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Notes to Accounts of Indosolar Ltd.

Mar 31, 2015

1. DEBT RESTRUCTURING IN THE YEAR ENDED 31ST MARCH 2012

i) Background

The Company had set up a green field project for manufacturing Solar Photovoltaic cells with a capacity of 160 MW, comprising two lines of 80 MW each under Phase –I and are in the process of setting up an additional manufacturing facility Line -3 with a 200 MW capacity under Phase – II, at Plot No. 3C/1 Ecotech-II, Udyog Vihar Greater Noida in the State of Uttar Pradesh. The lending banks ('Lenders') had, at the request of the Company, sanctioned term loans, deferred payment guarantee facilities and working capital facilities on such terms and conditions as contained in various loan agreements / facility agreements entered into between the Company and the Lenders.

ii) Conditions that lead to restructuring

The Company witnessed significant downturn due to weak demand both globally as well as in the domestic market and incurred significant cash and operating losses in the previous years. There was a mismatch between cost and selling prices that resulted in the stoppage of plant from September 2011, which severely impacted the cash flow position of the Company prompting the filing of a restructuring package of its loans that existed as on 1 July 2011 with the Corporate Debt Restructuring Cell ('CDR Cell'). At the request of the Company and in consideration of its commitment to improve its operations, the application filed was referred to the Corporate Debt Restructuring Forum, a non-statutory voluntary mechanism set up under the aegis of the Reserve Bank of India (hereinafter referred to as the "CDR"). Pursuant thereto, the CDR Empowered Group at their meeting held on 30 January 2012 approved a restructuring package in terms of which the loans as of 1 July 2011 were restructured and certain additional financial assistance was proposed to be extended to the Company that was set out in the Letter of Approval dated 7 March 2012 issued by Corporate Debt Restructuring Cell to the Lenders and the Company (hereinafter referred to as the "CDR Package").

The terms and conditions of the CDR were binding on the Lenders and the Company, effective from the date of the signing of the Master Restructuring Agreement ('MRA') i.e. 28 March 2012 with each of the Lenders (except for Indian Bank). The Company had accordingly given effect to the CDR scheme w.e.f. from 1 July 2011, in the financial statements for the year ended 31 March 2012. However one of the banks of the consortium group i.e. Indian Bank had not agreed to the CDR package and had not signed the Master Restructuring Agreement (MRA). The MRA was signed by the concerned bank on 5 July 2012. In connection with obtaining the necessary approvals for restructuring of existing loans, the promoters contributed funds in accordance with sanction letter. As a consequence, the Company received an unsecured loan from its promoters amounting to Rs. 950.00.

During the previous year, the Company has received interest free unsecured loan from a party amounting to Rs. 250.00 towards meeting expenses for CDR-2 to be converted into 2,5000,00 zero coupon redeemable non convertible non cumulative preference shares of face value of Rs 10 each on approval from shareholders. However during the current year, on approval from shareholders the Company has, instead of prefrence shares, allotted 2,500,000 equity shares of Rs 10 each at par value.

iii) Principal terms of the Master restructuring Agreement ('MRA') in accordance with the CDR scheme.

a) Waivers of existing events of default and the consequential effect thereof:The Company in accordance with the terms and conditions of the MRA agreed to the reconstitution of the Existing Loans due to the Lenders pursuant to the CDR Package. As part of the restructuring arrangement, the Lenders waived any existing Events of Default in connection with the Existing loans and any rights, remedies or powers that had arisen in connection therewith. Also, each of the Lenders waived the obligation of the Company to pay any liquidated damages, default or penal interest / interest / further interest charged by the Lenders in excess of the interest rates specified in the existing documents for financing and security of such Lender as they existed prior to 1 July 2011, without considering any increase in such rates on account of the occurrence of any default under such documents, together with compound interest, penalties or any other charges thereon under those documents of such Lender during the period commencing on 1 July 2011 and ending on 30 June 2013.

In accordance with the CDR scheme the consortium of lenders had waived the obligation of the Company to pay any liquidated damages, default or penal interest / interest / further interest charged by the Lenders in excess of the concessional rates approved under CDR package.

b) Restructuring of the loans existed as at 1 July 2011:

- Each of the Lenders and Company agreed that the loans shall be reconstituted as follows:

- Rupee Term Loans of Rs. 34,485.82 together with all interest, charges, costs, expenses and any other amounts accrued was reconstituted into Facility -A;

- Short Term Loan of Rs. 2,200.00 from Andhra Bank outstanding as on 1 July 2011 i.e. the Cut–off date was rescheduled and converted into "Priority Medium Term Loan" as Facility -B;

- Irregularity as on 31 March 2012 in Working Capital Limits comprising cash credit, packing credit, buyer's credit facility, bill discounting and irregularities due to anticipated devolvement of LCs was converted into WCTL as Facility C;

- Interest accrued/ to be accrued on Secured term loans, Short term loan and WCTL until 30 June 2013 to be funded by way of Funded Interest Term Loan ("FITL") as Facility- D.

c) Sanction for additional funding

1. Project Loan from Union Bank of India

Union Bank of India ('UBI') sanctioned a Project Loan amounting to Rs. 27,500 (including Priority Term Loan of Rs. 4,700). The Project Loan by UBI was sanctioned in the following manner:

a) The Company was sanctioned Rs. 22,800 Letter of Credit (LC) opened in favour of M/s. Schmid Technology Systems GmbH ('Schmid') through UBI, for a period of 35 months from the date of shipment out of the project loan sanctioned. In accordance with the said arrangement, the letter of credit shall be converted into Term Loan in February 2014. Schmid discounted the said Letter of Credit with their bankers (counterparty bank). UBI in consultation with the Company entered into a deferred payment credit facility with the counterparty bank wherein, a sum of Rs. 22,142.26 was paid by the counterparty bank to M/s. Schmid towards imported capital goods until 31 March 2012.

UBI is paying the interest in relation to such financing to the counterparty bank, which is being charged to the Company. In accordance with the terms of the deferred payment facility, there is no obligation to pay to Schmid as the same was discharged by the counterparty bank. As a consequence, UBI has an obligation towards the counterparty bank to repay the loan in accordance with the terms agreed at the end of the Letter of credit term i.e. 35 months from the date of shipment. Such amount payable under the deferred payment mechanism was therefore classified as long term borrowings. During the curent year the deferred payment mechanism was paid out of term loan facility reffered as 5(e). The balance as at 31 March 2015 and 31 March 2014 amount to Rs. Nil and Rs. 26,754.78 respectively.

b) Rs. 4,700 out of the said project loan representing priority medium term loan shall be disbursed by UBI to the Company towards capital expenditure. In the current year, the Company has drawn a sum of Rs. Nil (previous year Rs. 300.00) out of the sanctioned limit.

2. Priority medium term loan

As part of the CDR package the Lenders agreed to provide additional funding in the form of priority medium term loans of Rs. 10,000 for the implementation of 200 MW Plant in the proportion of the outstanding exposure to the Company as on the 1 July 2011. Such funding priority shall be in the form of deferred letter of credit for 35 months which shall be funded by the Priority loans. In the current year, the Company has drawn a sum of Rs. 1,150.00 (previous year Rs. 21.76) (net of repayment) out of the sanctioned limit.

d) Reset of Interest Rate:

The Lenders who are part of the consortium of banks, alongwith the approval of CDR EG, shall have a right to reset the rate of interest on the term loans after every three years (or short period as decided by the CDR EG) and working capital interest rate every year.

e) Consequential effect of the CDR Scheme on the interest cost and the classification of the interest accrued on borrowings as loans

As explained in note 6 (iii) (a) above, the Lenders waived the obligation of the Company to pay any liquidated damages, default or penal interest / interest / further interest charged by the Lenders in excess of the concessional rates approved under the CDR package w.e.f 1 July 2011. Consequently, an interest credit received from the Lenders amounting to Rs 1,201.70 and the balance of interest accrued outstanding as at 31 March 2012 relating to various facilities amounting to Rs 3,502.00 was transferred to FITL.

f) Default in repayment of loan and interest

As per the terms of the first Corporate Debt Restructuring package, 10% of principal amount aggregating to Rs. 6,717.08 and 5% of principle amount aggregating to Rs. 459.78 became due during the current year ended 31 March 2015 and 3% of principal amount aggregating to Rs. 2,439.29 became due during the previous year ended 31 March 2014. Further, the interest outstanding on the term loans as at 31 March 2015 amounts to Rs. 16,968.59 (Previous year Rs. 6,030.46).

3. 2nd Re-structuring

In light of continuing downturn in the solar industry where margins were under significant stress and the continuing operating and cash losses of the Company, the Company could not achieve the projection submitted under first CDR package. Considering the above, the Company has approached for second CDR package in the financial year ended March 31, 2014 which is under consideration with banks.

4. COMMITMENTS

a) Estimated amount of contracts remaining to be executed on capital account (net of advances) not provided for Rs. 337.73 (previous year Rs. 8,268.18).

b) For commitments relating to lease arrangements (Refer note 29).

c) For commitments relating to net positive foreign exchange earnings (Refer note 35).

5. LEASE TAKEN BY THE COMPANY

The Company has various operating leases under cancellable and non cancellable operating lease arrangements for plant and machinery, office premises, accommodation for employees and other assets which are renewable on a periodic basis. Rent expenses for operating leases included in the Statement of Profit and Loss is Rs. 21.12 (previous year: Rs. 55.14).

6. The Company has incurred expenses in foreign currency (including amortisation of imported machinery) amounting to Rs. 115,937.53 lakhs till 31 March 2015. Such machinery and raw material have been imported without payment of customs duty, being an Export Oriented Unit, on the basis of an undertaking given to customs authorities that the Company shall be able to earn a positive Net Foreign Exchange within ten years from the commencement of its operation. At current quarter end (i.e. after five years of commencement of its operations), the Company's earnings is a negative Net Foreign Exchange Earnings of Rs. 6,585.79 lakhs (previous quarter Rs. 18,557.22 lakhs). On a 5 year block basis the company had achieved the negative NFE of Rs. 26,102.08 lakhs upto 31 March 2014. In the next block of five years starting from 1 April 2014 till end of current quarter, the Company could achieve positive NFE of Rs. 19,516.29 lakhs. As explained in Note 2 above, the ability of the Company to meet its export obligations over the next 5 years is dependent on various factors which have created multiple uncertainties, the effect of which , is not ascertainable at present.

7. Related party disclosures List of related parties

a) Parties where control exists :

i) Key managerial personnel controlling the Company*

Mr. H.R Gupta

Mr. B.K Gupta

b) Other related party relationships where transactions have taken place:

i) Party holding significant influence over the enterprise Greenlite Lighting Corporation

8. Employees benefit

Disclosure in respect of employee benefits under Accounting Standard 15 "Employee Benefits" prescribed by the Companies (Accounting Standards) Rules 2006:

a) Defined Contribution Plans: The Company has recognised Rs. 67.20 (Previous year Rs. 25.87) related to employers' contribution to Provident Fund Scheme in the Statement of Profit and Loss.

b) Post employment benefit plan in the form of gratuity:

The Company has a post employment benefit in the form of gratuity wherein the last drawn salary plus dearness allowance is used to compute gratuity as per the provisions of the Payment of Gratuity Act, 1972. A period of 5 years has been considered as vesting and the maximum benefit that can be availed under the scheme is Rs. 10.00.

9. Segment Information

(a) Information about primary business segment

In the opinion of the management, there is only one reportable segment i.e. manufacturing of solar cells, as envisaged by Accounting Standard 17 "Segment Reporting", prescribed by the Companies (Accounting Standards) Rules, 2006.

(b) Information on secondary/ geographical segment

The Company sells its products to various customers within the country and also exports to other companies. Considering the size and proportion of exports to local sales, the Company considers sales made within the country and exports as different geographical segments.

10. Shareholders had passed ordinary resolution through postal ballot on 31st January, 2011 to empower and authorise the Board of Directors to vary terms and contracts mentioned in the prospectus dated 18th September, 2010, vary/ amend/ alter the utilisation of net proceeds inter se one or other of the purposes for their utilisation, described in the said prospectus on even date and utilise any part of the net proceeds for a purpose or purposes other than those described in the said prospectus. The funds raised and utilised by the Company are as under:

11. The Company had been awarded a turnkey contract by MP Urja Vikas Nigam Limited (MP Urja) for setting up of 3MW (in aggregate) SPV Power Plants with a capacity ranging between 10-50 KW per plant, vide letter of intent dated 12 September 2012, through a tender process during the quarter ended 31 December 2012. The contract included design, engineering, supply, installation and commissioning and interfacing of Solar Photovoltaic Power Plants (SPVPP) with 5 years Warranty Cum Comprehensive Maintenance Contract (CMC). In accordance with the stipulated terms of the contract, the Company has deposited earnest money deposit (EMD) amounting to Rs. 60.10 lakhs. Out of the total contract, work orders aggregating to 1.6 MW amounting to Rs. 2,914.13 lakhs was raised on the Company that was required to be executed till 30 June 2013. The Company has raised the bills for having completed 0.1 MW (5 sites) until 31 March 2014 and the dues outstanding in relation to the executed portion amounts to Rs. 177.23 lakhs. The Company had also filed an application seeking extension with MP Urja for completion of the unexecuted work.

During the previous year, the Company had received a final notice from MP Urja rejecting the extension plea and deciding to cancel the work order (other than the 3 sites considered completed by MP Urja) given to the Company along with the forfeiture of EMD and imposition of penalty due to the non compliance by the Company. MP Urja had also stated in the notice that it shall take action against the Company on account of breach of terms and conditions of the agreement. The contract stipulates a penalty if there is a delay in completing the work order that can extend to a maximum of 10 % of the order value and MP Urja will be free to purchase the balance goods from elsewhere without notice to the Company and carry out the unexecuted work, at Company's cost and risk. Also, any loss or damage that MP Urja may sustain due to such failure MP Urja shall have a right to recover any loss or damage, if any, from any sum payable to the Company. Further, if recovery is not possible from the Company on account of the Company's failure to pay the losses or damages within one month from the claim, the recovery shall be made under Madhya Pradesh Public Demand Recovery Act or any other law applicable under these circumstances.

The Company is contesting the MP Urja claims citing logistical issues, delay in handing over the sites and delays in issuing site completion reports by MP Urja and has requested to recall the notice for cancellation of work orders and has further requested to allow the Company to complete the pending work allocated. The response of MP Urja is still waited. However, the management is under final negotiation with the department and hope the matter will be resolved in the next 2 quarter of the next financial year and outstanding amount will be realised after adjusting sum amount of penalties which is not yet ascertained. As a consequence, the impact of the loss or damage due to the action that MP Urja may take and the outcome of the final notice issued, that may include forfeiture of EMD, adjusting the dues against any loss or damage and levy of penalty, in the light of the Company expressing its inability to complete the order within the stipulated time period, is uncertain and the same shall crystallise only on the conclusion of discussion and the actions that the authorities may take against the Company.

12. During the current year, one of the consortium lender banks of the Company has given the credit of Rs. 296.72 lakhs (previous year Rs. 223.82 lakhs) in the loan account of the Company with the realisations on sale of shares pledged by the one of the promoter, Greenlite Lighting Corporation, Canada (a promoter group company). The Company has recorded the same as interest free unsecured loan from Geenlite Lighting corporation, Canada and the same is repayable after 31 March 2016.

13. Previous period figures have been re-grouped/re-classified/re-arranged wherever necessary to make them comparable.


Mar 31, 2014

1. Commitments

a) Estimated amount of contracts remaining to be executed on capital account (net of advances) not provided for Rs. 8,268.18 (previous year Rs. 8,653.13).

b) For commitments relating to lease arrangements (Refer note 29).

c) For commitments relating to net positive foreign exchange earnings (Refer note 35).

2. The Company has incurred expenses in foreign currency (including amortisation of imported machinery) amounting to Rs. 106,746.62 lakhs till 31 March 2014. Such machinery and raw material have been imported without payment of customs duty, being an Export Oriented Unit, on the basis of an undertaking given to customs authorities that the Company shall be able to earn a positive Net Foreign Exchange within ten years from the commencement of its operation. At current year end (i.e. after five years of commencement of its operations), the Company''s earnings is a negative Net Foreign Exchange Earnings of Rs. 26,120.04 lakhs. As explained in Note 1, the ability of the Company to meet its export obligations over the next 5 years is dependent on various factors which have created multiple uncertainties, the effect of which, is not ascertainable at present.

3. Contingent liabilities

Particulars As at As at 31st March, 2014 31st March, 2013

Excise duty demand - 76.76 pending settlement

Service tax demand - 1,903.71 pending settlement

Custom duty demand 9,430.19 - pending settlement*

Total 9,430.19 1,980.47

* During the current year, the Company has received a show cause notice from the Office of the Commissioner, Customs, Central, Excise & Service Tax Commissionerate (''Authority), Noida, whereby the authority has asked the Company to explain why custom duty of Rs. 9,430.19 lakhs along with interest and penalty thereon should not be levied on the Company in respect of import of duty free capital goods, as the Company could not install the machinery within the stipulated time period. The Company has filed a reply with the authority citing the delays in installation primarily due to financial constraint arising out of the downturn in the solar industry. Response of the department on the same is still awaited.

4. The Company had been awarded a turnkey contract by MP Urja Vikas Nigam Limited (MP Urja) for setting up of 3MW (in aggregate) SPV Power Plants with a capacity ranging between 10-50 KW per plant, vide letter of intent dated 12 September 2012, through a tender process during the quarter ended 31 December 2012. The contract included design, engineering, supply, installation and commissioning and interfacing of Solar Photovoltaic Power Plants (SPVPP) with 5 years Warranty Cum Comprehensive Maintenance Contract (CMC). In accordance with the stipulated terms of the contract, the Company has deposited earnest money deposit (EMD) amounting to Rs. 60.10 lakhs. Out of the total contract, work orders aggregating to 1.6 MW amounting to Rs. 2,914.13 lakhs was raised on the Company that was required to be executed till 30 June 2013. The Company has raised the bills for having completed 0.1 MW (5 sites) until 31 March 2014 and the dues outstanding in relation to the executed portion amounts to Rs. 177.23 lakhs. The Company had also filed an application seeking extension with MP Urja for completion of the unexecuted work till 30 June 2014.

During the year, the Company had received a final notice from MP Urja rejecting the extension plea and deciding to cancel the work order (other than the 3 sites considered completed by MP Urja) given to the Company alongwith the forfeiture of EMD and imposition of penalty due to the non compliance by the Company. MP Urja has also provided in the notice that it shall take action against the Company on account of breach of terms and conditions of the agreement. The contract stipulates a penalty if there is a delay in completing the work order that can extend to a maximum of 10 % of the order value and MP Urja will be free to purchase the balance goods from elsewhere without notice to the Company and carry out the unexecuted work, at Company''s cost and risk. Also, any loss or damage that MP Urja may sustain due to such failure MP Urja shall have a right to recover any loss or damage, if any, from any sum payable to the Company. Further, if recovery is not possible from the Company on account of the Company''s failure to pay the losses or damages within one month from the claim, the recovery shall be made under Madhya Pradesh Public Demand Recovery Act or any other law applicable under these circumstances. Management is contesting the aforesaid claims citing logistical issues, delay in handing over the sites and delays to issue site completion reports on part of MP Urja and has requested to recall the notice for cancellation of work orders and has further requested to allow the Company to complete the pending work allocated. The response of MP Urja is still waited. As a consequence, the impact of the loss or damage due to the action that MP Urja may take and the outcome of the final notice issued, that may include forfeiture of EMD, adjusting the dues against any loss or damage and levy of penalty, in the light of the Company expressing its inability to complete the order within the stipulated time period, is uncertain and the same shall crystallise only on the conclusion of discussion and the actions that the authorities may take against the Company.

5. During the year, on 24 March 2014 the Company has received a letter from National Stock Exchange with reference to the recommendations of Qualified Audit Review Committee advising the Company to rectify the qualification in respect of i) Treatment of demurrage charges amounting to Rs. 1,254.51 lakhs that were paid at the time of removal of machinery which was lying at the bonded warehouse for a significant period of time and formed part of the cost of acquisition of an asset and were inappropriately capitalised under capital work-in-progress; ii) Multiple uncertainties due to various factors impacting going concern.

In response to the observations, the Company has rectified the treatment of demurrage charges and in respect of the uncertainties impacting going concern, the Company has filed a reply with the stock exchange explaining that the factors impacting going concern are not wholly within the control of the Company and therefore cannot be rectified. Accordingly, the financial statements includes demurrage/ detention charges aggregating to Rs. 1.308.36 lakhs (including Rs. 53.85 lakhs emanating from reconciliations with the vendor) and have been included in other expenses.

6. During the current year, one of the consortium lender banks of the Company has given the credit of Rs. 223.82 lakhs in the loan account of the Company with the realisations on sale of shares pledged by the one of the promoter, Greenlite Lighting Corporation, Canada (a promoter group company). The Company has recorded the same as interest free unsecured loan from Lighting corporation, Canada and the same is repayable after 31 March 2015.

7. Previous period figures have been re-grouped/re-classified/re-arranged wherever necessary to make them comparable.


Mar 31, 2013

1 Commitments

a) Estimated amount of contracts remaining to be executed on capital account (net of advances) not provided for Rs. 8,653.13 (previous year Rs. 2,674.30).

b) For commitments relating to lease arrangements (Refer note 29).

c) For commitments relating to net positive foreign exchange earnings (Refer note 35).

2 Lease taken by the Company

The Company has various operating leases under cancellable and non cancellable operating lease arrangements for plant and machinery, office premises, accommodation for employees and other assets which are renewable on a periodic basis. Rent expenses for operating leases included in the Statement of Profit and Loss is Rs. 316.29 (previous year: Rs. 266.35).

3 The Company has incurred expenses in foreign currency (including amortisation of imported machinery) amounting to Rs. 101,211.69 till 31st March 2013. Such machinery and raw material have been imported without payment of customs duty, being an Export Oriented Unit, on the basis of an undertaking given to customs authorities that the Company shall be able to earn a Net Positive Foreign Exchange within ten years from the commencement of its operation. At the year end (i.e. after three years of commencement of its operations), the Company''s earnings is a Negative Net Foreign Exchange Earnings of Rs. 22,124.03. As explained in Note 1 above, the ability of the Company to meet its export obligations over the next 6 years is dependent on various factors which have created multiple uncertainties, the effect of which if any is not ascertainable.

4 Related party disclosures List of related parties

a) Parties where control exists :

i) Key managerial personnel controlling the Company Mr. H.R Gupta Mr. B.K Gupta

b) Other related party relationships where transactions have taken place during the year

i) Other key managerial personnel Mr. A.K Agarwal

5 Employees benefit

Disclosure in respect of employee benefits under Accounting Standard 15 "Employee Benefits" prescribed by the Companies (Accounting Standards) Rules, 2006:

a ) Defined Contribution Plans: The Company has recognised Rs. 69.36 (Previous year Rs. 72.42) related to employers'' contribution to Provident Fund Scheme in the Statement of Profit and Loss.

b) Post employment benefit plan in the form of gratuity:

The Company has a post employment benefit in the form of gratuity wherein the last drawn salary plus dearness allowance is used to compute gratuity as per the provisions of the Payment of Gratuity Act, 1972. A period of 5 years has been considered as vesting and the maximum benefit that can be availed under the scheme is Rs. 10.00.

6 Segment Information

(a) Information about primary business segment

In the opinion of the management, there is only one reportable segment i.e. manufacturing of solar cells, as envisaged by Accounting Standard 17 "Segment Reporting", prescribed by the Companies (Accounting Standards) Rules, 2006.

(b) Information on secondary/ geographical segment

The Company sells its products to various customers within the country and also exports to other companies. Considering the size and proportion of exports to local sales, the Company considers sales made within the country and exports as different geographical segments.

7 Shareholders had passed ordinary resolution through postal ballot on 31st January, 2011 to empower and authorise the Board of Directors to vary terms and conditions mentioned in the prospectus dated 18th September, 2010, vary/ amend/ alter the utilisation of net proceeds inter se one or other of the purposes for their utilisation, described in the said prospectus on even date and utilise any part of the net proceeds for a purpose or purposes other than those described in the said prospectus. The funds raised and utilised by the Company are as under:

8 Contingent liabilities

Particulars As at As at 31st March, 2013 31st March, 2012

Excise duty demand pending settlement 76.76 -

Service tax demand pending settlement 1,903.71 -

Total 1,980.47 -

9 The Company had been awarded a turnkey contract by MP Urja Vikas Nigam Limited (MP Urja) for setting up of 3MW (in aggregate) SPV Power Plants with a capacity ranging between 10-50 KW per plant, vide letter of intent dated 12th September 2012, through a tender process during the year. The contract included design, engineering, supply, installation and commissioning and interfacing of Solar Photovoltaic Power Plants (SPVPP) with 5 years Warranty Cum Comprehensive Maintenance Contract (CMC). Out of the total contract, 1.6 MW was required to be executed till 30th June 2013. The contract remained unexecuted as at 31st March 2013. However, the Company is in the process of executing 100 KW subsequent to 31st March 2013. Also, the Company has filed an application seeking extension with MP Urja for completion of work. The contract stipulates a penalty if there is a delay in completing the work order that can extend to a maximum of 10 % of the order value and in the event of delay beyond 10 weeks, MP Urja has the authority to cancel the contract. The likely impact of the loss or damage due to inability or delay to complete the orders by the Company is not quantifiable as the final outcome thereof, is uncertain and the same shall crystallise only after the completion of discussion and necessary clearances from the necessary authorities.

10 Previous period figures have been re-grouped/re-classified/re-arranged wherever necessary to make them comparable.


Mar 31, 2012

A. Term and rights attached to Equity shares

The Company has only one type of equity shares having par value of Rs. 10 each per share. All shares rank pari passu with respect to dividend, voting rights and other terms. Each shareholder is entitled to one vote per share except, in respect of any shares on which any calls or other sums payable have not been paid. The Company pays and declares dividends in Indian Rupees. The dividend proposed, if any, by the Board of Directors is subject to approval of shareholders in the ensuing Annual General Meeting. The repayment of equity share capital in the event of liquidation and buy back of shares are possible subject to prevalent regulations. In the event of liquidation, normally the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

b. Aggregate number of equity shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding 31st March, 2012

(i) 185,000 equity shares (in '000) of Rs. 10 each, fully paid and 15,000 equity shares (in '000) of Rs. 0.50 each partly paid were issued to the shareholders of erstwhile Indosolar Limited in the year ended 31st March, 2009 in accordance with the scheme of amalgamation. Such partly paid equity shares were made fully paid prior to the effective date of scheme of amalgamation i.e. 24th September, 2009.

(ii) No shares have been bought back during the five-year period ended 31st March, 2012 (31st March, 2011). guarantees given by the Directors of the Company i.e. Mr. B. K. Gupta and Mr. H.R. Gupta.

1 DEBT RESTRUCTURING

i) Background

The Company had set up a green field project for manufacturing Solar Photovoltaic cells with a capacity of 160 MW, comprising two lines of 80 MW each under Phase -I and are in the process of setting up an additional manufacturing facility Line -3 with a 200 MW capacity under Phase - II, at Plot No. 3C/1 Ecotech-II, Udyog Vihar Greater Noida in the State of Uttar Pradesh. The existing lending banks ('Lenders') had, at the request of the Company, sanctioned Term loans, deferred payment guarantee facilities and working capital facilities on such terms and conditions as contained in various loan agreements / facility agreements entered into between the Company and the Lenders.

ii) Conditions leading to restructuring

The Company witnessed significant downturn due to weak demand both globally as well as in the domestic market and incurred significant cash and operating losses during the year. Also, the current mismatch between cost and selling prices resulted in the stoppage of plant from September, 2011, which severely impacted the cash flow position of the Company that prompted the filing of a restructuring package of its existing loans with the Corporate Debt Restructuring Cell ('CDR Cell'). At the request of the Company and in consideration of its commitment to improve its operations, the application so filed was referred to the Corporate Debt Restructuring Forum, a non-statutory voluntary mechanism set up under the aegis of the Reserve Bank of India (hereinafter referred to as the "CDR"). Pursuant thereto, the CDR Empowered Group at their meeting held on 30th January, 2012 approved a restructuring package in terms of which the existing loans were restructured and certain additional financial assistance was proposed to be extended to the Company as set out in the Letter of Approval dated 7th March, 2012 issued by Corporate Debt Restructuring Cell to the Lenders and the Company (hereinafter referred to as the "CDR Package")

The terms and conditions of the CDR are binding on the Lenders and the Company, effective from the date of the signing of the Master Restructuring Agreement ('MRA') i.e. 28th March, 2012 (except in case of Indian Bank wherein the ('MRA') is yet to be signed) with each of the Lenders. Under the CDR package, the Company is entitled to the reliefs and concessions granted by the Lenders pursuant to the Approved CDR Package, with effect from 1st July, 2011 ('the Relevant Date'). In connection with obtaining the necessary approvals for restructuring of existing loans, the promotors were required to contribute funds in accordance with sanction letter. As a consequence, the Company received an unsecured loan from its promotors amounting to Rs. 950.00.

iii) Principal terms of the Master restructuring Agreement ('MRA') in accordance with the CDR scheme.

a) Waivers of existing events of default and the consequential effect thereof:

The Company in accordance with the terms and conditions of the MRA agreed to the reconstitution of the Existing Loans due to the Lenders pursuant to the CDR Package. As part of the restructuring arrangement, the Lenders waived any existing Events of Default in connection with the Existing loans and any rights, remedies or powers that had arisen in connection therewith. Also, each of the Lenders waived the obligation of the Company to pay any liquidated damages, default or penal interest / interest / further interest charged by the Lenders in excess of the interest rates specified in the existing documents for financing and security of such Lender as they existed prior to 1st July, 2011, without considering any increase in such rates on account of the occurrence of any default under such documents, together with compound interest, penalties or any other charges thereon under those documents of such Lender during the period commencing on 1st July, 2011 and ending on 30th June, 2013.

b) Restructuring of the Existing loans:

- Each of the Lenders and Company agreed that the Existing Loans shall be reconstituted as follows:

- Existing Rupee Term Loans of Rs. 34,485.82 together with all interest, charges, costs, expenses and any other amounts accrued and outstanding on 1st July, 2011 has been reconstituted into Facility -A;

- The existing Short Term Loan of Rs. 2,200.00 from Andhra Bank outstanding as on 1st July, 2011 i.e. the Cut-off date shall be rescheduled and converted into "Priority Medium Term Loan" as Facility -B;

- The estimated amount of irregularity as on 31st March, 2012 in Working Capital Limits previously consisting of cash credit, packing credit, buyer's credit facility and bill discounting on the basis of prevailing exchange rates, prevailing realisable value of inventory etc. including irregularities due to anticipated devolvement of LCs upto 31st March, 2012, subject to reconciliation at the time of implementation, shall stand converted into WCTL as Facility - C;

- The outstanding amount on account of interest on Secured term loans, interest on Short term loan, interest on WCTL and interest on existing Working Capital from cut-off date till 30th June, 2013, not exceeding Rs. 9,845.00 shall stand funded by way of Funded Interest Term Loan ("FITL") as Facility - D

c) Sanction for additional funding

1. Project Loan from Union Bank of India

Union Bank of India ('UBI') sanctioned a Project Loan amounting to Rs. 27,500 (including Priority Term Loan of Rs. 4,700). The Project Loan by UBI has been sanctioned in the following manner:

a) The Company has been sanctioned Rs. 22,800 Letter of Credit (LC) opened in favour of M/s. Schmid Technology Systems GmbH ('Schmid') by UBI, for a period of 35 months from the date of shipment out of term loan disbursement. In accordance with the said arrangement, the same shall be converted into Term Loan in February, 2014. Schmid discounted the said Letter of Credit with their bankers (counterparty bank) and UBI in consultation with the Company and Schmid, entered into a Deferred payment credit facility with the counterparty bank wherein, a sum of Rs. 22,142.26 has been paid by the counterparty bank to M/s. Schmid towards imported capital goods . UBI is paying the interest in respect relating to such financing to the counterparty bank, which is being charged to the Company. In accordance with the terms of the agreement with Schmid and the Deferred payment facility, there is no obligation to pay to Schmid as the same has been discharged by the counterparty bank. As a consequence, UBI has an obligation towards the counterparty bank to repay the loan in accordance with the terms agreed at the end of the Letter of credit term i.e. 35 months from the date of shipment. Such amount payable under the Deferred payment mechanism has therefore been classified as Long term borrowings.

b) Rs. 4,700 out of the said Project Loan shall be disbursed by UBI to the Company towards capital expenditure.

2. Medium term loan

As part of the CDR package the Lenders have agreed to provide additional funding in the form of medium term loans of Rs.10,000 for the implementation of 200 MW Plant in the proportion of the outstanding exposure to the Company as on the 1st July, 2011. Such funding shall be in the form of deferred letter of credit for 35 months which shall be funded by the Priority loans.

d) Reset of Interest Rate:

The Lenders who are part of the consortium of banks, alongwith the approval of CDR EG, shall have a right to reset the rate of interest on the term loans after every three years (or short period as decided by the CDR EG) and working capital interest rate every year.

e) Consequential effect of the CDR Scheme on the interest cost and the classification of the interest accrued on borrowings as loans

As explained in note 6 (iii) (a) above, the Lenders waived the obligation of the Company to pay any liquidated damages, default or penal interest / interest / further interest charged by the Lenders in excess of the concessional rates approved under the CDR package from 1st July, 2011, the consequential effect has been that there has been a credit received from the Lenders amounting to Rs 1,201.70 and the balance of interest accrued outstanding as at 31st March, 2012 relating to various facilities amounting to Rs 3,502.00 transferred to FITL.

f) Balances outstanding in relation to facilities availed from Indian Bank pending finalisation and approval

As explained in note (ii) above, one of the consortium banks i.e. Indian Bank is yet to sign the Master Restructuring Agreement. However, management believes that as per RBI guidelines the CDR package has been approved by super majority of the consortium of banks. Accordingly, the owings to this particular bank have been reclassified and interest has been recalculated in accordance with the CDR package. The short term borrowings comprising cash credit amounting to Rs 1,223.92 and devolved Letter of Credit amounting to Rs. 511.57 have been reclassified as Long term borrowing (Rs. 1,402.43) and Short term borrowings (Rs. 333.06) as at 31st March, 2012. The existing term loan of Rs. 5,996.79 has been disclosed as long term borrowing with Nil current maturities. The interest due w.e.f 1st July, 2011 till 31st March, 2012 at revised rates amounting to Rs. 549.73 has been reclassified as a Funded Interest Term Loan. The above reclassifications and interest calculations are subject to reconciliation and approval by this particular bank.

** Details of dues to micro and small enterprises defined under the MSMED Act, 2006

The Ministry of Micro, Small and Medium Enterprises has issued an Office Memorandum dated 26th August, 2008 which recommends that Micro and Small Enterprises should mention in their correspondence with their customers the Entrepreneurs Memorandum number as allocated after filing of the Memorandum. Based on information received and available with the Company, there are no amounts payable to Micro and Small Enterprises as at 31st March, 2012. Based on the information presently available with the Company, there are no dues outstanding to micro and small enterprises covered under the Micro, Small and Medium Enterprises Development Act, 2006.

* Fixed deposits includes Rs. 413.08 (previous year Rs. 1,190.00 ) as margin money against guarantees issued by bank.

# Fixed deposits includes Rs. 2,375.30 (previous year Rs. 2,595.30 ) as margin money against guarantees issued by bank. Rs. 2,375.00 (previous year Rs. 2,375.00) have been funded from monies received from initial public issue. Also, refer note 41.

3 The Global Photovoltaic sector remains in a structural oversupply in 2012 with an estimated capacity likely to be in the region of 50GW with the operating capacity being lower than that. Correspondingly, the demand would be approximately 35GW. It is expected that China, USA, Japan and India shall be the main demand growth drivers in 2012.

The Indian Solar Energy Market has developed over the last few years mainly due to the National Solar Mission ('NSM') and the State Solar programs. Annual installed capacities/projections are as under:

The market size estimates in some of the expert reports (Deustche Bank and McKinsey) suggest that the annual capacity may be much higher compared to the above projections. The most recently conducted bidding process by NTPC Vidyut Vyapar Nigam Limited ('NVVN') under National Solar Mission (NSM) led to a sharper than expected reduction in the Project Costs Assumptions due to aggressive bidding. As a consequence, this has impacted the

price points for Solar cells and Modules, thus making the economics challenging at this point in time. Project developers are also facing difficulties in obtaining Financial Closure from Banks for their Projects, which is further delaying the finalization of orders for Solar cells and Modules.

The current mismatch between cost and selling prices has resulted in the stoppage of plant from September, 2011, which severely impacted the cash flow position of the Company that prompted the filing of a restructuring package with the Corporate Debt Restructuring Cell. In connection therewith, the Company prepared Cash Flow projections after taking into account the current business realities and such cash flows have been incorporated in the CDR package which has been approved by the consortium of banks. Management has simultaneously implemented operational improvement actions and new initiatives as part of the compensating actions to protect the margins in the context of the current price erosion. The cash flow projections have been prepared with an assumption that the project developers shall be able to achieve financial closures and that the Company shall be able to garner a reasonable share of demand both under NSM and State Solar Missions with sustainable and reasonable gross margins despite low selling prices. The Company's cash flow projections are largely dependent upon the achievement of all these factors.

Management believes that the sector requires significant government support and policy intervention to support the viability of the sector. A few such policy initiatives under active discussion and the outcome of which is awaited at this point in time relate to:

- The Imposition of Anti Dumping Duty on goods from China, Taiwan, Malaysia & USA as per the petition filed by The Solar Manufacturers Association of India on 18th January, 2012;

- The continuance and increasing scope of Local Content Requirement ['LCR'] for the PV cells in Phase II of NSM [2013 to 2017]; and

- Commitment of the government to the National Solar Mission and State Solar Missions.

As a result of the above significant uncertainties and possible changes in the business dynamics mentioned above, the outcome of which including consequential impact on the Company's cash flows will be known only in the ensuing period, the cash flows that were prepared by management and as approved by the CDR cell have been considered for impairment assessment. Based on such analysis, the cash flow projections do not indicate impairment as at 31st March, 2012 .

4 Commitments

a) Estimated amount of contracts remaining to be executed on capital account (net of advances) not provided for Rs. 2,674.30 (previous year Rs. 26,903.16).

b) For commitments relating to lease arrangements (refer note 30)

c) For commitments relating to net positive foreign exchange earnings (refer note 36).

5 Lease taken by the Company

The Company has various operating leases under cancellable and non cancellable operating lease arrangements for plant and machinery, office premises, accommodation for employees and other assets which are renewable on a periodic basis. Rent expenses for operating leases included in the Statement of Profit and Loss is Rs. 266.35 (Previous year: Rs. 372.55).

6 The Company had imported machinery, raw material and incurred other expenses in foreign currency amounting to Rs. 124,066.77 (previous year Rs. 113,705.52) till 31st March, 2012. Such machinery and raw material have been imported without payment of customs duty, being an Export Oriented Unit, on the basis of an undertaking given to customs authorities that the Company shall be able to earn a net positive Net Foreign Exchange within ten years from the commencement of its operation. At year end (i.e. after three years of commencement of its operations), the Company's earnings is a negative Net Foreign Exchange Earnings of Rs. 16,123.90 (previous year Rs. 9,018.29). Management is confident that they would be able to achieve a positive net foreign exchange during the unexpired period. Also, refer note 29.

7 Related party disclosures List of related parties

a) Parties where control exists :

i) Key managerial personnel controlling the Company Mr. H.R Gupta Mr. B.K Gupta

b) Other related party relationships where transactions have taken place during the year

i) Relatives of key managerial personnel controlling the Company Mrs. Priya Desh Gupta

ii) Other key managerial personnel Mr. A.K Agarwal

8 Employees benefit

Disclosure in respect of employee benefits under Accounting Standard 15 "Employee Benefits" prescribed by the Companies (Accounting Standards) Rules, 2006:

a) Defined Contribution Plans: The Company has recognised Rs. 77.50 (Previous year Rs. 75.53) related to employers' contribution to Provident Fund and Employees State Insurance Scheme in the Statement of Profit and Loss.

b) Post employment benefit plan in the form of gratuity:

The Company has a post employment benefit in the form of gratuity wherein the last drawn salary plus dearness allowance is used to compute gratuity as per the provisions of the Payment of Gratuity Act, 1972. A period of 5 years has been considered as vesting and the maximum benefit that can be availed under the scheme is Rs. 10.00 .

9 Segment Information

(a) Information about primary business segment

In the opinion of the management, there is only one reportable segment i.e. manufacturing of solar cells, as envisaged by Accounting Standard 17 "Segment Reporting", prescribed by the Companies (Accounting Standards) Rules, 2006.

(b) Information on secondary/ geographical segment

The Company sells its products to various customers within the country and also exports to other companies. Considering the size and proportion of exports to local sales, the Company considers sales made within the country and exports as different geographical segments.

10 During the previous year ended 31st March 2011, the Company incurred significant losses on account of delay in stabilization of one of its lines that had become operational in March, 2010. As a consequence, the Company claimed compensation for operational losses incurred during the period April, 2010 to September, 2010 from its vendor. In lieu of such claim, the Company received cash compensation amounting to Euro 50.00 lakhs (equivalent to Rs. 3,167.65) from its supplier of machinery. Such claim had been disclosed as an exceptional item in the Statement of Profit and Loss.

11 Shareholders had passed ordinary resolution through postal ballot on 31st January, 2011 to empower and authorise the Board of Directors to vary terms and contracts mentioned in the prospectus dated 18th September, 2010, vary/ amend/ alter the utilisation of net proceeds inter se one or other of the purposes for their utilisation, described in the said prospectus on even date and utilise any part of the net proceeds for a purpose or purposes other than those described in the said prospectus. The funds raised and utilised by the Company are as under:

12 During the year, the Company received a loan amounting to Rs. 531.38 from a foreign company to satisfy one of the stipulation of CDR package [also refer to note 6(ii)]. Such loan is categorised as External Commercial Borrowings in respect of which certain regulatory formalities were to be complied with and clearances were to be obtained prior to the receipt of such loan. Management has compiled the necessary documentation and have filed the application with the Reserve Bank of India on 22nd May, 2012 for condonation of non compliance with such regulatory requirements


Mar 31, 2011

1. Deferred tax

The Company has significant unabsorbed depreciation/ carry forward losses as per the tax laws. In view of absence of virtual certainty of realisation of carried forward tax losses/unabsorbed depreciation in the foreseeable future, deferred tax asset has been recognised only to the extent of deferred tax liability.

2. Contingent liabilities:

(a) Bills discounted with banks outstanding as at 31st March 2011 Rs. Nil (previous year: Rs. 115,161,283). Also refer to note 20 of this schedule.

(b) Estimated amount of contracts remaining to be executed on capital account (net of advances) not provided for Rs. 2,690,315,927 (Previous year Rs. 11,529,269).

3. The Company has imported machinery, raw material and incurred other expenses in foreign currency amounting to Rs.11,370,552,000 till 31st March, 2011. Such machinery and raw material have been imported without payment of customs duty, being an Export Oriented Unit, on the basis of an undertaking given to customs authorities that the Company shall be able to earn a net positive Net Foreign Exchange within five years from the commencement of its operation. At year end (i.e. after two years of commencement of its operations), the Company's earnings is a negative Net Foreign Exchange Earnings of Rs.901,829,000. Management is confident that they would be able to achieve a positive net foreign exchange during the unexpired period.

4. Related party

a) Parties where control exists:

i) Key managerial personnel controlling the Company

Mr. H.R. Gupta

Mr. B.K. Gupta

b) Other related party relationships where transactions have taken place during current year:

i) Relatives of key managerial personnel controlling the Company Mrs. Priya Desh Gupta

ii) Other key managerial personnel Mr. A.K. Agarwal

5. Employee benefit

Disclosure in respect of employee benefits under Accounting Standard 15 "Employee Benefits" prescribed by the Companies (Accounting Standards) Rules, 2006:

(a) Defined Contribution Plans: The Company has recognised Rs.7,552,551 (Previous year Rs.7,090,093) related to employers' contribution to Provident Fund and Employees State Insurance Scheme in the Profit and Loss Account.

(b) Post employment benefit plan in the form of gratuity:

The Company has a post employment benefit in the form of gratuity wherein the last drawn salary plus dearness allowance is used to compute gratuity as per the provisions of the Payment of Gratuity Act, 1972. A period of 5 years has been considered as vesting and the maximum benefit that can be availed under the scheme is Rs. 1,000,000.

6. Segment reporting

Business segment: In the opinion of the management, there is only one reportable segment i.e. manufacturing of solar cells, as envisaged by Accounting Standard 17 "Segment Reporting", prescribed by the Companies (Accounting Standards) Rules, 2006.

Geographical segment: The Company sells its products to various customers within the country and also exports to other countries. Considering the size and proportion of exports to local sales, the Company considers sales made within the country and exports as different geographical segments.

7. During the year, the Company has recognised bills discounted with recourse and outstanding at year end as part of working capital loan in Schedule 4 and the corresponding recoverable under sundry debtors following the principle of gross presentation. In the previous year, outstanding bills discounted amounting to Rs. 114,240,581 were adjusted against sundry debtors.

8. During the year the Company received a credit note from principal supplier of machinery amounting to Euro 1,500,000 (equivalent to Rs. 90,551,100 ) to compensate for the delay in the supply of machinery in accordance with the terms of the contract. The amount of credit note has been adjusted to the cost of plant and machinery and the depreciation has been accordingly, recomputed with retrospective effect, resulting in a downward adjustment to depreciation charge by Rs.6,767,243 in the year ended 31st March, 2011.

9. During the year ended 31st March, 2011, the Company incurred significant losses on account of delay in stabilization of one of its lines that had become operational in March, 2010. As a consequence, the Company claimed compensation for operational losses incurred during the period April, 2010 to September, 2010 from its vendor. In lieu of such claim, the Company received cash compensation amounting to Euro 5,000,000 (equivalent to Rs. 316,764,500) from its supplier of machinery. Such claim has been disclosed as an exceptional item in the Profit and Loss Account.

10. Previous year figures have been regrouped / recast wherever necessary to confirm to current year's classification.

 
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