1. Significant accounting judgments, estimates and assumptions
The application of the Company''''s accounting policies as described in Note 2, in the preparation of the Company''''s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. The estimates and assumptions are based on historical experience and other factors that are considered to be relevant. The estimates and underlying assumptions are reviewed on an ongoing basis and any revisions thereto are recognized in the period in which they are revised or in the period of revision and future periods if the revision affects both the current and future periods. Actual results may differ from these estimates which could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Estimates and assumptions
The estimates at 1st April, 2015 and at 31st March, 2016 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies).
The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at 1st April, 2015, the date of transition to Ind AS and as of 31st March, 2016.
Key Sources of estimation uncertainty :
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. Existing circumstances and assumptions about future developments may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
i) Useful lives of property, plant and equipment
In case of the power plant assets, in whose case the life of the assets has been estimated at 25 years based on technical assessment, taking into account the nature of the assets, the estimated usage of the asset, the operating condition of the asset, anticipated technological changes, manufacturer warranties and maintenance support, depreciation on the same is provided based on the useful life of each such component based on technical assessment, if materially different from that of the main asset w.e.f. 1st April 2015. Refer note 5.1 for details of value of power plant and its depreciation.
ii) Fair value measurement of financial instruments
In estimating the fair value of financial assets and financial liabilities, the Company uses market observable data to the extent available. Where such Level 1 inputs are not available, the Company establishes appropriate valuation techniques and inputs to the model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments’ include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are disclosed in Note 47.
iii) Defined benefit plans (gratuity benefits)
The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. Information about the various estimates and assumptions made in determining the present value of defined benefit obligations are disclosed in Note 52.
Determining whether property, plant and equipment are impaired requires an estimation of the value in use of the relevant cash generating units. The value in use calculation is based on a Discounted Cash Flow model over the estimated useful life of the Power Plants. Further, the cash flow projections are based on estimates and assumptions relating to tariff, operational performance of the Plants, life extension plans, market prices of coal and other fuels, exchange variations, inflation, terminal value etc. which are considered reasonable by the Management.(refer note 40)
v) Investments made / Interoperate deposits ("ICDs") given to subsidiaries
In case of investments made and Intercorporate Deposits ("ICD") given by the company in its subsidiaries, the Management assesses whether there is any indication of impairment in the value of investments and ICDs. The carrying amount is compared with the present value of future net cash flow of the subsidiaries. (refer note 41).
Significant management judgment is required to determine the amount of deferred tax assets that can be recognized,
based upon the likely timing and the level of future taxable profits together with future tax planning strategies, including estimates of temporary differences reversing on account of available benefits from the Income Tax Act, 1961. Deferred tax assets recognized to the extent of the corresponding deferred tax liability. (refer note 24.1)
2. First-time adoption of Ind-AS
The Company has adopted Ind AS from 1st April, 2016 and the date of transition to Ind AS is 1st April, 2015. These being the first financial statements in compliance with Ind AS, the impact of transition has been accounted for in opening reserves and comparable periods have been restated in accordance with Ind AS 101 -“First-time Adoption of Indian Accounting Standards". The Company has presented a reconciliation of its equity under Previous GAAP to its equity under Ind AS as at 1st April, 2015 and 31st March, 2016 and of the total comprehensive income for the year ended 31st March, 2016 as required by Ind AS 101.
Following are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.
a Deemed cost of property, plant and equipment and intangible assets
The Company has elected to continue with the carrying value of all its property, plant and equipments and intangible assets recognized as of 1st April, 2015 measured as per the previous GAAP and use that carrying value as its deemed cost on transition date.
b Deemed cost of investments
The Company has elected to continue with the carrying value of its investment in associate recognized as of 1st April, 2015 measured as per the previous GAAP and use that carrying value as its deemed cost of transition date.
c Exchange differences on long term foreign currency borrowings
The Company has elected to continue the policy adopted for accounting for exchange differences arising from translation of long-term foreign currency monetary items outstanding and recognized in the financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period as per the previous GAAP.
d Determining whether an arrangement contains a lease
The Company has applied Appendix C of Ind AS 17 - “Determining whether an arrangement contains a Lease" to determine whether an arrangement existing at the transition date contains a lease on the basis of facts and circumstances existing as at that date.
e Derecognition of financial assets and financial liabilities
The Company has applied the derecognition requirements of financial assets and financial liabilities prospectively for transactions occurring on or after transition date.
f Classification and measurement of financial assets
The Company has assessed classification and measurement of financial assets on the basis of facts and circumstances that exist as on transition date.
g Impairment of financial assets
The Company has applied impairment requirements of Ind AS 109 retrospectively; however, as permitted by Ind AS 101,
it has used reasonable and supportable information that is available without undue cost or effort to determine the credit risk at the date that financial instruments were initially recognized in order to compare it with the credit risk at the transition date.
h Assessment of embedded derivatives
The Company has assessed whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative on the basis of the conditions that existed at the later of the date it first became a party to the contract and the date when there has been a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract.
i Business Combination prior to transition date
In the financial year 2012-13, Grow more Trade and Investment Pvt. Ltd. was amalgamated with the Company pursuant to order of Hon'''' ble Gujarat High Court. Though the said transaction is in the nature of Business Combination, the Company has opted not to account for the said amalgamation as per Ind AS 103 “Business Combination", since the same is prior to transition date.
Footnotes to the reconciliation of Total Equity as at 31st March 2016 and 1st April 2015 and Statement of Other
Comprehensive Income for year ended 31st March, 2016 :
a) Remeasurement cost of net defined liability : Both under Indian GAAP and Ind AS, the Company recognized costs related to its post-employment defined benefit plan on an actuarial basis. Under Indian GAAP, the entire cost, including actuarial gains and losses, are charged to profit or loss. Under Ind AS, remeasurements [comprising of actuarial gains
and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets excluding amounts included in net interest on the net defined benefit liability] are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI.
b) Fair valuation for Financial Assets and Financial Liabilities :
i) The Company has valued certain financial assets and certain Financial Liabilities, at fair value. Impact of fair value changes as on date of transition, is recognized in opening reserves and changes thereafter are recognized in Statement of Profit and Loss Account.
ii) Borrowings (part of Financial Liabilities) : Under Indian GAAP, transaction costs incurred in connection with borrowings are amortized over the tenure of borrowings and charged to profit or loss for the period. Under Ind AS, transaction costs are included in the initial recognition amount of financial liability and charged to profit or loss using the effective interest method.
c) Major overhaul generally performed once in 5 years and expenditure thereon was charged to Statement of Profit and Loss has now been capitalized and depreciated.
d) The company has recognized deferred tax on other adjustments.
e) Statement of cash flows : The transition from Indian GAAP to Ind AS has not had a material impact on the statement of cash flows.
i. For charges created on the aforesaid assets, refer note 21.1 and 26.
ii. The Company has availed tax and duty benefit in the nature of exemptions from Custom Duty, Excise Duty, Service Tax, VAT and CST on its project procurements with respect to its power plant located at Mundra, Gujarat. The said benefits were availed by virtue of SEZ approval granted to the Company in December 2006, in terms of the provisions of the Special
Economic Zones Act, 2005 (hereinafter referred to as the ''''SEZ Act'''') and the Special Economic Zone Rules, 2006 which entitled the plant to procure goods and services without payment of taxes and duties as referred above.
Since, the procurement of goods and services during the project period were done by availing the exemption from payment of aforesaid taxes and duties, the amount capitalized for the said power plant as on the put to use date, is cost of property, plant and equipment (PPE) net off tax and duty benefit availed. In compliance with Ind AS 20 - "Government Grant",
the Company has grossed up the value of its PPE by the amount of tax and duty benefit availed by the Company is after
3. PROPERTY, PLANT AND EQUIPMENT AND CAPITAL WORK-IN-PROGRESS (contd.)
considering the same as government grant. The amount of said government grant (net off accumulated depreciation) as
on the transition date has been added to the value of PPE with corresponding credit to the deferred government grant. The amount of grant shall be depreciated as per useful life of PPE along with depreciation on PPE. The amount of deferred liability shall be amortised over the useful life of the PPE with credit to statement of profit and loss under the head “Other Operating Income".
The Company has recognized Government grant of RS,4,277.96 crores from the date of capitalization of plant. As on 1st April, 2015, Plant and Equipment includes Government grant of RS,4,277.96 crores in Gross block and RS,513.95 crores in accumulated depreciation.
* Figures below RS,50,000 Notes:
i) Of the above shares 1,655,744,119 Equity shares (1,455,912,932 shares as at 31st March, 2016 and 1,423,341,900 shares as at 1st April, 2015) have been pledged by the Company as additional security for secured term loans availed by Adani Power
ii) Of the above shares 612,000,000 Equity shares (612,000,000 shares as at 31st March, 2016 and 612,000,000 shares as at 1st April, 2015) have been pledged by the Company as additional security for secured term loans availed by Adani Power
iii) Of the above shares 986,443,300 Equity shares (162,508,577 shares as at 31st March, 2016 and Nil shares as at 1st April, 2015) have been pledged by the Company as additional security for secured term loans availed by Udupi Power Corporation Limited.
4. Non Current Investments (contd.)
iv) Of the above preference shares Nil Preference shares (as at 31st March, 2016 1,084,277,384 preference shares and as at 1st April, 2015 - Nil) were pledged by the Company as additional security for secured term loans availed by Udupi Power Corporation Limited.
v) During the year, 1,723,152,448 Cumulative Compulsorily Convertible Preference Shares have been converted into equivalent number of equity shares of Udupi Power Corporation Limited ("UPCL") ranking pari passu in all respects with the existing equity shares of UPCL.
vi) During the previous year, the Company has completed the acquisition of Udupi Power Corporation Limited ("UPCL") at an aggregate cost of RS,2,256.03 Crores and consequently UPCL has become the wholly owned subsidiary of Adani Power Limited w.e.f. 20th April, 2015.
The fair value of Other Non-current Financial Assets is not materially different from the carrying value presented.
i. For charge created on inventories, refer note 21.1 and 26.
ii. For fuel consumption refer statement of profit and loss account and for stores spares consumption refer Other Expense
note no 35.
i) Trade receivables are interest bearing and are generally on terms of 1 to 60 days.
ii) For securities, refer note 21.1 and 26.
iii) Trade receivables includes unbilled receivables of RS,215.98 Crores (as at 31st March, 2016 - RS,1,003.41 Crores and as at 1st
April, 2015 - RS,2,015.76 Crores)
iv) Credit concentration
As at 31st March 2017, of the total trade receivables 53% pertains to dues from State Distribution Companies under Long Term Power Purchase Agreements ("PPAs"), 34% from related parties and remaining from others.
v) Expected Credit Loss (ECL)
The Company is having majority of receivables from State Electricity Distribution Companies which are Government undertakings. The Company is regularly receiving its normal power sale dues from its customers including Discoms and in case of any disputed amount not being received; the same is recognized on conservative basis which carries interest as per the terms of agreements. Hence they are secured from credit losses in the future.
vi) The fair value of Trade receivables is not materially different from the carrying value presented.
i. The fair value of Other Current Financial Assets is not materially different from the carrying value presented except for Derivatives not designated as hedges (also refer note 47).
ii. Includes options amounting to RS,2.78 Crores as at 31st March, 2016 and RS,4.79 Crores as at 1st April, 2015.
b. Terms/rights attached to equity shares
The Company has only one class of equity shares having par value of H10 per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company the holders of the equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the share holders.
c. Shares held by parent company
Out of equity shares issued by the Company, shares held by its parent company are as under :
f. During the year, the Company has issued and allotted 52.30 Crores warrants at a price of H32.54 per Warrant to promoter
group entities which have been converted into equivalent number of equity shares of H10 each at a premium of H22.54 per share on preferential basis under section 42 of the Companies Act, 2013 and other relevant SEBI Regulations. The proceeds received from above has been utilized for repayment of trade payables, loans and other general corporate purposes.
g. During the previous year, the Company had allotted 250,000,000 Equity Shares of RS,10 each with premium of RS,18 per share to Mr. Gautam S. Adani and Mr. Rajesh S. Adani (On behalf of S. B. Adani Family Trust) and 148,100,000 Equity Shares of H10 each with premium of H18 per share to Adani Properties Private Limited on preferential basis under section 42 of the Companies Act, 2013.
i) Capital Reserve of RS,359.80 Crores were created due to amalgamation of Grow more Trade and Investment Private Limited with the Company in the financial year 2012-13 as per Section 391 to 394 of the Companies Act, 1956. As per the order of the Hon''''ble High Court of Gujarat, the Capital Reserve created on amalgamation shall be treated as free reserve of the Company.
ii) Securities premium reserve represents the premium received on issue of shares over and above the face value of equity shares. The reserve is available for utilization in accordance with the provisions of the Companies Act, 2013.
iii) During the previous year, General reserve of RS,9.04 Crores was created due to merger of solar power undertaking from
Adani Enterprise Limited. As per the scheme of arrangement approved by order of the Hon''''ble High Court of Gujarat (refer note 44), the difference between the value of assets acquired and the value of liabilities of the power undertaking transferred by Adani Enterprise Limited, has been treated as General Reserve of the Company.
iv) Retained earnings represents the amount that can be distributed by the Company as dividends considering the requirements of the Companies'''' Act, 2013. No dividends are distributed given the accumulated losses incurred by the Company.
1. The security details for the balances as at 31st March, 2017 :
a. Rupee Term Loans from Banks aggregating to RS,9,498.58 Crores (as at 31st March, 2016 RS,7,696.88 Crores and as at 1st April, 2015 RS,6,398.61 Crores), Rupee Term Loans from Financial Institutions aggregating to RS,1,412.34 Crores (as at 31st March, 2016 RS,384.60 Crores and as at 1st April, 2015 RS,502.50 Crores) and Foreign Currency Loans from Banks aggregating to RS,2,938.88 Crores (Previous Year RS,3,976.29 Crores and as at 1st April, 2015 RS,5,618.43 Crores) are secured / to be secured by first charge on all immovable, movable assets and leasehold land (refer note 10 and 18) of the Company on paripassu basis. (also refer note 5.1 and 5.2).
b. Foreign Currency Loans from Banks aggregating to Nil (as at 31st March, 2016 RS,457.16 Crores and as at 1st April, 2015 RS,431.25 Crores) are secured / to be secured by first charge on receivables of the Company and second charge on all immovable and movable assets of the Company on paripassu basis. (also refer note refer note 5.1 and 5.2).
c. Rupee Term Loans from Banks and Trade credits aggregating to RS,9,762.18 Crores (as at 31st March, 2016 RS,7,263.75 Crores and as at 1st April, 2015 RS,7,172.05 Crores) are further secured / to be secured by pledge of 794,749,709 Equity Shares held by S.B. Adani Family Trust (as at 31st March, 2016 - 693,444,326 Equity Shares held by S.B. Adani Family Trust and as at 1st April, 2015 - 250,790,465 Equity Shares held by erstwhile parent company Adani Enterprises Limited) as First charge.
5. Repayment schedule for the balances as at 31st March, 2017 :
a. The secured term loans from banks aggregating to RS,7,432.23 Crores (as at 31st March, 2016 H6,018.85 Crores) are repayable over a period of next 9.5 years in 438 installments structured on quarterly to yearly basis.
b. The secured term loan from banks aggregating to RS,5,005.23 Crores (as at 31st March, 2016 RS,6,111.44 Crores) and from
Financial Institutions aggregating to RS,1,412.34 Crores (as at 31st March, 2016 RS,384.64 Crores) respectively are repayable over a period of next 16 years in 1,472 installments structured on quarterly basis.
c. Unsecured term loan from banks and Financial Institutions of RS,690.91 Crores (as at 31st March, 2016 RS,787.96 Crores) is repayable over a period of next 3.5 years in 15 installments structured on quarterly to yearly basis.
d. Unsecured loan from related party of RS,680.36 Crores (as at 31st March, 2016 RS,764.12 Crores) are repayable on mutually agreed dates after a period of 17 months from the balance sheet date.
e. Unsecured loan from otRs,ers RS,49.70 Crores (as at 31st March, 2016 RS,291.50 Crores) are repayable on mutually agreed dates after a period of 5 months from the balance sheet date.
f. 9.00% Non Convertible debentures of RS,300 Crores (as at 31st March, 2016 Nil ) are redeemable on due date after 13 months.
g. 9.07% Non Convertible debentures of RS,275 Crores (as at 31st March, 2016 Nil ) are redeemable on due date after 13 months.
h. 10.30% Non Convertible debentures of RS,750 Crores (as at 31st March, 2016 RS,750 Crores) are redeemable on due date after 25 months.
i. 10.50% Non Convertible debentures of RS,1,200 Crores (as at 31st March, 2016 RS,1,200 Crores). RS,400 Crores are redeemable on due date after 19 months, RS,400 Crores are redeemable on due date after 22 months and RS,400 Crores are redeemable on due date after 25 months.
j. 10.50% Non Convertible debentures of RS,330 Crores (as at 31st March, 2016 Nil ) are redeemable on due date after 33 months.
k. 10.70% Non Convertible debentures of RS,451 Crores (as at 31st March, 2016 RS,500 Crores) are redeemable on due date after 24 months.
l. 10.48% Non Convertible debentures of RS,750 Crores (as at 31st March, 2016 Nil). RS,400 Crores are redeemable on due date after 37 months, RS,350 Crores are redeemable on due date after 25 months. 3. For current maturities of long term borrowing refer note no. 28.
i. The fair value of Other Non-current Financial Liabilities is not materially different from the carrying value presented except for Derivatives not designated as hedges (also refer note 47).
ii. Includes options amounting to RS,13.67 Crores as at 31st March, 2017 and Principal only swaps of RS,49.39 Crores as at 1st April, 2015.
i) There are no Micro, Small and Medium Enterprises, to whom the Company owes dues (including interest on outstanding
dues) which are outstanding as at the Balance Sheet date. The above information has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.
ii) Trade payable mainly includes amount payable to coal suppliers and operation and maintenance vendors in whose case credit period allowed is less than 12 months. Company usually opens usance letter of credit in favour of the coal suppliers.
Interest is charged by such suppliers for amount unpaid beyond the credit period. Since the average credit period is less than 12 months, the trade payable amount has been classified as current.
iii) The fair value of Trade payables is not materially different from the carrying value presented.
i. These do not include any amounts due and outstanding to be credited to "Investors'''' Education and Protection Fund".
ii. The fair value of Other Current Financial Liabilities is not materially different from the carrying value presented except for Derivatives not designated as hedges (also refer note 47).
iii. Includes options amounting to RS,152.04 Crores (as at 31st March, 2016 - RS,63.57 Crores and as at 1st April, 2015 - RS,22.69 Crores), forward covers amounting to RS,123.07 Crores (as at 31st March, 2016 - RS,15.67 Crores and as at 1st April, 2015 - RS,14.81 Crores) and principal only swaps of Nil (as at 31st March, 2016 - RS,64.44 Crores and as at 1st April, 2015 - RS,210.60 Crores).
i) Interest income comprises of :
a) Interest income of RS,586.45 Crores (previous year RS,471.35 Crores) on financial assets carried at amortized cost, which includes interest from fixed deposits with banks RS,16.41 Crores (Previous year RS,23.97 Crores), interest from loans and advances RS,568.35 Crores (Previous year RS,447.38 Crores) and interest on others RS,1.69 Crores (Previous year RS, Nil ); and
b) Interest income of RS,0.35 Crores (Previous year RS,1.87 Crores) on tax refunds.
ii) Miscellaneous income includes RS,76.23 Crores towards provision no longer required written back.
i) Pursuant to the Central Electricity Regulatory Commission ("CERC") order dated 21st February, 2014, the Company had recognized revenue in the nature of Compensatory Tariff ("CT") of RS,3,938.65 crores up to 31st December, 2016 in respect of a long term Power Purchase Agreement ("PPA") (Bid 2) of 1000 MW entered into with Gujarat Urja Vikas Nigam Limited ("GUVNL") and other long term PPAs of 1424 MW entered into with Haryana Utilities. In addition, the Company had also recognized CT of RS,426.19 crores up to 31st December, 2016 in respect of another long term PPA (Bid 1) of 1000 MW entered into with GUVNL.
The said order was challenged in the Appellate Tribunal for Electricity ("APTEL"). The APTEL vide its order dated 7th April, 2016, had set aside the aforementioned CERC order and had held that the promulgation of Indonesian regulation constitute Force Majeure event which was contested in the Hon’ble Supreme Court. The Hon’ble Supreme Court, vide its order dated 11th April, 2017 has set aside the aforementioned APTEL order and has ruled that said event is neither Force Majeure nor Change in Law as per the terms of PPA and hence, does not entitle Company to CT. Consequently, the Company has derecognized its claim on account of CT of RS,4,364.84 crores recognized up to 31st December, 2016, out of which, of H3,619.49 crores (recognized up to 31st March, 2016) is shown as an exceptional item and RS,745.35 crores (recognized from 1st April, 2016 to 31st December, 2016) has been adjusted from the revenue from operations.
Further, the aforesaid order of the Hon''''ble Supreme Court also held that the non-availability of domestic coal due to change in policy or Change in Law, in force in India, constitute Change in Law as per the terms of PPA. The Hon. Supreme Court directed the CERC to determine the relief under clause 13 of PPA. The Company has filed a petition with CERC to ascertain the relief that may be available to the Company,
ii) The Company had given advances to Brakel Kinnaur Power Private Limited ("Brakel") of RS,288.45 Crores which were, in turn, deposited by Brakel to Government of Himachal Pradesh ("the GoHP") in relation to 960 MW hydro power plant project ("the project"). The said advances has been written off due to delay in initiation of underlying project.
i) Matters relating to Income Tax from AY 2008-09 to 2012-13 is being contested at various levels of Tax authorities.
ii) Matter relating to Service Tax for FY 2008-09 is being contested at CESTAT.
iii) Matters relating to Central Sales Tax for FY 2010-11 and FY 2014-15 is being contested at various level of Indirect Tax authorities.
iv) Management is not expecting any future cash outflow with respect to above litigations.
6. For the financial year ended 31st March, 2017, the Company has incurred a loss of RS,6,054.34 crores and as at the year end, current liabilities (including RS,7,234.06 Crores to related parties) exceed current assets by RS,12,688.48 Crores. The Company expects to meet its financial obligations based on continued support from lenders, trade creditors as well as subsidiaries as may be required to sustain its operations on a going concern basis.
7. The Company has determined the recoverable amounts of the Power Plants over its useful life under Ind AS 36, Impairment of Assets based on the estimates relating to tariff, operational performance of the Plants, life extension plans, market prices of coal and other fuels, exchange variations, inflation, terminal value etc. which are considered reasonable by the Management.
On a careful evaluation of the aforesaid factors, the Management of the Company has concluded that the Recoverable Amounts of the Power Plants are higher than their carrying amounts as at 31st March, 2017.
8. The carrying amounts of long-term investments in equity shares of wholly owned subsidiary companies viz. Adani Power Maharashtra Limited ("APML''''), Adani Power Rajasthan Limited ("APRL") are RS,4,205.92 Crores (as at 31st March, 2016 -RS,4,205.92 Crores and as at 1st April, 2015 - RS,4,205.92 Crores) and RS,1,200 Crores (as at 31st March, 2016 - RS,1,200 Crores and as at 1st April, 2015 - RS,1,200 Crores) respectively, and Long term loans (Refer Note 8) include loans given to APML and APRL of RS,2,999.00 Crores (as at 31st March, 2016 - RS,2,964.26 Crores and as at 1st April, 2015 - RS,2,560.94 Crores) and RS,1,722.42 Crores (as at 31st March, 2016 - RS,1,682.95 Crores and as at 1st April, 2015 - RS,1,626.44 Crores) respectively.
APML and APRL own and operate 3300 MW and 1320 MW coal based power plants respectively with capacities tied up under power purchase agreements ("PPAs") for twenty five years with substantially fixed tariffs. The PPAs for these plants were made based on the commitments / understanding that domestic coal linkages would be available to meet the fuel requirements. However, adequate coal linkages were not made available due to various reasons not attributable to the respective subsidiary companies. In response to pleas for compensating the losses due to above, the respective state electricity regulators have granted part relief on account of Change in Law / Force Majeure. The Company’s management believes that it is eligible and will get for the required coal linkages as it supplies power under the Long Term PPA and until then will be eligible for relief on account of Change in Law / Force Majeure to compensate the operating losses. Whilst the matters related to relief on account of Change in Law / Force Majeure are under litigation, it is expected that equivalent amounts as recognized by respective subsidiaries (RS,2,583.23 Crores by APML and RS,1,980.92 Crores by APRL up to 31st March, 2017) will be ultimately recovered. As per the assessment by the Management, it would not be unreasonable to expect ultimate collection of an equivalent amount of relief, which is predicated on the legal advice that the Company has a good arguable case on merits, based on the principles set forth by the Hon. Supreme Court in order dated 11th April, 2017, in the similar matter in case of the Company (refer note 36 (i)) . Having regard to above and the expectation that similar relief will continue to be available till existence of the aforesaid circumstances, the Management of the Company has concluded that no provision for impairment is considered necessary at this stage.
9. During the previous year, the Company has executed a Share Purchase Agreement for acquisition of 100% stake in Korba West Power Company Limited ("KWPCL") which owns a 600 MW Coal based thermal power plant in state of Chhattisgarh, with Avantha Power and Infrastructure Limited which is pending for necessary approvals and consents. As at 31st March, 2017, the Company has paid advance consideration of RS,775 Crores (as at 31st March, 2016 RS,775 Crores).
10. The Company had successfully secured a coal block at Jitpur in the state of Jharkhand and executed the coal mine development and production agreement with the Government of India in FY 2014-15. The company has already initiated the process for development of the said mine.
11. During the financial year 2014-15, the Board of Directors had approved a composite Scheme of Arrangement ("the Scheme") under section 391 and 394 of the Companies Act 1956, between Adani Enterprises Limited (the erstwhile holding Company) ("AEL"), Adani Ports and Special Economic Zone Limited ("APSEZ"), Adani Transmission Limited ("ATL") and Adani Mining Private Limited ("AMPL") and the Company, for the demerger of various businesses of AEL with an appointed date of 1st April, 2015. During the financial year 2015-16, on receipt of approval by the Hon''''ble High Court of Gujarat and on adherence to the other necessary compliances, the said scheme became effective.
As per the Scheme, Solar Power Undertaking of AEL has been merged into the Company along with its assets and liabilities from the appointed date of 1st April, 2015. Pursuant to the merger of the Solar Power Undertaking of AEL into Company and based on fair valuation done, the Company has issued and allotted 63,916,831 new equity shares of H10 each to the equity shareholders of AEL in the ratio of 18,596 equity shares in Company for every 10,000 equity shares held by the equity shareholder in AEL. The equity shares held by AEL in the Company has been cancelled on approval of the said scheme by the Hon''''ble High Court of Gujarat vide its order dated 7th May, 2015.
12. (i) Financial Risk Management Objective and Policies :
The Company’s risk management activities are subject to the management direction and control under the framework of Risk Management Policy as approved by the Board of Directors of the Company. The Management ensures appropriate risk governance framework for the Company through appropriate policies and procedures and that risks are identified, measured and managed in accordance with the Company''''s policies and risk objectives.
In the ordinary course of business, the Company is exposed to Market risk, Credit risk, and Liquidity risk.
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and commodity risk.
a) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. 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.
The Company manages its interest rate risk by having a mixed portfolio of fixed and variable rate loans and borrowings.
To manage this, the Company enters into interest rate swaps, in which it agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed upon notional principal amount.
The sensitivity analysis have been carried out based on the exposure to interest rates for instruments not hedged against interest rate fluctuation at the end of the reporting period. The said analysis has been carried on the amount of floating rate long term liabilities outstanding at the end of the reporting period. A 50 basis point increase or decrease represents management''''s assessment of the reasonably possible change in interest rates.
ix. 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 sufficiency off funds 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).
x. 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 RS,2.11 Crores.
xi. 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''''s 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 compensated absences as at the year ended 31st March, 2017 is RS,12.40 Crores (Previous Year
13. Corporate Social Responsibility
As per Section 135 of the Companies Act, 2013, a corporate social responsibility (CSR) committee has been formed by the Company. The Company is not required to incur any CSR expense as per requirement of Section 135 of Companies Act, 2013.
However for a noble cause, it has incurred expenses of RS,0.23 Crores (previous year RS,0.01 Crores) on the activities which are specified in Schedule VII of the Companies Act, 2013.
(a) Gross amount as per the limits of Section 135 of the Companies Act, 2013 : Nil
(b) Amount spent during the year on : RS,0.23 Crores (Previous year : RS,0.01 Crores)
14.Recent accounting pronouncements
Standards issued but not yet effective : In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, ''''Statement of cash flows'''' and Ind AS 102, ''''Share-based payment.'''' These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, ''''Statement of cash flows'''' and IFRS 2, ''''Share-based payment,'''' respectively. The amendments are applicable to the Company from April 1, 2017. The management believes that the implication on financial statement of the above mentioned standard will not material.
15. Approval of financial statements
The financial statements were approved for issue by the board of directors on 27th May, 2017.