CONTENTS Proxy Form 65

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SCHEDULE 6 - NOTES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2008A. Background and Nature of OperationsThe Company was incorporated on June 17, 2005 as Essar Steel(Jharkhand) Limited. On July 26, 2006 the Company’s name has beenchanged to Essar Steel Jharkhand Limited. The Company is in processof setting a steel plant in the Chaibasa district of Jharkhand.B. Significant Accounting Policiesa. Basis of preparationThe financial statements have been prepared to comply inall material respects with the notified Accounting Standardsby the Companies Accounting Standard Rules, 2006 andthe relevant provisions of the Companies Act, 1956. Thefinancial statements have been prepared under the historicalcost convention on an accrual basis except in case of assetsfor which provision for impairment is made and revaluation iscarried out. The accounting policies have been consistentlyapplied by the Company and are consistent with those usedin the previous year.b. Use of EstimatesThe preparation of financial statements in conformitywith generally accepted accounting principles requiresmanagement to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosureof contingent liabilities at the date of the financial statementsand the results of operations during the reporting period end.Although these estimates are based upon management’sbest knowledge of current events and actions, actual resultscould differ from these estimates.c. Expenditure during Construction PeriodAll Cost including finance cost till commencement ofcommercial production is capitalized. Indirect expenditureincurred during construction period is capitalized as partof the indirect construction cost to the extent to which theexpenditure is indirectly related to construction or is incidentalthereto. Other indirect expenditure incurred during theconstruction period which are not related to the constructionactivity nor is incidental thereto is charged to the Profit andLoss Account. Income earned from deposits earmarkedagainst financing facilities during construction period isdeducted from the total of the indirect expenditure.All indirect expenses relating to project incurred uptocommencement of commercial production are classified asPre operative Expenditure and disclosed under Schedule2 – Pre-operative expenditure (net of income earned duringproject development stage).d. Operating LeaseLeases where the lessor effectively retains substantially allthe risks and benefits of ownership of the leased term, areclassified as operating leases. Operating lease payments arerecognized on a straight-line basis over the lease term.e. Earning Per ShareBasic earning per share is calculated by dividing the net profitor loss for the period attributable to equity shareholders bythe weighted average numbers of equity shares outstandingduring the period.For the purpose of calculating diluted earnings per share,the net profit or loss for the period attributable to equityshareholders and the weighted average number of sharesoutstanding during the period are adjusted for the effectsof all dilutive potential equity shares.f. Income taxesTax expense comprises of fringe benefit tax. Fringe benefittax is measured at the amount expected to be paid to the taxauthorities in accordance with the Indian Income Tax Act.Deferred tax is measured based on the tax rates and thetax laws enacted or substantively enacted at the balancesheet date. Deferred tax assets are recognised only to theextent that there is reasonable certainty that sufficient futuretaxable income will be available against which such deferredtax assets can be realized. In situations where the Companyhas unabsorbed depreciation or carry forward tax losses,all deferred tax assets are recognised only if there is virtualcertainty supported by convincing evidence that they canbe realized against future taxable profits.g. ProvisionsA provision is recognized when an enterprise has a presentobligation as a result of past event; it is probable that anoutflow 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 aredetermined based on best estimate required to settle theobligation at the balance sheet date. These are reviewed ateach balance sheet date and adjusted to reflect the currentbest estimates.h. Segment ReportingThe Company’s activities during the year revolve aroundsetting up of the project (Refer Note C below). Consideringthe nature of Company’s business and operations, there areno reportable segments (business and/or geographical) inaccordance with the requirements of Accounting Standard17 – ‘Segment Reporting’, issued by the Institute ofChartered Accountants of India (ICAI).Other NotesC. The Company is in the process of setting up steel plant (project)in the state of Jharkhand. The project is at start up stage ofconstruction and the Company has not commenced revenueoperations. The expenditure incurred directly or indirectly isclassified as Expenditure during Construction Period pendingcapitalization and will be apportioned to the Assets on thecompletion of project.Necessary details as per part II of Schedule VI to the CompaniesAct, 1956 have been disclosed in Schedule 2.Expenditure not directly or indirectly related to the constructionof the project has been charged off to Profit & Loss Account.D. Related Parties:a) Related Party where the control existsa. Holding Company:• Essar Steel Limited (ESTL)• Essar Steel Holdings Ltd. Mauritius the UltimateHolding Companyb. Ultimate Holding Company:• Essar Global Ltd. - Holding Company of Essar SteelHoldings Ltd. (EGL)b) Fellow Subsidiaries:• Essar Steel (Hazira) Limited (ESHL)• Essar Constructions (India) Limited (ECIL)• ETHL Global Capital Limited (EGCL)• Essar Steel Orissa Limited (ESOL)• Essar Steel Chhattisgarh Limited (ESCL)• Essar Steel Trading FZE, Dubai (ESTF)• Hazira Plate Limited (HPLT)• Essar Shipping & Logistics Limited (ESLL)• Essar SEZ Hazira Limited (Essar SEZ)• Essar Telecom Infrastructure Private Limited (ETIPL)• Hazira Pipe Mill Limited (HPML)c) Key Management Personnel:• Mr. J. Mehra, Directord) Individuals Owning, directly or indirectly, an interest in votingpower that gives them control or significant influence –• Mr. Shashi Ruia• Mr. Ravi Ruia• Mr. Prashant Ruia• Mr. Anshuman Ruia• Mr. Rewant Ruia43
Essar Steel Jharkhand Limited<strong>Form</strong>erly known as Essar Steel (Jharkhand) Limitede) Enterprises commonly controlled or influenced by major shareholders/directors/ key managerial personnel of the company (to the extentof transactions entered)• Essar Power (Jharkhand) Limited (EPJL)• Essar Investments Limited (EIL)• Essar Oil Limited (EOL)During the year following transactions were carried out with the related party in the ordinary course of business:Nature of TransactionsNameofPartyHoldingCompanyFellowSubsidiaries(In Rs.)Enterprises commonly controlled orinfluenced by major shareholders/directors/ key managerialpersonnel of the companyRecovery of Rent on property sublet and share in common expenses EOL - - 352,138EOL - - (105,000)EPJL - - 346,844EPJL - - (-)Professional Services ECIL - - -ECIL - (1,683,600) -Expenses incurred by Company on their behalf (recoverable) ESCL - 10,778 -ESCL - - -Short Term Advances received ESCL - - -ESCL - (1,000,000) -Advance towards supply of materials ESTL 4,200,000 - -ESTL (1,950,000) - -Share Application Money received EIL - - -EIL - - (3,400,000)Expenses incurred or advances made on behalf of the Company. ESTL - - -ESTL (5,117,601) - -EIL - - -EIL - - (3,183)Figures in brackets represents previous period(In Rs.)Closing Balance of the Party As at 31st March, 2008 As at 31st March, 2007EIL (1,89,951) (1,89,951)ESTL (1,12,67,601) (70,67,601)EOL 50,851 13,685ESCL 10,778 -Figures in brackets represent amount payable.E. The Company has initiated the process of identification of suppliersregistered under the Micro, Small and Medium EnterprisesDevelopment Act, 2006, by obtaining confirmation from all thesuppliers. Based on current information/confirmations availablewith the company, there are no suppliers who are registered underthe relevant act as at March 31, 2008.F. Lease Rentals:Operating leaseOffice premises are obtained on operating lease. Lease rent ispayable as per the lease term. The company has entered into twolease agreements during the current year:a) Office premises at Ranchi with a lease term of 60 monthsrenewable for a further period of 60 months at the optionof the company. The lease rent has an escalation of 15%in the fourth year and an additional 5% in the fifth year.The company can sublease the property only to its sisterconcerns. The Office has been sub-let to Essar Oil Limitedand Essar Power (Jharkhand) Limited on an operating leasebasis. This sub-lease is agreed as per the terms of agreemententered with lessor. During the year the company has paidlease rent of Rs.13,20,000 and recovered Rs. 6,60,000 inequal proportion from Essar Oil Limited and Essar Power(Jharkhand) Limited. This lease rent expense is capitalizedas expenditure incurred during the construction period.b) Office-cum-Guest House at Chaibasa for a period of 36months with no escalation in the rent during the term oflease. This property can neither be sublet nor improvedupon by the company. During the year the company haspaid lease rent of Rs.42,000 to the lessor.G. Earnings Per shareParticularsNet Loss as per Profit & Loss Account for thepurpose of calculating basic & diluted earningsper shareYear Ended Year Ended31st March, 2008 31st March, 2007Rs. 125,826 119,233Number of equity shares outstanding at the Nos. 50,000 50,000beginning of the year / periodNumber of equity shares issued during the Nos. - -year / periodNumber of Equity shares at the end of the Nos. 50,000 50,000year / periodWeighted Average Number of shares outstanding at the Nos. 50,000 50,000end of the year / periodEarnings Per Share of Rs. 10 each - Basic Rs. (2.52) (2.38)& DilutedH. Legal and Professional Fees:Legal and Professional fees comprises of Auditors Remuneration whichconsist of the Statutory Audit fees(In Rs.)Particulars Year Ended 31st March, 2008 Year Ended 31st March, 2008Statutory Audit Fees * 100,000 100,000Out of Pocket Expenses 6,862 -Total 106,862 100,000* exclusive of service tax.I. Previous year’s figures have been regrouped whereever necessaryto conform to this year’s clas sification.As per our report of even dateS.R. Batliboi & Co.For and on behalf of Board of DirectorsChartered AccountantsEssar Steel Jharkhand Limitedper Hemal Shah V. G. Raghavan N. B. VyasPartner Director DirectorMembership No. 42<strong>65</strong>0Place:MumbaiPlace:MumbaiDate: August 27, 2008 Date: August 27, 200844
Page 2 and 3: BOARD OF DIRECTORSShashi RuiaRavi R
Page 4 and 5: Sales and Marketing Sales of flat r
Page 6 and 7: Annexure - ‘A’ to Directors’
Page 8 and 9: FORM BRESEARCH AND DEVELOPMENT (R &
Page 10 and 11: Auditors’ Report to the Members o
Page 12 and 13: Name of the statute Nature of dues
Page 14 and 15: Profit and Loss Account for the yea
Page 16 and 17: Schedules forming part of Balance S
Page 19 and 20: Essar Steel LimitedSchedules formin
Page 21 and 22: Essar Steel LimitedSchedules formin
Page 23 and 24: Essar Steel LimitedSchedule forming
Page 25 and 26: Essar Steel LimitedShort term compe
Page 27 and 28: Essar Steel Limited4 Essar Steel (H
Page 29 and 30: Essar Steel LimitedRs. CroresThe As
Page 31 and 32: Essar Steel Limited9. Earnings per
Page 33 and 34: Essar Steel Limited15. Consumption
Page 35 and 36: Essar Steel LimitedAs at31st March
Page 37 and 38: Essar Steel Limited(ii)Provision fo
Page 39 and 40: Essar Steel LimitedCash Flow Statem
Page 41 and 42: Essar Steel Jharkhand LimitedFormer
Page 43: Essar Steel Jharkhand LimitedFormer
Page 47 and 48: Essar Steel Jharkhand LimitedFormer
Page 49 and 50: Essar Steel Orissa LimitedToThe Mem
Page 51 and 52: Balance Sheet as at 31st March, 200
Page 53 and 54: As at31st March, 2008As at31st Marc
Page 55 and 56: are consistent with the currency an
Page 57 and 58: ParticularsYear Ended31st March, 20
Page 59 and 60: Cash Flow Statement for the period
Page 61 and 62: Income Statement for the year ended
Page 63 and 64: NOTES TO THE FINANCIAL STATEMENTSAt
Page 65 and 66: equirements. The facility is repaya
Page 67: ESSAR STEEL LIMITEDRegd. Office: Po

CONTENTS Proxy Form 65

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