7.5% Compulsory Convertible Redeemable Non-Cumulative Preference Shares (CCRPS)
The issuer companies shall have a call option on the CCRPS which can be exercised by them in one or more tranches and in part or in full before the end of agreed tenure from November, 2029 to March 2035 (20 years/ 15 years) of the said shares. In case the call option is exercised, the CCRPS shall be redeemed at an issue price (i.e. face value and premium). The Company, however, shall have an option to convert the CCRPS into equity shares at any time during the tenure of such CCRPS. At the end of tenure and to the extent the issuer Companies or the CCRPS holders thereof have not exercised their options, the CCRPS shall be compulsorily converted into equity shares. On conversion, in either case, each CCRPS shall be converted into equity shares of corresponding value (including the premium applicable thereon). In case the Issuer companies declare dividend on their equity shares, the CCRPS holders will also be entitled to the equity dividend in addition to the coupon rate of dividend.
Considering the said terms, these investments have been classified as equity and fair valued through Other Comprehensive Income.
36% Compulsory Convertible Redeemable Non-Cumulative Preference Shares (CCRPS)
The issuer shall have a call option on the CCRPS which can be exercised by them in one or more tranches and in part or in full before the end of agreed tenure upto June, 2026 (5 years) of the said shares. In case the call option is exercised, the CCRPS shall be redeemed at an issue price equivalent to face value. The Company, however, shall have an option to convert the CCRPS into equity shares at any time during the tenure of such CCRPS. At the end of tenure and to the extent the issuer Companies or the CCRPS holders thereof have not exercised their options, the CCRPS shall be compulsorily converted into equity shares. On conversion, in either case, each CCRPS shall be converted into equity shares of corresponding value. In case the Issuer companies declare dividend on their equity shares, the CCRPS holders will also be entitled to the equity dividend in addition to the coupon rate of dividend.
Considering the said terms, these investments have been classified as equity and fair valued through Other Comprehensive Income.
The holder of convertible preference shares shall not be entitled to receive dividend to be paid out of the distributable profits of the Company for any financial period. The holder shall have the conversion right in relation to his convertible preference shares and shall be entitled at any time and at his option, to excercise the conversion right in respect of all or any of his convertible preference shares to convert such convertible preference shares into one ordinary share of USD 1 each credited as fully paid with a conversion premium of 5% per annum payable in cash, upto and including the date of conversion, calculated on annual basis for every convertible preference shares held. CPS issued on July, 2018 have conversion auction which can be excercised by them before the end of agreed tenure upto June, 2028.
(a) Capital Reserve
The Capital Reserve had arisen pursuant to the composite scheme of arrangement on account of net assets taken over from Reliance Futura Limited and forfeiture of unexercised share warrants.
(b) Capital Reserve (arisen pursuant to scheme of amalgamation)
The Capital Reserve had arisen pursuant to the composite scheme of arrangement with erstwhile Reliance Clean Energy Private Limited. The said scheme was sanctioned by Hon'ble High Court of Bombay vide order dated April 05, 2013. The Capital Reserve shall be a Reserve which arose pursuant to the above scheme and shall not be and shall not for any purpose be considered to be a Reserve created by the Company.
(c) Securities Premium
Securities premium is created to record premium received on issue of shares. The Reserve is utilized in accordance with the provision of the Companies Act, 2013.
(d) General Reserve (arisen pursuant to various schemes)
All below General Reserve arisen pursuant to schemes and shall not be and shall not for any purpose be considered to be a Reserve created by the Company.
i. General Reserves (arisen pursuant to composite scheme of arrangement)
The General Reserve had arisen pursuant to the composite scheme of arrangement between the Company, Reliance Natural Resources Limited, erstwhile Reliance Futura Limited and four wholly owned subsidiaries viz. Atos Trading Private Limited, Atos Mercantile Private Limited, Reliance Prima Limited and Coastal Andhra Power Infrastructure Limited. The said scheme was sanctioned by Hon'ble High Court of Judicature at Bombay vide order dated October 15, 2010.
ii. General Reserve (arisen pursuant to scheme of amalgamation with erstwhile Sasan Power Infraventures Private Limited)
The General Reserve had arisen pursuant to the scheme of amalgamation with erstwhile Sasan Power Infraventure Private Limited, sanctioned by the Hon'ble High Court of Bombay vide order dated April 29, 201 1. The scheme was effective from January 01, 2011.
iii. General Reserve (arisen pursuant to scheme of amalgamation with erstwhile Sasan Power Infrastructure Limited)
The General Reserve had arisen pursuant to the scheme of amalgamation with erstwhile Sasan Power Infrastructure Limited, sanctioned by the Hon'ble High Court of Bombay, vide order dated December 23, 201 1. The scheme was effective from September 01, 2011.
(e) Debentures Redemption Reserve
The Company is required to create a debenture redemption Reserve out of the profits of the Company for the purpose of redemption of debentures.
(f) Treasury Shares
The Reserve comprises loss on sale of treasury shares.
(g) Equity instruments/ others through Other Comprehensive Income:
The Company has elected to recognise changes in the fair value of investments in equity instruments in subsidiaries in other comprehensive income. The changes are accumulated within the FVOCI equity instruments Reserve within equity. The Company transfers amount from this Reserve to retained earnings when the relevant equity securities are derecognised.
3.9(a1) Nature of security for term loans
(i) Series I (2018) listed, rated, secured redeemable non convertible debentures of ' Nil (March 31, 2022'54,500 lakhs) was secured by first pari-passu charge with Rupee term loan at Sr. no. (iii), (vii) and (viii) over long term loans and advances of the Company.
(ii) 2500 Series III (2017) listed, rated, secured, redeemable non convertible debentures of ' 25,000 lakhs (March 31, 2022 ' 25,000 lakhs) are secured by pledge over 60,30,44,493 equity shares of Coastal Andhra Power Limited (a subsidiary). The fair value of immovable property of CAPL has sufficient asset cover to discharge the borrowing.
(iii) Rupee term loans from banks of ' Nil (March 31, 2022'32,400 lakhs) was secured by first charge over long term loans and advances of the Company on pari passu basis NCD at Sr. no. (i) and Rupee term loan at Sr. no. (vii) and (viii) was also secured by pledge over 29.97% shares of Rosa Power Supply Company Limited (a subsidiary), which has been invoked by the lender on January 14, 2020, the entire obligation of the lender is discharged. However the pledge of 29.97% equity shares of subsidiary RPSCL is under process of release. (Refer note 25).
(iv) Rupee term loans from banks of ' Nil (March 31, 2022'1,895 lakhs) and foreign currency loan of ' 4,950 lakhs (March 31, 2022'5,449 lakhs) are secured by first charge on all the assets of the 45 MW wind power project at Vashpet on pari passu basis with Rupee term loan at Sr. no. (vi).
(v) Rupee term loans from banks of ' 6,912 lakhs (March 31, 2022'6,912 lakhs) are secured by first pari passu charge over current assets of the Company excluding receivable pertaining to 45 MW wind power project at Vashpet.
(vi) Rupee term loans from banks of ' 10,962 lakhs (March 31, 2022'1 1,203 lakhs) are secured by first charge on all the assets of the 45 MW wind power project at Vashpet on pari passu basis with Rupee term loan and foreign currency loan at Sr. no. (iv).
(vii) Rupee term loans from banks of ' Nil (March 31, 2022'6,300 lakhs) was secured by the first pari passu charge with NCD at Sr. no. (i) and Rupee term loan at Sr. no. (iii) & (viii) over long term loans and advances including receivables accrued out of such long term loans and advances of the Company and also secured by pledge over 29.97% shares of Rosa Power Supply Company Limited (a subsidiary) which has been invoked by the bank on January 14, 2020, the entire obligation of the lender is discharged. However the pledge of 29.97% equity shares of subsidiary RPSCL is under process of release. (Refer note 25)
(viii) Rupee term loans from banks of ' Nil (March 31, 2022'16,875 lakhs) was secured by the first pari passu charge with NCD at Sr. no. (i) and Rupee term loan at Sr. no. (iii) and (vii) over long term loans and advances of the Company and also secured by pledge over 29.97% shares of Rosa Power Supply Company Limited (a subsidiary) which has been invoked by the bank on January 14, 2020, the entire obligation of the lender is discharged. However the pledge of 29.97% equity shares of subsidiary RPSCL is under process of release. (Refer note 25).
(ix) Current maturities of long term borrowings have been classified as current borrowings (Refer note 3.11(a))
3.9(a2) Terms of Repayment and Interest
(i) 2500 Series III (2017) listed, rated, secured, redeemable non convertible debentures are redeemable in 5 structured annual installments starting from June 30, 2031 and interest is payable at the end of tenure on June 30, 2035.
(ii) Foreign currency loans is repayable in 42 structured quarterly instalments commenced from September 2013 and interest is payable on a half yearly basis. The outstanding balance as at year end is ' 4,950 lakhs (March 31, 2022'5,449 lakhs).
(iii) Rupee term loans from bank is repayable in 16 quarterly instalments commencing from June 2017 and interest is payable on a monthly basis. The outstanding balance as at year end is ' 6,912 lakhs (March 31, 2022'6,912 lakhs).
(iv) Rupee term loans from bank is repayable in 53 structured quarterly instalments commenced from September 201 6 and interest is payable on a monthly basis. The outstanding balance as at year end is ' 10,962 lakhs (March 31, 2022'1 1,203 lakhs).
(v) ICD payable to related parties are repayable in 5 structured installments starting from June 30, 2031 and interest is payable at the end of the tenure on June 30, 2035.
3.9(a3) The amortised cost disclosed above is net off incidental cost of borrowings aggregating of ' 54 lakhs (March 31,2022 ' 792 lakhs).
(i) Rupee loan from bank of ' 17,213 lakhs (March 31, 2022 ' 17,213 lakhs) is secured by subservient charge on the current assets of the Company (except pertaining to 45 MW Wind power project at Vashpet) and is repayable on demand.
(ii) Working capital loan from bank is secured by first hypothecation and charge on all receivables of the Company, (excluding assets acquired under the merger scheme with erstwhile Reliance Clean Power Private Limited) both present and future on pari passu basis and is repayable on demand and interest is payable on a monthly basis.
4. Contingent liabilities and commitments
(a) Bank guarantees outstanding as at balance sheet date aggregating to ' 14,551 lakhs (March 31, 2022 ' 18,301 lakhs) issued in favor of subsidiaries by banks.
(b) Corporate guarantee issued to banks and financial institutions for loan facilities availed by subsidiary companies, outstanding as at balance sheet date aggregating to ' 7,39,100 lakhs (March 31, 2022'5,66,572 lakhs).
(c) The Company has acted as a co-borrower for facilities aggregating to ' Nil lakhs (March 31, 2022'55,542 lakhs) availed by one of its subsidiary.
(d) The Appeals pending aggregating to ' 1 1,689 lakhs (March 31, 2022 ' 14,610 lakhs) and ' 23 lakhs (March 31, 2022'42 lakhs) for direct and indirect tax respectively.
(e) In respect of subsidiaries, the Company has committed/ guaranteed to extend financial support in the form of equity or debt as per the agreed means of finance, in respect of the projects being undertaken by the respective subsidiaries, including any capital expenditure for regulatory compliance and to meet shortfall in the expected revenues/debt servicing. Future cash flows in respect of the above matters can only be determined based on the future outcome of various uncertain factors.
(f) As on March 31, 2023 there were no contracts remaining unexecuted on capital account.
6. Project status of Subsidiaries(a) Coastal Andhra Power Limited (CAPL)
CAPL was incorporated to develop an imported coal-based Ultra Mega Power Project (UMPP) of 3,960 MW capacity located in Krishnapatnam, District Nellore, in the State of Andhra Pradesh.
The project was awarded to Reliance Power Limited (RPL) through international tariff-based competitive bidding process managed by Power Finance Corporation (PFC), the nodal agency appointed by Ministry of Power. PFC was required to set up special purpose vehicles for each UMPP and to undertake initial development of UMPPs in terms of land acquisition and key clearances and thereafter select a developer for development, financing, construction and operation of the UMPP. On emerging successful, 100% ownership of CAPL was transferred by PFC to RPL pursuant to execution of a Share Purchase Agreement (SPA); thereafter RPL became the Parent Company of CAPL.
CAPL had entered into a firm price fuel supply agreement which envisaged supply of coal from Indonesia with RCRPL, a wholly owned subsidiary of the Parent Company. The Government of Indonesia introduced a new regulation in September, 2010 which prohibited sale of coal, including sale to affiliate companies, at below Benchmark Price which is linked to international coal prices and required adjustment of sale price every 12 months. This regulation also mandated to align all existing long-term coal supply contracts with the new regulations within one year i.e. by September, 2011. The new Indonesian regulations led to steep increase in price of coal imported from Indonesia, making the UMPP unviable and as a result CAPL could not draw down already tied-up debt for the project. The said issue was communicated to the power procurers of the UMPP with a view to enter into mutual discussions to arrive at a suitable solution to the satisfaction of all the stakeholders. The impact of new Indonesian regulation, being an industrywide issue which impacted all imported coal-based projects in the Country, was also taken up with GoI through the Association of Power Producers.
Since no resolution could be arrived, CAPL invoked the dispute resolution provision of the PPA. The procurers also issued a notice for termination of the PPA and raised a demand for liquidated damages of ' 40,000 lakhs.
CAPL filed a petition before the Hon'ble High Court at Delhi inter-alia for interim relief under Section 9 of the Arbitration and Conciliation Act, 1996. The single judge of the High Court at Delhi vide order dated July 02, 2012 dismissed the petition and CAPL filed an appeal against the said order before the Division Bench of the High Court at Delhi. The Division Bench dismissed the appeal on January 15, 2019 and consequently the PPA between procurers and CAPL stood terminated. Thereafter, the procurers have encashed the Performance Bank Guarantees of ' 30,000 lakhs towards recovery of their liquidated damages claim.
CAPL has now filed a petition before the Central Electricity Regulatory Commission (CERC) for referring the dispute to arbitration. Subsequently CAPL requested CERC to adjudicate the dispute itself and allow to file substantive petition which CERC vide order dated October 23, 2021 granted and disposed of the said Petition as withdrawn, with a liberty to CAPL & RPL to approach this Hon'ble Commission with a substantive petition. Accordingly substantive petition is filed before CERC which is currently pending adjudication. This has been shown as receivables from procurer (Refer note 3.4(e) and 26).
As per the terms of SPA among PFC, RPL and CAPL, on termination of PPA under Article 3.3.3 of PPA, PFC has a right to seek transfer of ownership of CAPL to PFC / entity designated by PFC. Accordingly, RPL has requested PFC to initiate process of transfer of ownership of CAPL and invite a procurers' meeting in that regard to decide on modalities of transfer. As PFC/Procurers are yet to take action on the request of CAPL, R-Power has filed a Writ Petition in DHC for direction to PFC/Procurers to buyback the SPV. Next date of hearing is August 1, 2023.
Government of Andhra Pradesh (GoAP), citing that the project has not been developed for last 10 years; has issued three land resumption orders dated July 22, 2017, February 25, 2021 and February 27, 2021. Aggrieved by this, CAPL and RPL have filed a Writ Petitions (WP 33246 of 2017 and WP 5058 of 2021) in High Court of Andhra Pradesh at Amaravati praying for setting aside the relevant land resumption orders. The High court vide orders dated October 06, 2017 and March 02, 2021 directed both the parties to maintain a "Status Quo". Next date of hearing is awaited.
(b) Samalkot Power Limited (SMPL)
The management had planned to set up a gas-based power plant consisting of 3 modules of 754 MW each at Samalkot (Andhra Pradesh), with gas being sourced from KG-D6 basin. After making significant progress in the construction of the said plant, the Company stopped further construction of the plant due to severe domestic gas shortage and nonavailability of long-term domestic gas linkage.
Out of the three modules, one module has been moved to Bangladesh. Reliance Power Limited, had entered into a Memorandum of Understanding (MOU) with Bangladesh Power Development Board (BPDB) in June 2015 for developing a gas-based project of 3000 MW capacity in a phased manner. Pursuant to the above, Reliance Bangladesh LNG and Power Limited (RBLPL), has concluded a long-term power purchase agreement (PPA) for supply of 718 MW (net) power from a combined cycle gas-based power plant to be set up at Meghnaghat near Dhaka in Bangladesh as Phase-1 project. RBLPL has signed all the project agreements (Power Purchase Agreement, Implementation Agreement, Land Lease Agreement and Gas Supply Agreement) with Government of Bangladesh authorities on 1 September 2019, and also inducted a strategic partner JERA Power International (Netherlands) - a subsidiary of JERA Co. Inc. (Japan) to invest 49% equity in RBLPL on 2 Sept., 2019. Samsung C&T (South Korea) has been appointed as the EPC contractor for the Bangladesh project. Samalkot Power Ltd. has signed an Equipment Supply Contract (ESC) with Samsung C&T (South Korea) on 11 March, 2020 to sell one module of equipment for the Phase-1 project in Bangladesh and the same was amended between the Parties and approved by US Exim Bank vide a Side Letter dated 3 December, 2020. All the conditions for achieving financial closure were satisfied and Financial Closure achieved and NTP issued by Samsung on 2 Feb., 2021. All the equipment to be supplied by Samalkot Power under the ESC were shipped by November 2021.
The Company has already realized the proceeds from sale of one Module and these have been used to repay a major portion of the outstanding US Exim loan.
For balance two modules, the Company is evaluating various alternatives including setting up next phase of the project in Bangladesh based on the MOU referred above or selling it to other third parties.
Considering the above facts, including the active discussions with the lenders to revise terms of the agreement and financial assistance from the company, the management believes that SMPL would be able to meet its financial and other obligations in foreseeable future.
7. Applicability of NBFC Regulations
The Company, based on the objects given in the Memorandum and Articles of Association, its role in construction and operation of power plants through subsidiaries and other considerations, has been legally advised that it is not covered under the provisions of Non-Banking Financial Company as defined in the Reserve Bank of India Act, 1934 and accordingly, is not required to be registered under section 45 IA of the said Act.
8. Status of Dadri Project
The Company proposed to develop a 7,480 MW gas-based power project to be located at Dadri, District Hapur, Uttar Pradesh in the year 2003. The Government of Uttar Pradesh (the GoUP) in the year 2004 acquired 2,100 acres of land and conveyed the same to the Company in the year 2005, However, certain land owners challenged the acquisition of land by the GoUP for the project before the Hon'ble Allahabad High Court. The Hon'ble Allahabad High Court quashed a part of land acquisition proceedings. Subsequently, in the appeals filed by the Company and land owners against the findings of the Hon'ble Allahabad High Court, the Hon'ble Supreme Court held the land acquisition proceedings as lapsed but upheld the right of the Company to recover the amount paid in any other proceeding. The Company has represented to the GoUP seeking compensation towards cost incurred on the land acquisition as well as other incidental expenditure thereto. Considering the above facts, the Company has classified assets related to the Dadri project under the head 'Assets
classified as held for sale' the Company has fully provided for receivables of ' 1 5,005 lakhs against the Dadri project. GoUP has not paid the agreed amount and consequently the Company invoked arbitration against GoUP. Arbitration Tribunal after pleadings disposed of the petition on 20.06.2022 and allowed claim of the Company GoUP has appealed in Delhi High Court against the Arbitral Award. Next date of hearing in the appeal is pending.
(c) Post employment obligation Gratuity
The Company has a defined benefit plan, governed by the Payment of Gratuity Act, 1 972. The plan entitles an employee, who has rendered at least five years of continuous service, to gratuity at the rate of fifteen days basic salary for every completed years of services or part thereof in excess of six months, based on the rate of basic salary last drawn by the employee concerned.
The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant.
In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. While calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liabilities recognised in the balance sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.
(iv) The above defined benefit gratuity plan was administrated 100% by Life Insurance Corporation of India (LIC).
(v) Defined benefit liability and employer contributions
The Company will pay demand raised by LIC towards gratuity liability on time to time basis to eliminate the deficit in defined benefit plan.
The weighted average duration of the defined benefit obligation is 2.41 years (March 31, 2022 - 3.19 years).
(vi) The Company has seconded certain employees to the subsidiaries. As per the terms of the secondment, liability towards salaries, provident fund and leave encashment will be provided and paid by the respective subsidiaries and gratuity will be paid / provided by the Company. Accordingly, provision for gratuity includes cost in respect of seconded employees
(vii) The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets under perform this yield, this will create a deficit.
Details of material transactions: Service income includes ' 3,960 lakhs from SPL, ' 2,400 lakhs from RPSCL (March 31,2022: SPL ' 3,960 lakhs, RPSCL ' 2,400 lakhs), Interest income on ICD given includes ' 5,517 lakhs to RCRPL (March 31, 2022: ' 5,467 lakhs), Interest expense on ICD includes ' 5,427 lakhs to Rinfra (March 31, 2022: ' 7,482 lakhs to Rinfra), Reimbursement of expenses and advances given includes ' 5,834 lakhs to CAPL, ' 4,151 to CPPL (March 31, 2022: CAPL ' 4,817 lakhs, CPPL ' @), Inter corporate deposit received includes ' 53,811 lakhs from RPSCL (March 31, 2022: ' Nil), Corporate guarantee issued to banks/financial institution includes ' 30,000 lakhs for RNRL and ' 82,600 lakhs for RPSCL, Conversion of ICD into equity and share warrants of ' 25,131 lakhs from R Infra (March 31, 2022: ' 77,750 lakhs), Forfeiture of equity share warrants of ' 9,873 lakhs from R Infra.
Details of material balances: Investment in Equity shares includes SPL ' 5,18,494 lakhs and RPSCL ' 2,24,1 90 lakhs (March 31, 2022: SPL ' 5,35,805 lakhs and RPSCL ' 296,338 lakhs), Investment in Preference shares includes SPL ' 425,006 lakhs, (March 31, 2022: ' 439,1 95 lakhs), Short term borrowing - Inter- corporate deposit includes ' 345,509 lakhs from RPSCL (March 32, 2022: ' 301 ,653 lakhs), Bank/ Corporate Guarantee issued to banks/ financial institutions includes ' 3,41,482 lakhs for VIPL and ' 1 58,224 lakhs for SMPL (March 31, 2022: ' 3,09,257 lakhs for VIPL and ' 1,42,053 lakhs for SMPL).
(iii) Other transactions
As per the terms of sponsor support agreement entered for the purpose of security of term loans availed by subsidiaries, the Company has pledged following percentage of its shareholding in the respective subsidiaries.
• 100% of equity shares of Sasan Power Limited
• 100% of equity shares of Dhursar Solar Power Private Limited
• 100% of equity shares of Rajasthan Sun Technique Energy Private Limited
• 98% of equity shares of Vidarbha Industries Power Limited
• 100% of preference shares of Sasan Power Limited
• 100% of preference shares of Dhursar Solar Power Private Limited
• 100% of preference shares of Rajasthan Sun Technique Energy Private Limited
• 100% of equity shares of Reliance Natural Resources Limited
• 100% of equity shares of Coastal Andhra Power Limited
• 100% of equity shares of Samalkot Power Limited
• 100% of equity shares of Rosa Power Supply Company Limited
The Company has given commitments / guarantees for loans taken by SPL, SMPL, VIPL, DSPPL and RSTEPL. (Refer note 4(e)).
(iv) The list of investment in subsidiaries along with proportion of ownership interest held and country of incorporation are disclosed in note no. 2 (c) (V) of consolidated financial statement
(v) The above disclosures do not include transactions with public utility service providers, viz, electricity, telecommunications in the normal course of business.
(vi) Transactions and balances with related parties which are in excess of 10% of the total revenue and 10% of net worth respectively of the Company are considered as material transactions.
(vii) Transactions with related parties are made on terms equivalent to those that prevail in case of arm's length transactions.
(viii) During the year 2022-23, the Company has paid sitting fees of ' Nil (March 31, 2022 ' 2 lakhs) to Individual mentioned in B (I) (b) above
(e) Valuation technique used to determine fair values
The fair value of financial instruments is determined using discounted cash flow analysis.
The carrying amount of current financial assets and liabilities are considered to be the same as their fair values, due to their short term nature.
The fair value of the long-term borrowings with floating-rate of interest is not impacted due to interest rate changes, and will be evaluated for their carrying amounts based on any change in the under-lying credit risk of the Company borrowing (since the date of inception of the loans).
For financial assets and liabilities that are measured at fair value, the carrying amount is equal to the fair values.
Note
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices.
Level 2: The fair value of financial instruments that are not traded in an active market (for example over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities which are included in level 3.
There are no transfers between any levels during the year.
The Company's policy is to recognise transfer into and transfer out of fair value hierarchy levels as at the end of the reporting period.
(a) Credit risk
The Company is exposed to credit risk, which is the risk that counterparty will default on its contractual obligation resulting in a financial loss to the Company. Credit risk arises from cash and cash equivalents, financial assets carried at amortised cost and deposits with banks and financial institutions, as well as credit exposures to trade customers including outstanding receivables.
Credit risk management
Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss.
The Company's credit risk arises from accounts receivable balances on sale of electricity is based on tariff rate approved by electricity regulator and inter-corporate deposits/loans are given to subsidiaries incorporated as special purpose vehicle for power projects awarded to the Company. The credit risk is very low as the sale of electricity is based on the terms of the PPA which has been approved by the Regulator. With respect to inter corporate deposits/ loans given to subsidiaries, the Company will be able to control the cash flows of those subsidiaries as the subsidiaries are wholly owned by the Company.
For deposits with banks and financial institutions, only highly rated banks/institutions are accepted. Generally all policies surrounding credit risk have been managed at company level. The Company's policy to manage this risk is to invest in debt securities that have a good credit rating.
(b) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, Company's treasury function maintains flexibility in funding by maintaining availability under committed credit lines.
In respect of its existing operations, the Company funds its activities primarily through long-term loans secured against each power plant. In addition, each of the operating plants has working capital loans available to it which are renewed annually, together with certain intra-group loans. The Company's objective in relation to its existing operating business is to maintain sufficient funding to allow the plants to operate at an optimal level.
Management monitors rolling forecasts of the Company's liquidity position and cash and cash equivalents on the basis of expected cash flows. This is generally carried out at the operating subsidiaries level of the Company in accordance with practice and limits set by the Company. These limits vary by location to take into account the liquidity of the market in which the entity operates. In addition, the Company's liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintained debt financing plans.
Periodic budgets and rolling forecasts are prepared at the level of operating subsidiaries as regular practice and in accordance with limits specified by the Company. There is delay/ default in repayment of loans for ' 51,669 lakhs as at the end of the financial year. The Company has been pursuing proposed strategic transactions/ sale of assets and overall financial restructuring, when executed, would make available the required liquidity for the continuing business and would also provide an extended maturity period for repayment of restructured balance debt.
Market risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because of volatility of prices in the financial markets. Market risk can be further segregated as: a) Foreign currency risk and b) Interest rate risk.
(i) Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company holds monetary assets in the form of investments in US Dollar. Further it has long term monetary liabilities which are in US dollar other than its functional currency.
While the Company has direct exposure to foreign exchange rate changes on the price of non-Indian Rupee-denominated securities and borrowings, it may also be indirectly affected by the impact of foreign exchange rate changes on the earnings of companies in which the Company invests. For that reason, the below sensitivity analysis may not necessarily indicate the total effect on the Company's net assets attributable to holders of equity shares of future movements in foreign exchange rates.
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's main interest rate risk arises from long-term borrowings with variable rates, which expose the Company to cash flow interest rate risk. The Company's borrowings at variable rate were mainly denominated in Rupees.
The Company's fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS-107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
17. Capital Management
(a) Risk Management
The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Company monitors capital on basis of total equity and debt on a periodic basis. Equity comprises all components of equity including the fair value impact. Debt includes long-term loan and short term loans. The following table summarizes the capital of the Company:
18. Segment reporting
Presently, the Company is engaged in only one segment viz 'Generation of Power' and as such there is no separate reportable segment as per Ind AS 108 'Operating Segments'. Presently, the Company's operations are predominantly confined in India.
19. Exchange Difference on Long Term Monetary Items
As explained above in note 2.1(m) with respect to accounting policy followed by the Company for recording of foreign exchange differences, the Company has adjusted the value of Plant and equipment by loss of ' 439 lakhs (March 31, 2022 gain of ' 187 lakhs) towards the exchange difference arising on long term foreign currency monetary liabilities towards depreciable assets.
20. Corporate social responsibility (CSR)
As per the section 135 of the Act, the Company is required to spend ' Nil towards CSR based on profitability of the Company, against the same ' Nil has been spent by the Company.
21. Disclosure under Micro, Small and Medium Enterprises Development Act, 2006
Disclosure of amounts payable to vendors as defined under the "Micro, Small and Medium Enterprise Development Act, 2006" is based on the information available with the Company regarding the status of registration of such vendors under the said Act.
22. The Company has outstanding obligations payable to lenders and its current liabilities exceed current assets as at March 31, 2023. The Company is confident of meeting its obligations by generating sufficient and timely cash flows through monetization of its assets and realization of amounts from various regulatory/ arbitration claims. Notwithstanding the dependence on these uncertain events, the Company is confident that such cash flows would enable it to service its debt, realize its assets and discharge its liabilities in the normal course of its business. Accordingly, the standalone financial statement of the Company have been prepared on a Going Concern Basis.
As at March 31, 2023 the Company has overdue of ' 26,893 lakhs (March 31, 2022'93,772 lakhs) included in the current maturities of long term debt in note no. 3.11(a) and ' 24,776 lakhs (March 31, 2022'66,551 lakhs) included in interest accrued in note no. 3.11(c).
* Refer note 25 below
25. During the year ended March 31, 2023, in continuation of the discussions for settlement with one of its lenders, the company has fully settled its debt, which constitutes very substantial portion of its external debt and has recognized one time gain in statement of profit and loss of ' 1,03,686 lakhs as an exceptional income and ' 16,880 lakhs as reversal to finance cost. Pursuant to the above said settlement, the entire obligation of the lender is discharged. However, the pledge of 29.97% equity shares of subsidiary Rosa Power Supply Company Limited is under process of release
26. During the year Company has created a provision of ' 30,000 lakhs against its certain financial assets and charged the same
to the statement of profit and loss for the year ended March 31, 2023
27. During the year the Company has issued and allotted 33,50,79,500 number of fully paid up equity shares of ' 10 each,
to Reliance Infrastructure Limited, upon exercise of its right to convert the equivalent number of warrants held by it and underlying payments have been made by conversion of debt. Consequently 39,49,20,500 warrants remain unexercised and balance of warrant subscription amount of ' 9,873 lakhs forfeited accordingly. The aforesaid equity shares shall rank pari-pasu in all respect with the existing equity shares of the Company. The Company has received listing and trading approval from National Stock Exchange of India Limited (NSE) and BSE Limited (BSE) for the said equity shares.
28. During the year, the Company has proposed to issue upto 6,000 Lakhs equity shares and/or warrants convertible into equity shares through preferential allotment ("Equity Shares") having face value of ' 10 each at the issue price of ' 15.55 each, to VFSI Holding Pte. Ltd under the provision of the Securities and Exchange Board of India (SEBI) (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended up to date (the "ICDR Regulations") and pursuant to Board meeting held on September 08, 2022 the Board has approved the Preferential Issue of Equity Shares. The Company has subsequently received requisite approval from BSE Ltd, National Stock Exchange of India Ltd and members towards the aforesaid Preferential Issue and accordingly the Company on October 21, 2022 has allotted 2,057.88 lakhs warrants to VFSI Holding Pte. Ltd and the initial subscription of ' 8,000 Lakhs (being 25% of allotment value of warrants) has been received on October 21, 2022.
29. The Company lease assets primarily consists of office premises which are of short term in nature with the term of twelve months or less and low value leases. For these short term and low value leases, the Company recognizes the lease payments as an expense in the Statement of Profit and Loss on a straight line basis over the term of lease.
During the year, the Company has recognized ' 336 lakhs as rent expenses in the Statement of Profit and Loss (March 31, 2022'324 lakhs).
30. The Company has net investment in various Forms in its subsidiaries as on March 31, 2023 of ' 1 1,75,444 lakhs consist of (i) ' 12,60,140 lakhs investment in Equity, Preference share and Inter corporate Deposit classified as equity (Refer Note 3.2(a)) (ii) ' 1,33,369 lakhs, loan of long term in nature (Refer Note 3.2(b)) (iii) ' 65,605 lakhs, loan of short term in nature (Refer Note 3.4(d)) (iv) ' 3,094 lakhs, loans / advances to related party short term in nature (Refer Note 3.4(d)) (v) ' 99,992 lakhs Other financial assets receivable from subsidiary (Refer Note 3.4(e)) (vi) ' (3,86,756) lakhs loans from subsidiaries short term in nature (Refer note 3.11(a)) and (vii) ' (4,233) lakhs for other financial liabilities (Refer note 3.11 (c)). These investments are made by the company in equity, preference shares, loans and advances to its subsidiary for meeting the business requirement.
31. (a) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (ultimate beneficiaries) or provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries.
(b) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the funding party company (ultimate beneficiaries) or provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries.
36. The figures for the previous year are re-casted / re-grouped, wherever necessary.
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