG respectively. In addition to above, value of Matching Forward Cover booked with Indusind Bank is ^ 22,906.35 Lakhs.

LC: Letter of Credit, BG: Bank Guarantee, BC: Buyers Credit.

31. During the current year, Company has declared dividend at ^ 0.70 per share for the Financial Year 2019-20 (Previous year ^ 1.33 per Shares) and paid an amount of ^ 4,353.48 Lakhs.

32. During the year the Company has made buy back of 1,41,74,469 Equity Shares @ ^ 110/- each out of the General Reserve. Capital Redemption Reserve in terms of section 69 of the Companies Act 2013 for the face value of redemption amount amounting to ^ 2,676.27 Lakhs has been created and disclosure of the same made in Note-11 Other Equity.

33. During the year certain items of income and expenditure pertaining to earlier years which do not have any materiality, has been considered as current year Income and expenditure and classified under respective head of accounts.

34. During the Financial year 2019-20, the company has elected to exercise the option available under Sec.115BAA of the Income Tax Act, 1961. Accordingly, the applicable Corporate Tax is 25.168% (Corporate Tax rate 22%, Surcharge 10% and Cess 4% on Tax and Surcharge).

35. The Company has made detailed assessment of impact of COVID-19 on its liquidity position for a period of at least one year from the Balance Sheet date, of the recoverability and carrying values of its assets comprising Property, Plant and Equipment, Intangible Assets, Trade Receivables, Inventory, Investments, Other Current and Non-Current Assets and ability to pay its liabilities as they become

due and effectiveness of internal financial controls at the Balance Sheet date, and has concluded that there are no material impact or adjustment required in the Financial Statement.

Management believes that it has taken into account all the possible impact of known events arising from COVID-19 pandemic till the date of approval ofits Financial Statements while preparing Financial Statements. Management is of the view that considering the nature of its business operations, existing customer and supplier relationship etc, impact on its business operations, if any, arising from COVID -19 pandemic is not expected to be significant. In spite of continued lock down and restrictions in working timing, during the current financial year the Company has managed to execute the sales orders for 2.311 MMT and produced Iron Ore Pallets of 2.210 MMT. Further, during the month of April, 2021 the company has managed to execute the sales orders for 0.16 MMT and produced 0.18 MMT As the situation is continuously evolving, the impact of COVID-19 pandemic may be different from that estimated as of the date of approval of these financial results. The Company will continue to monitor any material changes to future economic conditions.

Based on the assessment, the Management feels that there shall not be any material impact on Going Concern Assumption due to COVID 19 as on the Balance Sheet date and next 12 months thereafter.

36. The Company had extended ^ 18 Crores inter corporate loans to Hindustan Photo Films Mfg Company Ltd (HPF Ltd) during 1992-93. HPF Ltd has been declared to be sick under Sick Industrial Companies (Special provisions) Act 1985 in January 1996. Provision towards 100% of the said loan made in the books. M/s HPF has informed that official liquidator has been appointed. The company has lodged the claim to the official liquidator on 09.09.2019.

37. During the year, the Company has opened the VRS Scheme, total 13 employees separated under VRS scheme, compensation thereof amounting to ^ 319.31 Lakhs included under the head “Employee Benefit Expenditure”.

38. Related Party Disclosure: Key Management Personnel are:

M.V. Subba Rao Chairman-cum-Managing Director

Swapan Kumar Gorai Director (Finance)

T. Swaminathan Director (Commercial)

K.V Bhaskara Reddy Director (Production and Projects) P.K. Mishra Company Secretary

As per the requirement of Ind AS 24 the total compensation

paid to Key managerial personnel for the year 2020-21 are as

follows:

39. Previous Year’s figures have been regrouped/reclassified/ re-casted wherever necessary to confirm to current year’s presentation.

40. Figures in the Balance Sheet, Statement of Profit and Loss, Cash Flow Statement, Statement of Changes in Equity and the Notes thereon have been rounded off to Rupees Thousands and expressed in Rupees in Lakhs.

---

Mar 31, 2018

Background

KIOCL Limited (the “Company”) is a Schedule “A” Miniratna Government of India Enterprise, having its Head Office in Bangalore; it has Pelletisation and Pig Iron plant units in Mangalore. The Company was established as 100% Export Oriented Unit and is primarily engaged in the business of Iron Ore Mining, Beneficiation and Production of high quality Pellets. Recently the Company has diversified into Provision of Operating and Maintenance Services pertaining to its various core areas of expertise.

1. Significant Estimates

The application of Accounting Standards and Policies requires the Company to make estimates and assumptions about future events that directly affect its reported financial condition and operating performance. The accounting estimates and assumptions discussed are those that the Company considers to be most critical to its Financial Statements. An accounting estimate is considered critical if both (a) the nature of estimates or assumptions is material due to the level of subjectivity and judgement involved, and (b) the impact within a reasonable range of outcomes of the estimates and assumptions is material to the Company’s financial condition or operating performance.

Gratuity Assumptions

The measurement of the Company’s defined benefit obligation to its employees and net periodic defined benefit cost/income requires the use of certain assumptions, including, among others, estimates of discount rates and expected return on plan assets. Changes in these assumptions may affect the future funding requirements of the plans and actuarial gain/loss recognized in the statement of comprehensive income.

Net Realizable Value and Client demand:

The Company reviews the net realizable value of and demand for its inventory on a quarterly basis to ensure recorded inventory is stated at the lower of cost or net realizable value and that obsolete inventory is written off.

Lease of four tracts of land (a) 213,783 Sq Mtrs of land taken for Pellet Plant and Port facilities (b) 9,120 Sq Mtrs of land taken for storage of iron ore fines (c) 27,008 Sq Mtrs of land taken for pellet storage yard and (d) 21,270 Sq Mtrs of land taken for Captive Power Plant, although expired and pending registration, are considered as “Lease continuing” in view of written consent from NMPT for its continuation/renewal. Further, adequate provision has been made towards Registration charges and Stamp Duty on its renewal. The lease rent charged to expenses for the year towards four lands amounting to Rs. 808.30 Lakhs. Lease Rentals are charged to Statement of Profit and Loss on accrual basis. Further, the rental obligation for all 9 tracts of Land for remaining lease period is Rs. 30,984.39 Lakhs.

However, it has been informed that the Govt. of Karnataka has filed Special Leave Petition before the Hon’ble Supreme Court of India and the case is pending for disposal.

The amount of Rs. 2,617.43 Lakh (equivalent to 25% of FDT) collected earlier by NMDC as per the interim order of Hon’ble Court is shown under “Other Current Assets” in Books of Accounts and the Bank Guarantee equivalent to Rs.2,734.87 Lakh furnished to NMDC in this regard has not been included under the contingent liability.

As per Company’s assessment there will not be additional financial implication over and above the provisions already made.

D. The Company sought rectification of mistake u/s 154 of Income Tax Act, 1961 in the computation of taxable income for the Assessment Year 2013-14 amounting to Rs.384.25 Lakh and Assessment year 2012-13 amounting to Rs.839.96 Lakh including interest which are pending before the Assessing Authority.

2. With the suspension of mining operations at Kudremukh mine site, the Company is procuring the iron ore fines from NMDC mines and transporting it to its plant at Mangalore by rail or rail cum sea route.

Railways vide letter No. H/C.474 Classification/11 dated 21.10.2011 raised an issue regarding the applicability of distance based charge (DBC) over and above normal freight on Iron ore transported through railway network for manufacture of pellets and their subsequent export.

Iron ore fines and lumps attract DBC if the same are exported. However, the Iron Ore so moved and utilized in the steel plants for manufacture of finished product and exported thereafter do not attract the DBC. The same is also not applicable to Pig iron and Sponge Iron Industry.

This benefit is not available to pellets even though it is a manufactured and value added, technically and commercially distinct product.

This discrimination by Railways was challenged before the Hon’ble High Court of Karnataka through a writ petition. The writ petition was dismissed. KIOCL filed writ appeal challenging the dismissal of the writ petition. The Hon’ble High Court has granted interim order staying DBC, subject to the condition that 50% of the demand excluding penalty is to be deposited.

The Company initially worked out the DBC liability as Rs.12,727.28 Lakh and paid Rs.6,363.64 Lakh to South Western Railway (SWR). Subsequently after reconciliation with SWR in the meeting held on 15th November 2016, the liability of DBC was assessed at Rs.14,463.93 Lakh Pending disposal of writ appeal, liability has been created in the books of account for the balance amount as a prudent measure during 2013-14 and 2016-17. During the year 2014-15, an amount of Rs.1,461.51 Lakh was paid/adjusted to SWR which includes adjustment of congestion surcharge amounting to Rs.206.70 Lakh by SWR. During the year 2016-17, an additional amount of Rs.172.85 Lakh has been provided under exceptional item and an amount of Rs.500 Lakh has been paid. Hence the cumulative provision made amounting to Rs.14,463.93 Lakh out of which an amount of Rs.8,325.15 Lakh has been paid.

East Coast Railways (ECR) has raised a demand of Rs.41,446.00 Lakh towards DBC and penalty there on. The liability towards DBC excluding penalty worked out by company is Rs.6,740.94 Lakh. However, ECR has demanded DBC for Rs.10,361.381 Lakh without reducing the freight already paid by the company. The Company has paid Rs.5,188.86 Lakh and the liability for remaining balance amount of Rs.1,552.08 Lakh has been created in the books of accounts of Financial Year 2013-14 as a prudent measure pending disposal of writ petition. The Company filed writ petition before Hon’ble High Court of Odisha which has granted interim order on the similar lines of Hon’ble High court of Karnataka. On the request of railways, all the cases relating to DBC have been transferred to Hon’ble Supreme Court. The matter was last heard by the Hon’ble Supreme Court on 06.04.2018 and the case is posted for next hearing tentatively after eight weeks, i.e during first week of June 2018.Both the cases are therefore subjudice.

3. The Company’s private Railway Siding at Panambur, Mangalore was commissioned during January 2006 with allotment of code ‘PNKI-06529006’ by Railway. The Iron ore fines moved through this siding is not liable for levy of congestion surcharge over and above the freight. But, South Western Railway (SWR) continuously levied and collected congestion surcharge for the period from 01.04.2007 to 21.05.2008 for movement of rakes. The Company resisted this levy and collection. The Company also claimed refund of congestion surcharge amounting to Rs.6,877.86 Lakh from SWR in respect of 573 rakes moved during the above mentioned period. SWR refunded Rs.2,715.16 Lakh till date which includes Rs.206.70 Lakh adjusted by SWR towards DBC. The Company has approached Railway Claims Tribunal (RCT), Bangalore and filed an application for refund of the balance amount of Rs.4,162.70 Lakh with interest. The case is pending for disposal.

The Konkan Railway offered concessional freight to the Company for movement of rakes through Konkan route instead of shorter route i.e., Hassan-Mangalore, which has been accepted by the Company and 110 rakes were booked for the Konkan route. Subsequently, Konkan Railway allowed concessional freight for 92 rakes only and balance 18 rakes were moved through shorter routes i.e., Hassan-Mangalore. Hence, the Company claimed refund of Rs.2,54.45 Lakh from SWR towards differential freight. However SWR has not refunded the amount. Hence, the Company approached RCT, Bangalore and has claimed Rs.2,54.45 Lakh with interest. The case is pending for disposal.

East Coast Railway have collected 100% congestion surcharge instead of 30% for the rakes moved during the period from 15.04.2008 to 21.05.2008. The Company requested ECR for refunding Rs.436.83 Lakh being 70% excess congestion surcharge collected in respect of 26 rakes. As ECR failed to refund the amount, KIOCL has filed a petition before the RCT, Bhubaneswar for refund of Rs.436.83 Lakh with interest. The case is pending for disposal.

The Company has not recognized the above as income is line with the Company’s significant accounting policy no.1.5.

4. In pursuance of the directive of the Hon’ble Supreme Court, mining activities at Kudremukh were stopped with effect from 1st January 2006. At the time of closure of the mine the Company filed a petition for direction with prayers, inter-alia, to permit utilization of 54.01 hectares of land required for the purpose of safety and slope stability of the mine. Indian Bureau of Mines (IBM) has approved final mine closure plan (FMCP) of Kudremukh iron ore mine and the same was communicated vide letter no. MS/CMG/Fe-38-52 dated 06.05.2005. The expenditure towards mine closure, as per the above plan, was Rs.279 Lakh.

The Hon’ble Supreme Court, in its judgment (December 2006), directed IIT Delhi to issue global tender for, inter-alia, re-analyzing the stability of slopes, drawing up of mine closure plan, implementation of the above plan and drawing up of detailed terms for the work to be done, consistent with basic paradigm of “no or minimal disturbance to un-broken area”

The expenditure for this purpose was to be met out of Rs.1,900 Lakh paid by the company and which is presently lying with the adhoc Compensatory afforestation fund management and planning authority (CAMPA).

The Hon’ble Supreme Court has also directed that if any funds are required in excess of Rs.1,900 Lakh, the agency or the designated officer shall move to the Court for necessary direction.

Ministry of Mines(GOI), vide letter dated 07.02.2014, nominated the Regional Controller of Mines, IBM Bangalore as the ‘Designated Officer’ to take possession of Kudremukh Iron Ore Mines. Accordingly, the Company has handed over the possession of the Kudremukh Iron Ore Mines on 03.04.2014 to the Regional Controller of Mines, IBM Bangalore.

Subsequently, officials of IBM Bangalore and IIT, Delhi inspected the mine site on 20.05.2014, in which IIT Delhi opined that, keeping in view of the environment and safety concerns, the residual task of mine closure is relatively minor as compared to what was originally envisaged. Hence, the amount of Rs.1,900 Lakhs paid by the company to Central Empowered Committee already lying with the CAMPA. In addition to above Company has also made provision to the extent of Rs.600 Lakhs which is sufficient to meet the expenditure on mine closure, no further liability is considered necessary.

5. The Mangalore Pellet Plant is the outcome of Kudremukh activity for ore, for beneficiated concentrate and also water. Consequent upon the judgment of Hon’ble Supreme Court, mining and beneficiation activities were stopped w.e.f. 01.01.2006. However, Mangalore Pellet Plant and also Blast Furnace Unit draw the required water from Lakya Dam at Kudremukh.

As an alternative arrangement, the company has obtained in principle approval in 2012 for supply of water for its plant operation from Mangalore City Corporation at tariff applicable for industrial use. However, since there is no embargo for drawl of water still, the company continued to draw required water from Lakya Dam at Kudremukh for its Mangalore plants during the year. Hence, dam maintenance activity from the safety point of view and maintenance of water drawl system which include electrical and pipeline maintenance are still continuing. Therefore, Kudremukh department is maintained as a part of Mangalore Pellet Plant. Though, mining and beneficiation activities are not taking place, the department continues to exist. As such, Kudremukh installation is a working unit as on date.

6. Total mining lease areas of 4,605.02 hectares at Kudremukh include an extent of 1,220.03 hectares of government revenue land, apart from forest land and the Company’s free hold land. Regional Controller of Mines IBM, the designated officer has taken over the entire mining lease area for carrying out the mine closure activities in compliance of Hon’ble Supreme Court orders dated 15.12.2006 on 03.04.2014. However, the infrastructure and buildings located on Revenue land and other lands being the property of the Company shall continue to remain in their physical possession till the cessation of mine closure activities. Till the year 2013-14, the land records of revenue land were in the name of the Company. Government of Karnataka has changed the revenue records removing the Company’s name. Hence the Company was constrained to file a suit before Civil Judge Court, Mudigere for an injunction against Government and others, restraining them from dispossessing the Company from the said revenue land. The court heard the arguments and passed an interim order on 05.11.2013 restraining the defendants or anybody under them from dispossessing the Company from the suit schedule property (i.e. Revenue land) in any manner till the disposal of the suit or till the modalities have been worked out and implemented as directed by the Hon’ble Supreme court. The suit was dismissed on 20.11.2017.

Taking into consideration of taking over the entire mining lease area of 4605.02 hectors comprising forest land, revenue land, Company’s own land and other lands by the designated officer IBM for carrying out the mine closure activities in the mine in compliance of Hon’ble Court’s direction although their physical possession held with the Company, the Company depreciated all its township assets in full during the year 2014-15 as a prudent measure.

7. Employee Benefits- Actuarial Valuation

a) Liability with regard to Gratuity benefits payable in future is determined by actuarial valuation at the end of the year using the projected unit method. The Company operates a gratuity plan administered by LIC under Group Gratuity Life Assurance Scheme of LIC of India. Every employee is entitled to a benefit equivalent to fifteen days salary last drawn for each completed year of service upto 30 years and one month salary thereafter subject to a maximum of Rs.20 Lakh whichever is more beneficial than the Payment of Gratuity Act, 1972. The same is payable at the time of separation from the company or retirement, whichever is earlier. The benefits vest after five years of continuous service. Net liability /(Asset) recognized in Balance Sheet is Rs.5,574.81 Lakh (Previous year Rs.2,121.09 Lakh)

Disclosure required as per Indian Accounting Standard (Ind AS) - 19 on ‘Employee Benefits’ are appended.

8. As per Indian Accounting Standard (Ind AS) -2, ‘Valuation of Inventories’, materials and other supplies Held for Sale / use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. However, when there has been a decline in the price of materials and it is estimated that the cost of the finished products will exceed net realizable value, the materials are written down to net realizable value.

During the year, as net replacement value Iron ore fines (including semi-finished) and additives is lesser than its weighted average cost, the difference of Rs.408.55 Lakh (Previous year Rs. 1,625.60 Lakh) has been written down in the Statement of Profit and Loss for the year. Consequent upon this, the Profit for the year is reduced by Rs.408.55 Lakh.

9. Depreciation on Fixed Assets has been provided on Straight Line Method except certain assets for which higher rates were considered based on their estimated useful life as per the provisions of Schedule II of Companies Act, 2013.

Assets other than Roads, Bridges and Culverts, Township, Furniture & Fittings, Computers, vehicles are provided on their remaining value reduced by residual value over its remaining useful life as technically assessed. The residual values are reviewed periodically. As on 01.04.2014 the remaining useful life for assets including plant buildings which are its integral part, in Pellet Plant and Blast Furnace Unit was estimated at 8 years, Captive Power Plant 15 years and Port Facilities including grinding and balling unit 10 years. However, the useful life of Blast Furnace Unit was technically assessed by the committee during the year 2016-17 at 10 years from 01.04.2016.Additions during the year to P&M and Buildings in the above units are also limited to those useful lives.

Other assets are depreciated in accordance with useful life of the assets as indicated in Part C of Schedule II of Companies Act, 2013.

The value of assets and the rate of depreciations adopted vis-a-vis the life and rate of depreciation as per Companies Act, 2013 are as follows:

In respect of other assets i.e. Township Building, Roads-RCC and other than RCC, Furniture & Fittings -General, Furniture & Fittings - Canteen & Guest House, Motor Vehicles, Office Equipment’s, Computers -Normal & Computers -Servers, the useful life as per Schedule II of the Companies Act, 2013 has been adopted.

Component accounting of tangible fixed assets being mandatory, where cost of part of the asset significant to total cost of the asset and useful life of that part is different from useful life of principal asset, the useful life of that significant part determined separately for computation of Depreciation charge.

10. The following additional information is provided with reference to Ind AS 16, Property Plant and Equipment.

11. The Company is having two operating segments i.e., ‘Pellet’ and ‘Pig Iron’. Expenses relating to Kudremukh Department and the corporate office have been fully allocated to Pellet segment. Segment Reporting as per Ind AS-108 is appended.

12. The Company had intended to restart BFU Operation during the year 2017-18. Due to un-economic price of Pig Iron, Blast Furnace Unit (BFU) was not operated during the year. However, the recoverable amount in each class of assets in BFU and other Units are more than the carrying amount. Hence, there is no impairment loss to be recognized during the year.

However, due to unfavorable market conditions re-starting of BFU did not materialize during the year.

While excavating in pig iron stock yard, certain auxiliary material of pig iron worth Rs. 40.10 Lakh were retrieved and sold during the year (Previous year Rs.6.65 Lakh). As at the end of the year,

Company is holding a physical stock of 250 MT of Pig iron auxiliary material. As the cost of production of the same had been accounted for in earlier years, the same is valued at nil cost as at the end of the year, although the market value of the same be Rs.30.35 Lakh as per last sale price of similar product. As a prudent accounting measure, no value has been assigned to the stock in the Books of Accounts.

13. Under Operation & Maintenance portal, the Company had undertaken the following contracts during the year:

- O&M of Pellet & Beneficiation plant of NMDC Donimalai

- Leasing and O&M of furnace oil tanks to IOCL.

Revenue earned from these Operation and Maintenance contracts during the year are Rs. 3,416.97 Lakh and Rs. 109.29 Lakh respectively (previous year Rs. 2,774.59 Lakh, and Rs.123.51 Lakh respectively).

Expenditure incurred during the year including salaries and benefits of employees deployed on these contracts is Rs.3,548.74 Lakh (net) and Rs nil (Previous year Rs. 2,759.15 Lakh and Rs. Nil)

The revenue generated from of the above has been accounted for as ‘Revenue from other operations’ and the expenditure incurred including salaries and benefits has been accounted for under respective heads of account.

14. Expenses incurred towards generation of power being a significant cost of production have been included under the primary heads of account.

15. As per the Guidelines issued by Department of Public Enterprises, Govt. of India, the Company is allowed to extend upto 30% of Basic Pay plus Dearness Pay as Superannuation Benefits including Contributory Provident Fund, Gratuity and other specified Superannuation Benefit plans. As the Company had revised the pay scales of Executives, with effect from 01.01.2007 in compliance with the said DPE Guidelines, provision towards Superannuation Benefit has been made in line with the said Guidelines. The company has framed post retirement medical scheme and pension scheme with defined contribution plan. After due approval by the Board of Directors, the proposal was forwarded to administrative ministry for approval. Post retirement medical scheme has since been approved by the administrative ministry and the same is in the process of implementation.

The Company has assessed the liability up to 31.03.2018 in respect of both the schemes. The provision required for both the schemes upto 31.03.2018 is Rs.8,172.09 Lakhs as against existing provision of Rs.9,008.12 Lakhs. Excess provision to the extent of Rs.836.03 Lakhs has been withdrawn and depicted under the main head Other Income (Sub head - Provision no longer required).

16. The Company has spent Rs.1 Lakh towards CSR during the year 2017-18, as against the minimum amount to be spent of Rs.0.72 Lakh.

17. Due to closure of Kudremukh mine, most of the assets have been written down and nominal value has been retained. The recoverable amount in each class of assets in Kudremukh is more than the carrying amount. Hence, there is no impairment loss to be recognized during the year.

18. Minimum Alternate Tax

In accordance with the provisions of Section 115JAA of the Income Tax Act, 1961, the Company is allowed to avail credit equal to the excess of Minimum Alternative Tax (MAT) over normal income tax for the assessment year for which MAT is paid. MAT credit so determined can be carried forward for set off for ten succeeding assessment years for the year in which such credit becomes available. MAT credit can be set-off only in the year in which the Company is liable to pay tax as per the normal provisions of the Income Tax Act, 1961 and such tax is in excess of MAT for that year. The MAT credit asset is written down to the extent there is no longer convincing evidence to the effect that Company will pay normal income tax during the specified period.

19. Micro Small and Medium Enterprise

- The amount be paid to micro and small enterprises registered under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED) for the year 2017-18 is Rs.38.41 Lakh and the same has been included in trade payables under note 12.2.

- No interest is paid/payable during the year to any micro or small enterprise registered under the MSMED.

- The said information has been determined to the extent such parties could be identified on the basis of the information available with the Company regarding the status of suppliers under the MSMED.

- During the year, the Company has opened Trade Receivable Discounting System (TReDS) Account with RXIL for facilitating trade receivables with MSME.

20. Financial Risk Management

The Company’s business activities expose it to a variety of financial risks, namely liquidity risk, market risk, credit risk and currency risk. The Company’s senior management has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company has constituted a Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The key risks and mitigating actions are also placed before the Audit Committee of the Company. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits, to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

The Risk Management Committee of the Company is supported by the Finance team and experts of respective business divisions that provides assurance that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. The activities are designed to :

- protect the Company’s financial results and position from financial risks

- maintain market risks within acceptable parameters, while optimizing returns; and

- protect the Company’s financial investments, while maximizing returns.

The investment committee is responsible for maximizing the return on Company’s internally generated funds.

I. Management of Liquidity Risk

Liquidity risk is the risk that the Company faces in meeting its obligations associated with its financial liabilities. The Company’s approach to managing liquidity is to ensure that it has sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions. A material and sustained shortfall in our cash flow could undermine the company’s credit rating and impair investor confidence. The following table shows the maturity analysis of the company’s financial liabilities based on contractually agreed undiscounted cash flows as at the balance sheet date:

II. Management of Market Risk

Market risks comprises of Price risk & Interest rate risk. The Company does not designate any fixed rate financial assets as fair value through Profit and Loss nor at fair value through OCI. Therefore Company is not exposed to any interest rate risks. Similarly the Company does not have any financial instrument which is exposed to change in price.

III. Management of Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to customers and other receivables. The Company applies prudent credit acceptance policies, performs ongoing credit portfolio monitoring as well as manages the collection of receivables in order to minimize the credit risk exposure.

The maximum exposure to credit risk for each class of financial instruments is the carrying amount of that class of financial instruments presented in the notes to the financial statements. The Company’s major classes of financial assets are cash and cash equivalents, term deposits and trade receivables. For banks and financial institutions, only high rated banks / institutions are accepted.

Trade Receivables

Concentrations of credit risk with respect to trade receivables are limited, due to the Company’s sales are secured against Letter of Credit and/or Bank Guarantee. Accordingly Company has assessed that the impact of expected credit loss on receivable to be negligible.

IV. Foreign Currency Risk

The Company being an EOU is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar (USD), Euro (EUR), and Japanese Yen (JPY). Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Company’s functional currency (INR). The currency risk of the said underlying asset is managed by entering into foreign currency forward contracts (only on need basis).

The Company considers the following components of its Balance Sheet to be managed capital:

Total equity as shown in the Balance Sheet includes Retained Profit and Share Capital. The Company aim to manage its capital efficiently so as to safeguard its ability to continue as a going concern and to optimize returns to our shareholders. The capital structure of the Company is based on management’s judgement of the appropriate balance of key elements in order to meet its strategic and day-to-day needs. The Company considers the amount of capital in proportion to risk and manages the capital structure in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.

The Company’s policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain future development and growth of its business. The Company takes appropriate steps in order to maintain, or if necessary adjust, its capital structure. Company is not subject to financial covenants in any of its significant financing agreements.

The management monitors the return on capital as well as the level of dividends to shareholders.

ii) Fair Value Hierarchy

Management considers that the carrying amount of those financial assets and financial liabilities that are not subsequently measured at fair value, in the financial statements are approximate to their fair values.

No financial instruments are recognised and measured at fair value for which fair values are determined using the judgments and estimates.

Assets and liabilities which are measured at amortized cost for which fair values are disclosed at 31st March 2018

During the year there are no financial instruments which are measured at Level 1 and Level 2 category.

The fair value of financial instruments referred to above has been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active market for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements). The categories used are as follows:

- Level 1 : This hierarchy includes financial instruments measured using quoted prices.

- Level 2 : The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in this level.

- Level 3 : Derived from valuation techniques that include inputs for the Asset or Liability that is not based on observable market data (unobservable inputs).

Valuation process : For level 3 financial instruments the fair values have been determined based on present values and the discount rates used were adjusted for counterparty or own credit risk.

The carrying amounts of trade receivables, trade payables, bank deposits with more than 12 months maturity, capital creditors and Cash and Cash Equivalents are considered to be the same as their fair values.

The fair values for loans, security deposits were calculated based on cash flows discounted using a current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counterparty credit risk.

The fair values of non-current borrowings are based on discounted cash flows using a current borrowing rate. They are classified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.

For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

21. There is no amount due and outstanding to be credited to the Investor Education and Protection Fund as at 31.03.2018 and 31.03.2017.

22. The Company requested its debtors and creditors to confirm the balances at the year-end in respect of trade payables, trade receivables, advances and loans directly to the Statutory Auditors.

23. Gross sales include Excise Duty on finished products upto June 30 2017. Post implementation of Goods and Service Tax (GST) with effect from July 01, 2017, revenue from operations is net of GST. Accordingly, the revenue from operations for the year ended on March 31, 2018 is not comparable with the previous periods presented in the results.

The total Rs.12,487.24 Lakhs consists of Rs.4,260.88 Lakhs,Rs.4,381.92 Lakhs and Rs.3,844.44 Lakhs towards LC, BG and MFC respectively.

LC : Letter of Credit, BG : Bank Guarantee, BC: Buyers Credit, MFC: Matching Forward Cover

24. During the current year, Company has declared final dividend at Rs.0.37 per share for the year financial year 2016-17 and paid an amount of Rs.1,985.59 Lakh including dividend distribution tax (DDT) of Rs.335.85 Lakh after adjustment of interim dividend of Rs.844.02 Lakhs including DDT of Rs.146.05 Lakh, paid during the year 2016-17. Further, company has also declared interim dividend at Re.0.27 per share for the year 2017-18 amounting to Rs.2,061.96 Lakh including DDT of Rs.348.77 Lakh and the same has been paid during the year.

25. Ministry of Heavy Industries, Department of Public Enterprises (DPE) has issued office memorandum dated 03.08.2017 towards pay revision w.e.f 01.01.2017. The Company has estimated the liability from 01.01.2017 to 31.03.2018 and made adequate provision during the year and the same is included under note no. 18 - “Employee Benefit Expense”.

26. During the year Company has started investing surplus working capital in Public Sector Mutual Fund, regulated by SEBI. In the current year, the Company has earned Rs.1,220.07 Lakh as gains from such investment and the same has been depicted as Short Term Capital Gains-Mutual Funds under the head Other Income (Note No.16). This generated an average return of 6.61% Out of total Rs.1,220.07 Lakh, Rs.1,219.38 Lakh has been realized during the year and the balance of unrealized gain of Rs.0.69 Lakh is arrived at by way of Fair Valuation in line with Ind AS 109.

27. The Company’s name is included u/s 4(1) of MMDR Act 1957 to carry out Mineral Exploration activities. During the year, the Company was allotted to carry out Mineral Exploration at Tirumankaradu Iron Ore Block (TIO), Tirpur, Tamilnadu and Ubdur Area Block, Mysore District Karnataka by National Mineral Exploration Trust (NMET) with a total value of Rs.726.15 Lakh plus GST. The Company has incurred Rs.8.63 Lakh and Rs.14.93 Lakh on TIO and Ubdur blocks respectively. As the work was under progress as on 31.03.2018, the amount incurred for both the blocks has been classified as “Contract Work in Progress” and depicted under the head “Other Current Assets” vide note no.9.b.

28. During the year, auction was held to dispose off scrap item “Overland Conveyor” available at Blast Furnace Unit. The buyer has not lifted the complete item of scrap upto 31.03.2018. As the sale order was based on quantity (MT) lifted, the profit of Rs.40.74 Lakh has been recognized upto 31.03.2018 after adjustment of WDV Rs.75.22 Lakh and retained amount of WDV Rs.8.61 Lakh for the balance quantity and the same has been disclosed under the head “Asset held for sale - Other Non-Current Assets vide note no.9.a”.

Further, in respect of another item of asset (Jeep) pertaining to Kudremukh Unit, which was put up for sale through to e-auction on 28.03.2018 and was sold to H1 bidder. However, pending lifting of the same by the buyer till 31.03.2018, the value of the assets net of depreciation Rs.15/- is depicted under the head “Asset held for sale - Other Non-Current Assets vide note no.9.a”.

29. M/s NMPT has deducted an amount of Rs.589.26 Lakhs towards lease rent, premium, valuation and other charges at the time proceeds towards sale of Marshalling Yard measuring 47500 sq mt for a consideration of Rs.1400 Lakh. The Company has disputed the deductions made by NMPT and had preferred for arbitration through Permanent Machinery of Arbitrator under Cabinet Secretariat, Govt. of India. The arbitration award was pronounced in the month of February 2018 by allowing claim of Rs.388.66 Lakhs towards refund of Lease Rent for the period 11.12.2014 to 27.03.2017 and an amount of Rs.2.73 Lakhs towards excess deduction. M/s NMPT has preferred further appeal with regard to amount of Rs.388.66 Lakhs.

Out of total amount of Rs.589.26 Lakhs, provision exists to the extent of Rs.284.77 Lakhs and for balance Rs.303.05 Lakhs has been recognized under contingent liability since the matter is still under adjudication.

30. During the year Company has entered into trading of Iron Ore Fines through Blast Furnace Unit, business segment. As a part of the same it has placed a purchase order to M/s S M Niryat Private Limited, Kolkata to procure 55,000 MT of Iron Ore Fines at a value of Rs.1,613.89 Lakh excluding GST. Company has also secured sales order from M/s Rashtriya Ispat Nigam Limited (A Govt. of India Enterprise) for sale of the equal quantity of Iron Ore Fines during the transit at a value of Rs. 1,665.16 Lakh excluding GST. Through the said trading activity Company has earned profit of Rs.51.27 Lakh. The purchase and sale transactions are included under the head “Purchases of Stock-in-Trade” and “Revenue from Operations” respectively.

31. Capital stores and spares which are kept in stores for a very long period in anticipation of its requirement for plant at any time though valued at weighted average cost in the books and 100% provision was made on the previous reporting date since non-moving for more than the stipulated period as per the norms of the Company. Under the circumstances, in view of adoption of Ind AS, the company revisited the process of valuation of inventories. A new assessment is made and based on the recommendation of technical Committee, capital spares which are in usable conditions and meant only for capital consumption is restored to its cost amounting to Rs.1,331,.43 Lakh (consumed during the year Rs.77.55 Lakhs) and classified as separate segment under “Inventory’ in the Balance Sheet.

Consequently, provision for non-moving capital spares of Rs.881.10 Lakh are withdrawn during the year.

32. Government of Karnataka (GoK) issued Gazette notification on 23-1-2017 for reserving area of 470.40 hectares in Devadari Range, Sandur Taluk, Bellary district in favour of KIOCL Limited for mining lease of Iron and Manganese ore under section 17(A) 2A of MMDR act, 1957.

The company has engaged M/s. MECON Ltd. for preparation of prefeasibility report and preparation of mining plan and its approval from Indian Bureau of Mines, Government of India and incurred Rs.46.70 Lakh towards consultancy and other charges for the same.

Expenditure associated with the acquisition of mining rights including related professional fee, processing fee before execution of Mining Lease Deed are treated as “Mining rights under Acquisition” and are classified under the head “Intangible Assets” vide note no.3.2

33. During the year certain items of income and expenditure pertaining to earlier years which do not have any materiality, has been considered as current year Income and expenditure and classified under respective head of accounts. The net impact of the earlier period transactions is amounting to Rs.17.32 Lakh, as a result the profit for the year has been reduced.

34. Previous Year’s figures have been regrouped/reclassified/re-casted wherever necessary to confirm to current year’s presentation.

35. Figures in the Balance Sheet, Statement of Profit and Loss, Cash Flow Statement, Statement of Changes in Equity and the Notes thereon have been rounded off to Rupees Thousands and expressed in Rupees in Lakh.

---

Mar 31, 2017

Note 23: First time Adoption of Ind AS Transition to Ind AS

These are the Company’s first Financial Statements prepared in accordance with Ind AS.

The Company has adopted Indian Accounting Standards (Ind AS) as notified by the Ministry of Corporate Affairs with effect from April 1, 2016, with a transition date of April 1, 2015. The Accounting policies set out in Note No. 1 have been applied in preparing the Financial Statements for the year ended March 31, 2017, the comparative information presented in these Financial Statements for the year ended March 31, 2016 and in the preparation of an opening Ind AS Balance Sheet at April

1, 2015 (the date of transition). In preparing its opening Ind AS Balance Sheet, the Company has adjusted the amounts reported previously in Financial Statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (Indian GAAP). An explanation of how the transition from IGAAP to Ind AS has affected the Company’s financial position, financial performance and cash flows is set out in the following tables and notes.

A. Exemptions and Exceptions Availed

The adoption of Ind AS has been carried out in accordance with Ind AS 101, First-time Adoption of Indian Accounting Standards. Ind AS 101 requires that all Ind AS standards and interpretations that are issued and effective for the first Ind AS financial statements be applied retrospectively and consistently for all financial years presented. Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from IGAAP to Ind AS. The resulting difference between the carrying values of the assets and liabilities in the Financial Statements as at the transition date under Ind AS and IGAAP have been recognized directly in equity (retained earnings or another appropriate category of equity). This note explains the adjustments made by the Company in restating its IGAAP financial statements, including the Balance Sheet as at April 1, 2015 and the Financial Statements as at and for the year ended March 31, 2016.

A.1 Ind AS Optional Exemptions A. 1. 1. Deemed cost

Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its Property, Plant and Equipment as recognized in the Financial Statements as at the date of transition to Ind AS, measured as per the IGAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets. Accordingly, the Company has elected to measure all of its Property, Plant and Equipment and intangible assets at their IGAAP carrying value.

A.2 Ind AS Mandatory Exceptions

The Company has applied the following exceptions from full retrospective application of Ind AS as mandatorily required under Ind AS 101:

A. 2.1 Estimates

An entity’s estimates in accordance with Ind ASs at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with IGAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error. Ind AS estimates as at April

1, 2015 are consistent with the estimates as at the same date made in conformity with IGAAP. The Company made estimate for ''Impairment of financial assets based on expected credit loss model'' in accordance with Ind AS at the date of transition as these were not required under IGAAP.

A. 2.2 De-recognition of Financial Assets and Liabilities

Ind AS 101 requires a first-time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows a first-time adopter to apply the de-recognition requirements in Ind AS 109 retrospectively from a date of the entity’s choosing, provided that the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognized as a result of past transactions was obtained at the time of initially accounting for those transactions. The Company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS.

A. 2.3 Classification and Measurement of Financial Assets

Ind AS 101 requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS.

B. Reconciliations between IGAAP and Ind AS

The following tables represent the reconciliations of equity, total comprehensive income and cash flows for prior periods from IGAAP to Ind AS as per Ind AS 101:

C. Notes to First time Adoption of Ind AS Note 1: Property Plant and Equipments

Under Ind AS 16, Stores and Spares that meet the definition of Property, Plant and Equipments (PP&E) are capitalized as fixed assets retrospectively. Accordingly, Inventory aggregating to Rs.835.00 Lakh has been identified and capitalized as at April 1, 2015 which was previously recorded in the year 2015-16. The cumulative depreciation up to March 31, 2015 aggregating to Rs.407.00 Lakh has been adjusted against reserves.

Note 2: Leases

Under Ind AS, upfront premium paid on operating leases which is in the nature of onetime payment be charged to Income Statement. Accordingly, Leasehold land (net) balance amounting to Rs 3.97 Lakh in PP&E, is adjusted against reserve.

Note 3: Financial Assets and Liabilities including Security Deposits and Loans

Under the previous GAAP, Financial Assets/ Liabilities including interest free lease security deposits (that are refundable in cash on completion of the lease term) and loans are recorded at their transaction value. Under Ind AS, all Financial Assets and Liabilities are required to be recognized at fair value. There is no material impact of the fair valuation of loans to employees hence transaction value considered for presentation. Also Interest accrued is reclassified to respective deposit/advance balances.

Note 4 : Deferred Tax

Under IGAAP, deferred tax accounting was done using the Income Statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS requires entities to account for deferred taxes using the Balance Sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the Balance Sheet and its tax base. The application of Ind AS 12 approach has resulted into recognition of deferred tax on new temporary differences which was not required under IGAAP.

Further as per Ind AS, the company is entitled to recognize deferred tax to the extent of indexation benefit available as per Income tax Act, 1961 on freehold land as at the Balance Sheet date. Accordingly, Deferred Tax Asset of Rs.153.00 Lakh is adjusted against reserve.

An error noted in deferred tax charge for the year ending March 31, 2015, but noted and rectified during 2015-16 has been adjusted in opening Balance Sheet.

Note 5 : Proposed Dividend

Under the previous GAAP, dividends proposed by the board of directors after the Balance Sheet date but before the approval of the Financial Statements were considered as adjusting events. Accordingly, provision for proposed dividend was recognized as a Liability. Under Ind AS, such dividends are recognized when the same is approved by the shareholders in the General Meeting. Accordingly, the liability for proposed dividend of Rs.761.00 Lakh (including dividend distribution tax of Rs.146.00 Lakh) as at April 1, 2015 included under provisions has been reversed with corresponding adjustment to retained earnings. Consequently, the total equity increased by an equivalent amount.

Note 6 : Retained Earnings

Retained earnings as at April 1, 2015 and March 31, 2016 have been adjusted consequent to the above Ind AS transition adjustments.

Note 7 : Excise Duty

Under the previous GAAP, revenue from sale of products was presented exclusive of Excise Duty. Under Ind AS, revenue from sale of goods is presented inclusive of Excise Duty. The Excise Duty paid is presented on the face of the Statement of Profit and Loss as part of expenses. This change has resulted into an increase in Total Revenue and Total Expenses for the year ended March 31, 2016 by Rs.2,155.00 Lakh. There is no impact on the Total Equity and Profit.

Note 8 : Remeasurements of Post-employment Benefit Obligations

Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net Defined Benefit Liability are recognized in Other Comprehensive Income instead of Profit or Loss. Under the IGAAP, these remeasurements were forming part of the Profit or Loss for the year. As a result of this change, the Profit for the year ended March 31, 2016 decreased by Rs.75.00 Lakh. There is no impact on the total equity as at March 31, 2016.

Note 9 : Other Comprehensive Income

Under Ind AS, all items of Income and expense recognized in a period should be included in Profit or Loss for the period, unless a standard requires or permits otherwise. Items of Income and expense that are not recognized in profit or loss but are shown in the statement of Profit and Loss as “Other Comprehensive Income” includes remeasurements of Defined Benefit Plans net of tax of Rs.25.00 Lakh for previous year. The concept of Other Comprehensive Income did not exist under previous GAAP.

Note 10 : Cash Flow Statement under Ind AS

The Interest accrued on deposits with bank are regrouped with respective balances with banks. As a result of this change, the Cash and Cash Equivalents as at the year ended March 31, 2015 and March 31, 2016 are increased by Rs. 30,86.46 Lakhs and Rs. 30,79.70 Lakhs respectively with corresponding reduction in Other Current Assets.

Note 11: Figures for the previous years have been regrouped where ever necessary.

Lease of three tracts of land (a) 21270 SqMtrs of land taken for Captive Power Plant and (b) 27008 SqMtrs of land taken for pellet storage yard and (c) 9120 SqMtrs of land taken for storage of iron ore fines although expired and pending renewal, are considered as “Lease continuing” in view of written consent from NMPT for its continuation/renewal. Further, adequate provision has been made towards Registration charges and Stamp Duty on its renewal. The lease rent charged to expenses for the year towards three lands amounting to Rs.93.35 Lakh. Lease Rentals are charged to Statement of Profit and Loss on accrual basis. Further, the rental obligation for all 9 tracts of Land for remaining lease period is Rs.51,91.99 Lakh.

(*includes Rs. 110,57.62 Lakh towards Forest Development Tax (FDT) at the rate of 12% of basic price of iron ore. The supplier NMDC Limited has filed a writ petition in the Hon’ble High Court of Karnataka challenging the levy of the same. The case was disposed off vide order dated 03.12.2015 directing the Govt. of Karnataka to refund the FDT within three months.

However, it has been informed that the Govt. of Karnataka has filed Special Leave Petition before the Hon’ble Supreme Court of India and the case is pending for disposal.

The amount of Rs.26,17.43 Lakh (equivalent to 25% of FDT) collected earlier by NMDC as per the interim order of Hon’ble Court is shown under “Other Current Assets” in Books of Accounts and the Bank Guarantee equivalent to Rs.27,34.87 Lakh furnished to NMDC in this regard has been included under the contingent liability.

D. The Company sought rectification of mistake u/s 154 of Income Tax Act, 1961 in the computation of taxable income for the Assessment Year 2013-14 amounting to Rs.384.25 Lakh and Assessment year 2012-13 amounting to Rs.839.96 Lakh including interest which are pending before the Assessing Authority.

3. The Company is a 100% Export Oriented Unit. With the suspension of mining operations at Kudremukh mine site, the Company is procuring the iron ore fines from NMDC mines and transporting it to its plant at Mangaluru by rail or rail cum sea route.

The Railways are raising the Railway Receipts (RR) for transporting the Iron ore through rakes, which are promptly settled by the Company. As on date, none of the RR is pending for payment or under dispute.

Railways vide letter No. H/C.474 Classification/11 dated 21.10.2011 raised an issue regarding the applicability of distance based charge (DBC) over and above normal freight on Iron ore transported through railway network for manufacture of pellets and their subsequent export.

Iron ore fines and lumps attract DBC if the same are exported. However, the Iron Ore so moved and utilized in the steel plants for manufacture of finished product and exported thereafter do not attract the DBC. The same is also not applicable to Pig iron and Sponge Iron Industry.

This benefit is not available to pellets even though it is a manufactured and value added, technically and commercially distinct product.

This discrimination by Railways was challenged before the Hon’ble High Court of Karnataka through a writ petition. The writ petition was dismissed. KIOCL filed writ appeal challenging the dismissal of the writ petition. The Hon’ble Court has granted interim order staying DBC, subject to the condition that 50% of the demand excluding penalty is to be deposited.

The Company initially worked out the DBC liability as Rs.127,27.28 Lakh and paid Rs.63,63.64 Lakh to South Western Railway (SWR). Subsequently after reconciliation with South Western Railway in the meeting held on 15th November 2016, the liability of DBC was assessed at Rs.144,63.93 Lakh Pending settlement of writ appeal, liability has been created in the books of account for the balance amount as a prudent measure during 2013-14 and 2016-17. During the year 2014-15, an amount of Rs.14,61.51 Lakh was paid/adjusted to SWR which includes adjustment of congestion surcharge amounting to Rs.2,06.70 Lakh by SWR. During the year 2016-17, an additional amount of Rs.1,72.85 Lakh has been provided under exceptional item and an amount of Rs.5,00.00 Lakh has been paid. Hence the cumulative provision made amounting to Rs.144,63.93 Lakh out of which an amount of Rs.83,25.15 Lakh has been paid.

East Coast Railways (ECR) has raised a demand of Rs.414,46.00 Lakh towards DBC and penalty there on. The liability towards DBC excluding penalty worked out by company is Rs.6740.94 Lakh. However, ECR has demanded DBC for Rs.103,61.381 Lakh without reducing the freight already paid by the company. The Company has paid Rs.51,80.69 Lakh and the liability for remaining balance amount of Rs.15,60.25 Lakh has been created in the books of accounts of Financial Year 2013-14 as a prudent measure pending settlement of writ petition. The Company filed writ petition before Hon’ble High Court of Odisha which has granted interim order on the similar lines of Hon’ble High court of Karnataka. Both the cases are therefore subjudice.

4. The Company’s private Railway Siding at Panambur, Mangaluru was commissioned during January 2006 with allotment of code ‘PNKI-06529006’ by Railway. The Iron ore fines moved through this siding is not liable for levy of congestion surcharge over and above the freight. But, South Western Railway (SWR) continuously levied and collected congestion surcharge for the period from 01.04.2007 to 21.05.2008 for movement of rakes. The Company resisted this levy and collection. The Company also claimed refund of congestion surcharge amounting to Rs.68,77.86 Lakh from SWR in respect of 573 rakes moved during the above mentioned period. SWR refunded Rs.27,15.16 Lakh till date which includes Rs.2,06.70 Lakh adjusted by SWR towards DBC. The Company has approached Railway Claims Tribunal (RCT), Bengaluru and filed an application for refund of the balance amount of Rs.41,62.70 Lakh with interest. The case is pending for disposal.

The Konkan Railway offered concessional freight to the Company for movement of rakes through Konkan route instead of shorter route i.e., Hassan-Mangaluru, which has been accepted by the Company and 110 rakes were booked for the Konkan route. Subsequently, Konkan Railway allowed concessional freight for 92 rakes only and balance 18 rakes were moved through shorter routes i.e., Hassan-Mangaluru. Hence, the Company claimed refund of Rs.2,54.45 Lakh from SWR towards differential freight. However SWR has not refunded the amount. Hence, the Company approached RCT, Bengaluru and has claimed Rs.2,54.45 Lakh with interest. The case is pending for disposal.

East Coast Railway have collected 100% congestion surcharge instead of 30% for the rakes moved during the period from 15.04.2008 to 21.05.2008. The Company requested ECR for refunding Rs.4,36.83 Lakh being 70% excess congestion surcharge collected in respect of 26 rakes. As ECR failed to refund the amount, KIOCL has filed a petition before the RCT, Bhubaneswar for refund of Rs.4,36.83 Lakh with interest. The case is pending for disposal.

The Company has not recognized the above as income in line with the Company’s significant accounting policy no.1.5.

5. In pursuance of the directive of the Hon’ble Supreme Court, mining activities at Kudremukh were stopped with effect from 1st January 2006. At the time of closure of the mine the Company filed a petition for direction with prayers, inter-alia, to permit utilization of 54.01 hectares of land required for the purpose of safety and slope stability of the mine. Indian Bureau of Mines (IBM) has approved final mine closure plan (FMCP) of Kudremukh iron ore mine and the same was communicated vide letter no. MS/CMG/Fe-38-52 dated 06.05.2005. The expenditure towards mine closure, as per the above plan, was Rs.2.79 Crore.

The Hon’ble Supreme Court, in its judgment (December 2006), directed IIT Delhi to issue global tender for, inter-alia, re-analyzing the stability of slopes, drawing up of mine closure plan, implementation of the above plan and drawing up of detailed terms for the work to be done, consistent with basic paradigm of “no or minimal disturbance to un-broken area”

The expenditure for this purpose was to be met out of Rs.19.00 Crores paid by the company and which is presently lying with the adhoc Compensatory afforestation fund management and planning authority (Adhoc CAMPA).

The Hon’ble Supreme Court has also directed that if any funds are required in excess of Rs.19.00 Crore, the agency or the designated officer shall move to the Court for necessary direction.

Ministry of Mines(GOI), vide letter dated 07.02.2014, nominated the Regional Controller of Mines, IBM Bengaluru as the ‘Designated Officer’ to take possession of Kudremukh Iron Ore Mines. Accordingly, the Company has handed over the possession of the Kudremukh Iron Ore Mines on 03.04.2014 to the Regional Controller of Mines, IBM Bengaluru.

Subsequently, officials of IBM Bengaluru and IIT, Delhi inspected the mine site on 20.05.2014, in which IIT Delhi opined that, keeping in view environment and safety concerns the residual task of mine closure is relatively minor as compared to what was originally envisaged. Hence, the amount of Rs.19.00 Crores paid by the company to Central Empowered Committee already lying with the Adhoc-CAMPA, is sufficient to meet the expenditure on mine closure, no further liability is considered necessary.

6. The Mangaluru Pellet Plant is the outcome of Kudremukh activity for ore, for beneficiated concentrate and also water. Consequent upon the judgment of Hon’ble Supreme Court, mining and beneficiation activities were stopped w.e.f. 01.01.2006. However, Mangaluru Pellet Plant and also Blast Furnace Unit draw the required water from Lakya Dam at Kudremukh.

As an alternative arrangement, the company has obtained in principle approval in 2012 for supply of water for its plant operation from Mangaluru City Corporation at tariff applicable for industrial use. However, since there is no embargo for drawl of water still, the company continued to draw required water from Lakya Dam at Kudremukh for its Mangaluru plants during the year. Hence, dam maintenance activity from the safety point of view and maintenance of water drawl system which include electrical and pipeline maintenance are still continuing. Therefore, Kudremukh department is maintained as a part of Mangaluru Pellet Plant. Though, mining and beneficiation activities are not taking place, the department continues to exist. As such, Kudremukh installation is a working unit as on date.

7. Total mining lease areas of 4605.02 hectares at Kudremukh include an extent of 1220.03 hectares of government revenue land, apart from forest land and the Company’s free hold land. Regional Controller of Mines IBM, the designated officer has taken over the entire mining lease area for carrying out the mine closure activities in compliance of Hon’ble Supreme Court orders dated 15.12.2006 on 03.04.2014. However, the infrastructure and buildings located in Revenue land and other land being the property of the Company shall continue to remain in their physical possession till the cessation of mine closure activities. Till the year 2013-14, the land records of revenue land were in the name of the Company. Government of Karnataka has changed the revenue records removing the Company’s name. Hence the Company was constrained to file a suit before Civil Judge Court, Mudigere for an injunction against Government and others, restraining them from dispossessing the Company from the said revenue land. The court heard the arguments and passed an interim order on 05-11-2013 restraining the defendants or anybody under them from dispossessing the Company from the suit schedule property (i.e. Revenue land) in any manner till the disposal of the suit or till the modalities have been worked out and implemented as directed by the Hon’ble Supreme court. The suit is yet to be decided.

Taking into consideration of taking over the entire mining lease area of 4605.02 hectors comprising forest land, revenue land, Company’s own land and other land by the designated officer IBM for carrying out the mine closure activities in the mine in compliance of Hon’ble Court’s direction although their physical possession held with the Company, the Company depreciated all its township assets in full during the year 2014-15 as a prudent measure.

Disclosure required as per Indian Accounting Standard (Ind AS) - 19 on ‘Employee Benefits’ are appended.

9. As per Indian Accounting Standard (Ind AS) -2, ‘Valuation of Inventories’, materials and other supplies Held for Sale / use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. However, when there has been a decline in the price of materials and it is estimated that the cost of the finished products will exceed net realizable value, the materials are written down to net realizable value.

During the year, as net replacement value of Furnace oil and Iron ore fines (including semi finished) is lesser than its weighted average cost, the difference of Rs.16,25.60 Lakh (Previous year Rs.15,87.23 Lakh) including Rs.9,89.97 Lakh towards SIT has been written down in the Statement of Profit and Loss for the year. Consequent upon this the Profit for the year is reduced by Rs.16,25.60 Lakh.

10. The Company procures iron ore from Kirandul Complex of NMDC Limited for use as raw material in its pellet plant. Railway Siding at Malingar Valley of Kirandul from where iron ore is loaded into the Railway rakes does not have electronic weight meters. The ore loaded is measured as per volume metric basis. The quantity of ore thus arrived at is invoiced by NMDC. The supplies are made on advance payment basis. Railway authorities weigh the ore en-route through electronic weigh bridges. Accordingly, RR was generated by Railways for collection of freight. The long term agreement entered into between the Company and NMDC contains a clause that in the absence of non- functioning of electronic weight meters at loading point of supplier, the weight measured in the Railway RR should be considered for the quantity to be paid. During the years 2009 to 2013 there was short supply of 109,789 MT of ore valuing Rs.35,27.00 Lakh being the difference between quantity as per NMDC invoice and quantity as per Railway RR. The Company lodged a claim on NMDC for refund of this amount. In a joint meeting held on 24.02.2016, NMDC confirmed the figures and assured to obtain a legal opinion regarding refund. During the year 2016-17, M/s NMDC has issued letter dated

11.05.2016 along with the credit note for Rs.29,42.47 Lakh including CST. The refund amount of Rs.28,84.77 Lakh excluding CST was reconciled and accepted by the management of both the companies in May 2016 and has been accounted for during the year as other operating income.

11. The Company was allotted a quantity of 20,000 MT of iron ore fines in the e-auction held during October 2013 for NMDC’s Donimalai mines. This quantity has to be moved by Railway rakes as NMDC does not permit movement by Road. The Company had deposited the requisite amount of Rs.5,71.89 Lakh to the monitoring Committee (monitoring committee constituted by Central Empower Committee) and has submitted the required documents to Railways (SWR) for allotment of rakes. For the purpose of participating in the e-auction, the Company deposited Rs.25.00 Lakh with the monitoring committee which was treated as Security Deposit and the same would be forfeited as per terms and conditions of e-auction due to non-fulfillment of contractual obligation. During the current year, 19,317.10 MT Iron Ore Fines amounting to Rs.5,07.83 Lakh was lifted. The claim for refund for the balance amount of Rs. 43.22 Lakh shown under Accounts Recoverable.

Monitoring Committee has permitted the Company on 15.09.2015 to perform the contract even after the stipulated period. Therefore, the amount deposited with monitoring committee including EMD amount of Rs.25.00 Lakh is exhibited as Deposit to others under other financials assets- current in the Books of Accounts.

12. Depreciation on Fixed Assets has been provided on Straight Line Method except certain assets for which higher rates were considered based on their estimated useful life as per the provisions of Schedule II of Companies Act, 2013.

Assets other than Roads, Bridges and Culverts, Township, Furniture & Fittings, Computers, vehicles are provided on their remaining value reduced by residual value over its remaining useful life as technically assessed. The residual values are reviewed periodically. As on 01.04.2014 the remaining useful life for assets including plant buildings which are its integral part, in Pellet Plant and Blast Furnace Unit was estimated at 8 years, Captive Power Plant 15 years and Port Facilities including grinding and balling unit 10 years. Additions during the year to P&M and Buildings in the above units are also limited to those useful lives.

Other assets are depreciated in accordance with useful life of the assets as indicated in Part C of Schedule II of Companies Act, 2013.

*The life of the assets in BFU has been estimated at 10 years by expert committee constituted by the management during the year, except Overhead Conveyor (OLC) which has no balance useful life. An amount of Rs.3,55.74 Lakh has been charged off as depreciation for OLC after retaining 5% as residual value.

In respect of other assets i.e. Township Building, Roads-RCC and other than RCC, Furniture & Fittings - General, Furniture & Fittings - Canteen & Guest House, Motor Vehicles, Office Equipment’s, Computers - Normal & Computers -Servers, the useful life as per Schedule II of the Companies Act, 2013 has been adopted.

Component Accounting of tangible fixed assets being mandatory, where cost of part of the asset significant to total cost of the asset and useful life of that part is different from useful life of principal asset, the useful life of that significant part determined separately for computation of Depreciation charge.

13. The Company is having two reporting operating segments i.e., ‘Iron Oxide Pellet’ and ‘Pig Iron’. Expenses relating to Kudremukh Department and the corporate office have been fully allocated to Iron Oxide Pellet segment. Segment Reporting as per Ind AS-108 is appended.

14. Due to un-economic price of Pig Iron, Blast Furnace Unit (BFU) was not operated during the year. However, the recoverable amount in each class of assets in BFU and other Units are more than the carrying amount. Hence, there is no impairment loss to be recognized during the year.

The Company had intended to restart BFU Operation during the year 2016-17. However, due to high market price of LAM Coke, a major input, re-starting of BFU did not materialize during the year. To bring back the machineries and plant in place, an amount of Rs.10,66.00 Lakh incurred for refurbishment as against estimated cost of Rs.12,96.00Lakh. The company is in the process of procurement of required raw material for starting up the plant.

While excavating of pig iron stock yard certain auxiliary material of pig iron worth Rs.6.65 Lakh were retrieved and sold during the year (Previous year Rs.1,34.68 Lakh). As at the end of the year, Company is holding a physical stock of 60.77MT of Pig iron auxiliary material. As the cost of production of the same had been accounted for in earlier years, the same is valued at nil cost as at the end of the year, although the market value of the same beRs.13.23 Lakh as per last sale price of similar product. As a prudent accounting measure, no value has been assigned to the stock in the Books of Accounts.

15. Under Operation & Maintenance portal, the Company had undertaken the following contracts during the year:

- O&M of Pellet &Beneficiation plant of NMDC Donimalai

- O&M COB Plant of OMC Kaliapani

- Leasing and O&M of furnace oil tanks to IOCL.

Revenue earned from these Operation and Maintenance contracts during the year are Rs.27,74.59 Lakh Rs. 4,01.40 Lakh and Rs.1,23.51 Lakh respectively (previous year Rs.59.60 Lakh, Rs.282.02 Lakh and Nil respectively).

Revenue earned from Operation and Maintenance (O&M) contracts of NMDC Donimalai includes an amount of Rs.5,77.00 Lakh towards billing for the period Aug 2015 to Mar 2016 against deployment of manpower. As per the terms of the original contract plant has not been handed over to provide O&M services. However, as mutually agreed during the month of May 2016 it was confirmed that billing for deployment of manpower to be made till handing over the plant for O&M service. Accordingly, the Company has billed during the year for the manpower deployed for the period Aug 2015 to Mar 2016 and accounted for the same as income for the current year.

Expenditure incurred during the year including salaries and benefits of employees deployed on those contracts are Rs.27,59.15 Lakh Rs.3,97.44 Lakh and Nil respectively (Previous year Rs. 18,70.40 Lakh, Rs.2,88.00 Lakh and Nil respectively).

The revenue generated from of the above has been accounted for as ‘Revenue from other operations’ and the expenditure incurred including salaries and benefits has been accounted for under respective heads of account.

16. Expenses incurred towards generation of power being a significant cost of production have been included under the primary heads of account.

17. Details of Specified Bank Notes (SBN) held and transacted during the period from 8th November, 2016 to 30th December, 2016 are furnished below:

18. During the year a Memorandum of Settlement exercised with recognized employees union subject to clearance from Ministry of Steel. For this adequate provision exists in the books of accounts to meet the liability upto 31st March 2017.Hence no additional provision was required during the year.

19. As per the Guidelines issued by Department of Public Enterprises, Govt. of India, the Company is allowed to extend upto 30% of Basic Pay plus Dearness Pay as Superannuation Benefits including Contributory Provident Fund, Gratuity and other specified Superannuation Benefit plans. As the Company had revised the pay scales of Executives, with effect from 01.01.2007 in compliance with the said DPE Guidelines, provision towards Superannuation Benefit has been made in line with the said Guidelines accordingly.

The Company has thus made provision towards pension and post retirement medical scheme for Rs.12,62.08 Lakh (Previous year Rs. 8,77.02 Lakh).

20. The Company has not spent any amount towards CSR during the year 2016-17, as the average profit for the last three years was negative.

21. Due to closure of Kudremukh mining, most of the assets have been written down and nominal value has been retained. The recoverable amount in each class of assets in Kudremukh is more than the carrying amount. Hence, there is no impairment loss to be recognized during the year.

22. Minimum Alternate Tax

In accordance with the provisions of Section 115JAA of the Income Tax Act, 1961, the Company is allowed to avail credit equal to the excess of Minimum Alternative Tax (MAT) over normal income tax for the assessment year for which MAT is paid. MAT credit so determined can be carried forward for setoff for ten succeeding assessment years for the year in which such credit becomes available. MAT credit can be set-off only in the year in which the Company is liable to pay tax as per the normal provisions of the Income Tax Act, 1961 and such tax is in excess of MAT for that year. The MAT credit asset is written down to the extent there is no longer convincing evidence to the effect that Company will pay normal income tax during the specified period.

23. Micro Small and Medium Enterprise

- There were no amounts outstanding to be paid to micro and small enterprises registered under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED).

- No interest is paid/payable during the year to any micro or small enterprise registered under the MSMED.

- The said information has been determined to the extent such parties could be identified on the basis of the information available with the Company regarding the status of suppliers under the MSMED.

24. Financial Risk Management

The Company’s business activities expose it to a variety of financial risks, namely liquidity risk, market risk, credit risk and currency risk. The Company’s senior management has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company has constituted a Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The key risks and mitigating actions are also placed before the Audit Committee of the Company. 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 regularly to reflect changes in market conditions and the Company’s activities.

The Risk Management Committee of the Company is supported by the Finance team and experts of respective business divisions that provides assurance that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. The activities are designed to:

- protect the Company’s financial results and position from financial risks

- maintain market risks within acceptable parameters, while optimizing returns; and

- protect the Company’s financial investments, while maximizing returns.

The investment committee is responsible for maximizing the return on Company’s internally generated funds.

I. Management of Liquidity Risk

Liquidity risk is the risk that the Company faces in meeting its obligations associated with its financial liabilities. The Company’s approach to managing liquidity is to ensure that it has sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions. A material and sustained shortfall in our cash flow could undermine the company’s credit rating and impair investor confidence. The following table shows the maturity analysis of the company’s financial liabilities based on contractually agreed undiscounted cash flows as at the balance sheet date:

II. Management of Market Risk

Market risks comprises of Price risk & Interest rate risk. The Company does not designate any fixed rate financial assets as fair value through Profit and Loss nor at fair value through OCI. Therefore Company is not exposed to any interest rate risks. Similarly the Company does not have any financial instrument which is exposed to change in price.

III. Management of Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to customers and other receivables. The Company applies prudent credit acceptance policies, performs ongoing credit portfolio monitoring as well as manages the collection of receivables in order to minimize the credit risk exposure.

The maximum exposure to credit risk for each class of financial instruments is the carrying amount of that class of financial instruments presented in the notes to the financial statements. The Company’s major classes of financial assets are cash and cash equivalents, term deposits and trade receivables. For banks and financial institutions, only high rated banks / institutions are accepted.

Trade Receivables

Concentrations of credit risk with respect to trade receivables are limited, due to the Company’s sales are secured against Letter of Credit and/or Bank Guarantee. Accordingly Company has assessed that the impact of expected credit loss on receivable to be negligible.

25. Capital Management

The Company considers the following components of its Balance Sheet to be managed capital:

Total equity as shown in the Balance Sheet includes Retained Profit and Share Capital.

The Company aim to manage its capital efficiently so as to safeguard its ability to continue as a going concern and to optimize returns to our shareholders. The capital structure of the Company is based on management’s judgement of the appropriate balance of key elements in order to meet its strategic and day-to-day needs. The Company considers the amount of capital in proportion to risk and manage the capital structure in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.

The Company’s policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain future development and growth of its business. The Company takes appropriate steps in order to maintain, or if necessary adjust, its capital structure. Company is not subject to financial covenants in any of its significant financing agreements.

The management monitors the return on capital as well as the level of dividends to shareholders.

ii) Fair Value Hierarchy

Management considers that the carrying amount of those financial assets and financial liabilities that are not subsequently measured at fair value, in the financial statements approximate their fair values.

No financial instruments are recognized and measured at fair value for which fair values are determined using the judgments and estimates.

During the year there are no financial instruments which are measured at Level 1 and Level 2 category.

The fair value of financial instruments referred above has been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active market for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements). The categories used are as follows:

- Level 1: This hierarchy includes financial instruments measured using quoted prices.

- Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

- Level 3: Derived from valuation techniques that include inputs for the Asset or Liability that is not based on observable market data (unobservable inputs).

Valuation process: For level 3 financial instruments the fair values have been determined based on present values and the discount rates used were adjusted for counterparty or own credit risk.

The carrying amounts of trade receivables, trade payables, bank deposits with more than 12 months maturity, capital creditors and Cash and Cash Equivalents are considered to be the same as their fair values.

The fair values for loans, security deposits were calculated based on cash flows discounted using a current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counterparty credit risk.

The fair values of non-current borrowings are based on discounted cash flows using a current borrowing rate. They are classified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.

For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

27. There is no amount due and outstanding to be credited to the Investor Education and Protection Fund as at 31.03.2017 and 31.03.2016.

28. Related Party Disclosure: Key Management Personnel are

S / Shri.

Malay Chattarjee, Chairman-cum-Managing Director

Laxminarayana, Director (Finance) (Upto 31.05.2016)

M.V. Subba Rao, Director (Commercial)

Vidyananda. N, Director (Production & Projects)

Swapan Kumar Gorai, Director (Finance) (From 11.11.2016)

Except salary, perquisites and other particulars shown under Note 18 ‘Employee benefits expense’ there are no other transactions with the related parties which need disclosure.

29. The Company requested its debtors and creditors to confirm the balances at the year-end in respect of trade payables, trade receivables, advances and loans directly to the Statutory Auditors.

30. During the year, the Company has modified the Accounting Policies to implement Indian Accounting Standards and impact of which has been disclosed in Note No.23 (First time adoption of Indian Accounting Standards)

31. Previous Year’s figures have been regrouped/reclassified/re-casted wherever necessary to confirm to current year’s presentation.

32. Figures in the Balance Sheet, Statement of Profit and Loss, Cash Flow Statement, Statement of Changes in Equity and the Notes thereon have been rounded off to Rupees Thousands and expressed in Rupees in Lakh.

Notes :

i) Discount rate is based on the prevailing market yield of Indian Government securities as at the balance sheet date for the estimated term of the obligation.

ii) The salary escalation rate is arrived taking into consideration the seniority in the promotion and other relevant factors, such as demand supply in employment market and expected pay revision with effect from 01.01.2017.

Risk Exposure :

Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:

Inflation Risks : In the post retirement plans ie, gratuity, the payment is not linked to inflation, so this is a less material risk.

Life Expectanvy : The post retirement plan obligations is to provide benefits for the life of the member, so regularly significant where inflationary increases result in higher sensitivity to changes in life expectancy.

2. Revenue of approximately '' 3,79,37.65 Lakhs (Previous Year ''34,35.48 Lakhs) are derived from few external customers attributed to Pellet Segment who are individually contributing 10% of the Total Revenue.”

3. Un-allocated Assets and Liabilities comprise of those Assets and Liabilities which cannot be allocated to the segment.

---

Mar 31, 2012

(A) Contingent Liabilities not provided for:

(a) In respect of - Letters of Credit and Bank Guarantees etc., outstanding

(i) On Revenue Account 6,545.14 2,979.83

(ii) On Capital Account - 7,230.87

(* includes Rs. 11057.62 Lakhs towards Forest Development Tax at the rate of 12% of basic price of iron ore. NMDC Limited has filed a writ petition in the Hon''ble High Court of Karnataka challenging the levy of the same. The case is pending for disposal. Meanwhile, as per the interim order of the Hon''ble Court, Rs. 2617.43 lakhs (25% of FDT) is collected in cash and Bank Guarantee for Rs. 2734.87 lakhs is also collected by NMDC Limited)

1 The Company is a 100% Export Oriented Unit. With the suspension of mining operations at Kudremukh mine site, the Company is procuring the Iron Ore fines from NMDC mines and transporting it to its plant at Mangalore by rail or rail cum sea route. The Railways are raising the RRs for transporting the Iron Ore through rakes which are promptly settled by the Company. As on date none of the RR is pending for payment or under dispute.

Railways vide letter No. H/C.474 Classification/11 dtd. 21.10.2011 raised an issue regarding the applicability of distance based charge over and above normal freight on Iron Ore transported through railway network for manufacture of Pellets and their subsequent export.

Iron ore fines and lumps attract distance based charge if the same are exported. However, the Iron Ore so moved and utilized in the steel plants for manufacture of finished product and exported thereafter do not attract distance based charge. This benefit is not available to Pellets though it is a manufactured, and value added, technically and commercially distinct product. This is a clear violation of Article No. 14 of Constitution of India which guarantees equality before law. Accordingly, the issue raised by Railways is challenged before the Hon''ble High Court of Karnataka through a Writ Petition. The Writ Petition is duly admitted and is pending before the Hon''ble Court. Railways have not raised any quantified claim in this regard.

2 The Company has applied for a prospective licence of Khandhadhar deposit in Jharsuguda district, Odisha. The area identified is having low grade Iron Ore deposit and as project utility could be established only after detailed study, the Company has carried out exploration work in that area and incurred an amount of Rs. 239.38 Lakhs. Govt of Odisha rejected the PL prospecting licence (PL) application and recommended for grant of PL in favour of POSCO India Private Limited. The Company has filed a writ petition in the Hon''ble High Court of Odisha challenging the same. The Hon''ble High Court of Odisha quashed the recommendation of the State Govt in another case filed by M/s Geomine Orissa. In the said order court did not give any relief to Geomine Orissa. Hence, that Company filed a SLP before the Hon''ble Supreme Court. KIOCL being an interested party got impleaded in the said SLP The matter is before the Hon''ble Supreme Court. Hence above amount is shown under the head of account "Capital Work in Progress".

3 Expenses incurred towards generation of power have been included under the primary heads of account.

4 Mangalore Pellet Plant is the outcome of Kudremukh activity for Ore, for beneficiated Concentrate and also water. Consequent upon the judgement of Hon''ble Supreme Court, mining and beneficiation activities were seized w.e.f. 01.01.2006. However,

Mangalore Pellet Plant and also Blast Furnace Unit draw the required water from Lakya Dam at Kudremukh. Dam maintenance activity from the safety point of view and maintenance of water drawal system which include electrical and pipeline maintenance (67 KMs long of which 14 KM passes through National Park area) are still continuing.

Stoppage of water will result in immediate closure of Pellet Plant. Accordingly, Kudremukh installation is maintained as a part of Mangalore Pellet Plant. Though, mining and beneficiation is not taking place, the Department continues to exist and is looking for alternative mining site for operation both in India and abroad. As such, Kudremukh installation is a working unit as on date, in view of the above brief. As such, the expenditure of Kudremukh installation is allocated to Pellet Plant. Note No 4 of Schedule 16 to the accounts for the year 2010-11 disclosed that Kudremukh area where mining operations were stopped by the Hon''ble Supreme Court as discontinuing operation. As per the amended Schedule VI to the Companies Act, 1956 the results of continuing operation and that of discontinuing operations are to be disclosed separately. In the light of the amended Schedule VI, a fresh review of the situation was made. After the review, it is felt that major portion of the activities like dam maintenance for safety and water supply to Mangalore units are continuing. Only mining operation is discontinued. As such, it is decided that the discontinuing of operations as per Accounting Standard (AS)-24 is not applicable and accounts are presented accordingly. There is no monetary effect due to this withdrawal of disclosure.

5 In pursuance of the directive of the Hon''ble Supreme Court, mining activities at Kudremukh were stopped with effect from 1st January 2006. The Company filed a Petition for Direction with prayers, inter-alia, to permit utilisation of 54.01 hectares of land required for the purpose of safety and slope stability of the mine, at the time of closure of the mine.

Indian Bureau of Mines (IBM) has approved final mine closure plan (FMCP) of Kudremukh Iron Ore mine and the same was communicated vide letter no. MS/CMG/Fe-38-52 dated 06.05.2005. The expenditure towards mine closure, as per the approved plan, is Rs. 2,79,04,500.

The Hon''ble Supreme Court, in its judgement (December 2006), directed IIT Delhi to issue global tender for, inter-alia, re-analysing the stability of slopes, drawing up of mine closure plan, implementation of the above plan and drawing up of detailed terms for the work to be done, consistent with basic paradigm of "no or minimal disturbance to unbroken area" The expenditure for this purpose was to be met out of Rs. 19 Crores deposited by the Company and which is presently lying with the Adhoc Compensatory Aforestation Fund Management and Planning Authority (Adhoc CAMPA). The Court has also directed that if any funds are required in excess of the aforesaid amount, the agency or the designated officer shall move the Court for necessary direction.

IIT New Delhi is yet to start the process as directed by the Hon''ble Supreme Court. Under the above circumstances, the Company is unable to take any independent action.

Since the amount of Rs. 19 Crores paid by the Company to Central Empowered Committee is already lying with the Adhoc-CAMPA which is much more than the expenditure for mine closure as envisaged in the IBM approved final mine closure plan i.e. Rs. 2,79,04,500, no further provision for expenditure for mine closure at Kudremukh in the Books of Account is felt necessary.

6 The ''mines & plant assets'' in respect of Kudremukh establishment can be effectively utilised on relocation and/or disposed off. A substantial portion of such assets have been depreciated in full and the realisable value is estimated to be higher than the carrying value. Hence there is no impairment

7 The Provident Fund of the employees is managed by the Kudremukh Iron Ore Company''s Employees'' Provident Fund Trust and is administered by the trustees nominated by the Company. The rate of interest payable on the contribution is determined by the Govt of India and is binding on the Trust. Based on the financial instruments held by the Trust and the yield there upon the Company anticipates a short fall in its earnings during the current and future years. The Present Value of the obligation on account of such Interest guarantee, as estimated on Actuarial basis, works out to Rs. 39.11 Lakhs (Previous year Rs. 776.33 Lakhs) as at the Balance Sheet date. Excess provision of Rs. 737.22 Lakhs has been withdrawn during the year as provision no longer required and included under "Other Income".

8 Pending revision of pay scales of non- executive employees with effect from 01.01.2012, a provision of Rs. 84.69 lakhs is made during the year. The same is included in ''Employees Benefit Expenses.

9 As per the guidelines of Department of Public Enterprises, Central Public Sector Enterprises are allowed to extend 30% of Basic Pay plus Dearness Pay as Superannuation Benefits including Contributory Provident Fund, Gratuity and other specified superannuation benefits. The Company has revised the pay scales, with effect from 01.01.2007, in accordance therewith and provision towards superannuation benefits has been made accordingly. The Company is contributing around 16% of Basic Pay and Dearness Pay towards Contributory Provident Fund and Gratuity benefits. The balance 14%, amounting to Rs. 871.33 Lakhs (Previous year Rs. 3,209.35 Lakhs for the period from 01.01.2007 to 31.03.2011) has been provided during the year towards other Superannuation benefits.

10 During the year 27 employees of the Company have opted for Voluntary Retirement. Out of them, one has been released during the year and the remaining 26 employees will be released during the year 2012-13 on their specific request. Total VRS compensation paid and payable amounting to Rs. 583.54 Lakhs has been charged off during the year shown under "Employees Benefits expense".

11 During the year 2009-10, the Company had undertaken R&D efforts to determine viability of Doni Ore filtration through the existing system without mixing ore from Bailadila region. The R&D efforts were successful and enabled the Company to have future economic benefit in cost saving. Accordingly, the expenditure on this amounting to Rs. 1,924.98 Lakhs was recognised as "Process Development Expenditure" to be amortised over three years including the year 2009-10 and treated as an Internally Generated Intangible Asset disclosed as "Process Development Expenditure" under Fixed Assets. The policy on Amortisation of such expenditure over a period of three years is being continued. Accordingly, an amount of Rs. 641.66 Lakhs (Previous year Rs. 641.66 Lakhs), has been amortised during the year.

12 As per Accounting Standard (AS)-2 -"Valuation of Inventories", the raw materials for production of Pig Iron (including Auxiliaries) are required to be written down to their "Net Replacement Costs", since the cost of the finished product, Pig Iron, exceeds its Net Realisable Value (NRV). Accordingly, a provision was made during the year 2009-10

There has not been any substantial improvement in the "Net Realisable Value" of Pig Iron during the year. Therefore, an amount of Rs. 1,790.65 Lakhs, the provision made in earlier years is retained as at the Balance Sheet date.

13 Due to unviable price of Pig Iron, Blast Furnace Unit (BFU) is not operated during the year. The Company is proposing forward and backward integration by setting up of DISP Plant and Coke Oven Plant to make the operation of BFU economically viable. In principle approval for the same has been obtained from the Board.

14 During the year, the Company has used the entire stock of slime containing ultra fine Iron Ore of 24,751 MT (Previous year 19,712 MT) of slime in Pellet production by blending the same with virgin Iron Ore. Consequently, Rs. 905.51 Lakhs (Previous year 721.15 Lakhs) has been withdrawn during the year from the provision made in earlier years.

15 The Company is having two reporting business segments i.e., ''Iron Oxide Pellet'' and ''Pig Iron''.

16 Certain accounting policies have been re-worded during the year to improve clarity. Impact has been quantified, wherever necessary.

17 Confirmation of balances from Creditors (Trade payables), Debtors (Trade receivables), advances, deposits and materials with sub-contractors in certain cases have not been received.

18 Previous year''s figures have been regrouped wherever necessary.

19 Figures in the Balance Sheet, Profit and Loss Statement and the Notes thereon have been rounded off to Rs. Thousands and expressed in Rs. Lakhs.

20 Ministry of Corporate Affairs, Govt. of India, issued the Revised Schedule VI to the Companies Act, 1956. The same is applicable with effect from 01.04.2011. The Company has presented the Financial Statements in Revised Schedule VI format.

Notes:

1. The above statement has been prepared using indirect method except in case of interest income from investment, Dividend, purchase and sale of investment/Fixed assets and taxes, which have been considered on the basis of actual movement of cash, with corresponding adjustments in assets and Liabilities.

2. Additions to fixed assets and capital work-in-progress between the beginning and end of the period are treated as investing activities.

3. Figures in brackets indicate cash outflows.

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Mar 31, 2011

1. 1. Pending execution of Lease Deed with New Mangalore Port Trust for certain tracts of land, provision has been made for the Registration charges and Stamp duty, which is estimated at Rs. 4.35 Lakhs (Previous year Rs. 119.92 Lakhs). The expenditure incurred is amortised over the period of lease. Lease Rentals are charged to Profit and Loss Account on accrual basis.

Year ended Year ended 31-03-2011 31-03-2010

Rs. in Lakhs

2. (B) Contingent liabilities not provided for :

(a) In respect of - Letter of Credit and Bank Guarantees etc., outstanding

(i) On Revenue Account 2,979.83 2911.99

(ii) On Capital Account 7,230.87 Nil

(b) Claims against the Company not acknowledged as debts

(i) On Revenue Account 11,051.97 3,189.86

(ii) On Capital Account 16,845.48 16,199.24

(c) Disputed Liabilities in Appeal

(i) On Revenue Account

VAT 65.08 -

Excise Duty 371.28 -

Income Tax 4,557.52 -

3. Expenses incurred towards generation of power have been included under the primary heads of account

5. In pursuance of the directive of the Hon''ble Supreme Court, mining activities at Kudremukh were stopped on 31st December 2005. The Company fled a Petition for direction with prayers, inter-alia, to permit utilisation of 54.01 hectares of land required for the purpose of safety and slope stability of the mine, at the time of closure of the mine.

Indian Bureau of Mines (IBM) has approved final mine closure plan (FMCP) of Kudremukh iron ore mine and the same was communicated vide letter no. MS/ CMG/Fe-38-52 dated 06.05.2005. The expenditure towards mine closure, as per the approved plan, is Rs. 2,79,04,500.

The Hon''ble Supreme Court, in its judgement (December 2006), directed IIT Delhi to issue global tender for, inter-alia, re-analysing the stability of slopes, drawing up of mine closure plan, implementation of the above plan and drawing up of detailed terms for the work to be done, consistent with basic paradigm of "no or minimal disturbance to un broken area" The expenditure for this purpose was to be met out of Rs. 19 Crores deposited by the Company and which is presently lying with the Adhoc Compensatory Aforestation Fund Management and Planning Authority (Adhoc CAMPA). The Court has also directed that if any funds are required in excess of the aforesaid amount, the agency or the designated officer shall move the Court for necessary direction.

IIT New Delhi is yet to start the process as directed by the Hon''ble Supreme Court. Under the above circumstances; the Company is unable to take any independent action.

Since the amount of Rs. 19 Crores paid by the Company to Central Empowered Committee is already lying with the Adhoc-CAMPA which is much more than the expenditure for mine closure as envisaged in the IBM approved final mine closure plan i.e. Rs. 2,79,04,500, no further provision for expenditure for mine closure at Kudremukh in the Books of Account is felt necessary.

6. The ''mines & plant assets'' in respect of discontinued operations at Kudremukh mines can be effectively utilised on relocation and/or disposed off. A substantial portion of such assets have been depreciated in full and the realisable value is estimated to be higher than the carrying value. Hence there is no impairment loss to be recognised during the year.

7. The accounting policy with respect to Railway Claims receivable has been disclosed during the year separately although the same was being consistently followed by the Company. Railway claims are not certain of receipt within a definite period of time. Hence, accounting for such claims on actual receipt is felt prudent.

An item of Railway Claims, amounting to Rs. 226.56 Lakhs, was accounted on accrual basis during the year 2007-08. In order to confirm to the stated accounting policy, this amount has been reversed during the year and considered as a Prior Period Adjustment. Consequently, the profit after Prior Period Adjustment has reduced to this extent.

9. The provident fund of the employees is managed by the Kudremukh Iron Ore Company''s Employees'' Provident Fund Trust and is administered by the trustees nominated by the Company. The rate of interest payable on the contribution is determined by the Govt of India and is binding on the Trust. Based on the financial instruments held by the Trust and the yield there upon the Company anticipates a short fall in its earnings during the current and future years. The Present Value the obligation on account of such Interest guarantee, as estimated on Actuarial basis, works out to Rs. 776.33 Lakhs as at the Balance Sheet date. The same has been provided for in the accounts during the year and included under "Employees Remunerations and Benefits".

10. As per the guidelines of Department of Public Enterprises, Central Public Sector Enterprises are allowed to extend 30% of Basic Pay plus Dearness Pay as Superannuation Benefits including Contributory Provident Fund, Gratuity and other specified superannuation benefits. The Company has revised the pay scales, with effect from 01.01.2007, in accordance therewith and provision towards superannuation benefits has been made accordingly. The Company is contributing around 16% of Basic Pay and Dearness Pay towards Contributory Provident Fund and Gratuity benefits. The balance 14%, amounting to Rs. 3,209.35 Lakhs ( Rs. 818.50 Lakhs under "Employees Remunerations and Benefits" and Rs. 2,390.85 Lakhs accounted in Prior Period Adjustments) has been provided during the year towards other Superannuation benefits.

11. During the previous year, the company had undertaken R&D efforts to determine viability of Doni Ore filtration through the existing system without mixing ore from Bailadila region. The R&D efforts were successful and enabled the company to have future economic benefit in cost saving. Accordingly, the expenditure on this amounting to Rs. 1,924.98 Lakhs was recognised as "Process Development Expenditure" to be amortised over three years including the year 2009-10 and exhibited under "Miscellaneous Expenditure" in Asset side of the Balance Sheet.

During the year, the aforesaid item is being treated as a Internally Generated Intangible Asset. Consequently, the amount has been re-classified and disclosed as "Process Development Expenditure" under Fixed Assets. The policy on Amortisation of such expenditure over a period of three years is being continued. Accordingly, an amount of Rs. 641.66 Lakhs (Previous year Rs. 641.66 Lakhs), has been amortised during the year. The above re-classification does not have any impact on the results for the current year.

12. As per Accounting Standard (AS)-2 -"Valuation of Inventories", the raw materials for production of Pig Iron (including Auxiliaries) are required to be written down to their "Net Replacement Costs", since the cost of the finished product, Pig Iron, exceeds its Net Realisable Value (NRV). Accordingly, a provision was made during the year 2009-10.

There has not been any substantial improvement in the "Net Realisable Value" of Pig Iron during the year. Therefore, an amount of Rs. 1,790.65 Lakhs out of the provision made in the previous year is retained as at the Balance Sheet date.

13. During the physical verification of raw materials as on 31.03.2010, differences were noticed between book balance and physical balance in respect of LAM Coke and Calibrated Lump Ore and provision for such differences was made in the previous year''s accounts.

The differences were investigated during the year and a detailed report was presented to the Board. The differences were due to non-adjustment of normal losses in the nature of transit/handling losses, moisture losses etc., accumulated over a period of around 10 years. After deliberation, the Board accorded its approval for writing of the same. Accordingly an amount of Rs. 3,353.89 Lakhs was written of during the year and the following provisions made during the previous year against the same are simultaneously reversed

14. Furnace Oil is being stored in seven tanks of varying capacities at the Company''s facilities in Mangalore. It is observed that the Furnace Oil stored below suction point (tap on level) in the storage tanks loses its properties due to continuous sedimentation over the time resulting thickening of the oil. The estimated quantity of such stock is 1,714 KL. Hence a provision of Rs. 546.49 Lakhs towards the value of the same has been made during the current year.

15. Stock of raw material includes slime containing ultra fine iron ore (83,488 MT valued Rs. 1,626.66 Lakhs) as on 31.03.2010 for which provision was made in Accounts. During the year, the Company has used 19,712 MT (Previous year 39,025 MT) of slime in pellet production by blending the same with virgin Iron Ore. Consequently, Rs. 721.15 Lakhs (Previous year Rs. 1,427.71 Lakhs) has been withdrawn during the year from the provision made in earlier year.

16. On discontinuance of operation of Iron Ore Concentrate segment from 31.12.2005 and addition of Pig Iron segment from 01.04.2007, the activities of the Company are confined to two reporting business segments i.e., ''Iron Oxide Pellet'' and ''Pig Iron''. The expenditure relating to the enterprise as a whole which is not attributable to those segments includes expenditure relating to Kudremukh mines and is depicted under the head un-allocated expenditure. Un-allocated assets and unallocated liabilities include assets and liabilities of Kudremukh Mines.

17. Related party disclosure:

Key Management personnel :

K Ranganath Chairman-cum-Managing Director

M B Padiyar Director (Production & Projects)

T M Gopalakrishna Bhat Director (Finance)

Maj Gen (Dr) OP Soni Director (Commercial) w.e.f..01.02.2011

Except salary, perquisites and other particulars shown under Schedule 11, there are no other transactions with the related parties which need disclosure.

18. Certain accounting policies have been re-worded during the year to improve clarity. Impact has been quantified, wherever necessary.

19. Confirmation of balances from Sundry Creditors, Sundry Debtors, advances, deposits and materials with subcontractors in certain cases have not been received.

20. Previous year''s figures have been regrouped wherever necessary.

21. Figures in the Balance Sheet, Profit and Loss Account and the Schedules thereon have been rounded of to Rs. Thousands and expressed in Rs. Lakhs.

---

Mar 31, 2010

Year ended 31-03-2010 Year ended 31-03-2009 I.Pending execution of lease deed for land with New Mangalore Port Trust,provision has been made for the registration charges and stamp duty,which is estimated at Rs.119.92 Lakhs (previous year Rs.118.32 Lakhs).The expenditure incurred as well as the provision made are amortised over the period of lease.

The Company has registered in 2006-07 a track of land (47500 sq mtr)taken on lease in 2005-06 for five years.The amount of lease rental obligation for the remaining period of lease will be Rs.26.04 Lakhs (Previous year Rs.53.86 Lakhs) Rupees in Lakhs

2.(A)Estimated amount of the contracts to be 1,664.52 1,135.33 executed on capital account and not provided for (net of advances)

(B)Contingent liabilities not provided for : (a)In respect of -Letter of Credit and Bank Guarantee etc.,outstanding

(i)On Revenue Account 2911.99 739.62

(ii)On Capital Account Nil Nil

(b)Claims against the Company not acknowledged as debts

(i)On Revenue Account 3,189.86 82.56

(ii)On Capital Account 16,199.24 1,325.67

3.Expenses incurred towards generation of power have been included under the primary heads of account

4.In pursuance of the directive of the Honble Supreme Court,mining activities at Kudremukh were stopped on 31 st December 2005.The Company filed a Petition for Direction with prayers,inter-alia,to permit utilisation of 54.01 hectares of land required for the purpose of safety and slope stability of the mine,at the time of closure of the mine.

In its judgement (December 2006),Honble Supreme Court directed IIT Delhi to issue global tender for, inter-alia,re-analysing the stability of slopes,drawing up of mine closure plan,implementation of the above plan and drawing up of detailed terms for the work to be done,consistent with basic paradigm of "no or minimal disturbance to un broken area"and submit to the Court for further direction.

In view of the above,although mine is to be closed, the actual timing,modalities and expenditure involved for the purpose of mine closure cannot be assessed as of now.The Company,based on prudent accounting practice,depreciated in full most of the mines & plant assets,even though according to the internal assessment made by the Company,they can be effectively utilised on relocation and /or disposed off.The expenditure on mine closure may be offset against the inflow of some economic benefit,which may accrue.Hence no provision has been made for this expenditure in the Books of Account.

5.The mines &plant assetsin respect of discontinued operations at Kudremukh mines can be effectively utilised on relocation and/or disposed off.A substantial portion of such assets have been depreciated in full and the realisable value is estimated to be higher than the carrying value.Hence there is no impairment loss during the year.

6.During the year the revision of pay scales for Board level and other executives and Non-unionised Supervisors in the Company has been implemented with effect from 01.01.2007 as per guidelines of Department of Public Enterprises Office Memorandum No.2(70)/2008-DPE (WQ-GL-XVI/08 dated 26.11.2008 and OMs dated 09.02.2009 and 02.04.2009 and Government directives from Ministry of Steel OM F.No,5(2I)/2008-KDH dated 02.12.2009.However, regarding the revision of pay scales in respect of other employees,discussions with recognised Employees Union is under progress.Pending fmalisation of pay scales,a provision of Rs.1,055.51 Lakhs has been made in the Accounts under "Employees Remuneration and Benefits"

7.During the year 255 employees of the Company have opted for Voluntary Retirement.Out of them, 244 have been released during the year and 11 employees will be released during 2010-11 on their specific request.Total VRS compensation paid and payable amounting to Rs.3,241.72 Lakhs has been charged off during the year shown under "Employees Remuneration and Benefits"

8.Consequent upon closure of its mines at Kudremukh with effect from 31.12.2005,the Company is dependent on bought out ore from outside sources. The Companys mine turned out magnetite ore,and the production process of the Company was designed for handling magnetite ore as pellet feed. The hematite ore sourced from nearest mine at Donimalai region (Doni ore),is of complex characteristics which are varying from block to block.

During the grinding,it generates slime containing ultra fine causing difficulty in filtering thereby not liberating moisture from the pellet feed to a required moisture level.

The Company has under taken R&D trials to determine viability of Doni ore filtration through the existing system without mixing ore from Bailadila region (Baila ore).The R&D effort for changing over process technology of pellet production from Doni and Baila ore combination (70:30)to 100%Doni ore has been successful.Results of such R&D effort further established that there is no generation of slime in the process of grinding.

This R&D effort will enable the Company to have future economic benefit in cost saving.Consequently the net expenditure incurred during the trial period of conversion of 100%Doni iron ore into pellets amounting to Rs.1,924.98 Lakhs is treated as Process Development expenditure (Deferred Revenue Expenditure)and amortized over three years including the current year i.e.,2009-10.The same has been exhibited in accounts under "Extra ordinary items"

9.Since the cost of finished product in respect of Pig Iron exceeded its net realisable value,the raw materials for production of pig iron are required to be written down to their net replacement cost as per Accounting Standard (AS)-2-"Valuation of Inventories". An amount of Rs.3,030.68 Lakhs has been provided in the Accounts and shown under "Extra ordinary items".Consequently,there has been increase in loss to that extent during the year.

10.During the physical verification of raw materials as on 31.03.2010,differences were noticed between book balance and physical balance in certain cases. Pending verification and reconciliation of differences,a provision has been made in Accounts for Rs.2,115.17 Lakhs as a prudent measure.

11.Stock of raw material includes slime containing ultra fine iron ore (83,488 MT valued Rs.3,054.37 Lakhs) as on 31.03.2009 for which provision was made in Accounts.During the year,the Company has used 39,025 MT (Previous year 29,262 MT)of slime in pellet production by blending the same with virgin iron ore.Consequently,provision made during earlier year to the extent of Rs.1,427.71 Lakhs (Previous year 1,070.54 Lakhs)has been withdrawn during the year.

12.On discontinuance of operation of Iron Ore Concentrate segment from 31.12.2005 and addition of Pig Iron segment from 01.04.2007,the activities of the Company are confined to two reporting business segments i.e.,Iron Oxide Pelletand Pig Iron.The expenditure relating to the enterprise as a whole which is not attributable to segments includes expenditure relating to Kudremukh mines and is depicted under the head un-allocated expenditure.Un-allocated assets and unallocated liabilities include assets and liabilities of Kudremukh Mines

13.Related party disclosure:

Key Management personnel :

K Ranganath Chairman-cum-Managing Director

Sreeman N S Director (Commercial) (up to 26.11.2009)

M B Padiyar Director (Production &Projects)

T M Gopalakrishna Bhat Director (Finance)

Except salary,perquisites and other particulars shown under Schedule 11,there are no other transactions regarding related party which need disclosures

14.Certain accounting policies have been re-worded during the year.Impact has been quantified wherever necessary.

15.Confirmation of balances from Sundry Creditors, Sundry Debtors,advances,deposits and materials with sub-contractors in certain cases have not been received.

16.Previous years figures have been regrouped wherever necessary.

17.Figures in the Balance Sheet,Profit and Loss Account and the Schedules thereon have been rounded off to Rupees Thousands and expressed in Rupees Lakhs.

---

Mar 31, 2009

1. In pursuance of the directive of the Hon’ble Supreme Court, mining activities at Kudremukh were stopped on 31st December 2005. The Company filed a Petition for Direction with prayers, inter-alia, to permit utilisation of 54.01 hectares of land required for the purpose of safety and slope stability of the mine, at the time of closure of the mine.

In its judgement (December 2006), Hon’ble Supreme Court directed IIT Delhi to issue global tender for, inter-alia, re-analysing

2. Although Company has discontinued its operations at Kudremukh mines, the assets can be effectively utilised on relocation and or disposed off. As most of the mines and plant assets have been depreciated in full, the same have not been impaired. Hence there is no impairment loss during the year.

3. As per the provision of the Accounting Standard (AS) – 15 (Revised 2005) on “Employees Benefits “ Gratuity liability is a non-contributory defined benefit obligation and is provided for on the basis of an independent actuarial valuation made at the end of each financial year.

The ceiling of gratuity of the employees has been raised from Rs. 3.5 Lakhs to Rs. 10 Lakhs with effect from 01.01.2007. As per the Actuarial valuation the present value of obligation in respect of gratuity as on 31.03.2009 is Rs. 4,174.88 Lakhs. The impact of increase in the ceiling limit of gratuity is taken in to Profit & Loss Account for the year. The net increase in the liability is to the extent of Rs. 2,139.08 Lakhs

Provision for Leave encashment benefits, Leave travel concession is made on the basis of actuarial valuation. The measurement of present value of obligation has been done as prescribed under AS-15 (Revised) issued by ICAI and Guidance Note issued by the Accounting Standard Board (ASB) of ICAI. These are non-contributory defined benefit schemes.

Present value of obligations (cumulative) in respect of Leave Travel Concessions as on 31.03.2009 amounting to Rs.165.26 Lakhs (Previous year Rs. 145.18 Lakhs)

4. Employees remuneration and benefits for the year include provision made Rs. 3,215.98 Lakhs pending revision of pay scales of employees with effect from 01.01.2007 as per guidelines of Department of Public Enterprises Office Memorandum No. 2(70)/08-DPE (WC) dated 26.11.2008 and 02.04.2009.

5. Stock of raw material includes slime containing ultra fine iron ore (1,12,750 MT valued Rs. 4124.91 Lakhs) as on 31.03.2008. As it can only be used in pellet production by blending at certain proportion with iron ore and not otherwise by itself provision was made in 2007-08 for full amount. During the year, Company has used 29,262 MT of slime in pellet production by blending with iron ore. Consequently, provision to the extent of Rs. 1070.54 Lakhs has been withdrawn during the year

6. Consequent upon the dismissal of appeals for the assessment year 2005-06 by CIT(Appeals) of the original assessment u/s 143(3) of the IT Act 1961 which consist the demand of Rs. 19,03,80,999 and adjustment of the same during the assessment 2006-07, the Company as a prudent measure has provided for the full liability. However, the Company has preferred an appeal before ITAT Bangalore on the CIT (Appeals) orders.

7. After discontinuance of operation of iron ore concentrate segment from 31.12.2005 and addition of pig iron segment from 01.04.2007, the activities of the Company are confined to two reporting business segments i.e., ‘iron oxide pellet’ and ‘pig iron’. The expenditure relating to the enterprise as a whole which is not attributable to segments includes expenditure relating to Kudremukh mines and is depicted under the head un-allocated expenditure. Un-allocated assets and unallocated liabilities include assets and liabilities of Kudremukh Mines

8. Related party disclosure:

Key Management personnel:

P Ganesan Chairman-cum-Managing Director

(01.04.2008 to 30.04.2008) Rana Som Chairman-cum-Managing Director, NMDC Additional charge of Chairman –cum-Managing Director

(09.05.2008 to 23.05.2008) K Ranganath Chairman-cum-Managing Director

(23.05.2008 onwards) Sreeman N S Director (Commercial)

M B Padiyar Director (Production & Projects)

T M Gopalakrishna Bhat Executive Director (Finance) (from 01.04.2008 to 18.11.2008) and Director (Finance) (19.11.2008 onwards)

Except salary, perquisites and other particulars shown under Schedule 11, there are no other transactions regarding related party which need disclosures

9. Certain accounting policies have been re-worded during the year. Impact has been quantified wherever necessary.

10. Confirmation of balances from Sundry Creditors, Sundry Debtors, advances, deposits and materials with sub-contractors in certain cases have not been received.

11. Previous year’s figures have been regrouped wherever necessary.

12. Figures in the Balance Sheet, Profit and Loss Account and the Schedules thereon have been rounded off to Rupees Thousands and expressed in Rupees Lakhs.

---

Mar 31, 2007

ENDED 31ST MARCH 2007 Year ended Year ended 31-03-2007 31-03-2006 Rupees in Lakhs

1. Pending execution of lease deed for land for Companys operations at Mangalore with New Mangalore Port Trust, provision has been made for the registration charges and stamp duty, which is estimated at Rs.116.18 Lakhs (previous year Rs.117.11 Lakhs). However a track of land taken on lease has been registered during the year. An amount of Rs.4.41 Lakhs has been incurred for registration charges and stamp duty. The expenditure incurred as well as the provision made are amortised over the period of lease.

2. (A) Estimated amount of the contracts to be 879.57 1,204.35 executed on capital account and not provided for (net of advances)

(B) Contingent liabilities not provided for:

(a) In respect of - Letter of Credit and Bank Guarantee etc., outstanding

(i) On Revenue Account 703.43 1,020.43

(ii) On Capital Account - Nil Nil

3 All expenses for generation of power have been included under the primary heads of account

4. Kudremukh Iron & Steel Company Limited (KISCO) promoted by the Company (KIOCL) as joint venture along with Metal Scrap Trading Corporation Limited (MSTC) and Metallurgical and Engineering Consultants Limited (MECON) has become wholly owned subsidiary of the Company with effect from 30th June 2006 consequent upon acquisition of entire share capital of the joint venture. The Company has approved merger of KISCO with it subject to the necessary approval of authorities concerned. However, since approval has not been received, KISCO remained as a wholly owned subsidiary as on 31st March 2007.

A Loan amount of Rs 22,750 Lakhs is outstanding as on 31st March 2007 from KISCO (Maximum amount outstanding during the year-Rs. 22,750 Lakhs, Previous year-Rs. 22,750 Lakhs). The Loan carries interest at the Bank rate as prescribed under section 49 of the Reserve Bank of India Act, 1934

The loan is secured by movable and immovable properties of KISCO. In view of the above, the said loan is considered good.

Based on the request of KISCO, in October, 2005 the Board of Directors of the Company has approved a proposal to reschedule payment of interest that will accrue up to 31.03.2005 to be payable in four equal instalments commencing from the year 2006-07. During the year 2005-06, KISCO had remitted a sum of Rs. 1,365 Lakhs being interest for that year. The balance interest of Rs. 7,224.95 Lakhs due as on 31.03.2007 has not been considered as Income in the Books of Account in accordance with the Accounting Policy No.7(ii).

5 (a) KISCO, the wholly owned subsidiary of the Company, is operating under severe long-term constraints, which significantly impair its ability to transfer funds to the parent. In view of this and under the provisions of clause 11 of the Accounting Standard (AS) - 21 "Consolidated Financial Statements and Accounting for Investment in subsidiaries in separate Financial Statements" the consolidated financial statements of the Company Accounts and its subsidiary i.e. KISCO, have not been drawn up for the year 2006-07.

(b) The Companys investment of Rs. 5,000 Lakhs in KISCO is accounted in accordance with Accounting Standard (AS) 13-, "Accounting for Investments". The diminution in the value of investment, is fully provided earlier in the Accounts as per Companys Accounting Policy.

During the year 2005-06, a provision of Rs. 1,500 Lakhs was also made towards accumulated loss in the joint venture entity. However while approving the merger scheme, the Company has proposed that the share capital of the KISCO shall stand cancelled and reduced. The reserves and balance in the profit & loss account shall be set off against the investments as reflected in the Books of the Company (KIOCL) and the difference if any shall be adjusted against the Reserves of the Company.

As the merger of KISCO is imminent, the resultant loss if any after taking in to account the amount already provided for will be adjusted against the reserves of the Company.

6. In pursuance of the directive of the Honble Supreme Court, mining activities at Kudremukh was stopped on 31st December 2005. The Company filed a Petition for Direction with prayers, inter-alia, to permit utilisation of 54.01 hectares of land required for the purpose of safety and slope stability of the mine, at the time of closure of the mine.

In its judgement (December 2006), Honble Supreme Court directed IIT Delhi to issue global tender for, inter- alia, re-analysing the stability of slopes, drawing up of mine closure plan, implementation of the above plan and drawing up of detailed terms for the work to be done, consistent with basic paradigm of "no or minimal disturbance to un broken area" and submit to the Court for further direction.

In view of the above, although mine is to be closed, the actual timing, modalities and expenditure involved for the purpose of mine closure cannot be assessed as of now. Company, though based on prudent accounting practice, depreciated in full most of the mines and plant assets they can be effectively utilised, relocated. The expenditure on mine closure may be offset against the inflow of some economic benefit, which may accrue. Hence no provision has been made for this expenditure in the Books of Account.

7. Although Company has discontinued its operations at Kudremukh mines, some of the assets can be effectively utilised, relocated and the same have not been impaired. Hence there is no impairment loss during the year.

8. Consequent upon stoppage of mining activities at Kudremukh, the Company has introduced a Voluntary Retirement Scheme (VRS). During the year 2005-06, a provision was made in the accounts towards payment for voluntary separation for those whose applications were accepted but not relieved.

As per the provision of the Accounting Standard (AS) - 15 "Employees Benefits" the Company can defer the expenditure incurred on termination benefits over a period so that the expenditure thus deferred will be written off fully by 31st March 2010. Accordingly, the company has chosen to defer the expenditure incurred in 2005-06 and subsequent years as exhibited in Schedule 10 forming part of the Accounts.

Due to change in the method of accounting, the expenditure on voluntary retirement is decreased by Rs. 1,668.38 Lakhs and consequently, the profit for the year increased by that amount.

9. Stock of raw material as on 31st March 2007 includes slime containing low-grade ultra fine iron ore, which can be blended with normal iron ore ground material for production of pellet.

10. Consequent upon stoppage of mining at Kudremukh based on directive of Honble Supreme Court, the business activity falls within a single primary business segment viz., iron oxide pellets. As such, the disclosure requirement of Accounting Standard (AS) - 17, Segment Reporting is not applicable for the year.

11. Confirmation of balances in certain cases in respect of Sundry Creditors, Sundry Debtors, advances, deposits and materials with sub-contractors have not been received.

12. Certain accounting policies have been introduced changed reworded during the year. Impact has been quantified wherever possible.

13. Previous year figures have been regrouped wherever necessary to make them comparable.

14. Figures in the Balance Sheet, Profit and Loss Account and the Schedules thereon have been rounded off to Rupees Thousands and expressed in Rupees Lakhs.

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Mar 31, 2003

Year ended Year ended 31-03-2003 31-03-2002 Rupees in Lakhs

1. Pending execution of lease deed with New Mangalore Port Trust for land at Mangalore for Filter Plant, Pellet Plant, Captive Power Plant, UHF Station, Extension of pellet storage yard, Fuel oil handling facilities and Effluent Pipeline, no provision has been made for the registration charges and stamp duty which is estimated at Rs 114.99.lakhs.(Previous year Rs 128.28 Lakhs)

2. (A) Estimated amount of the contracts to be 50.69 581.27 executed on capital account and not provided for (net of advances)

(B) Contingent liabilities not provided for:

(a) In respect of - Letter of Credit and Bank Guarantee etc., outstanding

(i) On Revenue Account 1402.36 2224.38

(ii) On Capital Account - KISCO 5740.00 5740.00

- Others - 68.25

(b) Claims against the Company not acknowledged as debts

(i) On Revenue Account 252.94 17.80

(ii) On Capital Account 1499.30 1499.30

3. Claims lodged by the Company against suppliers/ contractors and pending for settlement not taken into account.

(i) On Revenue Account 8249.21 6271.65

(ii) On Capital Account 779.07 17.55 Rupees in Lakhs

4. Expenditure on operation of Helicopter not 18.99 26.73 included in travelling expenses in Schedule 12

5. Provision for encashment of earned leave and half pay leave accumulated by employees included under "Employees remuneration & benefits" on accrual basis. 270.63 893.26

With this the total provision as at the end of the year amounted to 1576.61 1305.98

6. Details of deferred tax Liability are as follows. Difference in written down value of assets 23,292.05 24,421.50 as Per IT & Books.

Add: Amortisation of development expenditure 1,672.41 1,264.97

24,964.46 25,686.47

Less:Provision for Non-moving stores 2,275.40 2,982.00

Provision for leave encashment 1,576.61 1,305.98

Provision for salary correction - 1,000.00

Provision for transit fee 931.30

Provision for travelling allowance 338.91

Provision for projects discontinued 168.77 288.13

19,673.47 20,110.36

Tax rate 36.75% 35.70%

Deferred Tax Liability 7,230.00 7,179.40

7. An amount of Rs 5500 lakhs deposited with Andhra Bank Financial Services Ltd, and due for repayment in October 1992 was repaid by them in instalments and the principal amount was fully repaid in August 2001. The interest accrued upto due date on these deposits amounting to Rs 297.37 lakhs still remained unpaid. However, ABFSL offered to pay this sum being the interest up to the contractual period and also Rs 600 lakhs towards interest beyond contractual period as full and final settlement. This was submitted to the Board of Directors in their 150th meeting held on 27.12.2001 for their consideration, who in turn recommended to seek permission of the Committee of Disputes for taking winding up action against ABFSL for recovery of interest. The permission is still awaited. As the payment of interest subsequent to the contractual date is pending for settlement, it has been considered prudent not to recognise the interest for the period subsequent to the due date.

8. Hindustan Photo Films Mfg Co Ltd. was referred to BIFR. ICICI has been appointed as the operating agency for this purpose by BIFR. ICICI since submitted a proposal involving settlement of dues. Pending settlement of the issue by BIFR, no provision has been made in respect of Inter Corporate Loan outstanding of Rs. 1800.00 lakhs from Hindustan Photo Films Mfg Co Ltd. Since Hindustan Photo Films Mfg Co Ltd. has been referred to BIFR, interest is not accounted in the Books of Accounts for the period from 1.4.1993 to 31.3.2003. An amount of Rs.223.18 lakhs, which was earlier accounted as interest upto 31.3.1993 and outstanding, has been reversed during the year 1997-98 in view of the uncertainty of recovery. Interest, if any will be accounted on settlement/receipt.

9. As per the Banking and Wheeling agreement executed with MESCOM, the excess energy generated by Captive Power Plant is being pumped to their grid. The Energy so pumped after deduction for wheeling is being reduced from the total energy consumed by the Company and accounted accordingly under `Power and .Fuel.

10. All expenses for generation of power have been included under the primary heads of account.

11. A Loan amount of Rs 22750 lakhs is due and outstanding as on 31st March 2003 from Kudremukh Iron & Steel Co Ltd.(KISCO). The loan carries an interest at the rate of 10% per annum. Since KISCO is not expected to generate sufficient cash to discharge its liabilities and obligations till the Ductile Iron Spun Pipe Project is completed and commissioned, deferment of payment of interest is granted till the end of March 2003. However, the interest accrued till then shall be payable by KISCO to KIOCL in three annual instalments commencing from the year 2003-04. KIOCL and KISCO Boards have approved a proposal to merge KISCO with KIOCL. This is under consideration of Govt. of India. Considering that KISCO is referred to BIFR, it has been considered prudent not to recognise the interest as there is uncertainty over its realisation. However the investment made by the company in KISCO towards allotment of equity shares and loans & advances is considered good since hypothecation deed dated 21st Nov2001 was executed by KISCO in favour of KIOCL as security.

12. " Employees remuneration and benefits" includes an amount of Rs 844.86 lakhs (Previous year Rs. 1000.00 lakhs) towards correction of the pay scales of Executives and Employees to be on par with other comparable Public Sector Undertaking

13. The expenditure of Rs 1333.42 lakhs incurred on Primary Ore Project is being treated as Deferred Revenue Expenditure and is being written off over a period of 5 years as it is expected that benefits of this project will accrue to the Company in the near future.

14. Related Party disclosure : Company: Kudremukh Iron & Steel Company Limited Promoted by KIOCL,MSTC,& MECON on Joint venture

Transactions:

(a) Purchases Year ended Year ended 31-03-2003 31-03-2002

Material Qty Value Qty Value Metric Ton Rs.Lakhs Metric Ton Rs.lakhs

Coke Fines 11484 508.16 2482 99.34

ETP Slurry 12841 12.84 6542 6.54

Dust Catcher 3917 3.92 826 0.83

Iron Ore Fines 6109 53.79 12180 107.25

Graphite powder 10 0.75 - -

Total - 579.46 - 213.96

(b) Sales

Pellets 4986 93.64 21325 381.29

Water lakh/Cum 16.01

Free of cost 10.38

Free of cost

(c) Others As on As on 31-03-2003 31-03-2002

Loans & Advances 22750.00 22750.00

Contingent Liability - Bank Guarantee 5740.00 5740.00

15. Based on the Supreme Courts order the Mining in Kudremukh can be carried out only up to Dec.2005. However alternatives are being explored and the Accounts are prepared on a going concern basis.

16. Provision for travelling allowance to employees who had served for five years or more in the company on retirement is made in the accounts on actuarial basis amounting to Rs 338.91 lakhs. Consequent on change in the method of accounting, profit for the year is reduced to that extent.

17. "Employees remuneration and benefits" includes Rs.348.67 lakhs paid towards compensation for the employees who had opted for Voluntary Retirement during the year.

18. Confirmation of balances in certain cases in respect of Sundry Creditors, Sundry Debtors, advances, deposits or materials with sub-contractors have not been received.

19. Previous year figures have been regrouped wherever necessary to make them comparable.

20. Figures in the Balance Sheet, Profit and Loss Account and the Schedules thereon have been rounded off to Rupees Thousands and expressed in Rupees Lakhs.

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Mar 31, 2001

Fixed assets

1- Development Cost

2- Amortisation in respect of Leasehold Land

3- 11.68 acres leased to other agencies and in their possession.

4- Assets do not include certain portion of pellet plant became non-performing due to process modification W.D.V of those assets as on 31-03-2001 amounting to Rs.7.56 lakhs have been provided and shown under "Depreciation for the year" column.

Other notes

Year ended Year ended 31-03-2001 31-03-2000

Rupees in Lakhs

1. Pending execution of lease deed with New Mangalore Port Trust for land at Mangalore for Captive Power Plant, UHF Station, Extension of Pellet Storage Yard, and Fuel oil handling facilities, no provision has been made for the registration charges and stamp duty which is estimated at Rs. 125.84 lakhs. (Previous year Rs 80.67 Lakhs)

2. (A) Estimated amount of the contracts to be executed on capital account and not provided for (net of advances) 1929.29 584.01

(B) Contingent liabilities not provided for:

(a) In respect of - Letter of Credit and Bank Guarantee etc., outstanding

(i) On Revenue Account 1494.90 3264.89 (ii) On Capital Account - KISCO 21740.00 21740.00 - Others 863.90

(b) Claims against the Company not acknowledged as debts

(i) On Revenue Account 39.48 1585.95 (ii) On Capital Account 950.37 960.53

3. Claims lodged by the Company against suppliers/contractors and pending for settlement not taken into account.

(i) On Revenue Account 4443.07 4163.59 (ii) On Capital Account 21.21 470.64

4. Inter Corporate Deposits amounting to Rs.20.00 crores is pending and outstanding as on 31.3.2001 with Andhra

Bank Financial Services Ltd ,a subsidiary of the Public sector Bank. An amount of Rs 33.40 crores was received during the year towards repayment of deposits of Rs 53.40 crores outstanding as on 31.3.2000. The deposits were due for repayment in October 1992 and the interest accrued upto due date on these deposits amounted to Rs 297.37 lakhs which have remained unpaid because of financial constraints faced by them. It has been considered prudent not to recognise the interest for the period subsequent to the due date. Interest, if any, will be accounted on receipt/settlement of interest rate for the period subsequent to the due date. As ABFSL, a Public Sector Financial Company, have assured repayment of deposits, it is considered premature to make any provision in this respect.

5. Hindustan Photo Films Mfg Co Ltd. was referred to BIFR. ICICI have been appointed as the operating agency for this purpose by BIFR. ICICI since submitted a proposal involving settlement of dues. Pending settlement of the issue by BIFR, no provision has been made in respect of Inter Corporate Loan outstanding from Hindustan Photo Films Mfg Co Ltd. Since Hindustan Photo Films Mfg Co Ltd. has been referred to BIFR, interest is not accounted in the Books of Accounts for the period from 1.4.1993 to 31.3.2001. An amount of Rs 223.18 lakhs, which was earlier accounted as interest upto 31.3.1993 and outstanding, has been reversed during the year 1997-98 in view of the uncertainty of recovery. interest , if any, will be accounted on settlement /receipt.

6. Expenditure on operation of Helicopter not included in

travelling expenses in Schedule 12 24.23 79.55

7. Settlement was reached with Karnataka Power Transmission Corpn Ltd (KPTCL) in respect of claims made by them for the energy supplied during the period covered by the Government of Karnatakas order No. DE / 17 / EEB 91 (P) dated 19.3.1993. An amount of Rs 6.01 crores was paid to KPTCL during the year as full and final settlement.

8. As per the Banking and Wheeling agreement executed with Karnataka Power Transmission Corpn Ltd., the excess energy generated by Captive Power Plant is being pumped to the KEB grid. The Energy so pumped after deduction for wheeling is being reduced from the total energy consumed by the Company and accounted accordingly under Power and Fuel.

9. All expenses for generation of power have been included under the primary heads of account.

10. An amount of Rs.74 crores was granted to Kudremukh Iron & Steel Co. Ltd., (KISCO) as loan and is outstanding as on 31.3,2001. The loan carries an interest at the rate of 10% per annum. Since KISCO is not expected to generate sufficient cash to discharge its liabilities and obligations till the Ductile Iron Spun Pipe Project is completed and commissioned, deferment of payment of interest is granted till the end of March, 2003. However, the interest accrued till then shall be payable by KISCO to KIOCL in three annual instalments commencing from the year 2003-04. KIOCL has agreed to make available necessary funds to discharge KISCOs term loan dues, and to meet the working capital needs. The Guarantee furnished by KIOCL in respect of the term loan sanctioned to KISCO by the consortium of Banks will get discharged on repayment and the properties of KISCO will be hypothecated to KIOCL to rank pari-passu with the NCD holders of KISCO. Further, KIOCL and KISCO Boards have approved a proposal to merge KISCO with KIOCL Since the merger proposal is under the consideration of the Govt. of India, interest on the loan granted to KISCO is not recognised as Income during the year, as there is uncertainty over its realisation.

11. " Employees remuneration and benefits" includes Rs 262.85 lakhs paid towards compensation for the employees who had opted for Voluntary Retirement during the year.

12. An amount of Rs.412.72 lakhs is provided in the Accounts on actuarial basis towards provision for encashment of earned leave and half-pay leave accumulated by the employees.

13. Consequent on the adoption of higher rate of depreciation in respect of Dyke at Lakya Dam on par with Lakya Dam, the profit for the year is reduced by Rs 9.97 lakhs.

14. Confirmation of balances in certain cases in respect of Sundry Creditors, Sundry Debtors, advances, deposits or materials with sub-contractors have not been received.

15. The temporary work permit granted to the Company will be expiring on 24.7.2001. The Company is hopeful of getting long term renewal of the mining lease.

16. Previous year figures have been regrouped wherever necessary to make them comparable.

17. Figures in the Balance Sheet, Profit and Loss Account and the Schedules thereon have been rounded off to Rupees Thousands and expressed in Rupees Lakhs.

---

Mar 31, 2000

Year ended Year ended 31-03-2000 31-03-1999

Rupees in Lakhs

1. Pending execution of lease deed with New Mangalore Port Trust for land at Mangalore for Captive Power Plant, UHF Station, Extension of pellet storage yard, and Fuel oil handling facilities, no provision has been made for the registration charges and stamp duty which is estimated at Rs. 80.67 lakhs. (Previous year Rs 14.10 Lakhs)

2. (A) Estimated amount of the contracts to be executed on capital account and not provided for (Net of advances.) 584.01 1238.28

(B) Contingent liabilities not provided for :

(a) In respect of - Letter of Credit and Bank Guarantee etc., outstanding

(i) On Revenue Account 3254.89 2865.72

(ii) On Capital Account - KISCO 21740.00 16000.00

- Others 52.22

(b) Claims against the Company not acknowledged as debts

(i) On Revenue Account 1585.95 14711.85

(ii) On Capital Account 960.53 876.47

3. Claims lodged by the Company against suppliers/contractors and pending for settlement not taken into account.

(i) On Revenue Account 4163.59 2774.88

(ii) On Capital Account 470.64 499.64

4. Inter Corporate Deposit amounting to Rs. 53.40 crores which were due for repayment in October 1992 is pending and outstanding as of 31st March 2000 with Andhra Bank Financial Services Ltd, a subsidiary of the Public sector Bank. The interest accrued and due on these deposits up to the due date is Rs. 297.37 lakhs which have remained unpaid because of financial constraints faced by them. It has been considered prudent not to recognise the interest for the period subsequent to the due date. Interest, if any, will be accounted on receipt/settlement of interest rate for the period subsequent to the due date. As ABFSL, a public sector financial Company, have assured repayment of deposits, it is considered premature to make any provision in this respect.

5. Hindustan Photo Films Mfg Co Ltd. was referred to BIFR. ICICI have been appointed as the operating agency for this purpose by BIFR and are formulating a comprehensive rehabilitation scheme involving settlement of dues. Pending settlement of the issue by BIFR, no provision has been made in respect of Inter Corporate Loan outstanding from Hindustan Photo Films Mfg Co Ltd. Since Hindustan Photo Films Mfg Co Ltd. has been referred to BIFR, interest is not accounted in the Books of Accounts for the period from 1.4.1993 to 31.3.2000. At amount of Rs. 223.18 lakhs, which was earlier accounted as interest upon 31-3-1993 and outstanding, has been reversed during the year 1997-98 in view of the uncertainty of recovery.

Interest, if any, will be accounted on settlement /receipt.

6. Expenditure on operation of Helicopter 79.55 16.52 not included in travelling expenses in Schedule 12.

7. As a Star Trading House, the Company is entitled for Special Import Licence in respect of Net Foreign Exchange realisation. Application for Special Import Licence of value amounting to Rs. 11273.74 Lakhs in respect of the net foreign exchange realisation for the period from 1.4.1998 to 30.9.1999 has already been made, and for the remaining period, an application will be submitted in due course.

8. Subsequent to the settlement reached with Karnataka Power Transmission Corpn Ltd (KPTCL) in respect of claims made by them for the energy supplied during the period covered by the Government of Karnataka's order No. DE/17/EEB 91 (P) dated 19.3.1993, an amount of Rs. 4129.37 Lakhs was paid to KPTCL during the year 1999-2000 based on the dues worked out by the Company. However, KPTCL had claimed an additional amount of Rs. 1546.47 Lakhs which was not acceptable to KIOCL. KIOCL had filed a writ petition in the High Court of Karnataka and the matter is under subjudice. Pending a decision in this matter, the amount claimed by KPTCL is shown under contingent liabilities not provided for on revenue account.

9. As per the Banking and Wheeling agreement executed with Karnataka Electricity Board, the excess energy generated by Captive Power Plant is being pumped to the KEB grid. The Energy so pumped after deduction for wheeling is being reduced from the total energy consumed by the Company and accounted accordingly under `Power and Fuel'.

10. All expenses for generation of power have been included under the primary heads of account.

11. Employees remuneration and benefits includes Rs. 578.25 lakhs pertaining to earlier years consequent on revision of salary implemented during 1999-2000 with retrospective effect from 1.1.1997.

12. An amount of Rs. 499.87 lakhs is provided in the Accounts on actuarial basis towards provision for encashment of earned leave and half-pay leave accumulated by the employees.

13. Consequent on the adoption of higher rate of depreciation in respect of steel cord conveyor belts and light vehicles, the profit for the year is reduced by Rs. 45.82 lakhs.

14. Confirmation of balances in certain cases in respect of Sundry Creditors, Sundry Debtors, advances, deposits or materials with sub-contractors have not been received.

15. Previous year figures have been regrouped wherever necessary to make them comparable.

16. Figures in the Balance Sheet, Profit and Loss Account and the Schedules thereon have been rounded off to Rupees Thousands and expressed in Rupees Lakhs.

17. The Balance Sheet and Profit and Loss Account approved by the Board of Directors in their meeting held on 24th June 2000 and certified by the Statutory Auditors on 24th June 2000 were revised in the light of observations of the Comptroller and Auditor General of India Under Sec 619(4) of the Companies Act 1956. This has resulted in increase in income by Rs. 74.99 Lakhs. Decrease in Expenditure by Rs. 55.70 lakhs and Increase in current year Income Tax by Rs. 15.00 lakhs.

Due to this, Profit Before Tax for the year in increased by Rs. 130.69 lakhs. Consequent on above changes, Assets and Liabilities in the Balance Sheet as at 31st March 2000 is increased by Rs. 115.69 lakhs.

---

Mar 31, 1999

1. Pending execution of lease deed with New Mangalore Port Trust for land at Mangalore for Captive Power Plant, UHF Station, Extension of pellet storage yard, and Fuel oil handling facilities, no provision has been made for the registration charges and stamp duty which is estimated at Rs.14.10 lakhs. (Previous year Rs.7.82 Lakhs)

2. (a) Estimated amount of the contracts to be executed on capital account and not provided for (net of advances)

(b) Contingent liabilities not provided for :

(1) In respect of - Letter of Credit and Bank Guarantee etc., outstanding

(i) On Revenue Account

(ii) On Capital Account - KISCO

- Others

(2) Claims against the Company not acknowledged as debts

(i) On Revenue Account

(ii) On Capital Account

3. Claims lodged by the Company against suppliers/contractors pending for legal settlement not taken into account.

(i) On Revenue Account

(ii) On Capital Account

4. The Company has agreed subject to such restrictions as may be imposed by Bangalore Development Authority to transfer to Kudremukh Employees Co-operative Housing Society Ltd., 6.019 acres of land at Koramangala Layout allotted by the Bangalore Development Authority on payment of cost of land.

5. Inter Corporate Deposits amounting to Rs.53.40 crores which were due for repayment in October 1992 is pending and outstanding as on 31st March 1999 with Andhra Bank Financial Services Ltd, a subsidiary of the Public Sector Bank. The interest accrued and due on these deposits up to the due date is Rs.297.37 lakhs which have remained unpaid because of financial constraints faced by them. It has been considered prudent not to recognise the interest for the period subsequent to the due date. Interest, if any will be accounted on receipt/ settlement of interest rate for the period subsequent to the due date. As ABFSL, a public sector financial Company, have assured repayment of deposits, it is considered premature to make any provision in this respect.

6. Interest on Inter Corporate Loans granted to Hindustan Photo Films Mfg. Co. Ltd., is not accounted in the books of Accounts for the period from 1.4.93 to 31.3.99. An amount of Rs.223.18 lakhs, which was earlier accounted as interest upto 31.3.93 and outstanding has been reversed during the year 1997-98 in view of the uncertainty of recovery as Hindustan Photo Films Mfg. Co. Ltd., was referred to BIFR. ICICI have been appointed as the operating agency for this purpose by BIFR and are formulating a Comprehensive rehabilitation scheme involving settlement of dues.

7. The additional Indian Income tax liability, if any, to be borne on behalf of Metchem arising out of the proposals of Commissioner of Income Tax, Bangalore for reopening/revision of assessment of the earlier years has not been reflected in the accounts pending resolution of the issues between IncomeTax Authorities and Metchem.

8. Expenditure on operation of Helicopter not included in travelling expenses in Schedule 12

9. As a Star Trading House, the Company is entitled for Special Import Licence respect of Net Foreign Exchange realisation. Application for Special Import Licence of value amounting to Rs.3304.14 lakhs in respect of the net foreign exchange realisation for the period from 1.4.1998 to 30.9.1998 has already been made, and for the remaining period, an application will be submitted in due course.

10. Revision of salary to employees is due from 1.1.97. Pending settlement of revision of scales of pay, provision in the Accounts is made at the rate of Twentyeight percent of Basic pay plus dearness allowance drawn by the employees as on 1.1.97 for the period from 1.1.97 to 31.3.99 and accounted under "Employees Remuneration and Benefits", against which 10% of basic pay has been released as interim relief and the balance provision is retained in the books of Accounts.

11. Consequent on settlement of dispute with Karnataka Electricity Board during March 1999, an additional provision of Rs. 7749.82 Lakhs has been made and charged to Power and Fuel in the books of Accounts. This settlement covers the Fuel Escalation charges, electricity tax and other claims made by the Karnataka Electricity Board for the energy supplied during the period covered by the Government of Karnataka's order No.DE/17/EEB 91 (P) dated 19.3.1993. An amount of Rs.40 crores advanced to KEB till the end of 31st March 1999 has been adjusted against the dues arising out of the settlement and a letter to this effect has been forwarded to Karnataka Electricity Board. Confirmation of balance from KEB however is still awaited.

12. As per the Banking and Wheeling agreement executed with Karnataka Electricity Board, the excess energy generated by Captive Power Plant is being pumped to the KEB grid. The energy so pumped after deduction for wheeling is being reduced from the total energy consumed by the Company and accounted accordingly under 'Power and Fuel'.

13. All expenses for generation of power have been included under the primary heads of account.

14. An amount of Rs.325.18 lakhs is provided in the Accounts on actuarial basis towards provision for encashment of earned leave and half pay leave accumulated by the employees.

15. Confirmation of balances in certain cases in respect of Sundry Creditors, Sundry Debtors, advances, deposits or materials with sub-contractors have not been received.

16. Previous year figures have been regrouped wherever necessary to make them comparable.

17. Figures in the Balance Sheet, Profit and Loss Account and the Schedules thereon have been rounded off to Rupees Thousands and expressed in Rupees Lakhs.

18. The Balance Sheet and Profit and Loss Account approved by the Board of Directors in their meeting held on 29th April 1999 and certified by the Statutory Auditors on 3rd May 1999 were revised in the light of observations of the Comptroller and Auditor General of India Under Sec 619(4) of the Companies Act 1956. This his resulted in-

Increase in income Rs. 12.74 Lakhs

Increase in expenditure Rs. 28.93 Lakhs

Decrease in income tax for the year Rs. 40.00 Lakhs

Increase in income tax of earlier years Rs. 17.61 Lakhs

Increase in tax on proposed dividend Rs. 15.86 Lakhs

Due to this, profit before tax for the year is decreased by Rs.16.19 Lakhs. Consequent on the above changes Assets and Liabilities in the balance sheet as at 31st March 1999 is decreased by Rs. 9.66 Lakhs.

---

Mar 31, 1996

1. Pending execution of lease deed with New Mangalore Port Trust for land at Mangalore for Captive Power Plant, UHF Station and extension of pellet storage yard no provision has been made for the registration charges and stamp duty which is estimated at Rs.5.46 lakhs.

2. Claims lodged by the Company against supplier/contractors pending for legal settlement not taken into account Rs. in lakhs Rs. in lakhs 31-03-96 31-03-95

(i) On Revenue Account 2189.15 2032.13

(ii) On Capital Account 109.12 109.12

3. The Company has agreed subject to such restrictions as may be imposed by Bangalore Development Authority to transfer to Kudremukh Employees Co-Operative Housing Society Ltd., 6.019 acres of land at Koramangala layout allotted by the Bangalore Development Authority on payment of cost of land.

4. Plant, Machinery and other assets damaged or suspected of damage during transit, erection or commissioning have been shown at cost and related insurance claims have been accounted separately.

5. Claims made on Government of Karnataka towards the interest on advance made by the company to them amounting to Rs.25 Crores for development of road and power facilities for the project and re-paid by them to the Company during 1977-78 being pursued but not accounted pending realisation.

6. Inter Corporate deposits amounting to Rs.53.40 Crores which were due for repayment in October 1992 is pending and outstanding as on 31st March 1996 with Andhra Bank Financial Services Ltd. a subsidiary of the Public Sector Bank. The interest accrued and due on these deposits up to the due date is Rs.297.37 lakhs which have remained unpaid because of financial constraints faced by them. It has been considered prudent not to recognise the interest for the period subsequent to the due date. Interest, if any, will be accounted on receipt/settlement of interest rate for the period subsequent to the due date. As ABFSL, a public sector financial Company, have assured repayment of deposits, it is considered premature to make any provision in this respect.

7. No provision has been made in the Accounts towards interest for the period from 01.04.93 to 31.03.96 on the Inter-corporate loan outstanding with M/s Hindustan Photo Films Mfg. Co. Ltd., since the interest outstanding as on 31.03.93 as well as the interest for the subsequent period has not been paid by them due to financial constraints. It is considered prudent not to recognise the interest from 01.04.93 until the repayment of principal along with the interest outstanding is received from them.

8. The additional Indian Income Tax liability, if any, to be borne on behalf of Metchem arising out of the proposals of Commissioner of Income Tax, Bangalore for reopening/ revision of assessment of the earlier years has not been reflected in the accounts pending resolution of the issue between Income Tax Authorities and Metchem.

9. Estimated expenditure on operation of Helicopter not included in travelling expenses in Schedule 12.

10. In respect of shipments of Iron Ore Concentrate/Pellets for which discharge port analysis has not been received, sales is based on the loading port analysis.

11. As a Star Trading House, the Company is entitled for Special Import Licence in respect of net foreign exchange realisation. An application for grant of Special Import Licence for a value of Rs.28.80 Crores is pending with the Development Commissioner for issue in respect of net realisation for the year 1994-95. Application for Special Import Licences in respect of net foreign exchange realisation for the year 1995-96 will be made to the Development Commissioner. The premium if any, on these Special Import Licences will be accounted on disposal / utilisation on receipt of Licences.

12. Based on the decision by the High Court of Karnataka in the case of CIT vs Bharath Earth Movers Limited, that leave salary liability is only of contingent nature, the Earned leave and Half Pay leave provided upto 31.03.95 of Rs.290.33 lakhs is withdrawn and shown under "Other Income". Consequent on the above change in the method of accounting Rs.128.96 lakhs has not been provided towards Leave Salary for the year 1995-96. The above changes have resulted in overstatement of profit for the year by Rs.419.29 lakhs.

13. The Company has since promoted Kudremukh Iron & Steel Company Limited jointly with MECON and MSTC to take up Pig Iron & Ductile Iron Spun Pipes Project. Consequently, the amount spent by the Company on land and other developmental works till 31-03-96 are transferred to KISCO and shown under Loans and Advances. Transfer of allotment of land from the Company to KISCO is under progress.

---

Mar 31, 1995

1. Pending execution of lease deed with New Mangalore Port Trust for land at Mangalore for Captive Power Plant, UHF Station and Extension of Pellet storage yard no provision has been made for the registration charges and stamp duty which is estimated at Rs.5.46 lakhs.

2. The Company has agreed subject to such restrictions as may be imposed by Bangalore Development Authority to transfer to Kudremukh Employees Co-Operative Housing Society Ltd., 6.019 acres of land at Koramangala layout allotted by the Bangalore Development Authority on payment of cost of land.

3. Plant, Machinery and other assets damaged or suspected of damage during transit, erection or commissioning have been shown at cost and related insurance claims have been accounted separately.

4. Claims made on Government of Karnataka towards the interest on advance made by the company to them amounting to Rs.25 Crores for development of road and power facilities for the project and re-paid by them to the Company during 1977-78 being pursued but not accounted pending realisation.

5. Inter Corporate deposits amounting to Rs.53.40 Crores which were due for repayment in October 1992 is pending and outstanding as on 31st March 1996 with Andhra Bank Financial Services Ltd. a subsidiary of the Public Sector Bank. The interest accrued and due on these deposits up to the due date is Rs.297.37 lakhs which have remained unpaid because of financial constraints faced by them. It has been considered prudent not to recognise the interest for the period subsequent to the due date. Interest, if any, will be accounted on receipt/settlement of interest rate for the period subsequent to the due date. As ABFSL, a public sector financial Company, have assured repayment of deposits, it is considered premature to make any provision in this respect.

6. No provision has been made in the Accounts towards interest for the year 1993-94 and 1994-95 on the Inter-corporate loan outstanding with Hindustan Photo Films Mfg. Co. Ltd., since the interest outstanding as on 31.03.93 as well as the interest for the 1993-94 and 1994-95 has not been paid by them due to financial constraints. It is considered prudent not to recognise the interest for the year 1993-94 and 1994-95 until the repayment of principal along with the interest outstanding is received from them.

7. The additional Indian Income Tax liability, if any, to be borne on behalf of Metchem arising out of the proposals of Commissioner of Income Tax, Bangalore for reopening/ revision of assessment of the earlier years has not been reflected in the accounts pending resolution of the issue between Income Tax Authorities and Metchem.

8. Pending settlement of the price for supply of Pellets to Indonesia during calendar year 1995, the sales have been provisionally invoiced and accounted on the basis of price for the calendar year 1994. 9. Estimated expenditure on operation of Helicopter not included in travelling expenses in Schedule 12.

10. In respect of shipments of Iron Ore Concentrate/Pellets for which discharge port analysis has not been received, sales is based on the loading port analysis.

11. As a Star Trading House, the Company is entitled for Special Import Licence in respect of Net Foreign Exchange realisation. Special Import Licence for a value of Rs.162.44 lakhs is pending disposal/utilisation The premium if any on these special import licences will be accounted on sale of these licences. Application for the Special Import Licenses in respect of net Foreign exchange realisation for the exports made during 1994-95 will be made and accounted on disposal/utilisation on receipt of licenses.

12. Revision of salary to employees is due from 01-01-1992. Pending settlement of revision of scales of pay, no provision is made in the Accounts. However, Interim relief at the rate of 10% of Basic Pay plus Fixed Dearness allowance per month as draw by the employees as on 01-01-1992 is being paid and accounted under 'Salaries and Wages'. This amount to Rs. 255.88 Lakhs including Employer's Contribution towards Provident Fund which resulted in lesser Profit for the year to that extent.

13. An amount of Rs. 26.78 lakhs is provided in the Accounts towards provision for half pay leave. Due to change in the Accounting policy over the earlier year, an additional liability of Rs. 24.25 lakhs was provided resulting reduction in profit for the year to that extent.