Mar 31, 2023
1. Corporate Information
The Tata Power Company Limited (the ''Company'') is a public limited company domiciled and incorporated in India under the Indian Companies Act, 1913. The registered office of the Company is located at Bombay House, 24, Homi Mody Street, Mumbai 400001, India. The Company is listed on the BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE). The principal business of the Company is generation, transmission and distribution of electricity.
The Company was amongst the pioneers in generation of electricity in India more than a century ago. The Company has an installed generation capacity of 6,075 MW in India and a presence in all the segments of the power sector viz. Generation (thermal and hydro), Transmission and Distribution.
2. Significant Accounting Policies:
The Standalone Financial Statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as notified under the Companies (Indian Accounting Standards) Rules, 2015 read with section 133 of the Companies Act, 2013 and presentation requirements of Division II of schedule III to the Companies Act, 2013 (as amended from time to time).
The Standalone Financial Statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value
- derivative financial instruments;
- certain financial assets and liabilities measured at fair value (Refer accounting policy regarding financial instruments);
- employee benefit expenses (Refer Note 27 for accounting policy)
Historical cost is the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire assets at the time of their acquisition or the amount of proceeds received in exchange for the obligation, or at the amounts of cash or cash equivalents expected to be paid to satisfy the liability in the normal course of business. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The standalone financial statements are presented in Indian Rupees (?) and all amounts are in Crore unless otherwise stated.
3. Other Significant Accounting Policies
The functional currency of the Company is Indian Rupee (?).
Income and expenses in foreign currencies are recorded at exchange rates prevailing on the date of the transaction. Foreign currency denominated monetary assets and liabilities are translated at the exchange rate prevailing on the balance sheet date and exchange gains and losses arising on settlement and restatement are recognised in the Statement of Profit and Loss. Non-monetary assets and liabilities that are measured in terms of historical cost in foreign currencies are not retranslated. Exchange differences on monetary items are recognised in the Statement of Profit and Loss in the period in which they arise except for exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
The Company presents assets and liabilities in the balance sheet based on current / non-current classification. An asset is treated as current when i t i s:
- expected to be realised or intended to be sold or consumed in normal operating cycle,
- held primarily for the purpose of trading,
- expected to be realised within twelve months after the reporting period, or
- cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- it is expected to be settled in normal operating cycle,
- it is held primarily for the purpose of trading,
- it is due to be settled within twelve months after the reporting period, or
- there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities measured at fair value through profit or loss are recognised immediately in the statement of profit and loss.
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market place. All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.
Financial assets are subsequently measured at amortised cost using the effective interest rate method if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
On initial recognition, the Company makes an irrevocable election on an instrument-by-instrument basis to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instruments, other than equity investment which are held for trading. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the ''Equity Instruments through Other Comprehensive Income''. The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading. Other financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income.
Investment in subsidiaries, jointly controlled entities and associates are measured at cost less impairment as per Ind AS 27 - ''Separate Financial Statements''.
Impairment of investments:
The Company reviews its carrying value of investments carried at cost annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is recorded in the Statement of Profit and Loss.
When an impairment loss subsequently reverses, the carrying amount of the Investment is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the cost of the Investment. A reversal of an impairment loss is recognised immediately in Statement of Profit or Loss.
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Company''s balance sheet) when:
- the right to receive cash flows from the asset have expired, or
- the Company has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its right to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company recognises lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
Debt and equity instruments issued by a Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
Financial liabilities are subsequently measured at amortised cost using the effective interest method or FVTPL. Gains and losses are recognised in statement of profit and loss when the liabilities are derecognised as well as through the Effective Interest Rate (EIR) amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the Statement of Profit and Loss.
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as FVTPL. Financial liabilities are classified as held for trading if these are incurred for the purpose of repurchasing in the near term. Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in the Statement of Profit and Loss.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 - ''Financial Instruments'' and the amount recognised less cumulative amortisation.
The Company enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks, including foreign exchange forward contracts. Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in Statement of Profit and Loss immediately.
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
The Company recognises a liability to make dividend distributions to its equity holders when the distribution is authorised and the distribution is no longer at its discretion. A corresponding amount is recognised directly in equity.
Cash flows are reported using the indirect method, where by profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
Considering the nature of business activities, the operating cycle has been assumed to have a duration of 12 months. Accordingly, all assets and liabilities have been classified as current or non-current as per the Company''s operating cycle and other criteria set out in Ind AS 1 ''Presentation of Financial Statements'' and Schedule III to the Companies Act, 2013.
4. Critical accounting estimates and judgements
In the application of the Company''s accounting policies, management of the Company is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the Standalone Financial Statements.
The areas involving critical estimates or judgements are:
Estimations used for impairment of Property, Plant and Equipment of certain cash generating units (CGU) - Note 5a, 5b and 5c Estimations used for fair value of unquoted securities and impairment of investments - Note 7 Estimation of defined benefit obligation - Note 27
Estimations used for determination of tax expenses and tax balances (including Minimum Alternate Tax credit) - Note 36 Estimates related to accrual of regulatory deferrals and revenue recognition - Note 19 and Note 31 Estimates and judgements related to the assessment of liquidity risk - Note 43.4.3
Judgement to estimate the amount of provision required or to determine required disclosure related to litigation and claims against the Company - Note 39
Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances.
5a Property, Plant and Equipments
Accounting Policy
Property, Plant and Equipment is stated at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes purchase price (net of trade discount and rebates) and any directly attributable cost of bringing the asset to its working condition for its intended use and for qualifying assets, borrowing costs capitalised in accordance with the Ind AS 23. Capital work in progress is stated at cost, net of accumulated impairment loss, if any. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipments as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the Statement of Profit and Loss as incurred.
Depreciation commences when an asset is ready for its intended use. Freehold land and assets held for sale are not depreciated.
Depreciation on Property, Plant and Equipments in respect of electricity business of the Company covered under Part B of Schedule II of the Companies Act, 2013, has been provided on the straight line method at the rates specified in tariff regulation notified by respective state electricity regulatory commission.
Depreciation is recognised on the cost of assets (other than freehold land and properties under construction) less their residual values over their estimated useful lives, using the straight-line method.
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The Company, based on technical assessment made by technical expert and management estimate, depreciates certain items of building, plant and equipment over estimated useful lives which are different from the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
Estimated useful lives of the Regulated and Non-Regulated assets are as follows: |
|
Type of assets |
Useful lives |
Hydraulic Works |
40 years |
Buildings-Plant |
5 to 60 years |
Buildings-Others |
3 to 30 years |
Coal Jetty |
25 years |
Railway Sidings, Roads, Crossings, etc. |
5 to 40 years |
Plant and Equipments (excluding Computers and Data Processing units) |
5 to 40 years |
Plant and Equipments (Computers) |
3 years |
Plant and Equipments (Data Processing units) |
6 years |
Transmission Lines, Cable Network, etc. |
5 to 40 years |
Furniture and Fixtures |
10 to 15 years |
Office Equipments |
5 years |
Motor Cars |
5 to 15 years |
Motor Lorries, Launches, Barges etc. |
25 to 40 years |
Helicopters |
25 years |
Derecognition
An item of Property, Plant and Equipments is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of Property, Plant and Equipments is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the Statement of Profit and Loss.
Impairment
Impairment of tangible and intangible assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets.
When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using an appropriate discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company''s CGUs to which the individual assets are allocated.
Impairment losses of tangible and intangible assets are recognised in the Statement of Profit and Loss.
Mar 31, 2022
1. Corporate Information
The Tata Power Company Limited (the ''Company'') is a public limited company domiciled and incorporated in India under the Indian Companies Act, 1913. The registered office of the Company is located at Bombay House, 24, Homi Mody Street, Mumbai 400001, India. The Company is listed on the BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE). The principal business of the Company is generation, transmission and distribution of electricity.
The Company was amongst the pioneers in generation of electricity in India more than a century ago. The Company has an installed generation capacity of 5,955.55 MW in India and a presence in all the segments of the power sector viz. Generation (thermal, hydro, solar and wind), Transmission and Distribution.
2. Significant Accounting Policies:
The Standalone Financial Statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as notified under the Companies (Indian Accounting Standards) Rules, 2015 read with section 133 of the Companies Act, 2013 (as amended from time to time).
The Standalone Financial Statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value
- derivative financial instruments;
- certain financial assets and liabilities measured at fair value (Refer accounting policy regarding financial instruments);
- employee benefit expenses (Refer Note 27 for accounting policy)
Historical cost is the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire assets at the time of their acquisition or the amount of proceeds received in exchange for the obligation, or at the amounts of cash or cash equivalents expected to be paid to satisfy the liability in the normal course of business. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The standalone financial statements are presented in Indian Rupees (?) and all amounts are in Crore unless otherwise stated.
3. Other Significant Accounting Policies
The functional currency of the Company is Indian Rupee (?).
Income and expenses in foreign currencies are recorded at exchange rates prevailing on the date of the transaction. Foreign currency denominated monetary assets and liabilities are translated at the exchange rate prevailing on the balance sheet date and exchange gains and losses arising on settlement and restatement are recognised in the Statement of Profit and Loss. Non-monetary assets and liabilities that are measured in terms of historical cost in foreign currencies are not retranslated. Exchange differences on monetary items are recognised in the Statement of Profit and Loss in the period in which they arise except for exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
The Company presents assets and liabilities in the balance sheet based on current / non-current classification. An asset is treated as current when it is:
- expected to be realised or intended to be sold or consumed in normal operating cycle,
- held primarily for the purpose of trading,
- expected to be realised within twelve months after the reporting period, or
- cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- it is expected to be settled in normal operating cycle,
- it is held primarily for the purpose of trading,
- it is due to be settled within twelve months after the reporting period, or
- there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities measured at fair value through profit or loss are recognised immediately in the statement of profit and loss.
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market place. All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.
Financial assets are subsequently measured at amortised cost using the effective interest rate method if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
On initial recognition, the Company makes an irrevocable election on an instrument-by-instrument basis to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instruments, other than equity investment which are held for trading. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the ''Equity Instruments through Other Comprehensive Income''. The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading. Other financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income.
Investment in subsidiaries, jointly controlled entities and associates are measured at cost less impairment as per Ind AS 27 -''Separate Financial Statements''.
The Company reviews its carrying value of investments carried at cost annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is recorded in the Statement of Profit and Loss.
When an impairment loss subsequently reverses, the carrying amount of the Investment is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the cost of the Investment. A reversal of an impairment loss is recognised immediately in Statement of Profit or Loss.
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Company''s balance sheet) when:
- the right to receive cash flows from the asset have expired, or
- the Company has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its right to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company recognises lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
Debt and equity instruments issued by a Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
Financial liabilities are subsequently measured at amortised cost using the effective interest method or FVTPL. Gains and losses are recognised in statement of profit and loss when the liabilities are derecognised as well as through the Effective Interest Rate (EIR) amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the Statement of Profit and Loss.
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as FVTPL. Financial liabilities are classified as held for trading if these are incurred for the purpose of repurchasing in the near term. Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in the Statement of Profit and Loss.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 - ''Financial Instruments'' and the amount recognised less cumulative amortisation.
The Company enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks, including foreign exchange forward contracts. Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in Statement of Profit and Loss immediately.
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
3. Other Significant Accounting Policies (Contd.)
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
The Company recognises a liability to make dividend distributions to its equity holders when the distribution is authorised and the distribution is no longer at its discretion. A corresponding amount is recognised directly in equity.
Cash flows are reported using the indirect method, where by profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
Considering the nature of business activities, the operating cycle has been assumed to have a duration of 12 months. Accordingly, all assets and liabilities have been classified as current or non-current as per the Company''s operating cycle and other criteria set out in Ind AS 1 ''Presentation of Financial Statements'' and Schedule III to the Companies Act, 2013.
4. Critical accounting estimates and judgements
In the application of the Company''s accounting policies, management of the Company is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the Standalone Financial Statements.
The areas involving critical estimates or judgements are:
Estimations used for impairment of property, plant and equipment of certain cash generating units (CGU) - Note 5a, 5b and 5c Estimations used for fair value of unquoted securities and impairment of investments - Note 7 Estimation of defined benefit obligation - Note 27
Estimations used for determination of tax expenses and tax balances (including Minimum Alternate Tax credit) - Note 36 Estimates related to accrual of regulatory deferrals and revenue recognition - Note 19 and Note 31 Estimates and judgements related to the assessment of liquidity risk - Note 43.4.3
Judgement to estimate the amount of provision required or to determine required disclosure related to litigation and claims against the Company - Note 39
Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances.
5. Amendments not yet effective:
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On March 23, 2022, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2022, applicable from April 1, 2022 as below:
The amendments specifies that to qualify for recognition as part of applying the acquisition method, the identifiable assets acquired and liabilities assumed must meet the definitions of assets and liabilities in the Conceptual Framework for Financial Reporting under Ind AS (Conceptual Framework), issued by the ICAI at the acquisition date. These changes do not significantly change the requirements of Ind AS 103. The Company does not expect the amendment to have any significant impact in its standalone financial statements.
The amendments clarifies that excess of net sale proceeds of items produced over the cost of testing while preparing the asset for its intended use (if any), shall not be recognise in the profit or loss but deducted from the directly attributable cost considered as part of cost of an item PPE. The Company has evaluated the amendment and there is no impact in recognition of its property, plant and equipment on its standalone financial statements
The amendments specify that that the ''cost of fulfilling'' a contract comprises the ''costs that relate directly to the contract''. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract). The amendment is essentially a clarification and the Company does not expect the amendment to have any significant impact in its standalone financial statements.
The amendment clarifies which fees an entity includes when it applies the ''10 percent'' test of Ind AS 109 in assessing whether to derecognise a financial liability or to consider as modification of existing financial liability. The Company does not expect the amendment to have any significant impact in its standalone financial statements.
Property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes purchase price (net of trade discount and rebates) and any directly attributable cost of bringing the asset to its working condition for its intended use and for qualifying assets, borrowing costs capitalised in accordance with the Ind AS 23. Capital work in progress is stated at cost, net of accumulated impairment loss, if any. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipments as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the Statement of Profit and Loss as incurred.
Depreciation commences when an asset is ready for its intended use. Freehold land and assets held for sale are not depreciated. Regulated Assets:
Depreciation on Property, plant and equipments in respect of electricity business of the Company covered under Part B of Schedule II of the Companies Act, 2013, has been provided on the straight line method at the rates specified in tariff regulation notified by respective state electricity regulatory commission.
Depreciation is recognised on the cost of assets (other than freehold land and properties under construction) less their residual values over their estimated useful lives, using the straight-line method.
5a Property, Plant and Equipments (Contd.)
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The Company, based on technical assessment made by technical expert and management estimate, depreciates certain items of building, plant and equipment over estimated useful lives which are different from the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
Estimated useful lives of the Regulated and Non-Regulated assets are as follows:
Type of assets |
Useful lives |
Hydraulic Works |
40 years |
Buildings-Plant |
5 to 40 years |
Buildings-Others |
25 to 60 years |
Coal Jetty |
25 years |
Railway Sidings, Roads, Crossings, etc. |
5 to 40 years |
Plant and Equipments (excluding Computers and Data Processing units) |
5 to 40 years |
Plant and Equipments (Computers and Data Processing units) |
3 years |
Transmission Lines, Cable Network, etc. |
4 to 40 years |
Furniture and Fixtures |
5 to 10 years |
Office Equipments |
5 years |
Motor Cars |
5 years |
Motor Lorries, Launches, Barges etc. |
25 to 40 years |
Helicopters |
25 years |
An item of Property, plant and equipments is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipments is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the Statement of Profit and Loss.
Impairment of tangible and intangible assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets.
When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using an appropriate discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company''s CGUs to which the individual assets are allocated.
Impairment losses of tangible and intangible assets are recognised in the Statement of Profit and Loss.
Mar 31, 2021
1. Corporate Information:
The Tata Power Company Limited (the ''Company'') is a public limited company domiciled and incorporated in India under the Indian Companies Act, 1913. The registered office of the Company is located at Bombay House, 24, Homi Mody Street, Mumbai 400001, India. The Company is listed on the BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE). The principal business of the Company is generation, transmission and distribution of electricity.
The Company was amongst the pioneers in generation of electricity in India more than a century ago.
The Company has an installed generation capacity of 2,304 MW in India and a presence in all the segments of the power sector viz. Generation (thermal, hydro, solar and wind), Transmission and Distribution.
2. Significant Accounting Policies:
The Standalone financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as notified under the Companies (Indian Accounting Standards) Rules, 2015 read with section 133 of the Companies Act, 2013 (as amended from time to time).
The Standalone Financial Statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value
- derivative financial instruments;
- certain financial assets and liabilities measured at fair value (Refer accounting policy regarding financial instruments);
- employee benefit expenses (Refer Note 26 for accounting policy)
Historical cost is the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire assets at the time of their acquisition or the amount of proceeds received in exchange for the obligation, or at the amounts of cash or cash equivalents expected to be paid to satisfy the liability in the normal course of business. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
3. Other Significant Accounting Policies
The functional currency of the Company is Indian Rupee (?).
Income and expenses in foreign currencies are recorded at exchange rates prevailing on the date of the transaction. Foreign currency denominated monetary assets and liabilities are translated at the exchange rate prevailing on the balance sheet date and exchange gains and losses arising on settlement and restatement are recognised in the statement of profit and loss. Non-monetary assets and liabilities that are measured in terms of historical cost in foreign currencies are not retranslated. Exchange differences on monetary items are recognised in the statement of profit and loss in the period in which they arise except for exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
The Company presents assets and liabilities in the balance sheet based on current / non-current classification. An asset is treated as current when it is:
- expected to be realised or intended to be sold or consumed in normal operating cycle,
- held primarily for the purpose of trading,
- expected to be realised within twelve months after the reporting period, or
3. Other Significant Accounting Policies (Contd.)
- cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- it is expected to be settled in normal operating cycle,
- it is held primarily for the purpose of trading,
- it is due to be settled within twelve months after the reporting period, or
- there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities measured at fair value through profit or loss are recognised immediately in the statement of profit and loss.
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market place. All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.
Financial assets are subsequently measured at amortised cost using the effective interest rate method if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
On initial recognition, the Company makes an irrevocable election on an instrument-by-instrument basis to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instruments, other than equity investment which are held for trading. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the ''Equity Instruments through Other Comprehensive Income''. The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
3. Other Significant Accounting Policies (Contd.)
Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading. Other financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income.
Investment in subsidiaries, jointly controlled entities and associates are measured at cost less impairment as per Ind AS 27
- ''Separate Financial Statements''.
Impairment of investments:
The Company reviews its carrying value of investments carried at cost annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is recorded in the statement of profit and loss.
When an impairment loss subsequently reverses, the carrying amount of the Investment is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the cost of the Investment. A reversal of an impairment loss is recognised immediately in statement of profit or loss.
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Company''s balance sheet) when:
- the right to receive cash flows from the asset have expired, or
- the Company has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its right to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company recognises lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
Debt and equity instruments issued by a Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
Financial liabilities are subsequently measured at amortised cost using the effective interest method or FVTPL. Gains and losses are recognised in statement of profit and loss when the liabilities are derecognised as well as through the Effective Interest Rate (EIR) amortisation process. Amortised cost is calculated by taking into account any discount or premium on
3. Other Significant Accounting Policies (Contd.)
acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as FVTPL. Financial liabilities are classified as held for trading if these are incurred for the purpose of repurchasing in the near term. Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in the statement of profit and loss.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 - ''Financial Instruments'' and the amount recognised less cumulative amortisation.
The Company enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks, including foreign exchange forward contracts. Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in statement of profit and loss immediately.
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
The Company recognises a liability to make dividend distributions to its equity holders when the distribution is authorised and the distribution is no longer at its discretion. A corresponding amount is recognised directly in equity.
4. Critical accounting estimates and judgements
In the application of the Company''s accounting policies, management of the Company is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
4. Critical accounting estimates and judgements (Contd.)
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the Standalone Financial Statements.
The areas involving critical estimates or judgements are:
Estimations used for impairment of property, plant and equipments of certain cash generating units (CGU) - Note 5 Estimations used for fair value of unquoted securities and impairment of investments - Note 7 Estimation of defined benefit obligation - Note 26
Estimations used for determination of tax expenses and tax balances (including Minimum Alternate Tax credit) - Note 35 Estimates related to accrual of regulatory deferrals and revenue recognition - Note 19 and Note 30 Estimates and judgements related to the assessment of liquidity risk - Note 42.4.3
Judgement to estimate the amount of provision required or to determine required disclosure related to litigation and claims against the Company - Note 38
Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances.
5. Property, Plant and Equipments
Property, plant and equipments is stated at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes purchase price (net of trade discount and rebates) and any directly attributable cost of bringing the asset to its working condition for its intended use and for qualifying assets, borrowing costs capitalised in accordance with the Ind AS 23. Capital work in progress is stated at cost, net of accumulated impairment loss, if any. When significant parts of plant and equipments are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipments as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the statement of profit and loss as incurred.
The accounting policy related to Right-of-Use Assets has been disclosed in Note 23.
Depreciation commences when an asset is ready for its intended use. Freehold land and assets held for sale are not depreciated.
Depreciation on Property, plant and equipments in respect of electricity business of the Company covered under Part B of Schedule II of the Companies Act, 2013, has been provided on the straight line method at the rates specified in tariff regulation notified by respective state electricity regulatory commission.
Depreciation is recognised on the cost of assets (other than freehold land and properties under construction) less their residual values over their estimated useful lives, using the straight-line method.
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The Company, based on technical assessment made by technical expert and management estimate, depreciates certain items of building, plant and equipment over estimated useful lives which are different from the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
5. Property, Plant and Equipments (Contd.)
Estimated useful lives of the Regulated and Non-Regulated assets are as follows:
Estimated useful lives of the Regulated and Non-Regulated assets are as follows: |
|
Type of assets |
Useful lives |
Hydraulic Works |
40 years |
Buildings-Plant |
5 to 40 years |
Buildings-Others |
25 to 60 years |
Coal Jetty |
25 years |
Railway Sidings, Roads, Crossings, etc. |
25 to 40 years |
Plant and Equipments (excluding Computers and Data Processing units) |
5 to 40 years |
Plant and Equipments (Computers and Data Processing units) |
3 years |
Transmission Lines, Cable Network, etc. |
25 to 40 years |
Furniture and Fixtures |
10 to 40 years |
Office equipments |
5 years |
Motor Cars |
5 years |
Motor Lorries, Launches, Barges etc. |
25 to 40 years |
Helicopters |
25 years |
An item of Property, plant and equipments is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipments is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of profit and loss.
Impairment of tangible and intangible assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets.
When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company''s CGUs to which the individual assets are allocated.
Impairment losses of tangible and intangible assets are recognised in the statement of profit and loss.
Mar 31, 2019
1. Other Significant Accounting Policies
1.1 Foreign Currencies
The functional currency of the Company is Indian Rupee (Rs.).
Income and expenses in foreign currencies are recorded at exchange rates prevailing on the date of the transaction. Foreign currency denominated monetary assets and liabilities are translated at the exchange rate prevailing on the balance sheet date and exchange gains and losses arising on settlement and restatement are recognised in the statement of profit and loss.
Non-monetary assets and liabilities that are measured in terms of historical cost in foreign currencies are not retranslated.
Exchange differences on monetary items are recognised in the statement of profit and loss in the period in which they arise except for exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
1.2 Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current / non-current classification. An asset is treated as current when it is:
- expected to be realised or intended to be sold or consumed in normal operating cycle,
- held primarily for the purpose of trading,
- expected to be realised within twelve months after the reporting period, or
- cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- it is expected to be settled in normal operating cycle,
- it is held primarily for the purpose of trading,
- it is due to be settled within twelve months after the reporting period, or
- there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
1.3 Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities measured at fair value through profit or loss are recognised immediately in the statement of profit and loss.
1.4 Financial Assets
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market place.
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.
1.5 Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost using the effective interest rate method if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
1.5.1 Financial assets at fair value through other comprehensive income (FVTOCI)
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
On initial recognition, the Company makes an irrevocable election on an instrument-by-instrument basis to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instruments, other than equity investment which are held for trading. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the âReserve for equity instruments through other comprehensive incomeâ. The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
1.5.2 Financial assets at fair value through profit or loss (FVTPL)
Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Other financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition.
1.5.3 Investment in Subsidiaries, Jointly Controlled Entities and Associates
Investment in subsidiaries, jointly controlled entities and associates are measured at cost less impairment as per Ind AS 27 -Separate Financial Statements.
Impairment of investments:
The Company reviews its carrying value of investments carried at cost annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted in the statement of profit and loss.
1.5.4 Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Companyâs balance sheet) when:
- the right to receive cash flows from the asset have expired, or
- the Company has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its right to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
1.5.5 Impairment of financial assets
The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company recognises lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
1.6 Financial liabilities and equity instruments
1.6.1 Classification as debt or equity
Debt and equity instruments issued by a Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
1.6.2 Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
1.6.3 Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in statement of profit and loss when the liabilities are derecognised as well as through the Effective Interest Rate (EIR) amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
1.6.4 Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
1.6.5 Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortisation.
1.7 Derivative financial instruments
The Company enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks, including foreign exchange forward contracts.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in statement of profit and loss immediately.
1.8 Reclassification of financial assets and liabilities
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Companyâs senior management determines change in the business model as a result of external or internal changes which are significant to the Companyâs operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
1.9 Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
1.10 Leasing arrangement
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
The Company as lessee
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease payments are recognised as an expense in the statement of profit and loss on a straight-line basis over the lease term.
1.11 Standards issued but not yet effective
The amendments to standards that are issued, but not yet effective, up to the date of issuance of the Companyâs financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective.
Ind AS 116 - Leases
Ind AS 116 Leases was notified in March 2019 and it replaces Ind AS 17 Leases. Ind AS 116 is effective for annual periods beginning on or after 1st April, 2019. It sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under Ind AS 17. Lessor accounting under Ind AS 116 is substantially unchanged from todayâs accounting under Ind AS 17. Ind AS 116 requires lessees and lessors to make more extensive disclosures than under Ind AS 17. The Company is in the process of evaluating the requirements of the standard and its impact on its financial statements.
Ind AS 12 - Income taxes (amendments relating to income tax consequences of dividend and uncertainty over income tax treatments)
The amendment relating to income tax consequences of dividend clarify that an entity shall recognise the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events. The company does not expect any impact from this pronouncement. It is relevant to note that the amendment does not amend situations where the entity pays a tax on dividend which is effectively a portion of dividends paid to taxation authorities on behalf of shareholders. Such amount paid or payable to taxation authorities continues to be charged to equity as part of dividend in accordance with Ind AS 12.
The amendment to Appendix C of Ind AS 12 specifies that the amendment is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under Ind AS 12. It outlines the following: (1) the entity has to use judgement, to determine whether each tax treatment should be considered separately or whether some can be considered together. The decision should be based on the approach which provides better predictions of the resolution of the uncertainty (2) the entity is to assume that the taxation authority will have full knowledge of all relevant information while examining any amount (3) entity has to consider the probability of the relevant taxation authority accepting the tax treatment and the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates would depend upon the probability. The Company does not expect any significant impact of the amendment on its financial statements.
Ind AS 109 - Prepayment Features with Negative Compensation
The amendments relate to the existing requirements in Ind AS 109 regarding termination rights in order to allow measurement at amortised cost (or, depending on the business model, at fair value through other comprehensive income) even in the case of negative compensation payments. The Company does not expect this amendment to have any impact on its financial statements.
Ind AS 19 - Plan Amendment, Curtailment or Settlement
The amendments clarify that if a plan amendment, curtailment or settlement occurs, it is mandatory that the current service cost and the net interest for the period after the re-measurement are determined using the assumptions used for the remeasurement. In addition, amendments have been included to clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling. The Company does not expect this amendment to have any significant impact on its financial statements.
Ind AS 23 - Borrowing Costs
The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings. The Company does not expect any impact from this amendment.
Ind AS 28 - Long-term Interests in Associates and Joint Ventures
The amendments clarify that an entity applies Ind AS 109 Financial Instruments, to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied. The company does not currently have any such long-term interests in associates and joint ventures.
Ind AS 103 - Business Combinations and Ind AS 111 - Joint Arrangements
The amendments to Ind AS 103 relating to re-measurement clarify that when an entity obtains control of a business that is a joint operation, it re-measures previously held interests in that business. The amendments to Ind AS 111 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not re-measure previously held interests in that business. The Company will apply the pronouncement if and when it obtains control / joint control of a business that is a joint operation.
1.12 Dividend distribution to equity shareholders of the Company
The Company recognises a liability to make dividend distributions to its equity holders when the distribution is authorised and the distribution is no longer at its discretion. As per the corporate laws in India, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
In case of Interim Dividend, the liability is recognised on its declaration by the Board of Directors.
1.13 Changes in accounting policies and disclosures
(a) Revenue from delayed payment charges
Delayed payment charges were hitherto recognised only when they are realised/recovered. With effect from 1st April, 2018, the Company has revised its accounting policy to recognise Delayed Payment Charges (DPC) on accrual basis based on contractual terms and an assessment of certainty of realisation. Management believes that this policy results in the financial statements providing reliable and more relevant information about the effects of transaction on the Companyâs financial position and performance. The revision in accounting policy has been applied retrospectively and does not have any significant impact on current year and previous year statement of profit and loss and retained earnings as at 1st April, 2017.
New and amended standards and interpretations
The Company applied for the first time certain amendments to the standards, which are effective for annual periods beginning on or after 1st April, 2018. The nature and the impact of each amendment is described below:
(b) Ind AS 20 Accounting for Government Grants and Disclosure
In accordance with the amendment in Ind AS 20 âAccounting for Government Grants and Disclosureâ the Company has changed its accounting policy of recognizing the grant as a reduction from the carrying amount of the asset instead of recognizing the grant as deferred income. Management believes that this policy results in the financial statements providing reliable and more relevant information about the effects of transaction on the Companyâs financial position and performance. The revision in accounting policy has been applied retrospectively and does not have any significant impact on retained earnings as at 1st April, 2017 and profit of the Company.
(c) Ind AS 115 Revenue from Contracts with Customers
Ind AS 115 supersedes Ind AS 11 Construction Contracts, Ind AS 18 Revenue and related interpretations and it applies, with limited exceptions, to all revenue arising from contracts with its customers. Ind AS 115 establishes a five-step model to account for revenue arising from contracts with customers and requires that revenue be recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.
The Company adopted Ind AS 115 using the full retrospective method of adoption. Ind AS 115 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires relevant disclosures.
On adoption of Ind AS 115, amount recoverable from consumers are considered as contract assets accordingly, the Company has classified amount recoverable from consumers from other financial assets to other assets for the previous year ended March 31, 2018. Also, liabilities towards consumers are considered as contract liabilities and accordingly, has been classified from other financial liabilities to other liabilities for the year ended March 31, 2018.
Mar 31, 2018
1.1 Foreign Currencies
The functional currency of the Company is Indian Rupee O.
Income and expenses in foreign currencies are recorded at exchange rates prevailing on the date ofthe transaction. Foreign currency denominated monetary assets and liabilities are translated at the exchange rate prevailing on the balance sheet date and exchange gains and losses arising on settlement and restatement are recognised in the statement of profit and loss. Non-monetary assets and liabilities that are measured in terms of historical cost in foreign currencies are not retranslated.
Exchange differences on monetary items are recognised in the statement of profit and loss in the period in which they arise except for exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
1.2 Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/non-current classification. An asset is treated as current when it is:
- expected to be realised or intended to be sold or consumed in normal operating cycle,
- held primarily for the purpose of trading,
- expected to be realised within twelve months after the reporting period, or
- cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- it is expected to be settled in normal operating cycle,
- it is held primarily for the purpose of trading,
- it is due to be settled within twelve months after the reporting period, or
- there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
1.3.1 Onerous Contracts
Present obligations arising under onerous contracts are recognised and measured as provisions with charge to the statement of profit and loss. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
1.3.2 Warranties
Provisions for the expected cost of warranty obligations under local sale of goods legislation are recognised at the date of sale of the relevant products, at the Companyâs best estimate of the expenditure required to settle the Companyâs obligation.
1.4 Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in statement of profit and loss.
1.5 Financial Assets
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market place.
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.
1.5.1 Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
1.5.2 Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cashflows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cashflows that are solely payments of principal and interest on the principal amount outstanding.
On initial recognition, the Company makes an irrevocable election on an instrument-by-instrument basis to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instruments, other than equity investment which are held for trading. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the âReserve for equity instruments through other comprehensive incomeâ. The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
1.5.3 Financial assets at fair value through profit or loss (FVTPL)
Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Other financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognised in statement of profit and loss.
1.5.4 Investment in Subsidiaries, Jointly Controlled Entities and Associates
Investment in subsidiaries, jointly controlled entities and associates are measured at cost less impairment as per Ind AS 27 -Separate Financial Statements.
Impairment of investments:
The Company reviews its carrying value of investments carried at cost or amortised cost annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for.
1.5.5 Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Companyâs balance sheet) when:
- the rights to receive cash flows from the asset have expired, or
- the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
1.5.6 Impairment of financial assets
The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company recognises lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
1.6 Financial liabilities and equity instruments
1.6.1 Classification as debt or equity
Debt and equity instruments issued by a Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
1.6.2 Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
1.6.3 Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in statement of profit and loss when the liabilities are derecognised as well as through the Effective Interest Rate (EIR) amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
1.6.4 Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
1.6.5 Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortisation.
1.7 Derivative financial instruments
The Company enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks, including foreign exchange forward contracts and cross currency swaps.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in statement of profit and loss immediately.
1.8 Reclassification of financial assets and liabilities
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Companyâs senior management determines change in the business model as a result of external or internal changes which are significant to the Companyâs operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
1.9 Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
1.10 Leasing arrangement
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease payments are recognised as an expense in the statement of profit and loss on a straight-line basis over the lease term.
1.11 Standards issued but not yet effective
The amendments to standards that are issued, but not yet effective, up to the date of issuance of the Companyâs financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective. The Ministry of Corporate Affairs (MCA) has issued the Companies (Indian Accounting Standards) Amendment Rules, 2017 and Companies (Indian Accounting Standards) Amendment Rules, 2018 amending the following standards:
Ind AS 115 - Revenue from Contracts with Customers
In March 2018, the Ministry of Corporate Affairs had notified Ind AS 115 (Revenue from Contracts with Customers) which would be applicable to the Company for accounting periods beginning on or after 1st April 2018. This Standard establishes the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. The Company is evaluating the requirements of the standard and its impact on its financial statements.
Amendments to Ind AS 12 - Recognition of Deferred Tax Assets for Unrealised Losses
The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount.
These amendments are effective for annual periods beginning on or after 1st April, 2018. These amendments are not expected to have any material impact on the Company.
1.12 Dividend distribution to equity shareholders of the Company
The Company recognises a liability to make dividend distributions to its equity holders when the distribution is authorised and the distribution is no longer at its discretion. As per the corporate laws in India, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
In case of Interim Dividend, the liability is recognised on its declaration by the Board of Directors.
1.13 Changes in accounting policies and disclosures New and amended standards and interpretations
The Company applied for the first time certain amendments to the standards, which are effective for annual periods beginning on or after 1st April, 2017. The nature and the impact of each amendment is described below:
Amendments to Ind AS 7 Statement of Cash Flows: Disclosure Initiative
The amendments require entities to provide disclosure of changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). The Company has provided the information for the current period.
Mar 31, 2017
1.1 Statement of compliance
The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as notified under the Companies (Indian Accounting Standards) Rules, 2015 read with section 133 of the Companies Act, 2013.
Upto the year ended 31st March, 2016, the Company prepared its financial statements in accordance with the requirements of previous GAAP, which included Standards notified under the Companies (Accounting Standards) Rules, 2006. These financial statements are the first financial statements of the Company under Ind AS. The date of transition to Ind AS is 1st April, 2015.
Refer Note 47 for details of first-time adoption exemptions availed by the Company.
1.2 Basis of preparation and presentation
These financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique.
1.3 Use of Estimates
The preparation of these financial statements in conformity with the recognition and measurement principles of Ind AS requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities, disclosures relating to contingent liabilities as at the date of the financial statements and the reported amounts of income and expense for the periods presented.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods are affected.
Key source of estimation of uncertainty at the date of the financial statements, which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, is in respect of, fair value of unquoted securities and impairment of investments, valuation of current and deferred tax expense, valuation of defined benefit obligations, regulatory deferral accounts and provisions and contingent liabilities.
Impairment of investments:
The Company reviews its carrying value of investments carried at cost or amortised cost annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for.
Valuation of deferred tax assets:
The Company reviews the carrying amount of deferred tax assets at the end of each reporting period. The policy for the same has been explained under Note 2.11.3.
Regulatory deferral account:
The Company determines surplus/deficit (i.e. excess/shortfall of/in aggregate gain over Return on Equity entitlement) for the year in respect of its regulated operations based on the principles laid down under the Tariff Regulations on the basis of Tariff Orders issued. In respect of such surplus/deficit, appropriate adjustments as stipulated under the regulations are made during the year. Further, any adjustments that may arise on annual performance review by regulators under the Tariff Regulations is made after the completion of such review.
1.4 Non-current assets held for sale
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sale of such asset and its sale is highly probable. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Non-current assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.
1.5 Revenue recognition
Revenue is recognised to the extent that it is probable that economic benefit will flow to the Company and that the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated rebates and other similar allowances.
1.5.1 Sale of Power
Revenue from Generation, Transmission and Distribution of power is recognised on an accrual basis and includes unbilled revenue accrued upto the end of the accounting year.
The Company determines surplus/deficit (i.e. excess/shortfall of/in aggregate gain over Return on Equity entitlement) for the year in respect of its regulated operations based on the principles laid down under the relevant Tariff Regulations/Tariff Orders as notified by respective State Regulatory Commissions. In respect of such surplus/deficit, appropriate adjustments as stipulated under the regulations are made during the year. Further, any adjustments that may arise on annual performance review by respective State Regulatory Commissions under the aforesaid Tariff Regulations/Tariff Orders is made after the completion of such review.
1.5.2 Delayed payment charges
Delayed payment charges and interest on delayed payments are recognised, on grounds of prudence when recovered.
1.5.3 Sale of Goods
Revenue from the sale of goods is recognised when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:
- the Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
- the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
- the amount of revenue can be measured reliably;
- it is probable that the economic benefits associated with the transaction will flow to the Company; and
- the costs incurred or to be incurred in respect of the transaction can be measured reliably.
1.5.4 Rendering of Services
Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract. The revenue from time and material contracts is recognised at the contractual rates as labour hours and direct expenses are incurred.
The Companyâs policy for recognition of revenue from construction contracts is described in note 2.5.6 below.
1.5.5 Dividend and Interest income
Dividend income from investments is recognised when the shareholderâs right to receive payment has been established. Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that assetâs net carrying amount on initial recognition.
1.5.6 Construction Contracts
When the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.
The outcome of a construction contract is considered as estimated reliably when (a) all critical approvals necessary for commencement of the project have been obtained; (b) the stage of completion of the project reaches a reasonable level of development i.e. the expenditure incurred on construction and development costs is at least 10% of the construction and development costs or Rs.5 crore spend whichever is higher.
When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
When contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the surplus is shown as amounts due from customers for contract work. Amounts received before the related work is performed are included in the balance sheet, as a liability, as advances received from customer. Amounts billed for work performed but not yet paid by the customer are included in the balance sheet under trade receivables.
1.6 Leasing arrangement
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
1.6.1 The Company as lessor
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Companyâs net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Companyâs net investment outstanding in respect of the leases.
Rental income from operating leases is generally recognised on a straight-line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the Companyâs expected inflationary cost increases, such increases are recognised in the year in which such benefits accrue. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
1.6.2 The Company as lessee
Assets held under finance leases are initially recognised as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Companyâs general policy on borrowing costs (see note 2.8 below). Contingent rentals are recognised as expenses in the periods in which they are incurred. Rental expense from operating leases is generally recognised on a straight-line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases, such increases are recognised in the year in which such benefits accrue. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
1.7 Foreign Currencies
The functional currency of the Company is Indian rupee (Rs.).
Income and expenses in foreign currencies are recorded at exchange rates prevailing on the date of the transaction. Foreign currency denominated monetary assets and liabilities are translated at the exchange rate prevailing on the balance sheet date and exchange gains and losses arising on settlement and restatement are recognised in the statement of profit and loss.
Non-monetary assets and liabilities that are measured in terms of historical cost in foreign currencies are not retranslated.
Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
1.8 Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in statement of profit and loss in the period in which they are incurred.
1.9 Government Grant
Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grant will be received.
Government grants relating to income are determined and recognised in the profit and loss over the period necessary to match them with the cost that they are intended to compensate and presented within other income.
Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to profit and loss on a straight line basis over the expected life of the related assets and presented within other operating income.
The benefit of a Government loan at a below market rate of interest is treated as a Government grant, measured as the difference between proceeds received and the fair value of loan based on prevailing market interest rates.
1.10 Employee Benefits
1.10.1 Defined contribution plans
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions.
1.10.2 Defined benefits plans
For defined benefit retirement plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding net interest), is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus in the Companyâs defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.
1.10.3 Short-term and other long-term employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date.
1.11 Income Taxes
1.11.1 Current and deferred tax for the year
Income tax expense comprises of current tax expense and the net change in the deferred tax asset or liability during the year. Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.
1.11.2 Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from âprofit before taxâ as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible.
The Companyâs current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
1.11.3 Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
For operations carried out under tax holiday period (80IA benefits of Income Tax Act, 1961), deferred tax assets or liabilities, if any, have been established for the tax consequences of those temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis.
Deferred tax assets include Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability. Accordingly, MAT is recognised as deferred tax asset in the balance sheet when the asset can be measured reliably and it is probable that the future economic benefit associated with the asset will be realised.
1.12 Property plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes purchase price and any directly attributable cost of bringing the asset to its working condition for its intended use and for qualifying assets, borrowing costs capitalised in accordance with the Companyâs accounting policy. Depreciation commences when the assets are ready for their intended use.
Freehold land and Assets held for sale are not depreciated.
Regulatory Assets:
Depreciation on Property, plant and equipment in respect of electricity business of the Company covered under Part B of Schedule II of the Companies Act, 2013, has been provided on the straight line method at the rates using the methodology as notified by the respective regulators.
Non Regulatory Assets:
Depreciation is recognised so as to write off the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method.
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
1.13 Intangible assets
1.13.1 Intangible assets acquired separately
Intangible assets that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
1.13.2 Internally generated intangible assets
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:
- the technical feasibility of completing the intangible asset so that it will be available for use or sale;
- the intention to complete the intangible asset and use or sell it;
- the ability to use or sell the intangible asset;
- how the intangible asset will generate probable future economic benefits;
- the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
- the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
1.13.3 Derecognition of Intangible assets
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.
1.13.4 Useful lives of intangible assets
Estimated useful lives of the intangible assets are as follows:
1.14 Impairment of tangible and intangible assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest Company of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
1.15 Inventories
Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on weighted average basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
1.16 Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
1.16.1 Onerous Contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
1.16.2 Warranties
Provisions for the expected cost of warranty obligations under local sale of goods legislation are recognised at the date of sale of the relevant products, at the Companyâs best estimate of the expenditure required to settle the Companyâs obligation.
1.17 Financial Instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in statement of profit and loss.
1.18 Financial Assets
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market place.
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets
1.18.1 Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
1.18.2 Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cashflows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cashflows that are solely payments of principal and interest on the principal amount outstanding.
On initial recognition, the Company makes an irrevocable election on an instrument-by-instrument basis to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instruments, other than equity investment which are held for trading. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the âReserve for equity instruments through other comprehensive incomeâ. The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
1.18.3 Financial assets at fair value through profit or loss (FVTPL)
Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading.
Other financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognised in profit or loss.
1.18.4 Investment in Subsidiaries, Jointly Controlled Entities and Associates
Investment in subsidiaries, jointly controlled entities and associates are measured at cost as per Ind AS 27 - Separate Financial Statements.
1.18.5 Impairment of financial assets (other than at fair value)
The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company recognises lifetime expected losses for all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
1.19 Financial liabilities and equity instruments
1.19.1 Classification as debt or equity
Debt and equity instruments issued by a Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
1.19.2 Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by a Company entity are recognised at the proceeds received, net of direct issue costs.
Repurchase of the Companyâs own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in statement of profit and loss on the purchase, sale, issue or cancellation of the Companyâs own equity instruments.
1.19.3 Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest method.
1.19.4 Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by a Company are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of:
- the amount of loss allowance determined in accordance with impairment requirements of Ind AS 109; and
- the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of Ind AS 18.
1.20 Derivative financial instruments
The Company enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks, including foreign exchange forward contracts and cross currency swaps.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately.
1.21 Cash and cash equivalents
The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.
1.22 Cash Flow Statement
Cash flows are reported using the indirect method, where by profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
1.23 Earnings per equity share
Basic earnings per equity share is computed by dividing the net profit attributable to the equity holders of the company by the weighted average number of equity shares outstanding during the period. Diluted earnings per equity share is computed by dividing the net profit attributable to the equity holders of the company by the weighted average number of equity shares considered for deriving basic earnings per equity share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable had the equity shares been actually issued at fair value (i.e.the average market value of the outstanding equity shares). Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. Dilutive potential equity shares are determined independently for each period presented.
The number of equity shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus shares issues including for changes effected prior to the approval of the financial statements by the Board of Directors.
1.24 Standards issued but not yet effective
In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, âStatement of cash flowsâ and Ind AS 102, âShare-based paymentâ. The amendments are applicable to the Company from 1st April, 2017.
Amendment to Ind AS 7:
The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.
The Company is evaluating the requirements of the amendment and its impact on its cash flows, which are not expected to be material.
Amendment to Ind AS 102:
The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes.
It clarifies that the fair value of cash-settled awards is determined on a basis consistent with that used for equity-settled awards. Market-based performance conditions and non-vesting conditions are reflected in the âfair valuesâ, but non-market performance conditions and service vesting conditions are reflected in the estimate of the number of awards expected to vest. Also, the amendment clarifies that if the terms and conditions of a cash-settled share-based payment transaction are modified with the result that it becomes an equity-settled share-based payment transaction, the transaction is accounted for as such from the date of the modification. Further, the amendment requires the award that include a net settlement feature in respect of withholding taxes to be treated as equity-settled in its entirety. The cash payment to the tax authority is treated as if it was part of an equity settlement.
The Company does not have any scheme of share based payments and hence the requirements of the amendment will not have any impact on the financial statements.
Mar 31, 2014
(a) Basis for Preparation of Accounts:
The Financial Statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notif ed under
Section 211(3C) of the Companies Act, 1956 ("the 1956 Act") (which
continue to be applicable in respect of Section 133 of the Companies
Act, 2013 ("the 2013 Act") in terms of General Circular 15/2013 dated
13th September, 2013 of the Ministry of Corporate Af airs) and the
relevant provisions of the 1956 Act/2013 Act, as applicable. The
Financial Statements have been prepared on accrual basis under the
historical cost convention, except for Fixed Assets at Strategic
Engineering Division, that are carried at revalued amount. The
accounting policies adopted in the preparation of the Financial
Statements are consistent with those followed in the previous year,
except for change in the accounting policy for revaluation of Tangible
Assets, as more fully described in Note 2.2.
(b) Use of Estimates:
The preparation of the Financial Statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the Financial Statements are prudent and reasonable. Future results
could dif er due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known/materialise.
(c) Cash and Cash Equivalents (for purposes of Cash Flow Statement):
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short-term balances (with an original maturity of three
months or less from the date of acquisition), highly liquid investments
that are readily convertible into known amounts of cash and which are
subject to insignif cant risk of changes in value.
(d) Cash Flow Statement:
Cash flows are reported using the indirect method, whereby prof t
before tax is adjusted for the ef ects of transactions of non-cash
nature and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from operating, investing and financing
activities of the Company are segregated based on the available
information.
(e) Tangible/Intangible Fixed Assets:
(i) Fixed assets, except Tangible Assets at its Strategic Engineering
Division are carried at cost less accumulated depreciation/amortisation
and impairment losses, if any. The cost of fixed assets comprises its
purchase price net of any trade discounts and rebates, any import
duties and other taxes (other than those subsequently recoverable from
the tax authorities), any directly attributable expenditure on making
the asset ready for its intended use, other incidental expenses and
interest on borrowings attributable to acquisition of qualifying fixed
assets upto the date the asset is ready for its intended use. The
Company has adopted the provisions of para 46A of AS-11 "The Ef ects of
Changes in Foreign Exchange Rates", accordingly exchange differences
arising on restatement/settlement of long-term foreign currency
borrowings relating to acquisition of depreciable fixed assets are
adjusted to the cost of the respective assets and depreciated over the
remaining useful life of such assets. Machinery spares which can be
used only in connection with an item of fixed asset and whose use is
expected to be irregular are capitalised and depreciated over the
useful life of the principal item of the relevant assets. Subsequent
expenditure relating to fixed assets is capitalised only if such
expenditure results in an increase in the future benefits from such
asset beyond its previously assessed standard of performance.
The Company revalued all its Tangible assets that existed on 1st April,
2013 at its Strategic Engineering Division. The revalued assets are
carried at the revalued amounts less accumulated depreciation and
impairment losses, if any. Increase in the net book value on such
revaluation is credited to "Revaluation reserve account" except to the
extent such increase is related to and not greater than a decrease
arising from a revaluation/impairment that was previously recognised in
the Statement of Prof t and Loss, in which case such amount is credited
to the Statement of Prof t and Loss. Decrease in book value on
revaluation is charged to the Statement of Prof t and Loss except where
such decrease relates to a previously recognised increase that was
credited to the Revaluation reserve, in which case the decrease is
charged to the Revaluation reserve to the extent the reserve has not
been subsequently reversed/utilised.
(ii) Fixed assets retired from active use and held for sale are stated
at the lower of their net book value and net realisable value and are
disclosed separately.
(iii) Capital Work-in-Progress:
Projects under which tangible fixed assets are not ready for their
intended use and other capital work-in-progress are carried at cost,
comprising direct cost, related incidental expenses and attributable
borrowing costs.
(iv) Intangible Assets under Development:
Expenditure on Research and Development [Refer Note 2.1 (l)] eligible
for capitalisation are carried as Intangible assets under development
where such assets are not yet ready for their intended use.
(f) Impairment of Assets:
The carrying values of assets/cash generating units at each Balance
Sheet date are reviewed for impairment. If any indication of impairment
exists, the recoverable amount of such assets is estimated and
impairment is recognised, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the greater
of the net selling price and their value in use. Value in use is
arrived at by discounting the future cash flows to their present value
based on an appropriate discount factor. When there is indication that
an impairment loss recognised for an asset in earlier accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognised in the Statement of Prof t and Loss,
except in case of revalued assets.
(g) Depreciation/Amortisation:
Depreciation in respect of its electricity business is provided at the
rates as well as methodology notif ed by the Central Electricity
Regulatory Commission (Terms and Conditions of Tarif ) Regulations,
2009 (CERC) w.e.f. 1st April, 2009 and at the rates as per the Power
Purchase Agreements (PPA) for capacities covered under PPAs, wherever
higher than those notif ed by CERC.
In respect of assets relating to other businesses of the Company,
depreciation has been provided for on written down value basis at the
rates and in the manner prescribed in Schedule XIV to the Companies
Act, 1956.
Intangible assets are amortised over the useful economic life of the
assets or 5 years, whichever is lower.
Leasehold Land is amortised on straight line basis over the period of
the lease, ranging from 20 years to 95 years.
(h) Leases:
Where the Company as a lessor leases assets under f nance leases, such
amounts are recognised as receivables at an amount equal to the net
investment in the lease and the f nance income is recognised based on a
constant rate of return on the outstanding net investment.
Assets leased by the Company in its capacity as lessee where
substantially all the risks and rewards oflownership vest in the
Company are classif ed as f nance leases. Such leases are capitalised
at the inception of the lease at the lower of the fair value and the
present value of the minimum lease payments and a liability is created
for an equivalent amount. Each lease rental paid is allocated between
the liability and the interest cost so as to obtain a constant periodic
rate of interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognised as
operating leases. Lease rentals under operating leases are recognised
in the Statement of Prof t and Loss on a straight line basis.
(i) Investments:
Long-term investments are carried individually at cost less provision
for diminution, other than temporary, in the value of such investments
determined on an individual basis. Current investments are carried
individually, at the lower of cost and fair value. Cost of investments
include acquisition charges such as brokerage, fees and duties.
(j) Inventories:
Inventories of stores, spare parts, fuel and loose tools are valued at
lower of cost (on weighted average basis) and net realisable value
after providing for obsolescence and other losses. Work-in-progress and
property under development are valued at lower of cost and net
realisable value. Cost includes cost of land, material, labour and
other appropriate overheads.
(k) Taxes on Income:
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Act, 1961.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is highly
probable that future economic benefit associated with it will flow to
the Company.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantively enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax
assets in respect of unabsorbed depreciation and carry forward of
losses are recognised only if there is virtual certainty supported by
convincing evidences that there will be suf cient future taxable income
available to realise such assets. Deferred tax assets are recognised
for timing differences of other items only to the extent that
reasonable certainty exists that suf cient future taxable income will
be available against which these can be realised. Deferred tax assets
are reviewed at each Balance Sheet date for their realisability.
Current and Deferred Tax relating to items directly recognised in
reserves are recognised in reserves and not in the Statement of Prof t
and Loss.
(l) Research and Development Expenses:
Revenue expenditure pertaining to research is charged to the Statement
of Prof t and Loss. Development costs of products are also charged to
the Statement of Prof t and Loss unless a product''s technological
feasibility has been established, in which case such expenditure is
capitalised. The amount capitalised comprises expenditure that can be
directly attributed or allocated on a reasonable and consistent basis
to creating, producing and making the asset ready for its intended use.
Fixed assets utilised for research and development are capitalised and
depreciated in accordance with the policies stated for
tangible/intangible fixed assets.
(m) Warranty Expenses:
Anticipated product warranty costs for the period of warranty are
provided for in the year of sale. (n) Foreign Currency Transactions
and Translations:
Initial recognition:
Transactions in foreign currencies entered into by the Company are
accounted at the exchange rates prevailing on the date of the
transaction or at rates that closely approximate the rate at the date
of the transaction.
Transactions in foreign currencies entered into by the Company''s
integral foreign operations are accounted at the exchange rates
prevailing on the date of the transaction or at rates that closely
approximate the rate at the date of the transaction.
Net investment in non-integral foreign operations is accounted at the
exchange rates prevailing on the date of the transaction or at rates
that closely approximate the rate at the date of the transaction.
Transactions of non-integral foreign operations are translated at the
exchange rates prevailing on the date of the transaction or at rates
that closely approximate the rate at the date of the transaction
Measurement at the balance sheet date:
Foreign currency monetary items (other than derivative contracts) of
the Company, outstanding at the Balance Sheet date are restated at the
year-end rates. Non-monetary items of the Company are carried at
historical cost.
Foreign currency monetary items (other than derivative contracts) of
the Company''s integral foreign operations outstanding at the Balance
Sheet date are restated at the year-end rates. Non-monetary items of
the Company''s integral foreign operations are carried at historical
cost.
Foreign currency monetary items (other than derivative contracts) of
the Company''s net investment in non-integral foreign operations
outstanding at the Balance Sheet date are restated at the year-end
rates.
All assets and liabilities of non-integral foreign operations are
translated at the year-end rates.
Treatment of exchange differences:
Exchange differences arising on settlement/restatement of short-term
foreign currency monetary assets and liabilities of the Company are
recognised as income or expense in the Statement of Prof t and Loss.
Exchange differences arising on settlement/restatement of short-term
foreign currency monetary assets and liabilities of the Company''s
integral foreign operations are recognised as income or expense in the
Statement of Prof t and Loss.
The exchange differences on restatement of long-term receivables from
non-integral foreign operations that are considered as net investment
in such operations is accounted as per policy for long-term foreign
currency monetary items stated in para below until disposal/recovery of
such net investment, in which case the accumulated balance in "Foreign
currency translation reserve" is recognised as income/expense in the
same period in which the gain or loss on disposal/recovery is
recognised.
The exchange differences relating to non-integral foreign operations
are accumulated in a "Foreign currency translation reserve" until
disposal of the operation, in which case the accumulated balance in
"Foreign currency translation reserve" is recognised as income/expense
in the same period in which the gain or loss on disposal is recognised.
The exchange differences arising on settlement/restatement of long-term
foreign currency monetary items are capitalised as part of the
depreciable fixed assets to which the monetary item relates and
depreciated over the remaining useful life of such assets. If such
monetary items do not relate to acquisition of depreciable fixed
assets, the exchange difference is amortised over the maturity
period/upto the date of settlement of such monetary items, whichever is
earlier, and charged to the Statement of Prof t and Loss. The
unamortised exchange difference is carried under Reserves and Surplus
as "Foreign currency monetary item translation difference account" net
of the tax ef ect thereon, where applicable.
Accounting of forward contracts:
Premium/discount on forward exchange contracts, which are not intended
for trading or speculation purposes, are amortised over the period of
the contracts if such contracts relate to monetary items as at the
Balance Sheet date. Refer Note 2.1 (o) for accounting for forward
exchange contracts relating to f rm commitments and highly probable
forecast transactions.
(o) Derivative Contracts:
The Company enters into derivative contracts in the nature of foreign
currency swaps, currency options, forward contracts with an intention
to hedge its existing assets and liabilities, f rm commitments and
highly probable transactions. Forward contracts which are closely
linked to the existing assets and liabilities are accounted as per the
policy stated for foreign currency transactions and translations. All
other derivative contracts are mark-to-market and losses are recognised
in the Statement of Prof t and Loss. Gains arising on the same are not
recognised, until realised, on grounds of prudence.
(p) Employee benefits:
Employee benefits consist of Provident Fund, Superannuation Fund,
Gratuity Scheme, Pension, Post Retirement Medical benefits, Retirement
Gift, Compensated Absences, Hospitalisation in Service and Long-term
Service Awards.
Def ned contribution plans:
The Company''s contributions paid/payable during the year to Provident
Fund, Superannuation Fund and Employee State Insurance Scheme are
considered as def ned contribution plans and are charged as an expense
based on the amount of contribution required to be made and when
services are rendered by the employees.
Def ned benefit plans:
For def ned benefit plans in the form of Gratuity, Ex-Gratia Death
benefits, Retirement Gifts, Post Retirement Medical benefits and
Pension, the cost of providing benefits is determined using the
Projected Unit Credit method, with actuarial valuations being carried
out at each Balance Sheet date. Actuarial gains and losses are
recognised in the Statement of Prof t and Loss in the period in which
they occur. Past service cost is recognised immediately to the extent
that the benefits are already vested and otherwise is amortised on a
straight line basis over the average period until the benefits become
vested. The retirement benefit obligation recognised in the Balance
Sheet represents the present value of the def ned benefit obligation as
adjusted for unrecognised past service cost, as reduced by the fair
value of scheme assets. Any asset resulting from this calculation is
limited to past service cost, plus the present value of available
refunds and reductions in future contributions to the schemes.
Short-term employee benefits:
The undiscounted amount of short term employee benefits expected to be
paid in exchange for the services rendered by employees are recognised
during the year when the employees render the service. These benefits
include performance incentive and compensated absences which are
expected to occur within twelve months after the end of the period in
which the employee renders the related service. The cost of such
compensated absences is accounted as under:
(a) in case of accumulated compensated absences, when employees render
the services that increase their entitlement of future compensated
absences; and
(b) in case of non-accumulating compensated absences, when the absences
occur.
Long-term employee benefits:
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related service are recognised as a liability at the present value of
the def ned benefit obligation as at the Balance Sheet date less the
fair value of the plan assets out of which the obligations are expected
to be settled. Hospitalisation in Service and Long Service Awards are
recognised as a liability at the present value of the def ned benefit
obligation as at the Balance Sheet date.
(q) Revenue Recognition:
(i) Revenue from Power Supply and Transmission Charges are accounted
for on the basis of billings to consumers/state transmission utility
and includes unbilled revenues accrued upto the end of the accounting
year.
(ii) The Company determines surplus/def cit (i.e. excess/shortfall
of/in aggregate gain over Return on Equity entitlement) for the year in
respect of its Mumbai and Jojobera regulated operations (i.e.
Generation, Transmission and Distribution) based on the principles laid
down under the respective Tarif Regulations as notif ed by Maharashtra
Electricity Regulatory Commission (MERC) and Jharkhand State
Electricity Regulatory Commission (JSERC) on the basis of Tarif Orders
issued by them. In respect of such surplus/def cit, appropriate
adjustments as stipulated under the regulations have been made during
the year. Further, any adjustments that may arise on annual performance
review by MERC and JSERC under the aforesaid Tarif Regulations will be
made after the completion of such review.
(iii) Delayed payment charges and interest on delayed payments are
recognised, on grounds of prudence, as and when recovered/conf rmed by
consumers.
(iv) Interest income and guarantee commission is accounted on an
accrual basis. Dividend income is accounted for when the right to
receive income is established.
(v) Amounts received from consumers towards capital/service line
contributions are accounted as a liability and are subsequently
recognised as income over the life of the fixed assets.
(vi) Revenue from infrastructure management services is recognised as
income as and when services are rendered and no signif cant uncertainty
to the collectability exists.
(vii) Income on contracts in respect of Strategic Engineering Business
and Project Management Services are accounted on "Percentage of
Completion" basis measured by the proportion that cost incurred upto
the reporting date bear to the estimated total cost of the contract.
(viii) Revenue from Sale of Carbon Credit and Renewable Energy Certif
cate is recognised at the time of sale.
(r) Issue Expenses and Premium on Redemption of Bonds and Debentures:
(i) Expenses incurred in connection with the issue of Euro Notes,
Foreign Currency Convertible Bonds, Unsecured Perpetual Securities,
Global Depository Receipts and Debentures are adjusted against
Securities Premium Account in the year of issue.
(ii) Discount on issue of Bonds, Debentures and Euro Notes are
amortised over the tenure.
(iii) Premium on Redemption of Bonds/Debentures, net of tax impact, are
adjusted against the Securities Premium Account in the year of issue.
(s) Borrowing Costs:
Borrowing costs include interest, amortisation of ancillary costs
incurred. Costs in connection with the borrowing of funds to the extent
not directly related to the acquisition of qualifying assets are
charged to the Statement of Prof t and Loss over the tenure of the
loan. Borrowing costs, allocated to and utilised for qualifying assets,
pertaining to the period from commencement of activities relating to
construction/development of the qualifying asset upto the date of
capitalisation of such asset is added to the cost of the assets.
Capitalisation of borrowing costs is suspended and charged to the
Statement of Prof t and Loss during extended periods when active
development activity on the qualifying assets is interrupted.
(t) Segment Reporting:
The Company identif es primary segments based on the dominant source,
nature of risks and returns and the internal organisation and
management structure. The operating segments are the segments for which
separate financial information is available and for which operating
prof t/loss amounts are evaluated regularly by the executive Management
in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identif ed
to segments on the basis of their relationship to the operating
activities of the segment.
Inter-segment revenue is accounted on the basis of transactions which
are primarily determined based on market/fair value factors.
Revenue, expenses, assets and liabilities which relate to the Company
as a whole and not allocable to segments on reasonable basis have been
included under "unallocable revenue/expenses/assets/liabilities".
(u) Provisions, Contingent Liabilities and Contingent Assets:
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement benef
ts) are not discounted to their present values and are determined based
on the best estimate required to settle the obligations at the Balance
Sheet date. These are reviewed at each Balance Sheet date and adjusted
to ref ect the current best estimates. Contingent liabilities are not
recognised in the financial statements and are disclosed in the Notes.
A Contingent asset is neither recognised nor disclosed in the financial
statements.
(v) Earnings Per Share:
Basic earnings per share is computed by dividing the prof t/loss after
tax by the weighted average number of equity shares outstanding during
the year. Diluted earnings per share is computed by dividing the prof
t/loss after tax as adjusted for dividend, interest and other charges
to expense or income relating to the dilutive potential equity shares,
by the weighted average number of equity shares considered for deriving
basic earnings per share and the weighted average number of equity
shares which could have been issued on the conversion of all dilutive
potential equity shares. Potential equity shares are deemed to be
dilutive only if their conversion to equity shares would decrease the
net prof t per share from continuing ordinary operations. Potential
dilutive equity shares are deemed to be converted as at the beginning
of the period, unless they have been issued at a later date.
2.2. The Company has changed its accounting policy in respect of
Tangible Assets at its Strategic Engineering Division. These Tangible
Assets which were hitherto carried at cost have been revalued as at 1st
April, 2013. The revaluation is based on a valuation made by an
independent valuer using the Depreciated Replacement Cost Method.
Accordingly, the gross book value of such assets and the accumulated
depreciation as at 1st April, 2013 have increased by Rs. 234.98 crore and
Rs. 7.59 crore respectively and Rs. 227.39 crore has been credited to the
Revaluation Reserve.
Consequent to the revaluation, the additional charge for depreciation
for the year ended 31st March, 2014 amounting to Rs. 2.60 crore is
withdrawn from Revaluation Reserve.
2.3. The Company had, during the previous year ended 31st March, 2013,
revised the rates and methodology of charging depreciation in respect
of its electricity business as per the notif cation issued by the CERC
w.e.f. 1st April, 2009 and on certain assets as per the Power Purchase
Agreements (PPA) for capacities covered under PPAs, if higher than
those notif ed by CERC. Further, the depreciation charge for the year
ended 31st March, 2014 is lower by Rs. 48.02 crore (31st March, 2013 - Rs.
48.02 crore). Accordingly, depreciation of Rs. 219.80 crore for the
years 2009-10 to 2011-12 has been written back during the year ended
31st March, 2013. As a result, the current tax for the year ended 31st
March, 2013, was higher by Rs. 53.58 crore and the deferred tax charge
for the year ended 31st March, 2013 was higher by Rs. 204.28 crore.
2.4 In an earlier year, in line with the Notif cation dated 29th
December, 2011 issued by the Ministry of Corporate Af airs (MCA), the
Company had selected the option given in paragraph 46A of the
Accounting Standard-11 (AS-11) - "The Ef ects of Changes in Foreign
Exchange Rates". Accordingly, the depreciated/amortised portion of net
foreign exchange (gain)/loss on long-term foreign currency monetary
items for the year ended 31st March, 2014 is Rs. 169.60 crore (31st
March, 2013 -Rs. 83.84 crore). The unamortised portion carried forward as
at 31st March, 2014 is Rs. 297.64 crore (31st March, 2013 -Rs. 253.86
crore).
3. Shareholders'' Funds - Share Capital
(b) Terms/rights attached to Equity Shares
The Company has issued only one class of Equity Shares having a Par
Value of Rs. 1/- per share. Each holder of Equity Shares is entitled to
one vote per share. The dividend proposed by the Board of Directors is
subject to the approval of the shareholders in the ensuing Annual
General Meeting.
During the year ended 31st March, 2014, the amount of per share
dividend recognised as distribution to equity shareholders was Rs. 1.25
per share of Face Value of Rs. 1/- each (31st March 2013 - Rs. 1.15 per
share).
In the event of liquidation of the Company, the holders of Equity
Shares will be entitled to receive remaining assets of the Company,
after distribution of all preferential amounts. The distribution will
be in proportion to the number of Equity Shares held by the
shareholders.
(d) In an earlier year, the Company issued 3,000 1.75% Foreign Currency
Convertible Bonds (FCCB) with Face Value of USD 100,000 each
aggregating to USD 300 million. The bondholders have an option to
convert these Bonds into Equity Shares, at an initial conversion price
of Rs. 145.6125 per share at a fixed rate of exchange on conversion of Rs.
46.81 = USD 1.00, at any time on and after 31st December, 2009, upto
11th November, 2014. The conversion price is subject to adjustment in
certain circumstances. The FCCB may be redeemed, in whole but not in
part, at the option of the Company at any time on or after 20th
November, 2011 subject to satisfaction of certain conditions. Unless
previously converted, redeemed or repurchased and cancelled, the FCCB
fall due for redemption on 21st November, 2014 at 109.47% of their
principal amount together with accrued and unpaid interest.
(e) The Company, vide its Letter of Of er dated 19th March, 2014, of
ered upto 33,22,30,130 Equity Shares of Face Value of Rs. 1/- each at a
price of Rs. 60/- per Equity Share (including Share Premium of Rs. 59/- per
Equity Share) for an amount aggregating to Rs. 1,993.38 crore to the
existing Equity Shareholders of the Company on rights basis in the
ratio of 7 Equity Shares for every 50 Equity Shares held by the Equity
Shareholders on the record date i.e. 20th March, 2014. The issue opened
on 31st March, 2014 and closed on 15th April, 2014. On 25th April, 2014
the Company has allotted 33,15,52,894 Equity Shares, balance Equity
Shares being kept in abeyance.
The Equity Shares issued vide the said Rights Issue have not been
considered for computing Earnings Per Share.
Security
(i) The Debentures mentioned in (a) have been secured by a charge on
movable properties and assets of the Company at Agaswadi and Visapur in
Satara
District of Maharashtra and Poolavadi in Tirupur District of Tamil
Nadu.
(ii) The Debentures mentioned in (b) have been secured by a pari passu
charge on the assets of the wind farms situated at Samana and Gadag in
Gujarat and Karnataka.
(iii) The Debentures mentioned in (c) have been secured by a charge on
the land situated at Village Takve Khurd (Maharashtra).
(iv) The Debentures mentioned in (d) and (e) have been secured by a
pari passu charge on land in Village Takve Khurd (Maharashtra) and
movable and immovable properties in and outside Maharashtra, except
assets of windmill projects, present and future.
(v) The Debentures mentioned in (f ) have been secured by a charge on
land in Village Takve Khurd (Maharashtra), movable and immovable
properties in and outside Maharashtra, as also all transmission
stations/lines, receiving stations and sub-stations in Maharashtra,
except assets of windmill projects, present and future.
(vi) The loans from HDFC Bank and IDBI Bank, mentioned in (g) and (h)
respectively have been secured by a pari passu charge on all movable
Fixed Assets (excluding land and building), present and future (except
assets of all wind projects both present and future) including movable
machinery, machinery spares, tools and accessories.
(vii) The loan from Kotak Mahindra Bank mentioned in (i) has been
secured by a pari passu charge on all movable Fixed Assets (excluding
land and building), present and future (except assets of wind projects,
both present and future, situated at Khandke, Brahmanvel and Supa in
Maharashtra) including movable machinery, machinery spares, tools and
accessories.
(viii) The loans from Asian Development Bank and Indian Renewable
Energy Development Agency Limited mentioned in ( j) and (k)
respectively have been secured by a f rst charge on the tangible
movable properties, plant & machinery and immovable properties situated
at Khandke, Brahmanvel and Sadawaghapur in Maharashtra.
(ix) The loan from Infrastructure Development Finance Company Limited
mentioned in (l) have been secured by a charge on the movable assets
except assets of all windmill projects present and future more
particularly situated in Supa, Khandke, Brahmanvel, Sadawaghapur, Gadag
and Samana in Maharashtra, Karnataka and Gujarat.
(x) The loan from Export Import Bank of India mentioned in (m) has been
secured by receivables (present and future), book debts and outstanding
monies.
(xi) The loan mentioned in (n) has been secured by hypothecation of
specif c assets (vehicles) taken on f nance lease. Redemption
(i) The Debentures mentioned in (a) are redeemable at par in fourteen
annual installments of Rs. 16 crore each and one installment of Rs. 26
crore commencing from 18th September, 2011.
(ii) The Debentures mentioned in (b) are redeemable at par in ten
annual installments of Rs. 25 crore each and f ve annual installments of
Rs. 20 crore each commencing from 23rd July, 2011.
(iii) The Debentures mentioned in (c) are redeemable at par at the end
of 10 years from the respective date of allotment viz. 28th December,
2022.
(v) The Debentures mentioned in (f) are redeemable at premium in three
installments amounting to Rs. 180 crore, Rs. 240 crore and Rs. 180 crore each
at the end of 9th, 10th and 11th year respectively from 18th October,
2004.
(vi) The f rst loan from HDFC Bank mentioned in (g) is redeemable at
par in 36 quarterly installments of Rs. 7.50 crore each commencing from
1st June, 2010 and 4 quarterly installments of Rs. 82.50 crore each
commencing from 30th June, 2020 and,
The second loan from HDFC Bank mentioned in (g) is redeemable at par in
40 quarterly installments of Rs. 5.63 crore each commencing from 16th
November, 2015 and 4 quarterly installments of Rs. 18.75 crore each
commencing from 16th November, 2025.
(vii) The loan from IDBI Bank of Rs. 300 crore mentioned in (h) is
redeemable at par in 46 quarterly installments of Rs. 3.75 crore each
commencing from 1st October, 2010 and one installment of Rs. 127.50 crore
on 1st April, 2022 and, The second loan from IDBI Bank of Rs. 400 crore
mentioned in (h) is redeemable at par in 36 quarterly installments of Rs.
5 crore each commencing from 1st April, 2011 and one installment of Rs.
220 crore on 1st April, 2020.
(viii) The f rst loan from Kotak Mahindra Bank mentioned in (i) is
redeemable at par in 8 quar terly installments of Rs. 7.75 crore each
commencing from 31st October, 2012, 4 quarterly installments of Rs. 5
crore each commencing from 31st October, 2014 and 4 quarterly
installments of Rs. 1.50 crore each commencing from 31st October, 2015.
and,
The second loan from Kotak Mahindra Bank mentioned in (i) is redeemable
at par in 40 quarterly installments of Rs. 5.63 crore each commencing
from 14th November, 2015 and 4 quarterly installments of Rs. 18.75 crore
each commencing from 14th November, 2025.
(ix) The loan from Asian Development Bank mentioned in (j) is
redeemable at par in 26 semi-annual installments commencing from 15th
December, 2007.
(x) The loan from Indian Renewable Energy Development Agency Limited of
Rs. 95 crore mentioned in (k) is redeemable at par in 26 semi-annual
installments commencing from 15th December, 2007 and, The second loan
from Indian Renewable Energy Development Agenc y Limited of Rs. 450 crore
mentioned in (k) is redeemable at par in 24 semi-annual installments of
Rs. 14.63 crore each commencing from 30th June, 2012 and two semi-annual
installments of Rs. 49.50 crore each commencing from 30th June, 2024.
(xi) The f rst loan from Infrastructure Development Finance Company
Limited of Rs. 450 crore mentioned in (l) is redeemable at par in 35
quarterly installments of Rs. 5.65 crore each commencing from 1st
October, 2009 and one installment of Rs. 252.25 crore commencing from
15th July, 2018 and The second loan from I nfrastruc ture Development
Finance Company Limited of Rs. 150 crore mentioned in (l) is redeemable
at par in 36 quar terly installments of Rs. 1.88 crore each commencing
from 15th May, 2010 and 4 quarterly installments of Rs. 20.63 crore each
commencing from 15th May, 2019 and The third loan from Infrastructure
Development Finance Company Limited of Rs. 800 crore mentioned in (l) is
redeemable at par in 40 quarterly installments of Rs. 15 crore each
commencing from 15th October, 2013 and 4 quarterly installments of Rs. 50
crore each commencing from 15th October, 2023.
(xii) The loan from Export Import Bank of India mentioned in (m) is
redeemable at par in 18 semi-annual installments of USD 372,200 each
commencing from 29th September, 2006 and last instalment of USD 50,400.
(xiii) The 10.75% Redeemable and Non-convertible Debentures mentioned
in (o) are redeemable at par at the end of 60 years from the respective
date of allotment viz. 21st August, 2072. The Company has the call
option to redeem the same at the end of 10 years from 21st August, 2022
and at the end of every year thereafter.
(xiv) 8.50% Euro Notes mentioned in (p) is repayable fully on 19th
August, 2017.
(xv) The loan from ICICI Bank mentioned in (r) is redeemable at par in
10 semi-annual installments commencing from 1st April, 2012.
(xvi) The loan from J P Morgan Chase Bank mentioned in (s) is repayable
fully on 28th November, 2016.
(xvii) The loan from BNP Paribas mentioned in (t) is repayable fully on
29th December, 2016.
(xviii) Sales Tax Deferral mentioned in (u) is repayable in 150
installments commencing from April, 2013 and repayable in full by 2022.
Cash Credit from banks is secured against f rst pari passu charge on
all current assets including goods, book debts, receivables and other
moveable current assets of the Company. The Cash Credit is repayable on
demand.
Buyer''s Line of Credit is secured against f rst pari passu charge on
all current assets including goods, book debts, receivables and other
moveable current assets of the Company.
Mar 31, 2013
(a) Basis for Preparation of Accounts:
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
the Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on accrual basis under the historical
cost convention. The accounting policies adopted in the preparation of
the financial statements are consistent with those followed in the
previous year.
(b) Use of Estimates:
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known/materialise.
(c) Cash and Cash Equivalents (for purposes of Cash Flow Statement):
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short-term balances (with an original maturity of three
months or less from the date of acquisition), highly liquid investments
that are readily convertible into known amounts of cash and which are
subject to insignificant risk of changes in value.
(d) Cash Flow Statement:
Cash flows are reported using the indirect method, whereby profit
before tax is adjusted for the effects of transactions of non-cash
nature and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from operating, investing and financing
activities of the Company are segregated based on the available
information.
(e) Tangible/Intangible Fixed Assets:
(i) Fixed assets are carried at cost less accumulated
depreciation/amortisation and impairment losses, if any. The cost of
fixed assets comprises its purchase price net of any trade discounts
and rebates, any import duties and other taxes (other than those
subsequently recoverable from the tax authorities), any directly
attributable expenditure on making the asset ready for its intended
use, other incidental expenses and interest on borrowings attributable
to acquisition of qualifying fixed assets upto the date the asset is
ready for its intended use. The Company has adopted the provisions of
para 46A of AS-11 "The Effects of Changes in Foreign Exchange Rates",
accordingly exchange differences arising on restatement/settlement of
long-term foreign currency borrowings relating to acquisition of
depreciable fixed assets are adjusted to the cost of the respective
assets and depreciated over the remaining useful life of such assets.
Machinery spares which can be used only in connection with an item of
fixed asset and whose use is expected to be irregular are capitalised
and depreciated over the useful life of the principal item of the
relevant assets. Subsequent expenditure relating to fixed assets is
capitalised only if such expenditure results in an increase in the
future benefits from such asset beyond its previously assessed standard
of performance.
(ii) Fixed assets retired from active use and held for sale are stated
at the lower of their net book value and net realisable value and are
disclosed separately in the Balance Sheet.
(iii) Capital Work-in-Progress:
Projects under which tangible fixed assets are not ready for their
intended use and other capital work-in-progress are carried at cost,
comprising direct cost, related incidental expenses and attributable
borrowing costs.
(iv) Intangible Assets under Development:
Expenditure on Research and Development [Refer Note 2.1 (l)] eligible
for capitalisation are carried as intangible assets under development
where such assets are not yet ready for their intended use.
(f) Impairment:
The carrying values of assets/cash generating units at each Balance
Sheet date are reviewed for impairment. If any indication of impairment
exists, the recoverable amount of such assets is estimated and
impairment is recognised, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the greater
of the net selling price and their value in use. Value in use is
arrived at by discounting the future cash flows to their present value
based on an appropriate discount factor. When there is indication that
an impairment loss recognised for an asset in earlier accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognised in the Statement of Profit and Loss,
except in case of revalued assets.
(g) Depreciation/Amortisation:
Depreciation in respect of its electricity business is provided at the
rates as well as methodology notified by the Central Electricity
Regulatory Commission (Terms and Conditions of Tariff) Regulations,
2009 (CERC) w.e.f. 1st April, 2009 and at the rates as per the Power
Purchase Agreements (PPA) for capacities covered under PPAs, wherever
higher than those notified by CERC.
In respect of assets relating to other businesses of the Company,
depreciation has been provided for on written down value basis at the
rates and in the manner prescribed in Schedule XIV to the Companies
Act, 1956.
Intangible assets are amortised over the useful economic life of the
assets or 5 years, whichever is lower.
Leasehold Land is amortised over the period of the lease, ranging from
20 years to 95 years.
(h) Leases:
Where the Company as a lessor leases assets under finance leases, such
amounts are recognised as receivables at an amount equal to the net
investment in the lease and the finance income is recognised based on a
constant rate of return on the outstanding net investment.
Assets leased by the Company in its capacity as lessee where
substantially all the risks and rewards of ownership vest in the
Company are classified as finance leases. Such leases are capitalised
at the inception of the lease at the lower of the fair value and the
present value of the minimum lease payments and a liability is created
for an equivalent amount. Each lease rental paid is allocated between
the liability and the interest cost so as to obtain a constant periodic
rate of interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognised as
operating leases. Lease rentals under operating leases are recognised
in the Statement of Profit and Loss on a straight line basis.
(i) Investments:
Long-term investments are carried individually at cost less provision
for diminution, other than temporary, in the value of such investments
determined on an individual basis. Current investments are carried
individually, at the lower of cost and fair value. Cost of investments
include acquisition charges such as brokerage, fees and duties.
(j) Inventories:
Inventories of stores, spare parts, fuel and loose tools are valued at
lower of cost (on weighted average basis) and net realisable value.
Work-in-progress and property under development are valued at lower of
cost and net realisable value. Cost includes cost of land, material,
labour and other appropriate overheads.
(k) Taxes on Income:
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Act, 1961.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantially enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax
assets in respect of unabsorbed depreciation and carry forward of
losses are recognised only if there is virtual certainty supported by
convincing evidences that there will be sufficient future taxable
income available to realise such assets. Deferred tax assets are
recognised for timing differences of other items only to the extent
that reasonable certainty exists that sufficient future taxable income
will be available against which these can be realised. Deferred tax
assets are reviewed at each Balance Sheet date for their realisability.
Current and Deferred tax relating to items directly recognised in
equity are recognised in equity and not in the Statement of Profit and
Loss.
(l) Research and Development Expenses:
Revenue expenditure pertaining to research is charged to the Statement
of Profit and Loss. Development costs of products are also charged to
the Statement of Profit and Loss unless a product''s technological
feasibility has been established, in which case such expenditure is
capitalised. The amount capitalised comprises expenditure that can be
directly attributed or allocated on a reasonable and consistent basis
to creating, producing and making the asset ready for its intended use.
Fixed assets utilised for research and development are capitalised and
depreciated in accordance with the policies stated for tangible fixed
assets and intangible assets.
(m) Warranty Expenses:
Anticipated product warranty costs for the period of warranty are
provided for in the year of sale.
(n) Foreign Exchange Transactions:
Initial recognition:
Transactions in foreign currencies entered into by the Company and its
integral foreign operations are accounted at the exchange rates
prevailing on the date of the transaction or at rates that closely
approximate the rate at the date of the transaction.
Measurement of foreign currency monetary items at the Balance Sheet
date:
Foreign currency monetary items (other than derivative contracts) of
the Company and its net investment in non-integral foreign operations
outstanding at the Balance Sheet date are restated at the year-end
rates.
In the case of integral operations, assets and liabilities (other than
non-monetary items), are translated at the exchange rate prevailing on
the Balance Sheet date. Non-monetary items are carried at historical
cost. Revenue and expenses are translated at the average exchange rates
prevailing during the year. Exchange differences arising out of these
translations are charged to the Statement of Profit and Loss.
Treatment of exchange differences:
Exchange differences arising on settlement/restatement of short-term
foreign currency monetary assets and liabilities of the Company and its
integral foreign operations are recognised as income or expense in the
Statement of Profit and Loss. The exchange differences on
restatement/settlement of loans to non-integral foreign operations that
are considered as net investment in such operations are accumulated in
a "Foreign exchange translation reserve" until disposal/recovery of the
net investment.
The exchange differences arising on revaluation of long-term foreign
currency monetary items are capitalised as part of the depreciable
fixed assets to which the monetary items relates and depreciated over
the remaining balance life of such assets and in other cases amortised
over the balance period of such long-term foreign currency monetary
items. The unamortised balance is carried in the Balance Sheet as
"Foreign currency monetary item translation account" net of the tax
effect thereon.
Accounting of forward contracts:
Premium/discount on forward exchange contracts, which are not intended
for trading or speculation purposes, are amortised over the period of
the contracts if such contracts relate to monetary items as at the
Balance Sheet date. Refer Note 2.1(o) for accounting for forward
exchange contracts relating to firm commitments and highly probable
forecast transactions.
(o) Derivative Contracts:
The Company enters into derivative contracts in the nature of foreign
currency swaps, currency options, forward contracts with an intention
to hedge its existing assets and liabilities, firm commitments and
highly probable transactions. Derivative contracts which are closely
linked to the existing assets and liabilities are accounted as per the
policy stated for foreign currency transactions and translations. All
other derivative contracts are mark-to-market and losses are recognised
in the Statement of Profit and Loss. Gains arising on the same are not
recognised, until realised, on grounds of prudence.
(p) Employee Benefits:
Employee benefits consist of Provident Fund, Pension, Superannuation
Fund, Gratuity Scheme, Compensated Absences, Long Service Awards, Post
Retirement Benefits and Directors Retirement Obligations.
Defined contribution plans:
The Company''s contributions paid/payable during the year to Provident
Fund, Superannuation Fund and Employee State Insurance Scheme are
considered as defined contribution plans and are charged as an expense
based on the amount of contribution required to be made.
Defined benefit plans:
For defined benefit plans in the form of gratuity fund, post retirement
benefits and Director''s pension scheme, the cost of providing benefits
is determined using the Projected Unit Credit method, with actuarial
valuations being carried out at each Balance Sheet date. Actuarial
gains and losses are recognised in the Statement of Profit and Loss in
the period in which they occur. Past service cost is recognised
immediately to the extent that the benefits are already vested and
otherwise is amortised on a straight line basis over the average period
until the benefits become vested. The retirement benefit obligation
recognised in the Balance Sheet represents the present value of the
defined benefit obligation as adjusted for unrecognised past service
cost, as reduced by the fair value of scheme assets. Any asset
resulting from this calculation is limited to past service cost, plus
the present value of available refunds and reductions in future
contributions to the schemes.
Short-term employee benefits:
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees are recognised
during the year when the employees render the service. These benefits
include performance incentive and compensated absences which are
expected to occur within twelve months after the end of the period in
which the employee renders the related service. The cost of such
compensated absences is accounted as under:
(a) in case of accumulated compensated absences, when employees render
the services that increase their entitlement of future compensated
absences; and
(b) in case of non-accumulating compensated absences, when the absences
occur.
Long-term employee benefits:
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related service are recognised as a liability at the present value of
the defined benefit obligation as at the Balance Sheet date less the
fair value of the plan assets out of which the obligations are expected
to be settled. Long Service Awards are recognised as a liability at
the present value of the defined benefit obligation as at the Balance
Sheet date.
(q) Revenue Recognition:
(i) Revenue from Power Supply and Transmission Charges are accounted
for on the basis of billings to consumers/state transmission utility
and includes unbilled revenues accrued upto the end of the accounting
year.
(ii) The Company determines surplus/deficit (i.e. excess/shortfall
of/in aggregate gain over Return on Equity entitlement) for the year in
respect of its Mumbai and Jojobera regulated operations (i.e.
Generation, Transmission and Distribution) based on the principles laid
down under the respective Tariff Regulations as notified by Maharashtra
Electricity Regulatory Commission (MERC) and Jharkhand State
Electricity Regulatory Commission (JSERC) on the basis of Tariff Orders
issued by them. In respect of such surplus/deficit, appropriate
adjustments as stipulated under the regulations have been made during
the year. Further, any adjustments that may arise on annual performance
review by MERC and JSERC under the aforesaid Tariff Regulations will be
made after the completion of such review.
(iii) Delayed payment charges and interest on delayed payments are
recognised, on grounds of prudence, as and when recovered/confirmed by
consumers.
(iv) Interest income and guarantee commission is accounted on an
accrual basis. Dividend income is accounted for when the right to
receive income is established.
(v) Amounts received from consumers towards capital/service line
contributions are accounted as a liability and are subsequently
recognised as income over the life of the fixed assets.
(vi) Revenue from infrastructure management services is recognised as
income as and when services are rendered and no significant uncertainty
to the collectability exists.
(vii) Income on contracts in respect of Strategic Engineering Business
and Project Management Services are accounted on "Percentage of
Completion" basis measured by the proportion that cost incurred upto
the reporting date bear to the estimated total cost of the contract.
(r) Issue Expenses and Premium on Redemption of Bonds and Debentures:
(i) Expenses incurred in connection with the issue of Euro Notes,
Foreign Currency Convertible Bonds, Unsecured Perpetual Securities,
Global Depository Receipts and Debentures are adjusted against
Securities Premium Account in the year of issue.
(ii) Discount on issue of Euro Notes is amortised over the tenure of
the Notes.
(iii) Premium on Redemption of Bonds/Debentures, net of tax impact, are
adjusted against the Securities Premium Account in the year of issue.
(s) Borrowing Costs:
Borrowing costs include interest, amortisation of ancillary costs
incurred. Costs in connection with the borrowing of funds to the extent
not directly related to the acquisition of qualifying assets are
charged to the Statement of Profit and Loss over the tenure of the
loan. Borrowing costs, allocated to and utilised for qualifying assets,
pertaining to the period from commencement of activities relating to
construction/development of the qualifying asset upto the date of
capitalisation of such asset is added to the cost of the assets.
Capitalisation of borrowing costs is suspended and charged to the
Statement of Profit and Loss during extended periods when active
development activity on the qualifying assets is interrupted.
(t) Segment Reporting:
The Company identifies primary segments based on the dominant source,
nature of risks and returns and the internal organisation and
management structure. The operating segments are the segments for which
separate financial information is available and for which operating
profit/(loss) amounts are evaluated regularly by the executive
Management in deciding how to allocate resources and in assessing
performance.
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identified
to segments on the basis of their relationship to the operating
activities of the segment.
Inter-segment revenue is accounted on the basis of transactions which
are primarily determined based on market/fair value factors.
Revenue, expenses, assets and liabilities which relate to the Company
as a whole and not allocable to segments on reasonable basis have been
included under "unallocable revenue/expenses/assets/liabilities"
(u) Provisions, Contingent Liabilities and Contingent Assets:
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present values and are determined
based on the best estimate required to settle the obligations at the
Balance Sheet date. These are reviewed at each Balance Sheet date and
adjusted to reflect the current best estimates. Contingent liabilities
are not recognised in the financial statements and are disclosed in the
Notes. A Contingent asset is neither recognised nor disclosed in the
financial statements.
(v) Earnings Per Share:
Basic earnings per share is computed by dividing the profit/(loss)
after tax by the weighted average number of equity shares outstanding
during the year. Diluted earnings per share is computed by dividing the
profit / (loss) after tax as adjusted for dividend, interest and other
charges to expense or income relating to the dilutive potential equity
shares, by the weighted average number of equity shares considered for
deriving basic earnings per share and the weighted average number of
equity shares which could have been issued on the conversion of all
dilutive potential equity shares. Potential equity shares are deemed to
be dilutive only if their conversion to equity shares would decrease
the net profit per share from continuing ordinary operations. Potential
dilutive equity shares are deemed to be converted as at the beginning
of the period, unless they have been issued at a later date.
Mar 31, 2012
(a) Basis for preparation of accounts:
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
the Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on accrual basis under the historical
cost convention. The accounting policies adopted in the preparation of
the financial statements are consistent with those followed in the
previous year except for change in the accounting policies for foreign
exchange (gain)/loss arising on revaluation on long term foreign
currency monetary items and accounting for software and related
expenses as more fully described in Note 2.2.
(b) Use of estimates:
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognized in the periods in which
the results are known/materialize.
(c) Cash and Cash Equivalents (for purposes of Cash Flow Statement):
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short term (with an original maturity of three months
or less from the date of acquisition), highly liquid investments that
are readily convertible into known amounts of cash and which are
subject to insignificant risk of changes in value.
(d) Cash Flow Statement:
Cash flows are reported using the indirect method, whereby
profit/(loss) before tax is adjusted for the effects of transactions of
non-cash nature and any deferrals or accruals of past or future cash
receipts or payments. The cash flows from operating, investing and
financing activities of the Company are segregated based on the
available information.
(e) Tangible Fixed Assets:
(i) Fixed assets are carried at cost less accumulated depreciation and
impairment losses, if any. The cost of fixed assets Includes interest
on borrowings attributable to acquisition of qualifying fixed assets
upto the date the asset is ready for its intended use and other
incidental expenses incurred up to that date. Exchange differences
arising on restatement/settlement of long term foreign currency
borrowings relating to acquisition of depreciable fixed assets are
adjusted to the cost of the respective assets and depreciated over the
remaining useful life of such assets. Machinery spares which can be
used only in connection with an item of fixed asset and whose use is
expected to be irregular are capitalized and depreciated over the
useful life of the principal item of the relevant assets. Subsequent
expenditure relating to fixed assets is capitalized only if such
expenditure results in an increase in the future benefits from such
asset beyond Its previously assessed standard of performance.
(ii) Fixed assets retired from active use and held for sale are stated
at the lower of their net book value and net realizable value and are
disclosed separately in the Balance Sheet.
(iii) Capital Work-in-Progress - Projects under which assets are not
ready for their intended use and other capital work-in-progress are
carried at cost, comprising direct cost, related incidental expenses
and attributable interest.
(f) Intangible Assets:
Intangible assets are carried at cost less accumulated amortization and
impairment losses, if any. The cost of an intangible asset comprises
its purchase price, including any import duties and other taxes (other
than those subsequently recoverable from the taxing authorities) and
any directly attributable expenditure on making the asset ready for its
intended use and net of any trade discounts and rebates. Subsequent
expenditure on an intangible asset after its purchase/completion is
recognised as an expense when incurred unless it is probable that such
expenditure will enable the asset to generate future economic benefits
in excess of its originally assessed standards of performance and such
expenditure can be measured and attributed to the asset reliably, in
which case such expenditure is added to the cost of the asset.
(g) Impairment:
The carrying values of assets/cash generating units at each Balance
Sheet date are reviewed for impairment. If any indication of impairment
exists, the recoverable amount of such assets is estimated and
impairment is recognized, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the greater
of the net selling price and their value in use. Value in use is
arrived at by discounting the future cash flows to their present value
based on an appropriate discount factor. When there is indication that
an impairment loss recognized for an asset in earlier accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognized in the Statement of Profit and Loss,
except in case of revalued assets.
(h) Depreciation/Amortization:
(i) Depreciation for the year in respect of assets relating to the
electricity business of the Company as Licensee/ other than a Licensee,
has been provided on straight line method in terms of the repealed
Electricity (Supply) Act, 1948 on the basis of the Central Government
Notification No.S.0.265(E)/266(E) dated 27th March, 1994/29th March,
1994, except that computers acquired on or after 1st April, 1998 are
depreciated at the rate of 33.40% p.a. on the basis of the approval
obtained from the State Government.
The Ministry of Corporate Affairs (MCA) vide its notification dated
31st May, 2011, has clarified that companies engaged in the generation
and supply of electricity can distribute dividend after providing for
depreciation at rates/methodology notified by Central Regulatory
Electricity Commission (CERC). The CERC under the provisions of The
Electricity Act, 2003 notified the rates/methodology effective 1 st
April, 2009, under the Terms and Conditions of Tariff Regulations,
2009. These rates would be applicable for purposes of tariff
determination and accounting in terms of the provisions of National
Tariff Policy notified by Government of India.
As the Company has both regulated and non-regulated generating
capacity, in the absence of guidelines, the application of the above
notification in the books of account would give rise to certain
inconsistencies that require to be addressed.
In view of the above, Company has sought clarifications and guidance
from the MCA on the applicability of the CERC rates for its regulated
and non-regulated operations, pending which the existing depreciation
rates continue to be followed for the year ended 31st March, 2012.
(ii) In respect of assets relating to other businesses of the Company,
depreciation has been provided for on written down value basis at the
rates and in the manner prescribed in Schedule XIV to the Companies
Act, 1956.
(iii) Expenses capitalized on account of purchase of new application
software, implementation of the said software by external third party
consultants and purchase of licenses including SAP, Oracle and others
are depreciated over the useful economic life of the software or 5
years, whichever is lower.
(iv) Assets costing less than Rs. 5,000/- are depreciated at the rate of
100%.
(v) Leasehold Land is amortized over the period of the lease ranging
from 20 years to 95 years.
(vi) Depreciation on additions/deletions of assets is provided on
pro-rata basis.
(i) Leases:
Where the Company as a less or leases assets under finance leases, such
amounts are recognized as receivables at an amount equal to the net
investment in the lease and the finance income is recognized based on a
constant rate of return on the outstanding net investment.
Assets leased by the Company in its capacity as lessee where
substantially all the risks and rewards of ownership vest in the
Company are classified as finance leases. Such leases are capitalized
at the inception of the lease at the lower of the fair value and the
present value of the minimum lease payments and a liability is created
for an equivalent amount. Each lease rental paid is allocated between
the liability and the interest cost so as to obtain a constant periodic
rate of interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lesser are recognized as
operating leases. Lease rentals under operating leases are recognized
in the Statement of Profit and Loss on a straight line basis.
(j) Investments:
Long term investments are carried individually at cost less provision
for diminution, other than temporary, in the value of such investments
determined on an individual basis. Current investments are carried
individually, at the lower of cost and fair value. Cost of investments
include acquisition charges such as brokerage, fees and duties.
(k) Inventories:
Inventories of stores, spare parts, fuel and loose tools are valued at
lower of cost (on weighted average basis) and net realizable value.
Work-in-progress and property under development are valued at lower of
cost and net realizable value. Cost includes cost of land, material,
lab our and other appropriate overheads.
(l) Taxes on Income:
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Act, 1961.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax is recognized on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantially enacted as at the reporting date. Deferred tax
liabilities are recognized for all timing differences. Deferred tax
assets in respect of unabsorbed depreciation and carry forward of
losses are recognized only if there is virtual certainty that there
will be sufficient future taxable income available to realize such
assets. Deferred tax assets are recognized for timing differences of
other items only to the extent that reasonable certainty exists that
sufficient future taxable income will be available against which these
can be realized. Deferred tax assets are reviewed at each Balance Sheet
date for their reliability.
Current and Deferred Tax relating to items directly recognized in
equity are recognized in equity and not in the Statement of Profit and
Loss.
(m) Research and Development Expenses:
Revenue expenditure pertaining to research is charged to the Statement
of Profit and Loss. Development costs of products are also charged to
the Statement of Profit and Loss unless a product's technological
feasibility has been established, in which case such expenditure is
capitalized. The amount capitalized comprises expenditure that can be
directly attributed or allocated on a reasonable and consistent basis
to creating, producing and making the asset ready for its intended use.
Fixed assets utilized for research and development are capitalized and
depreciated in accordance with the policies stated for tangible fixed
assets and intangible assets.
(n) Warranty Expenses:
Anticipated product warranty costs for the period of warranty are
provided for in the year of sale.
(o) Foreign Exchange Transactions:
Initial recognition:
Transactions in foreign currencies entered into by the Company and its
integral foreign operations are accounted at the exchange rates
prevailing on the date of the transaction or at rates that closely
approximate the rate at the date of the transaction.
Measurement of foreign currency monetary items at the Balance Sheet
date:
Foreign currency monetary items (other than derivative contracts) of
the Company and its net investment in non- integral foreign operations
outstanding at the Balance Sheet date are restated at the year-end
rates.
In the case of integral operations, assets and liabilities (other than
non-monetary items), are translated at the exchange rate prevailing on
the Balance Sheet date. Non-monetary items are carried at historical
cost. Revenue and expenses are translated at the average exchange rates
prevailing during the year. Exchange differences arising out of these
translations are charged to the Statement of Profit and Loss.
Treatment of exchange differences:
Exchange differences arising on settlement/restatement of short term
foreign currency monetary assets and liabilities of the Company and its
integral foreign operations are recognized as income or expense in the
Statement of Profit and Loss. The exchange differences on
restatement/settlement of loans to non-integral foreign operations that
are considered as net investment in such operations are accumulated in
a "Foreign currency translation reserve" until disposal/recovery of the
net investment.
The exchange differences arising on revaluation of long term foreign
currency monetary items are capitalized as part of the depreciable
fixed assets to which the monetary items relates and depreciated over
the remaining balance life of such assets and in other cases amortized
over the balance period of such long term foreign currency monetary
items. The unamortized balance is carried in the Balance Sheet as
"Foreign currency monetary item translation difference account" net of
the tax effect thereon.
Accounting of forward contracts:
Premium/discount on forward exchange contracts, which are not intended
for trading or speculation purposes, are mortised over the period of
the contracts if such contracts relate to monetary items as at the
Balance Sheet date. Refer Note 2.1 (p) for accounting for forward
exchange contracts relating to firm commitments and highly probable
forecast transactions.
(p) Derivative contracts:
The Company enters into derivative contracts in the nature of foreign
currency swaps, currency options, forward contracts with an intention
to hedge its existing assets and liabilities, firm commitments and
highly probable transactions. Derivative contracts which are closely
linked to the existing assets and liabilities are accounted as per the
policy stated for foreign currency transactions and translations. All
other derivative contracts are marked-to- market and losses are
recognised in the Statement of Profit and Loss. Gains arising on the
same are not recognized, until realized, on grounds of prudence.
(q) Employee benefits:
Employee benefits consist of Provident Fund, Pension, Superannuation
Fund, Gratuity Scheme, Compensated Absences, Long Service Awards, Post
Retirement Benefits and Directors Retirement Obligations.
Defined contribution plans:
The Company's contributions paid/payable during the year to Provident
Fund, ESIC, Superannuation Fund and Labor Welfare Fund are recognized
in the Statement of Profit and Loss.
Defined benefit plans:
For defined benefit plans in the form of gratuity scheme, post
retirement benefits and Director's pension scheme, the cost of
providing benefits is determined using the Projected Unit Credit
method, with actuarial valuations being carried out at each Balance
Sheet date. Actuarial gains and losses are recognized in the Statement
of Profit and Loss in the period in which they occur. Past service cost
is recognized immediately to the extent that the benefits are already
vested and otherwise is mortised on a straight line basis over the
average period until the benefits become vested. The retirement benefit
obligation recognized in the Balance Sheet represents the present value
of the defined benefit obligation as adjusted for unrecognized past
service cost, as reduced by the fair value of scheme assets. Any asset
resulting from this calculation is limited to past service cost, plus
the present value of available refunds and reductions in future
contributions to the schemes.
Short term employee benefits:
The undiscounted amount of short term employee benefits expected to be
paid in exchange for the services rendered by employees are recognized
during the year when the employees render the service. These benefits
include performance incentive and compensated absences which are
expected to occur within twelve months after the end of the period in
which the employee renders the related service. The cost of such
compensated absences is accounted as under:
(a) in case of accumulated compensated absences, when employees render
the services that increase their entitlement of future compensated
absences; and
(b) in case of non-accumulating compensated absences, when the absences
occur.
Long term employee benefits:
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related service are recognized as a liability at the present value of
the defined benefit obligation as at the Balance Sheet date less the
fair value of the plan assets out of which the obligations are expected
to be settled. Long Service Awards are recognized as a liability at the
present value of the defined benefit obligation as at the Balance Sheet
date.
(r) Revenue Recognition:
(i) Revenue from Power Supply and Transmission Charges are accounted
for on the basis of billings to consumers/ state transmission utility
and includes unbilled revenues accrued up to the end of the accounting
year.
(ii) The Company determines surplus/deficit (i.e. excess/shortfall
of/in aggregate gain over Return on Equity entitlement) for the year in
respect of its Mumbai and Jojobera regulated operations (i.e.
Generation, Transmission and Distribution) based on the principles laid
down under the respective Tariff Regulations as notified by Maharashtra
Electricity Regulatory Commission (MERC) and Jharkhand State
Electricity Regulatory Commission (JSERC) on the basis of Tariff
Order's issued by them. In respect of such surplus/deficit, appropriate
adjustments as stipulated under the regulations have been made during
the year. Further, any adjustments that may arise on annual performance
review by MERC and JSERC under the aforesaid Tariff Regulations will be
made after the completion of such review.
(iii) Delayed payment charges and interest on delayed payments are
recognized, on grounds of prudence, as and when recovered.
(iv) Interest income/Guarantee Commission is accounted on an accrual
basis. Dividend income is accounted for when the right to receive
income is established.
(v) Amounts received from consumers towards capital/service line
contributions are accounted as a liability and are subsequently
recognized as income over the life of the fixed assets.
(vi) Revenue from infrastructure management services is recognized as
income as and when services are rendered and no significant uncertainty
to the collectability exists.
(vii) Income on contracts in respect of Strategic Electronics Business
and Project Management Services are accounted on "Percentage of
Completion" basis measured by the proportion that cost incurred up to
the reporting date bear to the estimated total cost of the contract.
(s) Issue Expenses/Premium on redemption of Bonds and Debentures:
(i) Expenses incurred in connection with the issue of Euro Notes,
Foreign Currency Convertible Bonds, Unsecured Perpetual Securities,
Global Depository Receipts and Debentures are adjusted against
Securities Premium Account in the year of issue.
(ii) Discount on issue of Euro Notes is mortised over the tenure of
the Notes.
(iii) Premium on redemption of bonds/debentures, net of tax impact, are
adjusted against the Securities Premium Account in the year of issue.
(t) Borrowing costs:
Borrowing costs include interest, amortization of ancillary costs
incurred. Costs in connection with the borrowing of funds to the extent
not directly related to the acquisition of qualifying assets are
charged to the Statement of Profit and Loss over the tenure of the
loan. Borrowing costs, allocated to and utilized for qualifying assets,
pertaining to the period from commencement of activities relating to
construction/development of the qualifying asset up to the date of
capitalization of such asset is added to the cost of the assets.
Capitalization of borrowing costs is suspended and charged to the
Statement of Profit and Loss during extended periods when active
development activity on the qualifying assets is interrupted.
(u) Segment reporting:
The Company identifies primary segments based on the dominant source,
nature of risks and returns and the internal organization and
management structure. The operating segments are the segments for which
separate financial information is available and for which operating
profit/(loss) amounts are evaluated regularly by the executive
Management in deciding how to allocate resources and in assessing
performance.
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identified
to segments on the basis of their relationship to the operating
activities of the segment.
Inter-segment revenue is accounted on the basis of transactions which
are primarily determined based on market/ fair value factors.
Revenue, expenses, assets and liabilities which relate to the Company
as a whole and not allocable to segments on reasonable basis have been
included under "unallocated revenue/expenses/assets/liabilities''.
(v) Provisions, Contingent Liabilities and Contingent Assets:
A provision is recognized when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present values and are determined
based on the best estimate required to settle the obligations at the
Balance Sheet date. These are reviewed at each Balance Sheet date and
adjusted to reflect the current best estimates. Contingent liabilities
are not recognized in the financial statements and are disclosed in the
Notes. A Contingent asset is neither recognized nor disclosed in the
financial statements.
(w) Joint venture operations:
The accounts of the Company reflect its share of the Assets,
Liabilities, Income and Expenditure of the Joint Venture Operations
which are accounted on the basis of the audited accounts of the Joint
Ventures on line-by-line basis with similar items in the Company's
accounts to the extent of the participating interest of the Company as
per the Joint Venture Agreements.
(x) Earnings per share:
Basic earnings per share is computed by dividing the Profit/(Loss)
After Tax by the weighted average number of equity shares outstanding
during the year. Diluted earnings per share is computed by dividing the
profit/(loss) after tax as adjusted for dividend, interest and other
charges to expense or income relating to the dilutive potential equity
shares, by the weighted average number of equity shares considered for
deriving basic earnings per share and the weighted average number of
equity shares which could have been issued on the conversion of all
dilutive potential equity shares. Potential equity shares are deemed to
be dilutive only if their conversion to equity shares would decrease
the net profit per share from continuing ordinary operations. Potential
dilutive equity shares are deemed to be converted as at the beginning
of the period, unless they have been issued at a later date.
Mar 31, 2011
(a) Basis for preparation of accounts:
The financial statements have been prepared and presented under the
historical cost convention, on the accrual basis of accounting and in
accordance with the generally accepted accounting principles in
compliance with the relevant provisions of the Companies Act, 1956.
(b) Use of estimates:
The preparation of financial statements requires the management of the
Company to make estimates and assumptions that affect the reported
balance of assets and liabilities, revenues and expenses and
disclosures relating to the contingent liabilities. The management
believes that the estimates used in preparation of the financial
statements are prudent and reasonable. Future results could differ from
these estimates. Any revision to accounting estimates is recognised
prospectively in the current and future periods. Examples of such
estimates include provision for employee benefit plans, provision for
diminution in value of long term investments, provision for doubtful
debts/advances, provision for income taxes, etc.
(c) Fixed Assets:
(i) Fixed assets are stated at cost of acquisition or construction less
accumulated depreciation/amortisation.
(ii) Cost includes purchase price, taxes and duties, labour cost and
directly attributable costs for self constructed assets and other
direct costs incurred upto the date the asset is ready for its intended
use. Borrowing cost incurred for qualifying assets is capitalised upto
the date the asset is ready for intended use, based on borrowings
incurred specifically for financing the asset or the weighted average
rate of all other borrowings, if no specific borrowings have been
incurred for the asset.
(d) Impairment:
At each balance sheet date, the Company assesses whether there is any
indication that the fixed assets have suffered an impairment loss. If
any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment, if any.
Where it is not possible to estimate the recoverable amount of
individual asset, the Company estimates the recoverable amount of the
cash-generating unit to which the asset belongs.
(e) Depreciation/Amortisation:
(i) Depreciation for the year in respect of assets relating to the
electricity business of the Company as Licensee/other than a Licensee,
has been provided on straight line method in terms of the repealed
Electricity (Supply) Act, 1948 on the basis of Central Government
Notification No.S.O.265(E)/266(E) dated 27th March, 1994/29th March,
1994, except that computers acquired on or after 1st April, 1998 are
depreciated at the rate of 33.40% p.a. on the basis of approval
obtained from the State Government.
(ii) In respect of assets relating to other business of the Company,
depreciation has been provided for on written down value basis at the
rates and in the manner prescribed in Schedule XIV to the Companies
Act, 1956, except in the case of technical know-how which is written
off on a straight line basis over a period of six years.
(iii) Assets costing less than Rs. 5,000/- are depreciated at the rate of
100%.
(iv) Leasehold Land is amortised over the period of the lease.
(v) Depreciation on additions/deletions of assets is provided on
pro-rata basis.
(vi) Depreciation rates used for various classes of assets are:
Hydraulic Works à 1.95% to 3.40%
Buildings à 3.02% to 33.40%
Railway Sidings, Roads, Crossings, etc. Ã 3.02% to 5.00%
Plant and Machinery à 1.80% to 45.00%
Transmission Lines, Cable Network, etc. Ã 3.02% to 13.91%
Furniture, Fixtures and Office Equipment à 12.77% to 18.10%
Mobile Phones à 100%
Motor Vehicles, Launches, Barges, etc. Ã 25.89% to 33.40%
Helicopters à 9.00% to 33.40%
Depreciation so provided has been determined as being not less than the
depreciation which would have been recognised in the Profit and Loss
Account had the rates and the manner prescribed under Schedule XIV to
the Companies Act, 1956, been applied.
(f) Leases:
(i) Finance Lease:
Assets taken on finance lease are accounted for as fixed assets in
accordance with Accounting Standard (AS -19) - "Leases". Accordingly,
the assets are accounted at fair value. Lease payments are apportioned
between finance charge and reduction in outstanding liability.
(ii) Operating Lease:
Assets taken on lease under which all risks and rewards of ownership
are effectively retained by the lessor are classified as operating
lease. Lease payments under operating leases are recognised as expenses
on straight line basis.
(g) Investments:
Long term investments are carried at cost, less provision for
diminution other than temporary, if any, in the value of such
investments. Current investments are carried at lower of cost and fair
value.
(h) Inventories:
Inventories of stores, spare parts, fuel and loose tools are valued at
lower of cost and net realisable value. Cost is ascertained on weighted
average basis. Work-in-progress and property under development are
valued at lower of cost and net realisable value. Cost includes cost of
land, material, labour, manufacturing and other overheads.
(i) Taxes on Income:
Current tax is determined as the amount of tax payable in respect of
taxable income for the year. Credit in respect of Minimum Alternate Tax
paid is recognised only if there is convincing evidence of realisation
of the same.
Deferred tax, which is computed on the basis of enacted/substantively
enacted rates, is recognised, on timing differences, being the
difference between taxable income and accounting income that originate
in one period and are capable of reversal in one or more subsequent
periods. Where there is unabsorbed depreciation or carry forward
losses, deferred tax assets are recognised only if there is virtual
certainty of realisation of such assets. Other deferred tax assets are
recognised only to the extent there is reasonable certainty of
realisation in future.
(j) Research and Development Expenses:
(i) Expenditure of the research phase (other than cost of fixed assets
acquired) are charged as an expense in the year in which they are
incurred and
(ii) Expenditure on development phase which met the recognition
criteria are recognised as an intangible asset and the expenditure
which do not meet recognition criteria are charged as an expense in the
year in which they are incurred.
(k) Intangible Assets:
Intangible assets are recognised only if it is probable that the future
economic benefits that are attributable to the asset will flow to the
Company and the cost of the asset can be measured reliably.
(l) Premium on redemption of Debentures and Foreign Currency
Convertible Bonds (FCCB):
Premium payable on redemption of FCCB and Debentures as per terms of
their respective issues is provided fully in the year of issue by
adjusting against the Securities Premium Account.
(m) Warranty Expenses:
Anticipated product warranty costs for the period of warranty are
provided for in the year of sale.
(n) Foreign Exchange Transactions:
(i) Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing on the date of the transaction.
(ii) All monetary assets and monetary liabilities in foreign currencies
other than net investments in non-integral foreign operation are
translated at the relevant rates of exchange prevailing at the year end
and exchange differences are recognised in the Profit and Loss Account.
(iii) Exchange differences relating to monetary items that are in
substance forming part of the Company's net investment in non-integral
foreign operations are accumulated in Exchange Translation Reserve
Account.
(iv) In respect of foreign exchange contracts, the premium or discount
arising at the inception of such a contract is amortised as expense or
income over the life of the contract.
(o) Employee Benefits:
(i) Defined Contribution Plan:
Company's contributions paid/payable during the year to Provident Fund,
Superannuation Fund, ESIC and Labour Welfare Fund are recognised in the
Profit and Loss Account.
(ii) Defined Benefit Plan/Long term compensated absences:
Company's liability towards gratuity, compensated absences, post
retirement medical benefit schemes, etc. are determined by independent
actuaries, at each reporting date, using the projected unit credit
method. Past services are recognised on a straight line basis over the
average period until the benefits become vested. Actuarial gains and
losses are recognised immediately in the Profit and Loss Account as
incomes or expenses. Obligation is measured at the present value of
estimated future cash flows using a discounted rate that is determined
by reference to the market yields at the Balance Sheet date on
Government Bonds where the currency and terms of the Government Bonds
are consistent with the currency and estimated terms of the defined
benefit obligation.
(iii) Short term employee benefits are recognised as an expense at the
undiscounted amount in the Profit and Loss Account of the year in which
the related services are rendered.
(p) Revenue Recognition:
(i) Revenue from Power Supply and Transmission Charges are accounted
for on the basis of billings to consumers/State Transmission Utility
and inclusive of Fuel Adjustment Charges and includes unbilled revenues
accrued upto the end of the accounting year.
(ii) The Company determines surplus/deficit (i.e. excess/shortfall
of/in aggregate gain over Return on Equity entitlement) for the year in
respect of its Mumbai Licensed Area operations (i.e. Generation,
Transmission and Distribution) based on the principles laid down under
the respective Tariff Regulations as notified by Maharashtra
Electricity Regulatory Commission (MERC) and on the basis of Tariff
Order's issued by them. In respect of such surplus/deficit, appropriate
adjustments as stipulated under the regulations have been made during
the year. Further, any adjustments that may arise on annual performance
review by MERC under the aforesaid Tariff Regulations will be made
after the completion of such review.
(iii) Delayed payment charges and interest on delayed payments are
recognised, on grounds of prudence, as and when recovered.
(iv) Interest income/Guarantee commission is accounted on an accrual
basis. Dividend income is accounted for when the right to receive
income is established.
(v) Amounts received from consumers towards capital/service line
contributions is accounted as a liability and is subsequently
recognised as income over the life of the fixed assets.
(vi) Revenue from infrastructure management services is recognised as
income as and when services are rendered and when no significant
uncertainty as to the collectability exists.
(q) Accounting for Construction Contracts:
Income on contracts in respect of Transmission EPC, Strategic
Electronics Business and Project Management Services are accounted on
"Percentage of Completion" basis measured by the proportion that cost
incurred upto the reporting date bear to the estimated total cost of
the contract.
(r) Issue Expenses:
(i) Expenses incurred in connection with the issue of Euro Notes,
Foreign Currency Convertible Bonds, Global Depository Receipts and
Debentures are adjusted against Securities Premium Account.
(ii) Discount on issue of Euro Notes are amortised over the tenure of
the Notes.
(s) Payments under Voluntary Retirement Schemes (VRS):
Compensation paid under VRS is charged to the Profit and Loss Account
in the year of exercise of option.
(t) Segment Reporting:
The accounting policies adopted for segment reporting are in line with
the accounting policy of the Company. Revenue and expenses have been
identified to segments on the basis of their relationship to the
operating activities of the segment. Revenue and expenses, which
relate to the enterprise as a whole and are not allocable to segments
on a reasonable basis, have been included under "Unallocable
income/expenses".
(u) Provision, Contingent Liabilities and Contingent Assets:
A Provision is recognised when the Company has a present legal or
constructive obligation as a result of past event and it is probable
that an outflow of resource will be required to settle the obligation,
in respect of which reliable estimate can be made. Provisions
(excluding retirement benefits) are not discounted to its present value
and are determined based on best estimate required to settle the
obligation at the Balance Sheet date. These are reviewed at each
Balance Sheet date and adjusted to reflect the current best estimates.
Contingent Liabilities are not recognised in the financial statements.
A Contingent Asset is neither recognised nor disclosed in the financial
statements.
Mar 31, 2010
(a) Basis for preparation of accounts:
The financial statements have been prepared and presented under the
historical cost convention, on the accrual basis of accounting and in
accordance with the generally accepted accounting principles in
compliance with the relevant provisions of the Companies Act, 1956.
(b) Use of estimates:
The preparation of financial statements requires the management of the
Company to make estimates and assumptions that affect the reported
balance of assets and liabilities, revenues and expenses and
disclosures relating to the contingent liabilities.The management
believes that the estimates used in preparation of the financial
statements are prudent and reasonable. Future results could differ from
these estimates. Any revision to accounting estimates is recognised
prospectively in the current and future periods. Examples of such
estimates include provision for employee benefit plans, provision for
diminution in value of long term investments, provision for doubtful
debts/advances, provision for income taxes, etc.
(c) Fixed Assets:
All fixed assets are stated at cost, less depreciation. Cost comprises
the purchase price and any other applicable costs and also includes
borrowing costs as estimated to be attributable to the acquisition and
construction of fixed assets upto the date the asset is ready for use.
(d) Depreciation/Amortisation:
(i) Depreciation for the year in respect of assets relating to the
electricity business of the Company as Licensee/other than a Licensee,
has been provided on straight line method in terms of the repealed
Electricity (Supply) Act, 1948 on the basis of Central Government
Notification No. S.0.265 (E) / 266 (E) dated 27th March, 1994 / 29th
March, 1994, except that computers acquired on or after 1 st April,
1998 are depreciated at the rate of 33.40% p.a. on the basis of
approval obtained from the State Government.
(ii) In respect of assets relating to other business of the Company,
depreciation has been provided for on written down value basis at the
rates and in the manner prescribed in Schedule XIV to the Companies
Act, 1956, except in the case of technical know-how which is written
off on a straight line basis over a period of six years.
(iii) Assets costing less than Rs. 5,000/- are depreciated at the rate
of 100%.
(iv) Leasehold Land is amortised over the period of the lease.
(v) Depreciation on additions/deletions of assets is provided on
pro-rata basis.
(vi) Depreciation rates used for various classes of assets are:
Hydraulic Works - 1.95% to 3.40%
Buildings - 3.02% to 33.40%
Railway Sidings, Roads, Crossings,etc. - 3.02% to 5.00%
Plant and Machinery - 1.80% to 45.00%
Transmission Lines, Cable Network,etc. - 3.02% to 13.91%
Furniture, Fixtures and Office Equipment - 12.77% to 18.10%
Mobile Phones - 100%
Motor Vehicles, Launches, Barges, etc. - 25.89% to 33.40%
Helicopters - 9.00% to 33.40%
Depreciation so provided has been determined as being not less than the
depreciation which would have been recognised in the Profit and Loss
Account had the rates and the manner prescribed under Schedule XIV to
the Companies Act, 1956, been applied.
(e) Leases:
(i) Finance Lease:
Assets taken on finance lease are accounted for as fixed assets in
accordance with Accounting Standard (AS 19) - "Leases" Accordingly, the
assets are accounted at fair value. Lease payments are apportioned
between finance charge and reduction in outstanding liability.
(ii) Operating Lease:
Assets taken on lease under which all risks and rewards of ownership
are effectively retained by the lessor are classified as operating
lease. Lease payments under operating leases are recognised as expenses
on straight-line basis.
(f) Investments:
Long term investments are carried at cost, less provision for
diminution other than temporary, if any, in the value of such
investments. Current investments are carried at lower of cost and fair
value.
(g) Inventories:
Inventories of stores, spare parts, fuel and loose tools are valued at
or below cost. Cost is ascertained on weighted average basis.
Work-in-progress and property under development are valued at lower of
cost and net realisable value. Cost includes cost of land, material,
labour, manufacturing and other overheads.
(h) Taxes on Income:
Current tax is determined as the amount of tax payable in respect of
taxable income for the year. Credit in respect of Minimum Alternate Tax
paid is recognised only if there is convincing evidence of realisation
of the same.
Deferred tax, which is computed on the basis of enacted / substantively
enacted rates, is recognised, on timing differences, being the
difference between taxable income and accounting income that originate
in one period and are capable of reversal in one or more subsequent
periods - (See Note 18). Where there is unabsorbed depreciation or
carry forward losses, deferred tax assets are recognised only if there
is virtual certainty of realisation of such assets. Other deferred tax
assets are recognised only to the extent there is reasonable certainty
of realisation in future.
(i) Research and Development Expenses:
Research and Development costs (other than cost of fixed assets
acquired) are charged as an expense in the year in which they are
incurred.
(j) Intangible Assets:
Intangible Assets are recognised only if it is probable that the future
economic benefits that are attributable to the asset will flow to the
Company and the cost of the asset can be measured reliably.
(k) Premium on redemption of Debentures and Foreign Currency
Convertible Bonds (FCCB):
Premium payable on redemption of FCCB and Debentures as per terms of
their respective issues is provided fully in the year of issue by
adjusting against the Securities Premium Account.
(l) Warranty Expenses:
Anticipated product warranty costs for the period of warranty are
provided for in the year of sale. Other warranty obligations are
accounted for as and when claims are admitted.
(m) Foreign Exchange Transactions:
(i) Transactions denominated in foreign currencies are recorded atthe
exchange rate prevailing on the date of the transaction.
(ii) All monetary assets and monetary liabilities in foreign currencies
other than net investments in non-integral foreign operations are
translated at the relevant rates of exchange prevailing at the year end
and exchange differences are recognised in the Profit and Loss Account.
(iii) Exchange differences relating to monetary items that are in
substance forming part of the Companys net investment in non-integral
foreign operations are accumulated in Exchange Translation Reserve
Account.
(iv) In respect of foreign exchange contracts, the premium or discount
arising at the inception of such a contract is amortised as expense or
income over the life of the contract.
(n) Employee Benefits:
(i) Defined Contribution Plan:
Companys contributions paid/payable during the year to Provident Fund,
Superannuation Fund, ESIC and Labour Welfare Fund are recognised in the
Profit and Loss Account.
(ii) Defined Benefit Plan/Long term compensated absences:
Companys liability towards gratuity, compensated absences, post
retirement medical benefit schemes, etc. are determined by independent
actuaries, using the projected unit credit method. Past services are
recognised on a straight line basis over the average period until the
benefits become vested. Actuarial gains and losses are recognised
immediately in the Profit and Loss Account as incomes or expenses.
Obligation is measured at the present value of estimated future cash
flows using a discounted rate that is determined by reference to the
market yields at the Balance Sheet date on Government Bonds where the
currency and terms of the Government Bonds are consistent with the
currency and estimated terms of the defined benefit obligation.
(iii) Short-term employee benefits are recognised as an expense at the
undiscounted amount in the Profit and Loss Account of the year in which
the related services are rendered.
(o) Revenue Recognition:
(i) Revenue from Power Supply and Transmission Charges are accounted
for on the basis of billings to consumers/State Transmission Utility
and inclusive of Fuel Adjustment Charges and includes unbilled revenues
accrued upto the end of the accounting year.
(ii) The Company determines surplus/deficit (i.e. excess/shortfall
of/in aggregate gain over Return on Equity entitlement) for the year in
respect of its Mumbai Licensed Area operations (i.e. Generation,
Transmission and Distribution) based on the principles laid down under
the respective Tariff Regulations as notified by Maharashtra
Electricity Regulatory Commission (MERC) and on the basis of Tariff
Orders issued by them. In respect of such surplus/deficit, appropriate
adjustments as stipulated under the regulations have been made during
the year. Further, any adjustments that may arise on annual performance
review by MERC under the aforesaid Tariff regulations will be made
after the completion of such review.
(iii) Delayed payment charges and interest on delayed payments for
power supply are recognised, on grounds of prudence, as and when
recovered.
(iv) Interest income / Guarantee Commission is accounted on an accrual
basis. Dividend income is accounted for when the right to receive
income is established.
(p) Accounting for Contracts:
Income on contracts in respect of Transmission EPC, Strategic
Electronics business and Project Management Services are accounted on
"Percentage of Completion" basis measured by the proportion that cost
incurred upto the reporting date bear to the estimated total cost of
the contract.
(q) Issue Expenses:
(i) Expenses incurred in connection with the issue of Euro Notes,
Foreign Currency Convertible Bonds, Global Depository Receipts and
Debentures are adjusted against Securities Premium Account.
(ii) Discount on issue of Euro Notes are amortised over the tenure of
the Notes.
(r) Payments under Voluntary Retirement Schemes (VRS):
Compensation paid under VRS is charged to the Profit and Loss Account
in the year of exercise of option.
(s) Segment Reporting:
The accounting policies adopted for segment reporting are in line with
the accounting policy of the Company. Revenue and expenses have been
identified to segments on the basis of their relationship to the
operating activities of the segment. Revenue and expenses, which
relate to the enterprise as a whole and are not allocable to segments
on a reasonable basis, have been included under"Unallocable
income/expenses"
(t) Provision, Contingent Liabilities and Contingent Assets:
A Provision is recognised when the Company has a present legal or
constructive obligation as a result of past event and it is probable
that an outflow of resource will be required to settle the obligation,
in respect of which reliable estimate can be made. Provisions
(excluding retirement benefits) are not discounted to its present value
and are determined based on best estimate required to settle the
obligation at the Balance Sheet date. These are reviewed at each
Balance Sheet date and adjusted to reflect the current best estimates.
Contingent Liabilities are not recognised in the financial statements.
A Contingent Asset is neither recognised nor disclosed in the financial
statements.
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