Notes to Accounts of Energy Infrastructure Trust

Mar 31, 2022

As per the terms agreed by the Trust, the Investment Manager, Pipeline Infrastructure Limited (PIL) and Reliance Industries Holdings Private Limited (RIHPL), Reliance Industries Limited(RIL) has the right, but not the obligation, to purchase the entire equity stake of the Trust in PIL after a specific term or occurrence of certain events for a consideration of Rs. 50 Crore or the fair value at the conversion date, whichever is lower. Correspondingly, the Trust has right, but not the obligation, to sell its entire stake in PIL to RIL for a consideration of Rs. 50 Crore after a specific term or occurrence of certain events.

Rights and Restrictions to Units

The Trust has only one class of units. Each unit represents an undivided beneficial interest in the Trust. Each holder of unit is entitled to one vote per unit. The Unitholders have the right to receive at least 90% of the Net Distributable Cash Flows of the Trust at least once in each financial year in accordance with the InvIT Regulations. The Investment Manager approves distributions. The distribution will be in proportion to the number of units held by the unitholders. The Trust declares and pays distributions in Indian rupees. The distributions can be in the form of return of capital, return on capital and miscellaneous income.

A Unitholder has no equitable or proprietary interest in the Trust Assets and is not entitled to transfer Trust Assets (or any part thereof) or any interest in the Trust Assets (or any part thereof). A Unitholder''s right is limited to the right to require due administration of Trust in accordance with the provisions of the Trust Deed and the Investment Management Agreement.

The unit holders(s) shall not have any personal liability or obligation with respect to the Trust .

11.2 Under the provisions of the InvIT Regulations, Trust is required to distribute to Unitholders not less than 90% of the net distributable cash flows of the Trust for each financial year. Accordingly, a portion of the Unit Capital contains a contractual obligation of the Trust to pay to its Unitholders cash distributions. Hence, the Unit Capital is a compound financial instrument which contains equity and liability components in accordance with Ind AS 32 - Financial Instruments: Presentation. However, in accordance with SEBI Circulars (No. CIR/ IMD/DF/114/2016 dated October 20, 2016 and No. CIR/IMD/DF/127/2016 dated November 29, 2016) issued under the InvIT Regulations, the Unitholders'' funds have been presented as "Equity" in order to comply with the requirements of Section H of Annexure A to the SEBI Circular dated October 20, 2016 dealing with

the minimum presentation and disclosure requirements for key financial statements. Consistent with Unit Capital being classified as equity, the distributions to Unitholders is also presented in Statement of Changes in Unitholders'' Equity when the distributions are approved by the Board of Directors of Investment Manager.

13.1 As per the terms agreed by the Trust, the Investment Manager, Pipeline Infrastructure Limited (PIL) and Reliance Industries Holdings Private Limited (RIHPL), Reliance Industries Limited(RIL) has the right, but not the obligation, to purchase the entire equity stake of the Trust in PIL after a specific term or occurrence of certain events for a consideration of Rs. 50 Crore. Correspondingly, the Trust has right, but not the obligation, to sell its entire stake in PIL to RIL for a consideration of Rs. 50 Crore after a specific term or occurrence of certain events.

14.1 Dues to micro, small & medium enterprises as defined under the MSMED Act, 2006

The Trust does not have any over dues outstanding to the micro , small & medium enterprises as defined in Micro, Small and Medium Enterprises Development Act, 2006. The identification of micro and small enterprises is based on information available with the management.

The financial instruments are categorized into three levels based on the inputs used to arrive at fair value measurements as described below:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities; and

Level 2: Inputs other than the quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Inputs based on unobservable market data

Fair value measurements using unobservable market data (level 3)

*Expenditure Component Sweep is treated as an advance and will be settled against the future repayments as per the Agreements (s).

The investment made by India Infrastructure Trust (InvIT) in Non Convertible Debentures (InvIT NCD) are classified as a Financial Asset according to the Ind AS 32 and 109. The InvIT NCDs are held with an intention to collect contractual cash flows over the tenure of the instrument and not held with an intention to sell. However, the cash flows flowing to InvIT are not solely in the nature of payment of principle and interest due to various variable cash flows attached to the instrument including additional interest after servicing the interest on external debt. Hence InvIT NCDs are classified at Fair Value through Profit & Loss (FVTPL).

Income from Interest on Investment in InvIT NCD amounting to Rs. 635.92 Crore (Previous year Rs. 715.97 Crore) is included under "Revenue from operations". Other Fair value (loss)/gain on this NCD amounting to Rs. (37.48) Crore (Previous year Rs. 76.30 Crore) is included under "Fair value (loss)/gain on Non convertible debentures measured at FVTPL".

The discounted cash flow method has been applied for deriving the fair valuation of the debentures which requires determining the present value of all cash flows.

The payment of interest and principal component of the InvIT NCDs is provided in the Debenture Trust Deed wherein interest component at the Annual Interest Rate ("AIR") will be computed on the outstanding principal of Total NCDs (i.e. InvIT NCDs NCDs issued to External lenders ). For first five years upto March 31, 2024, the AIR is fixed at 9.7%. For the balance period the AIR is computed in the block of every 5 years as Benchmark Rate 100 bps (Benchmark Rate = the average of the previous 7 trading days Fixed Money Market and Derivatives Association of India ("FIMMDA") Corporate AAA 5 year yield. The AIR shall be subject to a minimum to 9.5% and a maximum of 10.5%. Accordingly, the coupon rate for balance period after the first 5 year block is considered at 9.5%.

The significant assumptions considered in the valuation are:

1. Discount rate considered for valuation: The discount rate for every year is computed as Benchmark Rate 100 bps, with benchmark rate being Zero Coupon Yield as on the Valuation Date for maturity corresponding to the cash flows adjusted for FIMMDA spread for AAA security and 1% for additional risk. If the discount rate for each year increases by 0.5% then Fair value of the investment will reduce by Rs. 165.91 Crore, if the discount rate reduces by 0.5% then Fair value of the investment will increase by Rs.173.48 Crore.

2. The rate at which Pipeline Infrastructure Limited ("PIL") will be able to re-finance the external debt: The interest rate at which PIL will be able to refinance new NCDs is considered based on expected future interest rate for a period of 15 years for a AAA rated bond using FIMMDA Corporate Spread adjusted by 1% for additional risk. If this rate increases by 0.5% then Fair value of the investment will decrease by Rs. 164.21 Crore and if this rate reduced by 0.5% then Fair value of the investment will increase by Rs.162.23 Crore.

The interest rates are blocked for a period of first 5 years at 9.7% i.e. upto March 22, 2024 and hence instrument is not exposed to interest rate risk in next year.

NOTE 23. FINANCIAL INSTRUMENTS - RISK MANAGEMENT Liquidity Risk

Liquidity risk arises from the Trust''s inability to meet its cash flow commitments on time. Trust''s objective is to, at all times, maintain optimum levels of liquidity to meet its cash and collateral requirements. The Trust closely monitors its liquidity position and deploys a disciplined cash management system. Trust''s liquidity is managed centrally with operating units forecasting their cash and liquidity requirements.

The Trust''s liquidity is managed centrally with operating units forecasting their cash and liquidity requirements. Treasury pools the cash surplus from across the different operating units and then arranges to either fund the net deficit or invest the net surplus in the market.

NOTE 26. DETAILS OF DUES TO MICRO AND SMALL ENTERPRISES AS PER MSMED ACT, 2006

The Trust does not have any over dues outstanding to the micro, small & medium enterprises as defined in Micro, Small and Medium Enterprises Development Act, 2006. The identification of micro and small enterprises is based on information available with the management. Hence, additional disclosure requirements under MSME are not applicable for the year under review.

NOTE 27.

Contingent liabilities and commitments (to the extent not provided for) are Nil as at March 31, 2022 (Previous year Nil) NOTE 28. LONG TERM CONTRACT

The Trust has a process whereby periodically all long term contracts are assessed for material foreseeable losses. At the year end, the Trust has reviewed and ensured that adequate provision as required under any law / accounting standard there are no foreseeable losses on such long term contracts has been made in the books of accounts.

NOTE 29. SEGMENT REPORTING

The Trust''s activities comprise of owning and investing in Infrastructure SPVs to generate cash flows for distribution to unitholders. Based on the guiding principles given in Ind AS - 108 "Operating Segments", this activity falls within a single operating segment and accordingly the disclosures of Ind AS -108 have not separately been given.

NOTE 30. CAPITAL MANAGEMENT

The Trust adheres to a disciplined Capital Management framework which is underpinned by the following guiding principles:

a) Maintain financial strength to esnure AAA or equivalent ratings at individual Trust and subsidiary level.

b) Ensure financial flexibility and diversify sources of financing and their maturities to minimize liquidity risk while meeting investment requirements.

c) Leverage optimally in order to maximize unit holder returns while maintaining strength and flexibility of the Balance sheet.

This framework is adjusted based on underlying macro-economic factors affecting business environment, financial market conditions and interest rates environment.

As at March 31, 2022 and March 31, 2021 the Trust has no borrowings, hence net gearing ratio is zero.

31.1 Applicability of ratio

i) The Company does not have any debt, therefore Debt-Equity ratio and Debt-Service Coverage ratio is not applicable.

ii) The Company is into service industry, hence inventory turnover ratio is not applicable.

iii) The Company does not have any Trade receivables, Therefore, Trade receivable turnover ratio is not applicable.

31.2 Reason for variance

i) Fixed deposit with bank which was part of cash and cash equivalents in previous year, has been presented under Non-current assets due to renewal and residual maturity being more than 1 year, which has led to variance in the Current ratio.

ii) Reduction is due to reason mentioned in 31.2.(i) above partly offset by decrease in working capital.

NOTE 32: SUBSEQUENT EVENTS

On a review of the business operations of the Trust, review of minutes of meetings, review of the trial balances of the periods subsequent to March 31, 2022, no subsequent events requiring reporting in the financials of Financial year 2021-22 have been identified.

NOTE 33:

The previous year figures have been regrouped wherever necessary to make them comparable with those of current year.

NOTE 34. APPROVAL OF FINANCIAL STATEMENTS

The financial statements have been approved by the Board of Directors of Investment Manager to the Trust, at their meeting held on May 19, 2022.