From published accounts

From Notes to Financial Statements

Notes below Schedule 7: Long Term Borrowings: The classification of loans between current liabilities and non-current liabilities continues based on repayment schedule under respective agreements as no loans have been recalled due to noncompliance of conditions under any of the loan agreements. The non-compliance of conditions under the loan agreements are primarily arising out of the order of the Hon’ble Supreme Court dated 17th January, 2012 (refer note 36). This is in accordance with the guidance issued by the Institute of Chartered Accountants of India on Revised Schedule VI to the Companies Act, 1956.

Repayment and other terms:

a) Secured redeemable non–convertible debentures (‘NCDs’) of Rs. 105/- each consists of:

13,868,050 (Previous year 16,918.250) – 12.50% NCDs of Rs. 105/- each amounting to Rs. 145.61 crore (Previous year Rs. 177.64 crore).

7,00,000 (Previous year 7,00,000) – 12.50% NCDs, of Rs. 100/- each on private placement basis partly paid up at Rs. 93.86 per debenture amounting to Rs. 6.57 crore (Previous year Rs. 6.57 crore).

During the year, the Company refinanced its Rupee borrowings with one of its existing lenders into an External Commercial Borrowing (ECB). This resulted in conversion of debentures having face value of Rs. 32.03 crore also into the ECD loan. Further, as per the common Loan Agreement (‘the CLA’) entered with lenders post exit from the Corporate Debt Restructuring (CDR) Scheme, the Company has agreed to pay interest on a monthly/quarterly basis, on debentures held by the erstwhile CDR lenders at a floating rate linked to the base rate of the respective bank prevailing on 8th August, 2012, with effect from 1st January, 2012, resulting in the interest rates ranging from 12.32% p.a. to 12.75% p.a. The Company is also in the process of sending offer letters to the remaining debentures holders (i.e., other than lenders) given them, inter alia, an option for prepayment of debentures along with accumulated interest in full. The principal amount of debentures is otherwise payable from December 2014 to June 2018 and accumulated interest from December 2014 to March 2027, with an option to prepay certain portion of interest at a discounted rate. As an alternative, these debenture holders can opt for revising the terms and conditions applicable to debentures in line with the terms contained in the CLA.

The Hon’ble High Court of Gujarat has, in response to the Company’s petition, ruled vide its orders dated 4th August, 2006 and 11th August, 2006 that the interest on certain categories of debentures should be accounted on cash basis. In accordance with the said petition/ order, funded/accrued interest liabilities amounting to Rs. 417.72 crore (Previous year Rs. 428.24 crore) as at 31st March, 2013 have not been accounted for. This amount carries interest rate ranging from fixed rate of 5% to a floating rate of 12.75% and is repayable from December 2014 to March 2027.

c) During the year, the Company exited Corporate Debt Restructuring Scheme resulting in termination of the MRA dated 17th December, 2004 and entered into a CLA dated 25th March, 2013 with the lenders for the loan facilities which were hitherto being governed by the MRA. The MRA gave an option, subject to consent of lenders, to the Company to prepay certain funded interest loans (the FS loans) of Rs. 2,471.63 crore on or before 24th April, 2012 without interest. The FS loan has not been prepaid before 24th April, 2012 and is now governed by the CLA.

In order to give accounting effect to reflect substance of the transaction, the FS loan was, since inception, measured by the Company in accordance with the principles of IAS 39, Financial Instruments, Recognition and Measurement, in the absence of specific guidance in Indian GAAP to cover the specific situation. In continuance of the above said principle and applying the principle of Accounting Standard AS 30, Financial Instruments, Recognition and Measurement, the FS loan has, upon signing of the CLA, been remeasured since inception, considering present value of cash flows inclusive of interest. Accordingly, the gross liability of Rs. 3,163.84 crore of the FS loans and funded interest thereon as at 31st March, 2013 (comprising of Rs. 2,126.36 crore to the banks and Rs. 1,037.48 crore to the financial institutions) have been measured at Rs. 1,833.84 crore (comprising of Rs. 1,234.34 crore to the banks and Rs. 599.50 crore to the financial institutions). Consequently, borrowing cost of Rs. 536.71 crore attributable to construction of the Refinery Project based on such remeasurement has been capitalised as part of cost of Fixed Assets and balance borrowing cost of Rs. 110.94 crore has been recognised in the statement of profit and loss.

The FS Loans of Rs. 2,471.63 crore is repayable in various installments from March 2021 to March 2026 and the Funded Interest thereon as at 31st March, 2013 amounting to Rs. 692.19 crore is repayable in 40 equal quarterly installments beginning 30th June, 2013.

A funded interest loan of Rs. 206.88 crore (previous year Rs. 206.88 crore) is payable in a single bullet payment in 2031 and is continued to be measured in accordance with the aforementioned principles at Rs. 34.95 crore (Previous year Rs. 31.67 crore).

Note below ‘Other Current / Non Current Assets’

Rs. 2,177.82 crore receivable from Essar House Limited (EHL) being the amount paid under the defeasment agreement of the sales tax liability covered by the scheme (refer note 36). The Company has agreed to recover these dues in eight equal quarterly installments along with interest, coinciding with the installment facility made available by the Hon’ble Supreme Court to the Company for repayment of the Gujarat Sales Tax dues. To secure this amount further, the Company is in the process of obtaining an additional guarantee from the parent company of EHL.

Note below ‘Revenue from Operations’

During the previous year, the Company deferred payment of sales tax/VAT liability amounting to Rs. 1,507.01 crore for the period 1st April, 2011 to 31st December, 2011 and defeased the same to a related party at its present value amounting to Rs. 528.42 crore. Sales tax/VAT amounting to Rs. 1,387.36 crore shown above as deduction from ‘Revenue from operations (gross)’ includes the defeased value of sales tax/Vat liability of Rs. 582.42 crore as per the defeasance agreement pursuant to which the assignee has undertaken to discharge the sales tax/VAT liability on the due dates. Pursuant to the Supreme Court Order dated 17th January, 2012, the Company subsequently reversed the entire amount of income recognised as an exceptional item (refer note 36).

Note on Hedge Accounting

During the year, the Company adopted hedge accounting principles of AS 30 – Financial Instruments and Derivatives for accounting of certain commodity hedges. Accordingly, Rs. 104.90 crore (gain) has been carried over to cash flow hedge reserve as of 31st March, 2013 pertaining to highly probable forecast of sales proceeds. If hedge accounting principles of AS 30 had not been adopted for the year ended 31st March, 2013, sales would have been higher by Rs. 18.48 crore, consumption of raw materials would have been lower by Rs. 5.69 crore, profit after tax would have been higher by Rs. 24.17 crore and receivables would have been lower by Rs. 80.73 crore.

The Hon’ble Supreme Court of India had  vide its order dated 17th January, 2012 set aside the order of the Hon’ble High Court of Gujarat dated 22nd April,     2008     which     had     earlier     confirmed     the Company’s eligibility to the Sales tax incentive Scheme (‘the scheme’) and accordingly the Company had reversed the net defeased income (net) of Rs. 778.25 crore recognised during 1st April, 2011 to 31st December, 2011 as exceptional items during     the     financial     year     2011-12.     Rs.     83.39     crore represents interest payable by the company on sales tax liability arising out of the Supreme Court order dated 13th September, 2012.

From Auditor’s Report
(a)        Note     7(ii)(c)     to     the     financial     statements     detailing the recognition and measurement of the borrowings by a Common Loan Agreement which were hitherto covered by the Master Restructuring Agreement as per the accounting policy consistently followed by the Company;     and     Note     34     to     the     financial     statements detailing the adoption of hedge accounting
principles in respect of commodity derivative contracts, as set out in Accounting Standards (AS) 30, Financial instruments: Recognition and Measurement,     in     absence     of     specific     guidance    under the Accounting Standards referred to in s/s. (3C) of section 211 of the Act.

(b)  Note 7(ii)(c) to the financial statements describing the fact about accounting of interest on certain categories of debentures on a cash basis as per the Court order.

(c)    Note     19     [footnote     (ii)]    to     the    financial    statement    regarding receivable of Rs. 2, 177.82 crore from Essar House Limited and the management plans of securing the dues as explained therein.