1. (i) During the year, Adani Transmission Limited ("the Company") has completed the acquisition of North Karanpura
Transco Limited (NKTL) and consequently NKTL has become wholly owned subsidiary of Adani Transmission Limited w.e.f. 8th July, 2016.
(ii) Further, the Company has acquired 74% Equity Shares of Maru Transmission Service Company Limited (MTSCL) and Aravali Transmission Service Company Limited (ATSCL) w.e.f. 6th October, 2016 from GMR Energy Limited. The balance 26% of Equity Shares of MTSCL & ATSCL are pledged in favour of the Company and the same will also get transferred after fulfillment of certain regulatory requirements and completion of lock-in period. As per the agreement, during the lock-in period, the Company will be the beneficial owner of all the rights and accretions in connection with the pledged shares. Accordingly, the Company has determined that it has "in-substance” ownership of the pledged shares and it has consolidated financial statements of MTSCL and ATSCL as having 100% interest. Pursuant to the acquisition, the figures for the current year ended 31st March, 2017 are not fully comparable with the figures of corresponding previous year.
2. The Hon''''ble Gujarat High Court vide its Order dated 7th May, 2015 has sanctioned the Composite Scheme of Arrangement and the Scheme came into effect on 22nd May, 2015 upon filing certified copies of the orders of the Hon''''ble Court of Gujarat sanctioning the Scheme with the Registrar of the Companies, Gujarat at Ahmadabad. The appointed date for the scheme is 1st April, 2015 .
Pursuant to the demerger of Transmission Undertaking of AEL, the company had issued and allotted new equity shares to the existing equity shareholders of AEL in the ratio of 1 equity share of the company for every 1 equity share held by the equity shareholder in AEL as of the record date for the purpose of the scheme. The equity shares held by AEL and Loan payable to AEL in the company has been cancelled pursuant to the Scheme.
3. As per Ind AS 19 "Employee Benefits", the disclosures as defined in the accounting standard are given below.
(a) Defined Benefit Plan
The Company operates a defined benefit plan (the Gratuity plan) covering eligible employees, which provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee''''s salary and the tenure of employment.
The status of gratuity plan as required under Ind AS-19:
viii. The Company has defined benefit plans for Gratuity to eligible employees, the contributions for which are made to Life Insurance Corporation of India who invests the funds as per Insurance Regulatory Development Authority guidelines.
ix. Sensitivity Analysis
Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase and mortality. The sensitivity analysis below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The results of sensitivity analysis is given below:
x. Asset Liability Matching Strategies
The Company has purchased insurance policy, which is basically a year-on-year cash accumulation plan in which the interest rate is declared on yearly basis and is guaranteed for a period of one year. The insurance Company, as part of the policy rules, makes payment of all gratuity outgoes happening during the year (subject to sufficient fund under the policy).
The policy, thus, mitigates the liquidity risk. However, being a cash accumulation plan, the duration of assets is shorter compared to the duration of liabilities. Thus, the Company is exposed to movement in interest rate (in particular, the significant fall in interest rates, which should result in a increase in liability without corresponding increase in the asset).
xi. Effect of Plan on Entity''''s Future Cash Flows
a) Funding arrangements and Funding Policy
The Company has purchased an insurance policy to provide for payment of gratuity to the employees. Every year, the insurance company carries out a funding valuation based on the latest employee data provided by the Company. Any deficit in the assets arising as a result of such valuation is funded by the Company.
b) Expected Contribution during the next annual reporting period The Company''''s best estimate of Contribution during the next year is Nil
c) Maturity Profile of Defined Benefit Obligation
Weighted average duration (based on discounted cashflows) - 4 years
xii. The Company has defined benefit plans for Gratuity to eligible employees, the contributions for which are made to Life Insurance Corporation of India who invests the funds as per Insurance Regulatory Development Authority guidelines.
The discount rate is based on the prevailing market yields of Government of India securities as at the balance sheet date for the estimated term of the obligations.
The expected contributions for Defined Benefit Plan for the next financial year will be in line with FY 2016-17.
The actuarial liability for leave encashment and compensated absences (including Sick Leave) as at the year ended 31st March 2017 is RS, 0.49 Crores.
(b) Defined Contribution Plan
Contribution to Defined Contribution Plans, recognized in Statement of profit and loss and Project Development
Expenditure, for the year is as under:
4. CAPITAL MANAGEMENT
The Company''''s objectives when managing capital is to safeguard continuity and healthy capital ratios in order to support its business and provide adequate return to shareholders through continuing growth. The Company''''s overall strategy remains unchanged from previous year.
The Company sets the amount of capital required on the basis of annual business and long-term operating plans which include capital and other strategic investments.
The funding requirements are met through a mixture of equity, internal fund generation, borrowings. The Company''''s policy is to use borrowings to meet anticipated funding requirements. The Company monitors capital on the basis of the net debt to equity ratio.
No changes were made in the objectives, policies or processes for managing capital during the years ended as at 31st March, 2017 and as at 31st March, 2016.
5.FINANCIAL RISK OBJECTIVE AND POLICIES
The Company''''s principal financial liabilities comprise borrowings, trade and other payables, The main purpose of these financial liabilities is to finance the Company''''s operations/projects .The Company''''s principal financial assets include loans,
trade and other receivables, and cash and cash equivalents that derive directly from its operations.
In the ordinary course of business, the Company is mainly exposed to risks resulting from exchange rate fluctuation (currency risk), interest rate movements (interest rate risk) collectively referred as Market Risk, Credit Risk, Liquidity Risk and other price risks such as equity price risk. The Company''''s senior management oversees the management of these risks. It manages its exposure to these risks through derivative financial instruments by hedging transactions. It uses derivative instruments such as Principal only Swaps, Interest rate swaps, foreign currency future options and foreign currency forward contract to manage these risks. These derivative instruments reduce the impact of both favorable and unfavorable fluctuations.
The Company’s risk management activities are subject to the management, direction and control of Central Treasury Team of the Group under the framework of Risk Management Policy for Currency and Interest rate risk as approved by the Board of Directors of the Company. The Group''''s central treasury team ensures appropriate financial risk governance framework for the Company through appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Group''''s policies and risk objectives. It is the Group''''s policy that no trading in derivatives for speculative purposes may be undertaken.
The decision of whether and when to execute derivative financial instruments along with its tenure can vary from period to period depending on market conditions and the relative costs of the instruments. The tenure is linked to the timing of the underlying exposure, with the connection between the two being regularly monitored. The Company is exposed to losses in the event of non-performance by the counterparties to the derivative contracts. All derivative contracts are executed with counterparties that, in our judgment, are creditworthy. The outstanding derivatives are reviewed periodically to ensure that there is no inappropriate concentration of outstanding to any particular counterparty.
Further, all currency and interest rate risks as identified above is measured on a daily basis by monitoring the mark to market (MTM) of open and hedged position. The MTM is derived basis underlying market curves on closing basis of relevant instrument quoted on Bloomberg/Reuters. For quarter ends, the MTM for each derivative instrument outstanding is obtained from respective banks. All gain / loss arising from MTM for open derivative contracts and gain / loss on settlement / cancellation / rollover of derivative contracts is recorded in statement of profit and loss, except for the cumulative impact of all derivative contracts outstanding as at the date of the Guidance Note becoming effective, which have been recognized in the reserves as at 1st April, 2015.
Interest rate risk
The company is exposed to changes in market interest rates due to financing, investing and cash management activities. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations with floating interest rates and period of borrowings. The Company manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings. The Company enters into interest rate swap contracts or interest rate future contracts to manage its exposure to changes in the underlying benchmark interest rates.
Interest rate sensitivity
The sensitivity analysis below have been determined based on the exposure to interest rates at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point increase or decrease represents management''''s assessment of the reasonably possible change in interest rates.
If interest rates had been 50 basis points higher / lower and all other variables were held constant, the Company''''s profit for the year ended March 31, 2017 would decrease / increase by H Nil (previous year RS, 9.25 crores). This is mainly attributable to interest rates on variable rate borrowings.
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a loss to the company.
The Company has adopted the policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial losses from default, and generally does not obtain any collateral or other security on trade receivables.
The carrying amount of financial assets recorded in the financial statements represents the Company''''s maximum exposure to credit risk.
Cash are held with creditworthy financial institutions.
The Company monitors its risk of shortage of funds using cash flow forecasting models. These models consider the maturity of its financial investments, committed funding and projected cash flows from operations. The Company''''s objective is to provide financial resources to meet its business objectives in a timely, cost effective and reliable manner and to manage its capital structure. A balance between continuity of funding and flexibility is maintained through the use of various types of borrowings.
The table below analysis derivative and non-derivative financial liabilities of the Company into relevant maturity groupings based on the remaining period from the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
6. RELATED PARTY DISCLOSURES :
As per Ind AS 24, Disclosure of transactions with related parties (as identified by management) are given below: Description of Relationship Name of related party
- Holding Company/Controlling entity S. B. Adani Family Trust (SBAFT)
- Subsidiary Company Adani Transmission (India) Limited
Maharashtra Eastern Grid Power Transmission Company Limited
Raipur - Rajnandgaon - Warora Transmission Limited
Chhattisgarh - WR Transmission Limited
Sipat Transmission Limited
Adani Transmission (Rajasthan) Limited
North Karanpura Transco Limited (w.e.f. 8th July, 2016)
Maru Transmission Service Company Limited (w.e.f. 6th October, 2016) Aravali Transmission Service Company Limited (w.e.f. 6th October, 2016)
- Key Managerial Persons Mr. Gautam S. Adani, Chairman
Mr. Deepak Bhargava, Whole-time Director (Resigned w.e.f. 31st March, 2017)
Mr. Kaushal Shah, Chief Financial Officer Mr. Jaladhi Shukla, Company Secretary
>Entities under Common Control Adani Agri Fresh Limited
Adani Enterprises Limited Adani Green Energy Limited Adani Infra (India) Limited Adani Power Limited Adani Power Maharashtra Limited Adani Power Rajasthan Limited Adani Wilmar Limited
(i) Previous year figures are regrouped / reclassified wherever necessary to correspond with the current years classification / disclosure
(ii) The Financial Statements for the year ended 31st March, 2017 have been reviewed by the Audit Committee and approved by the Board of Directors at their meetings held on 27th May, 2017.