PROFIT AND LOSS

Revenue side – Notes to accounts

Stock adjustment

The stock (inventory) that company was holding has increased as the new figure of stock is in
positive, which indicates the piling up of the closing stock. The figures have skyrocketed by 139% as
compared to the previous year. During the past year, the demand of iron ore was facing a slump due
to cheap import of Chinese ore, but the company might have misjudged the demand for the current
year as the government dropped the excise duty on exports and on an optimistic move might have
produced more. Nevertheless, the revenue did increase but not as much they would have estimated,
which ultimately caused a hoarding up of inventory.

Other Incomes

They have decreased by 190 crores as compared to the last year, which is caused by a drop in the
interest income by half (800 cr. to 400 cr.)

1) Any new investments might have been brought on which the interest might not have accrued
until now.

2) Although an increase in loans and advances (Balance Sheet) points towards the fact that interest
should have gone up, but as a major part of it has gone as an advance to suppliers and therefore to
boost up sales, they could have lended such loans to such suppliers at “special” rates.

Expense side – Notes to accounts

Tax

The tax paid to the income tax authorities have gone up by 800 crores mainly due to an increase in
the profit after tax figure has gone up by 44%. However, the tax paid which was 44% of the PAT has
now come down to 37% mainly due to adjustments in tax paid during the previous year.

Other Manufacturing Expenses

They have gone up by 10% Y-O-Y or by 38 crores, but can be explained as the major part of it was
spent on repairs to the plant and machinery as the fixed asset base has increased drastically by 962
crores (40% Y-O-Y)

BALANCE SHEET

Other Assets- They have increased by 650 crores (22% Y-O-Y), the major component, which has
increased in it, is other non-current assets that includes intellectual and property rights. This can be
interpreted that the company has bought license to conduct mining activities in new coalfields and is
in accord of what the directors’ reports state.
Loans and Advances – The following line item of the balance sheet has considerable jumped by 26%
Y-O-Y or by 615 crores and is mainly due to the following components,

1) Advance to suppliers – To increase sales by providing them with finance at cheap rates.

2) Other current assets – They have increased because the company has invested in marketable
securities, which might have been bought for speculative purposes.

Reserves and Surplus – They have shot up by 1835 crores, out of which the majority chunk (1000
crores) is due to an increase in general reserves (as per Directors’ Report-Expansion Plans) and the
rest is due to an increase in profits after tax.