A. Significant Accounting Policies :
1 Basis of preparation of Financial Statements :
(a) The financial statements have been prepared to comply in all material respects with the notified accounting standards by the Companies Accounting Standards Rules, 2006 (which are deemed to be applicable as per section 133 of the Companies Act, 2013 read with rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013. The financial statements have been prepared under the historical cost convention, on an accrual basis of accounting.
(b) The classification of assets and liabilities of the Company is done into current and non-current based on the operating cycle of the business of the Company. The operating cycle of the business of the Company is less than twelve months and therefore all current and non-current classifications are done based on the status of reliability and expected settlement of the respective asset and liability within a period of twelve months from the reporting date as required by Schedule III to the Companies Act, 2013.
(c) The accounting policies discussed more fully below, are consistent with those used in the previous year.
2 Use of Estimates :
The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognized in the period in which the results are known.
3 Revenue Recognition :
(a) On Construction Contracts :
Long term contracts including Joint Ventures are progressively evaluated at the end of each accounting period. On contracts under execution which have reasonably progressed, profit is recognized by evaluation of the percentage of work completed at the end of the accounting period, whereas, foreseeable losses are fully provided for in the respective accounting period. The percentage of work completed is determined by the expenditure incurred on the job till each review date to total expected expenditure of the job.
Additional claims (including for escalation), which in the opinion of the management are recoverable on the contract, are recognized at the time of evaluating the job.
(b) On supply of materials related to the transmission towers, revenue is recognized upon the delivery of goods to the client in accordance with the terms of contract. Sales include Excise Duty and other receivable from the customers but exclude VAT, wherever applicable.
(c) Insurance claims are accounted for on cash basis.
(d) Interest income is recognized on time proportion method basis taking into account the amounts outstanding and the rate applicable.
(e) Dividend Income is accounted when the right to receive the same is established.
4 Turnover :
Turnover represents work certified upto and after taking into consideration the actual cost incurred and profit evaluated by adopting the percentage of the work completion method of accounting.
Turnover also includes the revenue from the supply of material in the transmission tower contracts in accordance with the terms of contract.
5 Joint Venture :
(a) Joint Venture Contracts under Consortium are accounted as independent contracts to the extent of work completion.
(b) In Joint Venture Contracts under Profit Sharing Arrangement, services rendered to Joint Ventures are accounted as income on accrual basis, profit or loss is accounted as and when determined by the Joint Venture and net investment in Joint Venture is reflected as investments or loans and advances or current liabilities.
6 Research and Development Expenses :
All expenditure of revenue nature is charged to the Statement of Profit and Loss of the period. All expenditure of capital nature is capitalized and depreciation provided thereon, at the rates as applied to Other Assets of similar nature.
7 Employee Retirement Benefits :
Retirement benefits in the form of provident fund and superannuation is a defined contribution scheme and contributions are charged to the Statement of Profit and Loss for the year / period when the contributions are due.
Gratuity a defined benefit obligation is provided on the basis of an actuarial valuation made at the end of each year / period on projected Unit Credit Method.
Leave encashment is recognized on the basis of an actuarial valuation made at the end of each year on projected Unit Credit Method.
Actuarial gains / losses are immediately taken to Statement of Profit and Loss and are not deferred.
8 Fixed Assets and Depreciation :
Fixed Assets are valued and stated at cost of acquisition less accumulated depreciation thereon. Revalued Assets are stated at the revalued amount. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition of its intended use.
Depreciation for the accounting period is provided on :
(a) Straight Line Method, for assets purchased after 2nd April, 1987, at the rates specified in Schedule II to the Companies Act, 2013 based on useful life of Assets
(b) Written Down Value Method, for assets acquired on or prior to 2nd April, 1987, at the rates specified in Schedule II to the Companies Act, 2013 based on useful life of Assets
(c) Depreciation on revalued component of the assets is charged to Profit and Loss Account.
(d) Depreciation on assets used for construction has been treated as period cost.
(e) Depreciation on assets situated in countries outside India are accounted at the rates of depreciation prescribed as per the relevant local laws of such countries which are as follows :
9 Impairment of Assets :
On annual basis the Company makes an assessment of any indicator that may lead to impairment of assets. An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. Recoverable amount is higher of an asset's net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.
An impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired.
The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
10 Investments :
Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of long term investments.
11 Cash and Cash Equivalents :
Cash and Cash Equivalents in the Balance Sheet comprise cash at bank and in hand and short term investments with an original maturity of three months or less.
12 Inventories :
(a) Raw materials are valued at cost, net of Excise Duty and Value Added Tax, wherever applicable. Stores and Spares, loose tools are valued at cost except unserviceable and obsolete items that are valued at estimated realizable value thereof. Costs are determined on Weighted Average Method.
(b) Stores and Spares and material at construction site are valued and stated at lower of cost or net realizable value. The Weighted Average Method of inventory valuation is used to determine the cost.
(c) Work In Progress on construction contracts reflects value of material inputs and expenses incurred on contracts including estimated profits in evaluated jobs.
(d) Work In Progress from manufacturing operation is valued at cost and costs are determined on Weighted Average Method.
(e) Finished Goods are valued at cost or net realizable value, whichever is lower. Costs are determined on Weighted Average Method.
13 Foreign Currency Translation :
(a) Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transactions.
(b) Current Assets and Current Liabilities are translated at the yearend rate or forward contract rate.
(c) Any gain or loss on account of exchange difference either on settlement or translation is recognized in the Statement of Profit and Loss.
(d) Fixed Assets acquired in foreign currencies are translated at the rate prevailing on the date of Bill of Lading.
(e) The transactions of branches at Kenya, Nigeria, Algeria, Bhutan and Italy are accounted as integral operation.
(f) The exchange gain / loss on long term loans to non integral operations being subsidiaries are restated to Foreign Exchange Translation Reserve Account and will be transferred to the Statement of Profit and Loss in the year when the disposal or otherwise transfer of the operations are done.
14 Borrowing Cost
Borrowing costs directly attributable to the acquisition or construction of qualifying assets are capitalized. Other borrowing costs are recognized as expenses in the period in which they are incurred. In determining the amount of borrowing costs eligible for capitalization during a period, any income earned on the temporary investment of those borrowings is deducted from the borrowing costs incurred.
15 Employee Stock Option Scheme :
Employee stock options are evaluated and accounted on intrinsic value method as per the accounting treatment prescribed under Guidance Note on "Accounting for Employee Share-Based Payments" issued by the ICAI read with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 issued by Securities and Exchange Board of India. Accordingly the excess of market value of the stock options as on the date of grant over the exercise price of the options is recognized as deferred employee compensation and is charged to Statement of Profit and Loss on graded vesting basis over the vesting period of the options. The un-amortized portion of the deferred employee compensation is reduced from Employee Stock Option Outstanding which is shown under Reserves and Surplus.
16 Taxation :
Tax expense comprises current and Deferred Tax. Current Income Tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961 and the Income Computation and Disclosure Standards issued by the Central Board of Direct Taxes and tax laws prevailing in the respective tax jurisdictions where the Group operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current Income Tax relating to items recognized directly in equity is recognized in equity and not in the Statement of Profit and Loss.
Deferred Income Taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred Tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred Tax Assets and Deferred Tax Liabilities are offset, if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the Deferred Tax Assets and the Deferred Tax Liabilities related to the taxes on income levied by same governing taxation laws. Deferred Tax Assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such Deferred Tax Assets can be realized. In situations where the Company has unabsorbed depreciation or carry forward tax losses, all Deferred Tax Assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
At each Balance Sheet date the Company re-assesses unrecognized Deferred Tax Assets. It recognizes unrecognized Deferred Tax Assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such Deferred Tax Assets can be realized.
The carrying amount of Deferred Tax Assets are reviewed at each Balance Sheet date. The Company writes down the carrying amount of a Deferred Tax Asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which Deferred Tax Asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.
17 Sales Tax / Cenvat Credit / VAT / WCT :
Sales Tax / VAT / Works Contract Tax on construction contracts are accounted on payment basis. The Cost of Material (inputs) is accounted at purchase cost net of Excise Duty and Value Added Tax, wherever applicable. The Excise Duty elements of materials (inputs) is debited to "Modvat Credit Receivable A/c" and Value Added Tax element of materials (inputs) is debited to "VAT Credit Receivable A/c", under the head "Loans and Advances". The Excise Duty and Value Added Tax payable on dispatch of goods are credited to "Modvat Credit Receivable A/c" and "VAT Credit Receivable A/c" by debiting the same to Excise Duty and Value Added Tax (Sales Tax), respectively in Statement of Profit and Loss.
18 Provision, Contingent Liabilities and Contingent Assets :
Provisions involving substantial degree of estimation in measurement are recognized when an enterprise has a present obligation as a result of past event. it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.
Contingent Liabilities are not recognized but are disclosed in the notes to accounts. Disputed demands in respect of Central Excise, Customs, Income Tax and Sales Tax are disclosed as Contingent Liabilities. Payment in respect of such demands, if any, is shown as advance, till the final outcome of the matter.
Contingent Assets are neither recognized nor disclosed in the financial statements.
19 Earning Per Share :
Basic and Diluted earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of Equity Shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and weighted average number of Equity Shares outstanding during the period is adjusted for the effects of all dilutive potential Equity Shares.
20 Prior Period Items :
Prior period items are included in the respective head of accounts and material items are disclosed by way of notes to accounts.
(d) Shares reserved under option to be given
Nil (Previous Period NIL) Equity Shares have been reserved for issue as ESOP. Refer Note 34 for details of the ESOP shares and Scheme.
(e) Terms / rights attached to Equity Shares
The Company has only one class of Equity Shares having a par value of Rs. 2/- each. Each holder of equity share is entitled to one vote per share. The distribution will be in proportion to the number of Equity Shares held by the shareholder.
In the event of liquidation of the Company, the holders of Equity Shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. However, no such preferential amounts exist currently. The distribution will be in proportion to the number of Equity Shares held by the shareholders.
(a) The General Reserve is created to comply with the Companies (Transfer of Profit and Reserve Rules 1975).
(b) The Foreign Currency Translation Reserve is created in terms of Accounting Standard 11 ''The effect of changes in foreign exchange rates" issued under the Companies Accounting Standard Rules 2006.
(c) Based on significant evaluation and progress of projects the management is of the opinion that amount kept under Special Contingency Reserve is no longer required and hence transferred to General Reserve.
(d) In accordance with the Companies (Share Capital and Debenture) Rules 2014 the Company is maintaining the Debenture Redemption Reserve to the extent of 25% of the Outstanding Debentures. The Company has however not set aside or earmarked liquid assets of Rs. 9.15 Crore (Previous Period Rs. 0.82 Crore) being 15% of the amount of Debenture due for redemption before 31st March, 2017 as required by the aforesaid Circular in view of the financial crunch faced by the Company.
(a) The Company's Corporate Debt Restructuring (CDR) package was approved by the CDR Empowered Group (EG) in its meeting held on 24th June, 2013 and communicated to the Company vide its letter of approval dated 29th June, 2013. The Company executed the Master Restructuring Agreement (MRA) with the CDR lenders on 24th September, 2013. Substantial securities have been created in favour of the CDR lenders.
Key features of the CDR proposal are as follows :
- Reschedulement of Short Term Loans and Rupee Term Loans (RTL) and NCD payable over a period of ten years.
- Repayment of Rupee Term Loans (RTL) after moratorium of 27 months from cutoff date being 1st January, 2013 in structured quarterly installments commencing from April 2015.
- Conversion of various irregular / outstanding / devolved financial facilities into Working Capital Term Loan (WCTL).
- Repayment of WCTL after moratorium of 27 Months from cut off date in structured quarterly installments commencing from April 2015, subject to mandatory prepayment obligation on realization of proceeds from certain asset sale and capital infusion.
- Restructuring of existing and fresh fund based and non fund based financial facilities, subject to renewal and reassessment every year.
- Interest accrued but not paid on certain financial facilities till March 2014 is converted into Funded Interest Term Loan (FITL).
- Waiver of existing events of defaults, penal interest and charges etc. in accordance with MRA.
- Right of Recompense to CDR Lenders for the relief and sacrifice extended, subject to provisions of CDR Guidelines and MRA.
- Contribution of Rs.100 Crore in the Company by Promoters, in lieu of bank sacrifice, in the form of Promoters Contribution, which can be converted to equity.
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