Notes to Accounts of Power Finance Corporation Ltd.
Mar 31, 2023
11.4 Coastal Karnataka Power Limited (CKPL), a wholly-owned company of PFC Ltd. was set up for managing the UMPPs as per the mandate from GoI and was considered as associate over which PFC had significant influence. During FY 2022-23, CKPL''s MoA has been amended to be used for bidding lenders'' backed resolution plan by PFC and it has been renamed as PFC Projects Limited (PPL). Accordingly, the ability to direct activities of said Company now vests with PFC Ltd. and the same is now considered as a subsidiary.
11.5 At initial recognition, the Company made an irrevocable election to present subsequent changes in the fair value of certain equity instruments in other comprehensive income. The Company''s main operation is to extend financial assistance to power, logistics and infrastructure sector. Thus, in order to insulate Standalone Statement of Profit and Loss from price fluctuations of these instruments, the Management believes that FVTOCI classification provides a more meaningful presentation, rather than classifying them at FVTPL.
17.1 The Company raises funds through various instruments including non-convertible bond issues. During the year, the Company has not defaulted in servicing of any of its debt securities.
17.2 The amounts raised during the year have been utilised for the stated objects in the offer document/ Information memorandum/ facility agreement other than temporary deployment pending application of proceeds.
17.3 All the secured listed non-convertible debt securities of the Company are fully secured by way of mortgage on specified immovable properties and/or charge on receivables of the Company. The Company has maintained security cover of 1.05 times as per the terms of offer document/information memorandum sufficient to discharge the principal and interest thereon at all times for the secured listed non-convertible debt securities issued. Further, security cover maintained by the Company for all secured non-convertible debt securities is 1.03 times.
17.4 Wherever required, the Company has registered the charges with respective Registrars of Companies (ROC) within the statutory timelines.
17.6 Infrastructure Bonds (2010-11) Series III and IV are secured by charge on specific book debt of '' 254.91 crore as on 31.03.2023 ('' 438.71 crore as on 31.03.2022) of the Company along with first charge on immovable property situated at Jangpura, New Delhi.
17.7 These bond series are secured by first pari passu charge on present and future receivables (excluding those receivables which are specifically charged for infrastructure bonds issued during the FY 2010-11, the security details of which is contained at Note 17.6) along with first pari passu charge on immovable property situated at Guindy, Chennai.
17.1154 EC Capital Gain Tax Exemption Bonds, Taxable Secured Public Issue (2020-21) Tranche-I all Series & all category, and all other Tax Free Bonds Series are secured by first pari passu charge on the total receivables / book debts of the Company (excluding those receivables which are specifically charged for infrastructure bonds issued during the FY 2010-11, the security details of which is contained at Note 17.6), limited to the extent of payment / repayment of the bonds including interest, additional interest, cost and expenses and all other monies whatsoever payable / repayable by the Company to the Bondholders and/or others under / pursuant to the Transaction Documents.
18.4 Secured rupee term loans are secured by first pari passu charge in favour of lending banks on the receivables of the Company limited to payment/repayment of the term loan including interest, additional interest, cost and expenses and all other monies whatsoever payable/repayable by the Company to lending bank and/or others under/pursuant to the security document except for those receivables which are already charged in favour of Catalyst Trusteeship Ltd. (formally known as GDA Trusteeship Limited). Refer Note 10 for carrying values of the receivable pledged as security against secured rupee term loans
(vi) Interest Differential Reserve - KFW Loan:
It represents difference between the interest due and interest paid on KFW loan as per the loan agreement. Exchange gain / loss upon re-statement of loan balance, in accordance with the terms of the foreign currency borrowing from KFW, is adjusted against this reserve. The Company is not required to repay the unadjusted balance in the reserve after complete repayment of KFW Loan. Any unadjusted balance in the reserve after complete repayment of KFW Loan shall be used for further lending by the Company after consulting with KFW.
General Reserve includes the amounts appropriated from the profits of the Company before declaration of dividend (as was required under erstwhile Companies Act, 1956). It also includes the amount transferred from Statutory Reserves on utilisation/ reversal of such Reserves. Further the Company appropriates profit to General Reserve in order to avail full eligible deduction of Special Reserve under Section 36(1 )(viii) of the Income Tax Act, 1961.
(ix) Reserve for Equity Instruments through Other Comprehensive Income :
The Company elected to recognise changes in the fair value of certain investment in equity instruments through other comprehensive income. It represents cumulative gains and losses arising on the revaluation of equity instruments measured at fair value through other comprehensive income. When the asset is derecognised, amounts in the reserve are subsequently transferred to retained earnings and not to standalone statement of profit and loss. Dividends on such investments are recognised in statement of profit & loss unless the dividend clearly represents a recovery of part of the cost of the investment.
(x) Reserve for Effective portion of Cash Flow Hedges
The intrinsic value of hedging instruments which meets the qualifying criteria for hedge accounting & are designated and qualify as cash flow hedges is recognised in this reserve. The amounts recognised in such reserve are reclassified to the Statement of Profit or Loss when the hedged item affects profit or loss.
During the current year ended 31.03.2023, an amount of '' 1,478.29 crore (Previous year '' 1,884.82 crore) has been paid to Government of India as dividend (being proportionate share in final dividend for FY 21-22 and interim dividend for FY 22-23 ).
(ii) Events occurring after Balance Sheet date:
Board of Directors in its meeting held on 27.05.2023 has recommended final dividend @ 45% on the paid up equity share capital i.e. '' 4.50 per equity share of '' 10 each for the FY 2022-23 subject to approval of shareholders in ensuing Annual General Meeting.
(!!!) The Dividend Paid/Proposed is in compliance with the provisions of Section 123 of Companies Act 2013, as applicable.
34.1 Disclosures as per Ind AS 19 ''Employee Benefits'' in respect of provision made towards various employee benefits are provided in Note 44.
35. CORPORATE SOCIAL RESPONSIBILITY
In accordance with the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 notified w.e.f. 22.01.2021, any unspent amount pursuant to any ongoing project shall be transferred to unspent CSR Account in any scheduled bank within a period of thirty days from the end of the financial year, to be utilised within a period of three financial years from the date of such transfer. Any unspent CSR amount, other than for any ongoing project, shall be transferred to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year. Further, if the Company spends an amount in excess of the requirement under statute, the excess amount may be carried forward and set off in three succeeding financial years against the amount to be spent.
As the notification was made effective during FY 2020-21, the Company complied with the amended provisions of Section 135 of the Companies Act, 2013 with effect from the FY 2020-21. Accordingly, the unspent CSR amount as at 31.03.2020 would continue to be dealt with in accordance with the pre-amendment framework.
The Company maintains a capital base that is adequate to support the Company''s risk profile, regulatory and business needs. The Company sources funds from domestic and international financial markets, inter alia leading to diverse investor base and optimised cost of capital. Refer Note 17, 18 and 19 for details w.r.t. sources of funds and refer Standalone Statement of Changes in Equity for details w.r.t. Equity.
As contained in RBI Master Directions - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016, as amended from time to time (hereinafter referred to as "RBI Master Directions"), the Company is required to maintain a capital ratio consisting of Tier I and Tier II capital not less than 15% of its aggregate risk weighted assets on-balance sheet and of risk adjusted value of off-balance sheet items. Out of this, Tier I capital shall not be less than 10%. The Company regularly monitors the maintenance of prescribed levels of Capital to Risk Weighted Assets Ratio (CRAR). Further, with regard to capital restructuring, the Company is also guided, inter alia, by guidelines on "Capital Restructuring of Central Public Sector Enterprises" issued by Department of Investment and Public Asset Management (DIPAM), Ministry of Finance, Department of Public Enterprises in respect of issue of bonus shares, dividend distribution, buy back of equity shares etc.
39.2 During FY 2022-23 , the Company has not raised any subordinated debt as Tier-II capital and Perpetual Debt (Previous FY 2021-22 - Nil).
39.3 Dividend Distribution Policy
The Company has a well-defined dividend distribution policy. Dividend distribution policy focuses on various factors including but not limited to GoI guidelines, RBI circulars/guidelines, future capital expenditure plans, profits earned during the financial year, cost of raising funds from alternate sources, cash flow position and applicable taxes if any, subject to the guidelines as applicable from time to time.
As per the extant guidelines issued by Department of Investment and Public Asset Management (DIPAM), Government of India, the Company is required to pay a minimum annual dividend of 30% of Profit after Tax or 5% of the net-worth, whichever is higher subject to the maximum dividend permitted under extant legal provisions. Though, the Company endeavours to declare dividend as per these guidelines, it may propose to MoP, a lower dividend after analysis of various financial parameters like net-worth, CAPEX/business expansion needs; additional investments in subsidiaries/associates of the Company; other regulatory requirements etc. For details of dividend paid/recommended during the year, refer Note 24.2.
The Company is exposed to several risks which are inherent to the environment that it operates in. The Company is into business of extending financial assistance to power, logistics and infrastructure sector. The principal risks which are inherent with the Company''s business model and from its use of financial instruments include credit risk, liquidity risk and market risk (currency risk, interest rate risk and price risk).
For managing these risks, the Company has put in place an integrated enterprise-wide risk management mechanism to ensure that these risks are monitored carefully and managed efficiently. In accordance with the RBI Master Direction in order to augment risk management practices in the Company, the Company has a Chief Risk Officer (CRO) who is involved in the process of identification, measurement and mitigation of risks. The Company also has a Board level Risk Management Committee(RMC) headed by an Independent Director, whose main function is to monitor and review the risk management plan of the Company and to make recommendations to the Board of Directors for taking up various risk management activities. The Chief Risk Officer (CRO) is a permanent invitee to all the meetings of Risk Management Committee. The risk management approach i.e., Company''s objectives, policies and processes for identifying, measuring and managing each of above risk is set out in the subsequent paragraphs.
(a) Credit risk on cash and cash equivalents and other bank balances is limited as these are held with scheduled commercial public sector banks, high rated private sector banks and mutual fund houses, which meets the empanelment criteria as set out in the Company''s policy. The Company has also set exposure limits for deployment of funds in various types of instruments with respective banks/mutual fund houses.
For its investments, the Company manages its exposure to credit risk by periodically monitoring such investments, and applying the appropriate valuation techniques to arrive at the carrying value.
(b) Credit risk on other financial assets is evaluated based on Company''s knowledge of the credit worthiness of those parties and managed by monitoring the recoverability of such amounts. The Company carries an impairment loss allowance of '' 18.38 crore on its other financial assets as at 31.03.2023 (as at 31.03.2022''24.79 crore).
(c) The Company is exposed to credit risk primarily through its lending operations. The same is explained in the paragraphs below.
40.1.1 Credit Risk Management for Lending Operations
The Company has put in place key policies and processes for managing credit risk, which include formulating credit policies, guiding the Company''s appetite for credit risk exposures, undertaking reviews & objective assessment of credit risk, and monitoring performance and management of portfolios. All the procedures and processes of the Company are ISO 9001:2015 certified.
The credit risk management covers two key areas, i.e., project appraisal & project monitoring. The Company selects the borrowers in accordance with the Company''s approved credit policy, which inter alia, defines factors to be considered for rating of the borrower/ project. The Company''s customer selection procedure assesses viability of project along with that of its promoting entity. Rate of interest and maximum admissible exposure is, inter alia, based on internal rating awarded by the Company.
The Company follows a systematic, institutional project appraisal process to assess the credit risk before financing any project.
(a) Appraisal for Private Sector Projects
For private sector projects, a two-stage appraisal process is followed. Initially a preliminary appraisal is carried out in order to decide the prima facie preparedness of the project to be taken up for detailed appraisal. Detailed appraisal is carried out for those projects shortlisted on the basis of preliminary appraisal.
The Company along with evaluation of project viability also assesses the ability of its promoter(s) to contribute equity and complete the project. The Company follows an integrated rating methodology whereby Integrated Rating (IR) is calculated using the weighted average of the scores of the project grading and promoter grading. Based on the IR of the project, terms and conditions (including security package, interest rate and debt-equity ratio) are stipulated.
(b) Appraisal for State Sector Projects
State sector projects are taken up for detailed appraisal to determine, inter alia, if they are techno economically sound and compatible with integrated power development & expansion plans of the State.
The Company classifies state power generation utilities into various risk rating grades based on the evaluation of utility''s performance against specific parameters covering operational and financial performance. With regards to transmission utilities, the Company adopts the categorisation of its subsidiary RECL as per its policy. With regard to State Power Distribution utilities including integrated utilities, the Company''s categorisation policy provides for adoption of Ministry of Power''s (MoP''s) Integrated Ratings by aligning such ratings/ grading with that of Company''s rating structure.
Such categories/ratings are used to determine credit exposure limits, security requirements and pricing of loans given to the State Sector Borrowers. The Company also has a mechanism in place for monitoring the exposure to single borrower and exposure within a State.
The detailed project appraisal involves technical and financial appraisal covering various aspects such as project inputs, statutory and non-statutory clearances, contracts, project linkages, financial modelling/ projections, calculation of returns, sensitivity analysis etc.
After detailed analysis indicated above, the overall viability of the project and entity is assessed and various conditions in the form of pre-commitment, pre-disbursement and other conditions are stipulated so as to ensure tying up of funds (debt and equity both), all physical inputs, appropriateness of all the contracts, compliance of conditions precedent in agreements/ contracts/ statutory and non- statutory clearances related to the project etc. and in general to ensure bankability of the project & protection of the interest of the Company as a lender for timely servicing of debt. The Company has an authorisation/ delegation structure for the approval of credit facilities commensurating with the size of the loan.
The Company stipulates a package of security measures/covenants to mitigate risks during the construction and post COD (commercial operation date) stage of the project. Based on the risk appetite and appraisal of the project, the Company adopts a combination of the following measures:
(a) Primary Security - Charge on Project Assets or State Government Guarantees
(b) Collateral Securities - Corporate guarantee, Personal guarantee of promoters, Pledge of shares, Charge on assets / revenues of group/other companies
(c) Payment Security Mechanism - Escrow Account/Letter of Credit, Trust and Retention Account (TRA)
(d) Other covenants - Assignment of all project contracts, documents, insurance policies in favour of the Company, Upfront equity requirement, Debt Service Reserve Account (DSRA), Debt Equity ratio, shareholders'' agreements, financial closure, etc.
The Company has comprehensive project/loan monitoring guidelines that captures aspects relating to monitoring, tracking of project construction, implementation, identifies risks where intervention is required to minimise the time/ cost overruns/ consequent slippages in disbursements and including progress of commissioned projects.
For State sector projects, monitoring is carried out based on project progress details obtained regularly from borrowers through progress monitoring reports, site visits, discussions with the borrowers, information/reports available on Central Electricity Authority''s (CEA) website etc.
For private sector, where the Company is Lead Financial Institution (FI), the Company engages Lenders'' Engineers (LEs) and Lenders'' Financial Advisors (LFAs), which are independent agencies to act on behalf of various lenders / consortium members. The LEs conduct periodic site visits, review relevant documents, discusses with the borrowers and submit its reports on progress of the project. LFAs submit the statements of fund flow and utilisation of funds in the project periodically. In cases the Company is not the lead FI, the tasks related to LEs and LFAs services are coordinated with the concerned lead lender. From FY 2022-23 onwards the Company has started empanelling Project Management Agency (PMA), as a single entity, for private sector projects, thereby facilitating better coordination of project monitoring activities.
Also, the consolidated periodic progress report of certain projects is prepared comprising important observations/ issues viz. areas of concern, reasons for delay, issues affecting project construction/implementation etc. and is reviewed by the Company on a regular basis.
The Company continuously monitors delays and/or default of borrowers and their recoverability. On occurrence of default in the borrower''s account, the Company initiates necessary steps which may involve action(s) including, but not limited to, Special Mention Account (SMA) reporting to RBI, credit information reporting to Central Repository of Information on Large Credits (CRILC) etc., regularisation of the account by recovering all over dues, invocation of guarantees/ securities to recover the dues, conversion of loan into equity as per loan agreement, restructuring of loan account, formulating resolution plan with the borrower, change in ownership, Corporate Insolvency Resolution Process (CIRP) under IBC -2016, sale of the exposures to other entities/investors, other recovery mechanisms like referring the case for legal action before Debt Recovery Tribunal (DRT), SARFAESI, etc. and other actions as specified under regulatory/legal framework.
40.1.2 Credit Risk Measurement - Impairment Assessment for Lending Operations(i) Staging of loans
Ind-AS 109 outlines a three staged model for measurement of impairment based on changes in credit risk since initial recognition. For classification of its borrowers into various stages, the Company uses the following basis:
- A financial asset that is not credit impaired on initial recognition is classified in ''Stage 1''.
- If a significant increase in credit risk (SICR) is identified, the financial asset is moved to ''Stage 2''.
An assessment of whether credit risk has increased significantly since initial recognition is performed at each reporting date by considering the change in the risk of default occurring over the remaining life of the financial assets. In accordance with Ind AS 109 ''Financial Instruments'', the Company has applied rebuttable presumption that considers more than 30 days past due as a parameter for determining significant increase in credit risk.
- If the financial asset is credit-impaired, it is moved to ''Stage 3'' category.
In case of Stage 3 financial assets, after implementation of the resolution plan (except for change of ownership and/or resolution through NCLT), the financial asset is upgraded and classified as Stage 2 for two quarters from the date of implementation of resolution plan.
In accordance with Ind AS 109 ''Financial Instruments'', the Company considers the rebuttable presumption to define a financial asset as in default, i.e. when the loan account is more than 90 days past due on its contractual payments. Credit impaired financial assets are aligned with the definition of default.
(iii) Measurement of Expected Credit Loss (ECL)
The Company recognises impairment loss allowance for the financial assets in accordance with a Board-approved expected credit loss (ECL) policy. ECL is measured on either a 12 month or lifetime basis depending on whether there is significant increase in credit risk since initial recognition. ECL is the product of Probability of default (PD), Loss Given Default (LGD) and Exposure at Default (EAD). The Company has appointed an independent agency, CRISIL Ltd., during the financial year for assessment of ECL in accordance with Ind AS 109 ''Financial Instruments''. The brief methodology of computation of ECL is as follows:
(a) Probability of default (PD)
PD is an estimate of the likelihood of default over a given time horizon. It is estimated as at a point in time. For assessing 12-month PD, probability of a loan defaulting in next 12 months is ascertained and similarly for assessing lifetime PD, probability of a loan defaulting in its remaining lifetime is ascertained.
For Stage 1 accounts, 12 months PD is used.
For Stage 2 (significantly increased credit risk accounts), Lifetime PD is used.
For Stage 3 (credit impaired accounts), 100% PD is taken.
12-month PD: In case of State Sector borrowers, for the purpose of PD calculation, the risk rating grades of the utilities are considered. For Gencos/ Transcos/ Others, PFC''s internal rating grades have been considered. For Discoms/ Power Department borrowers, PFC has adopted the MoP ratings . The ratings as above has been be mapped with the standard external rating benchmarks. The PD factor associated with the mapped external rating as given in the PD transition matrix published by various CRAs have been used for PD calculation.
In case of Private sector borrowers, the latest external rating as published by various Credit Rating Agencies have been referred to compute PD using the PD transition matrix published by various CRAs . If external rating is not available, the PD has been computed through Proxy Risk Scoring Model on a 10-point scale with 1 suggesting minimum risk and 10 suggesting the highest risk. The said model uses the Quantitative financial ratios like Gearing (Debt/Equity), Return on Capital Employed, Interest Coverage ratio, Debt to EBITDA ratio and qualitative factors like PLF, ACS / ARR ratio or LAF to arrive at the final Risk score. The financial risk score obtained have been mapped to external rating benchmarks. This mapped rating has been referred to compute PD associated with the rating using the PD transition matrix published by various CRAs.
For Lifetime PD: Markov Chain Model has been used to compute Lifetime PDs of the rating grade.
LGD is the loss factor which the Company may experience in case the default occurs.
For State sector borrowers, the Company considers the credit worthiness of the states on various parameters while estimating the LGD for state utilities. For estimating the credit worthiness of the state, parameters like State GDP per capita, Fiscal deficit/GDP ratio and Proportion on Revenue Expenditure on Energy Sector, etc. are used as key inputs. The state utilities are bifurcated into Low, Medium and High-risk category based on the state category. In case of Private sector borrowers, LGD has been assessed considering factors related to the project to arrive at realisable value of the plant such as generation capacity, project cost per MW, percentage completion of the plant, and book value of the assets etc. A stress factor was also applied as a haircut to arrive at the realisable value.
For Stage 3 borrowers, LGD has been assessed project wise based on Bid value/resolution plan amount/ OTS amount/ any other value/ discounted cash flows etc. as applicable.
Exposure at Default is the outstanding exposure on which ECL is computed. EAD includes outstanding principal and interest accrued (including delayed charges) in respect of the loan. As per Note no.6.1 .(ii) , income on credit impaired assets is recognised as and when received or on accrual basis when expected realisation is higher than the loan amount outstanding, therefore, the same is not used in computation of Exposure at default.
(d) Key assumptions used in measurement of ECL
- The Company considers the date of initial recognition as the base date from which significant increase in credit risk is determined.
- Since the Company has a right to cancel any sanctioned but undrawn limits to any of its borrowers, EAD is assumed to be outstanding balance and interest of the loan as on the reporting date.
(e) The assessment of significant increase in risk and the calculation of ECL both incorporate forward-looking information. Further, the independent agency appointed to assist the Company in ECL assessment also consider the forwardlooking information in the determination of the impairment allowance to be assigned to the borrower, by taking into consideration various project operational parameters, project financial ratios, extension of the project completion and also possibility of stressed and favourable economic conditions. Further, the independent agency has also added some additional macroeconomic parameters such as Power demand, GDP growth, monthly weighted average prices of traded power and current account to arrive at a weighted shock factor to the base PD term structure for ECL computation so as to reflect the right risk assessment of the utilities.
40.1.3 Credit risk analysis for Lending Operations(i) Exposure to credit risk
For loans recognised in the balance sheet, the gross exposure to credit risk equals their carrying amount. Refer Note 10 ''Loans'' for Company''s exposure to credit risk arising from loans.
For financial guarantee issued, the maximum exposure to credit risk is the maximum amount that the Company would have to pay if the guarantees are called upon. For irrevocable loan commitments, the maximum exposure to credit risk is the full amount of the commitment facilities. Refer Note 46 for exposure of Guarantee and Outstanding Disbursement Commitments.
(ii) Concentration of credit risk
Credit concentration risk refers to risk associated with large credit/investment exposure to a single company or a group of companies based on its ownership, sector, region etc. that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions, with the potential to adversely affect lender''s core operations.
Loans to state sector are well diversified as these are extended to multiple entities under the control of various State Governments and Central Government. The Company considers that these loans have a low credit risk in comparison to lending to private sector mainly due to low default / loss history in state sector and availability of government guarantee in certain loans. Presence of Government interest in these projects also lowers the risk of non-recoverability of dues.
Further, the Company has a lending portfolio comprising of loans to generation, renewable, transmission, distribution, power projects & other infrastructure projects spread across diverse geographical areas.
40.1.4 Write off of Loan Assets
The Company writes off Loan assets in whole or in part in line with its write off policy, when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include ceasure of enforcement activity or where the Company''s recovery method is foreclosing on collateral and the value of collateral is such that there is no reasonable expectation of recovery in full. The waiver/write off is done in whole or in part as per the restructuring/ settlement/ resolution process.
40.1.5 Policy on sales out of amortised cost business model portfolio
The Company does not resort to the sale of financial assets, in ordinary course of business. However, the Company has an approved policy that it may proceed for resolution of stressed assets by either restructuring, change of ownership, settlement or otherwise. The assets are then assessed for derecognition as per Ind AS 109 ''Financial Instruments''.
Pursuant to Ad-interim order from Hon''ble High Court(s) these borrower(s) accounts have not been classified as Credit impaired. The Company holds adequate impairment loss allowance with respect to these loan accounts and has categorised them in Stage 2. The interest income is also not been recognised on these loan accounts on accrual basis since these loans are more than 90 days past due.
Liquidity risk is the risk that the Company doesn''t have sufficient financial resources to meet its obligations as and when they fall due. The risk arises from the mismatches in the timing of the cash flows which are inherent in all financing operations and can be affected by a range of company specific and market wide events.
In order to effectively manage liquidity risk, the Company endeavours to maintain sufficient cash flows to cover maturing liabilities without incurring unacceptable losses or risking damage to the Company''s reputation and also endeavours to maintain a diversified fund base by raising resources through different funding instruments. The adequacy of the Company''s liquidity position is determined keeping in view the current liquidity position , anticipated future funding needs, present and future earning capacity and available sources of funds.
The Company manages its day to day liquidity to ensure that the Company has sufficient liquidity to meet its financial obligation as & when due. The long-term liquidity is managed keeping in view the long-term fund position and the market factors. This is in line with the Board approved framework and breaches, if any, are to be reported as per approved framework. The Company has never defaulted in servicing of its borrowings.
Further, for overall liquidity monitoring and supervision, the Company has an Asset Liability Committee (ALCO) headed by Director (Finance). The ALCO tracks the liquidity risk by analysing the maturity or cash flow mismatches of its financial assets and liabilities. The mismatches are analysed by way of liquidity statements prescribed by RBI, wherein the cumulative surplus or deficit of funds is arrived at by distributing the cash flows against outstanding financial assets and financial liabilities according to the maturity ladder.
(ii) Foreign currency risk monitoring and management
The Company has put in place a Board approved "Policy for Management of Risks on Foreign Currency Borrowings" to manage and hedge risks associated with foreign currency borrowings which prescribes the structure and organisation for management of associated risks.
The Company enters into various derivative transactions viz. principal only swaps, options and forward contracts for hedging the exchange rate risk. As per extant policy, a system for reporting and monitoring of risks is in place wherein Committee for Management of Risks on Foreign Currency Borrowings, consisting of senior executives of the Company, monitors the foreign currency exchange rate. These derivative transactions are done for hedging purpose and not for trading or speculative purpose. The policy lays down the appropriate systems and controls to identify, measure and monitors, the currency risk for reporting to the Management.
40.4 Market Risk - Interest Rate Risk
40.4.1 Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in interest rates. The impact may be beneficial or adverse depending on the direction of change in interest rates and whether assets or liabilities re-price faster.
(i) Interest rate risk is managed with the objective to control market risk exposure while optimising the return.
The Asset Liability Committee (ALCO) tracks the interest rate risk through the gap analysis i.e. by analysing the mismatches between Rate Sensitive Assets and Rate Sensitive Liabilities. For gap analysis, the interest rate sensitivity statement prescribed by RBI is used, wherein the gap is measured between the Rate Sensitive Assets and Rate Sensitive Liabilities which are distributed based on the maturity date or the re-pricing date whichever is earlier.
Further, for managing the interest rate risk, the Company reviews its interest rates periodically based on prevailing market conditions, borrowing cost, yield, spread, competitors'' rates, etc. The asset mix is managed by the Company through its interest rate & credit policies which inter alia covers aspects like reset periods; repayment periods, prepayment premium etc. The liabilities are managed keeping in view factors like cost, market appetite, timing, market scenario, ALM gap position etc. The Company also enters into various derivatives transactions like interest rate swaps, cross-currency interest rate swaps to hedge its interest rate risk.
(ii) Interest Rate Sensitivity Analysis
As per RBI Guidelines, Earning at Risk (EaR) is an important focal point for interest risk management. For Interest Rate Sensitivity analysis, the impact of movement of interest rates has been measured on the Earning at Risk derived from the gap statements. The impact has been worked out considering 25 basis upward/downward shocks to interest rates over a one-year period, assuming a constant balance sheet. The analysis shows that if rates are increased/decreased by 25 bps, the impact on EaR will be ( /-) '' 194.52 crore. (As at 31.03.2022 ( /-) '' 118.77 crore).
The analysis assumes that the Rate Sensitive Assets and Rate Sensitive Liabilities are being re-priced at the same time. Further, the analysis considers the earliest/first re-pricing date of the Rate Sensitive Assets and Rate Sensitive Liabilities.
Note: A 25 basis point increase or decrease represents management''s assessment of the reasonably possible change in interest rates.
40.4.2 Disclosures in respect of Interest Rate Benchmark Reform
The Company has variable interest rate borrowings whose interest rate is based on interest rate benchmarks. Also, to hedge the variability of cash flows on these borrowings, the Company has entered into multiple interest rate swaps with key terms (principal amount, payment dates, repricing dates, currency) that match those of the debt on which it pays a fixed rate and receives a variable rate. Significant interest rate benchmark used in the Company''s borrowings is 6 month USD LIBOR (London Interbank offer rate).
(i) Exposure directly affected by the interest rate benchmark reform
The total amount of exposure that is directly affected by Interest Rate Benchmark Reform (IBOR) i.e. after June 2023 is USD 656.24 million (Amount in INR '' 5395.44 crore) as on 31.03.2023. Out of this, the amount of the derivative exposure linked with such liabilities and accounted for under hedge accounting is USD 650 million (Amount in INR '' 5,344.10 crore).
(ii) Managing the process of transition to alternative benchmark rates
The Company has in place a Board approved Policy for undertaking Libor Transition namely "Framework for transition from London Inter Bank Offered Rate (LIBOR) to Alternative Reference Rate (ARR)''. The framework inter ai/acovers aspects such as assessment of exposure linked to LIBOR, identification of risk arising out of LIBOR transition, contracts remediation, operational readiness, governing structure, regulatory compliance & reporting, etc. Further, the Company shall undertake all transition activities as per the process/ guidelines detailed in the policy. The process of transition from 6 month USD LIBOR to Alternative Reference Rate has been initiated & shall be completed within available timelines.
(iii) Significant assumptions for exposure affected by the interest rate benchmark reform
Ind AS 109 provides temporary exceptions to all the hedging relationships directly impacted by the interest rate benchmark reform. The alternative reference rate/benchmarks for the LIBOR linked loans and their derivatives are yet to be agreed with the lenders and the derivative bankers. However, it has been assumed that as a result of such reform there shall be no change in the relationship of the hedged items, hedged instruments and its corresponding hedge effectiveness.
The hedging instruments which meets the qualifying criteria for hedge accounting are designated as cash flow hedge. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in Other Comprehensive Income. The change in intrinsic value of hedging instruments is recognised in ''Effective Portion of Cash Flow Hedges''. The amounts recognised in such reserve are reclassified to the Statement of Profit or Loss when the hedged item affects profit or loss. Further, the change in fair value of the time value of a hedging instruments is recognised in ''Cost of Hedging Reserve''. The amounts recognised in such reserve are amortised to the Statement of Profit and Loss on a systematic basis.
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. The Company applies the following effectiveness testing strategies:
a) For derivatives other than options that exactly match the terms of the hedged item, the economic relationship and hedge effectiveness are based on the qualitative factors using critical terms match method (where principal terms of the hedging instrument and the hedged item are same).
b) For option structures, the Company analyses the relationship of changes in value of the hedging instrument and hedged item using regression analysis based dollar offset method.
43.6 Major terms and conditions of transactions with related parties
(i) Transactions with related parties are made on terms equivalent to those that prevail in arm''s length transactions.
(ii) The remuneration to Key Managerial Personnel are in line with the HR policies of the Company.
(iii) Loans and advances given to Directors/KMPs have specified terms / period of repayment and are in line with the HR Policies of the Company.
(iv) The Company makes advances to its associate companies which are incorporated as SPVs to meet the preliminary expenditure. Such advances carry interest rates at the rate applicable to Term Loans as per the Company''s policy.
(v) The interest and/or dividend paid to the Trusts and Key Managerial Personnel are on account of their investments in the debt securities and/or equity shares of the Company and the interest and/or dividend paid on such securities is uniformly applicable to all the holders.
(vi) Outstanding balances of group companies at the year-end are unsecured except loan given to PFCCL amounting to '' 9.52 crore.
44. EMPLOYEE BENEFITS44.1 Defined contribution plans:(a) Pension
The Company pays fixed contribution to National Pension Scheme (NPS) for its pension obligation towards employees at pre-determined rates into the Tier-I NPS Account (Pension Account) of the employees.
The Company pays fixed contribution on account of provident fund at prescribed rates to a separate trust, which invests the funds in permitted securities. The trust has to ensure, a minimum rate of return to the members as specified by GoI. However, any shortfall for payment of interest to members as per specified rate of return has to be compensated by the Company. The Company estimates that no liability will arise in this regard in the near future and hence, no further provision is considered necessary.
An amount of '' 17.10 crore (Previous year '' 14.87 crore) for the year is recognised as expense in the Standalone Statement of Profit and Loss on account of the Company''s contribution to the defined contribution plans.
(b) Post-Retirement Medical Scheme (PRMS)
The Company has a Post-Retirement Medical Scheme (PRMS) to provide medical facilities to superannuated employees, dependent family members of superannuated and deceased employees. The liability for PRMS is recognised on the basis of actuarial valuation.
This scheme is managed by a separate trust. The trust has to ensure adequate corpus for meeting the medical expenditure incurred by the eligible employees. However, any short fall has to be compensated by the Company. The Company estimates that no liability will arise in this regard in the near future and hence, no further provision is considered necessary.
Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:
Most of the plan asset investments are in government securities, other fixed income securities with high rating grades and mutual funds. The fair value of these assets is subject to volatility due to change in interest rates and other market & macro-economic factors. There is also a risk of asset liability matching i.e. the cash flow for plan assets does not match with cash flow for plan liabilities.
The present value of defined benefit plan liabilities is calculated using a discount rate which is determined by reference to government bonds'' yields at the end of the reporting period. A decrease (increase) in discount rate will increase (decrease) present values of plan liabilities, although this will be partially offset by an increase in the value of the plans'' investments.
The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan''s liability.
The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan''s liability.
v) Turnover rate/Withdrawal rate of employee
If the actual employee withdrawal rate in the future turns out to be more or less than expected then it may result in increase/decrease in the liability.
The Company actively monitors how the duration and expected yield of investments are matching the expected cash outflows arising from employee benefit obligations. Investments are well diversified, such that the failure of any single investment would not have a material impact on overall level of assets. There has been no change in the process used by the Company to manage its risks from prior periods.
(j) The weighted average duration of the defined benefit plan obligation at the end of the reporting period is 13.14 years (as at 31.03.2022: 13.98 years).
44.3 Other long-term employee benefits(a) Leave
The Company provides for earned leave benefit and half-pay leave benefit to the credit of the employees, which accrues on half-yearly basis at 15 days and 10 days respectively. A maximum of 300 days of earned leave can be accumulated at any point of time during the service. There is no limit for accumulation of half pay leave. On separation after 10 years of service or on superannuation, earned leave plus half pay leave taken together can be encashed subject to a maximum of 300 days. However, there is no restriction on the number of years of service for encashment of earned leave on separation from the service. Provision based on actuarial valuation amounting to '' 6.84 crore (Previous year '' 11.62 crore) for the year has been made at the year end and debited to the Standalone Statement of Profit and Loss.
Provision for settlement allowance and long service awards amounting to '' 4.57 crore for the year (Previous year '' 1.14 crore) has been made on the basis of actuarial valuation and debited to the Standalone Statement of Profit and Loss.
44.4 Employee benefits (including Gratuity, PRMS, Terminal Benefits, leave encashment and other employee benefits) in respect of Company''s employees working in its wholly-owned subsidiary on deputation / secondment basis are being allocated based on a fixed percentage of employee cost.
45.3 During the year 2022-23, the expenses relating to short-term/low value leases amounting to '' 9.81 crore (Previous year '' 7.20 crore) has been charged to Standalone statement of Profit and Loss. Included in the amount above are leases pertaining to residential accommodation of employees, space for official use, hiring of EDP equipment & other office equipment etc. These leases are usually renewable on mutually agreed terms and are cancellable.
45.4 The total cash outflow towards all leases, including Right-of-Use Assets is '' 10.11 crore (Previous year '' 8.10 crore).
|
46. CONTINGENT LIABILITIES AND COMMITMENTS |
(''in crore) |
|
|
No. Description |
As at 31.03.2023 |
As at 31.03.2022 |
|
Contingent Liabilities |
||
|
(i) Guarantees (a) & (b) |
- |
8.29 |
|
(ii) Claims against the Company not acknowledged as debts |
- |
- |
|
(iii) Additional demands raised by the Income Tax Department of earlier years which are being contested |
91.78 |
91.78 |
|
(iv) Service Tax demand or show cause notices raised by Service Tax Department in respect of earlier years which are being contested. |
25.98 |
24.53 |
|
Service Tax Department has filed appeals before CESTAT against the order of Commissioner (CE&ST) who had dropped a demand of service tax. The same is also being contested. |
50.90 |
53.40 |
|
(v)(b) Outstanding disbursement commitments to the borrowers by way of Letter of Comfort against loans sanctioned |
2427.96 |
7,032.45 |
|
Commitments |
||
|
(i) Estimated amount of contracts (excluding GST) remaining to be executed on capital account and not provided for |
139.52 |
174.53 |
|
(ii) Other Commitments - CSR unspent amount pertaining to the period up to 31.03.2020 |
52.43 |
99.15 |
|
Total |
2,788.57 |
7,484.13 |
|
(a) Default payment guarantee given by the Company in favour of a borrower company. The amount paid/payable against this guarantee is reimbursable by Government of Madhya Pradesh. (b) Necessary impairment loss allowance has been made. Refer note 21. |
||
47. There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at 31.03.2023 (Nil as at 31.03.2022). This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act,2006 has been to the extent the status of such parties could be identified on the basis of information available with the Company.
48. In the context of reporting business / geographical segment as required by Ind AS 108 - ''Operating Segments'', the Company''s operations comprise of only one business segment - lending to power, logistics and infrastructure sector entities. All activities revolve around the main business. Hence, there are no reportable segments as per Ind AS 108.
49. MODIFICATIONS IN THE SIGNIFICANT ACCOUNTING POLICIES:
No modifications have been carried out in the significant accounting policies during the year.
51. GOVERNMENT OF INDIA(GOI) SCHEMES BEING IMPLEMENTED BY THE COMPANY
The Company has been designated as Nodal Agency for operationalisation and implementation of RDSS Scheme and IPDS (R-APDRP subsumed in it). Role of Nodal Agency inter alia includes pass through of loans/grants to eligible utilities under schemes of GOI. The release of the funds under GoI schemes is ensured through Treasury Single Account (TSA) maintained with RBI, as per office memorandum issued by MoF, GoI dated March 9, 2022. This ensures that funds of these schemes are released ''Just in time'' from the Consolidated Fund of India (CFI) to the beneficiaries.
51.1 Revamped Distribution Sector Scheme (RDSS)
This Scheme was launched by GoI in July, 2021 to improve the operational efficiencies and financial sustainability of DISCOMs, by providing financial assistance to DISCOMs. It is a Reform based and result linked Distribution sector scheme. PFC along with REC is the nodal agency for operationalisation of the scheme. The implementation period of the Scheme is 5 Years (FY 2021-22 to FY 2025-26) with the sunset date of 31.03.2026. The key objectives of the scheme is to:
i) Improve the quality, reliability and affordability of power supply to consumers through a financially sustainable and operationally efficient distribution sector.
ii) Reduce AT&C losses to pan-India levels of 12-15% by 2024-25.
iii) Reduce ACS-ARR gap to zero by 2024-25.
The Scheme has an outlay of '' 3,03,758 crore with an estimated gross budgetary support of '' 97,631 crore from the GoI. The amount of grant received and administered to the eligible entities during FY 2022-23 is '' 1319.86 crore (Previous year '' 359 crore) and the cumulative grant administered till 31.03.2023 is '' 1,678.86 crore (till 31.03.2022 is '' 359 crore).
Further, No amount of grant remained undisbursed as on 31.03.2023 and 31.03.2022.
The Company is eligible for nodal agency fee at the rate of 0.50% of the sum total of the gross budgetary component of the various projects approved by Monitoring Committee. The total amount of nodal agency fee income from this scheme for FY 2022-23 stands at ''.71.58 crore. (Previous year Nil )
51.2 Integrated Power Development Scheme (IPDS) (with Restructured Accelerated Power Development and Reform Programme (R-APDRP) subsumed)
IPDS scheme was launched in December 2014 to extend financial assistance against capital expenditure for addressing the gaps in sub transmission & distribution network and metering in urban areas to supplement the resources of DISCOMs/ Power Departments. This scheme has the sunset date of 31.03.2022 and the ongoing approved projects have been subsumed as a separate component under the new RDSS scheme.
The estimated outlay of the scheme was '' 32,612 crore including a budgetary support of '' 25,354 crore from GoI. R-APDRP scheme cost of '' 44,011 crore including budgetary support of '' 22,727 crore have also been carried forward to IPDS scheme. The amount of fund received and administered to the eligible entities during FY 2022-23 is '' 474.46 crore (Previous year '' 2125.01 crore) and the cumulative grant administered till 31.03.2023 is '' 18,381.91 crore (till 31.03.2022''17,907.45 crore).
The amount of fund received under R-APDRP (subsumed with IPDS) and administered to the eligible entities during FY 2022-23 is '' 65.00 crore (Previous year '' 326.64 crore) and the cumulative grant administered till 31.03.2023 is '' 13,562.07 crore (till 31.03.2022''13,497.07 crore).
Further, no fund remained undisbursed as on 31.03.2023 and 31.03.2022.
The total amount of nodal agency fee income from this scheme for FY 2022-23 stands at Nil (Previous year '' 8.60 crore). Additionally, the Company has also received Nil (Previous year '' 28.20 crore) as reimbursement of expenditure from MoP under the said scheme.
52. (a) Status of documentation subsequent to reorganisatio
Mar 31, 2022
10.1. During the year, the Company has sent letters to borrowers seeking confirmation of balances as at 31.03.2022 except where loans have been recalled or pending before court/NCLT.
Confirmations for 98.03% of the said balances have been received. Out of the remaining loans amounting to '' 7,076.02 crore for which balance confirmations have not been received, 62.74% loans are secured by tangible securities, 29.95% by way of Government Guarantee/ Loans to Government and 7.31% are unsecured loans.
10.3 I n addition to the above, the Company has also approved settlement proposal with a borrower Narasimhaswamy Solar Generations Private Limited having loan outstanding amounting to '' 13.66 crore. The Company has provided time till 31.05.2022 to make payment of the total loan amount.
10.4 The Company has not advanced or loaned or invested any funds which are material either individually or in the aggregate (either from borrowed funds or share premium or any other sources or kind of funds) to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries
The Company has not received any fund which are material either individually or in the aggregate from any person(s) or entity(ies), including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
10.5 For details of credit risk exposure and management by the Company, refer Note 40.1.
11.3 During the current year ended 31.03.2022, pursuant to Board of Directors Resolution dated 30.08.2021, amendment in JV agreement was made in respect of Energy Efficiency Services Limited (EESL) amongst all the JV partners i.e. NTPC Limited, Power Finance Corporation Limited, REC Limited and Power Grid Corporation of India Limited vide Supplementary Agreement dated 01.09.2021. Due to this amendment, EESL ceases to be a jointly controlled entity under Ind AS framework for the Company w.e.f. 01.09.2021 and accordingly investments in EESL has been classified as FVTOCI.
11.4 At initial recognition, the Company made an irrevocable election to present subsequent changes in the fair value of certain equity instruments in other comprehensive income. The Company''s main operation is to provide financial assistance to power sector. Thus, in order to insulate Standalone Statement of Profit and Loss from price fluctuations of these instruments, the Management believes that FVTOCI classification provides a more meaningful presentation, rather than classifying them at FVTPL.
(a) These equity shares were sold in tranches during the year considering the market scenario. The fair value and gain have been computed based on the price as on the respective date of de-recognition and has been presented above on aggregate basis.
(b) Pursuant to the completion of liquidation proceedings of ''Small is Beautiful'' Fund; 61,52,200 units of the ''Small is Beautiful'' Fund held by the Company have been derecognised from the books.
Subsequent to derecognition of such investments, the Company has transferred the cumulative gain/loss on such shares within Equity (from Reserve for Equity instruments through OCI to Retained Earnings) during the year. Refer Standalone Statement of Changes in Equity for further details.
11.5 Refer Note 42 for details of fair valuation of investments.
17.1 The Company raises funds through various instruments including non-convertible bond issues. During the year, the Company has not defaulted in servicing of any of its debt securities.
17.2 The amounts raised during the period have been utilised for the stated objects in the offer document/Information memorandum/facility agreement other than temporary deployment pending application of proceeds.
17.3 All the secured listed non-convertible debentures of the Company are fully secured by way of mortgage on specified immovable properties and/ or charge on receivables of the Company. Further, the Company has maintained security cover of 1.01 times as per the terms of offer document/ information memorandum sufficient to discharge the principal and interest thereon at all times for these non-convertible debt securities issued.
17.4 Wherever required, the Company has registered the charges with RoC within the statutory timelines.
17.12 Infrastructure Bonds (2010-11) Series III and IV are secured by charge on specific book debt of '' 438.71 crore as on 31.03.2022 of the Company along with first charge on immovable property situated at Jangpura, New Delhi.
17.13 54 EC Capital Gain Tax Exemption Bonds, Taxable Secured Public Issue (2020-21) Tranche-I all Series & all category, and all other Tax Free Bonds Series are secured by first pari passu charge on the total receivables / book debts of the Company (excluding those receivables which are specifically charged for infrastructure bonds issued during the FY 2010-11, the security details of which is contained at Note 17.12), limited to the extent of payment/repayment of the bonds including interest, additional interest, cost and expenses and all other monies whatsoever payable/repayable by the Company to the Bondholders and/or others under/pursuant to the Transaction Documents.
18.10 None of the borrowings have been guaranteed by Directors.
18.11 There has been no default in repayment of borrowings and interest during periods presented above.
18.12 The amounts raised during the year have been utilised for the stated objects in the offer document/ Information memorandum/ facility agreement.
18.13 Refer Note 10 for carrying values of the receivable pledged as security against secured rupee term loans. Secured rupee term loans are secured by first pari passu charge in favour of lending banks on the receivables of the Company limited to payment/ repayment of the term loan including interest, additional interest, cost and expenses and all other monies whatsoever payable/repayable by the Company to lending bank and/or others under/pursuant to the security document except for those receivables which are already charged in favour of Catalyst Trusteeship Ltd. (formally known as GDA Trusteeship Limited).
20.2 Unclaimed dividends, unclaimed bonds and interest thereon include the amounts which have either not been claimed by the investors/holders of the instruments or are on hold pending legal formalities etc. The amount eligible to be transferred to Investor Education and Protection Fund has been transferred within the prescribed time limit.
20.3 Interest Subsidy Fund under Accelerated Generation & Supply Programme (AG & SP):Under AG & SP Scheme the Company had claimed subsidy from GoI at net present value to be passed on to the eligible borrowers. The said scheme has been closed during current FY 2021-22 and after adjusting all the subsidy benefits, an amount of '' 19.85 crore is refundable to MoP and it forms part of line item ''other liabilities'' in Note 20. The details are as under:
(vi) Interest Differential Reserve - KFW Loan:
It represents difference between the interest due and interest paid on KFW loan as per the loan agreement. Exchange gain/ loss upon re-statement of loan balance, in accordance with the terms of the foreign currency borrowing from KFW, is adjusted against this reserve. The Company is not required to repay the unadjusted balance in the reserve after complete repayment of KFW Loan. Any unadjusted balance in the reserve after complete repayment of KFW Loan shall be used for further lending by the Company after consulting with KFW.
(iii) Special Reserve created u/s 45-IC of Reserve Bank of India Act, 1934:
It represents transfer from retained earning @ 20 % of net profit after tax for the year as disclosed in profit and loss account and before any dividend is declared. No appropriation is allowed to be made from the reserve fund except for the purpose as may be specified by the Reserve Bank of India (RBI) from time to time and further, any such appropriation is also required to be reported to the RBI within 21 days from the date of such withdrawal.
General Reserve includes the amounts appropriated from the profits of the Company before declaration of dividend (as was required under erstwhile Companies Act, 1956). It also includes the amount transferred from Statutory Reserves on utilisation/ reversal of such Reserves. Further the Company appropriates profit to General Reserve in order to avail full eligible deduction of Special Reserve under Section 36(1 )(viii) of the Income Tax Act, 1961.
(iv) Reserve for Bad & doubtful debts u/s 36(1)(viia)(c) of Income-Tax Act,1961:
It has been created to enable the Company to avail income tax deduction. The reserve so maintained is primarily utilised for adjustment of actual bad debts or part thereof. As per Section 36(1 )(viia)(c) of Income Tax Act, 1961, the Company is eligible to avail deduction in respect of any provision / reserve made for bad and doubtful debts, not exceeding five percent of the total income as per Income Tax Act.
(ix) Reserve for Equity Instruments through Other Comprehensive Income:
The Company elected to recognise changes in the fair value of certain investment in equity instruments through other comprehensive income. It represents cumulative gains and losses arising on the revaluation of equity instruments measured at fair value through other comprehensive income. When the asset is derecognised, amounts in the reserve are subsequently transferred to retained earnings and not to standalone statement of profit and loss. Dividends on such investments are recognised in statement of profit & loss unless the dividend clearly represents a recovery of part of the cost of the investment.
During the current year ended 31.03.2022, an amount of ''1,884.82 crore has been paid to Government of India as dividend (being proportionate share in final dividend for FY 20-21 and interim dividend for FY 21-22 ).
(ii) Events occurring after Balance Sheet date:
Board of Directors in its meeting held on 25.05.2022 has recommended final dividend @ 12.50% on the paid up equity share capital i.e. '' 1.25 /- per equity share of '' 10/- each for the FY 2021-22 subject to approval of shareholders in ensuing Annual General Meeting.
(iii) The Dividend Paid/Proposed is in compliance with the provisions of Section 123 of Companies Act 2013, as applicable.
34.1 Disclosures as per Ind AS 19 ''Employee Benefits'' in respect of provision made towards various employee benefits are provided in Note 44.
35. Corporate Social Responsibility
In accordance with the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 notified w.e.f. 22.01.2021, any unspent amount pursuant to any ongoing project shall be transferred to unspent CSR Account in any scheduled bank within a period of thirty days from the end of the financial year, to be utilised within a period of three financial years from the date of such transfer. Any unspent CSR amount, other than for any ongoing project, shall be transferred to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year. Further, if the Company spends an amount in excess of the requirement under statute, the excess amount may be carried forward and set off in three succeeding financial years against the amount to be spent.
As the notification was made effective during FY 2020-21, the Company complied with the amended provisions of Section 135 of the Companies Act, 2013 with effect from the FY 2020-21. Accordingly, the unspent CSR amount as at 31.03.2020 would continue to be dealt with in accordance with the pre-amendment framework.
39. Capital Management
The Company maintains a capital base that is adequate to support the Company''s risk profile, regulatory and business needs. The Company sources funds from domestic and international financial markets, inter alia leading to diverse investor base and optimised cost of capital. Refer Note 17, 18 and 19 for details w.r.t. sources of funds and refer Standalone Statement of Changes in Equity for details w.r.t Equity.
As contained in RBI Master Directions - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016, as amended from time to time (hereinafter referred to as "RBI Master Directions"), the Company is required to maintain a capital ratio consisting of Tier I and Tier II capital not less than 15% of its aggregate risk weighted assets on-balance sheet and of risk adjusted value of off-balance sheet items. Out of this, Tier I capital shall not be less than 10%. The Company regularly monitors the maintenance of prescribed levels of Capital to Risk Weighted Assets Ratio (CRAR). Further, with regard to capital restructuring, the Company is also guided, inter alia, by guidelines on "Capital Restructuring of Central Public Sector Enterprises" issued by Department of Investment and Public Asset Management (DIPAM), Ministry of Finance, Department of Public Enterprises in respect of issue of bonus shares, dividend distribution, buy back of equity shares etc.
year, cost of raising funds from alternate sources, cash flow position and applicable taxes if any, subject to the guidelines as applicable from time to time.
As per the extant guidelines issued by Department of Investment and Public Asset Management (DIPAM), Government of India, the Company is required to pay a minimum annual dividend of 30% of Profit after Tax or 5% of the net-worth, whichever is higher subject to the maximum dividend permitted under extant legal provisions. Though, the Company endeavours to declare dividend as per these guidelines, it may propose to MoP, a lower dividend after analysis of various financial parameters like net-worth, CAPEX / business expansion needs; additional investments in subsidiaries/ associates of the Company; other regulatory requirements etc. For details of dividend paid/recommended during the year, refer Note 24.2 and Note 24.3.
40. Financial Risk Management
The Company is exposed to several risks which are inherent to the environment that it operates in. The Company is into business of extending financial assistance to power sector. The principal risks which are inherent with the Company''s business model and from its use of financial instruments include credit risk, liquidity risk and market risk (currency risk, interest rate risk and price risk).
For managing these risks, the Company has put in place an integrated enterprise-wide risk management mechanism to ensure that these risks are monitored carefully and managed efficiently. In accordance with the RBI Master Direction in order to augment risk management practices in the Company, the Company has a Chief Risk Officer (CRO) who is involved in the process
The Company has a well-defined dividend distribution policy. Dividend distribution policy focuses on various factors including but not limited to GoI guidelines, RBI circulars / guidelines, future capital expenditure plans, profits earned during the financial
of identification, measurement and mitigation of risks. The risk management approach i.e., Company''s objectives, policies and processes for identifying, measuring and managing each of above risk is set out in the subsequent paragraphs.
Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss to the Company by failing to discharge its obligation. Details of financial assets that expose the Company to credit risk are:
(a) Credit risk on cash and cash equivalents and other bank balances is limited as these are held with scheduled commercial public sector banks, high rated private sector banks and mutual fund houses, which meets the empanelment criteria as set out in the Company''s policy. The Company has also set exposure limits for deployment of funds in various types of instruments with respective banks/mutual fund houses.
For its investments, the Company manages its exposure to credit risk by periodically monitoring such investments, and applying the appropriate valuation techniques to arrive at the carrying value.
(b) Credit risk on other financial assets is evaluated based on Company''s knowledge of the credit worthiness of those parties and managed by monitoring the recoverability of such amounts. The Company carries an impairment loss allowance of '' 24.79 crore on its other financial assets as at 31.03.2022 (as at 31.03.2021 '' 22.46 crore).
(c) The Company is exposed to credit risk primarily through its lending operations. The same is explained in the paragraphs below.
40.1.1 Credit Risk Management for Lending Operations
The Company has put in place key policies and processes for managing credit risk, which include formulating credit policies, guiding the Company''s appetite for credit risk exposures, undertaking reviews & objective assessment of credit risk, and monitoring performance and management of portfolios. All the procedures and processes of the Company are ISO 9001:2015 certified.
The credit risk management covers two key areas, i.e., project appraisal & project monitoring. The Company selects the borrowers in accordance with the Company''s approved credit policy, which inter alia, defines factors to be considered for rating of the borrower/ project. The Company''s customer selection procedure assesses viability of project along with that of its promoting entity. Rate of interest and maximum admissible exposure is, inter alia, based on internal rating awarded by the Company.
The Company follows a systematic, institutional project appraisal process to assess the credit risk before financing any project.
(a) Appraisal for Private Sector Power Projects
For private sector projects, a two-stage appraisal process is followed. Initially a preliminary appraisal is carried out in order to decide the prima facie preparedness of the project to be taken up for detailed appraisal. Detailed appraisal is carried out for those projects shortlisted on the basis of preliminary appraisal.
The Company along with evaluation of project viability also assesses the ability of its promoter(s) to contribute equity and complete the project. The Company follows an integrated rating methodology whereby Integrated Rating (IR) is calculated using the weighted average of the scores of the project grading and promoter grading. Based on the IR of the project, terms and conditions (including security package, interest rate and debt-equity ratio) are stipulated.
(b) Appraisal for State Sector Power Projects
State sector projects are taken up for detailed appraisal to determine, inter alia, if they are techno economically sound and compatible with integrated power development & expansion plans of the State.
The Company classifies state power generation utilities into various risk rating grades based on the evaluation of utility''s performance against specific parameters covering operational and financial performance. With regards to transmission utilities, the Company adopts the categorisation of its subsidiary RECL as per its policy. With regard to State Power Distribution utilities including integrated utilities, the Company''s categorisation policy provides for adoption of Ministry of Power''s (MoP''s) Integrated Ratings by aligning such ratings/ grading with that of Company''s rating structure.
Such categories/ratings are used to determine credit exposure limits, security requirements and pricing of loans given to the State Sector Borrowers. The Company also has a mechanism in place for monitoring the exposure to single borrower and exposure within a State.
The detailed project appraisal involves technical and financial appraisal covering various aspects such as project inputs, statutory and non-statutory clearances, contracts, project linkages, financial modelling/projections, calculation of returns, sensitivity analysis etc.
After detailed analysis indicated above, the overall viability of the project and entity is assessed and various conditions in the form of pre-commitment, pre-disbursement and other conditions are stipulated so as to ensure tying up of funds (debt and equity both), all physical inputs, appropriateness of all the contracts, compliance of conditions precedent in agreements/ contracts/ statutory and non- statutory clearances related to the project etc. and in general to ensure bankability of the project & protection of the interest of the Company as a lender for timely servicing of debt. The Company has an authorisation/ delegation structure for the approval of credit facilities commensurating with the size of the loan.
The Company stipulates a package of security measures/covenants to mitigate risks during the construction and post COD (commercial operation date) stage of the project. Based on the risk appetite and appraisal of the project, the Company adopts a combination of the following measures:
(a) Primary Security - Charge on Project Assets or State Government Guarantees
(b) Collateral Securities - Corporate guarantee, Personal guarantee of promoters, Pledge of shares, Charge on assets/ revenues of group/other companies
(c) Payment Security Mechanism - Escrow Account/ Letter of Credit, Trust and Retention Account (TRA)
(d) Other covenants - Assignment of all project contracts, documents, insurance policies in favour of the Company, Upfront equity requirement, Debt Service Reserve Account (DSRA), Debt Equity ratio, shareholders'' agreements, financial closure, etc.
The Company has comprehensive project/loan monitoring guidelines that captures aspects relating to monitoring, tracking of project construction, implementation, identifies risks where intervention is required to minimise the time/ cost overruns/ consequent slippages in disbursements and including progress of commissioned projects.
For State sector projects, monitoring is carried out based on project progress details obtained regularly from borrowers through progress monitoring reports, site visits, discussions with the borrowers, information/reports available on Central Electricity Authority''s (CEA) website etc.
For private sector, where the Company is Lead Financial Institution (FI), the Company engages Lenders'' Engineers (LEs) and Lenders'' Financial Advisors (LFAs), which are independent agencies to act on behalf of various lenders/consortium
members. The LEs conduct periodic site visits, review relevant documents, discusses with the borrowers and submit its reports on progress of the project. LFAs submit the statements of fund flow and utilisation of funds in the project periodically. In cases the Company is not the lead FI, the tasks related to LEs and LFAs services are coordinated with the concerned lead lender.
Also, the consolidated periodic progress report of certain projects is prepared comprising important observations/ issues viz. areas of concern, reasons for delay, issues affecting project construction/implementation etc. and is reviewed by the Company on a regular basis.
The Company continuously monitors delays and/or default of borrowers and their recoverability. On occurrence of default in the borrower''s account, the Company initiates necessary steps which may involve action(s) including, but not limited to, Special Mention Account (SMA) reporting to RBI, credit information reporting to Central Repository of Information on Large Credits (CRILC) etc., regularisation of the account by recovering all over dues, invocation of guarantees/ securities to recover the dues, conversion of loan into equity as per loan agreement, restructuring of loan account, formulating resolution plan with the borrower, change in ownership, Corporate Insolvency Resolution Process (CIRP) under IBC-2016, sale of the exposures to other entities/investors, other recovery mechanisms like referring the case for legal action before Debt Recovery Tribunal (DRT), SARFAESI, etc. and other actions as specified under regulatory/legal framework.
40.1.2 Credit Risk Measurement - Impairment Assessment for Lending Operations
(i) Staging of loans
Ind AS 109 outlines a three staged model for measurement of impairment based on changes in credit risk since initial recognition. For classification of its borrowers into various stages, the Company uses the following basis:
- A financial asset that is not credit impaired on initial recognition is classified in ''Stage 1''.
- If a significant increase in credit risk (SICR) is identified, the financial asset is moved to ''Stage 2''.
An assessment of whether credit risk has increased significantly since initial recognition is performed at each reporting date by considering the change in the risk of default occurring over the remaining life of the financial assets. In accordance with Ind AS 109 ''Financial Instruments'', the Company has applied rebuttable presumption that considers more than 30 days past due as a parameter for determining significant increase in credit risk.
- If the financial asset is credit-impaired, it is moved to ''Stage 3'' category.
In case of Stage 3 financial assets, after implementation of the resolution plan (except for change of ownership and/ or resolution through NCLT), the financial asset is upgraded and classified as Stage 2 for two quarters from the date of implementation of resolution plan.
In accordance with Ind AS 109 ''Financial Instruments'', the Company considers the rebuttable presumption to define a financial asset as in default, i.e. when the loan account is more than 90 days past due on its contractual payments. Credit impaired financial assets are aligned with the definition of default.
(iii) Measurement of Expected Credit Loss (ECL)
The Company recognises impairment loss allowance for the financial assets in accordance with a Board-approved expected credit loss (ECL) policy. ECL is measured on either a 12 month or lifetime basis depending on whether there is significant increase in credit risk since initial recognition. ECL is the product of Probability of default (PD), Loss Given Default (LGD) and Exposure at Default (EAD). The Company has appointed an independent agency, ICRA Analytics Ltd., during the financial year for assessment of ECL in accordance with Ind AS 109 ''Financial Instruments''. The brief methodology of computation of ECL is as follows:
(a) Probability of default (PD)
PD is an estimate of the likelihood of default over a given time horizon. It is estimated as at a point in time. For assessing 12-month PD, probability of a loan defaulting in next 12 months is ascertained and similarly for assessing lifetime PD, probability of a loan defaulting in its remaining lifetime is ascertained.
For Stage 1 accounts, 12 months PD is used.
For Stage 2 (significantly increased credit risk accounts), Lifetime PD is used.
For Stage 3 (credit impaired accounts), 100% PD is taken.
For 12-month PD: PDs as associated with external ratings grades (published as a part of rating transition matrix of ICRA) have been used for assessment of ECL. In case of State Sector borrowers, the same have been derived on the basis of mapping with the Company''s internal ratings. Whereas in case of private sector borrowers, the same have been derived on the basis of mapping with latest external ratings as published by various credit rating agencies. In case of non-availability of external rating for private sector borrowers, the 12-month PD has been computed through a Proxy Risk Scoring Model developed by the agency. The said model uses the Quantitative financial ratios like Gearing (Debt/Equity), Return on Capital Employed, Interest Coverage ratio, Debt to EBITDA ratio and qualitative parameters like Plant Load Factor, LAF and ACS ARR gap.
For Lifetime PD: Markov Chain Model has been used to compute Lifetime PDs of the rating grade.
(b) Loss Given Default (LGD)
LGD is the loss factor which the Company may experience in case the default occurs.
For State sector borrowers, LGD has been assigned on the basis of risk category considering State GDP and fiscal deficit
In case of Private sector borrowers, LGD has been assessed considering factors like Project Cost per Unit, Percentage Completion, Project Capacity in case of generation projects and on the basis of book value of assets, Percentage Completion in case of transmission & distribution projects. The said assessed values have thereafter been discounted by applying stress factor and depreciation based on useful life of assets as published by CERC. Further, stage wise average LGD had been applied in case of other types of projects.
For Stage 3 borrowers, LGD has been assessed based on discounted projected cash flow analysis for operational projects and on assets valuation/Bid value/OTS amount etc. as available for other projects.
(c) Exposure at Default (EAD)
It is outstanding exposure on which ECL is computed. EAD includes outstanding principal and interest in respect of the loan.
(d) Key assumptions used in measurement of ECL
- The Company considers the date of initial recognition as the base date from which significant increase in credit risk is determined.
- Since the Company has a right to cancel any sanctioned but undrawn limits to any of its borrowers, EAD is assumed to be outstanding balance and interest of the loan as on the reporting date.
(e) The assessment of significant increase in risk and the calculation of ECL both incorporate forward-looking information. Further, the independent agency appointed to assist the Company in ECL assessment also consider the forward-looking information in the determination of the impairment allowance to be assigned to the borrower, by taking into consideration various project operational parameters, project financial ratios, extension of the project completion and also possibility of stressed and favourable economic conditions. Further, the independent agency has also added some additional macroeconomic parameters such as IIP (index of industrial production) electricity y-o-y growth rate, Money supply y-o-y growth rate to arrive at a weighted shock factor to the base PD term structure for ECL computation so as to reflect the right risk assessment of the utilities.
40.1.3 Credit risk analysis for Lending Operations
(i) Exposure to credit risk
For loans recognised in the balance sheet, the gross exposure to credit risk equals their carrying amount. Refer Note 10 ''Loans'' for Company''s exposure to credit risk arising from loans.
For financial guarantee issued, the maximum exposure to credit risk is the maximum amount that the Company would have to pay if the guarantees are called upon. For irrevocable loan commitments, the maximum exposure to credit risk is the full amount of the commitment facilities. Refer Note 46 for exposure of Guarantee and Outstanding Disbursement Commitments.
(ii) Concentration of credit risk
Credit concentration risk refers to risk associated with large credit/investment exposure to a single company or a group of companies based on its ownership, sector, region etc. that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions, with the potential to adversely affect lender''s core operations.
Loans to state sector are well diversified as these are extended to multiple entities under the control of various State Governments and Central Government. The Company considers that these loans have a low credit risk in comparison to lending to private sector mainly due to low default / loss history in state sector and availability of government guarantee in certain loans. Presence of Government interest in these projects also lowers the risk of non-recoverability of dues.
40.1.4 Write off of Loan Assets
The Company writes off financial assets, in whole or in part, when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include ceasure of enforcement activity or where the Company''s recovery method is foreclosing on collateral and the value of collateral is such that there is no reasonable expectation of recovery in full.
40.1.5 Policy on sales out of amortised cost business
The Company does not resort to the sale of financial assets, in ordinary course of business. However, the Company has an approved policy that it may proceed for resolution of stressed assets by either restructuring, change of ownership, settlement or otherwise. The assets are then assessed for derecognition as per Ind AS 109 ''Financial Instruments''.
Pursuant to Ad-interim order from Hon''ble High Court(s) these borrower(s) accounts have not been classified as Credit impaired. The Company holds adequate impairment loss allowance with respect to these loan accounts and has categorised them in Stage 2. The interest income is also not been recognised on these loan accounts on accrual basis since these loans are more than 90 days past due.
Liquidity risk is the risk that the Company doesn''t have sufficient financial resources to meet its obligations as and when they fall due. The risk arises from the mismatches in the timing of the cash flows which are inherent in all financing operations and can be affected by a range of company specific and market wide events.
In order to effectively manage liquidity risk, the Company endeavours to maintain sufficient cash flows to cover maturing liabilities without incurring unacceptable losses or risking damage to the Company''s reputation and also endeavours to maintain a diversified fund base by raising resources through different funding instruments. The adequacy of the Company''s liquidity position is determined keeping in view the current liquidity position , anticipated future funding needs, present and future earning capacity and available sources of funds.
The Company manages its day to day liquidity to ensure that the Company has sufficient liquidity to meet its financial obligation as & when due. The long-term liquidity is managed keeping in view the long-term fund position and the market factors. This is in line with the Board approved framework and breaches, if any, are to be reported to the Board of Directors. The Company has never defaulted in servicing of its borrowings.
Further, for overall liquidity monitoring and supervision, the Company has an Asset Liability Committee (ALCO) headed by Director (Finance). The ALCO tracks the liquidity risk by analysing the maturity or cash flow mismatches of its financial assets and liabilities. The mismatches are analysed by way of liquidity statements prescribed by RBI, wherein the cumulative surplus or deficit of funds is arrived at by distributing the cash flows against outstanding financial assets and financial liabilities according to the maturity ladder.
(v) The Company also maintains sufficient liquidity buffer in the form of High-Quality Liquid Assets (HQLA) as prescribed by RBI for NBFCs. Refer note 55.6 for disclosure in this regard.
40.3Market Risk - Foreign Currency RiskForeign currency risk is the risk that the fair value or future cash flows of a financial instrument, denominated in currency other than functional currency, will fluctuate because of changes in foreign exchange rates.
(i) The Company is exposed to foreign currency risk mainly on its borrowings denominated in foreign currency. The carrying amount of the Company''s foreign currency denominated borrowings is as follows:
(ii) Foreign currency risk monitoring and management
The Company has put in place a Board approved "Policy for Management of Risks on Foreign Currency Borrowings" to manage and hedge risks associated with foreign currency borrowings which prescribes the structure and organisation for management of associated risks.
The Company enters into various derivative transactions viz. principal only swaps, options and forward contracts for hedging the exchange rate risk. As per extant policy, a system for reporting and monitoring of risks is in place wherein Committee for Management of Risks on Foreign Currency Borrowings, consisting of senior executives of the Company, monitors the foreign currency exchange rate. These derivative transactions are done for hedging purpose and not for trading or speculative purpose. The policy lays down the appropriate systems and controls to identify, measure and monitors, the currency risk for reporting to the Management.
Further, for managing the interest rate risk, the Company reviews its interest rates periodically based on prevailing market conditions, borrowing cost, yield, spread, competitors'' rates, etc. The asset mix is managed by the Company through its interest rate & credit policies which inter alia covers aspects like reset periods; repayment periods, prepayment premium etc. The liabilities are managed keeping in view factors like cost, market appetite, timing, market scenario, ALM gap position etc. The Company also enters into various derivatives transactions like interest rate swaps, cross-currency interest rate swaps to hedge its interest rate risk.
(ii) Interest Rate Sensitivity Analysis
As per RBI Guidelines, Earning at Risk (EaR) is an important focal point for interest risk management. For Interest Rate Sensitivity analysis, the impact of movement of interest rates has been measured on the Earning at Risk derived from the gap statements. The impact has been worked out considering 25 basis upward/downward shocks to interest rates over a one-year period, assuming a constant balance sheet. The analysis shows that if rates are increased/decreased by 25 bps, the impact on EaR will be ( /-) '' 118.77 crore. (As at 31.03.2021 ( /-) '' 58.00 crore).
The analysis assumes that the Rate Sensitive Assets and Rate Sensitive Liabilities are being re-priced at the same time. Further, the analysis considers the earliest/first re-pricing date of the Rate Sensitive Assets and Rate Sensitive Liabilities.
Note: A 25 basis point increase or decrease represents management''s assessment of the reasonably possible change in interest rates.
40.4.2 Disclosures in respect of Interest Rate Benchmark Reform
The Company has variable interest rate borrowings whose interest rate is based on interest rate benchmarks. Also, to hedge the variability of cash flows on these borrowings, the Company has entered into multiple interest rate swaps with key terms (principal amount, payment dates, repricing dates, currency) that match those of the debt on which it pays a fixed rate and receives a variable rate. Significant interest rate benchmark used in the Company''s borrowings is 6 month USD LIBOR (London Interbank offer rate).
(i) Exposure directly affected by the interest rate benchmark reform
The total amount of exposure that is directly affected by Interest Rate Benchmark Reform (IBOR) i.e. after June 2023 is USD 657.67 million (Amount in INR '' 4,985.66 crore) as on 31.03.2022. Out of this, the amount of the derivative exposure linked with such liabilities and accounted for under hedge accounting is USD 650 million (Amount in INR '' 4,927.46 crore).
40.4 Market Risk - Interest Rate Risk
40.4.1 Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in interest rates. The impact may be beneficial or adverse depending on the direction of change in interest rates and whether assets or liabilities re-price faster.
(i) Interest rate risk is managed with the objective to control market risk exposure while optimising the return.
The Asset Liability Committee (ALCO) tracks the interest rate risk through the gap analysis i.e. by analysing the mismatches between Rate Sensitive Assets and Rate Sensitive Liabilities. For gap analysis, the interest rate sensitivity statement prescribed by RBI is used, wherein the gap is measured between the Rate Sensitive Assets and Rate Sensitive Liabilities which are distributed based on the maturity date or the re-pricing date whichever is earlier.
(ii) Managing the process of transition to alternative benchmark rates
The Company has in place a Board approved Policy for undertaking Libor Transition namely "Framework for transition from London Inter Bank Offered Rate (LIBOR) to Alternative Reference Rate (ARR)''. The framework inter alia covers aspects such as assessment of exposure linked to LIBOR, identification of risk arising out of LIBOR transition, contracts remediation, operational readiness, governing structure, regulatory compliance & reporting, etc. Further, the Company shall undertake all transition activities as per the process/guidelines detailed in the policy.
(iii) Significant assumptions for exposure affected by the interest rate benchmark reform
Ind AS 109 provides temporary exceptions to all the hedging relationships directly impacted by the interest rate benchmark reform. The alternative reference rate/benchmarks for the LIBOR linked loans and their derivatives are yet to be agreed with the lenders and the derivative bankers. However, it has been assumed that as a result of such reform there shall be no change in the relationship of the hedged items, hedged instruments and its corresponding hedge effectiveness.
(i) The Company is exposed to price risks arising from investments in listed equity shares. Refer Note 11 ''Investments'' for Company''s exposure to the same.
The hedging instruments which meets the qualifying criteria for hedge accounting are designated as cash flow hedge. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in Other Comprehensive Income. The change in intrinsic value of hedging instruments is recognised in ''Effective Portion of Cash Flow Hedges''. The amounts recognised in such reserve are reclassified to the Statement of Profit or Loss when the hedged item affects profit or loss. Further, the change in fair value of the time value of a hedging instruments is recognised in ''Cost of Hedging Reserve''. The amounts recognised in such reserve are amortised to the Statement of Profit and Loss on a systematic basis.
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. The Company applies the following effectiveness testing strategies:
a) For derivatives other than options that exactly match the terms of the hedged item, the economic relationship and hedge effectiveness are based on the qualitative factors using critical terms match method (where principal terms of the hedging instrument and the hedged item are same).
b) For option structures, the Company analyses the relationship of changes in value of the hedging instrument and hedged item using regression analysis based dollar offset method.
43.6 Major terms and conditions of transactions with related parties
(i) Transactions with related parties are made on terms equivalent to those that prevail in arm''s length transactions.
(ii) The remuneration to Key Managerial Personnel are in line with the HR policies of the Company.
(iii) Loans and advances given to Directors/ KMPs have specified terms/ period of repayment and are in line with the HR Policies of the Company.
(iv) The Company makes advances to its associate companies which are incorporated as SPVs to meet the preliminary expenditure. Such advances carry interest rates at the rate applicable to Term Loans as per the Company''s policy.
(v) The interest and/or dividend paid to the Trusts and Key Managerial Personnel are on account of their investments in the debt securities and/or equity shares of the Company and the interest and/or dividend paid on such securities is uniformly applicable to all the holders.
(vi) Outstanding balances of group companies at the year-end are unsecured.
44. Employee Benefits44.1 Defined contribution plans:
(a) Pension
The Company pays fixed contribution to National Pension Scheme (NPS) for its pension obligation towards employees at predetermined rates into the Tier-I NPS Account (Pension Account) of the employees.
The Company pays fixed contribution on account of provident fund at prescribed rates to a separate trust, which invests the funds in permitted securities. The trust has to ensure, a minimum rate of return to the members as specified by GoI. However, any shortfall for payment of interest to members as per specified rate of return has to be compensated by the Company. The Company estimates that no liability will arise in this regard in the near future and hence, no further provision is considered necessary.
An amount of '' 14.87 crore (Previous year '' 13.10 crore) for the year is recognised as expense in the Standalone Statement of Profit and Loss on account of the Company''s contribution to the defined contribution plans.
The Company has a Post-Retirement Medical Scheme (PRMS) to provide medical facilities to superannuated employees, dependent family members of superannuated and deceased employees. The liability for PRMS is recognised on the basis of actuarial valuation.
Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:
Most of the plan asset investments are in government securities, other fixed income securities with high rating grades and mutual funds. The fair value of these assets is subject to volatility due to change in interest rates and other market & macro-economic factors. There is also a risk of asset liability matching i.e. the cash flow for plan assets does not match with cash flow for plan liabilities.
The present value of defined benefit plan liabilities is calculated using a discount rate which is determined by reference to government bonds'' yields at the end of the reporting period. A decrease (increase) in discount rate will increase (decrease) present values of plan liabilities, although this will be partially offset by an increase in the value of the plans'' investments.
The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan''s liability.
The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan''s liability.
v) Turnover rate/Withdrawal rate of employee
If the actual employee withdrawal rate in the future turns out to be more or less than expected then it may result in increase/decrease in the liability.
The Company actively monitors how the duration and expected yield of investments are matching the expected cash outflows arising from employee benefit obligations. Investments are well diversified, such that the failure of any single investment would not have a material impact on overall level of assets. There has been no change in the process used by the Company to manage its risks from prior periods.
(j) The weighted average duration of the defined benefit plan obligation at the end of the reporting period is 13.98 years (as at 31.03.2021: 15.94 years).
44.3Other long-term employee benefits
(a) Leave
The Company provides for earned leave benefit and half-pay leave benefit to the credit of the employees, which accrues on half-yearly basis at 15 days and 10 days respectively. A maximum of 300 days of earned leave can be accumulated at any point of time during the service. There is no limit for accumulation of half pay leave. On separation after 10 years of service or on superannuation, earned leave plus half pay leave taken together can be encashed subject to a maximum of 300 days. However, there is no restriction on the number of years of service for encashment of earned leave on separation from the service. Provision based on actuarial valuation amounting to '' 11.62 crore (Previous year '' 8.85 crore) for the year has been made at the year end and debited to the Standalone Statement of Profit and Loss.
Provision for settlement allowance and long service awards amounting to '' 1.14 crore for the year (Previous year '' 2.68 crore) has been made on the basis of actuarial valuation and debited to the Standalone Statement of Profit and Loss.
44.4Employee benefits (viz. Gratuity, PRMS, Terminal Benefits, leave encashment and other employee benefits) in respect of Company''s employees working in its wholly-owned subsidiary on deputation / secondment basis are being allocated based on a fixed percentage of employee cost.
45.3 During the year 2021-22, the expenses relating to short-term/low value leases amounting to '' 7.20 crore (Previous year '' 6.49 crore) has been charged to Standalone statement of Profit and Loss. Included in the amount above are leases pertaining to residential accommodation of employees, space for official use, hiring of EDP equipment & other office equipment etc. These leases are usually renewable on mutually agreed terms and are cancellable.
47. There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at 31.03.2022 (Nil as at 31.03.2021). This has been determined to the extent the status of such parties could be identified on the basis of information available with the Company.
48. In the context of reporting business/geographical segment as required by Ind AS 108 ''Operating Segments'', the Company''s operations comprise of only one business segment lending to power sector entities. All activities revolve around the main business. Hence, there are no reportable segments as per Ind AS 108.
49. Modifications in the significant accounting policies:
A policy on Offsetting of financial assets and financial liabilities has been incorporated in line with Ind AS 32. Further, certain accounting policies have also been reworded to bring in more clarity and align with Company''s practice. There is no financial impact of such modifications carried out in the accounting policies.
51. Government of India(GoI) schemes being implemented by the Company
The Company has been designated as Nodal Agency for operationalisation and implementation of RDSS Scheme and IPDS (R-APDRP subsumed in it). Role of Nodal Agency inter alia includes pass through of loans/grants to eligible utilities under schemes of GOI. The Company receives the amount on such accounts and disburses it in accordance with the scheme. When funds are received from GOI, the amount is shown under other financial liabilities till the payments are released to the beneficiaries.
51.1 Revamped Distribution Sector Scheme (RDSS)
This Scheme was launched by GoI in July, 2021 to improve the operational efficiencies and financial sustainability of DISCOMs, by providing financial assistance to DISCOMs. It is a Reform based and result linked Distribution sector scheme. PFC along with REC is the nodal agency for operationalisation of the scheme. The implementation period of the Scheme is 5 Years (FY 2021-22 to FY 2025-26) with the sunset date of 31.03.2026. The key objectives of the scheme is to:
i) Improve the quality, reliability and affordability of power supply to consumers through a financially sustainable and operationally efficient distribution sector.
ii) Reduce AT&C losses to pan-India levels of 12-15% by 2024-25.
iii) Reduce ACS-ARR gap to zero by 2024-25.
The Company is eligible for nodal agency fee at the rate of 0.50% of the sum total of the gross budgetary component of the various projects approved by Monitoring Committee. The total amount of nodal agency fee income from this scheme for FY 2021-22 stands at Nil.
The Scheme has an outlay of '' 3,03,758 crore with an estimated gross budgetary support of '' 97,631 crore from the GoI and the amount of GoI grant administered to the eligible entities till 31.03.2022 through the Company is '' 359 crore.
51.2 Integrated Power Development Scheme (IPDS) (with Restructured Accelerated Power Development and Reform Programme (R-APDRP) subsumed)
IPDS scheme was launched in December 2014 to extend financial assistance against capital expenditure for addressing the gaps in sub transmission & distribution network and metering in urban areas to supplement the resources of DISCOMs/ Power Departments. This scheme has the sunset date of 31.03.2022 and the ongoing approved projects have been subsumed under the new RDSS scheme.
The estimated outlay of the scheme was '' 32,612 crore including a budgetary support of '' 25,354 crore from GoI. R-APDRP scheme cost of '' 44,011 crore including budgetary support of '' 22,727 crore have also been carried forward to IPDS scheme. The amount of GOI grant administered to the eligible utilities till 31.03.2022 is ''17,907.45 crore ('' 15,782.44 crore as at 31.03.2021).
The total amount of nodal agency fee income from this scheme for FY 2021 -22 stands at '' 8.60 crore (Previous year '' 4.65 crore). Additionally, the Company has also received '' 28.20 crore (Previous year '' 6.29 crore) as reimbursement of expenditure from MoP under the said scheme.
52. (a) Status of documentation subsequent to reorganisation of the State of Jammu & Kashmir
After the bifurcation of the State of Jammu & Kashmir into two Union territories- Jammu & Kashmir UT and Ladakh UT, the existing entities pertaining to the erstwhile state of Jammu & Kashmir have been restructured vide unbundling order dated 23.10.19. The addendums to the agreements with new restructured departments are yet to be executed. Pending the execution of such documents, the existing loans are being serviced/repaid in line with the existing loan agreement.
(b) Status of documentation subsequent to reorganisation of the State of Andhra Pradesh
Subsequent to the reorganisation of erstwhile Andhra Pr
Mar 31, 2021
There are no repatriation restrictions with respect to ''Bank Balances other than included in Cash and Cash equivalents'' as at the end of the reporting periods presented above.
The Company has taken Loan against these Term Deposits shown under Note 18.
No amount is due for deposit in Investor Education and Protection Fund.
|a) Interest rate derivatives include derivatives on rupee liabilities of '' 3,149.60 crore as at 31.03.2021 (As at 31.03.2020 '' 4,324.60 crore).
|b) Includes JPY loan liability partly hedged through forward rate contract entered for one leg (USD/INR) for '' 940.86 crore as at 31.03.2021 (As at 31.03.2020 covering USD/INR '' 964.94 crore).
|c) Includes currency derivatives of USD 51 million equivalent to INR '' 373.95 crore (Previous year Nil) against interest payments with positive MTM of '' 0.56 crore.
9.5. Refer Note 40.3 and Note 40.4 for Foreign Currency Risk Management and Interest Rate Risk Management respectively and Note 41 for disclosures related to hedge accounting.
10.1 During the year, the Company has sent letters to borrowers seeking confirmation of balances as at 31.03.2021 except where loans have been recalled or pending before court/NCLT.
Confirmations for 98.94 % of the said balances have been received. Out of the remaining loans amounting to '' 3,752.05 crore for which balance confirmations have not been received, 20.99% loans are secured by tangible securities, 78.24% by way of Government Guarantee/ Loans to Government and 0.77% are unsecured loans.
|a) Finance lease for financing wind turbine generators of a lessee RS India Wind Energy Pvt. Ltd. As per original terms, lease rent was to be recovered within a period of 25 years, starting from 01.01.2012, which comprises of 18 years as primary period and a maximum of 7 years as secondary period. The account is credit impaired since 03.10.2017.
|b) Excluding an overdue interest of '' 63.29 crore as at 31.03.2021 (Previous year '' 48.82 crore).
|c) Including an overdue principal of '' 39.52 crore as at 31.03.2021 (Previous year '' 28.28 crore).
|d) During the year, the Company has entered into a one-time settlement (OTS) with the lessee R S India Wind Energy Pvt. Ltd. wherein the settlement amount is to be received in instalments, last being due in June 2021. The amount received under settlement till 31.03.2021 is yet to be appropriated in view of the condition specified in OTS scheme that in case the lessee defaults in payment of any instalment, the amount so collected will be forfeited and utilised towards the settlement of outstanding debt of the lender under the Lease Agreement.
(i) The Company has not entered into any securitisation transaction during the year and there is no exposure on account of securitization as at 31.03.2021 (As at 31.03.2020 Nil).
(ii) The Company has not entered into any One Time Settlement scheme involving assignment of debt to Asset Reconstruction Company during the year ended 31.03.2021. (During the year ended 31.03.2020 the Company had entered into One Time Settlement scheme involving assignment of debt to Asset Reconstruction Company having principal outstanding of '' 1,917.44 crore along with interest and other charges).
(iii) The Company has not undertaken any assignment transaction during the year ended 31.03.2021 (Previous year Nil).
(iv) The Company has neither purchased nor sold any non-performing financial assets to other NBFCs during the year ended 31.03.2021 (Previous year Nil).
10.5 In addition to the above resolutions, the Company has also entered into a one-time settlement (OTS) with a borrower Krishna Godavari Power Utilities Limited having loan outstanding amounting to '' 76.63 crore. Pursuant to the approval of Resolution Plan passed by the Hon''ble National Company Law Tribunal (NCLT), the settlement amount is being received in instalments. The amount received under settlement till 31.03.2021 is yet to be appropriated in view of the conditions specified in resolution plan.
10.6 For details of credit risk exposure and management by the Company, refer Note 40.1.
* I nvestment in each associate is '' 0.05 crore as at 31.03.2021 and 31.03.2020. These associates are companies incorporated as SPVs under mandate from GoI for development of Ultra Mega Power Projects (UMPPs) with the intention to hand over the same to successful bidders on completion of the bidding process.
$ Under Process of striking off.
A Under approval for winding up.
11.3 The name of Power Equity Capital Advisors Private Limited has been struck off from the Registrar of Companies and the said subsidiary is dissolved vide Ministry of Corporate Affairs'' Notice No -ROC/DELHI/248(2)/STK-7/10148 dated 30.06.2020. Accordingly, the Company has written off its equity investment of '' 0.05 crore and reversed the cumulative impairment loss allowance of '' 0.05 crore held w.r.t. investment in the said subsidiary.
11.4 At initial recognition, the Company made an irrevocable election to present in other comprehensive income, subsequent changes in the fair value of investments in certain equity instruments. The Company''s main operation is to provide financial assistance to power sector. Thus, in order to insulate Standalone Statement of Profit and Loss from price fluctuations of these instruments, the Management believes that FVTOCI classification provides a more meaningful presentation, rather than classifying them at FVTPL.
*These equity shares were sold in tranches during the year considering the market scenario. The fair value and gain have been computed based on the price as on the respective date of de-recognition and have been presented on aggregate basis.
Subsequent to de-recognition of such investments, the Company has transferred the cumulative gain/loss on such shares within Equity (from Reserve for Equity instruments through OCI to Retained Earnings) during the year. Refer Standalone Statement of Changes in Equity for further details.
17.9 These bond series are secured by first pari-passu charge on present and future receivables (excluding those receivables which are specifically charged for infrastructure bonds issued during the FY 2010-11, the security details of which is contained at Note 17.10) along with first pari-passu charge on immovable property situated at Guindy, Chennai.
17.10 Infrastructure Bonds (2010-11) Series I, II, III and IV are secured by charge on specific book debt of '' 710.26 crore as on 31.03.2021 of the Company along with first charge on immovable property situated at Jangpura, New Delhi.
17.11 54 EC Capital Gain Tax Exemption Bonds, Taxable Secured Public Issue (2020-21) Tranche-I all Series & all category, and all other Tax Free Bonds Series are secured by first pari-passu charge on the total receivables/book debts of the Company (excluding those receivables which are specifically charged for infrastructure bonds issued during the FY 2010-11, the security details of which is contained at Note 17.10), limited to the extent of payment/repayment of the bonds including interest, additional interest, cost and expenses and all other monies whatsoever payable/repayable by the Company to the Bondholders and/or others under/ pursuant to the Transaction Documents.
18.9 None of the borrowings have been guaranteed by Directors.
18.10 There has been no default in repayment of borrowings and interest during periods presented above.
18.11 Refer Note 10 for carrying values of the receivable pledged as security against secured rupee term loans. Secured rupee term loans are secured by first pari-passu charge in favour of lending banks on the receivables of the Company limited to payment/ repayment of the term loan including interest, additional interest, cost and expenses and all other monies whatsoever payable/ repayable by the Company to lending bank and/or others under/pursuant to the security document except for those receivables which are already charged in favour of Catalyst Trusteeship Ltd. (formally known as GDA Trusteeship Limited).
20.2 Unclaimed dividends, unclaimed bonds and interest thereon include the amounts which have either not been claimed by the investors/holders of the instruments or are on hold pending legal formalities etc. Out of the above, the amount eligible to be transferred to Investor Education and Protection Fund has been transferred.
20.3 Interest Subsidy Fund under Accelerated Generation & Supply Programme (AG&SP):
(i) The Company claimed subsidy from GoI at net present value calculated at indicative interest rates in accordance with GOI''s letter vide D.O.No.32024/17/97 - PFC dated 23.09.1997 and O.M.No.32024/23/2001 - PFC dated 07.03.2003, irrespective of actual repayment schedule, moratorium period and duration of repayment. The amount of interest subsidy received and to be passed on to the borrowers is retained as Interest Subsidy Fund Account. Impact of difference between indicative rate & period considered at the time of claims and at the time of actual disbursement can be ascertained only after end of respective schemes.
23.1 Rights, preferences and restriction attached to equity shares
The Company had issued equity shares having par value of '' 10 per share. The holders of the equity shares are entitled to receive dividends as declared from time to time and are entitled to voting rights proportionate to their shareholding at the meeting of the shareholders.
23.3 Shares reserved for issue under options and contract/commitment for the sale of shares or disinvestment, including the terms and amount: Nil
23.4 During the period of last 5 years, the Company has issued 132,00,40,704 bonus shares in the ratio of 1:1 during FY 2016-17 and has not bought back any shares.
23.5 Terms of any securities convertible into equity shares issued along with the earliest date of conversion in descending order starting from the farthest such date: Nil
23.6 Calls unpaid (showing aggregate value of calls unpaid by directors and officers): Nil
23.7 Forfeited shares (amount originally paid-up): Nil
23.8 Refer Note 39 for Capital Management.
24.1 Nature and purpose of reserves
(i) Securities Premium:
It represents amount of premium received on issue of equity share capital net of expense incurred on issue of equity shares. This amount can be utilised in accordance with the provisions of the Companies Act, 2013.
(ii) Foreign Currency Monetary Item Translation Difference Account:
It represents unamortised foreign exchange gain/loss on Long-term Foreign Currency Borrowings (existing as on 31.03.2018) and are amortised over the tenure of the respective borrowings.
(iii) Special Reserve created u/s 45-IC of Reserve Bank of India Act, 1934:
It represents transfer from retained earning @ 20 % of net profit after tax for the year as disclosed in profit and loss account and before any dividend is declared. No appropriation is allowed to be made from the reserve fund except for the purpose as may be specified by the Reserve Bank of India (RBI) from time to time and further, any such appropriation is also required to be reported to the RBI within 21 days from the date of such withdrawal.
(iv) Reserve for Bad & doubtful debts u/s 36(1)(viia)(c) of Income Tax Act,1961:
It has been created to enable the Company to avail income tax deduction. The reserve so maintained is primarily utilised for adjustment of actual bad debts or part thereof. As per Section 36(1 )(viia)(c) of Income Tax Act, 1961, the Company is eligible to avail deduction in respect of any provision/reserve made for bad and doubtful debts, not exceeding five percent of the total income as per Income Tax Act.
(v) Special Reserve created u/s 36(1)(viii) of Income Tax Act, 1961
It is maintained in order to enable the Company to avail tax benefits. As per Section 36(1)(viii) of the Income Tax Act, 1961, the Company is eligible for deduction not exceeding 20% of profit derived from long term finance activity, provided such amount is transferred and maintained in special reserve account.
(vi) Interest Differential Reserve - KFW Loan:
It represents difference between the interest due and interest paid on KFW loan as per the loan agreement. Exchange gain/loss upon re-statement of loan balance, in accordance with the terms of the Foreign currency borrowing from KFW, is adjusted against this reserve. The Company is not required to repay the unadjusted balance in the reserve after complete repayment of KFW Loan. Any unadjusted balance in the reserve after complete repayment of KFW Loan shall be used for further lending by the Company after consulting with KFW.
(vii) General Reserve:
General Reserve includes the amounts appropriated from the profits of the Company before declaration of dividend (as was required under erstwhile Companies Act, 1956). It also includes the amount transferred from Statutory Reserves on utilization/ reversal of such Reserves. Further the Company appropriates profit to General Reserve in order to avail full eligible deduction of Special Reserve under Section 36(1)(viii) of the Income Tax Act, 1961.
(viii) Retained Earnings:
It represent profits and specified items of other comprehensive income recognised directly in retained earnings earned by the Company after transfer to and from other reserves and dividend distributions.
(ix) Reserve for Equity Instruments through Other Comprehensive Income :
The Company elected to recognise changes in the fair value of certain investment in equity instruments through other comprehensive income. It represents cumulative gains and losses arising on the revaluation of equity instruments measured at fair value through other comprehensive income. When the asset is derecognised, amounts in the reserve are subsequently transferred to retained earnings and not to standalone statement of profit and loss. Dividends on such investments are recognised in statement of profit & loss unless the dividend clearly represents a recovery of part of the cost of the investment.
(x) Reserve for Effective portion of gains and loss on hedging instruments in a Cash Flow Hedge through OCI:
The Company designates the intrinsic value of hedging instruments in ''Cash Flow Hedge'' relationships. Amounts recognised in such reserve are reclassified to the Statement of Profit or Loss when the hedged item affects profit or loss.
(xi) Cost of Hedging Reserve:
The changes in fair value of the time value of hedging instruments are accumulated in a separate component of equity as ''Cost of hedging reserve'' and amortised to the Statement of Profit and Loss on a systematic basis.
24.3 Events occuring after Balance Sheet date:
Board of Directors in its meeting held on 15.06.2021 has recommended final dividend @ 20% on the paid up equity share capital i.e. '' 2/- per equity share of '' 10/- each for the FY 2020-21 subject to approval of shareholders in ensuing Annual General Meeting.
34.1 Disclosures as per Ind AS 19 ''Employee Benefits'' in respect of provision made towards various employee benefits are provided in Note 44.
35. CORPORATE SOCIAL RESPONSIBILITY
During the year, Ministry of Corporate Affairs (MCA) has notified the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 (''amendment'') and has also notified the effective date as 22.01.2021 for the amendments of Section 135 of the Companies Act made vide Companies Amendment Act, 2019 and Companies Amendment Act, 2020.
In accordance with the amendment under the said notifications, any unspent CSR amount, other than for any ongoing project, shall be transferred to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year. Any unspent amount pursuant to any ongoing project must be transferred to unspent CSR Account in any scheduled bank within a period of thirty days from the end of the financial year, to be utilised within a period of three financial years, failing which it shall transfer the same to a Fund specified in Schedule VII, within a period of thirty days from the date of completion of the third financial year.
Further, if the Company spends an amount in excess of the requirement under statute, the excess amount may be set off for three succeeding financial years against the amount to be spent.
As the notification is made effective during FY 2020-21, The Company is complying with the amended provisions of Section 135 of the Companies Act, 2013 with effect from the current financial year. Further, the unspent CSR amount as at 31.03.2020 would continue to be dealt with in accordance with the pre-amendment framework.
The Company maintains a capital base that is adequate to support the Company''s risk profile, regulatory and business needs. The Company sources funds from domestic and international financial markets, inter-alia leading to diverse investor base and optimised cost of capital. Refer Note 17, 18 and 19 for details w.r.t. sources of funds and refer Standalone Statement of Changes in Equity for details w.r.t Equity.
As contained in RBI Master Directions - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016, as amended (hereinafter referred to as ''RBI Master Directions''), the Company is required to maintain a capital ratio consisting of Tier I and Tier II capital not less than 15% of its aggregate risk weighted assets on-balance sheet and of risk adjusted value of off-balance sheet items. Out of this, Tier I capital shall not be less than 10%. The Company regularly monitors the maintenance of prescribed levels of Capital to Risk Weighted Assets Ratio (CRAR). Further, with regard to capital restructuring, the Company is also guided, inter-alia, by guidelines on ''Capital Restructuring of Central Public Sector Enterprises'' issued by Department of Investment and Public Asset Management (DIPAM), Ministry of Finance, Department of Public Enterprises in respect of issue of bonus shares, dividend distribution, buy back of equity shares etc.
39.3 Dividend Distribution Policy
The Company has a well-defined dividend distribution policy. Dividend distribution policy focuses on various factors including but not limited to GoI guidelines, future capital expenditure plans, profits earned during the financial year, cost of raising funds from alternate sources, cash flow position and applicable taxes including tax on dividend, subject to the guidelines as applicable from time to time.
As per the extant guidelines issued by Department of Investment and Public Asset Management (DIPAM), Government of India, the Company is required to pay a minimum annual dividend of 30% of Profit after Tax or 5% of the net-worth, whichever is higher subject to the maximum dividend permitted under extant legal provisions. Though, the Company endeavours to declare dividend as per these guidelines, it may propose to MoP, a lower dividend after analysis of various financial parameters like net-worth, CAPEX/business expansion needs; additional investments in subsidiaries/associates of the Company; etc. For details of dividend paid/recommended during the year, refer Note 24.2 and Note 24.3.
The Company is exposed to several risks which are inherent to the environment that it operates in. The Company is into business of extending financial assistance to power sector. The principal risks which are inherent with the Company''s business model and from its use of financial instruments include credit risk, liquidity risk and market risk (currency risk, interest rate risk and price risk).
For managing these risks, the Company has put in place an integrated enterprise-wide risk management mechanism to ensure that these risks are monitored carefully and managed efficiently. Pursuant to RBI notification DNBR (PD) CC.NO/.099/03.10.001/2018-19 dated 16.05.2019; to augment risk management practices in the Company, the Board of Directors has also appointed a Chief Risk Officer (CRO) who is involved in the process of identification, measurement and mitigation of risks. The risk management approach i.e., Company''s objectives, policies and processes for identifying, measuring and managing each of above risk is set out in the subsequent paragraphs.
âCredit risk on cash and cash equivalents and other bank balances is limited as these are held with scheduled commercial public sector banks, high rated private sector banks and mutual fund houses, which meets the empanelment criteria as set out in the Company''s policy. The Company has also set exposure limits for deployment of funds in various types of instruments with respective banks/ mutual fund houses.
For its investments, the Company manages its exposure to credit risk by periodically monitoring such investments, and applying the appropriate valuation techniques to arrive at the carrying value.
âCredit risk on other financial assets is evaluated based on Company''s knowledge of the credit worthiness of those parties and managed by monitoring the recoverability of such amounts. The Company carries an impairment loss allowance of '' 22.46 crore on its other financial assets as at 31.03.2021 (as at 31.03.2020''20.41 crore).
|c)The Company is exposed to credit risk primarily through its lending operations. The same is explained in the paragraphs below.
40.1.1 Credit Risk Management for Lending Operations
The Company has put in place key policies and processes for managing credit risk, which include formulating credit policies, guiding the Company''s appetite for credit risk exposures, undertaking reviews & objective assessment of credit risk, and monitoring performance and management of portfolios. All the procedures and processes of the Company are ISO 9001:2015 certified.
The credit risk management covers two key areas, i.e., project appraisal & project monitoring. The Company selects the borrowers in accordance with the Company''s approved credit policy, which inter alia, defines factors to be considered for rating of the borrower/ project. The Company''s customer selection procedure assesses viability of project along with that of its promoting entity. Rate of interest and maximum admissible exposure is, inter alia, based on internal rating awarded by the Company.
(i) Project Appraisal
The Company follows a systematic, institutional project appraisal process to assess the credit risk before financing any project.
(a) Appraisal for Private Sector Power Projects
For private sector projects, a two-stage appraisal process is followed. Initially a preliminary appraisal is carried out in order to decide the prima facie preparedness of the project to be taken up for detailed appraisal. Detailed appraisal is carried out for those projects shortlisted on the basis of preliminary appraisal.
The Company along with evaluation of project viability also assesses the ability of its promoter(s) to contribute equity and complete the project. The Company follows an integrated rating methodology whereby Integrated Rating (IR) is calculated using the weighted average of the scores of the project grading and promoter grading. Based on the IR of the project, terms and conditions (including security package and interest rate) are stipulated.
(b) Appraisal for State Sector Power Projects
State sector projects are taken up for detailed appraisal to determine, inter-alia, if they are techno economically sound and compatible with integrated power development & expansion plans of the State.
The Company classifies state power generation utilities into various risk rating grades based on the evaluation
of utility''s performance against specific parameters covering operational and financial performance. With regards to transmission utilities, the Company adopts the categorisation of its subsidiary RECL as per its policy. With regard to State Power Distribution utilities including integrated utilities, the Company''s categorisation policy provides for adoption of Ministry of Power''s (MoP''s) Integrated Ratings by aligning such ratings/ grading with that of Company''s rating structure.
Such categories/ratings are used to determine credit exposure limits, security requirements and pricing of loans given to the State Sector Borrowers. The Company also has a mechanism in place for monitoring the exposure to single borrower and exposure within a State.
The detailed project appraisal involves technical and financial appraisal covering various aspects such as project inputs, statutory and non-statutory clearances, contracts, project linkages, financial modelling/ projections, calculation of returns, sensitivity analysis etc.
After detailed analysis indicated above, the overall viability of the project and entity is assessed and various conditions in the form of pre-commitment, pre-disbursement and the like are stipulated so as to ensure tying up of funds (debt and equity both), all physical inputs, appropriateness of all the contracts, compliance of conditions precedent in agreements/ contracts/ statutory and non-statutory clearances related to the project etc. and in general to ensure bankability of the project & protection of the interest of the Company as a lender for timely servicing of debt. The Company has an authorisation/ delegation structure for the approval and renewal of credit facilities commensurating with the size of the loan.
(ii) Security and Covenants
The Company stipulates a package of security measures/ covenants to mitigate risks during the construction and post COD (commercial operation date) stage of the project. Based on the risk appetite and appraisal of the project, the Company adopts a combination of the following measures:
(a) Primary Security-Charge on Project Assets or State Government Guarantees
(b) Collateral Securities-Corporate guarantee, Personal guarantee of promoters, Pledge of shares, Charge on assets/revenues of group/other companies
(c) Payment Security Mechanism - Escrow Account/Letter of Credit, Trust and Retention Account (TRA)
(d) Other covenants - Assignment of all project contracts, documents, insurance policies in favour of the Company, Upfront equity requirement, Debt Service Reserve Account (DSRA), Debt Equity ratio, shareholders'' agreements, financial closure, etc.
(iii) Project Monitoring
The Company has comprehensive project/loan monitoring guidelines that captures aspects relating to monitoring and tracking of project construction and implementation, progress of commissioned projects; identifies risks where intervention is required to minimise the time & cost overruns and consequent slippages in disbursements.
For State sector projects, monitoring is carried out based on project progress details obtained regularly from borrowers through progress monitoring reports, site visits, discussions with the borrowers, information/reports available on Central Electricity Authority''s (CEA) website etc.
For private sector, where the Company is Lead Financial Institution (FI), the Company engages Lenders'' Engineers (LEs) and Lenders'' Financial Advisors (LFAs), which are independent agencies to act on behalf of various lenders/ consortium members. The LEs conduct periodic site visits, review relevant documents, discusses with the borrowers and submit its reports on progress of the project. LFAs submit the statements of fund flow and utilization of funds in the project periodically. In cases the Company is not the lead FI, the tasks related to LEs and LFAs services are coordinated with the concerned lead lender.
Also, the consolidated periodic progress report of certain projects is prepared comprising important observations/ issues viz. areas of concern, reasons for delay, issues affecting project construction/implementation etc. and is reviewed by the Company on a regular basis.
The Company continuously monitors delays and/or default of borrowers and their recoverability. On occurrence of default in the borrower''s account, the Company initiates necessary steps which may involve action(s) including, but not limited to, Special Mention Account (SMA) reporting to RBI, credit information reporting to Central Repository of Information on Large Credits (CRILC) etc., regularisation of the account by recovering all over dues, invocation of guarantees/ securities to recover the dues, conversion of loan into equity as per loan agreement, restructuring of loan account, formulating resolution plan with the borrower, change in ownership, Corporate Insolvency Resolution Process (CIRP), sale of
the exposures to other entities/investors, other recovery mechanisms like referring the case for legal action before Debt Recovery Tribunal (DRT), SARFAESI, National Company Law Tribunal (NCLT) (IBC -2016) etc. and other actions as specified under regulatory/legal framework.
40.1.2 Credit Risk Measurement - Impairment Assessment
(i) Staging of loans
Ind AS 109 outlines a three staged model for measurement of impairment based on changes in credit risk since initial recognition. For classification of its borrowers into various stages, the Company uses the following basis:
- A financial asset that is not credit impaired on initial recognition is classified in ''Stage I''.
- If a significant increase in credit risk (SICR) is identified, the financial asset is moved to ''Stage II''.
An assessment of whether credit risk has increased significantly since initial recognition is performed at each reporting date by considering the change in the risk of default occurring over the remaining life of the financial assets. In accordance with Ind AS 109 ''Financial Instruments'', the Company has applied rebuttable presumption that considers more than 30 days past due as a parameter for determining significant increase in credit risk.
- If the financial asset is credit-impaired, it is moved to ''Stage III'' category.
In case of Stage III financial assets, after implementation of the resolution plan (except for change of ownership and/or resolution through NCLT), the financial asset is upgraded and classified as Stage II for two quarters from the date of implementation of resolution plan.
(ii) Default
In accordance with Ind AS 109 ''Financial Instruments'', the Company considers the rebuttable presumption to define a financial asset as in default, i.e. when the loan account is more than 90 days past due on its contractual payments. Credit impaired financial assets are aligned with the definition of default.
(iii) Measurement of Expected Credit Loss (ECL)
The Company recognises impairment loss allowance for the financial assets in accordance with a Board-approved expected credit loss (ECL) policy. ECL is measured on either a 12 month or lifetime basis depending on whether there is significant increase in credit risk since initial recognition. ECL is the product of Probability of default (PD), Loss Given
Default (LGD) and Exposure at Default (EAD). The Company has appointed an independent agency, ICRA Analytics Ltd., during the financial year for assessment of ECL in accordance with Ind AS 109 ''Financial Instruments''. The brief methodology of computation of ECL is as follows:
(a) Probability of default (PD)
PD is an estimate of the likelihood of default over a given time horizon. It is estimated as at a point in time. For assessing 12-month PD, probability of a loan defaulting in next 12 months is ascertained and similarly for assessing lifetime PD, probability of a loan defaulting in its remaining lifetime is ascertained.
For Stage I accounts, 12 months PD is used.
For Stage II significantly increased credit risk accounts, Lifetime PD is used.
For Stage III credit impaired accounts, 100% PD is taken.
For 12-month PD: PDs as associated with external ratings grades (published as a part of rating transition matrix of ICRA) have been used for assessment of ECL. In case of State Sector borrowers, the same have been derived on the basis of mapping with the Company''s internal ratings. Whereas in case of private sector borrowers, the same have been derived on the basis of mapping with latest external ratings as published by various credit rating agencies. In case of non-availability of external rating for private sector borrowers, the 12-month PD has been computed through a Proxy Risk Scoring Model developed by the agency. The said model uses the Quantitative financial ratios like Gearing (Debt/ Equity), Return on Capital Employed, Interest Coverage ratio, Debt to EBITDA ratio and qualitative parameters like Plant Load Factor, LAF and ACS ARR gap.
For Lifetime PD: Markov Chain Model has been used to compute Lifetime PDs of the rating grade.
(b) Loss Given Default (LGD)
LGD is the loss factor which the Company may experience in case the default occurs.
For State sector borrowers, LGD has been assigned on the basis of risk category considering State GDP and fiscal deficit.
In case of Private sector borrowers, LGD has been assessed considering factors like Project Cost per Unit,
Percentage Completion, Project Capacity in case of generation projects and on the basis of book value of assets, Percentage Completion in case of transmission & distribution projects. The said assessed values have thereafter been discounted by applying stress factor and depreciation based on useful life of assets as published by CERC. Further, stage wise average LGD had been applied in case of other types of projects.
For Stage III borrowers, LGD has been assessed based on discounted projected cash flow analysis for operational projects and on assets valuation for projects under liquidation.
(c) Exposure at Default (EAD)
It is outstanding exposure on which ECL is computed. EAD includes outstanding principal and interest in respect of the loan.
(d) Key assumptions used in measurement of ECL
- The Company considers the date of initial recognition as the base date from which significant increase in credit risk is determined.
- Since the Company has a right to cancel any sanctioned but undrawn limits to any of its borrowers, EAD is assumed to be outstanding balance as on the reporting date.
(e) The assessment of significant increase in risk and the calculation of ECL both incorporate forward-looking information. Further, the Credit Rating Models used by the independent agency appointed to assist the Company in ECL assessment also consider the forwardlooking information in the determination of the credit rating to be assigned to the borrower, by taking into consideration various financial ratios, extension of the project completion and also possibility of stressed and favourable economic conditions. The incorporation of macroeconomic adjustments to the PD also covers the ICAI guidelines related to COVID-19 published in March 2020. The co-relation of macroeconomic parameters such as IIP (index of industrial production) electricity y-o-y growth rate, Money supply y-o-y growth rate is considered with the GNPA ratio of PFC portfolio for Worst, Base and Best case scenarios and a weighted shock factor was then added to the base PD term structure. Hence PD value will constitute both idiosyncratic risk of the portfolio as well as the influence of macroeconomic risk factors.
40.1.3 Credit risk analysis
(i) Exposure to credit risk
For loans recognised in the balance sheet, the gross exposure to credit risk equals their carrying amount.
Refer Note 10 ''Loans'' for Company''s exposure to credit risk arising from loans.
For financial guarantee issued, the maximum exposure to credit risk is the maximum amount that the Company would have to pay if the guarantees are called upon. For irrevocable loan commitments, the maximum exposure to credit risk is the full amount of the commitment facilities. Refer Note 46 for exposure of Guarantee and Outstanding Disbursement Commitments.
(ii) Concentration of credit risk
Credit concentration risk refers to risk associated with large credit/investment exposure to a single company or a group of companies based on its ownership, sector, region etc. that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions, with the potential to adversely affect lender''s core operations.
40.1.4 Write-off of Loan Assets
The Company writes off financial assets, in whole or in part, when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include ceasure of enforcement activity or where the Company''s recovery method is foreclosing on collateral and the value of collateral is such that there is no reasonable expectation of recovery in full.
40.1.5 Policy on sales out of amortised cost business
The Company does not resort to the sale of financial assets, in ordinary course of business. However, the Company has an approved policy that it may proceed for resolution of stressed assets by either restructuring, change of ownership, settlement or otherwise. The assets are then assessed for derecognition as per Ind AS 109 ''Financial Instruments''.
Since, borrower(s) had obtained Ad-interim order from Hon''ble High Court(s). The Company holds adequate impairment loss allowance with respect to these loan accounts and has categorised them into Stage II. Further, interest income is not recognised on these loan accounts on accrual basis during the year ended 31.03.2021 (interest income was also not recognised on the loan on accrual basis during the previous half year ended 31.03.2020).
Liquidity risk is the risk that the Company doesn''t have sufficient financial resources to meet its obligations as and when they fall due. The risk arises from the mismatches in the timing of the cash flows which are inherent in all financing operations and can be affected by a range of company specific and market wide events.
In order to effectively manage liquidity risk, the Company endeavours to maintain sufficient cash flows to cover maturing liabilities without incurring unacceptable losses or risking damage to the Company''s reputation and also endeavours to maintain a diversified fund base by raising resources through different funding instruments. The adequacy of the Company''s liquidity position is determined keeping in view the current liquidity position, anticipated future funding needs, present and future earning capacity and available sources of funds.
The Company manages its day to day liquidity to ensure that the Company has sufficient liquidity to meet its financial obligation as & when due. The long term liquidity is managed keeping in view the long term fund position and the market factors. This is in line with the Board approved framework and breaches, if any, are to be reported to the Board of Directors. The Company has never defaulted in servicing of its borrowings.
Further, for overall liquidity monitoring and supervision, the Company has an Asset Liability Committee (ALCO) headed by Director (Finance). The ALCO tracks the liquidity risk by analysing the maturity or cash flow mismatches of its financial assets and liabilities. The mismatches are analysed by way of liquidity statements prescribed by RBI, wherein the cumulative surplus or deficit of funds is arrived at by distributing the cash flows against outstanding financial assets and financial liabilities according to the maturity ladder.
(iii) The Company has access to cash credit, overdraft, line of credits and working capital demand loans from banks to meet unanticipated liquidity need. Further, the Company has the highest domestic Credit Rating of AAA, thereby enabling it to mobilise funds from the domestic market within a short span of time. The Company has access to the following undrawn borrowing facilities:
(ii) Foreign currency risk monitoring and management
The Company has put in place a Board approved Currency Risk Management (CRM) policy to manage and hedge risks associated with foreign currency borrowings which prescribes the structure and organization for management of associated risks.
The Company enters into various derivative transactions viz. principal only swaps, options and forward contracts for hedging the exchange rate risk. As per CRM policy, a system for reporting and monitoring of risks is in place wherein Risk Management Committee (RMC), consisting of senior executives of the Company, monitors the foreign currency exchange rate. These derivative transactions are done for hedging purpose and not for trading or speculative purpose. The policy lays down the appropriate systems and controls to identify, measure and monitors, the currency risk for reporting to the Management. Parameters like hedging ratio, un-hedged exposure, mark-to market position, exposure limit with banks etc. are continuously monitored as a part of currency risk management.
40.4 Market Risk - Interest Rate Risk
40.4.1 Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in interest rates. The impact may be beneficial or adverse depending on the direction of change in interest rates and whether assets or liabilities re-price faster.
(i) Interest rate risk is managed with the objective to control market risk exposure while optimising the return.
The Asset Liability Committee (ALCO) tracks the interest rate risk through the gap analysis i.e. by analysing the mis-matches between Rate Sensitive Assets and Rate Sensitive Liabilities. For gap analysis, the interest rate sensitivity statement prescribed by RBI is used, wherein the gap is measured between the Rate Sensitive Assets and Rate Sensitive Liabilities which are distributed based on the maturity date or the re-pricing date whichever is earlier.
Further, for managing the interest rate risk, the Company reviews its interest rates periodically based on prevailing market conditions, borrowing cost, yield, spread, competitors'' rates, etc. The asset mix is managed by the Company through its interest rate & credit policies which inter-alia covers aspects like reset periods; repayment periods, prepayment premium etc. The liabilities are managed keeping in view factors like cost, market appetite, timing, market scenario, ALM gap position etc.
(ii) Interest Rate Sensitivity Analysis
As per RBI Guidelines, Earning at Risk (EaR) is an important focal point for interest risk management. For Interest Rate Sensitivity analysis, the impact of movement of interest rates has been measured on the Earning at Risk derived from the gap statements. The impact has been worked out considering 25 basis upward/downward shocks to interest rates over a one-year period, assuming a constant balance sheet. The analysis shows that if rates are increased/decreased by 25 bps, the impact on EaR will be ( /-) '' 58.00 crore. (As at 31.03.2020 ( /-) '' 73.08 crore).
The analysis assumes that the Rate Sensitive Assets and Rate Sensitive Liabilities are being re-priced at the same time. Further, the analysis considers the earliest/first re-pricing date of the Rate Sensitive Assets and Rate Sensitive Liabilities.
Note: A 25 basis point increase or decrease represents management''s assessment of the reasonably possible change in interest rates.
40.4.2 Disclosures in respect of Interest Rate Benchmark Reform
The Company has variable interest rate borrowings whose interest rate is based on interest rate benchmarks. Also, to hedge the variability of cash flows on these borrowings, the Company has entered into multiple interest rate swaps with key terms (principal amount, payment dates, repricing dates, currency) that match those of the debt on which it pays a fixed rate and receives a variable rate. Significant interest rate benchmark used in the Company''s borrowings is 6 month USD /JPY LIBOR (London Interbank offer rate).
Following is the detail of the foreign currency borrowing which may be impacted based on LIBOR transition as planned after June 2023 for 6 month USD LIBOR & December 2021 for JPY LIBOR:-
|
Benchmark |
Amount in respective currency (million) |
|
6 month USD LIBOR |
USD 909 |
|
6 month JPY LIBOR |
JPY 36,336 |
The Company is managing LIBOR transition plan. The significant change will be amendments to the contractual terms of the LIBOR referenced floating rate borrowings and the associated swap and the corresponding update of the hedge designation. The Company has incorporated LIBOR transition related clauses in all its facility agreement linked with interest rate benchmarks. Further, the Company is under discussion with other counterparties to discuss available alternative benchmark and commercials, but changes required by the IBOR (Interbank offer rate) reforms have not been agreed yet.
The nominal amount of the hedging instruments which may be impacted due to LIBOR transition i.e. after June 2023 is USD Interest rate swap - USD 900 million.
(i) The Company is exposed to price risks arising from investments in listed equity shares. Refer Note 11 ''Investments'' for Company''s exposure to the same.
(ii) Sensitivity Analysis
The table below represents the impact on Statement of Profit and Loss for 5% increase or decrease in the respective prices on Company''s equity investments, outside the group:
Derivatives are measured at FVTPL unless designated under Hedge Accounting relationship. The Company has designated certain derivative contracts under cash flow hedge. For derivatives other than interest rate derivative, the Company designates only the intrinsic value of option contracts as a hedged item by excluding the time value of the option. The changes in the fair value of the aligned time value of the option are recognised in other comprehensive income and accumulated in the cost of hedging reserve. The time value of the options at the inception of the hedging relationship is reclassified to profit or loss on a systematic basis over the term of hedging instrument.
(i) Hedge Effectiveness
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. The Company applies the following effectiveness testing strategies:
a) For derivatives other than options that exactly match the terms of the hedged item, the economic relationship and hedge effectiveness are based on the qualitative factors using critical terms match method (where principal terms of the hedging instrument and the hedged item are same).
b) For option structures, the Company analyses the relationship of changes in value of the hedging instrument and hedged item using regression analysis based dollar offset method.
Above transactions with the Government related entities cover transactions that are significant individually and collectively. The Company has also entered into other transactions such as telephone expenses, air travel and deposits etc. with other CPSUs. They are insignificant individually & collectively and hence not disclosed. All the transactions have been carried out on market terms.
43.5 Major terms and conditions of transactions with related parties
(i) Transactions with related parties are made on terms equivalent to those that prevail in arm''s length transactions.
(ii) The remuneration and staff loans to Key Managerial Personnel are in line with the service rules of the Company.
(iii) The Company makes advances to its associate companies which are incorporated as SPVs to meet the preliminary expenditure. Such advances carry interest rates at the rate applicable to Term Loans as per the Company''s policy.
(iv) The interest and/or dividend paid to the Trusts and Key Managerial Personnel are on account of their investments in the debt securities and/or equity shares of the Company and the interest and/or dividend paid on such securities is uniformly applicable to all the holders.
(v) Outstanding balances of group companies at the year-end are unsecured.
44. EMPLOYEE BENEFITS44.1 Defined contribution plans:
(a) Pension
The Company pays fixed contribution under the Corporate Sector Model of National Pension Scheme (NPS) for its pension obligation towards employees at pre-determined rates into the Tier-I NPS Account (Pension Account) of the employees.
(b) Provident Fund
The Company pays fixed contribution on account of provident fund at prescribed rates to a separate trust, which invests the funds in permitted securities. The trust has to ensure a minimum rate of return to the members, as specified by GoI. However, any shortfall for payment of interest to members as per specified rate of return has to be compensated by the Company. The Company estimates that no liability will arise in this regard in the near future and hence, no further provision is considered necessary.
An amount of '' 13.10 crore (Previous year '' 12.90 crore) for the year is recognised as expense in the Standalone Statement of Profit and Loss on account of the Company''s contribution to the defined contribution plans.
(a) Gratuity
The Company has a defined gratuity scheme which is managed by a separate trust. Every employee who has rendered continuous service of five years or more is entitled to gratuity at 15 days salary for each completed year of service subject to a maximum of '' 0.20 crore on superannuation, resignation, termination, disablement or on death, considering the provisions of the Payment of Gratuity Act, 1972, as amended. The liability for the same is recognised on the basis of actuarial valuation.
(b) Post-Retirement Medical Scheme (PRMS)
The Company has a Post-Retirement Medical Scheme (PRMS) to provide medical facilities to superannuated employees, dependent family members of superannuated and deceased employees. The liability for PRMS is recognised on the basis of actuarial valuation.
This scheme is managed by a separate trust. The trust has to ensure adequate corpus for meeting the medical expenditure incurred by the eligible employees. However, any short fall has to be compensated by the Company. The Company estimates that no liability will arise in this regard in the near future and hence, no further provision is considered necessary.
(d) Risk exposure
Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:
i) Investment risk
Most of the plan asset investments are in government securities, other fixed income securities with high grades and mutual funds. The fair value of these assets is subject to volatility due to change in interest rates and other market & macro-economic factors. There is also a risk of asset liability matching i.e. the cash flow for plan assets does not match with cash flow for plan liabilities.
ii) Changes in discount rate
The present value of defined benefit plan liabilities is calculated using a discount rate which is determined by reference to government bonds'' yields at the end of the reporting period. A decrease (increase) in discount rate will increase (decrease) present values of plan liabilities, although this will be partially offset by an increase in the value of the plans'' investments.
iii) Mortality rate risk
The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase/decrease in the life expectancy of the plan participants will increase the plan''s liability.
iv) Salary escalation risk
The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan''s liability.
v) Turnover rate/Withdrawal rate of employee
If the actual employee withdrawal rate in the future turns out to be more or less than expected then it may result in increase/ decrease in the liability.
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
The Company actively monitors how the duration and expected yield of investments are matching the expected cash outflows arising from employee benefit obligations. Investments are well diversified, such that the failure of any single investment would not have a material impact on overall level of assets. There has been no change in the process used by the Company to manage its risks from prior periods.
(j) The weighted average duration of the defined benefit plan obligation at the end of the reporting period is 15.94 years (as at 31.03.2020: 16.02 years).
44.3 Other long term employee benefits (a) Leave
The Company provides for earned leave benefit and half-pay leave benefit to the credit of the employees, which accrues on half-yearly basis at 15 days and 10 days respectively. A maximum of 300 days of earned leave can be accumulated at any point of time during the service. There is no limit for accumulation of half pay leave. On separation after 10 years of service or on superannuation, earned leave plus half pay leave taken together can be en-cashed subject to a maximum of 300 days. However, there is no restriction on the number of years of service for encashment of earned leave on separation from the service. Provision based on actuarial valuation amounting to '' 8.85 crore (Previous year '' 11.73 crore) for the year has been made at the year end and debited to the Standalone Statement of Profit and Loss.
(b) Other employee benefits
Provision for settlement allowance and long service awards amounting to '' 2.68 crore for the year (Previous year '' 3.53 crore) has been made on the basis of actuarial valuation and debited to the Standalone Statement of Profit and Loss.
44.4 Employee benefits (viz. Gratuity, PRMS, Terminal Benefits, leave encashment and other employee benefits) in respect of Company''s employees working in its wholly-owned subsidiary on deputation/secondment basis are being allocated based on a fixed percentage of employee cost.
Mar 31, 2019
Note: A25 basis point increase or decrease represents management''s assessment of the reasonably possible change in interest rates. The analysis assumes that the Rate Sensitive Assets and Rate Sensitive Liabilities are being re-priced at the same time. Further, the analysis considers the earliest/first re-pricing date of the Rate Sensitive Assets and Rate Sensitive Liabilities. 1. Hedge Accounting Derivatives are measured at FVTPL unless designated under Hedge Accounting relationship. The Company has designated certain derivative contracts (Principal Only Swap and Interest Rate Swap) under cash flow hedge. Hedge Effectiveness By critical terms matching method (where principal terms of the hedging instrument and the hedged item are same), the Company ensures that the hedges are highly effective i.e. hedge ratio is nearly 100% and the same is re-assessed at each reporting date. *The Company has started applying Hedge Accounting as per Ind AS 109 w.e.f FY 2018-19. "reflected in the line item named ''Net Translation / Transaction exchange Gain / Loss'' 2.Fair Value Measurements Some of the Company''s financial assets and financial liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation technique(s) and inputs used). 3. Fair Value of financial assets/ liabilities measured at amortized cost: The fair value of the following financial assets and liabilities have been determined in accordance with generally accepted pricing models based on a discounted cash flow analysis, with the most significant input being the discount rate that reflects the credit risk of counterparties except for the cases where quoted market prices are available. âincludes listed instruments with Level 1 fair value hierarchy. Foreign currency loans linked to LIBOR and multilateral agencies loans are valued at par. Foreign currency loans consist of MTN issuances which are valued at closing prices as per Reuters. The carrying amounts of other financial assets and financial liabilities are considered to be a reasonable approximation of their fair values. Above transactions with the Government related entities cover transactions that are significant individually and collectively. The Company has also entered into other transactions such as telephone expenses, air travel and deposits etc. with other CPSUs. They are insignificant individually & collectively and hence not disclosed. All transactions are carried out on market terms. 4.Terms and conditions of transactions with related parties (i) Transactions with related parties are made on terms equivalent to those that prevail in arm''s length transactions. (ii) The remuneration and staff loans to Key Managerial Personnel are in line with the service rules of the Company. (iii) The Company makes advances to its associate companies which are incorporated as SPVs to meet the preliminary expenditure. Such advances carry interest rates at the rate applicable to Term Loans as per the Company''s policy. (iv) Outstanding balances of subsidiary and associate companies at the year-end are unsecured. 5. Employee Benefits 6. Defined contribution plans: a) Pension The Company contributes to National Pension Scheme (NPS) for its pension obligation towards employees, with effect from 01.01.2018. Earlier, the Company had a defined contribution pension scheme which was managed by a separate trust. b) Provident Fund The Company pays fixed contribution on account of provident fund at prescribed rates to a separate trust, which invests the funds in permitted securities. The trust has to ensure a minimum rate of return to the members, as specified by Gol. However, any shortfall for payment of interest to members as per specified rate of return has to be compensated by the Company. The Company estimates that no liability will arise in this regard in the near future and hence, no further provision is considered necessary. An amount of Rs, 10.82 crore (previous year Rs, 9.26 crore) for the year is recognized as expense in the Standalone statement of profit and loss on account of the Company''s contribution to the defined contribution plans. 7. Defined benefit plans: (a) Gratuity The Company has a defined gratuity scheme which is managed by a separate trust. Every employee who has rendered continuous service of five years or more is entitled to gratuity at 15 days salary for each completed year of service subject to a maximum of Rs, 0.20 crore on superannuation, resignation, termination, disablement or on death, considering the provisions of the Payment of Gratuity Act, 1972, as amended. The liability forthe same is recognized on the basis of actuarial valuation. (b) Post-Retirement Medical Scheme (PRMS) The Company has a Post-Retirement Medical Scheme (PRMS) to provide medical facilities to superannuated employees and their dependent family members. The liability for PRMS is recognized on the basis of actuarial valuation. This scheme is managed by a separate trust. The trust has to ensure adequate corpus for meeting the medical expenditure incurred by the retired employees. However, any short fall has to be compensated by the Company. The Company estimates that no liability will arise in this regard in the near future and hence, no further provision is considered necessary. (d) Risk exposure Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below: i. Asset volatility Most of the plan asset investments are in government securities, other fixed income securities with high grades and mutual funds. The fair value of these assets is subject to volatility due to change in interest rates and other market & macro-economic factors. ii. Changes in discount rate The present value of defined benefit plan liabilities is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period. A decrease in discount rate will increase present values of plan liabilities, although this will be partially offset by an increase in the value of the plans'' investments. iii. Longevity risk The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan''s liability. iv. Salary risk The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan''s liability. - As at 31.03.2019, an amount of Rs, 0.60 crore (as at 31.03.2018 Rs, 0.60 crore and as at 01.04.2017 Rs, 0.60 crore) is included in the value of plan assets (in respect of the Company''s own financial instruments (corporate bonds)). - Actual return on plan assets is Rs, 3.86 crore (previous year Rs, 3.57 crore). (f) Significant Actuarial Assumptions The most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out as at 31.03.2019 by Trans Value Consultants. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method. The principal assumptions used for actuarial valuation are:- The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. i The Company actively monitors how the duration and expected yield of investments are matching the expected cash outflows arising from employee benefit obligations. Investments are well diversified, such that the failure of any single investment would not have a material impact on overall level of assets. There has been no change in the process used by the Company to manage its risks from prior periods. The table above is drawn on the basis of expected cash flows. (a) Expected contributions to post-employment benefit plans for the year ending 31.03.2020 are Rs, 10.94 crore. (b) The weighted average duration of the defined benefit plan obligation at the end of the reporting period is 16.98 years (as at 31.03.2018:18.36 years, as at01.04.2017:19.01 years). 8. Other long term employee benefits (a) Leave The Company provides for earned leave benefit and half-pay leave benefit to the credit of the employees, which accrues on half-yearly basis at 15 days and 10 days respectively. A maximum of 300 days of earned leave can be accumulated at any point of time during the service. There is no limit for accumulation of half pay leave. On separation after 10 years of service or on superannuation, earned leave plus half pay leave together can be encashed subject to a maximum of 300 days. However, there is no restriction on the number of years of service for encashment of earned leave on separation from the service. Provision based on actuarial valuation amounting to ^ 10.14 crore (previous year Rs, 9.56 crore) for the year has been made at the year end and debited to the standalone statement of profit and loss. (b) Others employee benefits Provision for settlement allowance and long service awards amounting to Rs, 2.07 crore for the year (previous year Rs, 0.87 crore) has been made on the basis of actuarial valuation and debited to the standalone statement of profit and loss. 9. Employee benefits (viz. Gratuity, PRMS, Terminal Benefits, Leave encashment and other employee benefits) in respect of Company''s employees working in its wholly-owned subsidiaries on deputation / secondment basis, are being allocated based on a fixed percentage of employee cost. 10.Disclosure as per Ind AS 12 "Income Taxes" * Default payment guarantee given by the Company in favour of a borrower company. The amount paid /payable against this guarantee is reimbursable by Government of Madhya Pradesh. * Out of the said demands, as at 31.03.2019 an amount of Rs, 59.90 crore (As at 31.03.2018 Rs, 5.01 crore and as at 01.04.2017 Rs, 40.53 crore) has already been deposited/ adjusted against refund of other assessment years. 11. There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at 31.03.2019 (Nil as at 31.03.2018 and 01.04.2017). This has been determined to the extent the status of such parties could be identified on the basis of information available with the Company. 12. Notes to first time adoption Explanation of major impact on adoption of Ind AS of the reported standalone financial statements of the Company as on the date of transition is as under: (a) Loans and interest income The Company''s loans, satisfying the business model test of held to collect contractual cash flows and SPPI (Solely Payment of Principal and Interest) test as on transition date, have been measured at amortized cost using effective interest rate (EIR) method. These loans were measured at cost under previous GAAP. This adjustment of retrospective application of EIR method, has resulted in the increase of Total Equity by Rs, 384.68 crore with a corresponding reduction in value of loans as on transition date. Subsequent to the transition date, the impact on Total Comprehensive Income (TCI) for the year ended 31.03.2018 is Rs, (470.45) crore and on total equity as on 31.03.2018 is Rs, (85.77) crore. (b) Financial liabilities and interest expense All financial liabilities except derivatives have been subsequently measured at Amortized Cost using the EIR method. The effect of the adjustments resulted in increase in Total Equity by Rs, 199.12 crore with corresponding reduction in the value of financial liabilities on transition date and by Rs, 125.72 crore as at 31.03.2018. Subsequent to the transition date, the impact on TCI for the year ended 31.03.2018 is Rs, (73.39) crore. (c) Reclassification of leasehold land Under Previous GAAP, upfront premium paid for leasehold land was recognized in "Fixed Assets" (termed as Property Plant and Equipment (PPE) under Ind AS). Under Ind AS, a lease where the substantial risks and rewards incidental to ownership are not transferred to the Company is classified as operating lease and is amortized over the remaining lease term. Consequently, leasehold land is reclassified from "Fixed Assets / PPE" to Prepaid Expense in Non- Financial Assets and is being amortized over the leasehold period. This has resulted in decrease in total equity as at 01.04.2017 by Rs, 9.79 crore and as at 31.03.2018 byRs, 0.34 crore. (d) Investments Under Ind AS, the Company has designated equity investments other than investments in subsidiaries / JVs / associates at Fair Value through Other Comprehensive Income (FVTOCI). The difference between the carrying amount and fair value as on transition date has been recognized in OCI reserve as at the date of transition and subsequently in Other Comprehensive Income. This has resulted in increase in Total Equity by Rs,225.77 crore with corresponding increase in value of investments in equity instruments as at the date of transition and decrease by Rs,105.47 crore as at 31.03.2018. (e) Impairment Loss Allowance Under previous GAAP, the provision on loan assets was maintained as per RBI prudential norms / directions. However, under Ind AS framework, impairment loss allowance on loans is made using Expected Credit Loss (ECL) approach. This has resulted in the reduction in Total Equity by Rs,6,568.97 crore as at the date of transition and Rs,8,393.91 crore as at 31.03.2018. The impact on TCI for the year ended 31.03.2018 is Rs,(1,824.94) crore. (f) Deferred Taxes Under previous GAAP, deferred tax accounting was done using the income statement approach. However, Ind AS requires the accounting of deferred taxes using the balance sheet approach, which includes identification of temporary differences based on the difference in carrying amount of an asset/ liability in the standalone balance sheet and its tax base. These differences have been suitably recognized in the standalone financial statements. These adjustments and the consequential impact due to the adoption of Ind AS have resulted in a decrease in the Total Equity by Rs, 278.24 crore as at 01.04.2017 and an increase in Total Equity by Rs, 4.25 crore as at 31.03.2018. (g) Derivative Financial Instruments Under previous GAAP, the derivative financial instruments in the nature of forward contracts were accounted for in accordance with AS 11 ''The Effects of Changes in Foreign Exchange Rates'' wherein the premium or discount component was amortized during the tenure of the contract. However under Ind AS, all derivative contracts are required to be fair valued at each reporting date in accordance with Ind AS 109 ''Financial Instruments''. As a result, as on transition date, the Total Equity has increased by Rs, 366.90 crore and by Rs, 236.77 crore as on 31.03.2018. The impact on TCI for the year ended 31.03.2018 is Rs, (64.27) crore. (h) Re-measurement of defined benefit plans Both under previous GAAP and Ind-AS, the Company recognized costs related to its post-employment defined benefit plan on an actuarial basis. Under previous GAAP, the entire cost, including actuarial gains and losses, were charged to profit or loss. Under Ind-AS, re-measurement gain/ loss are recognized in Other Comprehensive Income. As a result, profit for the year ended 31.03.2018 decreased by Rs, 7.50 crore (net of tax) with corresponding increase in other comprehensive income during the year. The impact of transition to Ind AS is mainly due to the classification of Earmarked bank balances as ''Other Bank Balances'' instead of ''Cash & Cash Equivalents''. 13. Status of documentation subsequent to reorganization of the State of Andhra Pradesh Subsequent to the reorganization of erstwhile Andhra Pradesh, the State of Telangana has been formed on 02.06.2014. However the assets and liabilities are yet to be transferred to the respective Power Utility through a formal gazette notification. Once the final transfer scheme is notified through Gazette Notification by Govt, duly indicating the transfer of assets and liabilities among the power utilities, action for execution of documentation formalities will be taken up in respect of all the outstanding loans with the new / name changed utilities. Till that time, the demand for payment of interest / principal is being segregated by the Utilities and the respective portions are being paid by Utilities in Telangana and Andhra Pradesh. 14. Company was creating impairment loss allowance, on Stage I and II loan assets at higher of Expected Credit Loss (ECL) as per Ind AS or as per RBI prudential norms. Now, the Company has aligned the impairment loss allowance on loan assets solely as per the requirement of Ind AS resulting in reduction of cumulative impairment loss allowance for the year ended 31.03.2019 and consequent increase in profit after-tax by Rs, 268.61 crore. 15. Exposures 16. RBI has categorized the Company as an Infrastructure Finance Company (IFC) in terms of instructions contained in RBI Circular CC No. 168 dated 12th February 2010. As an IFC, the total permissible exposure for lending in the private sector is 25% of owned funds in case of single borrower and 40% in case of a single group of borrowers and exposure for lending & investing taken together can be up to 30% and 50% of owned funds, respectively. In respect of Central/State Government entities, RBI has exempted the Company from applicability of RBI''s concentration of credit/investment norms till 31 st March, 2022. 46.2 The Company does not have any exposure to real estate sector. 46.3 Exposure to Capital Market: 46.4 Details of financing of parent company products: The Company does not have a parent company. 46.5 Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the Company: The Company has not exceeded its prudential exposure limits against Single Borrower / Group Borrower Limits during FY2018-19 and FY2017-18. Note:- In the above table, the principal cash flows net of provision relating to Stage III assets have been considered in over 5 years bucket irrespective of the maturity date. Further, Bonds with put & call option have been shown considering the earliest I exercise date. Further, the commercial papers and zero coupon bonds have been shown at the maturity value. 17. NSE and BSE vide their letters dated 31.01.2019 have levied fine on the Company for non-compliance in regard to Regulation 17(1) i.e. Composition of Board of Directors and 19(1) i.e. Composition of Nomination & Remuneration Committee of SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015. The Company in its reply to NSE & BSE has stated that being a Central Public Sector Undertaking and in terms of Article 86 of Articles of Association of the Company, the Directors on the board of the Company are appointed by President of India through Ministry of Power, Government of India. The Company has taken up the matter with Ministry of Power to expedite the process of appointment of balance number of Independent Directors on the Board of the Company for compliance of SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015. No complaints have been received by the Company from their borrowers during the year ended 31.03.2019. (Previous year Nil). 18. (a) The Company is preparing Consolidated Financial Statements in accordance with Ind AS -110. (b) The Company does not have any Overseas Assets in the form of Joint Ventures / Subsidiaries abroad. (c) There are no Off-balance Sheet SPVs sponsored by the Company. 19. In the context of reporting business / geographical segment as required by Ind AS 108 - "Operating Segments", the Company''s operations comprise of only one business segment - lending to power sector entities. Hence, there are no reportable segments as per Ind AS 108. 20. Figures have been rounded off to the nearest crore of rupees with two decimals.
Mar 31, 2018
1. (a) BASIS FOR PREPARATION OF FINANCIAL STATEMENTS
The Financial Statements have been prepared in accordance with historical cost convention on accrual basis in accordance with Generally Accepted Accounting Principles (GAAP) in India, which comprise applicable statutory provisions, relevant provisions of the Companies Act, 2013, applicable regulatory norms/guidelines prescribed by the Reserve Bank of India (RBI), Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI), and prevailing practices.
(b) USE OF ESTIMATES
The preparation of Financial Statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as on the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.
1. The Company is a Government Company engaged in extending financial assistance to power sector and is a Systemically Important (Non-Deposit Accepting or Holding) Non-Banking Finance Company (NBFC) registered with Reserve Bank of India as an Infrastructure Finance Company. Equity shares of the Company are listed on NSE and BSE.
2. Contingent Liabilities and Commitments:
2.1 Contingent Liabilities
(A) Guarantees etc.
(B) Income TaxDemands
Additional demands raised by the Income Tax Department totaling to Rs. 85.87 crore (Previous year Rs. 40.53 crore) of earlier years are being contested. Out of the said demands, an amount of Rs. 5.01 crore (Previous year Rs. 40.53 crore) has been paid. Further, the Income Tax Department has filed appeals against the relief allowed by appellate authorities to the Company aggregating to Rs. 165.39 crore (Previous year Rs. 165.39 crore). The same are also being contested. The Management does not consider it necessary to make provision, as the liability is not considered probable.
(C) Service Tax Demands
Service Tax demand or show cause notices raised by Service Tax Department totaling to Rs. 1.04 crore (Previous year Rs. 23.51 crore) of earlier years are being contested. Further, the Service Tax Department has also filed an appeal before CESTAT against the order of Commissioner (CE&ST) who had dropped a demand of service tax of Rs. 1.11 crore (Previous year Rs. 1.11 crore). The same is also being contested. Management does not consider it necessary to make provision, as the liabilities are not considered probable.
2.2 Other Commitments
Estimated amount of contracts remaining to be executed on account of capital account, not provided for is Rs. 473.77 crore as on 31.03.2018 (Previous year Nil).
3. A. The Company is creating Debenture Redemption Reserve (DRR) for public issue of bonds or debentures @ 50% (as per MCA Circular No. 6/3/2001 - CL.V dated 18.04.2002) for public issues wherein prospectus had been filed before 11.02.2013 and @ 25% (as required by Companies (Share Capital and Debentures) Rules, 2014) for the subsequent public issues.
B. The Company raises funds through various instruments including series of non-convertible bond issues. During the year, the Company has not defaulted in servicing of its borrowings.
As regards non-convertible Rupee denominated bonds, the previous due date for payment of interest and principal was 31.03.2018.
4. A. Foreign currency expenditure and earning:
B. Foreign currency liabilities not hedged by a derivative instrument or otherwise:-
*lncludes JPY loan liability partly hedged through forward rate contract entered for one leg (USD/INR) for USD 45 million / Rs. 293.29 crore (Previous year USD /INR leg for USD 45 million / Rs. 291.83 crore).
C. The Company amortizes exchange differences on long term foreign currency monetary items over their tenure. Consezquently, as at 31.03.2018 unamortized debit balance under Foreign Currency Monetary Item Translation Difference Account (FCMITDA) is Rs. 648.65 crore (Previous year debit balance Rs. 647.56 crore).
D. Liabilities and assets denominated in foreign currency have been translated at FEDAI spot rate at year end as given below:
5. Related Party Disclosures as per disclosure requirement of Accounting Standard-18:
(A) Key managerial personnel (KMP):
(B) Transactions with Key Management Personnel (KMP):
Managerial remuneration of KMP for the year ended 31.03.2018 is Rs. 3.45 crore (Previous year Rs. 3.50 crore). Loans & Advances given to KMP is Rs. 0.52 crore as on 31.03.2018 (Previous year Rs. 0.50 crore).
6. (A) Investment in share capital of companies incorporated and operating in India as subsidiaries / joint venture companies including companies promoted as Special Purpose Vehicles (SPVs) for Ultra Mega Power Projects (UMPPs) are given below:
(i) Financial statements are consolidated as per Accounting Standard 21 - Consolidated Financial Statements and Accounting Standard 27 - Financial Reporting of Interests in Joint Ventures.
(ii) Subsequent to decision by the Board of Directors of respective subsidiaries, merger of PFCCAS with PFCCL is under progress.
(iii) In continuation to decision taken in meeting dated 09th August, 2016, Board of Directors of the Company in its meeting held on 29th September, 2017, has approved scheme for the merger of PFCGEL with the Company subject to sanction by the Ministry of Corporate Affairs.
(iv) Decision of voluntary winding up of PECAP is under consideration of MoP, Gol.
(v) Subsidiary companies were incorporated as SPVs under mandate from the Gol for development of UMPPs with the intention to hand over the same to successful bidders on completion of the bidding process. Financial statements of these subsidiaries are not required to be consolidated in terms of paragraph 11 of Accounting Standard-21.
(vi) MoP vide its OM dated 16th January, 2017 has informed for the winding up of CSPL. The related proceedings are underway.
(vii) MoP vide its OM dated 21st June, 2016 has conveyed its approval for the winding up of TAMPL. The related proceedings are under way.
(viii) Maximum amount of investment during the year is same as investment at the year-end for each of the entities.
(B) The Companyâs share of assets, liabilities, contingent liabilities and capital commitment as at 31.03.2018 and income and expenses for the period ending 31.03.2018 in respect of EESL (Companyâs joint venture entity), based on unaudited provisional financial statements are given below:
7. As required under AS-19, disclosure with respect to various leases are given below:
(A) Asset under finance lease after 01.04.2001:
(i) Gross investment in leased assets and present value of minimum value receivable at the balance sheet date and value of unearned financial income are given in table below:
(ii) The Company had sanctioned an amount of Rs. 88.90 crore in year 2004 as finance lease for financing wind turbine generator (commissioned on 19.07.2004). Sanction was reduced to Rs. 88.85 crore in December 2006. Gross investment stood at the level of Rs. 0.44 crore as on 31.03.2018 (Previous year Rs. 0.89 crore). Lease rent is to be recovered within a period of 515 Years, starting from 19.07.2004, which comprises of 510 years as primary period and 5 years as secondary period. Secondary period is in force with effect from 19.07.2014.
(iii) The Company had sanctioned an amount of Rs. 98.44 crore in year 2004 as finance lease for financing wind turbine generator (commissioned on 18.5.2004). Gross investment stood at Nil as on 31.03.2018 (Previous year Rs. 3.45 crore). Lease rent is to be recovered within a period of 520 years, starting from 18.05.2004, which comprises of 510 years as primary period and a maximum of another 10 years as secondary period. Secondary period started on 01.04.2014 and was completed on 08.06.2017 on prepayment of secondary period lease rental.
(iv) The Company had sanctioned an amount of Rs. 93.51 crore in year 2004 as finance lease for financing wind turbine generator (commissioned on 09.06.2005). Gross investment stood at Nil as on 31.03.2018 (Previous year Rs. 3.74 crore). Lease rent is to be recovered within a period of 519 years 11 months, starting from 09.06.2005, which comprises of 510 years as primary period and a maximum of 59 years and 11 months as secondary period. Secondary period started on 01.04.2015 and was completed on 09.06.2017 on prepayment of secondary period lease rental.
(v) The Company had sanctioned an amount of Rs. 228.94 crore in year 2008 as finance lease for financing wind turbine generator (commissioned on 18.05.2011). Gross investment stood at Rs. 327.71 crore as on 31.03.2018 (Previous year Rs. 327.71 crore). Lease rent is to be recovered within a period of 525 years, starting from 01.01.2012, which comprises of 518 years as primary period and a maximum of 57 years as secondary period.
(B) The Companyâs operating leases consist of:
Premises for offices and for residential use of employees are lease arrangements, and are usually renewable on mutually agreed terms, and are cancellable. Rent for residential accommodation of employees include Rs. 5.45 crore (Previous year Rs. 5.61 crore) towards lease payments, net of recoveries in respect of premises for residential use of employees. Lease payments in respect of premises for employees are shown as rent for residential accommodation of employees in Note Part A 16 - Employee Benefit Expenses. Lease payments in respect of premises for offices amounting to Rs. 0.50 crore (Previous year Rs. 0.50 crore) are shown as office rent in Note Part A 17 - Other Expenses.
8. Implementation of GoI Schemes
(A) Subsidy under Accelerated Generation & Supply Programme (AG&SP):
(i) TheCompanyclaimedsubsidyfromGolatnetpresentvaluecalculatedatindicativeinterestrates in accordance with GOIâs letter vide D.O.No.32024/17/97 - PFC dated 23.09.1997 and O.M.No.32024/23/2001 -PFC dated 07.03.2003, irrespective of actual repayment schedule, moratorium period and duration of repayment. Amount of interest subsidy received and to be passed on to the borrower is retained as Interest Subsidy Fund Account. Impact of difference between indicative rate and period considered at the time of claims and at the time of actual disbursement can be ascertained only after end of respective schemes. However, on the basis of projections made for each project (based upon certain assumptions that these would remain same over the projected period of each loan / project), the Company estimated net excess amount of Rs. 9.64 crore and Rs. 103.09 crore as on 31.03.2018 (Previous year Rs. 8.67 crore and Rs. 93.56 crore) for IX and X Plan, respectively under AG&SP schemes, and there is no shortfall. This net excess amount is worked out on overall basis and not on individual basis and may vary due to change in assumptions, if any, during the projected period such as changes in moratorium period, repayment period, loan restructuring, pre-payment, interest rate reset etc. Any excess / shortfall in the interest subsidy fund will be refunded or adjusted / charged off on completion of respective scheme.
(ii) Balance under the head Interest Subsidy Fund shown as liability, represents amount of subsidy received from MoP, GoI which is to be passed on to borrowers against their interest liability arising in future under AG&SP, comprises of the following : -
(B) Re-structured Accelerated Power Development and Reforms Programme (R - APDRP):
(i) The Company is Nodal Agency for operationalization and associated service for implementation of R -APDRP.
Amounts received from the Gol under R - APDRP as a Nodal agency for on-lending to eligible borrowers are back to back arrangements with no profit or loss arising to the Company. The amount on-lended but not converted in to grants as per applicable guidelines will become payable along-with interest to the Gol on receipt from borrowers.
The amount recoverable from borrowers & payable to Gol under R - APDRP scheme stands at Rs. 14,645.44 crore as on 31.03.2018 (Rs. 12,749.20 crore as on 31.03.2017).
(ii) The Company receives nodal agency fee and reimbursement of expenditure under R-APDRP scheme for operationalization and associated service for implementation of R - APDRP from MoP, Gol. The cumulative claim for fee and reimbursement of expenditure is subject to cap of Rs. 850 crore or 1.7% of likely project outlay under Part A &Bof R-APDRP, whichever is less.
Total amount of nodal agency fee and reimbursement of expenditure received / receivable by the Company stands at Rs. 301.94 crore as on 31.03.2018 (Rs. 280.72 crore as on 31.03.2017).
(C) Integrated Power Development Scheme (IPDS)
The Company has been designated as Nodal Agency for operationalization and implementation of IPDS scheme also under overall guidance of the MoP, Gol. Role of Nodal agency is mentioned in IPDS scheme which inter-alia includes administration of Gol grant to eligible utilities which can be recalled / pre-closed subjectto certain conditions mentioned in IPDS guidelines.
Amount of GOI grant administered to the eligible utilities till 31.03.2018 is Rs. 5,329.82 crore (Rs. 2,561.01 crore as on 31.03.2017).
The Company is eligible for nodal agency fee totaling to 0.50% (to be accrued in phases as per scheme) of total project cost approved by Monitoring Committee or award cost, whichever is lower.
9. (a) As regards RBI Credit Concentration Norms, RBI vide its letter dated 16.06.2016, has extended exemption in respect of exposure to Central / State Government entities till 31.03.2022. Thus, the Company continues to follow MoP approved credit concentration norms for Central / State Government entities.
(b) In line with RBIâs letter dated 11.06.2014, Transmission & Distribution, Renovation & Modernization and Life Extension projects and also the hydro projects in Himalayan region or affected by natural disasters were regulated by the restructuring norms approved by MoP till 31.03.2017. Accordingly, with effect from 01.04.2017, RBI restructuring norms are applicable for any future restructuring undertaken in these loans.
10. In case of a loan asset, fraud has been committed by the borrower; the amount outstanding of Rs. 442.26 crore as on 31.03.2018 has been classified as loss asset and has been fully provided for (no such incidences in previous year).
11. Basis of secured / un-secured categorization of loan assets:
a) In cases where Company is a lead or sole lender, it considers the loan asset as secured if hypothecation of movable project assets has been completed and mortgage of more than 50% of the project land for loan assets has been achieved. Further, wherever valuation is required as per applicable norms, the security status is updated on the basis of valuation report.
b) In all other cases, secured / un-secured categorization is done on the basis of security status obtained from the lead lender.
12. Asset classification of loan accounts of one of the borrower has been maintained as standard as on 31.03.2018 in view of ad-interim stay from jurisdictional Honâble High Court, vide order dated 17.06.2015 followed by legal opinion. However, interest on this loan is being recognized on realisation basis. Accordingly, Interest / income of Rs. 573.18 crore accrued and remaining unrealised has not been recognized during year ended 31.03.2018 (previous year Rs. 413.03 crore). Further, provision in this account stands at Rs. 515.46 crore as on 31.03.2018 (Previous year Rs. 163.17 crore).
13. Disclosures as per Accounting Standard -15 :-
A. Provident fund
The Company pays fixed contribution on account of provident fund at prescribed rates to a separate trust, which invests the funds in permitted securities. The contribution to the fund for the period is recognized as expense and is charged to the statement of profit and loss. The trust has to ensure, a minimum rate of return to the members as specified by Gol. However, any shortfall for payment of interest to members as per specified rate of return has to be compensated by the Company. The Company estimates that no liability will arise in this regard in the near future and hence, no further provision is considered necessary.
B. Gratuity
The Company has a defined gratuity scheme which is managed by a separate trust. The provision for the same has been made on actuarial valuation based on total number of years of service rendered by an employee subject to a maximum amount of Rs. 20 lakh per employee.
C. Pension
The Company has a defined contribution pension scheme till 31.12.2017 which was managed by a separate trust. Employee and Employer contribution to the fund has been contributed on monthly basis. The Company has switched to National Pension System w.e.f. 01.01.2018.
D. Post-Retirement Medical Scheme (PRMS)
The Company has Post-Retirement Medical Scheme (PRMS), under which retired employees and their dependent family member are provided with medical facilities as per Company rules. They can also avail reimbursement of out-patient treatment subject to a ceiling fixed by the Company.
This scheme is managed by a separate trust. The provision for the same has been made on actuarial valuation. The trust has to ensure, adequate corpus for meeting the medical expenditure incurred by the retired employees. However, any short fall has to be compensated by the Company. The Company estimates that no liability will arise in this regard in the near future and hence, no further provision is considered necessary.
E. Terminal Benefits
Terminal benefits include settlement in home town for employees & their dependents.
F. Leave
The Company provides for earned leave benefit and half-pay leave benefit to the credit of the employees, which accrues on half-yearly basis @ 15 days and 10 days respectively. A maximum of 300 days of earned leave can be accumulated at any point of time during the service. There is no limit for accumulation of half pay leave. Earned leave is en-cashable during the service; while half pay leave is not en-cashable during the service or on separation / superannuation before 10 years. On separation after 10 years of service or on superannuation, earned leave plus half pay leave together can be en-cashed subject to a maximum of 300 days. However, there is no restriction in the number of years of service for earned leave encashment on separation from the service.
G. The above mentioned schemes (D, E and F) are unfunded and are recognized on the basis of actuarial valuation.
H. The summarised position of various defined benefits recognized for the year 31.03.2018 in the statement of profit and loss account, balance sheet are given below {Figures in brackets () are for Previous year}:
i) Expenses recognised in Statement of Profit and Loss Account
ii) Amount recognized in the Balance Sheet
iii) Changes in present value of defined benefit obligations
iv) Changes in fair value of plan assets
v) One percent increase / decrease in inflation rate would impact liability for medical cost of PRIMS, as under:-
vi) During the year, Company has provided liability of Rs. 1.50 crore, Rs. 6.67 crore, Rs. 9.56 crore and Rs. 0.07 crore (previous year Rs. 1.41 crore, Rs. 4.04 crore, Rs. 7.49 crore and Nil) towards contribution to the Gratuity Trust, PRMS, Leave and towards Pension respectively. Above amount includes Rs. 0.07 crore, Rs. 0.41 crore and Rs. 0.33 crore (previous year Rs. 0.09 crore, Rs. 0.43 crore and Rs. 0.29 crore) for Gratuity, Leave and PRMS respectively allocated to subsidiary companies.
I. Other Employee Benefits:-
During the year, provision of Rs. 0.12 crore (previous year Rs. 0.21 crore) has been made for Economic Rehabilitation Scheme (ERS) for employees and provision of Rs. 0.75 crore (previous year Rs. 0.59 crore) has been made for Long Service Award (LSA) for employees on the basis of actuarial valuation made at end of the year by charging / crediting statement of profit and loss. LSA includes Rs. 0.05 crore (previous year Rs. 0.05 crore) allocated to subsidiary companies.
J. (I) Details of Plan Asset:- Gratuity
The details of plan assets at cost, as at 31.03.2018 are given below:
(1)As at 31.03.2018, Bonds of the Company amounting to Rs. 0.60 crore (previous year Rs. 0.60 crore) are held by PFC Limited Gratuity Trust.
Principal assumptions used for actuarial valuation are:-
*Estiâmate of future salary increases considered in actuarial valuation, takes into account inflation, seniority, promotion and other relevant factors such as supply and demand in employment market.
(II) Details of Plan Asset:- PRIMS
The details of the plan assets at cost, as on 31.03.2018 are as follows:-
*Estiâmates of future salary increases considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors, such as supply and demand in employment market.
K. Employee benefits (viz. Gratuity, PRMS, Terminal Benefits, Leave encashment and other employee benefits) in respect of Companyâs employees working in PFCCAS, PFCGEL and PFCCL (subsidiaries of the Company) on deputation / secondment basis, are being allocated based on a fixed percentage of employee cost.
*The Companyâs best estimate of contribution towards gratuity for financial year 2018-19 is Rs. 3.31 crore (previous year Rs. 1.16 crore). Actual return on plan assets during the year ended 31.03.2018 is Rs. 1.93 crore (previous year Rs. 1.79 crore). Further, expected return on plan assets has been determined considering several applicable factors, mainly, composition of plan assets held, assessed risk of asset management and historical returns from plan assets.
*The Companyâs best estimate of contribution towards PRMS for financial year 2018-19 is Rs. 5.62 crore (Previous year Rs. 4.97 crore). Actual return on plan assets during the year ended 31.03.2018 is Rs. 1.69 crore (Previous year Rs. 1.04 crore). Further, expected return on plan assets has been determined considering several applicable factors, mainly, composition of plan assets held, assessed risk of asset management and historical returns from plan assets.
(a) In line with âGuidance Note on Accounting for Expenditure on Corporate Social Responsibility (CSR) Activitiesâ issued by The Institute of Chartered Accountants of India, provision on account of unspent CSR expenses as on 31.03.2017 of Rs. 100.20 crore has been reversed during the year ended 31.03.2018. On the basis of expenditure incurred Rs. 118.18 crore has been charged to Profit and Loss Account during the year ended 31.03.2018.
(b) Details of gross amount required to be spent on CSR activities by the Company during the year.
(c) Amount spent during the year on CSR activities:
(d) Details of related party transactions w.r.t. CSR activities as per Accounting Standard (AS) 18, Related Party Disclosures - Nil (Previous year Nil).
(e) Movements in the CSR provision during the year as per AS-29 shown separately at Note Part C - 19.
Assets as mentioned at SI. No. 1 to 5 above are depreciated using written down value method and Intangible Assets are amortized using straight-line method over the useful life estimated by the Company. Further, Companyâs estimate of useful life for Cell Phone is shorter than the life prescribed in Schedule II of the Companies Act, 2013, and for all other items useful life is in line with Schedule II of the Companies Act, 2013.
14. The Company has no outstanding liability towards Micro, Small and Medium enterprises.
15. Leasehold land is not amortized, as it is a perpetual lease.
16. As required under Section 125 of the Companies Act, 2013, Rs. 0.83 crore, (Previous year Rs. 4.58 crore), became due for transfer to the Investor Education and Protection Fund (IEPF) during the year ended 31.03.2018 and was deposited. Further, an amount of Rs. 2.63 crore (Previous year Rs. 2.03 crore) remains unpaid pending completion of transfer formalities by the claimants.
17. During the year, the Company has sent letters seeking confirmation of balances as at 31.12.2017 to the borrowers. Confirmation for 99.12% of the said balances have been received and confirmation for Rs. 2,291.39 crore is awaited.
18. A) The status of dividend on equity shares of face value of Rs. 10 each, for the year ended 31.03.2018 is as under:
B) Dividend payable to Non-Resident Shareholders
The Company has not remitted any amount in foreign currencies on account of dividends during the year and does not have information as to the extent to which remittances, if any, in foreign currencies on account of dividends have been made by/on behalf of non-resident shareholders. Particulars of dividends paid / payable to non-resident shareholders (including Foreign Institutional Investors) are given below:
19. Additional disclosures in accordance with RBI Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016.
(A) SignificantAccountingPolicies
Reference may be made to Note Part - B.
(B) Capital
Reference may be made to Note Part C - 30 for CRAR.
(C) Investments
(D) Derivatives
I. Forward Rate Agreement / Interest Rate Swap in respect of Loan Liabilities:
II. Company does not hold any exchange traded Interest Rate (IR) derivatives (Previous year Nil).
III. Qualitative disclosures on Risk Exposure in Derivatives:
a. Company has put in place a Board approved Currency Risk Management (CRM) policy to manage and hedge risks associated with foreign currency borrowing. The said policy prescribes structure and organization for management of associated risks.
b. Company enters into derivatives viz. Principal only Swaps, Interest Rate Swaps, options and Forward Contracts for hedging the interest / exchange rate risk in Rupee and foreign currency liabilities. As per the CRM Policy, a system for reporting and monitoring of risks is in place; wherein Risk Management Committee consisting of senior executives monitors the foreign currency exchange rate and interest rate risks managed through various derivative instruments.
c. These derivative transactions are done for hedging purpose and not for trading or speculative purpose. These are accounted for as per the accounting standard 11 / Guidance Note on Derivatives issued by ICAI. The mark to market positions mentioned are those as informed by the counterparty banks.
d. Reference may be made to Note Part B - 8 for relevant accounting policy on derivative transactions.
IV. Quantitative Disclosures on Risk Exposure in Derivatives in respect of Loan Liabilities:
(E) Disclosures related to Securitization
I. Company has not entered into any securitization transaction during the year and there is no exposure on account of securitization as at 31.03.2018 (Previous year Nil).
II. Company has not sold any financial assets to Securitization / Asset Reconstruction Company during the year ended 31.03.2018 (Previous year Nil).
III. Company has not undertaken any assignment transaction during the year ended 31.03.2018 (Previous year Nil).
IV. Company has neither purchased nor sold any non-performing financial assets during the year ended 31.03.2018 (Previous year Nil).
III. Details of financing of parent company products:
Company does not have a parent company.
IV. Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the NBFC: Company has not exceeded its prudential exposure limits against Single Borrower / Group Borrower Limits during FY 2017-18 and FY 2016-17.
V. Unsecured Advances:
Total amount of advances for which intangible securities such as charge over the rights, licenses, authority etc. has been taken is Nil as at 31.03.2018 (Previous year Nil).
(H) Registration obtained from other financial sector regulators:
Nil.
(I) Disclosure of Penalties imposed by RBI and other regulators
During the year ended 31.03.2018, no penalty has been imposed on the Company by RBI and other regulators (Previous year Nil).
(J) Credit rating
a. Ratings assigned by credit rating agencies and migration of ratings during the year:
No rating migration has taken place during the year,
b. Long term foreign currency issuer rating assigned to the Company as at 31.03.2018:
(K) Net Profit or Loss for the period, prior period items and changes in accounting policies
Reference may be made to Statement of Profit and Loss, Note Part A-18 and Note Part C-20 regarding prior period items and changes in accounting policies respectively.
(L) Circumstances in which revenue recognition has been postponed pending the resolution of significant uncertainties
Reference may be made to Note Part C-16
(M) Company is preparing Consolidated Financial Statements in accordance with Accounting Standard - 21 and 27. Reference may be made to Part C-7(A) of notes to accounts in this regard.
(N) Provisions and Contingencies
(O) Draw Down from Reserves
Reference may be made to Note Part A - 2 Reserves and Surplus.
(P) Concentration of Deposits, Advances, Exposures and NPAs
a. Concentration of Deposits (for deposit taking NBFCs) - Company is a non-deposit accepting NBFC.
e. Sector-wise NPAs:
Company is a Government Company engaged in extending financial assistance to power sector. As at 31.03.2018, the percentage of Gross NPAs to total loan assets stands at 9.57% (Previous year 12.50%).
(R) Company does not have any Overseas Assets in the form of Joint Ventures and Subsidiaries.
(S) Reference may be made to Note Part C - 7(A)(b) for list of Off-balance Sheet SPVs sponsored by the Company.
20. The identification of Business segment is done in accordance with the system adopted for internal financial reporting to the board of directors and management structure. The companyâs primary business is to provide finance for power sector which in the context of Accounting Standard 17 is considered the only primary business segment. Hence, no segmental reporting is required.
21. Figures have been rounded off to the nearest crore of rupees with two decimals.
22. Figures for the previous period have been regrouped / reclassified wherever necessary, to confirm to current period classification.
Mar 31, 2017
1. CASH FLOW STATEMENT
Cash flow statement is prepared in accordance with the indirect method prescribed in Accounting Standard - 3 on Cash Flow Statement.
2. CASH AND CASH EQUIVALENTS
Cash comprises cash on hand, demand deposits with banks, imprest with postal authorities and cheques / drafts / pay orders in hand. The Company considers cash equivalents as all short term balances (with an original maturity of three months or less frommthe date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
Other Notes on Accounts
3. The Company is a Government Company engaged in extending financial assistance to power sector and is a Systemically Important (Non-Deposit Accepting or Holding) Non-Banking Finance Company (NBFC) registered with Reserve Bank of India as an Infrastructure Finance Company. Equity shares of the Company are listed on NSE and BSE.
4. Contingent Liabilities and Commitments:
(B) Income Tax Demands
Additional demands raised by and paid to the Income Tax Department totaling to Rs,40.53 crore (Previous year Rs,45.23 crore) of earlier years are being contested. Further, the Income Tax Department has filed appeals against the relief allowed by appellate authorities to the Company aggregating to Rs,165.39 crore (Previous year Rs,121.04 crore). The same are also being contested. The Management does not consider it necessary to make provision, as the liability is not considered probable.
(C) Service Tax Demands
Service Tax demand / show cause notices raised by Service Tax Department totaling to Rs,23.51 crore (Previous year Nil) of earlier years are being contested. Further, the Service Tax Department has also filed an appeal before CESTAT against the order of Commissioner (CE&ST) who had dropped a demand of service tax of Rs,1.11 crore (Previous year Rs,1.11 crore). The same is also being contested. The Management does not consider it necessary to make provision, as the liabilities are not considered probable.
5 Other Commitments
Estimated amount of contract remaining to be executed on account of capital account, not provided for, is Nil (Previous year Nil).
* Pertaining to Assessment Year 2001-02 to 2014-15. $ Pertaining to Assessment Year 2001-02 to 2013-14.
A. The Company is creating Debenture Redemption Reserve (DRR) for public issue of bonds or debentures @ 50% (as per MCA Circular No. 6/3/2001 - CL.V dated 18.04.2002) for public issues wherein prospectus had been filed before 11.02.2013 and @ 25% (as required by Companies (Share Capital and Debentures) Rules, 2014) for the subsequent public issues.
B. The Company raises funds through various instruments including series of non-convertible bond issues. During the year, the Company has not defaulted in servicing of its borrowings.
As regards non-convertible Rupee denominated bonds, the previous due date for payment of interest and principal was 31.03.2017.
Rs,Includes JPY loan liability partly hedged through forward rate contract entered for one leg (USD/INR) for USD 45 million / Rs,291.83 crore (Previous year USD / JPY leg USD 105 million / Rs,701.09 crore).
C. The Company amortizes exchange differences on long term foreign currency monetary items over their tenure. Consequently, as at 31.03.2017 unamortized debit balance under Foreign Currency Monetary Item Translation Difference Account (FCMITDA) is Rs,647.56 crore (Previous year debit balance Rs,739.74 crore).
In-case of specific provision in the loan agreement, rate as prescribed in respective loan agreement has been used.
E. During the year ended 31.03.2017, Company has amended the accounting policy for accounting of derivative contracts in order to align it with the âGuidance Note on Accounting for Derivative Contracts'' issued by The Institute of Chartered Accountants of India which has become applicable from 01.04.2016. The said Guidance Note require derivative contracts to be accounted either on fair value basis or as per hedge accounting and the Company has opted for accounting on fair value basis.
Accordingly, Derivative contracts not covered by AS-11 but covered under Guidance Note are measured at fair value with changes in fair value being recognized in the Statement of Profit & Loss. In accordance with the transitional provisions mentioned in the Guidance Note, an amount of Rs,74.35 crore (net of Deferred Tax Liability of Rs,39.35 crore) has been adjusted in the opening balance of reserves, representing the cumulative impact of change in the fair value (gain) of the interest rate swaps till 31.03.2016 net of amount accrued. Thereafter, further fair value gain (net) on interest rate swaps has been booked to the Statement of Profit & Loss. Due to this change in the accounting policy, profit before tax for the year has increased by Rs,178.15 crore.
#Joined the Company on 11.04.2013, KMP from 01.04.2014 as per Companies Act 2013.
B Transactions with Key Management Personnel (KMP):
Managerial remuneration of KMP for the year ended 31.03.2017 is Rs,3.50 crore (Previous year Rs,2.36 crore). Loans & Advances given to KMP is Rs,0.50 crore (Previous year Rs,0.39 crore) as on 31.03.2017.
(i)Financial statements are consolidated as per Accounting Standard 21 - Consolidated Financial Statements and Accounting Standard 27
- Financial Reporting of Interests in Joint Ventures.
(ii)Subsequent to decision by the Board of Directors of respective subsidiaries, merger of PFCCAS with PFCCL is under progress.
(iii)The Board has in- principle approved the merger of PFCGEL with PFCL in meeting held on 9th August 2016 which is under progress.
(iv)Decision of voluntary winding up of PECAP is under consideration of MoP, GoI.
(v)Subsidiary companies were incorporated as SPVs under mandate from the GoI for development of UMPPs with the intention to hand over the same to successful bidders on completion of the bidding process. Financial statements of these subsidiaries are not consolidated, in accordance with paragraph 11 of Accounting Standard-21.
(vi)MoP vide its OM dated 21st June, 2016 has conveyed its approval for the wound up of TAMPL. The related proceedings are under way.
(vii)Board of Directors of NPEL (erstwhile JV of the Company) had approved a plan of Voluntary Liquidation with effect from 28.10.2014. The Voluntary winding up of NPEL has been completed on 26.07.2016. The Company has received Rs,1.21 crore in July 2016 as final settlement from NPELâs liquidator. Accordingly, during the year, accumulated provision Rs,1.06 crore has been reversed and loss on disposal of investments of Rs,0.98 crore has been recognized. Accordingly financial statements of NPEL have not been consolidated for the FY 2016-17.
(viii)Maximum amount of investment during the year is same as investment at the year-end for each of the entities except NPEL where maximum amount during the year stood at Rs,2.19 crore gross of provision for diminution.
B. None of the related party loanee is holding any equity investment in the Company as on 31.03.2017 (Previous year Nil).
9. A. Major Investments made during the year:
i) During the year, the Company has subscribed to 26,05,42,051 fully paid equity shares of NHPC Limited of face value of Rs,10/- per share under Offer for Sale by GoI. The shares have been subscribed at a cost of Rs,21.78/- per share including brokerage and other statutory charges aggregating to Rs,567.50 crore.
ii) The Company has subscribed to 9,90,00,000 fully paid equity shares of EESL of face value of Rs,10/- per share as on 31.03.2016 and the same have been allotted on 25.04.2016.
B. Conversion of Debt into Equity:
i) In case of a borrower which was classified as a doubtful loan asset, the Company invoked the pledge of equity shares. Accordingly, 6,57,46,779 number of equity shares of Rs,10/- each pledged by the promoters have been transferred to the Company on 01.06.2016. These equity shares have been recognised at a value of Rs,1/-.
Further, 6,61,00,000 number of equity shares of Rs,10/- each have been allotted to the Company on 01.06.2016 on partial conversion of sub-debt loan given earlier to the extent of Rs,66.10 crore. A provision for diminution in value of these shares has been made. The impact of provision after netting the provision earlier made is Rs,46.27 crore. Carrying value of these equity shares as on 31.03.2017 amounts to Rs,1.
As on 31.03.2017, the Company holds 23.32% of paid-up equity share capital of the borrower company.
ii) In case of another borrower, the Company has converted its debt into equity under approved Strategic Debt Restructuring (SDR) package and 27,50,00,000 number of equity shares of Rs,10/- each have been allotted to the Company on 23.02.2017. As at 31.03.2017, provision for diminution in value of investment works out to Rs,81.95 crore. Company has opted to distribute the provision over four quarters in accordance with RBI''s SDR norms. Accordingly, a provision for diminution in value of investment of Rs,20.49 crore has been provided in the last quarter of the current year. As at 31.03.2017, Company holds 4.81% of paid-up equity share capital of the borrower.
6. Interest Differential Fund (IDF) - KFW
The agreement between KFW and the Company provides that IDF belongs to the borrowers solely and will be used to cover exchange risk variations under this loan and any excess will be used in accordance with the agreement. Balance in IDF has been kept under separate account head titled as Interest Differential Fund - KFW and shown as a liability. Total fund accumulated as on 31.03.2017 is Rs,63.88 crore (Previous year Rs,60.71 crore), after transferring exchange difference of Rs,12.56 crore (Previous year Rs,13.48 crore).
(ii) The Company had sanctioned an amount of Rs,88.90 crore in year 2004 as finance lease for financing wind turbine generator (commissioned on 19.07.2004). Sanction was reduced to Rs,88.85 crore in December 2006. Gross investment stood at the level of Rs,0.89 crore as on 31.03.2017 (Previous year Rs,1.33 crore). Lease rent is to be recovered within a period of 15 Years, starting from 19.07.2004, which comprises of 10 years as primary period and 5 years as secondary period. Secondary period is in force with effect from 19.07.2014.
(iii) The Company had sanctioned an amount of Rs,98.44 crore in year 2004 as finance lease for financing wind turbine generator (commissioned on 18.5.2004). Gross investment stood at Rs,3.45 crore as on 31.03.2017 (Previous year Rs,3.94 crore). Lease rent is to be recovered within a period of 20 years, starting from 18.05.2004, which comprises of 10 years as primary period and a maximum of another 10 years as secondary period. Secondary period is in force with effect from 01.04.2014.
(iv) The Company had sanctioned an amount of Rs,93.51 crore in year 2004 as finance lease for financing wind turbine generator (commissioned on 09.06.2005). Gross investment stood at Rs,3.74 crore as on 31.03.2017 (Previous year Rs,4.21 crore). Lease rent is to be recovered within a period of 19 years 11 months, starting from 09.06.2005, which comprises of 10 years as primary period and a maximum of 9 years and 11 months as secondary period. Secondary period is in force with effect from 01.04.2015.
(v) The Company had sanctioned an amount of Rs,228.94 crore in year 2008 as finance lease for financing wind turbine generator (commissioned on 18.05.2011). Gross investment stood at Rs,327.71 crore as on 31.03.2017 (Previous year Rs,355.30 crore). Lease rent is to be recovered within a period of 25 years, starting from 01.01.2012, which comprises of 18 years as primary period and a maximum of 7 years as secondary period.
(B) The Company''s operating leases consist of:
Premises for offices and for residential use of employees are lease arrangements, and are usually renewable on mutually agreed terms, and are cancellable. Rent for residential accommodation of employees include Rs,5.61 crore (Previous year Rs,4.65 crore) towards lease payments, net of recoveries in respect of premises for residential use of employees. Lease payments in respect of premises for employees are shown as rent for residential accommodation of employees in Note Part A 16 - Employee Benefit Expenses. Lease payments in respect of premises for offices amounting to ''0.50 crore (Previous year ''0.50 crore) are shown as office rent in Note Part A 17 - Other Expenses. Future lease payments in respect of these lease agreements are given below:
7. Implementation of GoI Schemes
(A) Subsidy under Accelerated Generation & Supply Programme (AG&SP):
(i) The Company claimed subsidy from GoI at net present value calculated at indicative interest rates in accordance with GOI''s letter vide D.0.No.32024 / 17 / 97 - PFC dated 23.09.1997 and 0.M.No.32024 / 23 / 2001 - PFC dated 07.03.2003, irrespective of actual repayment schedule, moratorium period and duration of repayment. Amount of interest subsidy received and to be passed on to the borrower is retained as Interest Subsidy Fund Account. Impact of difference between indicative rate and period considered at the time of claims and at the time of actual disbursement can be ascertained only after end of respective schemes. However, on the basis of projections made for each project (based upon certain assumptions that these would remain same over the projected period of each loan / project), the Company estimated net excess amount of ''8.67 crore and Rs,93.56 crore as on 31.03.2017 (Previous year Rs,7.80 crore and Rs,87.47 crore) for IX and X Plan, respectively under AG&SP schemes, and there is no shortfall. This net excess amount is worked out on overall basis and not on individual basis and may vary due to change in assumptions, if any, during the projected period such as changes in moratorium period, repayment period, loan restructuring, pre-payment, interest rate reset etc. Any excess / shortfall in the interest subsidy fund will be refunded or adjusted / charged off on completion of respective scheme.
(B) Re-structured Accelerated Power Development and Reforms Programme (R - APDRP):
(i) The Company is Nodal Agency for operationalization and associated service for implementation of R - APDRP.
Amounts received from the GoI under R - APDRP as a Nodal agency for on-lending to eligible borrowers are back to back arrangements with no profit or loss arising to the Company. The amount on-lended but not converted in to grants as per applicable guidelines will become payable along-with interest to the GoI on receipt from borrowers.
(ii) Nodal Agency Fee under R - APDRP scheme for XIth plan is being accounted for @ 1% of sanctioned project cost in three stages - 0.40% on sanction of project, 0.30% on disbursement of funds and remaining 0.30% after completion of the sanctioned project (for Part - A) and verification of AT&C loss of the project areas (for Part - B). In addition, actual expenditure including expenditure allocable on account of Company''s manpower, incurred for operational zing the R- APDRP is reimbursable by MoP, GoI. The cumulative claim for fee and reimbursement of expenditure is subject to cap of Rs,850 crore or 1.7% of likely project outlay under Part A & B of R-APDRP, whichever is less.
From XIIth plan onwards, in accordance with Company''s claim, approved by MoP vide its letter dated 31.03.2015 and subsequent clarification issued by MoP vide letter dated 20.05.2015, the Company continues to restrict its claims only to reimbursement of actual expenditure excluding Company''s own manpower and administrative charges.
âExclusive of Service Tax
(C) Integrated Power Development Scheme (IPDS)
Ministry of Power on 03.12.2015 has launched IPDS for (i) strengthening of sub-transmission and distribution network in urban areas,
(ii) metering of feeders / distribution transformers / consumers in urban areas and (iii) IT enablement of distribution sector and strengthening of distribution network by subsuming R-APDRP and carrying forward the approved outlay for R-APDRP to IPDS.
The scope of works under IPDS includes work relating to strengthening of sub-transmission and distribution system, including provisioning of solar panels, metering of distribution transformers / feeders / consumers in the urban areas and IT enablement of distribution sector.
The Company has been designated as Nodal Agency for operationalization and implementation of scheme under overall guidance of the MoP, GoI. Role of Nodal agency is mentioned in IPDS scheme which inter-alia includes administration of GoI grant to eligible utilities which can be recalled / pre-closed subject to certain conditions mentioned in IPDS guidelines.
The Company will be eligible for 0.5% of total project cost approved by Monitoring Committee or award cost, whichever is lower, as nodal agency fee to be claimed / accrued as under:
i. 1st installment: 40% of nodal agency fee in financial years in which projects are approved by the Monitoring Committee under IPDS.
ii. 2nd installment: 30% of nodal agency fee on award of approved projects.
iii. 3rd installment: 20% of nodal agency fee after one year of claiming 2nd installment.
iv. 4th installment: 10% of nodal agency fee after completion of works.
8. Government of India Fully Serviced Bonds
For meeting GOI''s funding requirement of central sector schemes, during the year, the Company has raised an aggregate amount of Rs,5,000 crore through unsecured, redeemable, non-convertible, taxable bonds in the nature of debentures of face value of Rs,10 lacs at par on private placement basis. As per O.M. dated 20.10.2016 of Ministry of Finance, these bonds will be fully serviced by GoI. Accordingly, the amount of such bonds along-with interest is also appearing as recoverable by the Company from GoI.
9. A. Asset classification and Provisioning:
1) The Company has aligned with RBI Prudential norms during the year, contained in RBI''s âNon-Banking Financial Company
- Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016" as amended from time to time read with specific directions mentioned below:
1. Assets classification norms in line with RBI''s letter dated 03.10.2016:
i. loan assets (excluding lease asset) outstanding as at 31.03.2017 and overdue for 4 months or more is classified as Non-Performing Asset (NPA) and classification during the year is based on prevailing norm of overdue for 5 months or more,
ii. NPA as at 31.03.2017 for a period not exceeding 14 months is classified as Sub-standard asset and classification during the year is based on prevailing norm of NPA for a period not exceeding 16 months, and
iii. NPA as at 31.03.2017 for a period exceeding 14 months is classified as Doubtful asset and classification during the year is based on prevailing norm of NPA for a period exceeding 16 months.
10. Restructuring Norms:
(i) In line with RBI''s letter dated 11.06.2014, Transmission & Distribution, Renovation & Modernization and Life Extension projects and also the hydro projects in Himalayan region or affected by natural disasters are regulated by the restructuring norms approved by MoP till 31.03.2017. Accordingly, with effect from 01.04.2017, RBI restructuring norms will be applied for any future restructuring undertaken in these loans.
Further, RBI vide letter dated 11.06.2014 has directed that for new project loans to generating companies restructured w.e.f. 01.04.2015, the provisioning requirement would be 5% and for stock of such outstanding loans as on 31.03.2015 to all generating companies, provisioning shall commence with a provision of 2.75% with effect from 31.03.2015 and reaching 5% by 31.03.2018.
(ii) As regard implementation of RBI restructuring norms (shifting from MoP, GoI approved restructuring norms), based on the various correspondence exchanged, RBI in letter dated 11.04.2017 has stated that in case of a Govt. Sector account, if the project has not commenced commercial operation within DCCO envisaged at the time of financial closure (or revised DCCO within the permissible thresholds as given in RBI Norms for Restructured Advances), the classification is to be done project-wise instead of borrower-wise till 31.03.2022.
1) a) The Company has been applying RBI restructuring norms on new generation loans sanctioned w.e.f. 01.04.2015
(Before 01.04.2015, MoP, GoI approved restructuring norms were applicable).
b) After receipt of RBI letter dated 11.04.2017, Company has adopted RBI restructuring norms on remaining loans (other than loans as stated at 14A(1)(2)(i) above). In generation loans sanctioned before 31.03.2015 and where structuring has been done w.e.f. 01.04.2015, the asset classification has been given effect on 31.03.2017 as per RBI norms with consequent provisioning.
B. Credit Concentration Norms
For credit concentration norms, RBI vide its letter dated 16.06.2016, has extended exemption in respect of exposure to Central / State Government entities till 31.03.2022. Thus, the Company continues to follow MoP approved credit concentration norms for Central / State Government entities.
12. Pursuant to adoption of RBI''s restructuring norms during the year (shifting from MoP, GoI approved restructuring norms), in respect of loans to state sector, regular in servicing, having no overdoes as on 31.03.2017:
a) Company has categorized standard assets amounting to Rs,35,994.70 crore as restructured standard assets. The provision on such loans has been increased from 0.35% to 4.25%. Thus, profit before tax for the year ended 31.03.2017 has decreased by
b) Company has classified two loan assets as NPA having amount outstanding of Rs,8,284.47 crore as on 31.03.2017, which achieved DCCO on or before 31.03.2017 after 2/3/4 years from original DCCO (as permitted under norms). During the year, un-realized income on these loans amounting to Rs,163.71 crore has been reversed and additional provision of Rs,799.45 crore has been made on such loans. Thus, profit before tax for the year ended 31.03.2017 has decreased by Rs,963.16 crore.
c) Company has classified three loan assets as NPA having amount outstanding of Rs,4,157.28 crore as on 31.03.2017, which by year ended 31.03.2017 could not achieve date of commencement of commercial operation (DCCO) within 2/3/4 years from original DCCO (as permitted under norms). During the year, un-realized income on these loans amounting to Rs,103.04 crore has been reversed and additional provision of Rs,401.18 crore has been made on such loans. Thus, profit before tax for the year ended 31.03.2017 has decreased by Rs,504.22 crore.
d) Company has classified one loan asset as NPA having amount outstanding of Rs,5,793.83 crore as on 31.03.2017, which was restructured after achievement of DCCO. During the year, un-realised income on this loans amounting to Rs,142.03 crore has been reversed and additional provision of Rs,333.14 crore has been made on this loan.
Further, in accordance with borrower-wise asset classification norms, other loans to the same borrower have also been classified as NPA. Hence, un-realised income on such other loans amounting to Rs,118.59 crore has been reversed and additional provision of Rs,489.62 crore has been made on such other loans having amount outstanding of Rs,5,073.73 crore as on 31.03.2017.
Thus, profit before tax for the year ended 31.03.2017 has decreased by Rs,1,083.38 crore.
The profit before tax for the year has decreased by Rs,3,954.55 crore on account of para a to d above.
(1)R/R/R loans on which restructuring provisioning as per RBI norms is applicable, outstanding as at 31.03.2017 amount to Rs,19,445.92 crore in private sector and Rs,35,994.70 crore in Govt. sector as explained at Note Part C-15 (a) above (Previous year Rs,21,479.20 crore in private sector and Rs,10,783.78 crore in Govt. sector).
(2)Includes loans amounting to Rs,23,309.30 crore pertaining to Govt. Sector which became NPA on adoption of RBI RRR Norms during current year as explained at Note Part C-15 (b,c&d) above.
13. Basis of secured / un-secured categorization of loan assets:
a) In cases where Company is a lead or sole lender, it considers the loan asset as secured if hypothecation of movable project assets has been completed and mortgage of more than 50% of the project land for loan assets has been achieved. Further, wherever valuation is required as per applicable norms, the security status is updated on the basis of valuation report.
b) In all other cases, secured / un-secured classification is done on the basis of security status obtained from the lead lender.
14. In case of a restructured loan asset, categorized as sub-standard by the Company on 15.04.2015, the borrower has obtained an ad-interim stay on further proceedings from Hon''ble High Court of Madras vide order dated 17.06.2015.
The Company had sought a legal opinion with respect to asset classification, based on which, the loan asset was re-classified from restructured sub-standard to restructured standard asset and the NPA provision amounting to ''339.99 crore made till the date of reclassification was reversed during the previous year.
The matter is sub-judice and ad-interim stay is continuing. Based on the subsequent legal opinion sought, the Company maintained asset classification as standard as on 31.03.2016 and continues the same in the current year also amid further progress in the project.
On 30.06.2016, the Company has moved petition for vacating the order of ad-interim stay. The said petition is pending for hearing. Subsequent to reclassification of the said account in the previous year,
(i) interest / income of ''413.03 crore accrued and remaining unrealised as on 31.03.2017 has been reversed;
(ii) provision, as applicable based on the existing asset classification as restructured standard asset, has been made which stands at Rs,163.17 crore as on 31.03.2017 (as on 31.03.2016 Rs,148.82 crore);
(iii) provision treating the account as doubtful, on the loan balance of Rs,4,893.39 crore as on 31.03.2017 (as at 31.03.2016 Rs,4,251.91 crore), after considering the provision as stated at (ii) above, has not been recognized amounting to Rs,815.50 crore (previous year Rs,276.37 crore).
15. Disclosures as per Accounting Standard -15 :-
A. Provident fund
The Company pays fixed contribution on account of provident fund at prescribed rates to a separate trust, which invests the funds in permitted securities. The contribution to the fund for the period is recognized as expense and is charged to the statement of profit and loss. The trust has to ensure, a minimum rate of return to the members as specified by GoI. However, any shortfall for payment of interest to members as per specified rate of return has to be compensated by the Company. The Company estimates that no liability will arise in this regard in the near future and hence, no further provision is considered necessary.
B. Gratuity
The Company has a defined gratuity scheme which is managed by a separate trust. The provision for the same has been made on actuarial valuation based on total number of years of service rendered by an employee subject to a maximum amount of Rs,10 lakh per employee.
C. Pension
The Company has a defined contribution pension scheme which is in line with guidelines of the Department of Public Enterprise (DPE) and is managed by a separate trust. Employee and Employer contribution to the fund has been contributed on monthly basis. Pension is payable to the employees of the Company as per the scheme.
D. Post-Retirement Medical Scheme (PRMS)
The Company has Post-Retirement Medical Scheme (PRMS), under which retired employees and their dependent family member are provided with medical facilities in empanelled hospitals. They can also avail reimbursement of out-patient treatment subject to a ceiling fixed by the Company.
This scheme is managed by a separate trust. Trust was registered during the F.Y. 2014-15 in the name of PFC Superannuation Medical Fund and started operations from the FY 2016-17. Provision on this account as on 31.03.2016 amounting to Rs,17.83 crore was transferred by the Company to the trust on 11.07.2016. The provision for the same has been made on actuarial valuation. The trust has to ensure, adequate corpus for meeting the medical expenditure incurred by the retired employees. However, any short fall has to be compensated by the Company. The Company estimates that no liability will arise in this regard in the near future and hence, no further provision is considered necessary.
E. Terminal Benefits
Terminal benefits include settlement in home town for employees & their dependents.
F. Leave
The Company provides for earned leave benefit and half-pay leave benefit to the credit of the employees, which accrues on half-yearly basis @ 15 days and 10 days, respectively. A maximum of 300 days of earned leave can be accumulated at any point of time during the service. There is no limit for accumulation of half pay leave. Earned leave is en-cashable during the service; while half pay leave is not en-cashable during the service or on separation / superannuation before 10 years. On separation after 10 years of service or on superannuation, earned leave plus half pay leave together can be en-cashed subject to a maximum of 300 days. However, there is no restriction in the number of years of service for earned leave encashment on separation from the service.
G. The above mentioned schemes (D, E and F) are unfunded and are recognized on the basis of actuarial valuation.
H. The summarised position of various defined benefits recognized for the year 31.03.2017 in the statement of profit and loss account, balance sheet are given below {Figures in brackets ( ) are for Previous year}:
*During the year, the expenses include Rs,0.09 crore (previous year Rs,0.03 crore), Rs,0.43 crore (previous year Rs,0.55 crore) and Rs,0.29 crore (previous year Rs,0.44 crore) for gratuity, leave and PRMS respectively allocated to subsidiary companies.
vi) During the year, Company has provided liability of Rs,1.41 crore, Rs,4.04 crore, Rs,7.49 crore and Nil (Previous year Rs,0.27 crore, Rs,4.15 crore, Rs,6.39 crore and Nil) towards contribution to the Gratuity Trust, PRMS, leave and towards Pension respectively. Above amount includes Rs,0.09 crore, Rs,0.43 crore and Rs,0.29 crore (Previous year Rs,0.03 crore, Rs,0.55 crore and Rs,0.44 crore) for gratuity, leave and PRMS respectively allocated to subsidiary companies.
I. Other Employee Benefits:-
During the year, provision of Rs,0.21 crore (Previous year Rs,0.33 crore) has been made for Economic Rehabilitation Scheme (ERS) for employees and provision of Rs,0.59 crore (Previous year Rs,0.48 crore) has been made for Long Service Award (LSA) for employees on the basis of actuarial valuation made at end of the year by charging / crediting statement of profit and loss. LSA includes Rs,0.05 crore (Previous year Rs,0.06 crore) allocated to subsidiary companies.
(1)As at 31.03.2017, Bonds of the Company amounting to Rs,0.60 crore (previous year Rs,0.50 crore) are held by PFC Limited Gratuity Trust.
"Estimate of future salary increases considered in actuarial valuation, takes into account inflation, seniority, promotion and other relevant factors such as supply and demand in employment market.
(II) Details of Plan Asset:- PRMS
(1)As at 31.03.2017, Bonds of the Company amounting to Nil (previous year Nil) are held by PFC Limited PRMS Trust.
âEstimates of future salary increases considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors, such as supply and demand in employment market.
K. Employee benefits (viz. Gratuity, PRMS, Terminal Benefits, Leave encashment and other employee benefits) in respect of Company''s employees working in PFCCAS, PFCGEL and PFCCL (subsidiaries of the Company) on deputation / secondment basis, are being allocated based on a fixed percentage of employee cost.
Consequently, the Board of Directors of the Company in its meeting held on 1st September 2016 has accorded approval for allotment of 132,00,40,704 bonus equity shares (in the ratio of 1:1) to the existing shareholders as on 29.08.2016 (record date). As a result of this, paid up equity share capital of Company has increased from Rs,1,320.04 crore (132,00,40,704 equity shares of Rs,10 each) to Rs,2,640.08 crore (264,00,81,408 no of equity shares of Rs,10 each).
âDeclared by Board of Directors in their 359th meeting held on 24.03.2017 and paid on 07.04.2017.
(2) Paid on 01.09.2016.
B) Dividend payable to Non-Resident Shareholders
The Company has not remitted any amount in foreign currencies on account of dividends during the year and does not have information as to the extent to which remittances, if any, in foreign currencies on account of dividends have been made by/on behalf of non-resident shareholders. Particulars of dividends paid / payable to non-resident shareholders (including Foreign Institutional Investors) are given below:
II. Company does not hold any exchange traded Interest Rate (IR) derivatives (Previous year Nil).
III. Qualitative disclosures on Risk Exposure in Derivatives:
a. Company has put in place a Board approved Currency Risk Management (CRM) policy to manage and hedge risks associated with foreign currency borrowing. The said policy prescribes structure and organization for management of associated risks.
b. Company enters into derivatives viz. Principal only Swaps, Interest Rate Swaps and Forward Contracts for hedging the interest / exchange rate risk in Rupee and foreign currency liabilities. As per the CRM Policy, a system for reporting and monitoring of risks is in place; wherein Risk Management Committee consisting of senior executives monitors the foreign currency exchange rate and interest rate risks and are managed through various derivative instruments.
c. These derivative transactions are done for hedging purpose and not for trading or speculative purpose.
d. Reference may be made to Note Part B-8 for relevant accounting policy on derivative transactions.
IV. Quantitative Disclosures on Risk Exposure in Derivatives in respect of Loan Liabilities:
âInterest rate derivatives include derivatives on Rupee liabilities of Rs,6,164.60 crore (Previous year Rs,7,164.60 crore)
(2)Includes JPY loan liability partly hedged through forward rate contract entered for one leg (USD/INR) for Rs,291.83 crore (Previous
(E) Disclosures related to Securitization
I. Company has not entered into any securitization transaction during the year and there is no exposure on account of securitization as at 31.03.2017 (Previous year Nil).
II. Company has not sold any financial assets to Securitization / Asset Reconstruction Company during the year ended 31.03.2017 (Previous Year Nil).
III. Company has not undertaken any assignment transaction during the year ended 31.03.2017 (Previous Year Nil).
IV. Company has neither purchased nor sold any non-performing financial assets during the year ended 31.03.2017 (Previous Year Nil).
III. Details of financing of parent company products:
Company does not have a parent company.
IV. Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the NBFC:
Company has not exceeded its prudential exposure limits against Single Borrower / Group Borrower Limits during FY 2016-17 and FY 2015-16.
V. Unsecured Advances:
Total amount of advances for which intangible securities such as charge over the rights, licenses, authority etc. has been taken is Nil as at 31.03.2017 (Previous year Nil).
(H) Registration obtained from other financial sector regulators:
Nil.
(I) Disclosure of Penalties imposed by RBI and other regulators
During the year ended 31.03.2017, no penalty has been imposed on the Company by RBI and other regulators (Previous Year Nil).
(J) Credit rating
a. Ratings assigned by credit rating agencies and migration of ratings during the year:
(K) Net Profit or Loss for the period, prior period items and changes in accounting policies
Reference may be made to Part A-18 and C-23 of notes to accounts regarding prior period items and changes in accounting policies respectively.
(L) Circumstances in which revenue recognition has been postponed pending the resolution of significant uncertainties
Nil.
(M) Company is preparing Consolidated Financial Statements in accordance with Accounting Standard - 21 and 27. Reference may be made to Part C - 7 (A) of notes to accounts in this regard.
(N) Provisions and Contingencies
Reference may be made to Note Part C-21 for provisions and contingencies.
(O) Draw Down from Reserves
Reference may be made to Note Part C - 31 and Note - Part A - 2.
(P) Concentration of Deposits, Advances, Exposures and NPAs
a. Concentration of Deposits (for deposit taking NBFCs) - Company is a non-deposit accepting NBFC.
e. Sector-wise NPAs:
Company is a Government Company engaged in extending financial assistance to power sector. As at 31.03.2017, the percentage of Gross NPAs to total loan assets stands at 12.50% (Previous year 3.15%).
Mar 31, 2015
1. The Company is a Government Company engaged in extending financial
assistance to power sector and is a Non-Banking Finance Company
registered with RBI as an Infrastructure Finance Company.
2. Contingent liabilities:
(A) The details are as follows: (Rs. in crore)
S. Particulars
No.
(i) Default guarantees issued in foreign currency - US $ 0.74
million (as on 31.03.2014 US $ 4.14 million)
(ii) Guarantees issued in domestic currency
(iii) Claims against the Company not acknowledged as debts
(iv) Outstanding disbursement commitments to the borrowers by way
of Letter of Comfort against loans sanctioned
S. As on As on
No. 31.03.2015 31.03.2014
(i)
4.69 25.07
(ii) 262.84 299.20
(iii) 0.04 0.04
(iv) 787.32 2,274.96
Total 1,054.89 2,599.27
(B) Additional demands raised by the Income Tax Department totaling to
Rs. 64.41 crore (as on 31.03.2014 Rs. 49.87 crore) of earlier years
are being contested. Further, the Income Tax Department has filed
appeals against the relief allowed by appellate authorities to the
Company aggregating to Rs. 85.47 crore (as on 31.03.2014 Rs. 79.26
crore). The same are being contested. The Management does not consider
it necessary to make provision, as the probability of tax liability
devolving on the Company is negligible.
3. Additional demands raised by the Income Tax Department (net of
relief granted by Appellate Authorities) aggregating to Rs. 78.50
crore for Assessment Years 2001-02 to 2012-13 (as on 31.03.2014 Rs.
55.10 crore for Assessment Years 2001-02 to 2011-12) have been provided
for and are being contested by the Company.
4. Estimated amount of contract remaining to be executed on account of
capital contracts, not provided for, is Rs. 0.33 crore (as on
31.03.2014 Nil).
5. Ministry of Corporate Affairs (MoCA), Government of India, vide its
Circular No. 6/3/2001 - CL.V dated 18.04.2002 prescribed adequacy of
Debenture Redemption Reserve (DRR) as 50% of the value of debentures
issued through public issue; subsequently, the MoCA through its
Circular No. 11/02/2012-CL-V(A) dated 11.02.2013 modified the adequacy
of DRR to 25%. In this regard, the Company has requested the MoCA for
clarification, which is awaited.
Meanwhile, The Companies (Share Capital and Debentures) Rules, 2014,
with effect from 01.04.2014, also stated that for NBFCs registered with
the RBI under Section 45-IA of the RBI (Amendment) Act, 1997, the
adequacy of DRR will be 25% of the value of debentures issued through
public issue as per present SEBI (Issue and Listing of Debt Securities)
Regulations, 2008, and no DRR is required in the case of privately
placed debentures.
In view of above, the Company is creating DRR for public issue of bonds
/ debentures @ 50% for the issues for which prospectuses had been filed
before 11.02.2013 and @ 25% for the subsequent public issues.
6.(A) Transactions with related parties
Managerial remuneration of KMP for the year ended 31.03.2015 is Rs.
2.50 crore (previous year ended 31.03.2014 Rs. 2.30 crore).
(i) The financial statements are consolidated as per Accounting
Standard 21 - Consolidated Financial Statements and Accounting Standard
27 - Financial Reporting of Interests in Joint Ventures.
(ii) The subsidiary companies were incorporated as SPVs under the
mandate from the Government of India for development of Ultra-Mega
Power Projects (UMPPs) with the intention to hand over the same to
successful bidders on completion of the bidding process. The financial
statements of these subsidiaries are not consolidated, in accordance
with paragraph 11 of Accounting Standard-21.
(iii) Board of Directors of the Company, in its 322nd meeting held on
14th August, 2014, decided for winding up Tatiya Andhra Mega Power
Limited, subject to approval of Ministry of Power, Government of India.
(iv) The Group of Promoters (GoP) of National Power Exchange Limited
(NPEL), comprising of NTPC, NHPC, TCS and PFC in their meeting dated
21.03.2014 decided to recommend voluntary winding up of NPEL to the
Board of NPEL. The Board of Directors of PFC in their meeting held on
14th August, 2014 had approved the recommendation of the GoP. The
voluntary winding up of NPEL is under process.
The Company as on 31.03.2015 has an investment of Rs. 2.19 crore (as
on 31.03.2014 Rs. 2.19 crore) in the equity share capital of NPEL
against which a provision for diminution in value amounting to Rs. 1.06
crore (previous year Nil) has been made during the current year.
(v) To firms / companies in which directors are interest : Nil
(vi) Where there is no repayment schedule or repayment
beyond seven years : Nil
(vii) Where no interest or interest as per Section
186 of the Companies Act, 2013 : Nil
B. Investment by the loanee in the shares of
PFC / Subsidiaries : Nil
7. Investment made in equity shares of Coal India Ltd.:
During the year, the Company has subscribed to 1,39,64,530 fully paid
equity shares of Coal India Limited (CIL) of face value of Rs. 10/-
per share under Offer for Sale route. The shares have been subscribed
at a cost of Rs. 358.58/- per share aggregating to Rs. 500.74 crore.
8. Interest Differential Fund (IDF) - KFW
The agreement between KFW and the Company provides that the IDF belongs
to the borrowers solely and will be used to cover the exchange risk
variations under this loan and any excess will be used in accordance
with the agreement. The balance in the IDF fund has been kept under
separate account head titled as Interest Differential Fund - KFW and
shown as a liability. The total fund accumulated as on 31.03.2015 is
Rs. 58.38 crore (as on 31.03.2014 Rs. 54.63 crore), after transferring
exchange difference of Rs. 14.11 crore (as on 31.03.2014 Rs. 16.56
crore).
9.(i) The Company had sanctioned an amount of Rs. 88.90 crore in the
year 2004 as finance lease for financing wind turbine generator
(commissioned on 19.07.2004). The sanction was reduced to Rs. 88.85
crore in December 2006. The gross investment stood at the level of Rs.
1.78 crore as on 31.03.2015 (Rs. 4.21 crore as on 31.03.2014). The
lease rent is to be recovered within a period of 15 Years, starting
from 19.07.2004, which comprises of 10 years as a primary period and 5
years as a secondary period. Secondary period is in force with effect
from 19.07.2014.
(ii) The Company had sanctioned an amount of Rs. 98.44 crore in the
year 2004 as finance lease for financing wind turbine generator
(commissioned on 18.5.2004). The gross investment stood at Rs. 4.43
crore as on 31.03.2015 (Rs. 22.53 crore as on 31.03.2014). The lease
rent is to be recovered within a period of 20 years, starting from
18.05.2004, which comprises of 10 years as a primary period and a
maximum of another 10 years as a secondary period. Secondary period is
in force with effect from 01.04.2014.
(iii) The Company had sanctioned an amount of Rs. 93.51 crore in the
year 2004 as finance lease for financing wind turbine generator
(commissioned on 09.06.2005). The gross investment stood at Rs. 7.62
crore as on 31.03.2015 (Rs. 1.96 crore as on 31.03.2014). The lease
rent is to be recovered within a period of 19 years 11 months, starting
from 09.06.2005, which comprises of 10 years as a primary period and a
maximum of 9 years and 11 months as a secondary period.
(iv) The Company had sanctioned an amount of Rs. 228.94 crore in the
year 2008 as finance lease for financing wind turbine generator
(commissioned on 18.05.2011). The gross investment stood at Rs. 379.12
crore as on 31.03.2015 (Rs. 404.82 crore as on 31.03.2014). The lease
rent is to be recovered within a period of 25 years, starting from
01.01.2012, which comprises of 18 years as a primary period and a
maximum of 7 years as a secondary period.
10. Subsidy under Accelerated Generation & Supply Programme (AG&SP):
(i) The Company claimed subsidy from Govt. of India at net present
value calculated at indicative interest rates in accordance with the
GOI's letter vide D.O.No.32024 / 17 / 97 - PFC dated 23.09.1997 and
O.M.No.32024 / 23 / 2001 - PFC dated 07.03.2003, irrespective of the
actual repayment schedule, moratorium period and duration of repayment.
The amount of interest subsidy received and to be passed on to the
borrower is retained as Interest Subsidy Fund Account. The impact of
difference between the indicative rate and period considered at the
time of claims and at the time of actual disbursement can be
ascertained only after the end of the respective schemes. However, on
the basis of the projections made for each project (based upon certain
assumptions that these would remain same over the projected period of
each loan / project), the Company estimated the net excess amount of
Rs. 7.02 crore and Rs. 61.32 crore as on 31.03.2015 (Rs. 6.32 crore
and Rs. 74.53 crore as on 31.03.2014) for IX and X Plan, respectively
under AG&SP schemes, and there is no shortfall. This net excess amount
is worked out on overall basis and not on individual basis and may vary
due to change in assumptions, if any, during the projected period such
as changes in moratorium period, repayment period, loan restructuring,
pre-payment, interest rate reset etc. Any excess / shortfall in the
interest subsidy fund will be refunded or adjusted / charged off on
completion of the respective scheme.
11. The Company had exercised the option under para 46A of the AS-11 -
'The Effects of Changes in Foreign Exchange Rates', to amortize the
exchange differences on the long term foreign currency monetary items
over their tenure. Consequently, as on 31.03.2015 the debit balance
under Foreign Currency Monetary Item Translation Difference Account
(FCMITDA) amounting to Rs. 380.56 crore (as on 31.03.2014 Rs. 709.21
crore) is shown on the "Equity and Liabilities" side of the balance
sheet under the head "Reserve and Surplus", as a separate line item.
12. Implementation of GoI Scheme:
(A) Re-structured Accelerated Power Development and Reforms Programme
(R - APDRP):
(i) The Company is the Nodal Agency for operationalisation and
associated service for implementation of the R - APDRP under which
projects are being taken up in two parts. Part - A includes the
projects for establishment of baseline data and IT applications for
energy accounting as well as IT based customer care centers. Part - B
includes regular distribution strengthening projects. GoI provides 100%
loan for Part A and up to 25% (up to 90% for special category States)
loan for Part - B. Balance funds for Part - B projects can be raised by
the utilities from PFC / REC / multi-lateral institutions and / or own
resources. The loans under Part A- along with interest thereon are
convertible into grant as per applicable guidelines. Similarly, up to
50% (up to 90% for special category states) of the loan against Part -B
project would be convertible in to grant as per applicable guidelines.
Enabling activities of the programme are covered under Part - C.
Amounts received from the Government of India under R - APDRP as a
Nodal agency for on-lending to eligible borrowers are back to back
arrangements with no profit or loss arising to the Company. The amount
on-lended but not converted in to grants as per applicable guidelines
will become payable along with interest to the GoI on receipt from the
borrowers.
(ii) In line with the R - APDRP scheme approved by MoP, GoI , vide
Office Memorandum No. 14 / 03 / 2008 - APDRP dated 20th August, 2010,
till 31.03.2013, Nodal Agency Fees under R - APDRP had been accounted
for @ 1% of the sanctioned project cost in three stages - 0.40% on
sanction of the project, 0.30% on disbursement of the funds and
remaining 0.30% after completion of the sanctioned project (for Part -
A) and verification of AT&C loss of the project areas (for Part - B).
Further, actual expenditure, including expenditure allocable on account
of PFC manpower, incurred for operationalising the R- APDRP were
reimbursed / reimbursable by Ministry of Power, Government of India. As
per Office Memorandum No. 14 / 03 / 2008 - APDRP dated 20th August,
2010 of the MoP, GoI, the total amount receivable against the nodal
agency fee plus the reimbursement of actual expenditure will not exceed
Rs. 850 crore or 1.7 % of the likely outlay under Part A & B of R -
APDRP, whichever is less.
Ministry of Power (MoP) vide letter dated 15.07.2013 informed that as
per Department of Expenditure (DoE), Nodal Agency Fee for R-APDRP
scheme for 12th Plan may be restricted to 0.5% of the sanctioned
project cost or actual expenditure, whichever is less.
Pursuant to various correspondence with MoP, GoI a revised proposal was
submitted to MoP, GoI vide letter dated 26.12.2014, wherein Company
agreed to restrict its claims only to reimbursements of actual
expenditure in line with norms indicated by Department of Expenditure
(DoE) through MoP communication dated 15.07.2013 excluding Company's
own manpower (Salary only) / administrative charges during XII / XIII
Plan under R-APDRP. MoP vide letter dated 05.01.2015 directed the
Company to intimate its final claim based on revised proposal of the
Company. The Company, vide letter dated 02.02.2015, submitted its claim
including balance claim pertaining to XIth plan and claim for the
period from 01.04.2012 to 31.12.2014 (earlier shown as other expenses
of the Company) which has been approved by MoP vide its letter dated
31.03.2015
Accordingly, the Company has reversed Nodal Agency Fee for R-APDRP
scheme for XIIth Plan (upto FY 2013-14) amounting to Rs. 35.86 crore
and has not recognized the fee pertaining to the current year.
(B) Integrated Power Development Scheme (IPDS)
Govt. of India (GoI) has launched IPDS for the Urban areas with the (i)
Strengthening of Sub-transmission and Distribution network in urban
areas including provisioning of solar panels on Govt. buildings
including Net-metering, (ii) Metering of feeders / distribution
transformers / consumers in urban areas and (iii) IT enablement of
distribution sector and strengthening of distribution network, as per
CCEA approval dated 21.06.2013 for completion of the targets laid down
under R-APDRP for XIIth and XIIIth Plans by subsuming R-APDRP in IPDS
and carrying forward the approved outlay for R-APDRP to IPDS.
As per guidelines, approved by IPDS Monitoring Committee, constituted
by Ministry of Power (MoP), GoI, the company has been designated as the
Nodal Agency for operationalization and implementation of the scheme
under the overall guidance of the MoP. The role of the Nodal agency is
mentioned in IPDS scheme which inter-alia includes administration of
GoI grant to the eligible utilities which can be recalled / pre closed
subject to certain conditions mentioned in the IPDS guidelines.
The Company will be eligible for 0.5% of the total project cost
approved by Monitoring Committee or award cost, whichever is lower, as
nodal agency fee to be claimed / accrued as under:
i. 1st installment: 40% of the nodal agency fee (i.e. 40% of 0.5% of
approved project cost) in the financial years in which the projects are
approved by the Monitoring Committee under IPDS.
ii. 2nd installment: 30% of the nodal agency fee (i.e. 30% of 0.5% of
approved project cost) on award of approved projects.
iii. 3rd installment: 20% of the nodal agency fee (i.e. 20% of 0.5% of
approved project cost) after one year of claiming 2nd installment.
13. The Company has been creating provision @ 0.25% of the outstanding
standard loan assets excluding outstanding restructured standard loan
assets on which separate provision has been started during the year. As
on 31.03.2015, the Standard Asset provision stands at Rs. 486.57crore
(Rs. 469.42 crore as on 31.03.2014).
14. The Company being a Government owned Non-Banking Financial Company
is exempt from the RBI directions relating to Prudential Norms. RBI has
directed the Company, vide its letter dated 25.07.2013, to take steps
to comply with RBI's Prudential Norms by 31.03.2016. Further, RBI vide
its letter dated 03.04.2014 has allowed exemption from credit
concentration norms in respect of exposure to Central / State
Government entities till 31.03.2016.
The Company follows its own prudential norms approved by the Ministry of
Power (MoP), Govt.of India (GoI) (including revisions approved by BoD in
its meeting held on 09.03.2015 subject to the approval of MoP) which
inter-alia includes norms for Restructuring / Reschedulement /
Renegotiation (R/R/R) of loans which allows (i) two times restructuring
before COD, (ii) exemption to the loans having central / state
government guarantee and loans to government department, and (iii)
dispensation not to consider extension of repayment schedule without
sacrifice as restructuring for government sector borrowers. For R/R/R
norms, RBI has advised the Company to follow the instructions contained
in RBI circular DNBS.CO.PD.No. 367/03.10.01/2013- 14 dated 23.01.2014,
vide its letter dated 03.04.2014 inter-alia allowing maximum period of
delay in DCCO for which a loan can be restructured. The matter regarding
applicability of RBI's R/R/R norms was taken up with RBI. In this
regard, RBI vide its letter dated 11.06.2014 has allowed exemption from
application of its restructuring norms for Transmission & Distribution,
Renovation & Modernization and Life Extension projects and also the
hydro projects in Himalayan region or affected by natural disasters for
a period of 3 years i.e. till 31.03.2017. Further, for new project loans
to generating companies restructured w.e.f. 01.04.2015, the provisioning
requirement would be 5% and for stock of such outstanding loans as on
31.03.2015 to all generating companies, the provisioning shall commence
with a provision of 2.75% with effect from 31.03.2015 and reaching 5% by
31.03.2018. This provision is in addition to the provision for
diminution in fair value.
The Company vide its letter dated 03.07.2014 has communicated the
manner of its implementation to RBI, further reiterated vide Company's
letter dated 27.11.2014, inter-alia stating that all new project loans
sanctioned with effect from 01.04.2015 to generating companies would be
regulated by RBI norms on R/R/R. RBI vide its letter dated 04.02.2015
has informed that the Company's request is under examination.
Pending decision by RBI regarding implementation of R/R/R norms, the
Company is following its own norms read with the manner of
implementation as stated above.
Accordingly, the Accounting policy related to Prudential Norms on R/R/R
has been amended during the year ended 31.03.2015 which inter-alia
requires provision @ 2.75% on restructured standard assets. Thus,
during the year ended 31.03.2015 a provision has been made amounting to
Rs. 564.44 crore, on qualifying loans. As on 31.03.2015, these loans
comprise of private sector loan Rs. 20,524.91 crore and Govt. Sector
loan Nil. Consequently, profit for the year ended 31.03.2015 has been
reduced by Rs. 513.12 crore, after considering the existing provision
on standard loan assets on these restructured loans.
15. Provision for shortfall in security of
Restructured/Rescheduled/Renegotiated (R/R/R)Loans:
The Restructured Standard Assets as on 31.03.2015 includes 3 loan
assets amounting to Rs. 2,753.50 crore, classified as unsecured. These
loans carry adequate security as on 31.03.2015 in form of charge on
assets etc., but require completion of full security creation process
as per the sanction terms. Hence, these are classified as unsecured. As
these loans carry adequate security coverage as on 31.03.2015, there is
no short fall in security. Provision on these R/R/R assets has been
created @2.75% and no further provision for any shortfall in security
is required.
16. The Company has no outstanding liability towards Micro, Small and
Medium Enterprises.
17. Leasehold land is not amortized, as it is a perpetual lease.
18. Disclosures as per Accounting Standard -15 :-
A. Provident fund
The Company pays fixed contribution to provident fund at prescribed
rates to a separate trust, which invests the funds in permitted
securities. The contribution to the fund for the period is recognized
as expense and is charged to the statement of profit and loss. The
trust to ensure a minimum rate of return to the members as specified by
GoI. However, any short fall for payment of interest to members as per
specified rate of return has to be compensated by the Company. The
Company estimates that no liability will take place in this regard in
the near future and hence no further provision is considered necessary.
B. Gratuity
The Company has a defined gratuity scheme and is managed by a separate
trust. The provision for the same has been made on actuarial valuation
based upon total number of years of service rendered by an employee
subject to a maximum amount of Rs. 10 lakh.
C. Pension
The Company has a defined contribution pension scheme which is in line
with guidelines of the Department of Public Enterprise (DPE) and is
managed by a separate trust. Employer contribution to the fund has been
contributed on monthly basis. Pension is payable to the employees of
the Company as per the scheme.
D. Post Retirement Medical Scheme (PRMS)
The Company has Post-Retirement Medical Scheme (PRMS), under which
retired employees and their dependent family member are provided with
medical facilities in empanelled hospitals. They can also avail
reimbursement of out-patient treatment subject to a ceiling fixed by
the Company.
E. Terminal Benefits
Terminal benefits include settlement in home town for employees & their
dependents.
F. Leave
The Company provides for earned leave benefit and half-pay leave
benefit to the credit of the employees, which accrue on half yearly
basis @ 15 days and 10 days, respectively. A maximum of 300 days of
earned leave can be accumulated at any point of time during the
service. There is no limit for accumulation of half pay leave. Earned
leave is en-cashable during the service; while half pay leave is not
en-cashable during the service or on separation / superannuation before
10 years. On separation after 10 years of service or on superannuation,
earned leave plus half pay leave together can be en-cashed subject to a
maximum of 300 days. However, there is no restriction in the number of
years of service for earned leave encashment on separation from the
service.
The above mentioned schemes (D, E and F) are unfunded and are
recognized on the basis of actuarial valuation.
The summarised position of various defined benefits recognized for
31.03.2015 in the statement of profit and loss account, balance sheet
are as under {Figures in brackets ( ) are for 31.03.2014}
i) One percent increase / decrease in the inflation rate would impact
liability for medical cost of PRMS, as under:-
Cost increase by 1% Rs. 2.09 crore
Cost decrease by 1% Rs. (2.19) crore
ii) During the year, the Company has provided liability towards
contribution to the Gratuity Trust of Rs. 0.21 crore, to PRMS of Rs.
3.63 crore, to leave Rs. 5.06 crore and to pension Nil (during the
year ended 31.03.2014 towards contribution to the Gratuity Trust of Rs.
0.86 crore, to PRMS of Rs. 2.75 crore, to leave Rs. 6.17 crore and to
pension Rs. Nil crore). Above amount includes Rs. 0.02 crore (as on
31.03.2014 Rs. 0.07 crore), Rs. 0.42 crore (as on 31.03.2014 Rs. 0.58
crore) and Rs. 0.34 crore (as on 31.03.2014 Rs. 0.11 crore) for
gratuity, leave and PRMS respectively allocated to subsidiary
companies.
G. Other Employee Benefits:-
During the year, provision of Rs. 0.01 crore (during the year ended
31.03.2014 Rs. -0.05 crore) has been made for Economic Rehabilitation
Scheme (ERS) for Employees and provision of Rs. 0.92 crore has been
made for Long Service Award (LSA) for employees (during the year ended
31.03.2014 Rs. 0.74 crore) on the basis of actuarial valuation made at
the end of the year by charging / crediting the statement of profit and
loss.
H. Till FY 2013-14, the employee benefits (viz. Gratuity, PRMS,
Terminal Benefits, Leave encashment and other employee benefits) in
respect of Company's employees working in PFCCAS, PFC GEL and PFCCL on
deputation / secondment basis were being allocated on actuarial basis
and recognized as recoverable (from these subsidiaries) by the Company.
During the FY 2014-15, the practice has been changed with effect from
01.01.2007, whereby amount recoverable from subsidiaries, on account of
above stated employee benefits, has been mutually worked out at a fixed
percentage of employee cost.
19. Pursuant to the requirements of the Companies Act 2013, followed
by clarification from Department of Public Enterprises (DPE), the
Company amended its CSR and Sustainability policy during the year.
Accordingly, during the year, a CSR provision amounting to Rs. 117.49
crore (previous year Rs. 63.23 crore including reversal of CSR and SD
reserve amounting to Rs. 18.85 crore as on 31.03.2013) has been made
at the rate 2% of the average net Profit Before Tax (PBT) of the
Company earned during the three immediately preceding financial years.
During the FY 2014-15, an amount of Rs. 49.90 crore (previous year Rs.
46.52 crore) has been disbursed against CSR activities.
As on 31.03.2015, the CSR and SD provisions stands at Rs. 114.30
crore(previous year Rs. 32.33 crore) after adjusting an amount of Rs.
35.52 crore (previous year Rs. 30.90 crore) during the year on account
of CSR claims.
20. Disclosure as per Accounting Standard - 1 on 'Disclosure of
Accounting Policies.
During the FY ended 31.03.2015, following changes in Part - B-
Significant accounting policies have been made:
(i) Policy no. 1, Basis for Preparation of Financial Statements, has
been aligned with the Companies Act, 2013. There is no financial impact
due to this change.
(ii) Policy no. 2.7, regarding adjustment of repayment against earliest
disbursement is deleted since the same is covered under Policy no. 2.6.
There is no financial impact due to this change.
(iii) Policy no. 3.3, Fixed assets / Depreciation, has been aligned
with the Companies Act, 2013. There is no financial impact due to this
change. The financial impact on account of change in estimate has been
disclosed at note 35.
(iv) Policy no. 4.1, Intangible Assets / Amortization, has been aligned
with the presentation followed by the Company. There is no financial
impact due to this change.
(v) Policy no. 5, Investments, has been modified to bring in more
clarity. There is no financial impact due to this change.
(vi) Policy no. 6.4.(ii)(a) has been modified to avoid overlapping with
policy no. 6.3.(iii). There is no financial impact due to this change.
(vii) Policy no. 6.7.(i), Restructuring, Reschedulement or
Renegotiation of term(s) of loan, has been aligned with the changes in
the Prudential Norms of the Company. There is no financial impact due
to this change.
(viii) Policy no. 6.7.(vii), Eligibility for Upgradation of
Restructured / Rescheduled / Renegotiated Sub-standard Infrastructure
loan, has been aligned with the changes in the Prudential Norms of the
Company. There is no financial impact due to this change.
ix) Policy no. 6.7.(xii), regarding provisioning on Restructured /
Rescheduled / Renegotiated standard asset, has been added to align with
the changes in the Prudential Norms of the Company. The financial
impact has been disclosed at note18 supra.
x) Policy no. 9, Accounting of Government of India Schemes, has been
amended to align with the nature of transaction governed under the
policy related to GoI schemes such as R-APDRP, IPDS. There is no
financial impact due to this change.
(xi) Policy no. 11, R-APDRP Fund, has been deleted since the same is
covered under amended Policy no. 9. There is no financial impact due to
this change.
(xii) Policy no. 12.5, regarding income on development of Request for
Qualification (RFQ) document / Request for Proposal (RFP) document, has
been deleted since the same is no more relevant. There is no financial
impact due to this change.
(xiii) Policy no. 16, Cash and Cash Equivalents, has been added to
bring in more clarity. There is no financial impact due to this change.
21. (A) Interim Dividend
The Board of Directors in their 330th meeting held on 27.02.2015
declared interim dividend at the rate of 85% i.e. Rs. 8.50/- per
equity share of Rs. 10/- each amounting to Rs. 1,122.04 crore for the
FY 2014-15.
22. The Company got registered with Central Registry of Securitisation
Asset Reconstruction and Security Interest of India (CERSAI) in April,
2012 for filing and registering the records of equitable mortgages
created in its favour, in the web portal of CERSAI. On facing the
practical difficulties, the Company has since then continuously taken
up the matter with CERSAI and RBI.
The Company vide letter dated 24.12.2014 has also requested Department
of Financial Services to exempt the Company from reporting of equitable
mortgage transactions contemplated under Section 23 of SARFAESI Act,
2002. The Company vide letter dated 05.01.2015 has also sought RBI's
intervention in the matter. The response in this regard is still
awaited.
Meanwhile, the Company vide letter dated 19.02.2015 has again requested
CERSAI to remove the practical difficulties in entering the data in the
web portal of CERSAI. The response is still awaited.
23. As required under Section 205C of the Companies Act, 1956, Rs.
0.21 crore (Previous Year Rs. Nil) became due and was transferred to
the Investor Education and Protection Fund (IEPF) during the FY ended
31.03.2015. However, an amount of Rs. 0.56 crore (Previous Year Rs.
0.56 crore) remains unpaid pending completion of transfer formalities
by the claimants.
24. During the year, the Company has sent letters seeking confirmation
of balances as on 31.12.2014 to the borrowers and confirmation from all
the borrowers (except one case which is sub-judice) have been received.
25. Effective from 1st April 2014, depreciation on assets is provided
on original cost of the asset reduced by its residual value estimated
from time to time, as per written down value method, over the useful
lives of the assets as per Companies Act, 2013. In respect of life
expired assets, an amount of Rs. 1.92 crore (net of deferred tax) has
been charged to retained earnings as per Companies Act, 2013.
26. The Company does not have more than one reportable segment in
terms of Accounting Standard-17 on Segment Reporting.
27. Previous year's figures have been re-grouped / re-arranged,
wherever practicable to make them comparable.
28. Figures have been rounded off to the nearest crore of rupees with
two decimals.
29(A) Disclosures related to Securitisation
I. The Company has not entered into any securitization transaction
during the year and there is no exposure on account of securitisation
as on 31.03.2015 (Previous year Nil).
II. The Company has not sold any financial assets to Securitisation /
Reconstruction Company for asset construction during the year ended
31.03.2015 (Previous Year Nil).
III. The Company has not undertaken any assignment transaction during
the year ended 31.03.2015 (Previous Year Nil).
IV. The Company has neither purchased nor sold any non-performing
financial assets during the year ended 31.03.2015 (Previous Year Nil)
V. Unsecured Advances
Total amount of advances for which intangible securities such as charge
over the rights, licenses, authority etc. has been taken is Nil as on
31.03.2015 (As on 31.03.2014 Nil).
(B) Registration obtained from other financial sector regulators
The Company is a Government Company and is registered with RBI as
NBFC-ND-IFC (Non-Banking Finance Company - Non Deposit Accepting -
Infrastructure Finance Company).
(C) Disclosure of Penalties imposed by RBI and other regulators
During the year ended 31.03.2015, no penalty has been imposed on the
Company by SEBI and RBI (Previous Year Nil).
(D) Net Profit or Loss for the period, prior period items and changes
in accounting policies
Reference may be made to Part A-18 and C-29 of notes to accounts
regarding prior period items and changes in accounting policies
respectively.
(E) Circumstances in which revenue recognition has been postponed
pending the resolution of significant uncertainties Reference may be
made to note Part B - 2.1 of Significant Accounting Policy.
(F) The Company is preparing Consolidated Financial Statements in
accordance with Accounting Standard - 21. Reference may be made to Part
C - 8 (A) of notes to accounts in this regard.
Mar 31, 2014
1. SHARE CAPITAL
Under the Company stock, option plan titled as PFC-ESOP 2010, the
Remuneration Committee and there meeting held on 23rd December, 2011
had given the approval for FY 2009-10 for grant of 88,040 options,
effective from 29th July, 2011 and in their meeting held on 30th April
2012 had given as approval for FY 2010-11 for the grant of 92,964
options, effective from 30th April, 2012 to regular employees of the
Company through PFC Employees Welfare Trust at a price of Rs.176.05/-
per option for FY 2009-10 and Rs.180.75/- per option FY 2010-11,
exclusive of the face value of Rs.10/- per share, convertible into
equivalent number of equity shares of Rs.10/- each on payment of
Rs.10/- per share.
For FY 2009-10, out of 88,040 options, 87,888 options has been granted,
83,306 equity shares have been alloted during the previous financial
year and 4,255 equity shares during the current year upon exercising
the stock option under the scheme. For FY 2010-11, out of 92,964
options granted, 69,964 options have been settled in cash and 1,572
options have been cancelled during the previous financial year and
alloted 21,438 equity shares during the current year upon exercising
the stock option under the scheme.
2. Additional demands raised by the income Tax Department totaling to
Rs. 49.87 crore (as on 31.03.2013 Rs. 55.93 crore) of earlier years are
being contested. Further, the Income Tax Department has filed appeals
before ITAT against the orders of CIT (A) allowing relief to the
Company totaling to Rs. 79.26 crore (as on 31.03.2013 Rs. 67.96 crore).
The same are being contested. The Management does not consider it
necessary to make provision, as the probability of tax liability
devolving on the Company is negligible.
3. Additional demands raised by the Income Tax Department (net of
relief granted by Appellate Authorities) amounting to Rs. 55.10 crore
for Assessment Years 2001 -02 to 2011 -12 have been provided for and
are being contested by the Company.
4. Ministry of Corporate Affairs (MoCA), Government of India, vide its
Circular No. 6/3/2001 -CL.V dated 16.04.2002 prescribed adequacy of
Debenture Redemption Reserve (DRR) as 50% of the value of debentures
issued through public issue; subsequently, the MoCA through its
circular No. 11/02/2012-CL-V(A) dated 11.02.2013 modified the adequacy
of DRR to 25%.
In this regard, the Company has requested the MoCA for clarification,
which is awaited. Pending receipt of clarification, the Company is
creating DRR for public issue of bonds / debentures @ 50% for the
issues for which prospectuses had been filed before 11.02.2013 and @
25% for the subsequent public issues.
5. i. Investment in "Small is Beautiful" Fund: -
The Company has outstanding investment of Rs. 7.68 crore (as on
31.03.2013 Rs. 7.68 crore) in units of Small is Beautiful Fund. The
face value of the Fund is Rs.10 per unit. The NAV as on 31.03.2014 is
Rs. 9.70 per unit (Rs. 9.77 per unit as on 31.03.2013). As investment
in Small is Beautiful Fund is long term investment, the fluctuation in
NAV in the current scenario is considered as temporary.
ii. Investment in equity (unquoted) in Power Exchange India Umlted:-
Power Exchange India Ltd. (PXIL) has been promoted by National Stock
Exchange (NSE) and National Commodity and Derivatives Exchange Limited
(NCDEX). The authorized share capital is Rs. 100 crore consisting of 8
crore equity shares of Rs.10/- each and 2 crore preference shares of
Rs. 10/- each as on 31.03.2014. The paid up equity share capital of
PXIL is Rs. 46.47 crore, as on 31.03.2014. The Company has subscribed
Rs. 3,22 crore (Rs. 2.80 crore as on 31.03.2013) of the paid up capital
of PXIL.
6. Interest Differential Fund (IDF)-KFW
The agreement between KFW and PFC provides that the IDF belongs to the
borrowers solely and will be used to cover the exchange risk variations
under this loan and any excess will be used in accordance with the
agreement. The balance in the IDF fund has been kept under separate
account head titled as Interest Differential Fund - KFW and shown as a
liability. The total fund accumulated as on 31.03.2014 is Rs. 54.63
crore (as on 31.03.2013 Rs. 54.73 crore), after transferring exchange
difference of Rs. 16.56 crore (as on 31.03.2013 Rs. 15.21 crore).
6.i. The Company had sanctioned an amount of Rs. 88.90 crore in the
year 2004 as finance lease for financing wind turbine generator
(commissioned on 19.07.2004). The sanction was reduced to Rs. 88.85
crore in December 2006. The gross investment stood at the level of Rs.
4.21 crore as on 31.03.2014. The lease rent is to be recovered within a
period of 15 Years, starting from 19.07.2004, which comprises of 10
years as a primary period and 5 years as a secondary period.
ii. The Company had sanctioned an amount of Rs. 98.44 crore in the year
2004 as finance lease for financing wind turbine generator
(commissioned on 18-05-2004). The gross investment stood at Rs. 22.53
crore as on 31.03.2014. The lease rent is to be recovered within a
period of 20 years, starting from 18.05.2004, which comprises of 10
years as a primary period and a maximum of another 10 years as a
secondary period.
iii. The Company had sanctioned an amount of 7 93.51 crore in the year
2004 as finance lease for financing wind turbine generator
(commissioned on 09.06.2005). The gross investment stood at Rs. 1.96
crore as on 31.03.2014. The lease rent is to be recovered within a
period of 19 years 11 months, starting from 09.06.2005, which comprises
of 10 years as a primary period and a maximum of 9 years and 11 months
as a secondary period.
iv. The Company had sanctioned an amount of Rs. 228.94 crore in the
year 2008 as finance lease for financing wind turbine generator
(commissioned on 18,05.2004). The gross investment stood at Rs. 404.82
crore as on 31.03.2014, The lease rent is to be recovered within a
period of 25 years, starting from 01.01.2012. which comprises of 18
years as a primary period and a maximum of 7 years as a secondary
period.
7. Operating Lease:
The Company''s operating leases consists:-
Premises for offices and for residential use of employees are lease
arrangements, and are usually renewable on mutually agreed terms, and
are cancellable. Rent for residential accommodation of employees
include Rs. 4.19 crore (during year ended 31.03.2013 Rs. 3.84 crore)
towards lease payments, net of recoveries in respect of premises for
residential use of employees. Lease payments in respect of premises for
employees are shown as rent for residential accommodation of employees
in Note Part A 16 - Employee Benefit Expenses. Lease payments in
respect of premises for offices are shown as office rent in Note Part A
17-Other Expenses.
8. Subsidy under Accelerated Generation & Supply Programme (AG & SP):
The Company claimed subsidy from Govt. of India at net present value
calculated at indicative interest rates in accordance with the GOI''s
letter vide D.O.No.32024 / 17 / 97 - PFC dated 23.09.1997 and
O.M.No.32024 / 23 / 2001 - PFC dated 07.03.2003, irrespective of the
actual repayment schedule, moratorium period and duration of repayment.
The amount of interest subsidy received and to be passed on to the
borrower is retained as Interest Subsidy Fund Account. The impact of
difference between the indicative rate and period considered at the
time of claims and at the time of actual disbursement can be
ascertained only after the end of the respective schemes. However on
the basis of the projections made for each project (based upon certain
assumptions that these would remain same over the projected period of
each loan / project), the Company estimated the net excess amount of
Rs. 6.32 crore and Rs. 74.53 crore as at 31.03.2014 for IX and X Plan,
respectively under AG&SP schemes, and there is no shortfall. This net
excess amount is worked out on overall basis and not on individual
basis and may vary due to change in assumptions. If any, during the
projected period such as changes in moratorium period, repayment
period, loan restructuring, pre-payment, interest rate reset etc. Any
excess/shortfall in the interest subsidy fund will be refunded or
adjusted / charged off on completion of the respective scheme.
9. The Company had exercised the option under para 46A of the AS-11 -
The Effects of Changes in Foreign Exchange Rates'', to amortize the
exchange differences on the long term foreign currency monetary items
over their tenure. Consequently, as on 31.03.2014 the balance under
Foreign Currency Monetary item Translation Difference Account (FCMITDA)
is Rs. 709.21 crore (as on 31.03.2013 Rs.477.97 crore) and shown on the
ÂEquity and Liabilities'' side of the balance sheet under the head
ÂReserve and SurplusÂ, as a separate line item.
10. (i) The Company has been designated as the Nodal Agency for
operationalisation and associated service for implementation of the Re
structured Accelerated Power Development and Reforms Programme (R -
APDRP) during XI Plan by the Ministry of Power, Government of India
(GOI) under its overall guidance. Further, MoP vide order dated
06.07.2013 had agreed to continue R-APDRP in XII / XIII Plan,
inter-alia including extension of Part-A projects completion period
from 3 to 5 years.
Projects under the scheme are being taken up in two parts. Part-A
includes the projects for establishment of baseline data and IT
applications for energy accounting as well as IT based customer care
centers. Part - B includes regular distribution strengthening projects.
Gol provides 100% loan for Part A and up to 25% (up to 90% for special
category States) loan for Part - B. Balance funds for Part-8 projects
can be raised by the utilities from PFC / REC / multi-lateral
institutions and / or own resources. The loans under Part A- along with
interest thereon are convertible into grant as per R-APDRP guidelines.
Similarly, up to 50% (up to 90% for special category states) of the
loan against Part-B project would be convertible in to grant as per R -
APDRP guidelines. Enabling activities of the programme are covered
under Part-C.
The loans under R - APDRP are routed through the Company for
disbursement to the eligible utilities. The a mount so disbursed but
not converted in to grants as per R - APDRP guidelines will be repaid
along with interest to the Gol on receipt from the borrowers.
(ii) As per Office Memorandum No. 14 /03 / 2008-APDRP dated 20th
August, 2010 of the MoP, Gol, the total amount receivable against the
nodal agency fee plus the reimbursement of actual expenditure will not
exceed Rs. 850 crore or 1.7 % of the likely outlay under Part A & B of
R-APDRP, which ever is less.
(iii) In line with the R-APDRP scheme approved by MoP, Gol, vide Office
Memorandum No. 14 / 03/2008-APDRP dated 20th August, 2010, till
31.03.2013, Nodal Agency Fees under R - APDRP had been accounted for @
1% of the sanctioned project cost in three stages - 0.40% on sanction
of the project, 0.30% on disbursement of the funds and remaining 0.30%
after completion of the sanctioned project (for Part-A) and
verification of AT&C loss of the project areas (for Part - B), Further,
actual expenditure, including expenditure allocable on account of PFC
manpower, incurred for operationalising the R- APDRP were reimbursed /
reimbursable by Ministry of Power, Government of India.
Ministry of Power (MoP) vide letter dated 15.07.2013 informed that as
per Department of Expenditure (DoE), Nodal Agency Fee for R-APDRP
scheme for 12th plan may be restricted to 0.5% of the sanctioned
project cost or actual expenditure, whichever is less.
It was also indicated in the MoP letter dated 15.07.2013 that proposal
for any higher nodal agency fee may be considered, if agreed by the
DoE. Accordingly, the Company has submitted a proposal to MoP (vide our
letter dated 22.08.2013) for consideration of Nodal Agency Fee @ 0.50%
on R-APDRP sanctions and reimbursement of actual expenditure incurred
under R-APDRP (excluding PFC manpower expenditure), from 12th plan
onward. The proposal is under consideration by MoP, Gol, Pending
finalization, nodal agency fee / reimbursement of expenditure for 12th
plan has been accounted for during the year (with effect from
01.04.2012) on provisional basis as indicated by DoE through MoP
communication dated 15.07.2013. Accordingly, nodal agency fee income
amounting to Rs. 18.50 crore (Rs.18.43 crore for FY 2013-14 and Rs.
0.07 crore for FY 2012-13) has been recognised during the year.
Further, Rs. 42.59 crore on account of expenditure allocable to R-APDRP
has been accounted for separately and appearing under Note
Part-A-17-other expenses (including Rs. 21.81 crore of FY 2012-13
earlier booked as recoverable from MoP, Gol).
11.1. The Company has been creating provision for standard assets in
phases with effect from FY 2012-13, in three years period @ of 0.0833%
p.a. in order to bring it to 0.25% on 31st March, 2015 in line with the
accounting policy introduced during the financial year 2012-13,
Further, RBI vide its letter dated 25-07-2013 has directed that
provision may be made @ 0.25% ab-initio for all new assets.
Accordingly, the Company has changed its accounting policy to create
provision @ 0.25% for all new standard assets created in the current
year, while finalisation of half yearly financial statements as at
30.09.2013. The Board of Directors'' in its meeting dated 27.03.2014
decided to accelerate the provisioning for Standard Assets, so as to
bring it to 0.25% as on 31.03.2014 instead of on 31.03.2015. Therefore,
the accounting policy has again been changed, during the quarter ended
as at 31.03.2014, with effect from 01.04.2013 to create provision for
standard assets @0.25% of the outstanding as the end of the financial
year. As on 31.03.2014, the Standard Asset provision stands at Rs.
469.42 crore (Rs.132.79 crore as on 31.03.2013). Due to this change in
accounting policy, the profit for the year ended 31.03.2014 has
decreased by Rs. 156.47 crore,
11.2 The Company being a Government owned Non-Ban king Financial
Company is exempt from the RBI directions relating to Prudential Norms.
The Company, however, formulated its own set of Prudential Norms with
effect from 01.04.2003, which are revised from time to time. Ministry
of Power (MoP), Government of India (Gol) initially accorded its
approval to the Prudential Norms of the Company vide letter dated
19.04.2007 and thereafter extended validity of the same for subsequent
financial years. The prudential norms applicable for financial year
2013-14 are approved by MoP, Gol, vide its letter dated 23.05.2012 as
per which the Prudential Norms as applicable to the Company upto
31,03.2012 will continue to be applicable up to 31.03.2013 or till
further orders.
Further, RBI vide its notification dated 12.12.2006 proposed to bring
all deposit taking and systemically important government owned NBFCs
under the RBI''s direction on Prudential Norms from a date to be decided
later and advised Government companies to submit a roadmap for
compliance with various elements of the NBFCs regulation in
consultation with Government. Accordingly, PFC has been submitting
roadmaps as advised by RBI from time to time on the basis of which
exemption was granted by RBI upto FY 2012-13.
In response to the Road Map and subsequent correspondence, RSI vide its
letter dated 25.07.2013 advised on certain issues relating to
Provisioning of Standard assets, etc. and informed that the matters
relating to the Restructuring / Reschedulement/ Renegotiation (R/R/R)
of assets and the credit concentration norms are under its
consideration and it will revert back in due course, RBI has also
advised the Company to take steps to comply with RBI Prudential Norms
by 31.03.2016. The Company has informed to RSI its implementation
strategy for the above directions of RBI vide letter dated 07.10.2013
wherein for matter relating to the R/R/R of assets and the credit
concentration norms, it has been informed that the Company shall
continue to follow its extant norms for these matters till further
directions from RSI.
Now, RBI vide letter dated 3rd April, 2014 has allowed the exemption
from credit concentration norms in respect of exposure to Central /
State Government entities till 31.03.2016 and for the matter relating
to R/R/R, RBI has advised the Company to follow the instructions
contained in RBI circular DNBS.CO.PD.No. 367/03.10.01/2013-14 dated
23.01.2014. In this regard the Company vide letter dated 25.04.2014 has
submitted an implementation strategy to comply with RBI directions on
R/R/R of assets for the consideration of RBI and also stated that PFC
will follow the restructuring provisions contained in its extant
prudential norms till such time RBI may issue further instructions in
this respect. MoP, Gol, vide its letter dated 15.05.2014 has also
requested RSI to consider the implementation strategy as communicated
by the Company. The response from RBI is awaited. Since the Company is
following norms relating to R/R/R duly approved by MoP, Gol, the
management is of the view that RBI norms on R/R/R are not applicable to
the Company for the financial year 2013-14.
In-case of specific provision in the loan agreement for a rate other
than SBI TT selling rate, the rate has been taken as prescribed in the
respective loan agreement.
12.1 The Company has made the public issue of 75,00,000 tax free bonds
(secured) with an option to re tain oversubscription upto 3,87,59,000
bonds at the face value of Rs. 1,000/- each during the current
financial year and has mobilized Rs. 3875.90 crore. The security has
been created on 14-Nov-2013 and bonds have been allotted on
16-Nov-2013. The bonds have been listed in the BSE on 19-Nov- 2013. The
proceeds of the bond issue have been utilized for the purpose mentioned
in the offer document.
12.2 During the financial year 2013-14, Government of India (Gol) has
set up a fund called Goldman Sachs CPSE Exchange Traded Scheme (ÂGS
CPSE BeES") launched by Goldman Sachs Asset Management (India) Private
Limited (AMC). Accordingly, in March 2014, Government of India,
Ministry of Power, acting through Department of Disinvestment, has
disinvested 1,21,06,076 equity shares of face value of Rs. 10/- each by
selling it to the AMC. After disinvestment, the holding of Government
of India in the paid up equity share capital of the Company has come
down to 72.80% (As on 31.03.2013, 73.72%).
13.1 Disclosures as per Accounting Standard-15:-
A. Provident fund
The Company pays fixed contribution to provident fund at prescribed
rates to a separate trust, which invests the funds in permitted
securities. The contribution to the fund for the period is recognized
as expense and is charged to the statement of profit and loss. The
trust to ensure a minimum rate of return to the members as specified by
Gol. However, any short fall for payment of interest to members as per
specified rate of return has to be compensated by the Company. The
Company estimates that no liability will take place in this regard in
the near future and hence no further provision is considered necessary.
B. Gratuity
The Company has a defined gratuity scheme and is managed by a separate
trust. The provision for the same has been made on actuarial valuation
based upon total number of years of service rendered by the employee
subject to a maximum amount of Rs. 10 lakh.
C. Pension
The Company has a defined contribution pension scheme which is in line
with guidelines of the Department of Public Enterprise (DPE) and is
managed by a separate trust. Employer contribution to the fund has been
contributed on monthly basis. Pension is payable to the employee of the
corporation as per the scheme.
D. Post Retirement Medical Scheme (PRMS)
The Company has Post-Retirement Medical Scheme (PRMS), under which
retired employees and their dependent family member are provided with
medical facilities in empanelled hospitals. They can also avail
reimbursement of out-patient treatment subject to a ceiling fixed by
the Company.
E. Terminal Benefits
Terminal benefits include settlement in home town for employees & their
dependents.
F. Leave
The Company provides for earned leave benefit and half-pay leave
benefit to the credit of the employees, which accrue on half yearly
basis @ 15 days and 10 days, respectively. A maximum of 300 days of
earned leave can be accumulated at any point of time during the
service. There is no limit for accumulation of half pay leave. Earned
leave is en-cashable during the service, while half pay leave is not
en-cashable during the service or on separation/superannuation before
10 years. On separation after 10 years of service or on superannuation,
earned leave plus half pay leave together can be en-cashed subject to a
maximum of 300 days.
14. The Company has formulated a Corporate Social Responsibility &
Sustainable Development (CSR & SD) policy In line with the guidelines
issued by the Ministry of Heavy Industries and Public Enterprises
(Department of Public Enterprises) from time to time. As per the CSR
policy approved by the Company in October 2013, a minimum of 1% of the
consolidated profit after tax of the previous period will be allocated
every financial year for CSR & SD activities. Any unspent / unutilized
CSR & SD allocation of a particular year will be carried forward to the
following years and will have to be spent within the next 2 financial
years, failing which it would be transferred to Sustainable Development
fund to be created separately.
As there is an obligation under the policy to spend the amount
allocated for CSR & SD activities within a specified time, in line with
AS 29, the allocation for CSR & SO activities for the current year has
been provided for by charging to profits; the CSR and SO reserves as on
31.03.2013 amounting to Rs.18.85 crore have also been reversed and
provided for by charging to profits. As on 31.03.2014, the CSR and SD
provision stands at Rs.32.33 crore after adjusting for the amount
spent.
15. (i) During the year, the Company has sent letters seeking
confirmation of balances as on 31.12.2013 to the borrowers and
confirmation from all the borrowers have been received.
(ii) There are no unpaid / unclaimed bonds, interests on bonds and
dividends, which are over 7 years as on 31.03.2014 (previous period Rs.
Nil). However, an amount of Rs. 0.56 crore (previous year Rs. 0.56
crore) remaining unpaid pending completion of transfer formalities by
the claimants.
Mar 31, 2013
1. The Company is a government company engaged in extending financial
assistance to power sector.
2. Contingent liabilities:
(a) (Rs. in crore)
S.
No Particulars Amount as on
31.03.2013 Amount as on
31.03.2012
1. Default guarantees issued in
foreign currency - 41.34 56.40
US $ 7.54 million (as on 31.03.2012
US $ 10.94 million)
2. Guarantees issued in domestic currency 335.57 371.93
3. Claims against the Company not
acknowledged 0.04 0.00
as debts
4. Outstanding disbursement commitments
to the 4,247.61 5,730.38
borrowers by way of Letter of
Comfort against loans sanctioned
Total 4,624.56 6,158.71
(b) Additional demands raised by the Income Tax Department totaling to
Rs. 55.93 crore (as on 31.03.2012 Rs. 40.01 crore) of earlier years are
being contested. Further, the Income Tax Department has filed appeals
before ITAT against the orders of CIT(A) allowing relief totaling to
Rs. 67.96 crore (as on 31.03.2012 Rs. 65.03 crore). The same are being
contested. The Management does not consider it necessary to make
provision, as the probability of tax liability devolving on the Company
is negligible.
3. Estimated amount of contract remaining to be executed on account of
capital contracts, not provided for, is Nil crore (as on 31.03.2012 Rs.
0.57 crore).
4. Additional demands raised by the Income Tax Department (net of
relief granted by Appellate Authorities) amounting to Rs. 31.24 crore
for Assessment Years 2001-02 to 2010-11 have been provided for and are
being contested by the Company.
5. In line with circular No. 6 / 3 / 2001 - CL.V dated 18.04.2002 of
the Government of India, then Ministry of Law, Justice Company Affairs,
and Department of Company Affairs, the Company had been creating till
FY 2011-12, Debenture Redemption Reserve (DRR) upto 50% of the value
of, debentures issued through public issue, over the maturity period of
such debentures and no DRR in case of privately placed debentures.
In recent circular no 11/02/2012-CL-V(A) dated 11.02.2013, MoCA
(Ministry of Corporate Affairs) has prescribed that adequacy of DRR
will be 25% of the value of debentures issued through public issue and
no DRR is required in the case of privately placed debentures.
In this regard, the Company has requested the MoCA for clarification,
which is awaited. Pending receipt of clarification, the Company has
created and maintained DRR in line with the circular dated 18.04.2002.
6.1 (i) Investment in "Small is Beautiful" Fund: -
The Company has outstanding investment of Rs. 7.68 crore (as on
31.03.2012 Rs. 7.83 crore) in units of Small is Beautiful Fund. The
face value of the Fund is Rs. 10 per unit. The NAV as on 31.03.2012 was
Rs. 10.33 per unit and as on 31.03.2013 is Rs. 9.77 per unit. As
investment in Small is Beautiful Fund is long term investment, the
fluctuation in NAV in the current scenario is considered as temporary.
(ii) Investment in equity (unquoted) in Power Exchange India Limited:-
Power Exchange India Ltd. (PXIL) has been promoted by National Stock
Exchange (NSE) and National Commodity and Derivatives Exchange Limited
(NCDEX). The authorized share capital is Rs. 100 crore consisting of 80
crore equity shares of Rs. 10/- each and 20 crore preference shares of
Rs. 10/- each as on 31.03.2013. The paid up equity share capital of
PXIL is Rs. 46.05 crore, as on 31.03.2013. The Company has subscribed
Rs. 2.80 crore of the paid up capital of PXIL.
7. Interest Differential Fund (IDF) - KFW
The agreement between KFW and PFC provides that the IDF belongs to the
borrowers solely and will be used to cover the exchange risk variations
under this loan and any excess will be used in accordance with the
agreement. The balance in the IDF fund has been kept under separate
account head titled as Interest Differential Fund - KFW and shown as a
liability. The total fund accumulated as on 31.03.2013 is Rs. 54.73
crore (as on 31.03.2012 Rs. 52.01crore), after transferring exchange
difference of Rs. 15.21 crore (as on 31.03.2012 Rs. 15.66 crore).
8. (a) Asset under finance lease after 01.04.2001:
(i) The gross investment in the leased assets and the present value of
the minimum value receivable at the balance sheet date and the value of
unearned financial income are given in the table below:
The future lease rentals are given below:-
9. Subsidy under Accelerated Generation & Supply Programme (AG&SP) :
(i) The Company claimed subsidy from Govt. of India at net present
value calculated at indicative interest rates in accordance with the
GOI''s letter vide D.O.No.32024 / 17 / 97 - PFC dated 23.09.1997 and
O.M.No.32024 / 23 / 2001 - PFC dated 07.03.2003, irrespective of the
actual repayment schedule, moratorium period and duration of repayment.
The amount of interest subsidy received and to be passed on to the
borrower is retained as Interest Subsidy Fund Account. The impact of
difference between the indicative rate and period considered at the
time of claims and at the time of actual disbursement can be
ascertained only after the end of the respective schemes. However on
the basis of the projections made for each project (based upon certain
assumptions that these would remain same over the projected period of
each loan / project), the Company estimated the net excess amount of
Rs. 5.69 crore and Rs. 68.30 crore as at 31.03.2013 for IX and X Plan,
respectively under AG&SP schemes, and there is no shortfall. This net
excess amount is worked out on overall basis and not on individual
basis and may vary due to change in assumptions, if any, during the
projected period such as changes in moratorium period, repayment
period, loan restructuring, pre-payment, interest rate reset etc. Any
excess / shortfall in the interest subsidy fund will be refunded or
adjusted / charged off on completion of the respective scheme.
(ii) The balance under the head Interest Subsidy Fund shown as
liability, represents the amount of subsidy received from Ministry of
Power, Govt. of India which is to be passed on to the borrowers against
their interest liability arising in future, under Accelerated
Generation & Supply Programme (AG&SP), which comprises of the following
: -
10. The Company had exercised the option under para 46A of the amended
AS-11 ''The Effects of Changes in Foreign Exchange Rates'' to amortize
the exchange differences on the long term foreign currency monetary
items over their tenure. Consequently, as on 31.03.2013, Rs. 477.97
crore (as on 31.03.2012 Rs. 515.41 crore) has been carried forward in
the Foreign Currency Monetary Item Translation Difference Account
(FCMITDA) and shown on the asset side of the balance sheet, as a
separate line item.
As per the recent announcement dated 30.03.2013 of the ICAI, the debit
or credit balance in FCMITDA should be shown on the "Equity and
Liabilities" side of the balance sheet under the head "Reserve and
Surplus", as a separate line item.
The Company has requested (vide letter dated 09.05.2013) for
clarification from the Government of India, Ministry of Corporate
Affairs (MoCA) on the applicability of ICAI announcement. The
clarification is awaited.
Pending receipt of clarification from the MoCA, the FCMITDA is
continued to be shown on the asset side of the balance sheet, as a
separate line item, in line with presentation made in previous year.
11. (i) The Company has been designated as the Nodal Agency for
operationalisation and associated service for implementation of the
Re-structured Accelerated Power Development and Reforms Programme (R -
APDRP) during XI Plan by the Ministry of Power, Government of India
(GOI) under its overall guidance.
Projects under the scheme are being taken up in two parts. Part - A
includes the projects for establishment of baseline data and IT
applications for energy accounting as well as IT based customer care
centers. Part - B includes regular distribution strengthening projects.
GoI provides 100% loan for Part A and up to 25% (up to 90% for special
category States) loan for Part - B. Balance funds for Part - B projects
can be raised by the utilities from PFC / REC / multi-lateral
institutions and / or own resources. The loans under Part - A alongwith
interest thereon is convertible into grant as per R - APDRP guidelines.
Similarly, upto 50% (up to 90% for special category states) of the loan
against Part -B project would be convertible in to grant as per R -
APDRP guidelines. Enabling activities of the programe are covered under
Part - C.
The loans under R - APDRP are routed through the Company for
disbursement to the eligible utilities. The amount so disbursed but not
converted in to grants as per R - APDRP guidelines will be repaid along
with interest to the GoI on receipt from the borrowers.
12. The net deferred tax liabilities of Rs. 219.79 crore (as on
31.03.2012 Rs. 87.43 crore) have been computed as per Accounting
Standard 22 Accounting for Taxes on Income.
13. The Company has no outstanding liability towards Micro, Small and
Medium enterprises.
14. Leasehold land is not amortized, as it is a perpetual lease.
In-case of specific provision in the loan agreement for a rate other
than SBI TT selling rate, the rate has been taken as prescribed in the
respective loan agreement.
15.1 The Company has made the public issue of 69,97,468 tax free bonds
(secured) tranche - I at the face value of Rs. 1,000 each during the
current financial year and has mobilized Rs. 699.75 crore. The security
has been created on 03-Jan- 2013 and bonds have been allotted on
04-Jan-2013. The bonds have been listed in the BSE on 10-Jan-2013. The
proceeds of the bond issue have been utilized for the purpose mentioned
in the offer document.
15.2 The Company has made public issue of 16,53,680 tax free bonds
(secured) tranche - II at the face value of Rs. 1,000 each during the
current financial year and has mobilized Rs. 165.37 crore. The Bonds
have been allotted on 28-Mar-2013 and have been listed in the BSE on
03-April-2013. The security has been created in April 2013. As on
31.03.2013, the proceeds of the bond issue were in Public Issue Account
of the escrow collection banker. Subsequent to listing and security
creation, the bonds issue proceeds have been transferred in April 2013
by the escrow collection banker to the regular current account of the
Company and the Company has utilized the proceeds in April 2013 for the
purpose mentioned in the offer document.
16. Disclosures as per Accounting Standard -15 :-
A. Provident fund
The Company pays fixed contribution to provident fund at prescribed
rates to a separate trust, which invests the funds in permitted
securities. The contribution to the fund for the period is recognized
as expense and is charged to the statement of profit and loss account.
The obligation of the Company is to make such fixed contribution and to
ensure a minimum rate of return to the members as specified by GoI. Any
short fall for payment of interest to members as per specified rate of
return has to be compensated by the Company. The Company estimates that
no liability will take place in this regard in the near future and
hence no further provision is considered necessary.
B. Gratuity
The Company has a defined gratuity scheme and is managed by a separate
trust. The provision for the same has been made on actuarial valuation
based upon total number of years of service rendered by the employee
subject to a maximum amount of Rs.10 lakh.
C. Pension
The Company has a defined contribution pension scheme introduced in
line with guidelines of the Department of Public Enterprise (DPE) and
is managed by a separate trust. Employer contribution to the fund has
been contributed on monthly basis. Pension is payable to the employee
of the corporation as per the scheme.
D. Post Retirement Medical Scheme (PRMS)
The Company has Post-Retirement Medical Scheme (PRMS), under which
retired employees and their dependent family member are provided with
medical facilities in empanelled hospitals. They can also avail
reimbursement of out-patient treatment subject to a ceiling fixed by
the Company.
E. Terminal Benefits
Terminal benefits include settlement in home town for employees & their
dependents.
F. Leave
The Company provides for earned leave benefit and half-pay leave to the
credit of the employees, which accrue on half yearly basis @ 15 days
and 10 days, respectively. Maximum of 300 days of earned leave can be
accumulated during the service of an employee which can be availed or
encashed. There is no limit in accumulation of half pay leave during
the service. However, at the time of separation / superannuation, half
pay leave and earned leave can be encashed subject to limit of 300
days. The liability for the same is recognized, based on actuarial
valuation.
The above mentioned schemes (D, E and F) are unfunded and are
recognized on the basis of actuarial valuation.
The summarised position of various defined benefits recognized in the
statement of profit and loss account, balance sheet are as under
{Figures in brackets ( ) represents to as on 31.03.2012}
17.1 The Company has formulated a Corporate Social Responsibility (CSR)
policy in line with the guidelines issued by the Ministry of Heavy
Industries and Public Enterprises (Department of Public Enterprises)
vide Office Memorandum F.No.15(3)/2007 -DPE(GM)-GL-99 dated 09.04.2010.
As per the CSR policy of the Company, a minimum of 0.5% of the
consolidated profit after tax of the previous year will be allocated
every financial year for CSR Activities, and Company was creating CSR
provision for this purpose up to FY 2011-12.
Now, the Expert Advisory Committee of the Institute of Chartered
Accountants of India (ICAI) has given opinion that unspent expenditure
on CSR activities should not be recognized as provision, but a reserve
may be created as an appropriation of profits.
Accordingly, CSR provision of Rs. 16.39 crore (amount unspent as at
01.04.2012) has been reversed to the credit of the statement of profit
& loss through prior period account, and CSR reserve of Rs. 18.36 crore
has been created as appropriation of profit, the details of which are
as under:
17.2 The Company has formulated a Sustainable Development (SD) policy
in line with the guidelines issued by the Ministry of Heavy Industries
and Public Enterprises (Department of Public Enterprises) vide Office
Memorandum No.3(9)/2010 -DPE(MoU) dated 23.09.2011.
As per the SD policy approved by the Company, a minimum of Rs. 50 lakh
plus 0.1% of profit after tax (consolidated) exceeding Rs. 100 crore of
the previous year will be allocated every financial year for SD
Projects/ Activities. The unspent amount of Rs. 0.49 crore has been
appropriated from profits as SD reserve.
18. Board of Directors in its meeting held on 09.11.2012 amended the
prudential norms of the Company, subject to approval of Ministry of
Power, and accorded approval to create provision on standard assets in
phases with effect from FY 2012-13 in 3 year period (i.e. 0.0833%
p.a.), in order to bring it to 0.25% by 31.03.2015.
Accordingly, the Company has amended the accounting policy to this
effect and has made provision of Rs. 132.79 crore for the FY ended
31.03.2013.
If the company had followed the earlier policy, the net profit for the
FY ended 31.03.2013 would have been higher by Rs. 132.79 crore (net of
taxes).
The approval for the change in prudential norms by the Ministry of
Power, Government of India is under process.
19. (i) During the year, the Company has sent letters seeking
confirmation of balances as on 31.12.2012 to the borrowers and
confirmation from all, except from two borrowers, have been received.
(ii) There are no unpaid / unclaimed bonds, interests on bonds and
dividends, which are over 7 years as on 31.03.2013 (previous period Rs.
Nil). However, an amount of Rs. 0.56 crore (previous year Rs. 0.47
crore) remaining unpaid pending completion of transfer formalities by
the claimants.
20. The Company has no exposure to real estate sector as on
31.03.2013.
21. The Company does not have more than one reportable segment in
terms of Accounting Standard 17 on Segment Reporting.
22. Previous year''s figures have been re-grouped / re-arranged,
wherever practicable to make them comparable.
23. Figures have been rounded off to the nearest crore of rupees with
two decimals.
Notes at Part A (1 to 18), Part B and Part C form an integral part of
Balance Sheet and Statement of Profit & Loss.
Mar 31, 2012
1. The Company is a government company engaged in extending financial
assistance to power sector.
2. Contingent liabilities:
(i) Default guarantees issued by the Company in foreign currency :
a) EURO Nil million equivalents Rs. Nil crore (as on 31.03.2011 EURO
0.355 million equivalents to Rs. 2.27 crore).
b) US $ 10.94 million equivalent to Rs. 56.40 crore (as on 31.03.2011 US
$ 14.34 million equivalent to Rs. 64.75 crore). (ii) Default guarantee
issued by the Company in Indian Rupee Rs. 371.93 crore (as on 31.03.2011
Rs. 400.00 crore).
(iii) Bank guarantee issued by the Company in Indian Rupee Rs. 135.32
crore (as on 31.03.2011 Rs. 50.04 crore).
(iv) Additional demands raised by the Income Tax Department of Rs. 2.55
crore, Rs. 4.51 crore, Rs. 0.36 crore, Rs. 9.24 crore, Rs. 7.44 crore, Rs. 4.67
crore and Rs. 11.24 crore for Assessment Years 2000-01, 2001-02, 2002-03,
2005-06, 2007-08, 2008-09 and 2009-10 respectively are being contested.
Further, the Income Tax Department has filed appeals before ITAT
against the orders of CIT (A) allowing relief of Rs. 22.22 crore, Rs. 21.13
crore and Rs. 21.68 crore for AYs 2004-05 to 2006-07, respectively. The
same are being contested. The Management does not consider it necessary
to make any provision, as the probability of any tax liability
devolving on the Company is negligible.
(v) Claims against the Company not acknowledged as debts are Rs. Nil
crore (as on 31.03.2011 Rs. 7.80 crore).
(vi) Outstanding disbursement commitments to the borrowers by way of
Letter of Comfort issued against loans sanctioned is Rs. 5,730.38 crore
as on 31.03.2012 (as on 31.03.2011 Rs. 5,758.02 crore).
3. Estimated amount of contract remaining to be executed on account of
capital contracts, not provided for, is Rs. 0.57 crore (as on 31.03.2011
Rs. 3.70 crore).
4. Additional demands raised by the Income Tax Department (net of
relief granted by Appellate Authorities) amounting to Rs. 29.76 crore for
Assessment Years 2001-02 to 2009-10 were provided for and are being
contested by the Company.
5. The Company creates Debenture Redemption Reserve (DRR) upto 50% of
the value of bonds / debentures issued through public issue, during the
maturity period of such bonds / debentures.
The Company is not required to create Debenture redemption reserve in
case of privately placed debentures as per circular No. 6 / 3 / 2001 Ã
CL.V dated 18.04.2002 of the Government of India, Ministry of Law,
Justice Company Affairs, and Department of Company Affairs. .
The Company is not required to maintain reserve fund under section 45 Ã
I C of the Reserve Bank of India Act, 1934 by transferring 20 % of its
net profits, as it is exempted by RBI, vide RBI letter dated
24.01.2000.
6 (i) Investment in ÃSmall is Beautifulà Fund: -
The Company has outstanding investment of Rs. 7.83 crore (as on
31.03.2011 Rs. 8.73 crore) in units of Small is Beautiful Fund.The face
value of the Fund is Rs. 10 per unit. The NAV as on 31.03.2011 was Rs.
10.08 per unit and as on 31.03.2012 is Rs. 10.33 per unit. As investment
in Small is Beautiful Fund is long term investment, the fluctuation in
NAV in the current scenario is considered as temporary.
(ii) Investment in equity (unquoted) in Power Exchange India Limited:-
Power Exchange India Ltd. (PXIL) has been promoted by National Stock
Exchange (NSE) and National Commodity and Derivatives Exchange Limited
(NCDEX). The authorized share capital is Rs. 100 crore as on 31.03.2012.
The paid up capital of PXIL is Rs. 41.05 crore, as on 31.03.2012. The
Company has subscribed Rs. 2.80 crore of the paid up capital of PXIL.
7. Interest Differential Fund (IDF)Ã KFW
The agreement between KFW and PFC provides that the IDF belongs to the
borrowers solely and will be used to cover the exchange risk variations
under this loan and any excess will be used in accordance with the
agreement. The balance in the IDF fund has been kept under separate
account head titled as Interest Differential Fund à KFW and shown as a
liability. The total fund accumulated as on 31.03.2012 is Rs. 52.01 crore
(as on 31.03.2011 Rs. 49.01 crore), after adjusting the exchange loss of
Rs. 0.98 crore (as on 31.03.2011 Rs. 15.74 crore).
8. Subsidy under Accelerated Generation & Supply Programme (AG&SP):
(i) The Company claimed subsidy from Govt. of India at net present
value calculated at indicative interest rates in accordance with the
GOI's letter vide D.O.No.32024 / 17 / 97 Ã PFC dated 23.09.1997 and
O.M.No.32024 / 23 / 2001 Ã PFC dated 07.03.2003, irrespective of the
actual repayment schedule, moratorium period and duration of repayment.
The amount of interest subsidy received and to be passed on to the
borrower is retained as Interest Subsidy Fund Account. The impact of
difference between the indicative rate and period considered at the
time of claims and at the time of actual disbursement can be
ascertained only after the end of the respective schemes. However on
the basis of the projections made for each project (based upon certain
assumptions that these would remain same over the projected period of
each loan / project), the Company estimated the net excess amount of Rs.
5.12 crore and Rs. 249.91 crore as at 31.03.2012 for IX and X Plan,
respectively under AG&SP schemes, and there is no shortfall. This net
excess amount is worked out on overall basis and not on individual
basis and may vary due to change in assumptions, if any, during the
projected period such as changes in moratorium period, repayment
period, loan restructuring, pre-payment, interest rate reset etc. Any
excess / shortfall in the interest subsidy fund will be refunded or
adjusted / charged off on completion of the respective scheme.
9. Pursuant to the notification GSRNo.914 (E) dated 29.12.2011 issued
by the Government of India, Ministry of Corporate Affairs amending
Accounting Standard (AS) 11 Ã The Effects of Changes in Foreign
Exchange Rates, the Company has exercised the option under 46A of the
amended AS11 and changed the accounting policy to amortize the exchange
differences on the long term foreign currency monetary items over the
tenure. Consequently, as on 31.03.2012, Rs. 515.41crore has been carried
forward in the Foreign Exchange Monetary Item Translation Difference
Account
Had the Company followed the earlier practice of accounting of exchange
differences, the net profit for the year ended 31.03.2012 would have
been lower by Rs. 352.53 crore (net of taxes).
10. (i) The Company has been designated as the Nodal Agency for
operationalisation and associated service for implementation of the
Re-structured Accelerated Power Development and Reforms Programme (R Ã
APDRP) during XI Plan by the MoP, GoI under it's overall guidance.
Projects under the scheme are being taken up in two parts. Part à A
includes the projects for establishment of baseline data and IT
applications for energy accounting as well as IT based customer care
centers. Part à B includes regular distribution strengthening
projects.GoI provides 100% loan for Part A and up to 25% (up to 90% for
special category States) loan for Part à B. Balance funds for Part à B
projects can be raised by the utilities from PFC / REC / multi-lateral
institutions and / or own resources. The loans under Part à A alongwith
interest thereon is convertible into grant as per R Ã APDRP guidelines.
Similarly, upto 50% (up to 90% for special category states) of the loan
against Part ÃB project would be convertible in to grant as per R Ã
APDRP guidelines. Enabling activities of the programe are covered under
Part à C.
The loans under R Ã APDRP are routed through the Company for
disbursement to the eligible utilities. The amount so disbursed but not
converted in to grants as per R Ã APDRP guidelines will be repaid along
with interest to the GoI on receipt from the borrowers.
11. The net deferred tax liabilities of Rs. 87.43 crore (as on
31.03.2011 Rs. 82.97 crore) have been computed as per Accounting Standard
22 Accounting for Taxes on Income.
12. The Company has no outstanding liability towards Micro, Small and
Medium enterprises.
13. Leasehold land is not amortized, as it is a perpetual lease.
14. During the period, the Company has made Follow on Public Offer
(FPO) through book building process of 22,95,53,340 number of equity
shares of Rs. 10/- each. The FPO comprised of fresh issue of 17,21,65,005
equity shares of Rs. 10/- each by the Company and an offer for sale of
5,73,88,335 equity shares of Rs. 10/- each by the President of India
acting through the Ministry of Power, Government of India. The equity
shares have been priced at Rs. 203.00 per equity share for qualified
institutional bidders and non-institutional bidders and at Rs. 192.85 per
equity shares (5% of discount on Rs. 203.00) for retail individual
bidders and eligible employees. The Company has raised Rs. 3,433.65 crore
from issue of fresh shares to the public. Post issue, the holding of
Government of India in the paid up equity share capital of the Company
has come down from 89.78% to 73.72%.The equity shares offered to the
public including equity shares offered for sale by the Government of
India have been allotted on 24.05.2011 and have been listed in the
National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) on
27.05.2011. Accordingly, issued and paid up share capital has increased
from Rs. 1,147.77 crore to Rs. 1,319.93 crore and an amount of Rs. 3,241.57
crore (net of issue expenses of Rs. 19.91) has been taken to securities
Premium Reserve. The proceeds of the issue (net of issue expenses) have
been utilized fully for the purpose mentioned in the offer document.
15. (i) The Company has made a public issue of 4,70,722 number of
infrastructure bonds (secured) at the face value of Rs. 5,000/- each
aggregating to Rs. 235.36 crore. The bonds have been allotted on
31.03.2011 and have been listed in the Bombay Stock Exchange (BSE) on
11.04.2011. The proceeds of the bond issue have been utilized for the
purpose mentioned in the offer document.
(ii) The Company has made a public issue of 1,91,284 number of
infrastructure bonds (secured) at the face value of Rs. 5,000/- each
aggregating to Rs. 95.64 crore during the current year. The bonds have
been allotted on 21.11.2011 and have been listed in the Bombay Stock
Exchange (BSE) on 02.12.2011. The proceeds of the bond issue have been
utilized for the purpose mentioned in the offer document.
(iii) The Company has made public issue of 4,03,31,300 number of tax
free bonds (secured) at the face value of Rs. 1,000 each aggregating to Rs.
4,033.13 crore during the current financial year. The Bonds have been
allotted on 01.02.2012 and have been listed in the BSE on 14.02.2012.
The proceeds of the bond issue have been utilized for the purpose
mentioned in the offer document.
16. Disclosures as per Accounting Standard Ã15 :- A. Provident fund
The Company pays fixed contribution to provident fund at prescribed
rates to a separate trust, which invests the funds in permitted
securities. The contribution to the fund for the period is recognized
as expense and is charged to the profit and loss account.The obligation
of the Company is to make such fixed contribution and to ensure a
minimum rate of return to the members as specified by GoI. Any short
fall for payment of interest to members as per specified rate of return
has to be compensated by the Company. The Company estimates that no
liability will take place in this regard in the near future and hence
no further provision is considered necessary.
B. Gratuity
The Company has a defined gratuity scheme and is managed by a separate
trust. The provision for the same has been made on actuarial valuation
based upon total number of years of service rendered by the employee
subject to a maximum amount of Rs. 10 lakh.
C. Post Retirement Medical Scheme (PRMS)
The Company has Post-Retirement Medical Scheme (PRMS), under which
retired employees and the dependent family member share provided
medical facilities in empanelled hospitals.They can also avail of
reimbursement of out-patient treatment subject to a ceiling fixed by
the Company.
D. Terminal Benefits
Terminal benefits include settlement in home town for employees & their
dependents.
E. Leave
The Company provides for earned leave benefit and half-pay leave to the
credit of the employees, which accrue on half yearly basis @ 15 days
and 10 days, respectively. 75% of the earned leave is encashable while
in service and a maximum of 300 days earned leave can be accumulated,
which is encashable on superannuation / separation. Half pay leave is
encashable on separation after 10 years of service or at the time of
superannuation subject to a maximum of 300 days. The liability for the
same is recognized, based on actuarial valuation.
The above mentioned schemes (C, D and E) are unfunded and are
recognized on the basis of actuarial valuation.
The summarised position of various defined benefits recognized in the
profit and loss account, balance sheet are as under {Figures in
brackets ( ) represents to as on 31.03.2011}
v) One percent increase / decrease in the inflation rate would impact
liability for medical cost of PRMS, as under:-
Cost increase by 1% Rs. 0.09 crore
Cost decrease by 1% Rs. 0.05 crore
vi) During the period, the Company has provided liability towards
contribution to the Gratuity Trust of Rs. 0.64 crore, to PRMS of Rs. 1.50 crore, to leave Rs. 3.34 crore and to pension Rs. 2.54 crore (during the FY ended 31.03.2011 towards contribution to the Gratuity Trust of Rs. 1.79
crore, to PRMS of Rs. 0.92 crore, to leave Rs. 3.34 crore and to pension
Rs. 2.28 crore).
F. Other Employee Benefits:-
During the period, provision of Rs. (0.01) crore (during the FY ended
31.03.2011 Rs. (0.03) crore) has been made for Economic Rehabilitation
Scheme for Employees and provision of Rs. 0.58 crores has been made for
Long Service Award for Employees (during the FY ended 31.03.2011 Rs. 0.65
crore) on the basis of actuarial valuation made at the end of the year
by charging/ crediting the profit and loss account.
17. The Company has formulated a Corporate Social Responsibility (CSR)
policy in line with the Guidelines on Corporate Social Responsibility
for Central Public Sector Enterprises issued by the Ministry of Heavy
Industries and Public Enterprises (Department of Public Enterprises)
vide Office Memorandum F.No.15(3)/2007 -DPE(GM)-GL-99 dated 09.04.2010.
As per the CSR policy approved by the Company, a minimum of 0.5% of the
profit after tax of the previous year will be allocated every financial
year for CSR Activities. Accordingly, an amount of Rs. 13.24 crore was
provided for during the year ended 31.03.2012 (previous year Rs. 11.89
crore).
As at 31.03.2012, an amount of Rs. 32.22 crore has been sanctioned by the
Company against CSR expenditure for various projects out of which an
amount of Rs. 21.33 crore has been disbursed till 31.03.2012.
18. The Company has been paying income tax on perquisite to employees
in earlier years and till current year. Pursuant to a decision by the
Company, the income tax paid for the current year only has been
recovered from the employees.
19. (i) Income on account of premium on premature repayment of loan,
Income under the head, upfront fees, lead manager fees, facility agent
fees, security agent fee and service charges etc. on loans was earlier
accounted for in the year in which it was received by the Company. The
Company has changed the accounting policy of recognition of all such
income from cash basis to accrual basis in the financial year 2011-12.
Due to change in the accounting policy this year, the income on account
of the above for the year is higher by Rs. 0.23 crore. ( Rs. 0.23 crore
relates to the year 2010-11 and received in 2011-12)
(ii) Accounting policy under para 6 regarding Provision has been
realigned to prudential norms / interpretation of prudential norms of
the Company. Since the amendment is realignment / clarificatory in
nature, there is no financial impact.
20. (i) During the year, the Company has sent letters seeking
confirmation of balances as on 31.12.2011 to the borrowers.
However, confirmations in a few cases were yet to be received.
(ii) Some of the designated bank accounts opened for making interest
payment to bondholders / debenture holders have outstanding balance of
Rs. 0.47 crore are subject to reconciliation / confirmation.
(iii) There are no unpaid / unclaimed bonds, interests on bonds and
dividends, which are over 7 years as on 31.03.2012 (previous year Rs.
Nil).
21. The Company has no exposure to real estate sector as on
31.03.2012.
22. The Company does not have more than one reportable segment in
terms of Accounting Standard No. 17 on Segment Reporting.
23. Previous year's figures have been re-grouped / re-arranged,
wherever practicable to make them comparable.
24. Figures have been rounded off to the nearest crore of rupees with
two decimals.
Notes at Part A (A 1 to A 18), Part B and Part C form an integral part
of Balance Sheet and Statement of Profit & Loss.
Mar 31, 2011
1. The Company is a government company engaged in extending financial
assistance to power sector.
2. Contingent liabilities:
(i) Default guarantees issued by the Company in foreign currency :
a) EURO 0.355 million equivalents to Rs. 2.27 crore (previous year EURO
0.710 million equivalents to Rs. 4.35 crore).
b) US $ 14.34 million equivalent to Rs. 64.75 crore (previous year US $
17.745 million equivalent to Rs. 80.88 crore).
(ii) Default guarantee issued by the Company in Indian Rupee: Rs. 400
crore (previous year Rs. 400.00 crore).
(iii) Bank guarantee issued by the Company in Indian Rupee: Rs. 50.04
crore (previous year Rs 0.04 crore).
(iv) The additional demand raised by Income Tax Department of Rs. 9.24
crore, Rs 0.57crore , Rs. 0.03 crore and Rs. 4.48 crore. for Assessment
Years 2005-06, 2006-07, 2007-08 and 2008-09 respectively are being
contested. The management does not consider it necessary to make any
provision, as the probability of outfl ow of resources is negligible.
(v) Claims against the Company not acknowledged as debts are Rs. 7.80
crore (previous year Rs. 7.80 crore).
(vi) Outstanding disbursement commitments to the borrowers by way of
Letter of Comfort issued against loans sanctioned, Rs. 5,758.02 crore
as at 31.03.2011 (previous year Rs. 3,414.21 crore).
3. Estimated amount of contract remaining to be executed on account of
capital contracts, not provided for, is Rs. 3.70 crore (previous year
Rs. 4.26 crore).
4. Additional demands raised by the Income Tax Department (net of
relief granted by Appellate Authorities) amounting to Rs. 22.58 crore
for Assessment Year 2001-02 to 2008-09 were paid, provided for and are
being contested.
5. A project under implementation having principal outstanding of Rs.
700.00 crore (previous year Rs. 325.00 crore) has been considered as
standard asset in terms of RBI circular No. DBS.FID.No.C Ã 11 /
01.02.00 / 2001-02 dated 01.02.2002 read with D.O. letter DBS.FID
No.1285 / 01.02.00 / 2001-02 dated 14.05.2002 (thereby treating the
asset as standard till June, 2008), RBI letter no. DBOD, BP.No.7675 /
21.04.048 / 2008-09 dated 11.11.2008 (which inter-alia advised that the
date of commencement of commercial operation (DCCO) be treated as
31.03.2009), RBI circular no. DBOD. BP. BC. 85 / 21.04.048 / 2009 -10
dated 31.03.2010 and RBI letter no. DBOD. No. BP. No. 11505 / 21.04.048
/ 2010-11 dated- 21.01.2011. (which inter-alia enables that the said
asset can be retained as standard asset, if the DCCO is re-fixed
within the period of 3 years from the commercial operation of
31.03.2009 provided the change in DCCO is due to reasons beyond control
of the promoter and subject to compliance of certain provisions).
Accordingly, in terms of the RBI circular no. DBOD. No. BP. BC. 85 /
21.04.048 / 2009 -10 dated 31.03.2010, the Company has made a provision
of Rs. 2.80 crore at the rate of 0.40% of the outstanding amount of Rs.
700 crore during the year. However, the Company recognizes interest on
this loan on receipt basis in terms of the accounting policy and as per
prudential norms approved by the MoP.
The Company has approved and finalized amendments to the Financial
Realignment Plan (FRP).As per FRP, the Project Company is to issue Zero
Coupon Bonds (ZCB) (towards interest outstanding for the period from
01.10.2001 to 31.10.2005) valuing Rs. 103.87 crore. During the FY
2010-11, an amount of Rs. 120.81 crore ( including the dues of previous
year of Rs. 23.12 crore and the guarantee fee of Rs. 4.60 crore for the
current year) became due on the loan as per FRP, out of which Rs. 74.74
crore were received and accounted for as per the accounting policy. The
balance of Rs. 46.07 crore being interest and guarantee fee due up to
31.03.2011 and Rs.103.87 crore against ZCB have not been recognized, as
per the accounting policy.
6. During the year, one borrower had made premature repayment of loan
of Rs. 497.92 crore with payment of Rs. 10.99 crore towards prepayment
premium. As per the terms and conditions of the loans / prepayment
policy of the company, the demand for balance prepayment premium of Rs.
10.79 crores was sent to the borrower, which they have disputed and
have not paid. Hence the same has not been accounted for.
7. Interest Subsidy of Rs. 17.65 crore under Accelerated Generation &
Supply Programme (AG&SP) along with interest upto 31st March, 2011
amounting to Rs.26.78 crore (previous year Rs. 24.67 crore), became
recoverable in respect of one project, as the project was not completed
till 31.03.2007 and the subsidy was withdrawn by the MoP. The amount of
Rs. 26.78 crore (previous year Rs.24.67 crore) is payable to the MoP on
receipt from the borrower.
8. The company creates Debenture Redemption Reserve (DRR) upto 50% of
the value of bonds / debentures issued through public issue, during the
maturity period of such bonds / debentures. Accordingly, during the
year the company has created DRR amounting to Rs. 0.06 crore (previous
year Nil) on account of public issue of long term infrastructure bonds.
The Company is not required to create Debenture redemption reserve in
case of privately placed debentures as per circular No. 6 / 3 / 2001 Ã
CL.V dated 18.04.2002 of the Government of India, Ministry of Law,
Justice Company Affairs, Department of Company Affairs.
The Company is not required to maintain reserve fund under section 45 Ã
I C of the Reserve Bank of India Act, 1934 by transferring 20 percent
of its net Profits, as it is exempted by RBI, vide RBI letter dated
24.01.2000.
9.1 Related party disclosures: Key managerial personnel:
Name of the key managerial personnel
Shri Satnam Singh, CMD (with effect from 01.08.2008)
Shri M K Goel, Director (with effect from 27.07.2007)
Shri Rajeev Sharma, Director (with effect from 09.03.2009)
Shri R. Nagarajan, Director (with effect from 31.07.2009)
Subsidiary company
Shri N D Tyagi, CEO of PFC Consulting Limited.
Joint Ventures entities
Shri R. S. Sharma, Chairman of Energy efficiency Services Limited
Shri I. J. Kapoor, Chairman of National Power Exchange Limited
9.2 Power Finance Corporation Green Energy Ltd. (PFCGEL) has been
incorporated as a wholly owned subsidiary of the Company to extend
finance and financial services to promote green (renewable and
non-conventional sources of) energy with authorized share capital of
Rs. 1200.00 crores and subscribed share capital of Rs. 0.05 crores. The
certificate of commencement of business is awaited. The subsidiary's
financial statement is not consolidated, as the first financial year
of the subsidiary has been decided by its Board of directors to be for
the period from 30.03.2011 to 31.03.2012.
9.3 (i) Investment in "Small is Beautiful" Fund: -
The Company has outstanding investment of Rs. 8.73 crore (previous year
Rs. 12.08 crore) in units of Small is Beautiful Fund. The face value of
the Fund is Rs. 10 per unit. The NAV as on 31.03.2010 was Rs. 9.80 per
unit and as on 31.03.2011 is Rs. 10.08 per unit. As investment in Small
is Beautiful Fund is long term investment, the fl uctuation in NAV in
the current scenario is considered as temporary. (ii) Investment in
equity (unquoted) in Power Exchange India Limited:- Power Exchange
India Ltd. (PXIL) has been promoted by National Stock Exchange (NSE)
and National Commodity and Derivatives Exchange Limited (NCDEX). The
authorized capital has been enhanced from Rs. 50 crore to Rs. 100 crore
in September 2010. The paid up capital of PXIL is Rs. 40.00 crore, as
on 31.03.2011. The Company has subscribed Rs. 1.75 crore of the paid up
capital of PXIL.
10. Interest Differential Fund (IDF) Ã KFW
The agreement between KFW and PFC provides that the IDF belongs to the
borrowers solely and will be used to cover the exchange risk variations
under this loan and any excess will be used in accordance with the
agreement. The balance in the IDF fund has been kept under separate
account head titled as Interest Differential Fund à KFW and shown as a
liability. The total fund accumulated as on 31.03.2011 is Rs. 49.01
crore (previous year Rs. 47.60 crore) after adjusting the translation
loss of Rs. 15.74 crore (previous year Rs. 13.73 crore).
11. The Company borrows money in foreign currency to finance power
projects. In the opinion of the Company, AS 16 Ã Borrowing costs is
applicable where funds are borrowed for acquisition of qualifying
asset. The Company does not have any qualifying asset as per AS 16 and
hence the foreign exchange gain / loss have been recognized in the
Profit & Loss A/c as per AS 11 Ã The Effects of Changes in Foreign
Exchange Rates.
(ii) The company enters into derivative contracts for mitigating
exchange rate risk in foreign currency liabilities and interest rate
risk in foreign currency and rupee liabilities. Paragraphs 36 and 39 of
the AS 11 states that in respect of forward exchange contracts not
intended for trading or speculative purpose, the forward premium /
discount be amortised over the life of such contracts and the forward
exchange contracts intended for trading or speculative purpose be
marked to market. The derivatives entered into by the company are in
the nature of hedging and not in the nature of speculative or trading.
The derivatives in the nature of forwards are dealt with in accordance
with AS 11.
The Institute of Chartered Accountants of India (ICAI) had issued an
announcement dated 29th March, 2008 regarding accounting for
derivatives which gives companies an option either to account for
losses, if any, on derivatives based on mark to market valuation or to
adopt the principles enunciated in the Accounting Standard (AS) 30 on
'Financial Instruments: Recognition and Measurements'. The Company has
not adopted AS 30, nor accounted for mark to market losses for other
derivatives outstanding as at 31st March 2011, as the ICAI, vide their
announcement dated 11th February 2011, have stated, inter-alia, that AS
- 30 is not presently mandatory and that it is not expected to continue
in its present form, and hence the announcement prior to the date of
11th February, 2011, in the management's view, does not hold good.
ii) The Company had sanctioned an amount of Rs. 88.90 crore in the year
2004 as finance lease for financing wind turbine generator
(commissioned on 19.07.2004) which was reduced to Rs. 88.85 crore in
December 2006. The gross investment stood at the level of Rs. 46.01
crore as on 31.03.2011. The lease rent is to be recovered within a
period of 15 Years, starting from 19.07.2004, which comprises of 10
years as a primary period and 5 years as a secondary period.
(iii) The Company had sanctioned an amount of Rs. 98.44 crore in the
year 2004 as finance lease for financing wind turbine generator
(commissioned on 18.5.2004). The gross investment stood at Rs. 48.33
crore as on 31.03.2011. The lease rent is to be recovered within a
period of 20 years, starting from 18.05.2004, which comprises of 10
years as a primary period and maximum of another 10 years as a
secondary period.
(iv) The Company had sanctioned an amount of Rs.93.51 crore in the year
2004 as finance lease for financing wind turbine generator
(commissioned on 09.06.2005). The gross investment stood at Rs. 65.60
crore as on 31.03.2011. The lease rent is to be recovered within a
period of 19 years 11 months, starting from 09.06.2005, which comprises
of 10 years as a primary period and maximum of 9 years and 11 months as
a secondary period.
(v) The Company had sanctioned an amount of Rs.228.94 crore in the year
2008 as finance lease for financing wind turbine generator. The gross
investment stood at Rs. 381.25 crore as on 31.03.2011. The lease rent
is to be recovered within a period of 20 years, starting from
31.10.2010, which comprises of 12 years as a primary period and maximum
of 8 years as a secondary period.
b) Operating Lease:
The Company's operating leases consists:- Premises for offices and for
residential use of employees are lease arrangements, and are usually
renewable on mutually agreed terms, and are cancellable. Rent for
residential accommodation of employees include Rs. 6.89 crore (previous
year Rs. 4.06 crore) towards lease payments, net of recoveries in
respect of premises for residential use of employees. Lease payments in
respect of premises for employees are shown as rent for residential
accommodation of employees in Schedule 14 Ã Personnel, Administration
and Other Expenses. Lease payments in respect of premises for offices
are shown as office rent in Schedule 14 Ã Personnel, Administration
and Other Expenses.
12. Subsidy under Accelerated Generation & Supply Programme (AG&SP):
(i) The Company claims subsidy from Govt. of India at net present value
calculated at indicative interest rates in accordance with the GOI's
letter vide D.O.No.32024 / 17 / 97 Ã PFC dated 23.09.1997 and
O.M.No.32024 / 23 / 2001 Ã PFC dated 07.03.2003, irrespective of the
actual repayment schedule, moratorium period and duration of repayment.
The amount of interest subsidy received and to be passed on to the
borrower is retained as Interest Subsidy Fund Account. The impact of
difference between the indicative rate and period considered at the
time of claims and at the time of actual disbursement can be
ascertained only after the end of the respective schemes. However on
the basis of the projections made for each project (based upon certain
assumptions that these would remain same over the projected period of
each loan / project), the Company estimated the net excess amount of
Rs. 35.31 crore and Rs. 229.43 crore (excluding an amount of Rs. 17.65
crore recoverable from Irrigation Department of Government of
Maharashtra) as at 31.03.2011 for IX and X plan respectively under
AG&SP schemes and there is no shortfall. This net excess amount is
worked out on overall basis and not on individual basis and may vary
due to change in assumptions, if any, during the projected period such
as changes in moratorium period, repayment period, loan restructuring,
pre payment, interest rate reset etc. Any excess / shortfall in the
interest subsidy fund will be refunded or adjusted / charged off at the
completion of the respective scheme.
13. (i) The Company has been designated as the Nodal Agency for
operationalisation and associated service for implementation of the
Re-structured Accelerated Power Development and Reforms Programme (R Ã
APDRP) during XI plan by the MoP, GoI under it's overall guidance.
Projects under the scheme are being taken up in two parts. Part à A
includes the projects for establishment of baseline data and IT
applications for energy accounting as well as IT based customer care
centers. Part à B includes regular distribution strengthening projects.
GoI provides 100% loan for Part A and up to 25% (up to 90% for special
category States) loan for Part à B. Balance funds for Part à B projects
can be raised by the utilities from PFC / REC / multi-lateral
institutions and / or own resources. The loans under Part à A alongwith
interest thereon is convertible into grant as per R Ã APDRP guidelines.
Similarly, upto 50% (up to 90% for special category states) of the loan
against Part ÃB project would be convertible in to grant as per R Ã
APDRP guidelines. Enabling activities of the programe is covered under
Part à C.
The loans under R Ã APDRP are routed through the Company for
disbursement to the eligible utilities. The amount so disbursed but not
converted in to grants as per R Ã APDRP guidelines will be repaid along
with interest to the GoI on receipt from the borrowers.
ii) Pending finalization of norms for payment of nodal agency fee,
etc. the accounting policy therefore was held in abeyance in 2009-10
and fee etc. had not been accounted for in 2009-10. On finalization of
norms by MoP, GoI, vide office Memorandum No. 14 / 03 / 2008 Ã APDRP
dated 20th August, 2010, the Company has recognised in the books of
accounts, during the year ended 31.03.2011, nodal agency fee income Rs.
89.62 crore (previous year NIL) in respect of sanctions and
disbursements done in 2008-09, 2009-10 and 2010-11.
(iii) During the year ended 31.03.2011, the Company has recognized Rs.
39.20 crore as amount reimbursed / reimbursable from the Ministry of
Power, Govt. of India, towards the actual expenditure incurred in FY
2008-09, 2009-10 and in 2010-11 on various activities for
operationalising the programme.
14. The net deferred tax liabilities of Rs. 82.97 crore (previous year
Rs. 46.95 crore) have been computed as per Accounting Standard 22
Accounting for Taxes on Income.
15. The Company has no outstanding liability towards Micro, Small and
Medium enterprises.
16. The value of lease hold land aggregating to Rs. 37.87 crore
(previous year Rs. 38.33 crore) comprises of Rs. 31.83 crore (previous
year Rs. 31.83 crore) paid towards cost of land to Land and Development
office (L&DO), Ministry of Urban Affairs, Govt. of India, stamp duty
of Rs. 2.01 crore (previous year Rs.2.47 crore) and capitalization of
ground rent of Rs.4.03 crore (previous year Rs. 4.03 crore) up to the
date of completion of building. The Land and Development office have
executed the perpetual lease deed on 23.03.2011. The registration of
the perpetual lease deed is under process.
Leasehold land is not amortized, as it is a perpetual lease.
17. Disclosures as per Accounting Standard Ã15 :-
A. PROVIDENT FUND
The Company pays fixed contribution to provident fund at prescribed
rates to a separate trust, which invests the funds in permitted
securities. The contribution to the fund for the period is recognized
as expense and is charged to the Profit and loss account. The
obligation of the Company is to make such fixed contribution and to
ensure a minimum rate of return to the members as specified by GoI.
Any short fall for payment of interest to members as per specified
rate of return has to be compensated by the Company. The Company
estimates that no liability will take place in this regard in the near
future and hence no further provision is considered necessary.
B. GRATUITY
The Company has a defined gratuity scheme and is managed by a separate
trust. The provision for the same has been made on actuarial valuation
based upon total number of years of service rendered by the employee
subject to a maximum amount of Rs.10 lakh.
C. POST RETIREMENT MEDICAL SCHEME (PRMS)
The Company has Post-Retirement Medical Scheme (PRMS), under which
retired employees and the dependent family members are provided medical
facilities in empanelled hospitals. They can also avail of
reimbursement of out-patient treatment subject to a ceiling fixed by
the Company.
D. TERMINAL BENEFITS
Terminal benefits include settlement in home town for employees &
their dependents.
E. LEAVE
The Company provides for earned leave benefit and half-pay leave to
the credit of the employees, which accrue on half yearly basis @ 15
days and 10 days, respectively. 75% of the earned leave is encashable
while in service and a maximum of 300 days earned leave can be
accumulated, which is encashable on superannuation / separation. Half
pay leave is encashable on separation after 10 years of service or at
the time of superannuation subject to a maximum of 300 days. The
liability for the same is recognized, based on actuarial valuation.
The above mentioned schemes (C, D and E) are unfunded and are
recognized on the basis of actuarial valuation.
The summarised position of various defined benefits recognized in the
Profit and loss account, balance sheet are as under {Figures in
brackets ( ) represents to previous year}
v) One percent increase / decrease in the Inflation rate would impact
liability for medical cost of PRMS, as under:-
Cost increase by 1% Rs. 0.14 crore
Cost decrease by 1% Rs. 0.11 crore
vi) During the year, the Company has provided liability towards
contribution to the Gratuity Trust of Rs. 1.79 crore, to PRMS of Rs.
0.92 crore, to leave Rs. 3.34 crore and to pension Rs. 2.28 crore.
(previous year towards contribution to the Gratuity Trust of Rs.2.76
crore, to PRMS of Rs.3.09 crore, to leave Rs.7.36 crore and to pension
Rs.1.78 crore).
E. OTHER EMPLOYEE BENEFITS:-
During the year, provision of Rs. - 0.03 crore (previous Year Rs. 0.04
crore) has been made for Economic Rehabilitation Scheme for Employees
and provision of Rs. 0.65 crores has been made for Long Service Award
for Employees (Previous year Rs. 0.01 crore reversed) on the basis of
actuarial valuation made at the year end by charging / crediting the
Profit and loss account.
18. (i) During the year, the Company has sent letters seeking confi
rmation of balances as on 31.12.2010 to the borrowers. However, confi
rmations in few cases were yet to be received.
(ii) Some of the designated bank accounts opened for making interest
payment to bondholders / debenture holders have outstanding balance of
Rs. 0.50 crore are subject to reconciliation / confirmation.
Reserve for bad and doubtful debts u/s 36 (i) (viia) (c) of Income Tax
Act, 1961 is considered as part of Tier II Capital, as advised by RBI,
vide their letter No. DNBS.CO.PD.No. 6774 / 03-10-01 / 2009 Ã 10 dated
17.06.2010.
19. The Company has no exposure to real estate sector as on
31.03.2011.
20. The Company does not have more than one reportable segment in
terms of Accounting Standard No. 17 on Segment Reporting.
21. Previous year's figures have been re-grouped / re-arranged,
wherever practicable, to make them comparable with the current period.
22. Figures have been rounded off to the nearest crore of rupees with
two decimals.
23. Balance Sheet abstract and Company's General Business profile as
per Part IV of Schedule VI of the Companies Act, 1956 is enclosed as
Appendix.
Mar 31, 2010
1. Contingent liabilities: (i) Default Guarantees issued by the
Company in foreign currency :
a) EURO 0.710 million equivalents to Rs. 4.35 crore (previous year EURO
1.066 million equivalent to Rs. 7.29 crore).
b) US$ 17.745 million equivalent to Rs. 80.88 crore (previous year US$
21.145 million equivalent to Rs. 108.79 crore).
(ii) Default Guarantee issued by the Company in Indian Rupee: Rs.
400.00 crore, (previous year Rs. 400.00 crore).
(iii) Bank Guarantee issued by the Company in Indian Rupee: Rs.
0.04.crore, (previous year Rs. 0.04 crore).
(iv) Outstanding disbursement commitments to the borrowers for Letter
of Comforts issued against the loans sanctioned Rs. 3414.21 crore
(Previous year Rs. 394.88 crore).
(v) (a) The additional demand raised by Income Tax Department of Rs.
44.23 crore and Rs. 1.38 crore for Assessment Year 2006-07 & 2007-08,
respectively were paid and are being contested. The management does not
consider it necessary to make any provision as the probability of
outflow of resources is negligible.
(b) CIT(A) has granted refund of Rs. 2.97 crore for Assessment Year
1996-97 and Rs. 0.73 crore for Assessment Year 2001-02 against which
the Income Tax department has filed appeals before ITAT and are
pending, as Income tax department has not yet received permission of
the Committee of Disputes (COD).
(c) The Income tax department has filed appeals before Delhi High Court
against its own order and the order of ITAT granting refund of Rs. 0.36
crore & Rs. 0.31 crore for Assessment Year 2001-02 & 2002-03. The
Income tax department. has not yet obtained the CODs permission.
(vi) Claim not acknowledged as debts are Rs. 7.80 crore (previous year
Rs. 7.80 crore).
(vii) Estimated amounts of contracts remaining to be executed on
account of capital contracts is Rs. 4.26 crores (Previous Year Rs.
Nil).
2. The additional demands raised by Income Tax Department (net of
relief granted by Appellate Authorities) of Rs. 0.26 crore for
Assessment Year 1996-97, Rs. 3.22 crore for Assessment Year 2000-01,
Rs. 5.34 crore for Assessment Year 2001-02, Rs. 4.74 crore for
Assessment Year 2002-03, Rs. 4.24crore for Assessment Year 2003-04, Rs.
3.21 crore for Assessment Year 2004-05 and Rs. 23.64 crore for
Assessment Year 2005-06 were paid and provided for and are being
contested.
3. The Government of India, Ministry of Power, under section 58(4) of
the Madhya Pradesh Reorganization Act, 2000 (MPRA) issued an order No
42/8/2000-R&R dated 12.04.2001 through which assets, transfer rights,
liabilities, undertaking etc, of erstwhile Madhya Pradesh Electricity
Board (MPEB) were passed on to the successor boards namely MPSEB and
CSEB after bifurcation of state of Madhya Pradesh. Subsequently, the
GOI, Ministry of Power through the Gazette of India Extraordinary-MoP,
New Delhi notification dated 04.11.2004 had decided to divide the
liability and assets of erstwhile MPEB into MPSEB & CSEB in the ratio
of fixed assets of 90:10 respectively. Consequent upon this, CSEB has
informed that though it has been clearing the dues of the Company based
on the acquired liability of erstwhile MPEB at Rs.110.64 crore, it has
requested the Company to align the dues in line with MoP order to Rs.
105.23 crore. Nevertheless, the Company will receive the full amount of
principal payment either from CSEB or MPSEB. Further, PFC has taken up
the matter with MoP and has requested MoP to review and revise the
order on a plea that PFCs loans are project specific and the amount
disbursed actually goes into the creation of the assets on such
projects are not to be allocated in the manner as suggested by MoP in
the new order. The decision of MoP is awaited.
4. (i) A project under implementation having principal outstanding of
Rs 325.00 crores (previous year Rs. 297.98 crore) has
been considered as Standard Asset in terms of RBI Circular No.
DBS.FID.No.C-11/01.02.00/ 2001-02 dated 1.02.2002 read with D.O. letter
DBS.FID No.1285/ 01.02.00/2001-02 dated 14.05.2002 thereby treating the
asset as standard till June, 2008, and RBI vide letter no. DBOD,
BP.No.7675/ 21.04.048/ 2008-09 dated 11.11.2008 which advised that the
date of commencement of commercial operation should be 31.03.2009
(instead of the deemed date of completion of the project i.e. June 2006
as fixed by an independent group setup by RBI), as decided at the time
of actual financial closure of the project in September 2006. Based on
above, read with RBI Master Circular DBOD No. BP. BC.3 / 21.04.141/
2009-10 dated 01.07.2009, the asset may be treated as standard asset
not exceeding two years from the date of completion of the project
(i.e. 2 years from 31.3.2009). However, the company recognizes the
interest on this loan on receipt basis in terms of the Accounting
Policy and as per prudential norms approved by Ministry of Power.
Further, the Company has approved and finalized the amendments to the
Financial Realignment Plan (FRP), inter-alia, determining the scheduled
project Commercial Operation Date (COD) as 01.01.2011. Financial
Realignment Plan (FRP) has been accepted by the Project Management and
is under implementation.
As per FRP, the Project Company will issue Zero Coupon Bonds (ZCB)
(towards interest outstanding for the period from 01.10.2001 to
31.10.2005) valuing Rs. 103.87 crore (excluding waiver of interest,
penal interest etc. amounting to Rs. 8.64 crore). During the year, the
amount of Rs. 54.93 crores (including the dues of previous year of Rs.
8.72 crore and the guarantee fee for current year of Rs. 4.64 crores)
became due on the loan as per FRP, out of which Rs. 31.81 crores were
received and accounted for as per accounting policy. The balance of Rs.
23.12 crores being interest and other charges due as on 31.03.2010 and
Rs. 103.87 crore against ZCB have not been recognized as per accounting
policy.
(ii) One gas based power project, having Principal outstanding of Rs.
401.96 crore could not be commissioned on the scheduled commissioning
date (September 2006) due to non availability of gas. Resultantly the
company made an intermim reschedulement of the loan account on
07.03.2007, followed by final reshedulement on 03.12.2007 in line with
the reshedulement done by lead bank as per which replyment of the
principal was to commence from 15.10.2009. As the bottleneck of the
non availability of gas continued, the lead Bank again
restructured/rescheduled the loan account (in line with the lenders
meetings dated 12.02.2009) and classified it as standard asset under
special regulatory treatment, in accordance with RBI circular DBOD No.
BP.BC.84/21.04.048/2008-09 dated 14.11.2008. The company being one of
the consortium member of the lenders also resheduled the loan account
on 11.05.2009 and accordingly classified as Standard Asset.
5. During the year, two borrowers had made premature repayment of
their loan without prepayment premium including service tax amounting
to Rs. 6.75 crores. As per the terms and condition of loan / policy,
the demand for prepayment premium has been sent to the borrowers, which
they have disputed and not paid so far and thus has not been accounted
for. One borrower has made part pre mature repayment of Rs. 131.21
crores (principal- Rs. 125 crores and pre payment premium / interest
etc. Rs. 6.21 crores). As per the terms of Loan Agreement, the
pre-mature repayment can be made only on the interest payment due date.
Since the payment is made before the interest payment date, the Company
demanded interest upto interest due date. This is disputed by the
borrower. Hence the same has not been accounted for.
6. (i)Assets of Rs. 14.38 crore (Previous year Rs. 15.43 crore) were
classified as Non Performing Assets in terms of prudential norms of the
Company. Accordingly, a provision of Rs. 8.14 crore is held in the
accounts (previous year Rs. 8.97 crore). (ii) Interest Subsidy under
AG&SP (including interest upto 31st March, 2010) amounting to Rs. 24.67
crores (previous year Rs. 98.90 crores), became recoverable in respect
of one project (previous year two projects) and is yet to be recovered.
It became recoverable, as the project was not completed till 31.03.2007
and the subsidy was withdrawn by Ministry of Power. The interest
subsidy of Rs. 24.67 crore (previous year Rs. 95.71 crore) is payable
to the Ministry of Power and will be paid on its receipt.
7. The Company discontinued interest rate restructuring policy w.e.f.
December 2005. However, the loans which were restructured with 3 year
reset (after 3 years the loan shall carry original interest rate i.e.
the rate before interest restructuring). The borrower was given option
to seek further restructuring after 3 years on payment of 50% premium
being NPV of difference between original interest rate and Current
interest rate for the entire remaining period of Loan. Accordingly the
Company has done interest restructuring amounting to Rs. Nil (previous
year Rs. 703.35 crore). An amount of Rs. Nil (previous year Rs. 8.95
crore) has been received and credited to Profit and Loss Account as
Interest Restructuring Premium (Refer schedule 10).
8. The Company is not required to create Bond Redemption Reserve in
respect of bonds by virtue of the Department of Company Affairs
Circular of 18.04.2002 according to which the financial institutions
within the meaning of Section 4A of the Companies Act 1956 were not
required to create Bond Redemption Reserve in case of privately placed
debentures.The Company is not required to maintain Reserve Fund under
Section 45-IC of the Reserve Bank of India Act, 1934 by transferring 20
percent of its net profits, as it is exempted by RBI vide its letter
dated 24.01.2000.
9.1 Related Party Disclosures: Key Managerial Personnel:
Name of the Key Managerial Personnel
Shri Satnam Singh, CMD (w.e.f. 01.08.2008)
Shri M K Goel, Director (w.e.f. 27.07.2007)
Shri Rajeev Sharma, Director (w.e.f. 09.03.2009)
Shri R. Nagarajan, Director (w.e.f. 31.07.2009)
10.The Company has made investments in equity (unquoted) of -
ÃNational Power Exchange Limitedà and ÃEnergy Efficiency Services LtdÃ.
National Power Exchange Limited (NPEL)
PFC, NTPC, NHPC and TCS have jointly promoted ÃNational Power Exchange
Limited. The National Power Exchange Ltd (NPEL) will carry out the
business of providing platform for trading of power through an
organized exchange. The Company has since made the investment of Rs
0.83 crore upto 31st March 2010. NPEL has not commenced its operation.
Energy Efficiency Services Limited (EESL)
Energy Efficiency Services Limited has been jointly promoted by NTPC,
PFC, PGCIL and REC with equal participation in equity capital for
implementing Energy Efficiency Projects. At the time of incorporation,
the authorized equity capital of EESL was Rs.10 crores and paid up
equity capital was Rs.2.50 crores. The companys share in paid up
equity capital was Rs. 0.63 crore (25% of paid up capital) comprising
of 625,000 equity shares of Rs. 10 each. The authorized share capital
of EESL has been enhanced to Rs. 190 crore during the Financial Year
ended 31-03-2010. EESL has commenced its operations.
10.1(i) Investment in ÃSmall is Beautifulà Fund: -
The Company had outstanding investment Rs. 12.08 crore (previous year
Rs.14.47 crore) in units of ÃSmall is Beautifulà Fund. Against this, a
sum of Rs. 0.145 crore has been received as dividend during the year.
The NAV of the Units of the Fund was Rs. 9.80 per unit of Rs. 10 (face
value) as on 31.03.2010. The diminution/ increase (-) in value of NAV
amounting to Rs. -1.08 crore (Previous year Rs. 1.32 crore) has been
accounted for during the year.
(ii) Investment in equity (unquoted) in Power Exchange India Limited
(PXI)
Power Exchange India Ltd. has been promoted by NSE and NCDEX. The
authorized capital has been enhanced from Rs. 25 crore to Rs. 50 crore
during the financial year ending 31.03.2010. The paid up capital of PXI
was Rs. 34.34 crores, as on 31.03.2010. The Company has subscribed Rs.
1.75 crore of the paid up capital consisting of 17,50,000 equity shares
of Rs. 10 each into the equity capital of PXI. PXI has commenced its
operations.
11. Interest Differential Fund (IDF) Ã KFW
The agreement between KFW and PFC provides that the IDF belongs to the
borrowers solely and will be used to cover the exchange risk variations
under this Loan and any excess will be used in accordance with the
agreement. The balance in the IDF fund has been kept under separate
account head titled as Interest Differential Fund-KFW and shown as a
liability. The total fund accumulated as on 31.03.2010 is Rs. 47.60
crore (previous year Rs. 34.19 crore) after adjusting the translation
loss of Rs. 13.73 crore (previous year Rs. 24.12 crore).
12. During the current year, exchange gain (net) of Rs. 103.84 crore
(previous year exchange loss of Rs. 252.53. crore) on foreign currency
assets and liabilities comprising of translation gain of Rs. 92.51
crore (previous year translation loss of Rs. 235.66 crores) and actual
gain of Rs. 11.33 crore (previous year actual loss of Rs. 16.87 crores)
has been recognised in Profit & Loss account as per Accounting Standard
11.
13. The company was having outstanding forward foreign exchange
contracts and principal only swaps (POS) against the Foreign Currency
Loan liabilities as per details given hereunder:- i) Forward contracts
to cover exchange rate risk in USD/INR leg. : US$ 13.9795 million
ii) Forward contracts to cover exchange rate risk in USD/JPY leg. :
1JPY 454 million
iii) Forward contracts to cover EURO/USD leg. : Euro 0.9662 million
14. (a) Asset under finance lease after 01.04.2001
(i) The Gross investment in the leased assets and the present value of
the minimum value receivable at the balance sheet date has been given
in the table below with the description as total of future minimum
lease payments and present value of the lease payments amounting to Rs.
205.01 crore and Rs. 160.63 crore respectively. The reconciliation of
these figures has also been indicated under the head Ãunearned finance
chargesà with an amount of Rs. 44.38 crore.
The future lease rentals are given below:-
(ii) The Company had sanctioned an amount of Rs. 88.90 crore in the
year 2004 as finance lease for financing Wind Turbine Generator
(commissioned on 19.07.2004) which was reduced to Rs. 88.85 crore in
December 2006. The Gross Investment stood at the level of Rs. 59.95
crore as on 31.3.2010. The lease rent is to be recovered within a
period of 15 Years, which comprises of 10 years as a primary period and
5 years as a secondary period.
(iii) The Company had sanctioned an amount of Rs. 98.44 crore in the
year 2004 as finance lease for financing Wind Turbine Generator
(commissioned on 18.5.2004). The Gross Investment stood at Rs. 63.79
crore as on 31.3.2010. The lease rent is to be recovered within a
period of 20 years, which comprises of 10 years as a primary period and
maximum of another 10 years as a secondary period.
(iv) The Company had sanctioned an amount of Rs. 93.51 crore in the
year 2004 as finance lease for financing Wind Turbine Generator
(commissioned on 09.06.2005). The Gross Investment stood at Rs. 81.27
crore as on 31.3.2010. The lease rent is to be recovered within a
period of 19 years 11 months which comprises of 10 years as a primary
period and maximum of 9 years and 11 months as a secondary period.
b) Operating Leases:
The Companys operating leases consists:- Premises for residential use
of employees and offices which are leasing arrangements usually
renewable on mutually agreed terms but are not non-cancellable. Rent
for residential accommodation of employees include Rs. 4.06 crore
(Previous year Rs. 1.83 crore) towards lease payments, net of
recoveries in respect of premises for residential use of employees.
Lease payments in respect of premises for employees are shown as Rent
for Residential Accommodation of employees in Schedule 14- Personnel,
Administration and Other Expenses. Lease payments in respect of
premises for offices are shown as Office Rent in Schedule 14-
Personnel, Administration and Other Expenses.
15 Subsidy under Accelerated Generation & Supply Programme (AG&SP):
The Company is claiming subsidy from Govt. of India at Net Present
Value calculated at indicative interest rates in accordance with GOIs
letter vide D.O.No.32024/17/97-PFC dated 23.09.1997 and
O.M.No.32024/23/2001-PFC dated 07.03.2003 irrespective of the actual
repayment schedule, moratorium period and duration of repayment. The
amount of interest subsidy received and to be passed on to the borrower
is retained as Interest Subsidy Fund Account. The impact of difference
between the indicative rate and period considered at the time of claims
and at the time of actual disbursement can be ascertained only after
the end of the respective schemes. However on the basis of the
projections made for each project (based upon the certain assumptions
that these will remain same over the projected period of each loan /
project), the Company estimated the net excess amount of Rs. 166.25
crore and Rs. 209.97 crore (excluding recoverable amount of Rs. 17.65
crore from Irrigation Department of Government of Maharashtra which is
subject to decision of Ministry of Power) as at 31/03/2010 for IX & X
plan respectively under AG&SP schemes. This net excess amount is worked
out on overall basis and not on individual basis & may vary due to
change in assumptions, if any during the projected period such as
changes in moratorium period , repayment period , loan restructuring ,
pre payment, interest rate reset etc. However during the year, the
Company has refunded an amount of Rs. 150 Crores as estimated net
excess amount lying against IX plan on the directions of MoP and
balance amount of excess, if any, will be refunded/ adjusted as per
further directions of MoP.
16. One borrower à Chattishgarh State Electricity Board (CSEB) has
been unbundled into four power utilities on 1st January 2009. However,
the Government of Chattishgarh is yet to issue the final notification /
order for division of asset and liabilities among all the successor
power utilities from the date of unbundling of CSEB. Loan Transfer
Agreement shall be executed after issue of the said final order by the
Govt. of Chhattisgarh. Pending transfer of loans to respective
successor power utilities, the loan liabilities are outstanding in the
name of CSEB.
17. (i) The Company has been appointed as the ÃNodal Agency for the
operationalisation and implementation of Re-structured
Accelerated Power Development and Reforms Programme (R-APDRP), under
the overall guidance of the Ministry of Power (MoP), Government of
India (GOI).
Projects under the scheme are being taken up in Two Parts. Part-A
includes the projects for establishment of baseline data and IT
applications for energy accounting / auditing as well as IT based
consumer service centers. Part-B includes regular distribution
strengthening projects. GoI provide 100% loan for Part A and 25% (90%
for special category States) loan for Part B.
The Loans under R-APDRP are being routed through the Company for
disbursement to the borrowers. The amount so disbursed along with
accrued interest will be paid to Government of India ( GOI) on receipt
from the borrowers.
18. The Company had started creating deferred tax liability on special
reserve created and maintained under Section 36(1) (viii) of Income
Act, 1961, as per the opinion of Expert Advisory Committee of ICAI in
Financial Year 2004-05. Based upon the clarification received from the
Accounting Standard Board of Institute of Chartered Accountants of
India (ICAI) vide letter dated 02.06.2009 and as explained in Policy
No.13.2, the Company had stopped creating DTL on special reserve
created and maintained from Financial Year 2008-09. Further, during the
financial year 2008-09 the Company reversed the Deferred Tax Liability
(DTL) created in earlier years on special reserve created and
maintained under Income Tax Act. The reversal of DTL was done by
crediting revenue reserve by Rs. 745.14 crore for Financial Year
1997-98 to Financial Year 2003-04 (as DTL was created by debiting
revenue reserve), crediting Profit and Loss Account by Rs. 483.24
crores for Financial Year 2004-05 to Financial Year 2007-08 (as DTL was
created by debiting Profit and Loss Account for these years) and by
debiting DTL by Rs. 1228.38 crores.
Further, DTL on the Special Reserve created and maintained under
Section 36(1) (viii) of Income Act, 1961 for the current year amounting
to Rs. 157.93 crore ( Previous year Rs. 133.28 crore) has not been
created as per paragraph 13.2 of Accounting Policy.
19. The Company has no outstanding liability towards Micro, Small and
Medium enterprises.
20. The value of lease hold land aggregating to Rs. 38.33 crore
(previous year Rs. 38.33 crore) comprises of amount of Rs. 31.83 crore
(previous year Rs. 31.83 crore) paid towards cost of land to Land and
Development Office (L&DO), Ministry of Urban Affairs, Govt. of India,
stamp duty liability of Rs. 2.47 crore (previous year Rs. 2.47 crore)
and capitalization of ground rent up to the date of completion of
building of Rs. 4.03 crore ( previous year Rs. 4.03 crore). In
accordance with Memorandum of Agreement (MOA) executed with L&DO, the
lease deed is yet to be signed. Pending execution of perpetual lease
deed, (which does not have limited useful life) the value of leasehold
land is not amortized and / or no provision for depreciation has been
made on the said leasehold land.
21. Disclosures as per Accounting Standard-15:-
A. Provident Fund
The Company pays fixed contribution to Provident Fund at prescribed
rates to a separate trust, which invests the funds in permitted
securities. The contribution to the fund for the period is recognized
as expense and is charged to the profit and loss account. The
obligation of the Company is to make such fixed contribution and to
ensure a minimum rate of return to the members as specified by GOI. Any
short fall for payment of interest to members as per specified rate of
return has to be compensated by the Company. The Company estimates that
no liability will take place in this regard in the near future and
hence no further provision is considered necessary.
B. Gratuity
The company has a defined gratuity scheme and is managed by a separate
trust. The provision for the same has been made on actuarial valuation
based upon total number of years of service rendered by the employee
subject to a maximum amount of Rs. 10 lakh.
C. Post Retirement Medical Scheme (PRMS)
The Company has Post-Retirement Medical Scheme (PRMS), under which
retired employee and the dependent family members are provided medical
facilities in empanelled hospitals. They can also avail reimbursement
of Out-Patient treatment subject to a ceiling fixed by the Company.
D. Terminal Benefits
Terminal benefits include settlement in home town for employees &
dependents.
E. Leave
The Company provides for earned leave benefit and half-pay leave to the
credit of the employees which accrue on half yearly basis @ 15 days and
10 days respectively. 75% of the earned leave is encashable while in
service and maximum of 300 days earned leave can be accumulated which
is encashable on superannuation/ separation. Half pay leave is
encashable on separation after 10 years of service or at the time of
superannuation subject to a maximum of 300 days. The liability for the
same is recognized based on actuarial valuation.
The above mentioned schemes (C, D and E) are unfunded and are
recognized on the basis of actuarial valuation.
The summarised position of various defined benefits recognized in the
profit and loss account, balance sheet are as under {Figures in
brackets ( ) represents to previous year}
E. Other Employee Benefits:- During the year, provision of Rs.0.04
crore (previous Year Rs. 1.88 crore) has been made for Economic
Rehabilitation Scheme for Employees and provision of Rs. 0.01 crore has
been reversed for Long Service Award for Employees (Previous year Rs.
0.27 crore made) on the basis of actuarial valuation made at the year
end by charging/crediting the profit and loss account.
22. (i) During the year, the Company has sent letters seeking
confirmation of balances as on 31-12-2009 to borrowers. The balance
confirmation is received from all the borrowers confirming 99.99% of
the total outstanding balance amount sought for confirmation. Some of
the balances of debtors, creditors and loan and advances are subject to
confirmation / reconciliation / adjustments, if any.
(ii) Some of the designated bank accounts opened for making interest
payment to bondholders/ debenture holders have outstanding balance of
Rs. 0.61 crore (remaining unpaid for more than 9 months) are subject to
reconciliation/ confirmation.
23. The pay revision of non executives (including non-unionized
supervisors) of the company is due w.e.f. 01.01.2007. Pending
implementation of pay revision, a provision of Rs. 1.57 crore (previous
year Rs. 4.77 crore both for executives and non- executives) for the
year has been made towards wage revision on an estimated basis in line
with office memorandum issued by DPE.
24. The Company does not have more than one reportable segment in
terms of Accounting Standard No. 17 on Segment Reporting.
25. Previous years figures have been re-grouped / re-arranged,
wherever practicable, to make them comparable with the current year.
26. Figures have been rounded off to the nearest lakh of rupees.
27. Balance Sheet abstract and Companys General Business Profile as
per Part IV of Schedule VI of the Companies Act, 1956 is enclosed as
Appendix.
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