From Published Accounts

Section B:

Jindal Stainless Steel Ltd.

(31-3-2016)

–   Composite scheme of Arrangement: Revision of
Financial Statements pursuant to section III and IV of the scheme becoming
effective (section I and II given effect earlier in same FY)

From Notes to Financial
Statements

27. Composite Scheme of Arrangement

1.  A   Composite 
Scheme  of Arrangement
(hereinafter referred to as “Scheme”) amongst Jindal Stainless Limited (the
Company/Transferor Company) and its three wholly owned subsidiaries namely
Jindal Stainless (Hisar) Limited (JSHL), Jindal United Steel Limited (JUSL) and
Jindal Coke Limited (JCL) under the provision of section 391-394 read with
section 100-103 of the Companies Act, 1956 and other relevant provision of
Companies Act, 1956 and/or Companies Act, 2013 has been sanctioned by the
Hon’ble High Court of Punjab & Haryana, Chandigarh vide its Order
dated 21^st September, 2015, as amended vide order dated 12^th
October, 2015.

     Section
I and Section II of the Scheme became effective on 1^st November,
2015, operative from the appointed date i.e. close of business hours before
midnight of 31^st March, 2014.

     Section
III of the scheme comprising Transfer of the Business undertaking 2 (as defined
in the scheme) of the Company comprising, inter-alia, of the Hot Strip
Plant of the Company located at Odisha and vesting of the same in Jindal United
Steel Limited (JUSL) on Going Concern basis by way of Slump Sale w.e.f.
appointed date i.e. close of business hours before midnight of 31^st March,
2015 and section IV of the Scheme comprising Transfer of the Business Undertaking
3 (as defined in the Scheme) of the Company comprising, inter-alia, of
the Coke Oven Plant of the Company Located at Odisha and vesting of the same
with Jindal Coke Limited (JCL) on Going Concern basis by way of Slump Sale
w.e.f. appointed date i.e close of business hours before midnight of 31^st
March, 2015. Section III and section IV of the Scheme has become effective on
24^th September, 2016 [i.e. on receipt of approvals from the Orissa
Industrial Infrastructure Development Corporation (OIIDCO) for the
transfer/grant of the right to use in the land on which Hot Strip (HSM Plant)
& Coke Oven Plants are located to JUSL & JCL respectively as specified
in the Scheme].

2.  Pursuant
to the section I and section II of the Scheme becoming effective:

a)  Against
amount of Rs. 36,618.67 lakh, the company is required to issue and allot
equity shares to JSHL at a price to be determined in accordance with chapter
VII of SEBI (ICDR) regulations 2009, with the record date jointly to be decided
by the board of directors of the Company and JSHL being considered as relevant
date as specified in the Scheme. The board of the Company and JSHL have, in
their respective meetings held on 6^th November, 2015, fixed 21^st
November, 2015 as the record date. However, since the price worked out for
issue of equity shares by the Company to JSHL, in terms of the provisions of
chapter VII SEBI (ICDR) was not reflective of the actual price of the equity
shares of the Company on EX-JSHL basis, therefore the allotment of equity shares
based on the aforesaid record date has not been pursued. Hence, pending
allotment by the Company of the aforesaid equity shares to JSHL as on 31^st
March, 2016, the same has been shown as “Share Capital Suspense Account”.
Subsequent to the Balance Sheet date, the company has allotted 16,82,84,309
nos. fully paid up equity shares of Rs. 2/- each @ 21.76 per share (including
premium of Rs.19.76 per share) on 3^rd July, 2016.

b)  Out of Rs.
2,60,000.00 lakh payable by JSHL, Rs. 1,18,493.00 lakh
has been received upto 31^st March, 2016 and also balance amount of Rs.1,41,507.00
lakh has been received subsequent to balance sheet date.

c)  In terms
of the Scheme, all the business and activities of Demerged Undertakings and
Business Undertaking 1 carried on by the Company on and after the appointed
date, as stated above, are deemed to have been carried on behalf of JSHL.
Accordingly, necessary effects had been given in the previous year accounts and
in these accounts on the Scheme becoming effective (read with note no.5 below).

3.  Pursuant
to the section III and section IV of the Scheme becoming effective:

a)  Business
undertaking 2 & Business undertaking 3 have been transferred to and vested
in JUSL & JCL respectively with effect from the Appointed Date i.e. close
of business hours before midnight of March 31, 2015 and the same has been given
effect to in these accounts.

b)   (i)   Business Undertaking 2 has been transferred at
a lump sum consideration of Rs. 2,41,267.33 lakh; out of this Rs.
2,15,000.00 lakh shall be paid by JUSL and against the balance amount of Rs.
26,267.33 lakh, the JUSL is to issue & allot to the Company
17,50,00,000 nos. 0.01% non-cumulative compulsorily convertible preference
shares having face value of Rs.10 each and 8,76,73,311 nos. 10%
non-cumulative non-convertible redeemable preference shares having face value
of Rs.10 each as specified in the Scheme, AND

      (ii) Business undertaking 3 has been transferred at
a lump sum consideration of Rs. 49,264.71 lakh; out of this Rs. 37,500.00
lakh shall be paid by JCL and against the balance amount of Rs.
11,764.71 lakh, the JCL is to issue & allot to the Company 2,60,00,000
nos. 0.01% non-cumulative compulsorily convertible preference shares having
face value of Rs. 10 each and 9,16,47,073 nos. 10% non-cumulative non-convertible
redeemable preference shares having face value of Rs. 10 each as
specified in the Scheme. Pending allotment as stated above the same have been
shown as “Investment-pending Allotment”

      c)   On transfer of Business Undertaking 2 &
Business Undertaking 3, the differential between the book values of assets
& liabilities transferred and the lump sum consideration received as stated
above amounting to Rs. 36,259.75 lakh has been credited in the Statement
of Profit & Loss and included under Exceptional Item (Note no.30).

      d)  In terms of the Scheme, all the business and
activities of Business Undertaking 2 & Business Undertaking 3 carried on by
the company on and after the appointed date, as stated above, are deemed to have
been carried for and on behalf of JUSL & JCL respectively. Accordingly,
necessary effects have been given in these accounts on the Scheme becoming
effective.

4.  The
necessary steps and formalities in respect of transfer of the properties,
licenses, approvals and investments in favour of JSHL, JUSL & JCL and
modification of charges etc. are under implementation.

5.  While
according its approval for transfer/right to use of the land in the name of
JUSL & JCL Government of Odisha, Department of Steel & Mines vide
letter dated 16^th August, 2016, had put a condition that sections I
& II of the Scheme will not be carried out in so far as the mining lease of
the Company is concerned; accordingly transfer of the Mining Rights to Demerged
Undertakings (as referred in the Scheme) (Demerged undertaking transferred to
JSHL) is not been given effect, consequently:- (i) all mining activities in
relation to the Mining Rights continue to be carried out by the company (JSL);
and (ii) all assets (excluding fixed assets) and liabilities (including
contingent liabilities) in relation to the Mining Rights continue to be
recorded in the books of JSL; and (iii) all revenue and net profit: post 1^st
November 2015 on sections I & II of the scheme becoming effective are
recorded in the books of the company.

6.  Post
Section III of the Scheme becoming effective, the Company has entered into an
agreement for Trolling of slabs got done from JUSL (Business Undertaking 2)
effective from 1^st April 2015, accordingly impact of the same amounting
to Rs. 35,262.50 lakh has been given under manufacturing expenses in
these accounts.

7.   (A) Pursuant to the Scheme the effects on the
financial statements of operations carried out by the company for on behalf of
JUSL & JCL post the said appointed date have been given in these accounts
from the effective date (for the close of business hours before midnight of 31^st
March, 2015) are as summarised below:

(B) As stated
in note no.1 above, the section III and section IV of the Scheme became
effective on 24^th September 2016, accordingly interest on amount
receivable will be accounted for.

8.  The
financial statement of the Company for the year ended 31^st March,
2016 were earlier approved by the Board of Directors at their meeting held on
28^th May, 2016 on which the Statutory Auditors of the Company had
issued their report dated 28^th May, 2016. These financial statements
have been reopened and revised to give effect to the Scheme as stated in note
no.1 & 3 herein above.

From Auditors’ Report

Report
on the Standalone Financial Statements

We
have audited the accompanying REVISED standalone financial statements of JINDAL
STAINLESS LIMITED (“the Company”), which comprise the REVISED Balance Sheet as
at 31^st March, 2016, the REVISED Statement of Profit and Loss, the
REVISED Cash Flow Statement for the year then ended, and a summary of the
significant accounting policies and other explanatory information in which
impact of the Scheme (as stated in Note No.27) have been incorporated.

From Directors’ Report

Asset
Monetisation and Business Reorganisation Plan (AMP) and Composite Scheme of
Arrangement

The
Company, after having various rounds of discussions with the CDR Lenders, had
finalised a comprehensive plan of Asset Monetisation cum Business
Reorganisation Plan (“AMP”), which entailed monetisation of identified
business undertaking(s) of the Company through demerger/slump sale(s) and
utilisation of the proceeds of the slump sale(s) in reduction of debt of the
Company.

As
a part of the above said AMP, a Composite Scheme of Arrangement among the
Company and its three wholly owned subsidiary companies viz. Jindal Stainless
(Hisar) Limited (“JSHL”), Jindal United Steel Limited (“JUSL”)
and Jindal Coke Limited (“JCL”) and their respective creditors and
shareholders was undertaken which was approved by the Hon’ble High Court of
Punjab and Haryana at Chandigarh, vide its order dated 21^st September,
2015 (as modified on 12^th October, 2015), Certified true copy of the
said Order was filed on 1^st November, 2015, with the office of
Registrar of Companies, NCT of Delhi and Haryana. Consequently, Section I
(pertaining to demerger of Mining Division and Ferro Alloys Division and
vesting the same in JSHL) and section II (pertaining to slump sale of
manufacturing facility at Hisar from the Company to JSHL) of the Scheme became
operative from the Appointed Date 1 i.e. close of business hours before
midnight of 31^st March, 2014. The Scheme envisaged demerger of
Mining Division including the Chromite Mines located at Sukinda and vesting the
same in JSHL, however, the Company did not receive approval from the Ministry
of Mines, Government of Odisha for transfer of the said Mines to JSHL,
therefore, the Board of Directors of the Company in its meeting held on 23^rd
November, 2016, in terms of clause 1.10 of section V of the Scheme, decided not to transfer the Mines of JSHL.

Section
III and IV of the Scheme with respect to JUSL and JCL respectively became
operative from Appointed Date 2 i.e. close of business hours before midnight of
31^st March, 2015, upon receipt of approval from Orissa Industrial
and Infrastructure Development Corporation Limited (OIIDCO), on 24^th
September, 2016, with respect to the transfer/right to use the land on which
Hot Strip Mill and Coke Oven Plant is located, from the Company to JUSL and JCL
respectively.