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

BSE: 500400ISIN: INE245A01021INDUSTRY: Power - Generation/Distribution

BSE   ` 92.50   Open: 92.00   Today's Range 91.90
93.40
+0.60 (+ 0.65 %) Prev Close: 91.90 52 Week Range 75.90
101.75
Year End :2017-03 

1. Background:

The Tata Power Company Limited (the ‘Company’) is a public limited company domiciled and incorporated in India under the Indian Companies Act, 1913. The registered office of the Company is located at Bombay House, 24 Homi Mody Street, Mumbai 400001, India.

The Company pioneered the generation of electricity in India more than a century ago. Prior to 1st April, 2000 the Tata Electric Companies comprised of the following three Companies -

- The Tata Hydro-Electric Power Supply Company Limited, established in 1910 (Tata Hydro).

- The Andhra Valley Power Supply Company Limited, established in 1916 (Andhra Valley).

- The Tata Power Company Limited, established in 1919 (Tata Power).

With effect from 1st April, 2000, Andhra Valley and Tata Hydro merged into Tata Power to result in one large unified entity. The Company has an installed generation capacity of 2,954 MW in India and a presence in all the segments of the power sector viz. Fuel and Logistics, Generation (thermal, hydro, solar and wind), Transmission and Distribution.

2. Critical accounting estimates and judgements

In the application of the Company’s accounting policies, the directors of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.

The areas involving critical estimates are:

Estimation of current tax and deferred tax expense - Note 24 and 33

Estimated fair value of unquoted securities and impairement of investments - Note 34

Estimation of defined benefit obligation - Note 39

Regulatory deferral accounts - Note 18

Estimation of values of contingent liabilities - Note 37

Estimates and judgement are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances.

3. Assets classified as held for sale

(i) (a) The Company had a power generation unit at Belgaum, Karnataka. Operations at the unit have been discontinued on 28th February, 2013 with conclusion of Power Purchase Agreement with the customers. The Company has disposed of majority of the assets located at the unit and is in the process of disposing of the Freehold land. During the year ended 31st March, 2017, the Company has reclassified the said land as asset held for sale. No impairment loss has been recognised on reclassification as the Company expects that the fair value (estimated based on the recent market prices of similar properties in similar locations) less costs to sell is higher than the carrying amount of Rs.2.90 crore as at 31st March, 2017.

(b) The Company was in the process of setting up a thermal power generation unit in Jharkhand state and accordingly had acquired Freehold land at Tiruldih. Coal for the unit was planned to be sourced from Tubed coal block in Latehar district. However, in 2014, the H’onble Supreme Court de-allocated the said coal block. As a result, the project was left with no fuel supply and has become unviable. Hence, the Company has decided to dispose of the Freehold land at Tiruldih. During the year ended 31st March, 2017, the Company has reclassified the said land as asset held for sale. Accordingly, the Freehold Land is being carried in the books at its fair value less cost to sell of Rs.9.72 crore (i.e. fair value estimated based on market price of similar properties near the location less costs to sell the land) resulting in the recognition of Rs.34 crore as impairment loss in the statement of profit and loss.

(c) The Company has ceased power generation at its Diesel (DG set) based unit at Vadaval, Maharashtra and has disposed of the DG sets. The Company is in the process of disposing freehold land. During the year ended 31st March, 2017, the Company has reclassified the said freehold land at the the said unit as asset held for sale. No impairment loss has been recognised on reclassification as the Company expects that the fair value (estimated based on the recent market prices of similar properties in similar locations) less costs to sell is higher than the carrying amount Rs.3.21 crore as at 31st March, 2017.

(ii) The Company has ceased power generation at Unit 4 at Trombay, Maharashtra and has initiated process for disposal of its assets. During the year ended 31st March, 2017, the Company has reclassified property, plant and equipment at the said unit as asset held for sale. No impairment loss has been recognised on reclassification as the Company expects that the estimated fair value less costs to sell is higher than the carrying amount of Rs.24.68 crore as at 31st March, 2017.

(iii) The Company has decided to divest certain portion of its investments carried at fair value through other comprehensive income in Tata Teleservices (Maharashtra) Limited and Indian Energy Exchange Limited. Hence, the said investments have been classified as held for sale at fair value of Rs.195.21 crore as at 31st March, 2017.

4. Other Equity

Nature and purpose of reserves General Reserve:

General Reserve is used from time to time to transfer profits from Retained Earnings for appropriation purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the General Reserve will not be reclassified subsequently to statement of profit and loss.

Securities Premium Reserve:

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

Debenture Redemption Reserve:

The Company is required to create a Debenture Redemption Reserve out of the profits which is available for payment of dividend for the purpose of redemption of debentures.

Capital Redemption Reserve:

Capital Redemption Reserve represents amounts set aside on redemption of preference shares.

Capital Reserve:

Capital Reserve consists of forfeiture of the amount received from Tata Sons Limited on preferential allotment of convertible warrants in the Company, on the lapse of the period to exercise right to convert the said warrants and on forfeiture of amounts paid on Debentures.

Retained Earnings

Retained Earnings are the profits of the company earned till date net of appropriations.

Equity Instrument through Other Comprehensive Income:

This reserve represents the cumulative gains and losses arising on revaluation of equity instruments measured at fair value through other comprehensive income, net of amounts reclassified to retained earnings when those assets are disposed of.

Security

(i) The Debentures mentioned in (a) have been secured by a charge on movable properties and assets of the Company at Agaswadi and Visapur in Satara District of Maharashtra and Poolavadi in Tirupur District of Tamil Nadu.

(ii) The Debentures mentioned in (b) have been secured by a pari passu charge on the assets of the wind farms situated at Samana in Gujarat and Gadag in Karnataka.

(iii) The Debentures mentioned in (c) have been secured by a charge on the land situated at Village Takve Khurd (Maharashtra).

(iv) The Debentures mentioned in (d) and (e) have been secured by a pari passu charge on land in Village Takve Khurd (Maharashtra) and movable and immovable properties in and outside Maharashtra, except assets of windmill projects, present and future.

(v) The Debentures mentioned in (f) had been secured by a charge on land in Village Takve Khurd (Maharashtra), movable and immovable properties in and outside Maharashtra, as also all transmission stations/lines, receiving stations and sub-stations in Maharashtra, except assets of windmill projects, present and future.

(vi) The Loans from HDFC Bank and IDBI Bank, mentioned in (g) and (i) respectively have been secured by a pari passu charge on all movable Fixed Assets (excluding land and building), present and future (except assets of all wind projects both present and future) including movable machinery, machinery spares, tools and accessories.

(vii) The Loan from ICICI Bank, mentioned in (h) secured by way of first pari-passu charge on all the movable assets (excluding land and buildings), present and future (except assets of all windmill projects present and future), including movable machinery, current assets, machinery spares, tools and accessories.

(viii) The Loan from Kotak Mahindra Bank mentioned in (j) has been secured by a pari passu charge on all movable Fixed Assets (excluding land and building), present and future (except assets of all wind mill projects, both present and future) including movable machinery, machinery spares, tools and accessories.

(ix) The Loan from State Bank of India mentioned in (k) has been secured by a pari passu charge on all movable Fixed Assets (excluding land and building), present and future (except assets of all windmill projects, both present and future) including movable machinery, machinery spares, tools and accessories.

(x) The Loan from IDFC Bank (Loan from Infrastructure Development Finance Company Limited has been transferred to IDFC Bank on its demerger), mentioned in (l) and (o) have been secured by a pari passu charge on all movable Fixed Assets (excluding land and building), present and future (except assets of all wind projects both present and future) including movable machinery, machinery spares, tools and accessories.

(xi) The Loans from Asian Development Bank and Indian Renewable Energy Development Agency Limited mentioned in (m) and (n) respectively have been secured by a first charge on the tangible movable properties, plant & machinery and immovable properties situated at Khandke, Brahmanvel and Sadawaghapur in Maharashtra.

(xii) The Loan from Technology Development Board, Department of Science & Technology, Government of India mentioned in (p) is secured by way of Bank Guarantee.

5. (a) Coastal Gujarat Power Limited (CGPL), a wholly owned subsidiary of the Company has implemented the 4000 MW Ultra Mega Power Project at Mundra (“Mundra UMPP”). As at 31st March, 2017, the Company has a long-term investment of Rs.11,136.15 crore (31st March, 2016 -Rs.6,443.85 crore, 1st April, 2015 -Rs.6,047.90 crore) in equity (including perpetual security) of CGPL, has given loans of Rs.Nil (31st March, 2016 -Rs.3,795.89 crore, 1st April, 2015 -Rs.3,034.56 crore) to CGPL, and has given guarantees of Rs.2,781.69 crore (31st March, 2016 -Rs.3,039.24 crore, 1st April, 2015 -Rs.3,403.27 crore) to CGPL’s lenders.

The Management of CGPL, on an ongoing basis, reviews and assesses the recoverability of the carrying value of its fixed assets based on certain externally available information and assumptions relating to future fuel prices, revenues and operating parameters and useful life of the plant, which the management believes reasonably reflect the future expectation. In view of the estimation uncertainties, the future cash flows, the assumptions are monitored periodically and adjustments are made if the conditions relating to the assumptions indicate that such adjustment is appropriate.

Based on the assessment of recoverability of the carrying value of fixed assets as at 31st March, 2017 and having regard to the overall returns expected from CGPL, no impairment as at 31st March, 2017 is considered necessary for long-term investments of Rs.11,136.15 crore in CGPL and no provision is required in respect of guarantees of Rs.2,781.69 crore given to CGPL’s lenders.

(b) The Company has investments in equity shares of Tata Teleservices Limited (TTSL) which are measured at fair value through other comprehensive income. Based on a valuation report obtained from TTSL, the Company had reassessed the fair value of its investment in TTSL as at 30th September, 2016 and recorded fair value loss of Rs.124.46 crore as at that date. In the absence of updated information, it has not been possible to revise the valuation as at 31st March, 2017 and consequently adjustments, if any, to the carrying value of investments in TTSL of Rs.384.88 crore as at 31st March, 2017 have not been made.

(c) During the year, DoCoMo had filed a petition before the Delhi High Court for implementation of the Arbitration Award related to its exercise of the ‘put option’ to the transfer of its entire shareholding in TTSL at a minimum predetermined price of Rs.58.045 per share pursuant to which the Delhi High Court directed Tata Sons (as representative of the Tata Group) to deposit the damages including costs and interest in an escrow account. Accordingly, the Company deposited Rs.790 crore with Tata Sons, being its share of the contractual obligation. On 28th April, 2017, the Delhi High Court ruled that the Arbitration Award is enforceable in India. Consequently, the Company has as at 31st March, 2017 written-off ‘other advances’ of Rs.651.45 crore, being the difference between the fair value of equity shares of TTSL determined as at 30th September, 2016 and the consideration payable to DoCoMo deposited with Tata Sons. This has been disclosed as an exceptional item. The balance of Rs.138.55 crore, which represents the fair value of shares receivable from DoCoMo based on a valuation as at 30th September, 2016, is being carried forward as Other Advance and included in Other Non-current Financial Asset. As stated in note 34(b) above, valuation of TTSL shares as at 31st March, 2017 is not available.

6. Micro and small enterprises under the Micro, Small and Medium Enterprises Development Act, 2006 have been determined based on the information available with the Company and the required disclosures are given below:

7. Commitments

(i) In terms of the Sponsor Support agreement entered into between the Company, Coastal Gujarat Power Limited (CGPL) and lenders of CGPL, the Company has undertaken to provide support by way of base equity contribution to the extent of 25% of CGPL’s project cost and additional equity or subordinated loans to be made or arranged for, if required as per the financing agreements to finance the project. The Sponsor Support Agreement also includes support by way of additional financial support for any overrun in project costs, operational loss and Debt Service Reserve Guarantee as provided under the financing agreements. Pending achievement of the”Project Financial Completion Date”as defined under the Financing Agreement, the Sponsor support will continue. In terms of the conditions of the financing agreements, the Company has provided total Additional Subordinated Loans and Equity of Rs.6,022.59 crore (31st March, 2016 - Rs.5,047.00 crore, 1st April, 2015 -Rs.4,235.82 crore) to CGPL. The loans would be repaid in accordance with the conditions of the Subordination and Hypothecation Agreements either out of additional equity to be infused by the Company or out of the balance Indian rupee term loans receivable by CGPL in future on the fulfilment of conditions in the Coal Supply and Transportation Agreements Completion Date (CSTACD) agreement.

(ii) In respect of NELCO Limited, the Company has undertaken to arrange for the necessary financial support to NELCO Limited in the form of interim short term funding for meeting its business requirements.

(iii) The Company has undertaken to arrange for the necessary financial support to its Subsidiaries Khopoli Investments Limited, Bhivpuri Investments Limited, Industrial Power Utility Limited, Tata Power Jamshedpur Distribution Limited and Tata Power International Pte. Limited.

(iv) In respect of Maithon Power Limited (MPL), the Company jointly with Damodar Valley Corporation (DVC) has undertaken to the lenders of MPL, to provide support by way of base equity contribution and additional equity or subordinated loans to meet the increase in Project Cost. Further, the Company has given an undertaking to MPL to fulfil payment obligations of Tata Power Trading Company Limited (TPTCL) and Tata Power Delhi Distribution Limited (TPDDL) in case of their default.

(v) In terms of pre-implementation agreement entered into with Government of Himachal Pradesh and the consortium consisting of the Company and SN Power Holding Singapore Pte. Ltd. (Company being the Lead Member of the consortium) for the investigation and implementation of Dugar Hydro Electric Project, the Company has undertaken as Lead Member to undertake/perform various obligations pertaining to Dugar Project.

(vi) In accordance with the terms of the Share Purchase Agreement and the Shareholder’s Agreement entered into by Panatone Finvest Limited (PFL), an associate of the Company, with the Government of India, PFL has contractually undertaken a “Surplus Land” obligation including agreeing to transfer 45% of the share capital of the Resulting Company, at Nil consideration, to the Government of India upon Demerger of the Surplus Land by Tata Communication Limited (TCL). The Company has till date acquired 1,34,22,037 shares of TCL from PFL. The Company would be entitled to be allotted 4.71% of the share capital of the Resulting Company based on its holding of 1,34,22,037 shares of TCL. The Company has given an undertaking to PFL to bear the “Surplus Land” obligation pertaining to these shares.

d) (i) In respect of the Standby Charges dispute with Reliance Infrastructure Ltd. (R-Infra) for the period from 1st April, 1999 to 31st March, 2004, the Appellate Tribunal of Electricity (ATE), set aside the Maharashtra Electricity Regulatory Commission (MERC) Order dated 31st May, 2004 and directed the Company to refund to R-Infra as on 31st March, 2004, Rs.354.00 crore (including interest of Rs.15.14 crore) and pay interest at 10% per annum thereafter. As at 31st March, 2017 the accumulated interest was Rs.229.56 crore (31st March, 2016 -Rs.218.36 crore, 1st April, 2015 -Rs.207.16 crore) (Rs.11.20 crore for the year ended 31st March, 2017). On appeal, the Hon’ble Supreme Court vide its Interim Order dated 7th February, 2007, has stayed the ATE Order and in accordance with its directives, the Company has furnished a bank guarantee of the sum of Rs.227.00 crore and also deposited Rs.227.00 crore with the Registrar General of the Court which has been withdrawn by R-Infra on furnishing the required undertaking to the Court.

Further, no adjustment has been made for the reversal in terms of the ATE Order dated 20th December, 2006, of Standby Charges credited in previous years estimated at Rs.519.00 crore, which will be adjusted, wholly by a withdrawal/ set off from certain Statutory Reserves as allowed by MERC. No provision has been made in the accounts towards interest that may be finally determined as payable to R-Infra. Since 1st April, 2004, the Company has accounted Standby Charges on the basis determined by the respective MERC Tariff Orders.

The Company is of the view, supported by legal opinion, that the ATE’s Order can be successfully challenged and hence, adjustments, if any, will be recorded by the Company on the final outcome of the matter.

(ii) MERC vide its Tariff Order dated 11th June, 2004, had directed the Company to treat the investment in its wind energy project as outside the Mumbai Licensed Area, consider a normative Debt Equity ratio of 70:30 to fund the Company’s fresh capital investments effective 1st April, 2003 and had also allowed a normative interest charge @ 10% p.a. on the said normative debt. The change to the Clear Profit and Reasonable Return (consequent to the change in the capital base) as a result of the above mentioned directives for the period upto 31st March, 2004, has been adjusted by MERC from the Statutory Reserves along with the disputed Standby Charges referred to in Note 37(d)(i) above. Consequently, the effect of these adjustments would be made with the adjustments pertaining to the Standby Charges dispute as mentioned in Note 37(d)(i) above.

e) The Company, in terms of the Share Purchase Agreement, as stated in Note 36 (b)(ix), has undertaken additional “Surplus Land” obligation towards the purchase of 11,40,000 shares of Tata Communications Ltd. by Tata Sons Limited from Panatone Finvest Ltd.

f) The Company had received demands from various levels of sales tax departments in respect of entry tax on imports aggregating Rs.2,213.64 crore (including interest of Rs.643.99 crore and penalty of Rs.740.89 crore) for financial years 2005-06 to 2012-13. The Company paid Rs.246.21 crore under protest. The Hon’ble Bombay High Court upheld the levy, in respect of an appeal filed by the Company. The Company filed a Special Leave Petition against the above Order before the Hon’ble Supreme Court, which extended the interim stay granted by the Hon’ble Bombay High Court and requested to list the matter after pleadings are completed. The Company is of the view, supported by legal opinions, that the Company has a strong case on merits. Accordingly, Rs.1,967.43 crore (including interest of Rs.643.99 crore and penalty of Rs.740.89 crore) will be accounted by the Company based on the final outcome of the matter [Refer Note No. 37 (a)(i)].

8. Other Disputes

In the matter of claims raised by the Company on R-Infra, towards (i) the difference in the energy charges for the period March 2001 to May 2004 and (ii) for minimum off-take charges of energy for the period 1998 to 2000, MERC has issued an Order dated 12th December, 2007 in favour of the Company. The total amount payable by R-Infra, including interest, is estimated to be Rs.323.87 crore as on 31st December, 2007. ATE in its Order dated 12th May, 2008 on appeal by R-Infra, has directed R-Infra to pay the difference in the energy charges amounting to Rs.34.98 crore for the period March 2001 to May 2004. In respect of the minimum off-take charges of energy for the period 1998 to 2000 claimed by the Company from R-Infra, ATE has directed MERC that the issue be examined afresh and after the decision of the Hon’ble Supreme Court in the Appeals relating to the distribution licence and rebates given by R-Infra. The Company and R-Infra had filed appeals in the Hon’ble Supreme Court. The Hon’ble Supreme Court, vide its Order dated 14th December, 2009, has granted stay against ATE Order and has directed R-Infra to deposit with the Hon’ble Supreme Court, a sum of Rs.25.00 crore and furnish bank guarantee of Rs.9.98 crore. The Company had withdrawn the above mentioned sum subject to an undertaking to refund the amount with interest, in the event the Appeal is decided against the Company. On grounds of prudence, the Company has not recognised any income arising in respect of these matters.

9. Employee benefit plan

1. Defined Contribution plan

The Company makes Provident Fund and Superannuation Fund contributions to defined contribution retirement benefit plans for eligible employees. Under the schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The contributions as specified under the law are paid to the provident fund set up as a trust by the Company. The Company is generally liable for annual contributions and any shortfall in the fund assets based on the government specified minimum rates of return and recognises such contributions and shortfall, if any, as an expense in the year it is incurred. Having regard to the assets of the fund and the return on the investments, the Company does not expect any shortfall in the foreseeable future.

The Company has recognised Rs.24.02 crore (31st March, 2016 - Rs.21.53 crore) for provident fund contributions and Rs.10.23 crore (31st March, 2016 -Rs.10.13 crore) for superannuation contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.

2. Defined benefit plans

2.1 The Company operates the following unfunded/funded defined benefit plans:

Unfunded:

Post-Employment Medical Benefits

The Company provides certain post-employment health care benefits to superannuated employees at some of its locations. In terms of the plan, the retired employees can avail free medical check-up and medicines at Company’s facilities.

Pension (including Director pension)

The Company operates a defined benefit pension plan for employees who have completed 15 years of continuous service. The plan provides benefits to members in the form of a pre-determined lump sum payment on retirement. Executive Director, on retirement, is entitled to pension payable for life including HRA benefit. The level of benefit is approved by the Board of Directors of the Company from time to time.

Ex-Gratia Death Benefit

The Company has a defined benefit plan granting ex-gratia in case of death during service. The benefit consists of a predetermined lump sum amount along with a sum determined based on the last drawn basic salary per month and the length of service.

Retirement Gift

The Company has a defined benefit plan granting a pre-determined sum as retirement gift on superannuation of an employee.

Funded: Gratuity

The Company has a defined benefit gratuity plan. The gratuity plan is primarily governed by the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of five years are eligible for gratuity. The level of benefits provided depends on the member’s length of service and salary at the retirement date. The gratuity plan is funded plan. The fund has the form of a trust and is governed by Trustees appointed by the Company. The Trustees are responsible for the administration of the plan assets and for the definition of the investment strategy in accordance with the regulations. The funds are deployed in recognised insurer managed funds in India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimates of expected gratuity payments.

2.2 Risk exposure:

Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:

Asset volatility:

The plan liabilities are calculated using a discount rate set with reference to government bond yield. If plan assets underperform this yield, it will result in deficit. These are subject to interest rate risk. To offset the risk, the plan assets have been deployed in high grade insurer managed funds.

Inflation rate risk:

Higher than expected increase in salary will increase the defined benefit obligation.

Demographic risk:

This is the risk of variability of results due to unsystematic nature of decrements that include mortality, withdrawal, disability and retirement. The effect of these decrements on the defined benefit obligations is not straight forward and depends upon the combination of salary increase, discount rate and vesting criterion.

10. In respect of the contracts pertaining to the Strategic Engineering Business and Project Management Services, disclosures required as per Ind AS 11 are as follows:

(a) Contract revenue recognised as revenue during the year Rs.506.13 crore (31st March, 2016 -Rs.549.88 crore).

(b) In respect of contracts in progress -

(i) The aggregate amount of costs incurred and recognised profits upto 31st March, 2017 Rs.1,042.45 crore (31stMarch, 2016 -Rs.935.78 crore).

(ii) Advances and progress payments received as at 31st March, 2017 Rs.615.09 crore (31st March, 2016 -Rs.695.37 crore, 1st April, 2015 -Rs.813.25 crore).

(iii) Retention money included as at 31st March, 2017 in Sundry Debtors Rs.13.13 crore (31st March, 2016 -Rs.8.47 crore, 1st April, 2015 -Rs.6.32 crore).

(c) (i) Gross amount due to customers for contract work as a liability as at 31st March, 2017 Rs.44.20 crore (31stMarch, 2016 - Rs.66.00 crore,1st April, 2015 -Rs.191.44 crore).

(ii) Gross amount due from customers for contract work as an asset as at 31st March, 2017 Rs.370.03 crore (31stMarch,2016 -Rs.240.40 crore, 1st April, 2015 -Rs.191.89 crore).

1.2 Fair Value Hierarchy:

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and consists of the following three levels:

Level 1 Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. This includes quoted equity instruments, government securities, traded debentures (borrowings) and mutual funds that have quoted price.

Level 2 Inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This includes derivative financial instruments and investment in redeemable non-cumulative preference shares.

Level 3 Inputs are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. This includes unquoted equity shares.

2. Financial risk management

In its ordinary operations, the Company’s activities expose it to the various types of risks, which are associated with the financial instruments and markets in which it operates. The Company has a risk management policy which covers the foreign exchanges risks and other risks associated with the financial assets and liabilities such as interest rate risks and credit risks. The risk management policy is approved by the Board of Directors. The following is the summary of the main risks:

2.1 Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates (currency risk) and interest rates (interest rate risk), will affect the company’s income or value of its holding of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

2.1.1 Foreign currency risk management

The Company is exposed to foreign exchange risk through its operations in international projects and purchase of coal from Indonesia and elsewhere and overseas borrowings. The results of the Company’s operations can be affected as the rupee appreciates/depreciates against these currencies. The Company enters into derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures.

2.1.2 Interest rate risk management

Interest rate risk arises from the potential changes in interest rates that may have adverse effects on the Company in the reporting period or in future years.

Interest rate sensitivity:

The sensitivity analysis below have been determined based on exposure to interest rates for term loans and debentures at the end of the reporting period and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in case of term loans and debentures that have floating rates.

2.2 Liquidity risk management

The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The maturity profile of the financial assets are listed below:

11. Segment Reporting:

Information reported to the Chief Operating Decisions Maker (CODM) for the purpose of resource allocation and assessment of segment performance focus on business segment which comprises of Power and Others.

Specifically, the Company’s reportable segments under Ind AS are as follows:

Power: Comprises of Generation, Transmission, Distribution and assets relating to Power Business given on Finance Lease

Others: Comprises of Defence Electronics and Engineering, Project Contracts/Infrastructure Management Services and Property Development

Revenue and expenses directly attributable to segments are reported under each reportable segment. Expenses which are not directly identifiable to each reporting segment have been allocated on the basis of associated revenue of the segment and manpower efforts. All other expenses which are not attributable or allocable to segments have been disclosed as unallocable expenses.

Assets and liabilities that are directly attributable or allocable to segments are disclosed under each reportable segment. All other assets and liabilities are disclosed as unallocable.

12. Disclosure in terms of G.S.R.307(E) dated 30th March, 2017 issued by the Ministry of Corporate Affairs, Government of India

The details of Specified Bank Notes (SBN) held and transacted during the period 8th November, 2016 to 30th December, 2016, the denomination wiss SBNs and other notes as per the notification is given below:

During the period from 10th November, 2016 to 15th December, 2016, the Company was allowed to receive SBNs as a legal tender from its customers towards payment of their electricity dues. The Company has designated collection centres, which are permitted to receive cash from its customers. Cash collected at these centres is directly deposited into Company’s Bank accounts. The Company has received details of SBNs deposited from respective banks, and has considered amount collected as equivalent to amount deposited.

13. Explanation of Transition to Ind AS and effect of Ind AS adoption

13.1 First-time adoption-mandatory exceptions, optional exemptions

a. Overall principle

The Company has prepared the opening balance sheet as per Ind AS as of 1st April, 2015 (the transition date) by recognising all assets and liabilities whose recognition is required by Ind AS, not recognising items of assets or liabilities which are not permitted by Ind AS, by reclassifying items from previous GAAP to Ind AS as required under Ind AS, and applying Ind AS in measurement of recognised assets and liabilities. However, this principle is subject to certain exceptions and certain optional exemptions availed by the Company as detailed below.

b. Derecognition of financial assets and liabilities

The Company has applied the derecognition requirements of financial assets and financial liabilities prospectively for transactions occurring on or after 1st April, 2015 (the transition date).

c. Classification of debt instruments

The Company has determined the classification of debt instruments in terms of whether they meet the amortised cost criteria or the FVTOCI criteria based on the facts and circumstances that existed as of the transition date.

d. Deemed cost for PPE, investment property and intangible assets

The Company has elected to restate retrospectively generally all its property, plant and equipment and intangible assets as per the Ind AS 16 on transition date (as at 1st April, 2015).

e. Determining whether an arrangement contains a lease

The Company has applied Appendix C of Ind AS 17 “Determining whether an Arrangement contains a Lease” to determine whether an arrangement existing at the transition date contains a lease on the basis of facts and circumstances existing as of the transition date.

f. Equity investments at FVTOCI

The Company has designated investment in equity shares of its non-current investments as FVTOCI on the basis of facts and circumstances that existed at the transition date.

g. Investments in subsidiaries, joint ventures and associates

The Company has elected to adopt the carrying value under previous GAAP as on the date of transition i.e. 1st April, 2015 in its separate financial statements and use that carrying values as its deemed cost as of the transition date.

13.2 Notes to reconciliations between Previous GAAP and Ind AS

(a) Under previous GAAP, current investments were stated at lower of cost and fair value. Under Ind AS these financial assets have been classified as Fair Value through Profit and Loss (FVTPL) on the date of transition and fair value changes after the date of transition have been recognised in statement of profit and loss.

(b) Under previous GAAP, non-current investments were stated at cost less provision for diminution in value of investment, if any. Under Ind AS, financial assets in equity instruments have been classified as Fair Value through Other Comprehensive Income (FVTOCI) through an irrevocable election at the date of transition.

(c) Under previous GAAP, finance lease arrangement is recorded based on the legal form. Whereas under Ind AS arrangement that do not take the legal form of a lease but fulfilment of which is dependent on the use of specific assets and which convey the right to use the assets are accounted for as lease.

(d) Under previous GAAP, the net mark-to market losses on derivative financial instruments, as at the Balance Sheet date, were recognised in statement of profit and loss and the net gains, if any, were ignored. Under Ind AS, such derivative financial instruments are to be recognised at fair value and the changes are recognised in statement of profit and loss.

(e) Under previous GAAP, dividend payable is recognised as a liability in the period to which it relates. Under Ind AS, dividend to shareholders is recognised when declared by the members in annual general meeting.

(f) Under the previous GAAP the Company had adopted para 46 of AS-11 and capitalised exchange gain/loss. Whereas in Ind AS the Company has adopted Ind AS cost for all its Fixed Assets, hence exchange gain/loss is recognised in opening reserve and changes thereafter are recognised in statement of profit and loss or other comprehensive income, as the case may be.

(g) Under Ind AS the Company has recognised income on preference shares and Interest free loans given to subsidiaries.

(h) The deferred tax adjustments include the impact of transition adjustments together with Ind AS mandate of using balance sheet approach against profit and loss approach in the previous GAAP. On the date of transition, deferred tax impact on transition provision has been accounted in the Reserves, and consequential impact in the statement of profit and loss for the subsequent periods.

(i) Under previous GAAP, loan processing fees/transaction cost were expensed when incurred, whereas under Ind AS, it is considered for calculating effective interest rate and the impact for the periods subsequent to the date of transition is accounted in the statement of profit and loss.

(j) Defined benefit plans - Under Ind AS, actuarial gains or losses arising on defined benefit plans are recognised in other comprehensive income, whereas under previous GAAP same was being charged to the statement of profit and loss.

14. The Company is engaged in the business of providing infrastructural facilities as per Section 186 (ii) read with Schedule VI of the Act. Accordingly, disclosure under Section 186 of the Act, is not applicable to the Company.

15. Significant Events after the Reporting Period

There were no significant adjusting events that occurred subsequent to the reporting period other than the events disclosed in the relevant notes.

16. Approval of Financial Statements

The financial statements were approved for issue by the Board of Directors on 19th May, 2017.