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You can view the entire text of Notes to accounts of the company for the latest year

BSE: 542760ISIN: INE00M201021INDUSTRY: Engineering - General

BSE   ` 522.90   Open: 525.10   Today's Range 518.00
532.90
+4.90 (+ 0.94 %) Prev Close: 518.00 52 Week Range 253.45
646.95
Year End :2023-03 

(A) Rights, preferences and restrictions attached to equity shares

The Company has a single class of equity shares. Accordingly, all equity shares rank equally with regard to dividends and share in the Company's residual assets. The equity shares are entitled to receive dividend as declared from time to time. The voting rights of an equity shareholder on a poll (not on show of hands) are in proportion to its share of the paid-up equity capital of the Company. Voting rights cannot be exercised in respect of shares on which any call or other sums presently payable have not been paid.

Failure to pay any amount called up on shares may lead to forfeiture of the shares. On winding up of the Company, the holders of equity shares will be entitled to receive the residual assets of the Company, remaining after distribution of all preferential amounts in proportion to the number of equity shares held.

(B) Shares held by holding company

During the year ended 31 March 2022, pursuant to the Share Subscription Agreement ("SSA") dated 10 October 2021 entered into between the Company, Shapoorji Pallonji and Company Private Limited ("SPCPL"), Mr. Khurshed Yazdi Daruvala and Reliance New Energy Limited (formerly known as Reliance New Energy Solar Limited) ("RNEL"), 29,333,333 equity shares were allotted by the Company on 30 December 2021 to RNEL on a preferential basis. Pursuant to the Share Purchase Agreement ("SPA") dated 10 October 2021 entered into between SPCPL, Mr. Khurshed Yazdi Daruvala and RNEL, SPCPL has sold 18,400,000 equity shares of the Company to RNEL on 6 January 2022. Also, pursuant to the open offer made by RNEL, 8,476,251 equity shares were acquired by RNEL on 28 January 2022. Further, SPCPL and Mr. Khurshed Yazdi Daruvala have sold 15,380,904 and 4,286,846 equity shares respectively to RNEL on 9 February 2022. On completion of all the above, RNEL holds 75,877,334 equity shares representing 40.00% of the total share capital of the Company as on date. Accordingly, effective 30 December 2021 the Company ceased to be a subsidiary of SPCPL.

(F) Equity Shares allotted as fully paid-up without payment being received in cash

During the year ended 31 March 2018:

a] 16,036,000 equity shares were issued without payment being received in cash pursuant to the scheme of arrangement of merger of the Solar EPC ("S-EPC"] business of Sterling and Wilson Private Limited along with certain subsidiaries engaged in the S-EPC business with the Holding Company.

b] 3,558 equity shares were issued without payment being received in cash on conversion of loan to equity.

(G) Employee stock option

On 27 March 2019, The Board of Directors of the Holding Company has proposed to Institute the Scheme for Employee Stock Option Plan ('ESOP' or 'Scheme') subject to approval of Shareholders'. The said Scheme has been approved by the Shareholders on 30 May 2021 and grant of the stock options was approved by Nomination and Remuneration Committee effective 15 July 2021. Pursuant to Scheme the Company has granted and has reserved 1,301,213 new stock grants to eligible employees, the exercise price of these ESOP is ' 2 38 per share and the same would get vested in 4 annual tranches of 25% each, commencing one year from date of grant, i.e. 15 July 2021. Refer note 44 for disclosure on share based payments.

(i) Capital reserve on demerger

The Company's capital reserve on demerger is on account of the difference between the net assets and liabilities taken over relating to the Solar-EPC business pursuant to the scheme of arrangement.

(ii) Capital redemption reserve

Capital redemption reserve comprises of an amount equal to nominal value of Class B share bought back out of free reserves of Sterling & Wilson - Waaree Private Limited ('SWWPL'), SWWPL has been merged

with the Company effective from 1 April 2020. Capital redemption reserve is created out of profits available for distribution towards buy back of equity share of the SWWPL. This reserve can be used for the purpose of issue of Bonus shares.

(iii) Securities Premium

Securities premium is used to record the premium received on issue of shares. It is utilised in accordance with the provisions of the Companies Act, 2013.

(iv) Employee stock option reserve

Employee stock option reserve represents the cumulative amounts charged to profit in respect of employee share option arrangements where the scheme has not yet been settled by means of an award of shares to an employees.

(v) Retained earnings

Retained earnings are the (loss) / profits that the Company has incurred / earned till date, less any transfers to general reserve, dividends or other distributions

paid to the owners of the Company and also includes Remeasurements of defined benefit liability, net of tax.

(vi) Effective portion of cash flow hedge

The Company has designated its hedging instruments as cash flow hedges and any effective portion of cash flow hedge is maintained in the said reserve. In case the hedging becomes ineffective, the amount is recognised in the standalone statement of profit and loss. On settlement of the hedging instruments, the balance is re-cycled to the standalone statement of profit and loss.

Details of the security and repayment terms :

(a) Long-term debt from State Bank of India Limited, ICICI Bank Limited, IndusInd Bank Limited and IDFC First Bank Limited with carrying amount aggregating to ' 800 crore (31 March 2022: Nil); The loans carry a variable interest rate ranging from 8.20% p.a. to 9.50% p.a. (31 March 2022: Nil). The loans are secured by second pari passu charge over the current assets and movable fixed assets (excluding leasehold improvements and capital work-inprogress) of the Company. The loans are for a period of 365 to 1,460 days and are repayable in quarterly instalments ranging from 4-12 instalments.

(b) Long-term debt from Arka Fincorp Limited as at 31 March 2023 amounting to ' 100 crore (31 March 2022: Nil). The loan carries an interest rate of 10.90% p.a. (31 March 2022: Nil). The loan is secured by second pari passu charge over the current assets and movable fixed assets (excluding leasehold improvements and capital work-inprogress) of the Company. The loan is for a period of 365 days and is repayable in three instalments.

(c) There are no charges or satisfaction which are to be registered with Registrar of Companies beyond the statutory period.

Details of the security and repayment terms :

(a] Secured Cash Credit facilities from banks under consortium arrangement carrying amount as at 31 March 2023 of ' 42.08 Crore (31 March 2022: ' 46.37 Crore). The bank includes Union Bank of India, State Bank of India, IDBI Bank Limited, Axis Bank Limited, IndusInd Bank Limited, and Yes Bank Limited. The lead bank for the consortium arrangement is Union Bank of India. The Cash Credit is repayable on demand and carries a variable interest rate of 8.55% p.a. to 12.50% p.a. (31 March 2022: 8.45% p.a. to 12.00% p.a.). The Cash Credit is secured by first pari passu charge over the current assets and movable fixed assets (excluding leasehold improvements and capital work-in-progress) of the Company.

(b) Secured Working Capital Loans from banks under consortium arrangement carrying amount as at 31 March 2023 of ' 241.42 Crore (31 March 2022 of ' 264.72 Crore), the banks include Union Bank of India, State Bank of India, IDBI Bank Limited, DBS Bank India Limited, IDFC First Bank Limited, Yes Bank Limited and ICICI Bank Limited, the lead bank for the consortium arrangement is Union Bank of India. The loans carry a variable interest rate which ranges from 8.50% p.a. to 12.50% p.a. (31 March 2022: 8.45% p.a. to 12.50% p.a). The loans are secured by first pari passu charge over the current assets and movable fixed assets (excluding leasehold improvements and capital work-in-progress) of the Company. Working Capital Loan

is subject to repayment / roll-over on due date, for a period of 30-180 days based on sanctioned terms and conditions.

(c) Secured Working Capital term loans from IDBI Bank Limited, DBS Bank India Limited, Yes Bank Limited with carrying amount as at 31 March 2023 aggregating to ' 600 Crore (31 March 2022: ' Nil). The loans carry a variable interest rate ranging from 8.90% p.a. to 9.60% p.a. (31 March 2022: Nil). The loans are secured by second pari passu charge over the current assets and movable fixed assets (excluding leasehold improvements and capital work-inprogress) of the Company. The loans are for a period of 365 days and are repayable in a single bullet repayment at end of the period.

(d) Unsecured Unlisted Commercial Paper from Siddhesh Capital Market Services Private Limited having carrying amount as at 31 March 2023 of ' 9.60 crore (31 March 2022: Nil) carries a discount rate of 9.50% p.a. The commercial paper is repayable on 14 September 2023.

(e) Unsecured loan from Esterlina Solar Engineers Private Limited having carrying amount as at 31 March 2023 of ' 0.20 crore (31 March 2022 ' Nil) carries a fixed interest of 11.00% p.a.. The loan is repayable on demand.

(f) Unsecured Supplier credit facilities from Oxyzo Financial Services Private Limited and OFB Tech Private Limited, carrying amount as at 31 March 2023 of ' 46.88 crore (as at 31 March 2022: ' 42.14 crore) carries an interest rate of 12.80% p.a. (31 March 2022: 12.00% p.a.) and is repayable within 120 days from draw down date.

(g) There are no charges or satisfaction which are to be registered with Registrar of Companies beyond the statutory period.

(h) The Company has been sanctioned working capital from banks on the basis of security of current assets and moveable fixed assets (excluding leasehold improvements and capital work-in-progress). The Company in this regard has been duly submitting with all such banks from whom such facilities are taken, the quarterly statements as per the terms of the sanction. The said quarterly statements are in agreement with the books of account of the Company of the respective quarters at the point of time of reporting.

Provision for liquidated damages:

Liquidated damages are contractual obligations affecting the contract revenue in case of the works contracts with customers arising as a result of penalties from delays caused in the completion of a contract. For contracts delayed beyond the stipulated contract completion periods, management has estimated the liability that could arise on these contracts.

Provision for foreseeable loss/onerous contracts:

In case of construction contracts, when it is probable that total contract costs will exceed total contract revenue, the expected loss (foreseeable loss) is recognised as an expense immediately in the statement of profit and loss.

Notes:

(a) Increase in Debt Equity ratio is mainly on account of increase in borrowings during the year to meet the working capital requirement of the Company and its subsidiaries along with reduction in project margins caused by enhanced sub-contractor costs and overheads which reduced the equity base.

(b) Debt Service Coverage ratio has worsened on account of increase in loss at an EBITDA level coupled with increase in borrowings during the year to meet the working capital requirement of the Company and its subsidiaries.

(c) Reduction in return on equity ratio is mainly on account of loss for the year.

(d) The Company is not engaged in the business of manufacturing or trading of goods or services and consequently this ratio is not applicable.

(e) Delay in collection of old receivables coupled with the lower turnover during the year had a consequent effect on the trade receivable to turnover ratio.

(f) Delay in collection from customer, reduction in trade payables and reduction in turnover during the year resulted in this ratio.

(g) Lower gross margin on account of enhanced sub-contractor costs and overheads due to project delays alongwith increase in interest costs resulted in this ratio.

(h) Reduction in revenue coupled with lower gross margin on account of enhanced sub-contractor costs and overheads resulted in this ratio.

(i) The Company does not have return bearing investments and hence the ratio is not applicable.

42 Contingent Liabilities and Commitments Particulars

31 March 2023

31 March 2022

Contingent liabilities (Refer note 53]

(a) The Claim against the Company under Andhra Pradesh Goods and Services Tax Act, 2017, Rajasthan Goods and Services Tax Act, 2017, Gujarat Goods and Services Tax Act 2017 demanding tax, penalty and interest (net of provision) *

345.04

249.41

(b) Demand raised by Income Tax authorities

14.14

66.63

(c) Demand raised by Egypt VAT inspection authority

30.95

56.19

(d) Liquidated damages not acknowledged as debt (net of provision)

495.95

608.78

886.08

981.01

* The demand was raised on Sterling and Wilson Private Limited ('SWPL'] by Authorities. However, pursuant to the Scheme of Arrangement, the business of the Company was held in trust by Sterling and Wilson Private Limited ('SWPL') with effect from 9 March 2017 to 28 March 2018 (the date on which Scheme become approved by regulatory authorities). Accordingly, the contingent liability is considered in the books of the Company.

Particulars

31 March 2023

31 March 2022

Capital and other commitments

Capital Commitment towards partner's capital contribution in Sterling Wilson - SPCPL - Chint Moroccan Venture

0.01

0.01

Capital commitment (net of advances) for procurement of property, plant and equipment

0.32

0.2 3

Unspent Corporate Social Responsibilty amount (Refer note 47)

2.10

-

2.43

0.24

Other commitments

a] The Company has issued letters of undertaking to provide need based financial support to its subsidiaries Sterling and Wilson Saudi Arabia Limited and Sterling and Wilson Solar LLC, Oman.

b] The Company had issued corporate guarantee to Emirates NBD Bank PJSC, Dubai, ('Bank') and outstanding as at 31 March 2023 is AED 18.30 crore (' 409.40 crore] (31 March 2022: AED 18.30 crore (' 376.21 crore]] in respect of borrowing facility to be extended by Bank to the Company's subsidiary, Sterling and Wilson International Solar FZCO. The corporate guarantee shall be valid till 12 November 2023.

c] The Company had issued corporate guarantee to Union Bank of India, DIFC Branch ('UBI'] and outstanding as at 31 March 2023 is USD 7.00 crore (' 575.15 crore] (31 March 2022: USD 7.00 crore (' 528.64 crore]] in respect of borrowing facility to be extended by the UBI to the Company's subsidiary, Sterling and Wilson International Solar FZCO. The corporate guarantee shall be valid till 1 March 2025.

d] The Company had issued corporate guarantee to The Hongkong and Shanghai Banking Corporation Limited ('HSBC'] and outstanding as at 31 March 2023 is AUD 1.70 crore (' 93.57 crore] (31 March 2022: AUD 1.70 crore (' 96.16 crore]] in respect of borrowing facility to be extended by HSBC to the Company's subsidiary, Sterling and Wilson International Solar FZCO. The corporate guarantee shall be valid till 30 August 2023.

e] The Company had signed Corporate Guarantee cum Indemnity Agreement dated 30 March 2022 with its wholly owned subsidiary Sterling and Wilson International Solar FZCO in respect of the Indemnity Agreement signed by the Company with Shapoorji Pallonji and Company Private Limited, Khurshed Yazdi Daruvala (jointly the "Promoter Selling Shareholders"] and Reliance New Energy Limited (formerly known as Reliance New Energy Solar Limited] and outstanding amount as at 31 March 202 3 is USD 4.68 crore (' 384.53 crore] (31 March 2022: USD 4.68 crore (' 353.75 crore]]. Also Refer Note 53.

f] During the year, the Company has issued corporate guarantee to Intesa Sanpaolo, Dubai branch and outstanding as at 31 March 2023 is USD 1.70 crore (' 139.68 crore] in respect of borrowing facility to be extended by Intesa Sanpaolo to the Company's

subsidiary, Sterling and Wilson International Solar FZCO. The corporate guarantee shall be valid till 25 March 2024.

g] During the year the Company has issued a Corporate Guarantee amounting to USD 1.25 crore (' 102.37 crore] to Atlantic Insurance Company, USA to enable it to issue a surety bond on behalf of the Company's step down subsidiary, Sterling and Wilson Solar Solutions Inc. The surety bond shall be valid till 16 January 2027.

h] The Hon'ble Supreme Court of India ("SC"] by it's order dated February 28, 2019, in the case of Surya Roshani Limited & others v/s EPFO, set out the principles based on which allowances paid to the employees should be identified for inclusion in basic wages for the purposes of computation of Provident Fund contribution. Subsequently, a review petition against this decision has been filed and is pending before the SC for disposal.

In the view of the management, the liability for the period from date of the SC order to 31 March 2019 is not significant. Further, pending decision on the subject review petition and directions from the EPFO, the impact for the past period, if any, is not ascertainable and consequently no effect has been given in the accounts.

i] A customer in respect of a 93.30 MW DC Photovoltaic solar energy generation facility has initiated Arbitration proceedings for recovery of liquidated damages levied and (unsubstantiated] costs amounting to ' 255.10 crore (31 March 2022: ' 234.70 crore]. The Company has responded to the same as part of the proceedings. As on date the customer owes to the Company an overdue amount of ' 133.95 crore (31 March 2022: ' 123.24 crore] towards EPC work with a further amount of ' 6.84 crore (31 March 2022: ' 6.29 crore] towards unbilled receivable, pending certification of final invoice. The Company has also made a claim of ' 78.84 crore (31 March 2022: ' 66.39 crore] towards prolongation cost, interest on overdue payment and other ancillary costs on the customer. Basis the contractual rights available, the management is confident of full recovery of the receivables and unbilled revenue as at 31 March 2023 and accordingly believes that no further provision is required pertaining to liquidated damages and costs as claimed by the customer. These amounts are covered under indemnity from the promotors of the Company (Refer note 53]

j] The Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business.

The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liability, where applicable in its standalone financial statements. The Company's management does not reasonably expect that these legal notices, when ultimately concluded and determined, will have a material and adverse effect on Company's results of operations or financial condition.

43 Employee Benefits Defined contribution plan:

Contribution to provident fund, Employee State Insurance Scheme and other funds aggregating to ' 13.98 crore (31 March 2022: ' 16.02 crore) is recognised as an expense and included in 'Employee benefits expenses'.

Defined benefit plan and long-term employee benefits:

General description

Gratuity (Defined benefit plan)

In accordance with Indian law, the Company has a defined benefit gratuity plan. Every employee in India who has completed five years or more of service gets a gratuity on death or resignation or retirement at 15 days salary (last drawn basic salary) for each completed year of service.

Compensated absences (Long-term employee benefits)

Long term leave wages are payable to all eligible employees at the rate of daily gross salary for each day of accumulated leave on death or on resignation or upon retirement.

The above sensitivity analysis have been calculated to show the movement in defined benefit obligation in isolation and assuming there are no other changes in market conditions at the reporting date. In practice, generally it does not occur. When we change one variable, it affects to others. In calculating the sensitivity, project unit credit method at the end of the reporting period has been applied.

Estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The Company's liability on account of gratuity is not funded and hence the disclosures relating to the planned assets are not applicable to the Company.

Compensated absences

Compensated absences for employee benefits of ' 5.84 crore (31 March 2022: ' 3.71 crore) expected to be paid in exchange for the services is recognised as an expense during the year.

44 Share based payments

On 27 March 2019, The Board of Directors of the Holding Company has proposed to Institute the Scheme for Employee Stock Option Plan ('ESOP' or 'Scheme') subject to approval of Shareholders'. The said Scheme has been approved by the Shareholders on 30 May 2021 and grant of the stock options was approved by Nomination and Remuneration Committee effective 15 July 2021. Pursuant to Scheme the Company has granted and has reserved 1,301,213 new stock grants to eligible employees, the exercise price of these ESOP is ' 238 per share and the same would get vested in 4 annual tranches of 25% each, commencing one year from date of grant, i.e. 15 July 2021.

47 Corporate social responsibility

As per Section 135 of the Act, a CSR committee has been formed by the Company. The funds are utilised during the year on the activities which are specified in Schedule VII of the Companies Act 2013. The utilisation is done by way of direct contribution towards various activities and activities conducted by the Company.

48 Disclosure under Ind AS 115, Revenue from Contracts with Customers

A) The Company undertakes Engineering, Procurement and Construction business. The ongoing contracts with customers are for Solar utility and Rooftop Project. The type of work in these contracts involve construction, engineering, designing, supply of materials, development of system, installation, project management, operations and maintenance etc.

B) Disaggreagtion of revenue from contracts with customers

Revenue from contracts with customers is disaggregated by primary geographical area and the type of contract of revenue recognition. Disaggregated revenue with the Company's reportable segments is given in note 50.

E) Performance obligation

The Company undertakes Engineering, Procurement and Construction business. The ongoing contracts with customers are for Solar utility and Rooftop Project. The type of work in these contracts involve construction, engineering, designing, supply of materials, development of system, installation, project management, operations and maintenance etc.

The Company evaluates whether each contract consists of a single performance obligation or multiple performance obligations. Contracts where the Company provides a significant integration service to the customer by combining all the goods and services are concluded to have a single performance obligations. Contracts with no significant integration service, and where the customer can benefit from each unit on its own, are concluded to have multiple performance obligations. In such cases consideration is allocated to each performance obligation, based on standalone selling prices. Where the Company enters into multiple contracts with the same customer, the Company evaluates whether the contract is to be combined or not by evaluating factors such as commercial objective of the contract, consideration negotiated with the customer and whether the individual contracts have single performance obligations or not.

The Company recognises contract revenue over time as the performance creates or enhances an asset controlled by the customer. For such arrangements revenue is recognised using cost based input methods. Revenue is recognised with respect to the stage of completion, which is assessed with reference to the proportion of contract costs incurred for the work performed at the balance

sheet date relative to the estimated total contract costs.

Any costs incurred that do not contribute to satisfying performance obligations are excluded from the Company's input methods of revenue recognition as the amounts are not reflective of our transferring control of the system to the customer. Significant judgment is required to evaluate assumptions related to the amount of net contract revenues, including the impact of any performance incentives, liquidated damages, and other forms of variable consideration.

If estimated incremental costs on any contract, are greater than the net contract revenues, the Company recognizes the entire estimated loss in the year/period the loss becomes known. Variations in contract work, claims, incentive payments are included in contract revenue to the extent that may have been agreed with the customer and are capable of being reliably measured.

The Company recognises revenue from Operations and Maintenance services using the time-elapsed measure of progress i.e input method on a straight line basis.

There is no revenue to be recognised in future related to performance obligations that are unsatisfied (or partially satisfied) as at 31 March 2023 and 31 March 2022, except as disclosed below.

The following table includes revenue to be recognised in future related to performance obligations that are unsatisfied (or partially satisfied) as at 31 March 2023 in respect of EPC contracts that have original expected duration of more than one year:

F) Practical expedients:

Applying the practical expedient in paragraph 63 of Ind AS 115, the Company does not adjust the promised amount of consideration for the effects of a significant financing component if at contract inception it is expected that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

The Company applies practical expedient in paragraph 121 of Ind AS 115 and does not disclose information about remaining performance obligations for EPC contracts that have original expected duration of one year or less.

50 Segment Reporting

A. Basis for segmentation

The Company is primarily engaged in the business of complete turnkey solution for Engineering, Procurement, Construction, Operation and maintenance of Renewable Energy Power projects. The Company's Chief Operating Decision Maker (CODM) reviews the internal management reports prepared based on financial information for EPC business and Operation and maintenance service based on analysis of certain performance indicators viz. Gross margin, Profit after tax. Accordingly, the Group has determined its reportable segments under Ind AS 108 "Operating Segments" as follows:

- Engineering, Procurement and Construction (EPC) business; and

- Operation and maintenance service.

B. Business Segment

The Company's revenues and assets represents company's businesses viz. Solar EPC and Solar Operation and maintenance service. Accordingly, Revenue and expenses have been identified to a segment on the basis of direct relationship to operating activities of the segment. Expenditure which are not directly identifiable but has a relationship to the operating activities of the segment are allocated on a reasonable basis.

Revenue and expenses which relate to enterprise as a whole and are not allocable to a segment on reasonable basis have been disclosed as "Unallocable".

Segment assets and segment liabilities represent assets and liabilities of respective segment. Investments, tax related assets/ liabilities and other common assets and liabilities that cannot be allocated to a segment on reasonable basis have been disclosed as "Unallocable".

C. Geographical information

The geographic information analyses the Company's revenues and non-current assets by the company's country of domicile and other countries. In presenting geographic information, segment revenue has been based on the selling location in relation to sales to customers and segment assets are based on geographical location of assets.

Business in India, the Company's country of domicile, represented approximately 42.42% during the year ended 31 March 2023 (31 March 2022: 15.96%) of its net revenues.

The Company's business in Australia and Chile represented 48.68% and 4.84%, respectively, of its net revenues during the year ended 31 March 2023 (31 March 2022: Chile and Australia represented 67.75% and 12.19% respectively). No other country individually comprised 10% or more of the Company's Standalone net revenues during these periods.

(c) Financial risk management

The Company has exposure to the following risks arising from financial instruments:

i) Credit risk ;

ii) Liquidity risk ; and

iii) Market risk

Risk management framework

The Company's Board of directors has overall responsibility for the establishment and oversight of the Company's risk management framework. The Board of directors is responsible for developing and monitoring the Company's risk management policies.

The Company's risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company's activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Audit Committee oversees how management monitors compliance with the Company's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit Committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Board of directors.

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from customers and investment in debt securities. The carrying amounts of financial assets represent the maximum credit exposure.

Trade and other receivables

The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company establishes an allowances for doubtful debts and impairments that represents its estimates of incurred losses in respect of trade and other receivable and investment.

Net trade receivable as on 31 March 2023 is ' 546.08 crore (31 March 2022: ' 589.78 crore).

Two largest customers (net of expected credit loss provision) have a total concentration of 41.06% (31 March 2022: Two largest customers had a total concentration of 31.09%) of net trade receivable.

As per simplified approach, the Company makes provision of expected credit losses on trade receivables and other receivables to mitigate the risk of default payments and makes appropriate provision at each reporting date wherever outstanding is for longer period and involves higher risk.

Cash and bank balances

The Company held cash and cash equivalents and other bank balances with credit worthy banks and financial institutions of ' 68.73 crore and ' 384.45 crore as at 31 March 2023 and 31 March 2022 respectively. The credit worthiness of the such bank and financial institutions is evaluated by management on an ongoing basis and is considered to be good.

Derivatives

The derivatives are entered with the credit worthy banks and financial institutions counter parties. The Credit worthiness of such banks and financial institutions is evaluated by the management on an ongoing basis is considered to be good.

Guarantees

The Company's policy is to provide the financial guarantees and surety bond for its subsidiaries. The outstanding guarantee and surety bond as at 31 March 2023 is ' 1,602.32 crore and 102.37 crore respectively (31 March 2022: ' 1,401.06 crore and ' Nil). The financial guarantees were given to banks and the surety bond was given to an Insurance Company in respect of credit facilities availed by a subsidiary of the Company.

Security deposits given to lessors

The Company has given security deposit to lessors for premises leased by the Company as at 31 March 2023 and 31 March 2022. The Company monitors the credit worthiness of such lessors where the amount of security deposit is material.

Loans, investments in group companies

The Company has given unsecured loans to its subsidiaries as at 31 March 2023 and 31 March 2022. The Company has reviewed the carrying amounts of loans to determine whether there is any indication that those loans have suffered an impairment loss, as at 31 March 2023 no such indication exist.

Other than the trade receivables and other receivables, the Company has no other financial assets that are past due but not impaired.

ii Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company's reputation.

As at 31 March 2023, the Company had unsecured borrowings from banks and others of ' 56.68 crore (31 March 2022: ' 42.14 crore), secured borrowings from banks of ' 1,641.42 crore (31 March 2022: ' 264.72 crore), secured loan from financial institution of ' 100 crore (31 March 22: Nil), secured commercial papers ' Nil (31 March 2022: ' 37.34 crore), cash credit loan from banks of ' 42.08 crore (31 March 2022: ' 46.37 crore), cash and cash equivalents of ' 23.32 crore (31 March

2022: ' 344.85 crore] and other bank balances of ' 45.41 Crore (31 March 2022: ' 39.60 crore).

During the year ended 31 March 2023, there were no instances of delay in repayment of working capital loans.

During the year ended 31 March 2022, there were 23 instances of delay in repayment of working capital loans to twelve Banks for a period ranging between 1 to 28 days. There were no instances of delays in working capital loans other than as mentioned. Further, the same were regularised and there was no overdue outstanding as at 31 March 2022.

Exposure to liquidity risk

The table below analyses the Company's financial assets and financial liabilities into relevant maturity groupings based on their contractual maturities for derivative and non derivative financial assets and financial liabilities:

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse changes in market rates and prices (such as interest rates, foreign currency exchange rates) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive financial instruments, all foreign currency receivables and payables and all short term and long-term debt. The Company is exposed to market risk primarily related to foreign

exchange rate risk, interest rate risk and the market value of its investments. Thus, the Company's exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currencies. The Company uses derivatives to manage market risks. All such transactions are carried out within the guidelines set by the risk management committee. The Company has applied hedge accounting to manage volatility in profit or loss on account of foreign currency risk during the year ended 31 March 2023.

(a) Currency Risk

The Company is exposed to currency risk on account of its operating and financing activities. The functional currency of the Company is Indian Rupee.

The risk estimates provided assume a change of 100 basis points interest rate for the interest rate benchmark as applicable to the borrowings summarised above. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The year end balances are not necessarily representative of the average debt outstanding during the year.

(c) Capital Management

The Company's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital as well as the level of dividends to ordinary shareholders.

The Company monitors capital using a ratio of 'adjusted net debt' to 'adjusted equity'. For this purpose, adjusted net debt is defined as total borrowings, comprising interest-bearing loans and borrowings and obligations under leases, less cash and cash equivalents. Adjusted equity comprises all components of equity. Charge for the year on goodwill amortisation has been deducted while calculating total equity of the company since it represents a pure non-cash expense.

53 On 29 December 2021, the Company has signed an Indemnity Agreement with Shapoorji Pallonji and Company Private Limited, Khurshed Yazdi Daruvala (jointly the "Promoter Selling Shareholders") and Reliance New Energy Limited (formerly known as Reliance New Energy Solar Limited] pursuant to which, the Promoter Selling Shareholders would indemnify and re-imburse the Company and its subsidiaries/branches for a net amount, if it exceeds ' 300.00 crore, on settlement of liquidated damages pertaining to certain identified past and existing

projects (as on the date of signing the aforementioned agreements], old receivables, direct and indirect tax litigations as well as certain legal and regulatory matters. These amounts would be settled by 30 September 2022 and thereafter on 30 September of each succeeding year, on the basis of the final settlement amounts with customers/suppliers/other authorities. Consequently, trade receivables from the customer undergoing a resolution process under the supervision of the National Company Law Tribunal ('NCLT'] and bank guarantees

encashed by certain customers would also be recoverable from the Promoter Selling Shareholders once crystallized, if not recovered from the customers. The Promoter Selling Shareholders are consequently entitled to net off the amounts payable, with specific counter-claims levied and recovered by the Company and its subsidiaries/branches on its customers/vendors relating to these matters.

I n line with the terms of the Indemnity Agreement, the Company has determined the crystallized claim to be levied on the Promoter Selling Shareholders for the period ending 30 September, 2022, after deduction of ' 300.00 crore to be borne by the Company and its subsidiaries/ branches, for which the provisions (including ' 142.14 crore by the Company's subsidiaries] were recorded upto 31 December, 2021. The Company has aligned a part of this provision along certain financial heads in keeping with the crystallized claims as on 30 September 2022. Consequently, this has resulted in an increase in Other Income by ' 90.35 crore which has been offset by a reduction in Revenue from operations by ' 90.35 crore. This has no impact on the loss after tax for the year ended 31 March, 2023.

During the current year, the Company had raised Indemnity Calculation Notice on the Promoter Selling Shareholders towards the crystallized claim amounting to ' 90.14 crore comprising of ' 66.67 crore against indemnity matters and ' 2 3.47 crore towards legal fees paid by the Company for matters under dispute. As of 31 March 2023, ' 11.47 crore relating to legal fees was outstanding, which has been received subsequent to the year end.

54 The Company, entered into a contract for a 100 MW AC Photovoltaic plant in the state of Karnataka with an infrastructure company ("customer"] to cater to inhouse power demands of the large office space facilities at Bangalore of a real estate developer ("developer"]. The works were majorly completed by end February 2018 and the balance work was pending due to non-availability of land, which was in the scope of the customer. In October 2018, National Company Law Tribunal ("NCLT"] actions were initiated against the customer group and the Company issued a work suspension notice to the customer, for balance of payments, with a copy to the developer. The developer issued directions to the Company, vide a letter, to go ahead with the works/maintenance of the plant wherein they also assured the Company that they

would make the payment if the customer failed to pay. As on date, the customer owes the Company ' 92.45 crore. In addition, an amount of ' 64.10 crore under confirmed, irrevocable Letters of Credit arranged by the customer from their bank mainly for the supplies which had been discounted by the Company, after confirmation, both from the customer and their bank, became due. Due to the NCLT actions against the customer group, the customer's bank refused to make the payment to the Company's bank citing prevention against doing the same due to the NCLT order, and the Company had to return the amount back to its bank.

During the year ended 31 March 2020, the Company had initiated legal proceedings in both these matters, which are now pending with the National Company Law Appellate Tribunal. Further, during the year ended 31 March 2023, the Company has filed a criminal complaint against the developer.

The Company has sought legal opinions regarding the amount due from the developer as per their assurance letter and from the customer's bank due to failure to pay confirmed Letters of Credit and has been advised that the said amounts are recoverable. The amount of ' 92.45 crore and ' 64.10 crore is shown under the head Trade Receivables and Other Financial Assets, respectively. Both the above are covered under the Indemnity Agreement as given in Note 53 above.

55 The Red Herring Prospectus dated 29 July 2019 stated that Shapoorji Pallonji and Company Private Limited and Khurshed Yazdi Daruvala ("Selling Shareholders"] shall use a portion of the net offer proceeds towards funding full repayment of the outstanding inter-corporate deposits payable by a fellow subsidiary to the Company. The balance outstanding as at the beginning of the previou year was entirely repaid during the previous year along with all interest accrued thereagainst.

The Company has responded to queries on this matter raised by the concerned authorities. The Company, based on independent opinions from legal experts, has determined that there is no non-compliance with any provisions of the Companies Act, 2013 and/or SEBI (Issue of Capital and Disclosure Requirements] Regulations, 2018, by the Company, in respect of this matter.

56 During the current year, the managerial remuneration paid by the Company in relation to its Manager is in excess of the limits laid down under Section 197 of the Companies Act, 2013, read with schedule V to the Act by ' 1.00 crore. The Company is in the process of obtaining approval for ' 1.00 crore towards the managerial remuneration for the financial year 2022-2023 from its shareholders at the forthcoming annual general meeting.

57 The Company's international transactions with related parties are at arm's leng th as per the Independent accountants report for the year ended 31 March 2022. Management believes that the Company's international transactions with related parties post 31 March 2022 continue to be at arm's length and that the transfer pricing legislation will not have any impact on these

standalone financial statements, particularly on amount of tax expense and that of provision for taxation.

58 The Indian Parliament has approved the Code on Social Security, 2020 which would impact the contributions by the Company towards Provident fund and Gratuity. The Ministry of Labour and Employment has released draft rules for the Code of Social Security, 2020 on 13 Novemeber 2020, and has invited suggestions from stakeholders which are under active consideration by the Ministry. The Company will assess the impact and its evaluation once the subject rules are notified and will give appropriate impact in its financial statements in the period in which, the Code becomes effective and the related rules to determine the financial impact are published.

60 Other matters

Information with regard to other matters specified in Schedule III to the Act is either nil or not applicable to the Company for the year.