Accounting for multiple schemes of amalgamation/arrangement and acquisition:
Sesa Sterlite Ltd . (31-3-2014)
From Notes to Accounts
The Scheme of Amalgamation and Arrangement (the “Scheme-1”) amongst Sterlite Energy Limited (‘SEL’), Sterlite Industries (India) Limited (‘Sterlite’), Vedanta Aluminium Limited (‘VAL’), Madras Aluminium Company Limited (‘Malco’) and the Company was sanctioned by the High Court of Judicature of Bombay at Goa vide its order dated April 3, 2013 and the Honourable High Court of Madras vide its order dated July 25, 2013. The Scheme became effective for Sterlite and Malco on August 17, 2013; and for SEL and VAL the scheme became effective on August 19, 2013.
The Honourable Supreme Court of Mauritius by an order dated August 24, 2012 and the Honourable High Court of Judicature of Bombay at Goa by an Order dated April 03, 2013, approved the Scheme of Amalgamation (the “Scheme-2”) of Ekaterina (holding 70.5% shareholding in Vedanta Aluminum Limited), with the Company. The effective date of amalgamation is August 17, 2013.
The summary of the appointed dates and effective dates of the schemes are as follows:
The above schemes have been given effect to in the financial statements for the year ended March 31, 2014.
I. Amalgamation of SEL with the Company:
(a) SEL was engaged in the generation of commercial power in the State of Odisha and was a wholly owned subsidiary of erstwhile Sterlite.
(b) In accordance with the Scheme-1:
(i) SEL stands dissolved without winding up with effect from January 01, 2011, on the effective date.
(ii) A ll assets, debts and liabilities of SEL have been deemed transferred to and vested in the Company with effect from January 01, 2011.
(iii) SEL carried on the business for and behalf of the Company for the period from the appointed date to the effective date, in trust as per the Scheme -1.
(iv) In accordance with the Scheme-1, upon Chapter 2 of the Scheme-1, becoming effective, SEL became a wholly owned subsidiary of SGL, and accordingly no shares were issued and allotted by SGL.
(c) The amalgamation has been accounted under the ‘Pooling of Interests’ method as envisaged in the Accounting Standard (AS) – 14 on Accounting for amalgamations specified in the Companies (Accounting Standard) Rules 2006, whereby:
(i) In accordance with the Scheme-1, the assets, liabilities and reserves (excluding share premium) of SEL as at January 01, 2011 along with subsequent additions/ deletions up to March 31, 2013 have been recorded at their book values. Further, equity share capital, share premium account of SEL, and investments in the equity shares of SEL has been eliminated and resultant balance amount of Rs. 2.48 crore has been debited to General Reserve of the Company.
(ii) The profits of SEL from appointed date January 01, 2011 to March 31, 2013 have been transferred to the Surplus in Statement of Profit and Loss of the Company. The operations of SEL during the year have been accounted for in the current year’s Statement of Profit and Loss of SEL as at April 01, 2013 Rs. 194.02 crore (after the alignment of accounting policies of SEL in line with SGL accounting policies) has been included in Surplus in Statement of Profit and Loss of the Company.
(iii) In terms of the Scheme-1 inter-company balance (payable, receivables, loans, advances, etc.) between SEL and the Company (after giving effect of Sterlite amalgamation) as at appointed date have been cancelled.
II. Amalgamation of Sterlite with the Company:
(a) Sterlite was engaged in the copper smelting business:
(b) In accordance with the Scheme-1 :
(i) Sterlite stands dissolved without winding up with effect from April 01, 2011, on the effective date.
(ii) 1,656,179,625 number of equity shares have been issued to the equity shareholders of Sterlite, except for equity shares of Sterlite held by MALCO and excluding shares against which Ads were issued in the ratio of 3 equity shares of face value of Rs.1/- each in the Company for every 5 equity shares held in Sterlite. 72,173,625 ADS of the Company representing 288,694,500 equity shares of the Company have been issued in the ratio of 3 ADS of the Company for every 5 ADS of Sterlite.
(iii) A ll assets, debts and liabilities of Sterlite have been deemed transferred to and vested in the Company with effect from April 01, 2011.
(iv) Sterlite carried on the business for and behalf of the Company for the period from the appointed date to the effective date, in trust as per the Scheme -1.
(c) T he amalgamation has been accounted under the ‘Pooling of Interests’ method as envisaged in the Accounting Standard [AS] – 14 on Accounting for Amalgamations specified in the Companies [Accounting Standard] Rules 2006, whereby:
(i) In accordance with the Scheme – 1, the assets, liabilities and reserves of Sterlite as at April 01, 2011 along with subsequent addition/deletion up to March 31, 2013 have been recorded at their book values. The difference between the value of total assets, total liabilities and the face value of share capital allotted to the shareholders of Sterlite amounting to Rs. 134,45 crore and credit balance in the General Reserve of Rs. 2,770.29 crore has been credited to the General Reserve in accordance with the Scheme – 1.
(ii) In terms of the Scheme – 1, inter-company balances [payables, receivables, loans, advances, etc.] between VAL – Aluminium and the Company [after giving effect of Sterlite amalgamation] as at appointed date have been canceled.
(iii) The profits of Sterlite from the appointed date April -1, 2011 to March 31, 2013 have been transferred to Surplus in the Statement of Profit and Loss of the Company. The operations of Sterlite during the year have been accounted for in the current year’s Statement of Profit and Loss of the Company. The balance in Surplus in Statement of Profit and Loss of Sterlite as at April 01, 2013, Rs. 3,069.67 crore [after the alignment of the accounting policies of Sterlite in line with SGL accounting policies] has been included in Surplus in Statement of Profit and Loss of the Company.
III. Aluminum Division of Vedanta Aluminium Limited [“VAL -Aluminium”] with the Company:
(a) Vedanta Aluminium Limited was engaged in the production of aluminium with associated captive power plants. “VAL-aluminium” consisting of 0.5 mtpa aluminium smelter at Jharsuguda and 1.0 mtpa alumina refinery at Lanjigarh in the State of Odisha.
(b) In accordance with the Scheme -1:
(i) VAL-Aluminium demerged from VAL and merged with the Company from appointed date April 01, 2011.
(ii) N o shares have been issued and allotted by the Company to Vedanta Aluminium Limited for the demerger of the VAL-Aluminium and merger with the Company.
(iii) All assets, debts and liabilities of VALAluminium have been deemed transferred to and vested in the Company with effect from April 01, 2011.
(iv) Vedanta Aluminium Limited carried on VALAluminium business for and behalf of the Company for the period from the appointed date to the effective date, in trust as per the Scheme -1.
(i) In accordance with the Scheme-1, the assets and liabilities of VAL-Aluminium as at April 01, 2011 along with subsequent addition/deletion up to March 31, 2013 have been recorded at their book values. Further, in accordance with the Scheme-1, excess of book values of assets over liabilities of VAL-Aluminium business amounting to Rs. 532.46 crore has been credited to General Reserve of the Company.
(iii) In terms of the Scheme-1 inter-company balance (payable, receivables, loans, advances, etc.) between SEL and the Company (after giving effect of Sterlite amalgamation) as at appointed date have been cancelled.
ii. amalgamation of sterlite with the company:
(a) Sterlite was engaged in the copper smelting business:
(b) In accordance with the Scheme-1 :
(i) Sterlite stands dissolved without winding up with effect from April 01, 2011, on the effective date.
(ii) 1,656,179,625 number of equity shares have been issued to the equity shareholders of Sterlite, except for equity shares of Sterlite held by maLCo and excluding shares against which Ads were issued in the ratio of 3 equity shares of face value of Rs.1/- each in the Company for every 5 equity shares held in Sterlite. 72,173,625 adS of the Company representing 288,694,500 equity shares of the Company have been issued in the ratio of 3 adS of the Company for every 5 ADS of Sterlite.
(iii) All assets, debts and liabilities of Sterlite have been deemed transferred to and vested in the Company with effect from april 01, 2011.
(iv) Sterlite carried on the business for and behalf of the Company for the period from the appointed date to the effective date, in trust as per the Scheme -1.
(c) The amalgamation has been accounted under the ‘Pooling of interests’ method as envisaged in the accounting Standard [AS] – 14 on accounting for Amalgamations specified in the Companies [Accounting Standard] Rules 2006, whereby:
(i) In accordance with the Scheme – 1, the assets, liabilities and reserves of Sterlite as at april 01, 2011 along with subsequent addition/deletion up to march 31, 2013 have been recorded at their book values. The difference between the value of total assets, total liabilities and the face value of share capital allotted to the shareholders of Sterlite amounting to Rs. 134,45 crore and credit balance in the General reserve of Rs. 2,770.29 crore has been credited to the General reserve in accordance with the Scheme – 1.
(ii) In terms of the Scheme – 1, inter-company balances [payables, receivables, loans, advances, etc.] between VAL – Aluminium and the Company [after giving effect of Sterlite amalgamation] as at appointed date have been canceled.
(iii) The profits of Sterlite from the appointed date april -1, 2011 to march 31, 2013 have been transferred to Surplus in the Statement of Profit and Loss of the Company. The operations of Sterlite during the year have been accounted for in the current year’s Statement of Profit and Loss of the Company. the balance in Surplus in Statement of Profit and Loss of Sterlite as at april 01, 2013, Rs. 3,069.67 crore [after the alignment of the accounting policies of Sterlite in line with SGL accounting policies] has been included in Surplus in Statement of Profit and Loss of the Company.
iii. Aluminum Division of vedanta aluminium limited [“val-aluminium”] with the company:
(a) Vedanta Aluminium Limited was engaged in the production of aluminium with associated captive power plants. “VAL-aluminium” consisting of 0.5 mtpa aluminium smelter at jharsuguda and 1.0 mtpa alumina refinery at Lanjigarh in the State of Odisha.
(b) In accordance with the Scheme -1:
(i) VAL-Aluminium demerged from VAL and merged with the Company from appointed date april 01, 2011.
(ii) no shares have been issued and allotted by the Company to Vedanta Aluminium Limited for the demerger of the VAL-Aluminium and merger with the Company.
(iii) All assets, debts and liabilities of VAL- aluminium have been deemed transferred to and vested in the Company with effect from april 01, 2011.
(iv) Vedanta Aluminium Limited carried on VAL- aluminium business for and behalf of the Company for the period from the appointed date to the effective date, in trust as per the Scheme -1.
(i) In accordance with the Scheme-1, the assets and liabilities of VAL-Aluminium as at April 01, 2011 along with subsequent addition/deletion up to march 31, 2013 have been recorded at their book values. Further, in accordance with the Scheme-1, excess of book values of assets over liabilities of VAL-Aluminium business amounting to rs. 532.46 crore has been credited to General reserve of the Company.
(ii) In terms of the Scheme, inter-company balance (payables, receivable, loans, advances, etc.) between VAL-Aluminium and the Company (after giving effect of Sterlite amalgamation) as at appointed date have been cancelled.
(iii) The losses of VAL-Aluminium during the period april 01, 2011 to march 31, 2013 have been transferred to Surplus in Statement of Profit and Loss of the Company. The operations of VAL-Aluminium during the year have been accounted for in the current year’s Statement of Profit and Loss of the Company. The debit balance of Surplus in Statement of Profit and Loss of VAL-Aluminum as of April 01,2013 rs. 4,389.54 crore (after the alignment of accounting policies of VAL-Aluminium in line with SGL accounting policies) has been included in Surplus in Statement of Profit and Loss of the Company.
(iv) In accordance with the Scheme-1, post the vesting of VAL-Aluminium business with the Company, shortfall of book values of assets over the liabilities of the aluminium business after adjusting the carrying value of equity share investment in VAL as on the effective date not representing by the net assets value of VAL as on effective date amounting to Rs. 1,471.63 crore has been debited to General reserve of the Company.
iv. Residual business of The Madras aluminium company limited (‘Malco- residual’) with the company:
(a) The madras aluminium Company Limited (malco) was engaged in the production of aluminium and commercial power generation business in the State of Tamilnadu.
(b) In accordance with the Scheme-1:
(i) In accordance with the Scheme-1, the power business of malco consisting of 100 MW coal based power plant was sold at a consideration of Rs. 150.00 crore to VAL with appointed date of april 01, 2012. Residual business of malco merged with the Company from appointed date august 17, 2013 and malco ceased to exist.
(ii) 78,724,989 number of equity shares have been issued to the equity shareholders of Malco in the ratio of 7 equity shares of face value of Re. 1/- each in the Company for every 10 equity shares held in malco.
(iii) All assets, liabilities and reserves of malco- residual business were deemed transferred to and vested in the Company with effect from august 17, 2013.
(c) The amalgamation has been accounted under the ‘Pooling of interests’ method as envisaged in the accounting Standards (AS) – 14 on accounting for Amalgamations specified in the Companies (Accounting Standard) Rules 2006, whereby:
(i) The assets, liabilities and reserves of malco- residual (except investment in the equity shares of Sterlite) as at appointed date have been recorded at their respective carrying values in the books of the Company. in accordance with the Scheme-1, the difference between the value of total assets (excluding investment in Sterlite), total liabilities, reserves and the face value of share capital allotted to the shareholders of malco Rs. 14.62 crore and credit balance in the General reserve of Rs. 231.24 crore has been credited to General reserve of the Company.
(ii) In terms of the Scheme-1, as at appointed date the investment in the equity shares of Sterlite in the books of malco-residual has been cancelled and resultant balance amount of Rs. 312.26 crore has been debited to General reserve of the Company.
(iii) In terms of the Scheme-1, inter-company balances (payables, receivables, loans, advances, etc.) between malco-residual and the Company as at the appointed date have been cancelled.
(iv) The balance in Surplus in Statement of Profit and Loss of malco-residual as at august 17, 2013 rs. 351.06 crore (after the alignment of accounting policies of malco-residual business in line with SGL accounting policies) has been included in Surplus in Statement of Profit and Loss of the Company.
(d) Upon the Scheme becoming effective and with effect from the appointed date, the assets and liabilities of the power business undertaking, as appearing in the books of malco at the close of business on the day preceding the appointed date as vested in the Company, are recorded by Vedanta Aluminium Company (“VAL”) at a value derived by apportioning the cash consideration paid amongst all assets and liabilities pertaining to the power business of the undertaking. In terms thereof, VAL has recorded assets of Rs. 216.98 crore and liabilities of Rs. 66.98 crore by apportioning the cash consideration of Rs. 150 crore as stated above.
Subsequently, the name of VAL has been changed to malco energy Limited w.e.f. october 24, 2013.
v. Amalgamation of Ekaterina limited (ekaterina) with the company:
(a) The honourable high Court of judicature of Bombay at Goa, by an order dated april 03, 2013, and the honourable Supreme Court of mauritius by an order dated august 24, 2012, approved the Scheme of amalgamation (the “Scheme-2”) of Ekaterina (holding 70.5% shareholding in Vedanta aluminium Limited), with the Company effective from the appointed date april 01, 2012. the effective date of amalgamation is august 17, 2013.
(b) In accordance with the Scheme-2 :
(i) 72,034,334 number of equity shares were issued to the equity shareholders of Ekaterina in the ratio of 1 equity shares of face value Re. 1 each in the Company for every 25 shares held in ekaterina.
(ii) In accordance with the Scheme-1, the assets, liabilities and reserves of ekaterina as at april 01, 2012 along with subsequent addition/ deletion up to march 31, 2013 have been recorded in the books of the Company at their respective book values.
(iii) Ekaterina stands dissolved without winding up with effect from april 01, 2012.
(iv) Ekaterina carried on the business for and behalf of the Company for the period from the appointed date to the effective date, in trust as per the Scheme-2.
(c) The amalgamation has been accounted under the ‘Pooling of interests’ method as envisaged in the accounting Standard (aS) – 14 on accounting for Amalgamations specified in the Companies (Accounting Standard) Rules 2006, whereby:
(i) The assets, liabilities and reserves of ekaterina as at appointed date have been recorded at their respective carrying values in the books of the Company. in accordance with the Scheme-2, difference between total assets, total liabilities, reserves and the face of value shares capital allotted to the shareholders of EKTL amounting to Rs. 917.48 crore credited to General reserve of the Company.
(ii) In terms of the Scheme-2 inter-company balances (payables, receivables, loans, advances, etc.) between ekaterina and the Company as at the appointed date have been cancelled.
VI. Consequent to the above and utilising the carry forward unabsorbed tax losses of VAL-Aluminium and SeL, the Company has recognised a current tax credit of Rs. 1,755.09 crore during the year.
VII. Subsequent to the effectiveness of the Scheme, a Special Leave petition challenging the order of the high Court of judicature of Bombay at Goa has been filed by the income tax department, a creditor and a shareholder have challenged the Scheme in the high Court of madras. The said petitions are pending for admission/hearing.
VIII. Subsequent to the effectiveness of the Scheme, all the subsidiaries of erstwhile Sterlite industries (india) Limited have become subsidiaries of the Company. Consequent to the above, such subsidiaries have been consolidated in the Group Consolidated Financial Statements from april 1, 2013 and an amount of Rs. 47,151.30 crore has been accounted under reserves & Surplus [refer note no 6) as an adjustment “Pursuant to Scheme of Amalgamation”, which includes the adjustments to the General Reserves and the adjustments to the General reserves and Surplus in Consolidated Statement of Profit and Loss, as referred to in Notes I to V above.
34. Acquistion of val’s power business through slump sale:
By way of Slump sale agreement dated august 19, 2013 between VAL and the Company, the power business consisting of 1,215 mW (9X135MW) captive power plants situated at jharsuguda and 300MW co-generation facility (90mW operational and 210mW under development) at Lanjigarh together with the assets and liabilities, has been purchased by the Company on a going concern basis at its carrying value at a consideration of ` 2,893 Crore.
35. Pursuant to the share purchase agreement, dated February 25, 2012 between Bloom Fountain Limited (‘BFL’), a wholly owned subsidiary of the Company and Vedanta Resources Holdings Limited (‘VRHL’), BFL acquired 38.68% shareholding in Cairn India Limited and associated debts of $5,998 million by way of acquisition of Twin Star Energy Holdings Limited (‘tehL’), for a nominal cash consideration of $1. Consequently w.e.f. August 26, 2013, TEHL, twin Star mauritius holdings Limited (‘tmhL’) and Cairn india Limited (including all its subsidiaries) have become subsidiaries of the Company.
The effect of acquisition of TEHL, TMHL and Cairn India Limited on the financial position and results as included in the consolidated financial statements for the year ended March 31, 2014 are given below:
From the auditors’ report
EMPHASIS OF MATTER
We draw attention to Note 31 to the financial statements which describes the Scheme of amalgamation and Arrangement and its effects given in the financial statements.
Our opinion is not qualified in respect of this matter.
