A project report on ratio analysis 2016

1. 1. Page | 1 A PROJECT REPORT Entitled: A Brief Study on Ratio Analysis in Eastern

Coalfield Limited. Under the guide of (Faculty Guide) Dr. Shakti Prasad Tiwari ( Mob:-
9430434342) (Industry Guide) Md. Tashfeen, Chief Manager (Cost & Budget) Mr. Roshan
Kumar, Assistant Manager (Central Accounts) Submitted by Srabani Dutta Roll No. –
1411004502 Submitted for the partial requirements for the degree of Masters in Business
Administration in Sikkim Manipal University, India.
2. 2. Page | 2 Student Declaration I hereby declare that the Project Report A Brief Study on
Ratio Analysis in Eastern Coalfield Limited is submitted for the partial requirement for the
degree of Masters of Business Administration from Sikkim Manipal University, India. This is
not submitted for the purpose of any degree, diploma or fellowship from other Universities.
Date: ___________ Name: Srabani Dutta Place: ___________ Roll No.: 1411004502
3. 3. Page | 3 Guide Certificate This is to certify that project report entitled: A Brief Study on
Ratio Analysis in Eastern Coalfield Limited submitted in partial fulfilments of the requirement
for the degree of Masters of Business Administration at Sikkim Manipal University. Student
Name: Srabani Dutta Roll No. : 1411004502 has named under my supervision and guidance
and no part of this report has been submitted for the award of any other degree, diploma,
fellowship or other similar title or prizes and that the work has not been published in journal
or magazine. Dr. Shakti Prasad Tiwari ( Mob:-9430434342)
4. 4. Page | 4 Examiner’s Certification: The project report of Srabani Dutta Roll No.-
1411004502 is approved and is acceptable in quality and format. Examiner: Name:
_________________ Qualification: _________________ Designation:
____________________
5. 5. Page | 5 Acknowledgement I am using this opportunity to express my gratitude to
everyone who supported me throughout the course of this MBA project. I am thankful for
their aspiring guidance, invaluably constructive criticism and friendly advice during the
project work. I am sincerely grateful to them for their truthful and illuminating views on a
number of issues related to the project. I express my warm thanks to Mr. Kajal Dey for his
support and guidance at Sikkim Manipal University. I would also like to thank my project
external guide Mr. Md. Tashfeen from Cost & Budget and Mr. Roshan Kumar from Central
Accounts and all the people who provided me with the facilities being required and
conductive conditions for my MBA project. Thank you, Srabani Dutta
6. 6. Page | 6 Table of Contents Executive
Summary ................................................................................................................... 7
Introduction.................................................................................................................................
..... 8 Industry
Profile ...........................................................................................................................11
History .......................................................................................................................................
......13 Title: A Brief Study on Ratio Analysis in Eastern Coalfield Limited ...............16
Company
Profile...........................................................................................................................17
Research
Methodology.............................................................................................................18
Financial
Statement...................................................................................................................19 Data
Analysis and Interpretation.......................................................................................20 Analysis
and Interpretation of Ratio.................................................................................83
Limitations..................................................................................................................................
....93
Findings......................................................................................................................................
......94
 Suggestions................................................................................................................................
....95
Conclusion..................................................................................................................................
.....96
Bibliography................................................................................................................................
...97
7. 7. Page | 7 EXECUTIVE SUMMARY Ratio Analysis is one of the techniques of financial
analysis where ratios are used as a yardstick for evaluating the financial condition and
performance of a firm. Analysis and interpretation of various accounting ratios gives a better
understanding of financial and performance of firm. Trend ratios indicate the direction of
change in the performance – improvement, deterioration or constancy – over the year.
Objective of the study: 1. To help the management in its planning and forecasting activities.
2. To evaluate operational efficiency, liquidity, and solvency of firm. 3. To help the
management in having effective control over the activities of different departments. 4. To
compare the previous five years and present year performance of the company. 5. To give
suggestion and recommendation based on the study.
8. 8.  The operating efficiency and performance of the company. Classification of Ratios Ratios
can be classified into different categories depending upon the basis of classification. I.
TRADITIONAL CLASSIFICATION Traditional classification has been on the basis of financial
statements, on which ratio may be classified as follows. 1. Profit The efficiency with which
the firm is utilizing in generating sales revenue.  The limit or extent to which the firm has
used its borrowed funds.  The ability of the firm to meet its current obligations. Page | 8
INTRODUCTION Ratio Analysis is a technique of analyzing the financial statement of
industrial concerns. Now a day this technique is sophisticated and is commonly used in
business concerns. Ratio Analysis is not an end but it is only means of better understanding
of financial strength and weakness of a firm. Ratio Analysis is one of the most powerful tools
of financial analysis which helps in analyzing and interpreting the health of the firm. Ratio’s
are proved as the basic instrument in the control process and act as back bone in schemes
of the business forecast. With the help of ratio we can determine & loss account ratios. E.g.
Gross Profit Ratio, Net Profit Ratio, Operating Ratio etc. 2. Balance sheet ratio. E.g. Current
Ratio, Debt Equity Ratio, Working Capital Ratio etc. 3. Composite/Mixed Ratio.
9. 9. Page | 9 E.g. Stock Turnover Ratio, Debtors Turnover Ratio, Fixed Assets Turnover
Ratios etc. II. FUNCTIONAL CLASIFICATION OF RATIOS Functional ratios 1. Liquidity
ratios a) Current Ratio b) Quick Ratio 2. Leverage ratios a) Debt-equity Ratio b) Current
Asset to Proprietor’s fund Ratio III. PROBABILITY RATIOS a) Gross Profit Ratio b)
Operating Profit Ratio c) Return On Investment IV. ACTIVITY RATIO 1. Inventory Turnover
Ratio 2. Asset Turnover Ratio: a. Fixed Asset Turnover Ratio b. Current Asset Turnover
Ratio 3. Working Capital Turnover Ratio
10. 10. Page | 10 Company Profile
11. 11.  The formal transfer Deeds/Agreement for Assets Pending completion of legal
formalities for transfer of assets and liabilities to the Company certain Assets including
Mining Rights etc. continue to be in the name of CIL.  Eastern Coalfields Limited (The
Company) was incorporated as a Private Limited Company on 1st November,1975 as a
100% Subsidiary of Coal India Limited (CIL) upon taking over of Assets and Liabilities vested
with the Eastern Division of Coal Mines Authority Limited ( former name of Coal India
Limited). The Company is primarily engaged in business of production and sale of coal.
Page | 11 INDUSTRY PROFILE EASTERN COALFIELDS LIMITED (A subsidiary of Coal
India Limited) Eastern Coalfield Limited (ECL) is a coal producer based in India. The
company came into existence in 1975 after nationalization of coal mines in India. It is one of
the eight fully owned subsidiaries of Coal India Limited. The company has its headquarters
at Sanctoria, Asansol in West Bengal. It at present owns 105 numbers of operating mines
out of which 81 are underground mines, 24 are opencast mines. Background & Liabilities
 transferred and taken over by the Company in respect of coal Mines Labour Welfare
Organisation, Kalla & Central hospital along with 4 other Hospitals/Dispensaries, Mines
Rescue Station, Barakar Engineering & Building includes RoadsFoundry Works are yet to
be finalised and executed in favour of the Company. Fixed Assets and Capital-Work-in-
Progress & Physical verification in respect of all fixed assets and in respect of
PlantCulverts situated in the residential/office/mining areas. & Machinery each worth Rs.
1.00 lakh or more have been carried out as per programme. Resultant differences on
completion of formalities have been adjusted.
12. 12.  The enquiry proceedings by CBI, Dhanbad for shortage of coal at Rajmahal OCP of Rs.
19.54 lakhs tonne valued at Rs. 63.58 crore in 2007-08 has been completed in 2010-2011.
The report on the same has been forwarded to C The Net value of Assets taken over on
nationalization of coal mines amounting to Rs. 8.17 crores, details of which are not available,
under Coal Mines Nationalization Act, 1973 have been taken into account and shown under
the group of tangible assets and against which full provision has been made. Inventory
Page | 12 Coal of 471408 M.T. (471408 M.T.) mixed with matti etc. is non- vendible and
has been taken at NIL value. SUNDRY DEBTORS Provision for Sundry Debtors is made on
case to case basis. Normally no provision of Sundry Debtors is made on unsettled amount of
Debtors in the initial year. In the 2nd year provision is made up to 50% amount of unsettled
amount of debtors, and the rest is provided in the 3rd year if it remains unsettled.hairman,
CIL for information and to advice the Vigilance department for taking action against the
charged officers as per CBI order. The outcome of the order is still to be received.
13. 13. Page | 13 HISTORY History and Formation Of Coal India Limited With dawn of the Indian
independence a greater need for coal production was felt in the First Five Year Plan. In 1951
the Working Party for the coal Industry was set up which included representatives of coal
industry, labour unions and government which suggested the amalgamation of small and
fragmented producing units. Thus the idea for a nationalized unified coal sector was born.
Integrated overall planning in coal mining is a post-independence phenomenon. National
Coal Development Corporation was formed with 11 collieries with the task of exploring new
coalfields and expediting development of new coal mines. With the Government's national
energy policy the near total national control of coal mines in India took place in two stages in
1970s. The Coking Coal Mines (Emergency Provisions) Act 1971 was promulgated by
Government on 16 October 1971 under which except the captive mines of IISCO, TISCO,
and DVC, the Government of India took over the management of all 226 coking coal mines
and nationalised them on 1 May, 1972. Bharat Coking Coal Limited was thus born. Further
by promulgation of Coal Mines (Taking over of Management) Ordinance 1973 on 31 January
1973 the Central Government took over the management of all 711 non-coking coal mines.
In the next phase of nationalization these mines were nationalized with effect from 1 May
1973 and a public sector company named Coal Mines Authority Limited (CMAL) was formed
to manage these non coking mines. Corporate Structure and Subsidiary Companies Coal
India is a holding company with seven wholly owned coal producing subsidiary companies
and one mine planning & consultancy company. The producing companies are: 1. Eastern
Coalfields Limited (ECL), Sanctoria, West Bengal 2. Bharat Coking Coal Limited (BCCL),
Dhanbad, Jharkhand 3. Central Coalfields Limited (CCL), Ranchi, Jharkhand 4. South
Eastern Coalfields Limited (SECL), Bilaspur, Chattisgarh 5. Western Coalfields Limited
(WCL), Nagpur, Maharashtra 6. Northern Coalfields Limited (NCL), Singrauli, Madhya
Pradesh 7. Mahanadi Coalfields Limtied (MCL), Sambalpur, Orissa
14. 14. Page | 14 The consultancy company is Central Mine Planning and Design Institute
Limited (CMPDIL), Ranchi, Jharkhand. Origin of Eastern Coalfields Limited (ECL) Eastern
Coalfields Limited (ECL) owes its origin to “Raniganj Coalfields” which is the birth place of
coal mining in the Country. In 1774, first mining operation in the Country was started in
Raniganj Coalfields by Sumner & Heatly, a British mining firm at the instance of Warren
Hestings to procure coal mainly for the manufacture of arms and ammunition. In 1820, first
 Coal Company, M/s. Alexander & Company was established in India. In 1835, first Indian
enterprise, M/s. Carr & Tagore Company was formed when Raniganj coalfields passed into
the hands of Prince Dwarakanath Tagore, the grandfather of Nobel Laureate Poet
Rabindranath Tagore. In 1843, the first joint stock Coal Company, M/s. Bengal Coal
Company, was formed after amalgamating M/s. Carr & Tagore Company and another coal
company, M/S Gilmore Homfray & Co. then in existence. Since then, underground coal
mining operation had been continuing in Raniganj Coalfields by numerous small owners.
Raniganj Coalfields remained the principal producer of coal in India in the 19th Century and
for a considerable period of the 20th Century. Eastern Division of earlier Coal Mines
Authority Limited (CMAL) was converted into Eastern Coalfields Limited (ECL) and was
incorporated on November 1, 1975 as a wholly owned subsidiary of CIL under Companies
Act, 1956. ECL took over 414 mines, 314 in West Bengal, including all the private sector coal
mines of Raniganj Coalfields and 100 in Jharkhand (then Bihar), which were then under
Eastern Division of CMAL, and regrouped into 123 mines i.e. 84 Profile of Eastern Coalfields
Limited 64 in W.B. and 39 in Jharkhand. At the time of nationalization, only around 214 out of
the 414 mines taken over were working. Most of the mines, with small base hold, had shafts
fitted with old stream winders having limited capacity and there was hardly any mechanized
open cast mines in ECL. Nationalisation and After In 1973, all Non-coking Coal Mines were
nationalized and brought under Eastern Division of Coal Mines Authority Limited. In 1975
Eastern Coalfields Limited, a Subsidiary of Coal India Limited (C.I.L) was formed and
inherited all the private sector coal mines of Raniganj Coalfields. Geographic Location &
Area
15. 15. Page | 15 ECL mining leasehold area is 753.75 Sq.Kms and surface right area is 237.18
Sq.Kms. It is situated in two States-West Bengal and Jharkhand. Raniganj Coalfield is
spreading over Burdwan, Birbhum, Bankura and Purulia Districts in West Bengal. Saherjuri
Coalfield in Deoghar District of Jharkhand which is being worked as SP Mines Area under
ECL. Hura Coalfields in Godda District of Jharkhand is also under ECL, where ECL’s largest
opencast mine Rajmahal is situated. Heart of Raniganj Coalfields is located on the north of
Ajoy while Mejia and Parbelia are on south of Damodar River. In Dhanbad District, Mugma
field lies on the west of Barakar River. Formation of coal seems has occurred mainly in two
sequence at ECL- Raniganj measures & Barakar measures. Raniganj measures covers the
entire coalfield of Raniganj-Pandaveswar, Kajora, Jhanjra, Bankola, Kenda, Sonepur,
Kunustoria, Satgram, Sripur, Sodepur & Partly at Salanpur Areas. Barakar measures covers
two areas Salanpur & Mugma Areas, SP_Mines & Rajmahal Areas are mainly related to
Barakar measure & Talchair series. Area of Operations Total command area of ECL is 1620
Sq.km. covering different coalfields as shown in Table 1 Table 1: Command Area of ECL for
Operations Raniganj & Mugma Coalfields 1530 Sq. Km Located in Burdwan, Birbhum,
Bankura, Purulia districts of West Bengal and Dhanbad district of Jharkhand Saherjuri &
Rajmahal Fields 90 Sq. Km Located in Deoghar and Godda districts of Jharkhand Source:
Annual Report & Accounts of ECL 2009-10
16. 16. Page | 16 TITLE: A Brief Study on Ratio Analysis in Eastern Coalfield Limited
Methodology The study is conducted at Eastern Coalfield Limited, CMD's Office, Sanctoria.
Sources of Data Collection The data is collected in two types 1. Primary Data 2. Secondary
Data 1. Primary Data: It will be collected with the help of interaction with the employee of
ECL, and the internal guide. 2. Secondary Data: Source like company annual report 2014-
15.
17. 17. Page | 17 Company Profile Name of the company: Eastern Coalfields Limited Address :
Sanctoria, P.O. - Disergarh Dist.- Burdwan ( W.B.) Registered Office : CMD's Office,
Sanctoria, Post - Disergarh, District- Burdwan, Pin – 713333 Mission Statement : To produce
and market the planned quantity of coal and coal products efficiently and economically in an
eco- friendly manner with due regard to safety, conservation and quality. Vision Statement :
To emerge as a global player in the primary energy sector committed to provide energy
security to the country by attaining environmentally & socially sustainable growth through
 best practices from mine to market. Bankers During 2014-15: State Bank of India, Axis Bank,
Bank of Baroda, United Commercial Bank, Union Bank of India, United Bank of India,
Oriental Bank of Commerce, Canara Bank, Bank of India, Punjab National Bank. Primary
Line of Company: Coal Production
18. 18. Page | 18 RESEARCH METHODOLOGY Research Research is nothing but systematic
investigation and study of sources & Financial Statements of the Company. Accounting
Ratios.  Selection of data: From the Financial Statements of the firm for last two years; i.e.
from Financial Statements for the year 2013-14 Financial Statements for the year 2014-15
Period: The Study covers a period of two years data from 2013-14, 2014- 15 mean an
Accounting year of the company consisting of 365 working days. Measurement Technique /
Statistical Tools  The methodology includes the personal interaction with the finance
manager. materials. it establish facts and it reach conclusions. Methodology Methodology
is nothing but a body of methods used in a particular activity.
19. 19. Page | 19 FINANCIAL STATEMENT A financial statement is a organized collection of
data according to logical and consistent accounting procedures. Its purpose is to convey
understanding of some financial aspects of business firm. It may show a position at a
moment in time as in the case of balance sheet or may reveal a series of activities over a
given period of time as in case of income statement. Financial statement are prepared for the
management to deal with, a. Status of investments. b. Results achieved during a given
period under review a financial statement generally refers to the following; 1. Income
Statement - The income statement also termed as (profit or loss account) is generally
considered to be the most useful of all financial statements. It explains what has happened
to a business as a result of operations between two balance sheet dates. It discloses the
revenue realized from the sale of goods and the costs incurred in the process of producing
the scheme. It tells the story of Progress or decline over given period and why and how an
indicated result was achieved. 2. Balance sheet - It is statement of financial position of a
business at particular moment of time and the claims of the owners and outside against
those assets at that time. 3. Statement of Retained Earnings - The term retained earnings
means the accumulated excess of earnings over losses and dividends. The balance shown
income statement is transferred to the balance through this statement. After making
necessary appropriations. It is thus a connecting link between the balance sheet and income
statement. This statement is also termed as project and loss appropriation account in case of
companies.
20. 20. Page | 20 DATA ANALYSIS AND INTERPRETAION EASTERN COALFIELDS LIMITED
BALANCE SHEET (CONSOLIDATED) As at 31st March, 2015 (Rs. In Crores) Notes AS AT
31.03.2015 AS AT 31.03.2014 I 1) 2) 3) 4) EQUITY AND LIABILITIES Shareholder’s Fund a.
Share Capital b. Reserves & Surplus Non-Current Liabilities a. Long Term Borrowing b.
Deffered Tax Liabilities c. Other Long Term Liabilities d. Long Term Provisions Minority
Interest Current Liabilities a. Short Term Borrowing b. Trade Payables c. Other Current
Liabilities d. Short Term Provisions 1 2 3 4 5 6 7 8 9 4,269.42 (2716.00) 164.33 -- 18.92
3,135.23 129.01 72.56 3,334.07 1,051.41 1,553.42 3,318.48 _ 4,587.05 2,218.45 (3804.82)
681.29 -- 17.99 4,042.55 1,714.51 63.86 2,854.20 858.76 (1,586.37) 4,741.83 _ 5,491.33
Total 9,458.95 8,646.79 II ASSETS
21. 21. Page | 21 1) 2) Non-Current Assets a. Fixed Assets i. Tangible Assets- Gross Block
Less: Depreciation, Impairment & Provisions Net Carrying Value ii. Intangible Assets- Gross
Block Less: Depreciation, Impairment & Provisions Net Carrying Value iii. Capital Work – in-
Progress iv. Intangible Assets Under Development b. Non-Current Investment c. Deferred
Tax Asset (Net) d. Long Term Loans & Advances e. Other Non- Current Assets Current
Assets a. Current Investments b. Inventories c. Trade Receivables d. Cash & Bank Balance
e. Short Term Loans & Advances f. Other Current Assets 10A 10A 10B 10C 11 12 13 14 15
16 17 18 19 5,276.83 3,843.25 1,341.88 1,210.06 0.03 551.02 1,426.88 4,563.88 377.81
345.7 1,433.58 131.82 265.86 80.19 0.08 91.95 172.71 17.41 7,265.35 4,863.43 3,607.44
 1,295.49 1,167.69 0.03 450.52 1,720.01 3,852.00 205.25 270.65 1,255.99 127.80 106.87
30.36 0.13 510.99 99.86 16.33 6,498.46 Total 9,458.95 8,646.79 Significant Accounting
Policies 33 Additional Notes on Accounts 34
22. 22. Page | 22 The Notes referred to above form an integral part of Balance Sheet. EASTERN
COALFIELDS LIMITED STATEMENT OF PROFIT & LOSS For the Year Ended 31st March,
2015 (Rs. In Crore) Notes For the Year ended 31.03.15 For the Year ended 31.03.14
INCOME A. Sale of Coal, coke etc Less:- Excise Duty Other Levies Net Sales B. Other
Operating Revenue (Net) i) Revenue from Operations (A+B) ii) Other Income 20 21
13,413.84 (655.62) (2,739.68) 10,018.54 221.99 10,240.53 672.26 11,945.92 (595.80)
(2,462.33) 8,887.79 221.66 9,109.45 491.25 Total Revenue (I+II) 10,912.79 9,600.70
Expenses Cost of Material Consumed Change in Inventories of Finished Goods Work in
Progress and Stock in Trade Employee Benefit Expenses Power & Fuel Corporate Social
Responsibility Expenses Repairs Contractual Expenses Finance Costs
Depreciation/Amortization/Impairmen t Provisions Write Off 22 23 24 -- 25 26 27 28 -- 29 30
797.82 (84.84) 5,850.50 475.78 24.85 101.22 1,025.03 -- 244.79 99.58 73.42 735.36 5.64
5,512.57 463.77 -- 76.47 820.53 -- 213.50 (131.57) 127.70
23. 23. Page | 23 Overburden Removal Adjustment Other Expenditure -- 31 174.42 349.99
210.00 264.09 Total Expenses 9,132.56 8,298.06 Profit/(Loss) before Prior Period,
exceptional and extraordinary items and tax Prior Period Adjustment { charges/ (Incomes) }
Exceptional Items Profit/(Loss) before extraordinary items and tax Extraordinary Items
{ charges/ (Incomes) } Profit/(Loss) before Tax Less: Tax Expense - Current Year - Add:
MAT Credit Entitlement - Deffered Tax - Earlier Years Profit/(Loss) for the period Earning per
equity share (in Rs.) (Face Value of Rs. 1000/- per share) 1. Basic 2. Diluted Significant
Accounting Policies Additional Notes on Accounts 32 -- -- -- -- -- -- -- -- -- -- -- 33 34 1,780.23
(2.18) -- 1,782.41 -- 1,782.41 398.59 (174.62) 419.04 -- 1,139.40 513.60 -- 1,302.64 3.36 --
1,299.28 -- 1,299.28 73.84 -- 353.21 -- 872.23 393.17 -- The Notes referred to above form an
integral part of Profit & Loss Account.
24. 24. Page | 24 EASTERN COALFIELDS LIMITED CASH FLOW STATEMENT FOR THE
YEAR ENDED 31ST MARCH, 2015 (Rs. In Crores) 31.03.2015 31.03.2014 A. Cash Flow
from Operating Activities Net Profit Before Taxation (Add / Less) Non Operating Expenses /
(Non Operating Incomes): Liability Written Back Depreciation / Impairment Interest Income
OBR Adjustment Profit on Sale of Asset Provision for Loss of Asset / Surveyed Off Asset
Debit / (Credit) for Foreign Exchange Fluctuation Operating Profit before working capital
changes Decrease / (Increase) in Sundry Debtors Decrease / (Increase) in Loans &
Advances Decrease / (Increase) in Current assets Decrease /(Increase) in Inventories
Increase/(Decrease) in Liabilities & Provisions (excl. LIAB W/Back) (12.43) 244.79 (421.99)
174.42 (1.10) 1.56 9.61 293.13 (70.79) (76.16) (100.50) (625.68) 1,782.41 (5.14) 1,777.27
(580.00) (124.45) 213.50 (189.86) 210.00 (1.63) 4.01 13.46 1,862.12 (16.27) (88.51) (8.19)
(1,054.59) 1,299.28 125.06 1,424.31 694.56
25. 25. Page | 25 Cash Generation from Operation Advance Income Tax Paid 215.42 1,197.27
215.42 -- 2,118.87 -- Net Cash Flow from Operating Activities (A) : 981.85 2,118.87 B. Cash
Flow from Operating Activities Purchases of Assets including Capital WIP Adjustment in
Value of Fixed Assets Redemption of Power Bond Decrease/ (Increase) in Deposits (More
than 3 Mths.) Interest Income Profit on Sale of Fixed Asset (686.69) (0.67) 0.05 (1,213.12)
421.99 1.10 (1,477.34) (408.87) 6.70 0.02 (1,153.55) 189.86 1.63 (1,364.21) Net cash flow
from investing activities (B) (1,477.34) (1,364.21) C. Cash Flow from Financing Activities
Repayment of Long Term Borrowings (5.75) (5.74) Net Cash Flow from Financing Activities
(C) (5.75) (5.74) Net Increase in Cash / Cash Equivalents (A+B+C) (501.24) 748.92 Cash &
Cash Equivalent (Excl. Deposit more than three mths) Opening Cash & Bank Balance
Closing Cash & Bank Balance 1,188.07 686.83 (501.24) 439.15 1,188.07 748.92
26. 26. Page | 26 NOTE – 1 SHARE CAPITAL (Rs. In Crores) AS AT 31-03-2015 AS AT 31-03-
2014 AUTHORISED : i. 250,00,000 Equity Share of Rs. 1000.00 each. ii. 210,00,000 (P.Y.
 NIL), 6% Non Convertible Cumulative, Redeemable Preference Shares of Rs. 1000/- each
2500.00 2100.00 2500.00 -- 4,600.00 2,500.00 Issued, Subscribed & Paid up : 10390000
Equity Shares of Rs. 1000/- each fully Paid-up in cash 11794500 Equity Shares of Rs. 1000/-
each alloted as fully paid-up consideration received other than cash 20509700 (P.Y. NIL),
6% Non Convertible Cumulative, Reedemable Preference Shares of Rs. 1000/- each alloted
as fully paid up for Consideration received other than cash 1,039.00 1,179.45 2,050.97
1,039.00 1,179.45 -- Total 4,269.42 2218.45 Note 1.1: Shares in the company held by each
shareholder holding more than 5% Shares. Name of Shareholder No. of Shares Held (Face
value of Rs. 1000 each) % of Total Shares Coal India Limited Holding Company (Equity
Share) 22184500 100% Coal India Limited Holding Company (Preference Share) 20509700
100%
27. 27. Page | 27 Note 1.2: (a) There was no change in the Number of Equity Shares during the
year. Note 1.2: (b) All Preference Shares were issued to the Coal India Limited Holding
Company during the year. NOTES TO BALANCE SHEET (CONTD.) CONSOLIDATED
NOTE – 2 RESERVES & SURPLUS (Rs. In Crores) AS AT 31-03-2015 AS AT 31-03-2014
RESERVES : Capital Reserve As per last Balance Sheet Add: Addition during the year Less:
Adjustment During the year -- -- -- -- -- -- -- -- Capital Redemption Reserve As per last
Balance Sheet Add: Addition during the year Less: Adjustment During the year -- -- -- -- -- --
-- -- Reserve for Foreign Exchange Transactions As per last Balance Sheet Add: Addition
during the year Less: Adjustment During the year -- -- -- -- -- -- -- -- CSR Reserve As per last
Balance Sheet Add: Addition during the year Less: Transfer to General Reserve -- -- -- -- -- --
28. 28. Page | 28 -- -- General Reserve As per last Balance Sheet Add : Transfer from
Statement of Profit & Loss Less: Adjustment During the year 832.71 -- -- 832.71 -- -- 832.71
832.71 Surplus in Statement of Profit & Pre-Operational Expenses -- -- -- -- Total :
(2,716.00) (3,804.82) NOTE – 3 LONG TERM BORROWING (Rs. In Crores) AS AT 31-03-
2015 AS AT 31-03-2014 Term Loan Preliminary Expenses Loss As per last Balance
Sheet Retained earnings (as per schedules of Companies Act 2013) Profit after Tax During
the year (4,637.53) (50.58) 1,139.40 (5,509.76) -- 872.23 (3,548.71) (4,637.53)
APPROPRIATION Reserve for Foreign Exchange Transaction Transfer to General Reserve
Transfer to CSR Reserve Interim Dividend Proposed Dividend on Equity Shares Corporate
Dividend Tax -- -- -- -- -- -- -- -- -- -- -- -- (3,548.71) (4,637.53) Miscellaneous Expenditure (to
the extent not written off)
29. 29. Page | 29 IBRD JBIC Export Development Corp., Canada Liebherr France S.A., France
Loan From Coal India Limited -- -- 164.33 -- -- -- 162.32 518.97 Total 164.33 681.29
CLASSIFICATION 1 Secured Unsecured CLASSIFICATION 2 Loan Guaranteed by directors
& others -- 164.33 -- 681.29 Particulars of Loan Amount in Rs. crores Nature of Guarantee
Export Development Corporation, Canada 164.33 GOI Previous Year 162.32 GOI Note 3.1:-
Loss on Exchange Rate Variance of Rs. 7.89 crores (Rs. 13.46 crores) in respect of
unsecured loan from Export Development Corporation, Canada has been adjusted in the
value of the unsecured loan and corresponding effect in Other expenses (Note - 31) of the
Statement of Profit and Loss. Note 3.2: During the year repayment of foreign loan of Rs. 5.75
crores (Rs. 5.74 crores) has been made. Note 3.3: During the year the CIL Loan has been
converted into 6% Non Convertible, Cumulative Redeemable Preference share capital.
NOTES TO BALANCE SHEET (CONTD.) CONSOLIDATED: NOTE – 4 OTHER LONG
TERM LIABILITIES (Rs. In Crores) AS AT 31-03-2015 AS AT 31-03-2014 Shifting &
Rehabilitation Fund Opening Balance Add: Interest from -- -- -- --
30. 30. Page | 30 Investment of the fund Add: Contribution Received Less : Amount utilised -- --
-- -- -- -- Trade Payable Security Deposits Others -- 17.54 1.38 -- 16.79 1.20 Total 18.92
17.99 NOTE – 5 LONG TERM PROVISIONS (Rs. In Crores) AS AT 31-03-2015 AS AT 31-
03-2014 For Employee Benefits - Gratuity - Leave Encashment - Other Employee Benefits
For Foreign Exchange Transactions (Marked to Market) OBR Adjustment Account Mine
Closure For Others (Post Retirement Medical Benefit) 256.56 499.71 304.14 - - 1,785.17
148.06 141.59 1,515.36 451.72 276.91 - - 1,610.75 73.52 114.29 TOTAL 3.135.23 4,042.55
 Note 5.1: The year end liability of Gratuity, Leave encashment, Medical benefit for retired
executives and other employees benefit like Group Personal Accident Insurance Policy,
Leave Travel Concession, compensation to dependents in case of mines accidental death
are valued on actuarial basis. Note 5.2: Provisions of long term gratuity is after adjustment of
gratuity trust fund balance of Rs. 2042.35 Crores (Rs. 662.31 Crores). NOTES TO
BALANCE SHEET (CONTD.) CONSOLIDATED: NOTE – 6 SHORT TERM BORROWING
(Rs. In Crores) AS AT 31-03-2015 AS AT 31-03-2014 Loan From Bank Loans Repayable on
Demand -- --
31. 31. Page | 31 Balance with Coal India Limited & other Subsidiaries of Coal India Limited
Overdraft against Pledge of Term Deposit Other Loans and Advances Deferred Credits
129.01 -- -- -- 1,714.51 -- -- -- Total 129.01 1,714.51 CLASSIFICATION 1 Secured
Unsecured CLASSIFICATION 2 Loan Guaranteed by directors & others -- 129.01 -- 1,714.51
Particulars of Loan Amount in Rs. crores Nature of Guarantee NIL NIL NIL Note 6.1:- During
the year Balance with CIL of Rs. 1532 crores has been converted into 6% Non convertible
Cumulative, Redeemable Preference Share capital. NOTE – 7 TRADE PAYABLES (Rs. In
Crores) AS AT 31-03-2015 AS AT 31-03-2014 Sundry Creditors For Revenue Stores 72.56
63.86 Total 72.56 63.86 NOTES TO BALANCE SHEET (CONTD.) CONSOLIDATED: NOTE
– 8 OTHER CURRENT LIABILITIES (Rs. In Crores) AS AT 31-03-2015 AS AT 31-03-2014
Current Maturities of Long Term Borrowings Term Loan From IBRD Term Loan From JBIC
Term Loan From Export Development Corp., Canada -- -- 5.88 -- -- 5.75
32. 32. Page | 32 Term Loan From Liebherr France S.A., France Loan From Coal India Limited
Surplus Fund from Coal India Limited Current Account with Subsidiaries For Capital
(including Stores) FOR EXPENSES : Salary Wages & Allowances Power & Fuel Others -- --
-- -- 71.59 298.43 55.79 107.38 -- -- -- -- 20.73 330.57 61.01 95.19 461.60 486.77
STATUTORY DUES : Sales Tax/VAT Provident Fund & Pension Fund Central Excise Duty
Royalty & Cess on Coal Stowing Excise Duty Clean Energy Cess Other Statutory Levies
3.00 68.10 0.32 42.11 11.36 98.16 42.20 -- 66.09 23.34 29.74 11.05 24.51 17.52 265.25
172.25 Income Tax Deducted at Source Security Deposit Earnest Money Advance & Deposit
from customers / others Interest Accrued and due on Borrowings Interest Accrued but not
due on Borrowings Cess Equalisation Account* Current Account with IICM Unpaid Dividend
Ex-Owner Account 47.00 90.54 49.37 526.00 -- -- 1,410.51 -- -- -- 38.13 79.63 48.02 388.17
-- -- 1,241.82 -- -- --
33. 33. Page | 33 Advance Deposit other Pre- Nationalisation Others Liabilities -- 406.33 --
372.93 Total 3,334.07 2,854.20 *Note - 8.1:- In the process of making payment of Cess on
the annual value of coal bearing land based on the average production of preceding two
years valuing at a rate prevailing as on 1st April of each year and realisation made from
customers on the value of despatches of Coal considering the sale price prevailing on 31st
March of the financial year, there remains a balance accumulating to Rs. 1410.51 cr. (Rs.
1241.82 cr.) which has been shown under cess equalisation A/C. NOTE – 9 SHORT TERM
PROVISIONS (Rs. In Crores) AS AT 31-03-2015 AS AT 31-03-2014 For Employee Benefits
- Gratuity - Leave Encashment - PPLB - PRP - Other Employee Benefits For Proposed
Dividend For Corporate Dividend Tax Provision for Income Tax Less : Advance Income Tax /
Tax Deducted at Source For Excise Duty on Closing Stock of Coal For Others 74.84 73.60
261.78 330.29 65.57 -- -- 469.52 (252.91) 26.14 2.58 76.09 75.03 217.39 264.46 69.12 -- --
154.06 (18.74) 18.59 2.76 Total 1,051.41 858.76 Note: 9.1: Provision for short term gratuity
is after adjustment of gratuity trust fund balance of Rs. 310.83 Crores (Rs. 355.74 Crores).
NOTE - 10 A FIXED ASSETS (Rs. In Crores) GROSS BLOCK DEPRECIATION
IMPAIRMENT LOSS TOTAL CARRYIN
34. 34. Page | 34 PARTICU LARS G VALUE As on 01. 04. 14 Ad dit ion du rin g th e pe rio d
Adj./Sa les/Tra nsfer during the period As on 31. 03. 15 As on 01. 04. 14 Ad dit ion du rin g
th e pe rio d Adj./Sa les/Tra nsfer during the period As on 31. 03. 15 As on 01. 04. 14 Ad dit
ion du rin g th e pe rio d Adj./Sa les/Tra nsfer during the period As on 31. 03. 15 Total
Depreciat ion/Impa irment Loss As on 31. 03. 15 As on 31. 03. 14 Tangible Assets Land a. F
 r e e h o l d 69. 68 34. 90 (31.85) 72. 73 5.5 9 -- (5.58) 0.0 1 -- -- -- -- 0.01 72. 72 64. 09 b. L
e a s e h o l d 12 4.2 2 99. 33 31.38 25 4.9 3 33. 25 13. 57 5.58 52. 20 -- -- -- -- 52.20 20 2.7
3 91. 17 Building/ Water Supply/R oad & Culverts 49 3.0 2 20. 54 (0.30) 51 3.2 6 23 4.5 9
17. 18 13.01 26 4.7 8 -- -- -- -- 264.78 24 8.4 8 25 8.4 3 Plant & Equipme nts 36 25. 87 26
6.3 4 (39.55) 38 52. 66 28 35. 36 16 4.4 5 (6.36) 29 93. 45 -- -- -- -- 2993.45 85 9.2 1 79 0.5
1 Telecom municati on 31. 71 0.2 8 -- 31. 99 18. 61 1.0 6 -- 19. 67 -- -- -- -- 19.67 12. 32 13.
10 Railway Sidings 26. 75 1.5 0 -- 28. 25 19. 91 0.9 3 0.94 21. 78 -- -- -- -- 21.78 6.4 7 6.8 4
35. 35. Page | 35 Furniture & Fixtures/ Office Tools& Equipme nts/Elect rical Fittings/ Fire Arms
10 7.4 0 8.6 7 -- 11 6.0 7 77. 67 4.4 7 4.57 86. 71 -- -- -- -- 86.71 29. 36 29. 73 Vehicle 13. 96
0.4 4 (0.26) 14. 14 11. 84 0.2 6 (0.25) 11. 85 -- -- -- -- 11.85 2.2 9 2.1 2 Aircraft -- -- -- -- -- --
-- -- Develop ment Assets taken on Nationali sation 9.1 6 -- (0.99) 8.1 7 9.1 6 -- (0.99) 8.1 7
-- -- -- -- 8.17 -- -- Surveyed Off Assets 36 1.6 6 -- 22.97 38 4.6 3 -- -- -- -- 36 1.6 6 1.2 3
21.74 38 4.7 3 384.63 -- -- TOTAL 48 63. 43 43 2.0 0 (18.60) 52 76. 83 32 45. 78 20 1.9 2
10.92 34 58. 62 36 1.6 6 1.2 3 21.74 38 4.7 3 3843.25 14 33. 58 12 55. 99 Tangible Assets
(As on 31.03.20 14) 42 72. 75 31 7.0 8 (88.06) 45 01. 77 31 60. 59 16 1.6 4 (76.45) 32 45.
78 -- -- -- -- 3245.78 12 55. 9 11 24. 94 Intangibl e Assets Compute r Software Develop ment
10 92. 75 45. 75 -- 11 38. 50 73 8.0 6 20. 91 -- 75 8.9 7 23 1.7 8 17. 26 2.62 25 1.6 6
1010.63 12 7.8 7 12 2.9 1 Prospecti ng & Boring 20 2.7 4 0.6 4 -- 20 3.3 8 13 6.7 9 1.1 6
(0.20) 13 7.7 5 61. 06 0.2 6 -- 61. 68 199.43 3.9 5 4.8 9 Total 12 95. 49 46. 39 -- 13 41. 88
87 4.8 5 22. 07 (0.20) 89 6.7 2 29 2.8 4 17. 88 2.62 31 3.3 4 1210.06 13 1.8 2 12 7.8 0
36. 36. Page | 36 Intangibl e Assets (As on 31.03.20 14) 12 62. 80 32. 75 (0.06) 12 95. 49 84 2.2
7 32. 57 0.01 87 4.8 5 27 7.8 6 15. 27 (0.29) 29 2.8 4 1167.69 12 7.8 0 15 7.8 3 GRAND
TOTAL 61 58. 92 47 8.3 9 (18.60) 66 18. 71 41 20. 63 22 3.9 9 10.72 43 55. 34 65 4.5 0 19.
11 24.36 69 7.9 7 5053.31 15 65. 40 13 83. 79 Note-10A.1:- Direct purchase of Tenancy
Land are classified as free hold Land. Land acquired under Coal Bearing Acquisition Act,
1957, L.A. Act 1894, inherited land on nationalisation, direct transfer of Govt. Land and
Forest Land are classified as Land Other. Note-10A.2:- Land includes certain land taken on
possession by the Company for which legal formalities in respect of title deeds etc. are
pending. However, land taken on possession by the Company, for which values are yet to be
ascertained pending completion of legal formalities, have not been included. Note-10A.3:-
Full provision amounting to Rs. 1.23 Crore (Rs. 3.87 crore) on the value of surveyed off
Assets has been made. NOTE - 10 B CAPITAL WORK-IN-PROGRESS (Rs. In Crores)
PARTI CULA RS COST PROVISION IMPAIRMENT LOSS TOTAL CARRYIN G VALUE As
on 01. 04. 14 Ad diti on du rin g the per iod Adj./Sa les/Tra nsfer during the period As on 31.
03. 15 As on 01. 04. 14 Ad diti on du rin g the per iod Adj./Sa les/Tra nsfer during the period
As on 31. 03. 15 As on 01. 04. 14 Ad diti on du rin g the per iod Adj./Sa les/Tra nsfer during
the period As on 31. 03. 15 Total Depreciat ion/Impai rment Loss As on 31. 03. 15 As on 31.
03. 14 Tangi ble Asset s Buildi ng/W ater Suppl y /Road & Culve rts 19. 46 29. 74 (20.62) 28.
58 5.9 1 0.0 1 -- 5.9 2 -- -- -- -- 5.92 22. 66 13. 55 Plant & Equip ment s 12 2.3 7 32 7.8 7
(196.15 ) 25 4.0 9 36. 69 0.2 8 (0.01) 36. 96 -- -- -- -- 36.96 21 7.1 3 85. 68 Railw ay 7.1 4
17. 81 (1.21) 23. 74 2.6 3 -- -- 2.6 3 -- -- -- -- 2.63 21. 11 4.5 1
37. 37. Page | 37 Siding s Devel opme nt -- 0.0 8 -- 0.0 8 -- -- -- -- -- -- -- -- -- 0.0 8 -- Other s 4.0
8 11. 49 (9.71) 5.8 6 0.9 5 0.0 3 -- 0.9 8 -- -- -- -- 0.98 4.8 8 3.1 3 TOTA L 15 3.0 5 38 6.9 9
(227.6 9) 31 2.3 5 46. 18 0.3 2 (0.01) 46. 49 -- -- -- -- 46.49 25 6.8 6 10 6.8 7 Tangi ble Asset
s (As on 31.03 .2014 ) 10 7.4 1 31 8.9 5 (273.31 ) 15 3.0 5 46. 09 0.1 4 -0.05 46. 18 -- -- -- --
46.18 10 6.8 7 61. 32 Note- 10B.1:- Total provision for Tangible Assets upto the end of the
period is Rs. 46.49 crores (Rs. 46.18 crores) NOTE - 10 C INTANGIBLE ASSET UNDER
DEVELOPMENT (Rs. In Crores) PART ICUL ARS COST PROVISION IMPAIRMENT LOSS
TOTAL CARRYIN G VALUE As on 01. 04. 14 Ad diti on du rin g the per iod Adj./Sa les/Tra
nsfer during the period As on 31. 03. 15 As on 01. 04. 14 Ad diti on du rin g the per iod
Adj./Sa les/Tra nsfer during the period As on 31. 03. 15 As on 01. 04. 14 Ad diti on du rin g
the per iod Adj./Sa les/tra nsfer during the period As on 31. 03. 15 Total Depreciat ion/Impai
rment Loss As on 31. 03. 15 As on 31. 03. 14 Intan gible Asset s Deve lopm ent 62. 70 57.
 11 (40.13) 79. 68 10. 47 0.0 1 (2.27) 8.2 1 22. 58 1.7 8 (0.35) 24. 01 32.22 47. 46 29. 65
Pros pecti ng & Borin g 4.8 2 32. 66 (0.64) 36. 84 2.7 3 -- -- 2.7 3 1.3 8 -- -- 1.3 8 4.11 32. 73
0.7 1 TOTA L 67. 52 89. 77 (40.77) 11 6.5 13. 20 0.0 1 (2.27) 10. 94 23. 96 1.7 8 (0.35) 25.
39 36.33 80. 19 30. 36
38. 38. Page | 38 2 Intan gible Asset s (As on 31.03 .2014 ) 54. 12 46. 56 (33.16) 67. 52 13. 94
-- (0.74) 13. 20 19. 97 4.0 2 (0.03) 23. 96 37.16 30. 36 20. 21 Note 10 C. 1: Total provision /
Impairment loss upto the end of the year is 36.33 Crores ( 37.16 crores) under intangible
Assets. NOTES TO BALANCE SHEET (CONTD.) CONSOLIDATED: NOTE – 11 NON -
CURRENT INVESTMENTS - Unquoted at Cost (Rs. In Crores) Number of
shares/bonds/secu rities current year/(previous year) Face value per shares/bonds/securi ty
current year/(previous year)(Rs.) AS AT 31-03- 2015 AS AT 31-03- 2014 TRADE 8.5% Tax
Free Special Bonds (Fully Paid up) : (on securitisation of Sundry Debtors) Major State-wise
Break-up (4 Bonds of Rs. 1,65,000/- each) UP Haryana Maharashtra Madhya Pradesh
Gujarat West Bengal Others Equity Shares in Joint Venture Companies (with name of joint
ventures) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
39. 39. Page | 39 Equity Shares in Subsidiaries Companies (with name of Subsidiaries) Others
(in Co- operative Shares) i) 500 “B” class shares of Rs.1000/- each in Coal Mines Officers
Co operative credit Society Ltd. Rs. 0.05 ii) 1000 “D” class shares of Rs. 100/- each in
Dishergarh colly Worker’s central co-opt store Ltd. Rs. 0.01 iii) 4000 shares of Rs. 25/- each
in the Mugma coalfield colly Worker’s central co-opt store Ltd. Rs. 0.01 iv) 500 “B” class
shares of Rs. 100/- each in Sodepur colly Employee’s co-opt credit society Ltd. & 500 “B”
class shares of Rs. 100 each in Dhenomain colly. Employees’ co-opt credit society Ltd. Rs.
0.01 NON-TRADE 7.55% Non Convertible IRFC Tax Free Bonds 2021 Series -- -- -- -- -- -- --
0.08 -- -- 0.08 -- Total 0.08 0.13 Aggregate of Quoted Investment -- --
40. 40. Page | 40 Aggregate of Unquoted Investment Market Value of Quoted Investment
Provision made for diminution in the value of Investment -- -- -- -- -- -- NOTES TO BALANCE
SHEET (CONTD.) CONSOLIDATED: NOTE – 12 LONG TERM LOANS & ADVANCES (Rs.
In Crores) AS AT 31-03-2015 AS AT 31-03-2014 LOANS ADVANCES For Capital -Secured
considered goods -Unsecured considered goods -Doubtful -- 162.29 3.95 -- 88.57 4.80
Less : Provision for Doubtful Loans and Advances 166.24 3.95 93.37 4.80 162.29 88.57 For
Revenue -Secured considered goods -Unsecured considered goods -Doubtful -- 2.23 0.56 --
2.20 0.56 Less : Provision for Doubtful Loans and Advances 2.79 0.56 2.76 0.56 2.23 2.20
Security Deposits -Secured considered goods -Unsecured considered goods -Doubtful --
7.26 1.52 -- 7.89 0.66 8.78 8.55
41. 41. Page | 41 Less : Provision for Doubtful Loans and Advances 1.52 0.66 7.26 7.89 Deposit
for P&T, Electricity etc. -Secured considered goods -Unsecured considered goods -Doubtful
-- 0.35 0.44 -- 0.37 0.44 Less : Provision for Doubtful Loans and Advances 0.79 0.44 0.81
0.44 0.35 0.37 LOAN TO EMPLOYEES & OTHERS For House Building -Secured
considered goods -Unsecured considered goods -Doubtful 0.56 -- -- 0.82 -- -- 0.56 0.82 For
Motorcar and Other Conveyance -secured considered goods -Unsecured considered goods
-Doubtful 0.02 -- -- 0.01 -- -- 0.02 0.01 For Others -Secured considered goods -Unsecured
considered goods -Doubtful -- -- -- -- -- -- Less : Provision for Doubtful Loans and Advances
-- -- -- -- -- -- 172.71 99.86 LOAN TO SUBSIDIARIES -Secured considered goods
-Unsecured considered goods -Doubtful -- -- -- -- -- -- 172.71 99.86 Note
42. 42. Page | 42 PARTICULARS CLOSING BALANCE MAXIMUM AMOUNT DUE AT ANY
TIME DURING CURRENT PERIOD PREVIOUS PERIOD CURRENT PERIOD PREVIOUS
PERIOD Due by the Companies in which directors of the company is also a director/member
(with name of the Companies) NIL NIL NIL NIL Due by the parties in which the Director(s) of
company is /are interested NIL NIL NIL NIL NOTES TO BALANCE SHEET (CONTD.)
CONSOLIDATED: NOTE – 13 OTHER NON-CURRENT ASSETS (Rs. In Crores) AS AT 31-
03-2015 AS AT 31-03-2014 Long Term Trade Receivable - Secured considered goods -
Unsecured considered goods - Doubtful -- -- -- -- -- -- Less: Provision for bad and doubtful
 Trade Receivable -- -- -- -- Exploratory Drilling Work - Secured considered goods -
Unsecured considered goods - Doubtful -- -- -- -- -- -- -- -- -- -- Less: Provision for bad and
doubtful Receivables for Mine Closure Expenses -- 1.09 -- -- Other Receivables - Secured
considered goods - Unsecured considered -- 16.32 -- 16.33
43. 43. Page | 43 goods - Doubtful 4.98 5.22 Less: Provision for bad and doubtful Receivables
21.30 4.98 21.55 5.22 16.32 16.33 Total 17.41 16.33 Note: P A R T I C U L A R S CLOSING
BALANCE MAXIMUM AMOUNT DUE AT ANY TIME DURING CURRENT PERIOD
PREVIOUS PERIOD CURRENT PERIOD PREVIOUS PERIOD Due by the Companies in
which directors of the company is also a director/member ( With name of the Companies)
Due by the parties in which the Director(s) of company is /are interested NIL NIL NIL NIL NIL
NIL NIL NIL NOTES TO BALANCE SHEET (CONTD.) CONSOLIDATED: NOTE – 14
CURRENT INVESTMENTS - Quoted / Unquoted at Cost (Rs. In Crores) Number of
shares/bonds/s ecurities current year/(previous year) Face value per shares /bonds/sec
urities current year/(previ ous year)(Rs.) Market value/NAV per shares/bonds/s ecurities
current year/(previous year)(Rs.) AS AT 31.03.2 015 AS AT 31.03.2 014 NON TRADE
Mutual Fund Investm ent ( with name of -- -- -- -- --
44. 44. Page | 44 mutual fund ) 7.55% Non Converti ble IRFC Tax Free Bonds 2021 Series
TRADE 8.5% Tax Free Special Bonds (Fully Paid up) : (on securitis ation of Sundry Debtors)
Major State- wise Break- up (2 Bonds of ` 1,65,000 /- each) UP 0.03 0.03 Total 0.03 0.03
Aggregat e of Quoted Investm ent Aggregat e of Unquote d Investm ent Market Value of
Quoted Investm ent Market Value of -- -- -- -- -- --
45. 45. Page | 45 Unquote d Investm ent Provision made for diminuti on in the value of Investm
ent -- -- -- -- NOTES TO BALANCE SHEET (CONTD.) CONSOLIDATED: NOTE – 15
INVENTORIES (Rs. In Crores) AS AT 31-03-2015 AS AT 31-03-2014 Stock of Coal Coal
Under Development Less : Provision 386.00 -- 1.76 299.95 -- 1.76 A. Stock of Coal (Net) at
lower of cost or net realisable value 384.24 298.19 Stock of Stores & Spares (at cost) Stores
-in –transit Less : Provision 188.06 0.34 38.81 177.68 0.06 43.97 B. Net Stock of Stores &
Spares (at cost) 149.59 133.77 C. Workshop Jobs : Work-in-progress and Finished Goods
Less : Provision 16.50 0.12 18.06 0.20 Net Stock of Workshop Jobs (at cost) 16.38 17.86 D.
Press : Work-in-Progress and Finished Goods E. Stock of Medicine at Central Hospital (at
cost) F. Prospecting & Boring/ Development -- 0.81 -- 0.70
46. 46. Page | 46 Exp./Coal Blocks meant for Sale -- -- Total ( A to F ) 551.02 450.52 Note -
15.1:- Closing Stock of stores at Central and Area Stores have been valued at weighted
average cost. Provision at the end of the year for Rs. 38.81 crore (Rs. 43.97 crore) consists
of the following: a) Provision for quantitative discrepancies noticed between Bin Cards and
Stores Ledger upto NIL (Rs. 2.07 Crore) b) Provision for unserviceable, damaged and
obsolete store Rs. 10.47 crore (Rs.10.47 crore) c) Provision for non-moving stores & spares
Rs. 28.34 crore ( Rs. 31.43 crore. ) SCHEDULES TO BALANCE SHEET (CONTD.)
CONSOLIDATED ANNEXURE TO NOTE – 15 (Qty. in Lakh tonnes) (value in lakh Rs. )
TABLE – A Reconciliation of closing stock adopted in Account with Book stock as at
31.03.2015 OVERALL STOCK NON-VENDABLE STOCK VENDABLE STOCK Qty. Value
Qty. Value Qty. Value 1.A)Opening stock as on 01.04.14 B) Adjustment in Opening Stock
2.Production for the year 3. Sub-Total ( 1+2) 4. Off- Take for the year : A) Outside Despatch
B) Coal feed to Washeries C) Own Consumption 23.84 0.00 34651 0 4.71 0.00 4656 0 19.13
0.00 29995 0 23.84 400.08 423.92 382.20 0.00 2.50 34651 1019102 1053753 1001853 0
8644 4.71 0.00 4.71 0.00 0.00 0.00 4656 0 4656 0 0 0 19.13 400.08 419.21 382.20 0.00
2.50 29995 1019102 1049097 1001853 0 8644
47. 47. Page | 47 TOTAL(A) 5. Derived Stock 6. Measured Stock 7. Difference (5-6) 8. Break-up
of Difference: A) Excess within 5% B) Shortage within 5% C) Excess beyond 5% D)
Shortage beyond 5% 9. Closing stock adopted in A/c. (6-8A+8B) 384.70 39.22 38.61 0.61
0.07 0.68 0.00 0.00 39.22 1010497 43256 42585 671 73 744 0 0 43256 0.00 4.71 4.71 0.00
0.00 0.00 0.00 4.71 0 4656 4656 0 0 0 0 4656 384.70 34.51 33.90 0.61 0.07 0.68 0.00 0.00
 34.51 1010497 38600 37929 671 73 744 0 0 38600 Note: Production includes seized coal of
0.02 lakh tonne. NOTES TO BALANCE SHEET (CONTD.) CONSOLIDATED: NOTE – 16
TRADE RECEIVABLES (Rs. In Crores) AS AT 31-03-2015 AS AT 31-03-2014 Debts
outstanding for a period exceeding six months from the due date -Secured considered good
-Unsecured considered good -Doubtful -- 761.31 455.07 -- 1142.74 423.70 Less: Provision
for bad and doubtful trade receivables 1216.38 455.07 1566.44 423.70 761.31 1142.74
Other Debts -Secured considered good -Unsecured considered good -Doubtful -- 665.57
8.07 -- 577.27 --
48. 48. Page | 48 Less: Provision for bad and doubtful trade receivables 673.64 8.07 577.27 --
655.57 577.27 Total 1426.88 1720.01 Notes: CLOSING BALANCE MAXIMUM AMOUNT
DUE AT ANY TIME DURING CURRENT PERIOD PREVIOUS PERIOD CURRENT PERIOD
PREVIOUS PERIOD Due by the companies in which directors of the company is also a
director/member (With name of the Companies) NIL NIL NIL NIL Due by the parties in which
the Director(s) of company is/are interested NIL NIL NIL NIL Note 16.1:- Adjustment of an
amount of Rs. 86.25 crores (Previous year Rs. 382.91 crores) for grade slippage has been
made after reconciliation, settlement and issuing credit notes to parties during the year. Note
16.2:- The details of provision are as under: Rs. In Crore 31.03.15 Rs. In Crore 31.03.14
Opening Provision Less: Settled/Written off/Adjusted against opening debtors Add: New
provision during the year Less: Written back from opening provision Closing Balance 423.70
-- 90.23 50.79 463.14 399.39 -- 92.82 68.51 423.70 NOTES TO BALANCE SHEET
(CONTD.) CONSOLIDATED: NOTE – 17
49. 49. Page | 49 CASH & BANK BALANCE AS AT 31-03-2015 AS AT 31-03-2014 Balances
with Scheduled Banks -SBI Dividend Account (unpaid/unclaimed dividend account) -In
Deposit Accounts with maturity upto 3 months -In Current Accounts -In Cash Credit Accounts
Balances with Non - Scheduled Banks In Account with Banks outside India Remittance - in
transit Cheques, Drafts and Stamps on hand Cash on hand Deposit with Scheduled Banks
under Shifting and Rehabilitation Fund Scheme with maturity upto 3 months Other Bank
Balances Balances with Scheduled Banks -In Deposit Accounts with maturity more than 3
months Deposit with Scheduled Banks under Shifting and Rehabilitation Fund Scheme with
maturity more than 3 months Deposit with Scheduled Banks under Mine Closure Plan
Scheme* 318.28 219.09 -- -- -- 0.83 0.57 -- 3877.05 -- 148.06 529.32 584.43 -- -- -- 0.08 0.72
-- 2663.93 -- 73.52 Total 4563.88 3852.00 1. Maximum amount outstanding with Banks other
than Scheduled Banks at any time during the year nil nil 2. Deposit for more than 1 (one)
year from the date of purchase nil nil
50. 50. Page | 50 3. Rs. 66.49 crores has been deposited with Union Bank of India towards Mine
closure Escrow a/c during the period. 4. Rs. 8.05 crores has been deposited with Union Bank
of India as Interest towards Mine closure Escrow a/c during the year. NOTES TO BALANCE
SHEET (CONTD.) CONSOLIDATED: NOTE – 18 SHORT TERM LOANS & ADVANCES
(Rs. In Crores) AS AT 31-03-2015 AS AT 31-03-2014 LOANS ADVANCE ( Recoverable in
cash or in kind or for value to be received) ADVANCE TO SUPPLIERS For Revenue
-Secured considered good -Unsecured considered good -Doubtful -- 75.21 0.49 -- 74.09 2.50
Less: Provision for bad and doubtful Advance 75.70 0.49 76.59 2.50 75.21 74.09 75.21
74.09 ADV PAYMENT OF STATUTORY DUES Sales Tax -Secured considered good
-Unsecured considered good -Doubtful -- -- 28.03 -- -- -- 24.08 -- Less: Provision for bad and
doubtful Advance 28.03 -- 24.08 -- 28.03 24.08 Advance Income Tax / Tax Deducted at
Source Less : Provision for Income Tax -- -- -- -- -- --
51. 51. Page | 51 Others -Secured considered good -Unsecured considered good -Doubtful --
21.53 0.20 -- 20.15 0.44 Less: Provision for bad and doubtful Advance 21.73 0.20 20.59 0.44
21.53 20.15 49.56 44.23 Advance to Employees -Secured considered good -Unsecured
considered good -Doubtful -- 78.02 1.32 -- 79.84 1.32 Less: Provision for bad and doubtful
Advance 79.34 1.32 81.16 1.32 Current Account with Coal India Limited & other Subsidiaries
of Coal India Limited Loan Account with Subsidiaries -Secured considered good -Unsecured
considered good -Doubtful Less: Provision for bad and doubtful Loan MAT Credit Entitlement
 Claims Receivables -Secured Considered Good -Unsecured considered good -Doubtful
78.02 -- -- -- -- -- 174.62 -- -- 0.01 2.20 79.84 -- -- -- -- -- -- -- -- 6.70 2.20 Less: Provision for
bad and doubtful claim receivables 2.21 2.20 8.90 2.20 0.01 6.70 Prepaid Expenses 0.39
0.39 253.04 86.93 Total 377.81 205.25 Note:
52. 52. Page | 52 CLOSING BALANCE MAXIMUM AMOUNT DUE AT ANY TIME DURING
CURRENT PERIOD PREVIOUS PERIOD CURRENT PERIOD PREVIOUS PERIOD Due by
the companies in which directors of the company is also a director/member (with name of the
Companies) NIL NIL NIL NIL Due by the parties in which the Director(s) of company is/are
interested NIL NIL NIL NIL NOTES TO BALANCE SHEET (CONTD.) CONSOLIDATED:
NOTE – 19 OTHER CURRENT ASSETS (Rs. In Crores) AS AT 31-03-2015 AS AT 31-03-
2014 Interest Accrued -Investment -Deposit with Banks -Others Ex Owner’s Account Other
Advances Less: Provision -- 257.35 -- -- 0.06 -- -- 127.72 -- -- 0.06 -- 0.06 0.06 DEPOSITS
Deposit for Customs Duty, Port Charges etc. Deposit with Coal India Limited Deposit for
Royalty, Cess & Sales Tax Less: Provision Others Less: Provision -- -- -- -- 5.55 0.49 -- -- --
-- 3.74 0.49 5.06 3.25 Amount Receivable from Govt of India for transactions on behalf of Ex-
Coal Board -- --
53. 53. Page | 53 Less: Provision Other Receivables Less: Provision -- 84.42 1.16 -- 140.75 1.13
83.26 139.62 TOTAL 345.73 270.65 NOTES TO STATEMENT OF PROFIT & LOSS
CONSOLIDATED: NOTE – 20 REVENUE FROM OPERATIONS (Rs. In Crores) For the year
ended 31-03-2015 For the year ended 31-03-2014 A. Sales of Coal Less: Excise Duty Less:
Other Levies Royalty Cess on Coal Stowing Excise Duty Central Sales Tax Clean Energy
Cess State Sales Tax/VAT Other Levies 13413.84 655.62 350.75 1578.58 38.22 192.68
374.17 176.99 28.29 11945.92 595.80 322.83 1522.89 35.98 150.20 179.89 238.22 12.32
TOTAL LEVIES 3395.30 3058.13 NET SALES: 10018.54 8887.79 B. Other Operating
Revenue Facilitation charges for coal Import Subsidy for Sand stowing and protective works
Loading and additional transportation charges Less: Excise Duty Less: Other Levies OTHER
OPERATING REVENUE (B) 49.58 185.57 8.42 4.74 221.99 53.62 181.87 8.37 5.46 221.66
C. Revenue from Operation (A+B) 10240.53 9109.45
54. 54. Page | 54 Note 20.1:- Sale is net of deduction for grade slippage of Rs. 86.25 crores (Rs.
382.91 crores) due to credit note issued to the parties for grade slippage. Note 20.2:- Sale
includes MOU quantity of 42.50 LT. (8.91 LT) and MOU gain of Rs. 596.16 Crores (Rs.
122.71 Crores) Note 20.3:- Sales includes Rs. 268.40 crores (Rs. 349.11 crores) as
incentive under fuel supply agreement with various power sector for achieving despatch
target. Note 20.4:- Sales includes e-auction quantity of 18.89 LT (39.04 LT) and e-auction
gain of Rs. 298.96 crores (Rs. 224.35 crores) Note 20.5:- Sales includes Export sales to
Bhutan of 0.04 LT amounting to Rs. 1.33 crores. NOTES TO STATEMENT OF PROFIT &
LOSS (CONTD.) CONSOLIDATED: NOTE – 21 OTHER INCOME (Rs. In Crores) For the
year ended 31-03-2015 For the year ended 31-03-2014 Income From Long Term
Investments Dividend from Joint Ventures Dividend from Subsidiaries Interest from
Government Securities (8.5% Tax Free Special Bonds) (Trade) 7.55% Non Convertible IRFC
Tax Free Bonds 2021 Series (Non-Trade) Income From Current Investments Dividend from
Mutual Fund Investments Interest from Government Securities (8.5% Tax Free Special
Bonds) (Trade) 7.55% Non Convertible IRFC Tax Free Bonds 2021 Series (Non- Trade) -- --
-- -- -- -- -- 0.01 -- --
55. 55. Page | 55 Income From Others Interest (Gross) From deposit with banks From loans and
advances to employees From income tax refunds From Coal India Others Central Excise
Duty on closing of coal Apex Charges Profit on Sale of Assets Recovery of Transportation &
Loading Cost Gain on Foreign exchange Transactions Exchange Rate Variance Lease Rent
Liability Write Backs Guarantee Fees from Subsidiaries Other non-operating Income 421.89
0.10 -- -- 0.01 -- -- 1.10 -- -- -- -- 12.43 -- 236.73 189.86 0.10 0.09 -- 0.01 2.16 -- 1.63 -- -- -- --
124.45 -- 172.94 TOTAL 672.26 491.25 Note: Other non-operating income includes sales
compensation under F.S.A. of Rs. 143.12 crores (Rs. 91.57 crores) NOTES TO
STATEMENT OF PROFIT & LOSS (CONTD.) CONSOLIDATED: NOTE – 22 COST OF
 MATERIAL CONSUMED (Rs. In Crores) For the year ended 31-03-2015 For the year ended
31-03-2014 Explosives Timber POL HEMM Spares Other Consumable Stores & Spares
147.58 5.04 280.09 134.26 230.85 126.14 4.33 277.57 140.79 186.53 TOTAL 797.82 735.36
NOTES TO STATEMENT OF PROFIT & LOSS (CONTD.) CONSOLIDATED:
56. 56. Page | 56 NOTE – 23 CHANGE IN INVENTORIES OF FINISHED GOODS, WORK IN
PROGRESS AND STOCK IN TRADE (Rs. In Crore) For the year ended 31-03-2015 For the
year ended 31-03-2014 Opening Stock of Coal / Coke Add : Adjustment of Opening Stock
Less : Deterioration of Coal/Coke 297.19 -- 1.76 307.06 -- 1.76 Total (1) 295.43 305.30
Less : Closing Stock of Coal/Coke Less: Deterioration of Coal/Coke 383.51 1.76 297.19 1.76
Total (2) 381.75 295.43 A) Change in Inventory of Closing Stock (1-2) Opening Stock of
Workshop made finished goods and WIP Less: Provision (86.32) 18.06 0.20 9.87 13.83 0.20
Total (3) 17.86 13.63 Closing Stock of Workshop made finished goods and WIP Less:
Provision 16.50 0.12 18.06 0.20 Total (4) 16.38 17.86 B) Change in Inventory of Closing
Stock of workshop (3-4) Press Opening Job i) Finished Goods ii) Work in Progress 1.48 -- --
(4.23) -- -- Total (5) Press Closing Job i) Finished Goods ii) Work in Progress -- -- -- -- -- --
Total (6) C) Change in Inventory of Closing Stock of Press Job made finished goods and
WIP (5-6) -- -- -- -- -- -- -- --
57. 57. Page | 57 -- -- Total Change in Inventory of Stock (A+B+C ) (84.84) 5.64 NOTES TO
STATEMENT OF PROFIT & LOSS (CONTD.) CONSOLIDATED: NOTE – 24 EMPLOYEE
BENEFIT EXPENSES (Rs. In Crores) For the year ended 31-03-2015 For the year ended
31-03-2014 Salary, Wages, Allowances & Benefits Exgratia PRP Contribution to P.F. &
Other Funds Gratuity Leave Encashment VRS Workman Compensation Medical Expenses
for existing employees Medical Expenses for retired employees Grants to Schools &
Institutions Sports & Recreation Canteen & Creche Power – Township Hire Charges of Bus,
Ambulance eyc. Other Employee Benefits 4177.68 296.44 65.82 489.96 339.79 170.36 1.85
5.29 36.41 29.62 6.61 1.45 0.24 111.21 5.33 112.44 4056.42 231.96 64.02 468.03 264.43
145.82 3.12 4.13 33.43 13.41 5.96 1.42 0.13 113.63 5.36 101.30 TOTAL 5850.50 5512.57
Note 24.1: Salary, Wages, Allowances & Benefits includes provisions of Rs. 25.16 crores
(Rs. 24.49 crores) made for Superannuation Benefit to Executive.
58. 58. Page | 58 NOTES TO STATEMENT OF PROFIT & LOSS (CONTD.) CONSOLIDATED:
NOTE – 25 Corporate Social Responsibility Expenses (Rs. In Crores) For the year ended 31-
03-2015 For the year ended 31-03-2014 CSR Expenses 24.85 -- TOTAL 24.85 -- NOTE – 26
REPAIRS (Rs. In Crores) For the year ended 31-03-2015 For the year ended 31-03-2014
Building Plant & Machinery Others 6.42 92.66 2.14 4.24 69.60 2.63 TOTAL 101.22 76.47
NOTES TO STATEMENT OF PROFIT & LOSS (CONTD.) CONSOLIDATED: NOTE – 27
CONTRACTUAL EXPENSES (Rs. In Crores) For the year ended 31-03-2015 For the year
ended 31-03-2014 Transportation Charges: -Sand -Coal & Coke -Stores & Others etc.
Wagon Loading Hiring of P & M Other Contractual Work 54.54 230.58 1.66 19.96 540.91
177.38 53.58 223.23 1.76 7.42 379.16 155.38 TOTAL 1025.03 820.53
59. 59. Page | 59 NOTE – 28 FINANCE COSTS (Rs. In Crores) For the year ended 31-03-2015
For the year ended 31-03-2014 INTEREST EXPENSE Deferred Payments Bank Overdraft/
Cash Credit Interest on IBRD & JBIC Loan CIL Fund Loan Interest Interest to Subsidiaries
Others -- -- -- -- -- -- -- -- -- -- -- -- TOTAL (A) -- -- OTHER BORROWING COSTS Guarantee
Fees on (IBRD & JBIC) Loan Other Expenses / Bank Charges * -- -- -- -- TOTAL (B) -- --
TOTAL (A+B) -- -- NOTES TO STATEMENT OF PROFIT & LOSS (CONTD.)
CONSOLIDATED: NOTE – 29 PROVISIONS (Rs. In Crores) For the year ended 31-03-2015
For the year ended 31-03-2014 A) PROVISION MADE FOR Doubtful debts Doubtful
advances & Claims Foreign exchange transaction Stores & Spares Reclamation of
Land/Mine Closure Expenses Surveyed of Fixed Assets /Capital WIP Others 90.23 0.04 --
0.55 66.49 1.56 0.09 92.82 0.03 -- 0.75 71.03 4.01 -- TOTAL (A) 158.96 168.64 B)
PROVISION WRITTEN BACK Doubtful Debts Doubtful advances & Claims 50.79 2.49 68.51
0.62
60. 60. Page | 60 Foreign Exchange Transaction Stores & Spares Reclamation of Land/Mine
Closure Expenses Surveyed of Fixed Assets /Capital WIP Others -- 5.71 -- 0.36 0.03 -- 3.95
271.38 1.12 8.63 TOTAL (B) 59.38 300.21 TOTAL (A+B) 99.58 (131.57) Note 29.1:-
Provision for mine closure expenses of Rs. 66.49 crores (Rs. 71.03 crores) has been taken
on the pro-rata cost of total mine closure expenditure of all operating mines being
determined as per guideline issued by the Ministry of Coal, GOI. NOTES TO STATEMENT
OF PROFIT & LOSS (CONTD.) CONSOLIDATED: NOTE – 30 WRITE OFF (Rs. In Crores)
For the year ended 31-03-2015 For the year ended 31-03-2014 Doubtful debts Doubtful
advances Others 68.66 2.49 2.27 127.70 -- -- TOTAL 73.42 127.70 NOTE – 31 OTHER
EXPENSES (Rs. In Crores) For the year ended 31-03-2015 For the year ended 31-03-2014
Travelling expenses -Domestic -Foreign Training Expenses Telephone & Postage
Advertisement & Publicity Freight Charges Demurrage Donation/Subscription Security
Expenses Service charges of CIL Hire Charges CMPDI Expenses 11.11 0.13 2.94 1.79 3.37
0.08 0.70 0.03 73.81 7.46 17.88 20.57 12.05 0.54 2.65 1.78 4.21 0.03 0.38 0.13 62.30 --
16.22 9.59
61. 61. Page | 61 Legal Expenses Bank Charges Guest House Expenses Consultancy Charges
Under Loading Charges Loss on Sale/Discard/Surveyed of Assets Auditor’s Remuneration &
Expenses -For Audit Fees -For Taxation Matters -For Company Law Matters -For
Management Services -For Other Services -For Reimbursement of Expenses Internal Audit
Fees & Expenses Rehabilitation Charges Royalty & Cess Central Excise Duty Rent Rates &
Taxes Insurance Loss on Exchange Rate Variance Lease Rent Rescue/Safety Expenses
Dead Rent/Surface Rent Siding Maintenance Charges Land/Crops Compensation R & D
Expenses Environmental & Tree plantation Expenses Miscellaneous Expenses 2.28 0.24
1.76 4.88 22.37 0.01 0.14 0.07 -- -- 0.10 0.14 2.28 6.84 3.26 7.55 -- 1.92 0.08 9.61 -- 3.31
14.44 2.06 0.01 7.50 2.52 116.75 1.30 0.12 1.72 0.65 10.59 -- 0.14 0.09 -- -- 0.09 0.24 1.48
-- 1.91 -- -- 4.29 0.03 13.46 -- 2.82 8.47 2.93 0.98 -- 2.42 100.48 TOTAL 349.99 264.09
NOTES TO STATEMENT OF PROFIT & LOSS (CONTD.) CONSOLIDATED: NOTE – 32
PRIOR PERIOD ADJUSTMENT (Rs. In Crores) For the year ended 31-03-2015 For the year
ended 31-03-2014 A) Expenditure Sale of Coal & Coke Stock of Coal & Coke Other Income
Consumption of Stores & Spares Employees Remuneration & Benefits -- -- -- -- -- -- -- -- -- --
62. 62. Page | 62 Power & Fuel Welfare Expenses Repairs Contractual Expenses Other
Expenditure Interest and other financial charges Depreciation -- -- -- -- -- -- -- -- -- -- 2.41 -- --
-- TOTAL (A) -- 2.41 B) Income Sale of Coal & Coke Stock of Coal & Coke Other Income
Consumption of Stores & Spares Employees Remuneration & Benefits Power & Fuel
Welfare Expenses Repairs Contractual Expenses Other Expenditure Interest and other
financial charges Depreciation -- -- 0.45 -- -- -- -- -- -- 0.59 -- 1.14 -- -- (1.14) 0.19 -- -- -- -- --
-- -- -- TOTAL (B) 2.18 (0.95) TOTAL (A-B) (2.18) 3.36 NOTES – 33 SIGNIFICANT
ACCOUNTING POLICIES 1.0 Accounting Convention: Financial statements are prepared
under the historical cost convention and on accrual basis of accounting and going concern
concept, in accordance with the generally accepted accounting principles in India and the
relevant provisions of the Companies Act, 2013, including accounting standards notified
therein, except otherwise stated. 1.1 Use of estimate: In preparing the financial statements in
conformity with Accounting Principles generally accepted in India, management is
sometimes required to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosures of contingent liability as at the date of financial
statements and the amount of revenue and expenses during the reported period. Actual
results may differ from those estimates. Any revision to such
63. 63. Page | 63 estimate is recognized in the period in which the same is determined. 2.0
Subsidies / Grants from Government: 2.1 Subsidies / Grants on capital account are deducted
from the cost of respective assets to which they relate. The unspent amount at the Balance
Sheet date, if any, is shown as current liabilities. 2.2 Subsidies / Grants on revenue account
are credited to Statement of Profit & Loss as income and the relevant expenses are debited
to the respective heads of expenses. The unspent amount at the Balance Sheet date, if any,
 is shown as current liabilities. 2.3 Subsidies / Grants from Government received as an
implementing agency 2.3.1 Certain Grant / Funds received under S&T, PRE, EMSC, CCDA
etc. as an implementing agency and used for creation of assets are treated as Capital
Reserve and depreciation thereon is debited to Capital Reserve Account. The ownership of
the asset created through grants lies with the authority from whom the grant is received.
2.3.2 Grant / Funds received as Nodal/Implementing Agency are accounted for on the basis
of receipts and disbursement. 3.0 Fixed Assets: 3.1 Land: Value of land includes cost of
acquisition, cash rehabilitation expenses, resettlement cost and compensation in lieu of
employment incurred for concerned displaced persons. 3.2 Plant & Machinery: Plant &
Machinery includes cost and expenses incurred for erection / installation and other
attributable costs of bringing those assets to working conditions for their intended use. 3.3
Railway Siding: Pending commissioning, payments made to the railway authorities for
construction of railway sidings are shown in Note 12 – “Long Term Loans & Advances” under
Advances for Capital. 3.4 Development: Expenses net of income of the projects / mines
under development are booked to Development Account and grouped under Capital Work-
in-Progress till the projects / mines are brought to revenue account. Except otherwise
specifically stated in the project report to determine the commercial readiness of the project
to yield production on a sustainable basis and completion of required development activity
during the
64. 64. Page | 64 period of constructions, projects and mines under development are brought to
revenue considering the following criteria: a. From beginning of the financial year
immediately after the year in which the project achieves physical output of 25% of rated
capacity as per approved project report, or b. 2 years of touching of coal, or c. From the
beginning of the financial year in which the value of production is more than total, expenses.
- Whichever event occurs first. 4.0 Prospecting & Boring and other Development
Expenditure: The cost of exploration and other development expenditure incurred in one
“Five year” plan period will be kept in Capital work-in-progress till the end of subsequent two
“Five year” plan periods for formulation of projects, before it is written-off, except in the case
of Blocks identified for sale or proposed to be sold to outside agency which will be kept in
inventory till finalisation of sale. 5.0 Investments: Current investments are valued at the lower
of cost and fair value as at the Balance Sheet date. Investments in mutual fund are
considered as current investments. Non-Current investments are carried at cost. However,
when there is a decline, other than temporary, in the value of the long term investment, the
carrying amount is reduced to recognize the decline. 6.0 Inventories: 6.1 Book stock of coal /
coke is considered in the accounts where the variance between book stock and measured
stock is upto +/- 5% and in cases where the variance is beyond +/- 5% the measured stock is
considered. Such stock are valued at net realisable value or cost whichever is lower. 6.1.1
Coal & coke fines are valued at lower of cost or net realisable value. 6.1.2 Slurry
(coking/semi-coking), middling of Washeries and by products are valued at net realisable
value. 6.2 Stores & Spares:
65. 65. Page | 65 6.2.1 The closing stock of stores and spare parts has been considered in the
accounts as per balances appearing in priced stores ledger of the Central Stores and as per
physically verified stores lying at the collieries/ units. 6.2.2 Stock of stores & spare parts
(which also includes loose tools ) at central & area stores are valued at cost calculated on
the basis of weighted average method. The year-end inventory of stores & spare parts lying
at collieries / sub-stores / drilling camps/ consuming centres, initially charged off, are valued
at issue price of Area Stores, Cost / estimated cost. Workshop jobs including work-in-
progress are valued at cost. Similarly stock of stationary at printing press and medicines at
central hospital are valued at cost. 6.2.3 Stock of stationery (other than lying at printing
press), bricks, sand, medicine (except at Central Hospitals), aircraft spares and scraps are
not considered in inventory. 6.2.4 Provisions are made at the rate of 100% for unserviceable,
damaged and obsolete stores and at the rate of 50% for stores & spares not moved for 5
years. 7.0 Depreciation / Amortisation: 7.1 Depreciation on fixed assets is provided on
 straight line method on the basis of useful life specified in Schedule II of Companies Act
2013 except for assets mentioned below, for which depreciation is provided on the basis of
technically estimated useful life which are lower than that envisaged as per schedule II of
Companies Act, 2013 to depict a more true and fair rate of depreciation:- Telecommunication
equipment :- 6 years and 9 years Photocopying machine :- 4 years Fax machine :- 3 years
Mobile phone :- 3 years Digitally enhance cordless telephone :- 3 years Printer & Scanner :-
3 years Earth Science Museum :- 19 years High volume respiratory dust samplers :- 3 years
Certain equipment /HEMM :- 7 years and 6 years as applicable. SDL (equipment) :- 5 years
LHD (equipment) :- 6 years 7.2 The residual value of all assets for depreciation purpose is
considered as 5% of the original cost of the asset except those item of assets covered under
Para 7.3 7.3 In case of assets namely Coal tub, winding ropes, haulage ropes, stowing pipes
& safety lamps the technically estimated useful life has been determined to be one year with
a nil residual value.
66. 66. Page | 66 7.4 Depreciation on the assets added / disposed of during the year is provided
on pro-rata basis with reference to the month of addition / disposal, except on those assets
with one year useful life and nil residual value as mention under Para 7.3, which are fully
depreciated in the year of their addition. These Assets are taken out from the Assets after
expiry of two years following the year in which these are fully depreciated. 7.5 Value of land
acquired under Coal Bearing Area (Acquisition & Development) Act, 1957 is amortised on
the basis of the balance life of the project. Value of leasehold land is amortised on the basis
of lease period or balance life of the project whichever is earlier. 7.6 Prospecting, Boring and
Development expenditure are amortised from the year when the mine is brought under
revenue in 20 years or working life of the project whichever is less. 7.7 Cost of Software
recognized as intangible asset, is amortised on straight line method over a period of legal
right to use or three years, whichever is less; with a nil residual value. 8.0 Impairment of
Asset: Impairment loss is recognised wherever the carrying amount of an asset is in excess
of its recoverable amount and the same is recognized as an expense in the statement of
profit and loss and carrying amount of the asset is reduced to its recoverable amount.
Reversal of impairment losses recognised in prior years is recorded when there is an
indication that the impairment losses recognised for the asset no longer exist or have
decreased. 9.0 Foreign Currency Transactions: 9.1 Balance of foreign currency transactions
is translated at the rates prevailing on the Balance Sheet date and the corresponding effect
is given in the respective accounts. Transactions completed during the period are adjusted
on actual basis. 9.2 Transactions covered by cross currency swap options contracts to be
settled on future dates are recognised at the rates prevailing on the Balance Sheet date, of
the underlying foreign currency. Effects arising out of such contracts are taken into accounts
on the date of settlement. 10.0 Retirement benefits / other employee benefits: a. Defined
contributions plans: The company has defined contribution plans for payment of Provident
Fund and Pension Fund benefits to its employees. Such Provident Fund and Pension Fund
are maintained and operated by the Coal Mines
67. 67. Page | 67 Provident Fund (CMPF) Authorities. As per the rules of these schemes, the
company is required to contribute a specified percentage of pay roll cost to the CMPF
Authorities to fund the benefits. b. Defined benefits plans: The liability on the Balance Sheet
date on account of gratuity and leave encashment is provided for on actuarial valuation basis
by applying projected unit credit method. Further the company has created a Trust with
respect to establishment of Funded Group Gratuity (cash accumulation) Scheme through
Life Insurance Corporation of India. Contribution is made to the said fund based on the
actuarial valuation. c. Other employee benefits: Further liability on the Balance Sheet date of
certain other employee benefits viz. benefits on account of LTA/ LTC; Life Cover Scheme,
Group Personal Accident Insurance Scheme, Settlement Allowance, Post Retirement
Medical Benefits Scheme and compensation to dependants of deceased in mines accidents
etc. are also valued on actuarial basis by applying projected unit credit method. 11.0
Recognition of Income and Expenditure: Income and Expenditure are generally recognised
 on accrual basis and provision is made for all known liabilities. 11.1 Sales a. Revenue in
respect of sales is recognised when the property in the goods with the risks and rewards of
ownership are transferred to the buyer. b. Sale of coal are net of statutory dues and
accepted deduction made by customer on account of quality of coal. c. The revenue
recognition is done where there is reasonable certainty of collection. On the other hand,
revenue recognition is postponed in case of uncertainty as assessed by management. 11.2
Dividend Dividend income is recognised when right to receive is established. 12.0 Borrowing
Costs: Borrowing Cost directly attributable to the acquisition or construction of qualifying
assets is capitalised. Other borrowing costs are recognised as expenses in the period in
which they are incurred.
68. 68. Page | 68 13.0 Taxation: Provision of current income tax is made in accordance with the
Income Tax Act., 1961. Deferred tax liabilities and assets are recognised at substantively
enacted tax rates, subject to the consideration of prudence, on timing difference, being the
difference between taxable income and accounting income that originate in one period and
are capable of reversal in one or more subsequent period. 14.0 Provision: A provision is
recognised when an enterprise has a present obligation as a result of past event; it is
probable that an outflow of resources embodying economic benefit will be required to settle
the obligation, in respect of which a reliable estimate can be made. Provisions are not
discounted to present value and are determined based on best estimate required to settle
the obligation at the balance sheet date. 15.0 Contingent Liability: Contingent liability is a
possible obligation that arises from past events and the existence of which will be confirmed
only by the occurrence or non-occurrence of one or more uncertain future events not wholly
within the control of the enterprise or a present obligation that arises from past events but is
not recognised because it is not probable that an outflow of resources embodying economic
benefit will be required to settle the obligations or reliable estimate of the amount of the
obligations can not be made. Contingent liabilities are not provided for in the accounts and
are disclosed by way of Notes. 16.0 Overburden Removal (OBR) Expenses: In open cast
mines with rated capacity of one million tonnes per annum and above, cost of OBR is
charged on technically evaluated average ratio (COAL:OB) at each mine with due
adjustment for advance stripping and ratio-variance account after the mines are brought to
revenue. Net of balances of advance stripping and ratio variance at the Balance Sheet date
is shown as cost of removal of OB under the head Non - Current Assets/ Long Term
Provisions as the case may be. The reported quantity of overburden as per record is
considered in calculating the ratio for OBR accounting where the variance between reported
quantity and measured quantity is within the lower of the two alternative permissible limits, as
detailed hereunder:-
69. 69. Page | 69 Annual Quantum of OBR of the Mine. Permissible limits of variance. I II %
Quantum (in Mill.Cu.Mtr.) Less than 1 Mill.Cu.M. +/- 5% 0.03 Between 1 and 5 Mill. Cu. M.
+/- 3% 0.20 More than 5 Mill. Cu.M +/- 2% NIL However, where the variance is beyond the
permissible limits as above, the measured quantity is considered. 17.0 Prior Period
Adjustments and Prepaid Expenses: Income / expenditures relating to prior period and
prepaid expenses, which do not exceed Rs. 0.10 Crore in each case, are treated as income /
expenditure of current year. NOTE – 34 ADDITIONAL NOTES ON ACCOUNTS (For the
Year ended 31st March, 2015) 1. BACKGROUND : 1.1 Eastern Coalfields Limited (The
Company) was incorporated as a Private Limited Company on 1st November, 1975 as a
100% Subsidiary of Coal India Limited (CIL) upon taking over of Assets and Liabilities vested
with the Eastern Division of Coal Mines Authority Limited ( former name of Coal India
Limited). The Company is primarily engaged in business of production and sale of coal. 1.2
Pending completion of legal formalities for transfer of assets and liabilities to the Company
certain Assets including Mining Rights etc. continue to be in the name of CIL 1.3 The formal
transfer Deeds/Agreement for Assets & Liabilities transferred and taken over by the
Company in respect of coal Mines Labour Welfare Organisation, Kalla & Central hospital
along with 4
70. 70. Page | 70 other Hospitals/Dispensaries, Mines Rescue Station, Barakar Engineering &
Foundry Works are yet to be finalised and executed in favour of the Company. 2. FIXED
ASSETS AND CAPITAL-WORK-IN-PROGRESS. a. Building includes Roads & Culverts
situated in the residential/office/mining areas. b. Physical verification in respect of all fixed
assets and in respect of Plant & Machinery each worth Rs. 1.00 lakh or more have been
carried out as per programme. Resultant differences on completion of formalities have been
adjusted. c. The Net value of Assets taken over on nationalization of coal mines amounting
to Rs. 8.17 crores, details of which are not available, under Coal Mines Nationalization Act,
1973 have been taken into account and shown under the group of tangible assets and
against which full provision has been made. 3. INVENTORY: a. The enquiry proceedings by
CBI, Dhanbad for shortage of coal at Rajmahal OCP of Rs. 19.54 Lakhs tonne valued at Rs.
63.58 Crore in 2007-08 has been completed in 2010-2011. The report on the same has been
forwarded to Chairman, CIL for information and to advice the Vigilance department for taking
action against the charged officers as per CBI order. The outcome of the order is still to be
received. b. Coal of 471408 M.T. (471408 M.T.) mixed with matti etc. is non-vendible and
has been taken at NIL value. 4. SUNDRY DEBTORS: a. Provision for Sundry Debtors is
made on case to case basis. Normally no provision of Sundry Debtors is made on unsettled
amount of Debtors in the initial year. In the 2nd year provision is made up to 50% amount of
unsettled amount of debtors, and the rest is provided in the 3rd year if it remains unsettled.
5. CURRENT LIABILITIES & PROVISIONS: A) CURRENT LIABILITIES:
71. 71. Page | 71 a. As required by section 22 of Micro, Small & Medium Enterprises
Development Act, 2006, as on 31-03-2015 Principal amount remaining unpaid to MSME is `
0.16 crore (` 0.19 crore) and interest due thereon is NIL (NIL). B) PROVISIONS: b. The year
end provision towards Gratuity, Leave Encashment, and Gross Personal Accident Insurance,
LTA / LTC, Life Cover Scheme, Settlement Allowances, Fatal Accident Benefits and Medical
Benefits of retired employees has been made on actuarial valuation as per the certificate
given by the Actuary. Actuarial valuation of gratuity liability as per actuary certificate is given
as under: ACTUARIAL VALUATION OF GRATUITY LIABILITY AS AT 31.03.2015
CERTIFCATES AS PER ACCOUNTING STANDARD 15(Revised 2005) Table 1:
DISCLOSURE ITEM 120(c) Table Showing Changes in Present Value Of Obligations. As at
31/03/2015 Present Value of Obligation at Beginning of year Acquisition Adjustment Interest
Cost Past Service Cost Current Service Cost Curtailment cost Settlement Cost Benefits Paid
Actuarial gain/loss on Obligations Present Value of Obligation at end of Year 25334144509 0
1815831560 0 1282602212 0 0 5272500000 2937260348 26097338630 Table 2:
DISCLOSURE ITEM 120(e) : Table Showing Changes in Fair Value of Plan Assets As at
31/03/2015 Fair Value of Plan Asset at Beginning of year Acquisition Adjustment Expected
Return on Plan Asset Contributions Benefits Paid Actuarial gain/loss on Plan Asset Fair
Value of Plan Asset at End of year 101805000000 0 814440000 17650200000 5272500000
159160000 23531800000 Table 3: DISCLOSURE ITEM 120(f): Table showing Funded
Status As at 31/03/2015 Present Value of Obligation at end Year Fair Value of Plan Asset at
end Year Funded Status Unrecognized actuarial gain/loss at end of the year Net
Asset(Liability) Recognized in Balance Sheet 26097338630 23531800000 -2565538630 0
-2565538630
72. 72. Page | 72 Table 4:- DISCLOSURE ITEM 120(g): Table showing Expense Recognized in
Statement of Profit/Loss As at 31/03/2015 Current Service Cost Past Service Cost Interest
Cost Expected Return on Plan Asset Curtailment cost Settlement Cost Actuarial gain/loss
recognized in the year Expense Recognized in Statement of Profit/Loss 1282602212 0
1815831560 814440000 0 0 2778100349 5062094121 Table 7: DISCLOSURE ITEM 120(1):
Table showing Actuarial Assumptions As at 31/03/2015 Mortality Table Superannuation Age
Early Retirement & Disablement Discount Rate Inflation Rate Return on Asset Remaining
Working Life Formula Used IALM(2006-08)ULT. 60 10 Per Thousand P.A 6 above age 45 3
between 29 and 45 1 below age 29 8.25% 6.25% N.A 12 Years : Projected unit Credit
Method Table 10: DISCLOSURE, ITEM 120(o): Movements in the Liability Recognized in
 Balance Sheet: As at 31/03/2015 Opening Net Liability Expenses as above Contributions
Closing Net Liability 0 1703607893 0 1703607893 Closing Fund/Provision at end of Year
5603146905 NOTE TO APPENDIX B OF AS15(REVISED 2005) AS THE SCHEME IS
UNFUNDED CHARGES TO PROFIT /LOSS ACCOUNT HAS BEEN BASED ON
FOLLOWING ASSUMPTIONS: 1. PREVIOUS OBLIGATION WAS PROVIDED FOR AT
LAST ACCOUNTING DATE 2. BENEFIT TO EXITS HAS BEEN PAID TO DEBIT OF ABOVE
PROVISION 3. CURRENT OBLIGATION WILL BE PROVIDED FOR AT CURRENT
ACCOUNTING DATE 5.3 The company has made an ad-hoc provision of Rs. 65.82 crore
(Rs. 64.02 Crore) during the year as Performance Related Pay as per advice of CIL.
73. 73. Page | 73 5.4 The company has made a provision of Rs. 27.30 crore (Rs. 11.46 crore)
during the year as Post-Retirement Medical Benefit for the executives. 5.5 The Company has
made a provision of Rs. 296.44 crore (Rs. 231.96 crore) during the year towards payment of
Ex- gratia to non-executive employees @ Rs. 40000- per employee. 6 STATEMENT OF
PROFIT AND LOSS 6.1 Coal issued to employees (free issue) amounting to Rs. 10.68 crore
(Rs. 17.65 crore) and for internal consumption amounting to Rs. 75.27 crore (Rs. 76.68
crore) are accounted for on the basis of norms fixed by the management and valued at
related grade selling price and the same is exhibited in the accounts as a specific contra. 6.2
Subsidy from appropriate authority for stowing and protective work undertaken during the
year amounting to Rs. 49.58 crore (Rs. 58.65 crore) has been shown under Other Income
(Note – 21). Subsidy receivable out of the same amounting to Rs. 11.88 Crore (Rs. 45.28
crore) has been shown under Other Current Assets (Note – 19). 6.3 Depreciation on fixed
assets for the year has been calculated on the basis of the useful life of assets prescribed as
per Schedule II of the Companies Act 2013 (effective from Financial Year 2014-15 onwards)
instead of that being followed as per Schedule XIV of the Companies Act 1956 hitherto. This
change has resulted in the profit for the year being lower by Rs. 84.67 Crore. 6.4 A) During
the year based on technically estimated useful life depreciation rates of the following assets
are revised: SL No. Assets Useful Life 1 2 3 4 5 Photocopy Machine Fax Machine Mobile
Phone Digitally enhance cordless telephone Computer (including printer & scanner) 4 3 3 3 3
6.4 B) DEPRECIATION OH HEMM: Depreciation on HEMM is provided on Straight Line
Method at the rate prescribed at schedule II of the Companies Act 2013 except on certain
HEMM where higher rate of depreciation is charged as per technically estimated useful life
as given below:- Particulars of the Asset Useful Life Tele –Communication Equipment
Dumper Up to 35T Dumper Up to 50T Hydraulic Shovels up to 1.2 CUM Hydraulic Shovels
up to > 1.2 to 2.2 Hydraulic Shovels up to >2.2 to 5.0 CUM 6 6 7 7 7 7
74. 74. Page | 74 Hydraulic Shovels up to > 5.0 to 10.0 CUM B.H.Drill < 160mm 7 6 6.5 Export
Sales: Sales includes Export Sales of coal, in Indian Rupee terms, to Dumgsam Cement
Corporation Limited Bhutan, details of which is as under: Quantity Coal Value Gross Value
3720.29 Tonne Rs. 1.33 Crore Rs. 1.83 Crore 7.0 CAPITAL COMMITMENT: Capital
Commitment as on 31-3-2015 (Rs. In Crore) SL. Particulars Amount 1 2 3 4 5 6 7 8 9 Plant &
Machineries Building Road & Culverts Railway Siding Development (Prospecting & Boring)
Mines Development Other Development Water Supply Others 123.80 3.85 0.86 91.97 1.94
18.08 1.68 1.21 5.20 TOTAL 248.59 8.a Production of Coal during the year amounted to
400.06 Lakh Tonne (360.46 Lakh Tonne). 8.b Coal Stock (Quantity in lakh tonnes) (Rs. In
Crores) 31.03.2015 31.03.2014 31.03.2015 31.03.2014 Op. Stock Adjust / seized coal
Sales(*) Closing Stock (**) 19.13 -- 382.20 34.51 21.14 -- 359.78 19.13 299.95 -- 10018.54
386.00 309.74 -- 8887.90 299.95 (*) Does not include coal issued for domestic consumption
by Employees and boiler consumption of 2.50 lakh tonnes ( 2.77 lakh tonnes) (**) Net
surplus/shortage – (-) NIL lakh tonne { Nil lakh tonne}. 9.0 Earning in foreign exchange:- NIL
( NIL ). 10.0 CIF Value of Imports. Particulars Current Year Previous Year Raw Materials -- --
75. 75. Page | 75 Components, Stores & Spares Capital Goods 6.71 176.25 10.11 -- 11.0
Expenditure in Foreign Currency: (Rs. In Crores) Particulars Current Year Previous Year
Travelling Expenses Expenses on Know - How & Foreign Consultancy. Pension to
Foreigners Others 0.13 Nil Nil 106.52 0.54 Nil Nil 12.91 12.0 Total consumption of Stores:
 (Rs. In Crores) (Percentage) Current Year Previous Year Current Year Previous Year Total
consumption of imported materials. Indigenous 11.68 786.14 10.11 725.25 1.46% 98.54%
1.37% 98.63% TOTAL 797.82 735.36 13. GENERAL: 13.1 Impairment of assets
(Prospecting Boring & Mine Development) is made when the carrying amount of each mine
(Cash Generating Unit) exceeds its recoverable amount, which is being determined on the
basis of future Cash Flows of subsequent five years calculated on constant price level. 13.2
An advance payment of Rs. 8.10 Crore has been made towards FBT in 2005-06, against
which the return was submitted for Rs. 7.49 Crore as per self-assessment/tax audit report
and assessment was made accordingly. Subsequently an appeal petition was submitted
showing revised liabilities as Rs. 4.00 Crore. The matter is pending with the appropriate
authority. 13.3 In the opinion of the management, all current assets including loans and
advances have realisable value in the ordinary course of business at least equal to the
amount at which they are stated. Further, adequate provision has also been made in respect
of all known liabilities. 13.4 Reconciliation of balances with sundry debtors is made on a
perpetual basis. Confirmation of creditors and other parties are obtained in most of the
cases. In the absence of confirmation from them the book balances are considered correct.
13.5 No provision is made on vendible stock except for deterioration of old stock due to fire,
theft, etc. 13.6 PRESENT STATUS OF BIFR AND FINANCIAL RESTRUCTURING OF ECL
As on 31st March, 1997 accumulated losses of the Company exceeded its net worth by Rs.
251.20 Crores. Hence the company was referred to BIFR in October, 1997 in terms of
Section 15(1) of SICA. Due to financial
76. 76. Page | 76 restructuring done by CIL on 31st May, 1998 by converting unsecured loan of
Rs. 1179.45 Crores into equity, the net worth of the company became positive as on that
date and company came out of BIFR. The company continued to incur loss and the net worth
of the company again became negative as on 31st March, 1999. The Company was again
referred to BIFR in November, 1999. Company’s case was registered vide Case
No.501/2000. BIFR sanctioned the Draft Rehabilitation Scheme in November, 2004 for
implementation. As per Scheme, net worth of the Company was slated to become positive in
2008-09 with concession from CIL. Cabinet Committee on Economic Affairs has also
approved the BRPSE recommended Revival Plan of ECL on 6th October, 2006. As per this
Scheme, net worth of the Company was slated to become positive in 2009-10. As directed
by BIFR, in its meeting held on 02.09.2011, DMRP, September, 2011 was submitted but the
official approval has not been communicated till now. As per the revised DMRP of ECL –
September, 2011, the net worth of the company was slated to become positive in 2015-16.
Miscellaneous Application No.341/2014 filed by the Company before the BIFR was heard on
22nd September, 2014. This application was filed by the Company to pass an order directing
CIL for waiver of Unsecured Loan and conversion of Current Account Balance into Equity.
The Bench observed that the already sanctioned Scheme envisaged that the relief was
categorically sought from CIL for waiver of Unsecured Loan and conversion of Current
Account Balance to Equity Share Capital and therefore, permission of the BIFR appeared to
be implied and implicit for doing so at the level of CIL and therefore, no further permission
from the BIFR was required. Accordingly, BIFR Bench directed State Bank of India
(Monitoring Agency) to: 1. Clarify to ECL, being the Applicant Company, about the procedure
of implementation of the unimplemented part of the Scheme and its treatment in the Balance
Sheet regarding waiver of Unsecured Loan and conversion of Current Account Balance into
Equity Share Capital and 2. Submit a report that the implementation of the sanctioned
Scheme is consistent in the manner it was sanctioned. The Bench also directed the
Company to file auditor’s certificate stating status of the net worth of the Company along with
its current Balance Sheet immediately after implementation of the unimplemented part of the
sanctioned scheme. State Bank of India vide its letter dated 1st November 2014 to ECL
proposed modification of terms of relief and concession from CIL from “Waiver of unsecured
loan of Rs. 519 Crore and conversion of Current
77. 77. Page | 77 Account Balance of Rs. 1532 Crore as on 31st March 2003 into Equity Share
Capital” to “issue of nonconvertible, redeemable, cumulative preference shares for an
aggregate value of Rs. 2051 Crores to CIL by ECL in full satisfaction of Unsecured Loan and
Current Account Balance as on 31st March 2003”. After detailed deliberation in 310th CIL
Board Meeting held on 8th November 2014 and as recommended by Audit Committee,
Board accorded its approval to convert Unsecured Loan of Rs. 519 Crore and Current
Account Balance of Rs. 1532 Crore, aggregating to Rs. 2051 Crore, as on 31st March 2003
of ECL with CIL into fully paid-up 6% non- convertible, cumulative, redeemable, Preference
Shares of face value of Rs. 1000/ - each to CIL. The Preference Shares are to be redeemed
on expiry of 7 years from the date of issue and allotment. However, CIL would have the
option to redeem at any time after the expiry of 5 years from the date of issue and allotment.
Redemption of preference shares shall be at the face value (no redemption premium).
Annual cumulative dividend is 6%. Accordingly Authorized Capital of ECL was raised from
Rs. 2500 Crore to Rs. 4600 Crore (Refer Note 1) and in the 275th ECL Board meeting held
on 25th December 2014 the Board approved the proposal for offer and allotment of
Preference Shares amounting to Rs. 2050.97 Crore to CIL. On 26th December 2014,
20509700 6% non-convertible, cumulative, redeemable, Preference Shares of Rs. 1000/-
each amounting to Rs. 2050.97 Crores was allotted and issued to CIL, in accordance with
the above, and consequently the net worth of ECL became positive. The company had filed
a Miscellaneous Application (MA) dated 02.02.2015, registered in BC section vide No.53/
2015/ BC dated 02.02.2015. In the prayer of the MA, the Company had requested the
Hon’ble Bench to issue the following directions inter-alia: a) To make an affirmative
declaration with regard to the positive net worth of the Company and further declare it as no
longer a Sick Industrial Company as per the provisions of the Act; and b) To pass such other
or further orders as this Hon’ble Board may deem fit and proper on the facts and
circumstances of the present case. In the hearing held on 11.02.2015 in MA No. 53/ 2015,
the representative of the company stated that the company has filed an MA requesting the
Board to de-register the company from the purview of SICA as the net worth of the company
has turned positive at Rs. 916.87 Crore based on its audited Balance Sheet as on
31.12.2014 and auditors certificate annexed with the MA.
78. 78. Page | 78 SBI, the monitoring agency, recommended vide its letter dated 09.02.2015 for
de-registration of the company from the purview of SICA/ BIFR being a fit case with in the
meaning of section 3(1)(o) of SICA since the net worth of the company has become positive.
Having considered the submissions made during the hearing and material on record, the
Bench issued the following directions inter-alia: a. The sick company, M/ s Eastern Coalfields
Ltd. (BIFR Case No.501/2000) ceases to be a sick industrial company, with in the meaning
of Section 3(1)(o) of SICA, as its net-worth has turned positive. It is therefore, discharged
from the purview of SICA / BIFR. b. The Board discharges State Bank of India from the
responsibility of Monitoring Agency to the Board. c. Accordingly, MA No.53/2015 filed by the
company stands disposed off. 13.7 In the absence of notification of rules by the
Central/State Government the effects of the provisions of the The Mines and Minerals
(Development and Regulation) Amendment Act, 2015 has not been considered in the
accounts. 13.8 MAT Credit Entitlement: During the year the Company is required to pay
Minimum Alternative Tax (MAT)as the same exceeds the normal Income Tax payable for the
year. MAT credit being the excess of MAT over the normal Income Tax payable is
recognized as an asset – “MAT Credit Entitlement” for adjustment against the normal Income
Tax during the specified period under the Income Tax Act, in accordance with the
recommendation contained in the guidance note issued by the Institute of Chartered
Accountants of India. The Company shall review the “MAT Credit Entitlement” at each
Balance Sheet date and make necessary adjustment during the specified period. 14.
ACCOUNTING STANDARDS: 1. AS-17: Segment Reporting – The Company is primarily
engaged in a single segment business of production and sale of coal. There is no other
reportable primary segment identifiable in accordance with AS-17. 2. AS-18: Related Party
 Disclosures – Key Managerial Personnel Whole time Functional Directors: a. Shri Rakesh
Sinha Chairman-cum-Managing Director b. Shri S. Chakravarty Director (Technical) Opn. c.
Shri C. K. Dey Director (Finance) (Up to 28.02.15)
MBA PROJECT REPORT ON RATIO ANALYSIS
Meaning of Ratio:- A ratio is simple arithmetical expression of the relationship of
one number to another. It may be defined as the indicated quotient of two
mathematical expressions.

According to Accountant’s Handbook by Wixon, Kell and Bedford, “a ratio is an

expression of the quantitative relationship between two numbers”.

  Ratio Analysis:- Ratio analysis is the process of determining and presenting the

relationship of items and group of items in the statements. According to Batty J.
Management Accounting “Ratio can assist management in its basic functions of
forecasting, planning coordination, control and communication”.

 It is helpful to know about the liquidity, solvency, capital structure and
profitability of an organization. It is helpful tool to aid in applying judgement,
otherwise complex situations.

Ratio analysis can represent following three methods.

Ratio may be expressed in the following three ways :

1.     Pure Ratio or Simple Ratio :- It is expressed by the simple division of one

number by another. For example , if the current assets of a business are Rs.
200000 and its current liabilities are Rs. 100000, the ratio of ‘Current assets
to current liabilities’ will be 2:1.

2.     ‘Rate’ or ‘So Many Times :- In this type , it is calculated how many times a
figure is, in comparison to another figure. For example , if a firm’s credit
sales during the year are Rs. 200000 and its debtors at the end of the year are
Rs. 40000 , its Debtors Turnover Ratio is 200000/40000 = 5 times. It shows
that the credit sales are 5 times in comparison to debtors.

3.     Percentage  :- In this type, the relation between two figures is expressed in
hundredth. For example, if a firm’s capital is Rs.1000000 and its profit is
Rs.200000 the ratio of profit capital, in term of percentage, is
200000/1000000*100 = 20%
ADVANTAGE OF RATIO ANALYSIS 

1. Helpful in analysis of Financial Statements.

2. Helpful in comparative Study.
3. Helpful in locating the weak spots of the business.
4. Helpful in Forecasting.
5. Estimate about the trend of the business.
6. Fixation of ideal Standards.
7. Effective Control.
8. Study of Financial Soundness.
LIMITATIONS OF RATIO ANALYSIS
1.     Comparison not possible if different firms adopt different accounting policies.
2.     Ratio analysis becomes less effective due to price level changes.
3.     Ratio may be misleading in the absence of absolute data.
4.     Limited use of a single data.
5.     Lack of proper standards.
6.     False accounting data gives false ratio.
7.     Ratios alone are not adequate for proper conclusions.
8.     Effect of personal ability and bias of the analyst. 
CLASSIFICATION OF RATIO 
Ratio may be classified into the four categories as follows:
A.        Liquidity Ratio

a.      Current Ratio

b.     Quick Ratio or Acid Test Ratio

B.        Leverage or Capital Structure Ratio

a.      Debt Equity Ratio

b.     Debt to Total Fund Ratio

c.     Proprietary Ratio

d.     Fixed Assets to Proprietor’s Fund Ratio

e.      Capital Gearing Ratio

f.       Interest Coverage Ratio

 C.        Activity Ratio or Turnover Ratio

a.      Stock Turnover Ratio

b.     Debtors or Receivables Turnover Ratio

c.     Average Collection Period

d.     Creditors or Payables Turnover Ratio

e.      Average Payment Period

f.       Fixed Assets Turnover Ratio

g.     Working Capital Turnover Ratio

D.        Profitability Ratio or Income Ratio

 (A) Profitability Ratio based on Sales :

 a. Gross Profit Ratio

 b. Net Profit Ratio

 c. Operating Ratio

 d. Expenses Ratio

 (B) Profitability Ratio Based on Investment :

I.        Return on Capital Employed

          

       II.       Return on Shareholder’s Funds :

a.      Return on Total Shareholder’s Funds

b.     Return on Equity Shareholder’s Funds

c.     Earning Per Share

d.     Dividend Per Share

e.      Dividend Payout Ratio

 f.       Earning and Dividend Yield

g.     Price Earning Ratio

LIQUIDITY RATIO

 (A) Liquidity Ratio:- It refers to the ability of the firm to meet  its current
liabilities. The liquidity ratio, therefore, are also called ‘Short-term Solvency
Ratio’. These ratio are used to assess the short-term financial position of the
concern. They indicate the firm’s ability to meet its current obligation out of
current resources.

 In the words of Saloman J. Flink, “Liquidity is the ability of the firms to meet its
current obligations as they fall due”.

 Liquidity ratio include two ratio :-

a.      Current Ratio

b.     Quick Ratio or Acid Test Ratio

a. Current Ratio:- This ratio explains the relationship between current assets and
current liabilities of a business.

Current Assets:-‘Current assets’ includes those assets which can be converted into
cash with in a year’s time.
Current Assets = Cash in Hand + Cash at Bank + B/R + Short Term Investment +
Debtors(Debtors – Provision) + Stock(Stock of Finished Goods + Stock of Raw
Material + Work in Progress) + Prepaid Expenses.

Current Liabilities :- ‘Current liabilities’ include those liabilities which are

repayable in a year’s time.

Current Liabilities = Bank Overdraft + B/P + Creditors + Provision for Taxation +

Proposed Dividend + Unclaimed Dividends + Outstanding Expenses + Loans
Payable with in a Year.
Significance :- According to accounting principles, a current ratio of 2:1 is
supposed to be an ideal ratio.

It means that current assets of a business should, at least , be twice of its current
liabilities. The higher ratio indicates the better liquidity position, the firm will be
able to pay its current liabilities more easily. If the ratio is less than 2:1, it indicate
lack of liquidity and shortage of working capital.
The biggest drawback of the current ratio is that it is susceptible to “window
dressing”. This ratio can be improved by an equal decrease in both current assets
and current liabilities.

b. Quick Ratio:- Quick ratio indicates whether the firm is in a position to pay its
current liabilities with in a month or immediately.

‘Liquid Assets’ means those assets, which will yield cash very shortly.

 Liquid Assets = Current Assets – Stock – Prepaid Expenses

Significance :- An ideal quick ratio is said to be 1:1. If it is more, it is considered

to be better. This ratio is a better test of short-term financial position of the
company.

LEVERAGE OR CAPITAL STRUCTURE RATIO

(B)  Leverage or Capital Structure Ratio :- This ratio disclose the firm’s ability to
meet the interest costs regularly and Long term indebtedness at maturity.

These ratio include the following ratios :

a.      Debt Equity Ratio:- This ratio can be expressed in two ways:

First Approach : According to this approach, this ratio expresses the

relationship between long term debts and shareholder’s fund.

 Formula:
Debt Equity Ratio=Long term Loans/Shareholder’s Funds or Net Worth
Long Term Loans:- These refer to long term liabilities which mature after one
year. These include Debentures, Mortgage Loan, Bank Loan, Loan from Financial
institutions and Public Deposits etc.

Shareholder’s Funds :- These include Equity Share Capital, Preference Share

Capital, Share Premium, General Reserve, Capital Reserve, Other Reserve and
Credit Balance of Profit & Loss Account.

Second Approach : According to this approach the ratio is calculated as follows:-

 Formula:
Debt Equity Ratio=External Equities/internal  Equities
 
 Debt equity ratio is calculated for using second approach.

Significance :- This Ratio is calculated to assess the ability of the firm to meet its
long term liabilities. Generally, debt equity ratio of is considered safe.
If the debt equity ratio is more than that, it shows a rather risky financial position
from the long-term point of view, as it indicates that more and more funds invested
in the business are provided by long-term lenders.
The lower this ratio, the better it is for long-term lenders because they are more
secure in that case. Lower than 2:1 debt equity ratio provides sufficient protection
to long-term lenders.
b.  Debt to Total Funds Ratio : This Ratio is a variation of the debt equity ratio and
gives the same indication as the debt equity ratio. In the ratio, debt is expressed in
relation to total funds, i.e., both equity and debt.
Formula:
Debt to Total Funds Ratio = Long-term Loans/Shareholder’s funds + Long-term
Loans
 
Significance  :- Generally, debt to total funds ratio of 0.67:1 (or

67%) is considered satisfactory. In other words, the proportion of long term loans
should not be more than 67% of total funds.
A higher ratio indicates a burden of payment of large amount of interest charges
periodically and the repayment of large amount of loans at maturity. Payment of
interest may become difficult if profit is reduced. Hence, good concerns keep the
debt to total funds ratio below 67%. The lower ratio is better from the long-term
solvency point of view.
c. Proprietary Ratio:- This ratio indicates the proportion of total funds provide by
owners or shareholders.

Formula:

Proprietary Ratio = Shareholder’s Funds/Shareholder’s Funds + Long term loans

 
Significance  :- This ratio should be 33% or more than that. In other words, the
proportion of shareholders funds to total funds should be 33% or more.
 A higher proprietary ratio is generally treated an indicator of sound financial
position from long-term point of view, because it means that the firm is less
dependent on external sources of finance.

If the ratio is low it indicates that long-term loans are less secured and they face
the risk of losing their money.

d. Fixed Assets to Proprietor’s Fund Ratio  :- This ratio is also know as fixed
assets to net worth ratio.

 Formula:
Fixed Asset to Proprietor’s Fund Ratio = Fixed Assets/Proprietor’s Funds (i.e., Net
Worth)
Significance :- The ratio indicates the extent to which proprietor’s (Shareholder’s)
funds are sunk into fixed assets. Normally , the purchase of fixed assets should be
financed by proprietor’s funds. If this ratio is less than 100%, it would mean that
proprietor’s fund are more than fixed assets and a part of working capital is
provided by the proprietors. This will indicate the long-term financial soundness of
business.

e. Capital Gearing Ratio:- This ratio establishes a relationship between equity

capital (including all reserves and undistributed profits) and fixed cost bearing
capital.

 Formula:
Capital Gearing Ratio = Equity Share Capital+ Reserves + P&L Balance/ Fixed
cost Bearing Capital

Whereas, Fixed Cost Bearing Capital = Preference Share Capital  + Debentures +

Long Term Loan

Significance:- If the amount of fixed cost bearing capital is more than the
equity share capital including reserves an undistributed profits), it will be called
high capital gearing and if it is less, it will be called low capital gearing.

The high gearing will be beneficial to equity shareholders when the rate of
interest/dividend payable on fixed cost bearing capital is lower than the rate of
return on investment in business.
 Thus, the main objective of using fixed cost bearing capital is to maximize the
profits available to equity shareholders.

f.  Interest Coverage Ratio:- This ratio is also termed as ‘Debt Service Ratio’. This
ratio is calculated as follows:

 Formula:

Interest Coverage Ratio = Net Profit before charging interest and tax / Fixed
Interest Charges

Significance  :- This ratio indicates how many times the interest charges are
covered by the profits available to pay interest charges.

This ratio measures the margin of safety for long-term lenders.

 This higher the ratio, more secure the lenders is in respect of payment of interest
regularly. If profit just equals interest, it is an unsafe position for the lender as well
as for the company also , as nothing will be left for shareholders.

 An interest coverage ratio of 6 or 7 times is considered appropriate.

ACTIVITY RATIO OR TURNOVER RATIO

 (C) Activity Ratio or Turnover Ratio :- These ratio are calculated on the bases of ‘cost
of sales’ or sales, therefore, these ratio are also called as ‘Turnover Ratio’.  Turnover
indicates the speed or number of times the  capital employed has been rotated in the
process of doing business. Higher turnover ratio indicates the better use of capital or
resources and in turn lead to higher profitability.

 It includes the following :

a.          Stock Turnover Ratio:- This ratio indicates the relationship between the cost
of goods during the year and average stock kept during that year.

Formula:

Stock Turnover Ratio = Cost of Goods Sold / Average Stock

 Here, Cost of goods sold = Net Sales – Gross Profit

 Average Stock = Opening Stock + Closing Stock/2

 Significance:- This ratio indicates whether stock has been used or not. It shows
the speed with which the stock is rotated into sales or the number of times the
stock is turned into sales during the year.

The higher the ratio, the better it is, since it indicates that stock is selling quickly.
In a business where stock turnover ratio is high, goods can be sold at a low
margin of profit and even than the profitability may be quit high.

b.          Debtors Turnover Ratio :- This ratio indicates the relationship between credit
sales and average debtors during the year :

Formula:

Debtor Turnover Ratio = Net Credit Sales / Average Debtors + Average B/R

While calculating this ratio, provision for bad and doubtful debts is not deducted
from the debtors, so that it may not give a false impression that debtors are
collected quickly.

Significance :- This ratio indicates the speed with which the amount is collected
from debtors. The higher the ratio, the better it is, since it indicates that amount
from debtors is being collected more quickly. The more quickly the debtors pay,
the less the risk from bad- debts, and so the lower the expenses of collection and
increase in the liquidity of the firm.

By comparing the debtors turnover ratio of the current year with the previous year,
it may be assessed whether the sales policy of the management is efficient or not.

c.            Average Collection Period :- This ratio indicates the time with in which the
amount is collected from debtors and bills receivables.

 Formula:

Average Collection Period = Debtors + Bills Receivable /  Credit Sales per day

Here, Credit Sales per day = Net Credit Sales of the year / 365

Second Formula :-

Average Collection Period = Average Debtors *365 /  Net Credit Sales

Average collection period can also be calculated on the bases of ‘Debtors Turnover
Ratio’. The formula will be:
Average Collection Period = 12 months or 365 days / Debtors  Turnover Ratio

Significance  :- This ratio shows the time in which the customers are paying for
credit sales. A higher debt collection period is thus, an indicates of the inefficiency
and negligency on the part of management. On the other hand, if there is decrease
in debt collection period, it indicates prompt payment by debtors which reduces the
chance of bad debts.

d. Creditors Turnover Ratio :- This ratio indicates the relationship between credit

purchases and average creditors during the year .

Formula:-

Creditors Turnover Ratio = Net credit Purchases / Average Creditors + Average B/P

Note  :- If the amount of credit purchase is not given in the question, the ratio may
be calculated on the bases of total purchase.
Significance  :- This ratio indicates the speed with which the amount is being paid
to creditors. The higher the ratio, the better it is, since it will indicate that the
creditors are being paid more quickly which increases the credit worthiness of the
firm.

d. Average Payment Period  :- This ratio indicates the period which is normally
taken by the firm to make payment to its creditors.

 Formula:-

Average Payment Period = Creditors + B/P/ Credit Purchase per day

This ratio may also be calculated as follows :

Average Payment Period = 12 months or 365 days /  Creditors Turnover Ratio

Significance  :- The lower the ratio, the better it is, because a shorter payment
period implies that the creditors are being paid rapidly.

d.          Fixed Assets Turnover Ratio  :- This ratio reveals how efficiently the fixed
assets are being utilized.

Formula:-
 Fixed Assets Turnover Ratio = Cost of Goods Sold/ Net Fixed Assets

Here, Net Fixed Assets = Fixed Assets – Depreciation

Significance:- This ratio is particular importance in manufacturing concerns where

the investment in fixed asset is quit high. Compared with the previous year, if there
is increase in this ratio, it will indicate that there is better utilization of fixed assets.
If there is a fall in this ratio, it will show that fixed assets have not been used as
efficiently, as they had been used in the previous year.

e.            Working Capital Turnover Ratio :- This ratio reveals how efficiently

working capital has been utilized in making sales.

Formula :-

Working Capital Turnover Ratio = Cost of Goods Sold /  Working Capital

Here, Cost of Goods Sold = Opening Stock + Purchases +  Carriage + Wages +

Other Direct Expenses - Closing Stock

Working Capital = Current Assets – Current Liabilities

Significance  :- This ratio is of particular importance in non-manufacturing

concerns where current assets play a major role in generating sales. It shows the
number of times working capital has been rotated in producing sales.

A high working capital turnover ratio shows efficient use of working capital and
quick turnover of current assets like stock and debtors.

A low working capital turnover ratio indicates under-utilisation of working capital.

Profitability Ratios or Income Ratios

(D) Profitability Ratios or Income Ratios:- The main object of every business

concern is to earn profits. A business must be able to earn adequate profits in
relation to the risk and capital invested in it. The efficiency and the success of a
business can be measured with the help of profitability ratio.

 Profitability ratios are calculated to provide answers to the following questions:

           i.            Is the firm earning adequate profits?

         ii.            What is the rate of gross profit and net profit on sales?

       iii.            What is the rate of return on capital employed in the firm?

       iv.            What is the rate of return on proprietor’s (shareholder’s) funds?

         v.            What is the earning per share?

 Profitability ratio can be determined on the basis of either sales or investment into
business.

(A)            Profitability Ratio Based on Sales  :

 a) Gross Profit Ratio : This ratio shows the relationship between gross profit and
sales.

 Formula :

Gross Profit Ratio = Gross Profit / Net Sales *100

 Here, Net Sales = Sales – Sales Return

Significance:- This ratio measures the margin of profit available on sales. The

higher the gross profit ratio, the better it is. No ideal standard is fixed for this ratio,
but the gross profit ratio should be adequate enough not only to cover the operating
expenses but also to provide for deprecation, interest on loans, dividends and
creation of reserves.

b) Net Profit Ratio:- This ratio shows the relationship between net profit and
sales. It may be calculated by two methods:

 Formula:

Net Profit Ratio = Net Profit / Net sales *100

Operating Net Profit = Operating Net Profit / Net Sales *100

Here, Operating Net Profit = Gross Profit – Operating Expenses such as Office and
Administrative Expenses, Selling and Distribution Expenses, Discount, Bad Debts,
Interest on short-term debts etc.
Significance  :- This ratio measures the rate of net profit earned on sales. It helps in
determining the overall efficiency of the business operations. An increase in the
ratio over the previous year shows improvement in the overall efficiency and
profitability of the business.
(c) Operating Ratio:- This ratio measures the proportion of an enterprise cost of
sales and operating expenses in comparison to its sales.
 Formula:

Operating Ratio = Cost of Goods Sold + Operating Expenses/ Net Sales *100

Where, Cost of Goods Sold = Opening Stock + Purchases + Carriage + Wages +

Other Direct Expenses - Closing Stock

Operating Expenses = Office and Administration Exp. + Selling and Distribution

Exp. + Discount + Bad Debts + Interest on Short- term loans.

‘Operating Ratio’ and ‘Operating Net Profit Ratio’ are inter-related. Total of both
these ratios will be 100.
Significance:- Operating Ratio is a measurement of the efficiency and profitability
of the business enterprise. The ratio indicates the extent of sales that is absorbed by
the cost of goods sold and operating expenses. Lower the operating ratio is better,
because it will leave higher margin of profit on sales.

(d)  Expenses Ratio:- These ratio indicate the relationship between expenses and
sales. Although the operating ratio reveals the ratio of total operating expenses in
relation to sales but some of the expenses include in operating ratio may be
increasing while some may be decreasing. Hence, specific expenses ratio are
computed by dividing each type of expense with the net sales to analyse the causes
of variation in each type of expense.

The ratio may be calculated as :

(a) Material Consumed Ratio = Material Consumed/Net Sales*100

(b) Direct Labour cost Ratio = Direct labour cost / Net sales*100

(c) Factory Expenses Ratio = Factory Expenses / Net Sales *100

 (a), (b) and (c) mentioned above will be jointly called cost of goods sold ratio.

 It may be calculated as:

 Cost of Goods Sold Ratio = Cost of Goods Sold / Net Sales*100

(d) Office and Administrative Expenses Ratio = Office and Administrative Exp./

                                                                            Net Sales*100

(e) Selling Expenses Ratio = Selling Expenses / Net Sales *100

(f) Non- Operating Expenses Ratio = Non-Operating Exp./Net sales*100

Significance:- Various expenses ratio when compared with the same ratios of the
previous year give a very important indication whether these expenses in relation
to sales are increasing, decreasing or remain stationary. If the expenses ratio is
lower, the profitability will be greater and if the expenses ratio is higher, the
profitability will be lower.

(B)  Profitability Ratio Based on Investment in the Business:-

These ratio reflect the true capacity of the resources employed in the enterprise.
Sometimes the profitability ratio based on sales are high whereas profitability ratio
based on investment are low. Since the capital is employed to earn profit, these
ratios are the real measure of the success of the business and managerial efficiency.
These ratio may be calculated into two categories:

I. Return on Capital Employed

II. Return on Shareholder’s funds

I.      Return on Capital Employed :- This ratio reflects the overall profitability of

the business. It is calculated by comparing the profit earned and the capital
employed to earn it. This ratio is usually in percentage and is also known as ‘Rate
of Return’ or ‘Yield on Capital’. 

Formula:

Return on Capital Employed = Profit before interest, tax and dividends/

Capital Employed *100
Where, Capital Employed = Equity Share Capital + Preference Share Capital + All
Reserves + P&L Balance +Long-Term Loans- Fictitious Assets (Such as
 Preliminary Expenses OR etc.) – Non-Operating Assets like Investment made
outside the business.

Capital Employed = Fixed Assets + Working Capital  

Advantages of ‘Return on Capital Employed’:-

     Since profit is the overall objective of a business enterprise, this ratio is a

barometer of the overall performance of the enterprise. It measures how
efficiently the capital employed in the business is being used.

     Even the performance of two dissimilar firms may be compared with the help of
this ratio.

     The ratio can be used to judge the borrowing policy of the enterprise.

     This ratio helps in taking decisions regarding capital investment in new projects.
The new projects will be commenced only if the rate of return on capital
employed in such projects is expected to be more than the rate of borrowing.

     This ratio helps in affecting the necessary changes in the financial policies of the
firm.

     Lenders like bankers and financial institution will be determine whether the
enterprise is viable for giving credit or extending loans or not.

     With the help of this ratio, shareholders can also find out whether they will
receive regular and higher dividend or not.

II.  Return on Shareholder’s Funds :-

Return on Capital Employed Shows the overall profitability of the funds supplied
by long term lenders and shareholders taken together. Whereas, Return on
shareholders funds measures only the profitability of the funds invested by
shareholders.
These are several measures to calculate the return on shareholder’s funds:

(a)  Return on total Shareholder’s Funds :-

For calculating this ratio ‘Net Profit after Interest and Tax’ is divided by total
shareholder’s funds.
 Formula:

Return on Total Shareholder’s Funds = Net Profit after Interest and Tax / Total
Shareholder’s Funds

Where, Total Shareholder’s Funds = Equity Share Capital + Preference Share

Capital + All Reserves + P&L A/c Balance –Fictitious Assets

Significance:- This ratio reveals how profitably the proprietor’s funds have been
utilized by the firm. A comparison of this ratio with that of similar firms will throw
light on the relative profitability and strength of the firm.

(b) Return on Equity Shareholder’s Funds:-

 Equity Shareholders of a company are more interested in knowing the earning

capacity of their funds in the business. As such, this ratio measures the profitability
of the funds belonging to the equity shareholder’s.

Formula:

Return on Equity Shareholder’s Funds = Net Profit (after int., tax &
preference  dividend) / Equity  Shareholder’s Funds *100

RATIO ANALYSIS
 Where, Equity Shareholder’s Funds = Equity Share Capital + All Reserves + P&L
A/c

 Balance – Fictitious Assets

 Significance:- This ratio measures how efficiently the equity shareholder’s funds

are being used in the business. It is a true measure of the efficiency of the
management since it shows what the earning capacity of the equity shareholders
funds. If the ratio is high, it is better, because in such a case equity shareholders
may be given a higher dividend.

(c) Earning Per Share (E.P.S.)  :- This ratio measure the profit available to the
equity shareholders on a per share basis. All profit left after payment of tax and
preference dividend are available to equity shareholders.

 Formula:
Earning Per Share = Net Profit – Dividend on  Preference Shares / No. of Equity
Shares

Significance:- This ratio helpful in the determining of the market price of the

equity share of the company. The ratio is also helpful in estimating the capacity of
the company to declare dividends on equity shares.

(d) Dividend Per Share (D.P.S.):- Profits remaining after payment of tax and
preference dividend are available to equity shareholders.

But of these are not distributed among them as dividend . Out of these profits is
retained in the business and the remaining is distributed among equity shareholders
as dividend. D.P.S. is the dividend distributed to equity shareholders divided by the
number of equity shares.

 Formula:

D.P.S. = Dividend paid to Equity Shareholder’s / No. of Equity Shares *100

(e) Dividend Payout Ratio or D.P. :- It measures the relationship between the

earning available to equity shareholders and the dividend distributed among them.

 Formula:

D.P. = Dividend paid to Equity Shareholders/ Total

 Net Profit belonging to Equity Shareholders*100

 OR

D.P. = D.P.S. / E.P.S. *100

(f) Earning and Dividend Yield :- This ratio is closely related to E.P.S. and D.P.S.
While the E.P.S. and D.P.S. are calculated on the basis of the book value of shares,
this ratio is calculated on the basis of the market value of share
 (g) Price Earning (P.E.) Ratio:- Price earning ratio is the ratio between market
price per equity share & earnings per share. The ratio is calculated to make an
estimate of appreciation in the value of a share of a company & is widely used by
investors to decide whether or not to buy shares in a particular company.
Significance :- This ratio shows how much is to be invested in the market in this
company’s shares to get each rupee of earning on its shares. This ratio is used to
measure whether the market price of a share is high or low.