NOTES TO CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS

for the year ended 31 March 2017

(All amount in thousands of US $, unless otherwise stated)

1.     Corporate information

1.1.     General information

KSK Power Ventur plc ('the Company' or 'KPVP' or 'KSK' or 'Parent'), a limited liability corporation, is the Group's parent Company and is incorporated and domiciled in the Isle of Man. The address of the Company's Registered Office, which is also principal place of business, is Fort Anne, Douglas, Isle of Man, IM1 5PD. The Company's equity shares are listed on the Standard List on the official list of the London Stock Exchange.

1.2.     Nature of operations

KSK Power Ventur plc, its subsidiaries and joint operations (collectively referred to as 'the Group') are primarily engaged in the development, ownership, operation and maintenance of private sector power projects with multiple industrial consumers and utilities in India.

KSK focused its strategy on the private sector power development market, undertaking entire gamut of development, investment, construction (for its own use), operation and maintenance of power plant with supplies initially to heavy industrials operating in India and now branching out to cater to the needs of utilities and others in the wider Indian power sector.

The principal activities of the Group are described in note 9.

1.3.     Statement of compliance /responsibility statement

a.     The Consolidated and Company financial statements contained in this document have been prepared in accordance with International  Financial Accounting Standard and its interpretations as adopted by European Union ('EU') and the provisions of the Isle of Man, Companies Act 1931-2004 applicable to companies reporting under IFRS and gives a true and fair view of the assets, liabilities, financial position and the profit or loss of the group as required by Disclosure and Transparency Rules ("DTR") 4.2.4R;

b.     the management report contained in this document includes a fair review of the information required by the Financial Conduct Authority's DTR 4.2.7R (being an indication of important events that have occurred during the financial year and their impact on the financial statements; and a description of the principal risks and uncertainties);

c.     this document includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein);

The financial statements were authorised for issue by the Board of Directors on 26 July 2017.

1.4.     Financial period

     The Consolidated and Company financial statements cover the period from 1 April 2016 to 31 March 2017, with comparative figures from 1 April 2015 to 31 March 2016.

1.5.     Basis of preparation

These Consolidated financial statements have been prepared on the historical cost convention and on an accrual basis, except for the following:

·    Derivative financial instruments that are measured at fair value;

·    Financial instruments that are designated as being at fair value through profit or loss account upon initial recognition are measured at fair value;

·    Available-for-sale financial assets that are measured at fair value; and

·    Liabilities for cash-settled shared-based payment arrangements

·    Net employee defined benefit (asset) / liability that is measured based on actuarial valuation.

The financial statements of the Group and the Company have been presented in United States Dollars ('US $'), which is the presentation currency of the Company. All amounts have been presented in thousands, unless specified otherwise.

Balances represent consolidated amounts for the Group, unless otherwise stated. The Company's financial statement represents separate financial statement of KPVP.

    

     Going Concern: 

     These financial statements have been prepared on the going concern basis which assumes the Group and the Company will have sufficient funds to continue its operational existence for the foreseeable future, covering at least twelve months from the date of signing these financial statements. This is based on the Group's assessment of the business, sectoral developments, underlying economic environment as well as approach towards addressing the business challenges faced by operating assets to achieve optimistic solutions thereto. The Group is making cautious efforts to preserve and maximize the economic value of the underlying power generation assets and recognizes that dilution of equity interest at some of these power plants could be the potential outcome and with support from the project stakeholders at each of such assets it would be able to address the requirements of Going Concern at each of the same. However, the Group is exposed to a number of operational, legal, financial, economic and political risks, including:

     Capital structure

     The Group is seeking additional equity financing and/or debt restructuring in respect of the KSK Mahanadi and other key power plant projects in order to stabilise the projects development and the Groups financing and operating obligations. The Group is currently pursuing a number of avenues in this regard and expects positive outcomes during late 2017. It is anticipated by management that a number of the financing facilities will be restructured during the next 12 months and that the Group's proportion of equity holdings in significant projects may be diluted as a result of these initiatives. However there can be no certainty as to the outcome of these negotiations or the impact on the finances of the Group.

     Financial

     The Group requires funds for both short term operational needs as well as for long term investment programs, mainly in construction projects for its power plants. As at 31 March 2017, the Group has net current liabilities of US $ 404,454 and is dependent on a continuation of both short term and long term debt financing facilities. A number of the facilities that are due to expire at or before 31 March 2018 are in the process of being extended and have a rollover clause in a number of cases, and the Group may refinance and/or restructure certain short term borrowings into long term borrowings and will also consider alternative sources of financing, where applicable. The Directors consider that facilities will remain available to the Group based on current trading, current covenant compliance and ongoing discussions with the Group's primary lending consortium regarding future facilities and arrangements in respect of current borrowings. During the year the Group breached certain debt service covenant requirements in respect of loan facilities - the Group remains in active discussions with its lenders with regard to the provision of facilities.

     Operational

     The Group continues to generate cash flows from current operations which are further expected to increase with improved PLF in the existing 1200 MW KSK Mahanadi and Sai Wardha operations, and incremental cash flows upon expected commissioning of another two units of 600 MW each and also on account of reduction in coal procurement costs with the new coal policy called 'SHAKTI'. Also in Sai Wardha, with recent COMPAT order, the Group is confident of reduction in overall coal price and thereby increases in operating cash flow. These factors are key assumptions with regard to management's forecasts and expectations.

     Legal and claims

     The Group is also involved in a number of on-going legal and claim matters. These may impact on the timing of receipt and value of receivables recognised in the financial statements. For example, the Group has experienced delays and legal challenge to the settlement of significant receivables, including c$220m recognized in respect of change in law claim under PPA due to fuel input considerations, which the Group has recognized in accordance with the PPA, has obtained legal advice in respect of and considered the recent ruling of Central Electrical Regulatory Commission and Honorable Supreme Court of India in similarly placed power projects, as such management consider the entire claim as fully recoverable, and c$93m recognized in the period due to fuel supply issues from Western Coalfields Limited and Coal India Limited, wherein the Competition Appellate Tribunal and Honorable Competition Commission of India have ruled in favour of the Company. Notwithstanding these rulings the Group has not forecast receipt of these amounts in the going concern cash flow analysis prepared by management due to the uncertainty regarding timing of receipt.  In addition the Group is subject to a number of claims, whilst the Group considers that it has a strong position of defense in respect, these proceedings may result in outflows that are not currently recognized. For further details refer to note 15 (b).

     Political environment

     Given the country and sector of operations the Group is exposed to political uncertainties that may result in changes in government policy which may materially affect the business plans, of the Group and amounts recognised in the financial statements.

    

Commitments

     The Group also has significant capital commitments at the period-end of which a portion is due to be met during the next 12 months, primarily in respect of on-going plant construction projects at KSK Mahanadi. However, the Group currently has also significant committed undrawn borrowing facilities, subject to certain conditions, amounting to approximately US $ 479,852 to meet its long term investment programmes. The Group has already entered in to Common Loan Agreement with the Lenders at KSK Mahanadi with respect to cost overrun debt sanctioned of US $ 892,252 and the remaining draw down of these funds of US $ 393,958 is not impacted by the current restructure negotiations or breaches on financing facilities. This will facilitate drawing the balance of the debt depending upon the investment required for construction of project and resultant surpluses of operational cash flows available to meet Group obligations.

     Conclusion

     Nonetheless Group monitors the situation on an on-going basis and plans alternative arrangements where possible. The outcome of the above factors is subject to material uncertainty and may impact on the timing of the strategic development of power plants, the Groups proportional equity holdings in significant projects and the going concern of the Group. However, the Directors continue to have a reasonable expectation that the Company and Group are well placed to manage their business risks and continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis of accounting when preparing these financial statements.

 

2.     Changes in accounting policy and disclosure

     The accounting policies adopted are consistent with those of the previous financial year except for the adoption of new standards as of 1 April 2016, noted below.

The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 April 2016.

 

-       IFRS 14 - Regulatory Deferral Accounts: IFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-regulation, to continue applying most of its existing accounting policies for regulatory deferral account balances upon its first-time adoption of IFRS. Entities that adopt IFRS 14 must present the regulatory deferral accounts as separate line items on the statement of financial position and present movements in these account balances as separate line items in the statement of profit or loss and Other Comprehensive Income ('OCI'). The standard requires disclosure of the nature of, and risks associated with, the entity's rate-regulation and the effects of that rate-regulation on its financial statements. IFRS 14 is effective for annual periods beginning on or after 1 January 2016. Since the Group is not subject to any rate regulation and is an existing IFRS preparer, this standard would not apply.

 

-       IFRS 11 - Accounting for acquisition of interest in Joint Operations (Amendments): The amendments to IFRS 11 require that a joint operator accounting for the acquisition of an interest in a joint operation, in which the activity of the joint operation constitutes a business, must apply the relevant IFRS 3 principles for business combinations accounting. The amendments also clarify that a previously held interest in a joint operation is not re-measured on the acquisition of an additional interest in the same joint operation while joint control is retained. In addition, scope exclusion has been added to IFRS 11 to specify that the amendments do not apply when the parties sharing joint control, including the reporting entity, are under common control of the same ultimate controlling party.

 

The amendments apply to both the acquisition of the initial interest in a joint operation and the acquisition of any additional interests in the same joint operation and are prospectively effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact on the Group.

 

-    IAS 16 & IAS 38 - Clarification of Acceptable Methods of Depreciations and Amortisation (Amendments): The amendments clarify the principle in IAS 16 and IAS 38 that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets. The amendments are effective prospectively for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments do not have any impact to the Group given that the Group has not used a revenue-based method to depreciate its non-current assets.

 

-       IAS 16 & IAS 41 - Agriculture: Bearer Plant (Amendments): The amendments change the accounting requirements for biological assets that meet the definition of bearer plants. Under the amendments, biological assets that meet the definition of bearer plants will no longer be within the scope of IAS 41. Instead, IAS 16 will apply. After initial recognition, bearer plants will be measured under IAS 16 at accumulated cost (before maturity) and using either the cost model or revaluation model (after maturity). The amendments also require that produce that grows on bearer plants will remain in the scope of IAS 41 measured at fair value less costs to sell. For government grants related to bearer plants, IAS 20 Accounting for Government Grants and Disclosure of Government Assistance will apply. The amendments are retrospectively effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments do not have any impact to the Group as the Group does not have any bearer plants.

 

-       IAS 27 - Equity method in Separate Financial Statements (Amendments):  The amendments will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. Entities already applying IFRS and electing to change to the equity method in its separate financial statements will have to apply that change retrospectively. For first-time adopters of IFRS electing to use the equity method in its separate financial statements, they will be required to apply this method from the date of transition to IFRS. The amendments are effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments will not have any impact on the Group's consolidated financial statements.

 

-       IFRS 10, IFRS 12 and IAS 28 - Investment Entities: Applying the Consolidation Exception (Amendments): The amendments address issues that have arisen in applying the investment entities exception under IFRS 10. The amendments to IFRS 10 clarify that the exemption from presenting consolidated financial statements applies to a parent entity that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value.

Furthermore, the amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is not an investment entity itself and that provides support services to the investment entity is consolidated. All other subsidiaries of an investment entity are measured at fair value. The amendments to IAS 28 allow the investor, when applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to its interests in subsidiaries.

 

These amendments must be applied retrospectively and are effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact on the Group.

 

 

-    IAS 1 - Disclosure Initiative (Amendments): The amendments to IAS 1 Presentation of Financial Statements clarify, rather than significantly change, existing IAS 1 requirements. The amendments clarify:

-       The materiality requirements in IAS 1

-       That specific line items in the statement(s) of profit or loss and OCI and the statement of financial position may be disaggregated

-       That entities have flexibility as to the order in which they present the notes to financial statements

-       That the share of OCI of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss

Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial position and the statement(s) of profit or loss and OCI. These amendments are effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact on the Group.

 

-       Annual Improvements 2012-2014 Cycle: These improvements are effective for annual periods beginning on or after 1 January 2016. They include:

 

-       IFRS 5 Non-current Assets Held for Sale and Discontinued Operations: Assets (or disposal groups) are generally disposed of either through sale or distribution to owners. The amendment clarifies that changing from one of these disposal methods to the other would not be considered a new plan of disposal, rather it is a continuation of the original plan. There is, therefore, no interruption of the application of the requirements in IFRS 5. This amendment must be applied prospectively.

 

-       IFRS 7 Financial Instruments: Disclosures

 

Servicing contracts: The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial asset. An entity must assess the nature of the fee and the arrangement against the guidance for continuing involvement in IFRS 7 in order to assess whether the disclosures are required. The assessment of which servicing contracts constitute continuing involvement must be done retrospectively. However, the required disclosures would not need to be provided for any period beginning before the annual period in which the entity first applies the amendments.

 

Applicability of the amendments to IFRS 7 to condensed interim financial statements: The amendment clarifies that the offsetting disclosure requirements do not apply to condensed interim financial statements, unless such disclosures provide a significant update to the information reported in the most recent annual report. This amendment must be applied retrospectively.

 

-       IAS 19 Employee Benefits: The amendment clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used. This amendment must be applied prospectively.

 

-       IAS 34 Interim Financial Reporting: The amendment clarifies that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the interim financial report (e.g., in the management commentary or risk report). The other information within the interim financial report must be available to users on the same terms as the interim financial statements and at the same time. This amendment must be applied retrospectively.

 

These amendments are not expected to have any impact on the Group.

 

3.     Acquisition and Dilution - change in non-controlling interest without change in control

Dilution in KSK Energy Ventures Limited

During the year ended 31 March 2017, 43,840,496 equity shares in KSK Energy Ventures Limited ("KEVL") were sold to non - controlling interest. Pursuant to this the economic interest of the Group in KEVL has decreased from 68.17 percent to 57.83 percent resulting in a 10.34 percent decrease in Group's controlling interest in subsidiary without loss of control. The aforesaid transaction is accounted as an equity transaction, and accordingly no gain or loss is recognised in the consolidated income statement. The difference of US $ 34,514, between the fair value of the net consideration received US $ 7,702 and the amount by which the non-controlling interest are adjusted US $ 42,216, is debited to 'Other reserve' within consolidated statement of changes in equity and attributed to the owners of the Company.

Forfeiture of share warrant

During the year ended 31 March 2015, the Group has issued 80,808,080 warrants of face value of Rs 10 (US $ 0.16) each in KSK Energy Ventures Limited ('KEVL'), an Indian Listed subsidiary to KSK Power Holdings Limited ("KPHL") with an option to apply for and be allotted equivalent number of equity shares of the face value of Rs 10 (US $ 0.16) each at a premium of Rs 89 (US $ 1.45) each on a preferential basis.

                                                 

During the year ended 31 March 2017, KPHL has not exercised the right of conversion of balance 69,856,800 warrants resulting in forfeiture of the same. The aforesaid transaction is accounted as an equity transaction, and accordingly no gain or loss is recognised in the consolidated income statement. An amount of  US $ 8,195 by which the non-controlling interest is adjusted and debited to 'other reserve' within Consolidated statement of changes in equity and attributed to the owners of the Company.

Acquisition in KSK Mahanadi Power Company Limited

During the year ended 31 March 2017, the Group has issued additional 62,000,000 equity shares in KSK Mahanadi Power Company Limited ("KMPCL") to KSK Energy Ventures Limited ("KEVL") and 97,360,000 equity shares to KSK Energy Company Private Limited ("KECPL") at a face value of Rs 10 (US $ 0.16) at par.

Pursuant to above, the economic interest of the Group in KMPCL increased by 2.69 percent in a subsidiary without loss of control. The aforesaid transaction is accounted as an equity transaction, and no gain or loss is recognised in the consolidated income statement.  Pursuant to this an amount of US $ 454 by which the non controlling interest is adjusted, is debited to 'other reserve' within Consolidated statement of changes in equity and attributed to the owners of the company.

Dilution of KSK Water Infrastructure Private Limited  

During the period ended 31 March 2017, the Group has transferred 30,000,000 equity shares of Rs 10 (US $ 0.16) at par in KSK Water Infrastructure Private Limited ("KWIPL") held by KSK Energy Company Private Limited ("KECPL") to KSK Mahanadi Power Company Limited ("KMPCL")

Pursuant to above, the economic interest of the Group in KWIPL decreased by 4.62 percent in subsidiary without loss of control. The aforesaid transaction is accounted as an equity transaction, and no gain or loss is recognised in the consolidated income statement.  Pursuant to this an amount of US $ 452 by which the non-controlling interest is adjusted, is credited to 'other reserve' within consolidated statement of changes in equity and attributed to the owners of the company.

Dilution of KSK Wind Energy Halagali Benchi Private Limited ('KWEHBPL'), KSK Wind Power Sankonahatti Athni Private Limited ('KWPSAPL') and KSK Wind Energy Mothalli Haveri Private Limited ('KWEMHPL')

During the period ended 31 March 2017, the Group has transferred 2,563,254 equity shares of Rs 10 (US $ 0.16) at par in KWEHBPL, 2,544,485 equity shares of Rs 10 (US $ 0.16) at par in KWEMHPL, 2,544,481 equity shares of Rs 10 (US $ 0.16) at par in KWPSAPL held by KSK Green Energy Pte Limited to KSK Electricity Financing India Private Limited.

Pursuant to above, the economic interest of the Group in KWEHBPL, KWEMHPL, KWPSAPL decreased by 31.83 percent each in subsidiaries without loss of control. The aforesaid transaction is accounted as an equity transaction, and no gain or loss is recognised in the consolidated income statement.  Pursuant to this an amount of US $ 755 by which the non-controlling interest is adjusted, is debited to 'other reserve' within consolidated statement of changes in equity and attributed to the owners of the company.

Dilution of KSK Wind Power Aminabhavi Chikodi Private Limited ('KWPACPL')

During the period ended 31 March 2017, the Group has transferred 773,254 equity shares of Rs 10 (US $ 0.16) at par in KWPACPL held by KSK Green Energy Pte Limited to KSK Electricity Financing India Private Limited

Pursuant to above, the economic interest of the Group in KWPACPL decreased by 9.56 percent without loss of control. The aforesaid transaction is accounted as an equity transaction, and no gain or loss is recognised in the consolidated income statement.  Pursuant to this an amount of US $ 111 by which the non-controlling interest is adjusted, is debited to 'other reserve' within consolidated statement of changes in equity and attributed to the owners of the company.

 

4.     Investments and other financial assets

	Consolidated		Company
	2017	2016	2017	2016
Current
Financial assets at fair value through profit or loss
-  held for trading	5,410	5,177	-	-
Loans and receivables	152,846	44,446	87	-
	158,256	49,623	87	-
Non-current
Financial assets at fair value through profit or loss
-  Derivative assets	40,297	45,872	-	-
Available-for-sale investments	17,970	17,938	-	-
Deposit with banks	9,079	4,994	-	-
Loans and receivables	34,382	30,523	-	-
Loans to and receivables to Joint Venture partner	1,533	1,501	-	-
Loans to and receivable to subsidiaries	-	-	147,002	155,978
Investment in subsidiaries	-	-	226,888	226,842
	103,261	100,828	373,890	382,820
Total	261,517	150,451	373,977	382,820

Financial assets at fair value through profit or loss (held for trading)

The Group has invested into short-term mutual fund units and equity securities in various companies being quoted on Indian stock market which are designated as held for trading. The fair value of the mutual fund units and equity securities are determined by reference to published data.

Available-for-sale investment

The Group has investments in listed equity securities of various companies being quoted on the Indian and London stock markets respectively. The fair value of the quoted equity shares are determined by reference to published data. The Group also holds non-controlling interest (1%-25%) in unlisted entities which are in the business of power generation and allied projects. The Group designated these quoted and unquoted equity shares as available-for-sale investment in accordance with the documented investment strategy of the Group to manage and evaluate performance of the equity shares on fair value basis. The fair value of unquoted ordinary shares has been estimated using a relative valuation using price earnings ratio / book value method. The valuation requires management to make certain assumptions about the inputs including size and liquidity.

Derivative assets

Derivative assets include currency option contracts and currency forward contracts carried at fair value. Fair value of currency options is determined by an independent valuer, which is the counterparty in the contracts. Fair value of currency forwards is determined by mark to market value of the forward on the date of the financial position.

Loans and receivables

This primarily includes inter-corporate deposits of US $ 21,391 (2016: US $ 9,313), deferred loan origination costs                   US $ Nil (2016: US $ 2,496), security deposit US $ 60,610 (2016: US $ 54,925), advance for investments US $ 1,637 (2016: US $ 1,603) and other financial assets US $ 103,590 (2016: US $ 6,632).

Investment in subsidiaries

Investment primarily includes unquoted investments in subsidiaries in the Company financial statements. The Company has invested in 139,244,601 (2016: 139,244,601) equity shares in KEL, 12,000 (2016: 12,000) equity shares in KASL, 84,146,843 (2016: 84,146,843) equity shares in KGEPL and 1 (2016: 1) equity share in KSVP totalling to US $ 226,888 (2016: US $ 226,842).

The Company is carrying investment and advances to subsidiaries amounting to US $ 291,270 (net of US $ 82,620 of borrowings from subsidiaries) in the separate financial statement at cost. Even though the consolidated equity of the Group is US $ 89,029 and the market capitalisation is c US $120,000, Management believes there are no permanent diminutions in the investment value because the underlying power generating assets have significant inbuilt intrinsic value and long term economic value. Also as against the net carrying value of US $ 291,270 investment by the Company, the aggregate equity investment made across the various power project SPVs is significantly in excess of the carrying value. Therefore, management believes that the lower consolidated equity vis a vis investment value is only a temporary event, and reflects the commissioning and current operational challenges at the project SPVs as a result of the power sector in India as a whole. This in no way interferes with the long term value held in the strategic assets via the investment in subsidiaries, which are held for a long term purpose  to generate yield returns over the economic life of the asset. Therefore management has concluded that no impairment in the carrying value of the investment in subsidiaries at cost in the separate financial statement is necessary at the current time.

Investment and other financial assets amounting to US $ 204,706 (2016: US $ 99,593) for the Group are subject to security restrictions (refer note 7).

Impairment of financial assets

During the year ended 31 March 2017, the Group's available-for-sale financial asset of US $ Nil (2016: US $ 170) and loans and receivable of US $ 308 (2016: US $ 16,481) were collectively impaired.

During the year ended 31 March 2017, the Company's loans and receivable of US $Nil (2016: US $ 912) were collectively impaired and written off.

 

5.     Cash and short-term deposits

     Cash and short-term deposits comprise of the following:

	Consolidated		Company
	2017	2016	2017		2016
Cash at banks and on hand	21,565	16,022	969	1,194
Short-term deposits	83,514	106,778	-	-
Total	105,079	122,800	969	1,194

 

Short-term deposits are made for varying periods, depending on the immediate cash requirements of the Group.

 

The Group has pledged its short-term deposits amounting US $ 83,457 (2016: US $ 106,739) in order to fulfil collateral requirements (refer note 7).

 

         For the purpose of cash flow statement, cash and cash equivalent comprise:

	Consolidated		Company
	2017	2016	2017	2016
Cash at banks and on hand	21,565	16,022	969	1,194
Short-term deposits	83,514	106,778	-	-
Total	105,079	122,800	969	1,194
Less: Restricted cash1	(83,495)	(106,776)	-	-
Cash and cash equivalent	21,584	16,024	969	1,194

¹Include deposits pledged for prevailing credit facilities from banks and deposits with maturity term of three months to twelve months (refer note 7).

 

6.     Issued share capital

 Share capital

         The Company presently has only one class of ordinary shares. For all matters submitted to vote in the shareholders' meeting, every holder of ordinary shares, as reflected in the records of the Company on the date of the shareholders' meeting, has one vote in respect of each share held. All shares are equally eligible to receive dividends and the repayment of capital in the event of liquidation of the Company.

 

 

The Company has an authorised share capital of 500,000,000 equity shares (2016: 500,000,000) at par value of £ 0.001 (US $ 0.0013) per equity share amounting to US $ 650. The issued and fully paid up number of shares of the Company is 175,308,600 (2016: 175,308,600). During the year Company has not issued/ bought back any ordinary share.

         Share application money represents amount received from investors/parents pending allotment of ordinary shares.

         Reserves

Share premium represents the amount received by the Group over and above the par value of shares issued. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax consequences. Revaluation reserve comprises gains and losses due to the revaluation of previously held interest of the assets acquired in a business combination.

         Foreign currency translation reserve is used to record the exchange difference arising from the translation of the financial statements of the Group entities and the same is not distributable.

Capital redemption reserve represents statutory reserve required to be maintained under local law of India on account of redemption of capital.  The reserve is credited equivalent to amount of capital redeemed by debiting retained earnings and the same is not distributable.

         Other reserve represents the difference between the consideration paid and the adjustment to net assets on change of controlling interest, without change in control and the excess of the fair value of share issued in business combination over the par value of such shares. Any transaction costs associated with the issuing of shares by the subsidiaries are deducted from other reserves, net of any related income tax consequences. Further, it also includes the loss/gain on fair valuation of available-for-sale financial instruments and re-measurement of defined benefit liability net of taxes and the same is not distributable.

Retained earnings mainly represent all current and prior year results as disclosed in the consolidated income statement and consolidated other comprehensive income less dividend distribution.

 

7.     Loans and borrowings

The loans and borrowings comprise of the following:

		Interest rate (range %)	Final maturity	Consolidated		Company
				2017	2016	2017	2016
Long-term "project finance" loans		3.51 to 19.75	April-38	3,342,527	2,793,569	-	-
Short-term loans		0.00 to 26.00	March-20	142,953	158,762	83,921	80,798
Buyers' credit facility		1.53 to 4.17	March-18	81,238	138,614	35,000	35,000
Cash credit and other working capital facilities		10.90 to 17.50	March-18	241,918	194,255	-	-
Redeemable preference shares		0.01	January-29	5,940	5,817	-	-
Debentures		0.01 to 21.00	March-25	51,256	32,785	-	-
Total				3,865,832	3,323,802	118,921	115,798

The interest-bearing loans and borrowings mature as follows:

	Consolidated		Company
	2017	2016	2017	2016
Current liabilities
Amounts falling due within one year	598,827	623,600	118,921	115,798
Non-current liabilities
Amounts falling due after more than one year but not more than five years	1,208,631	925,489	-	-
Amounts falling due in more than five years	2,058,374	1,774,713	-	-
Total	3,865,832	3,323,802	118,921	115,798

 

Total debt of US $ 3,865,832 (2016: US $ 3,323,802) comprised:

§ Long-term "project finance" loans of the Group amounting US $3,342,527 (2016: US $ 2,793,569) is fully secured on the property, plant and equipment and other assets of subsidiaries and joint operations that operate power stations, allied services and by a pledge over the promoter's shareholding in equity and preference capital of some of the subsidiaries and joint operations and corporate guarantee provided by the Company.

§ The short term loans taken by the Group are secured by the corporate guarantee provided by the Company, pledge of fixed deposits of the Group and by pledge of shares held in the respective entities.

§ Buyer's credit facility is secured against property, plant and equipment and other assets on pari-passu basis, pledge of fixed deposits and corporate guarantee of KEVL.

§ A number of the facilities that are due to expire at 31 March 2018 are in the process of being extended and have a rollover clause in a number of cases.

§ Cash credit and other working capital facilities are fully secured against property, plant and equipment and other assets on pari-passu basis with other lenders of the respective entities availing the loan facilities.

§ Redeemable preference shares are due for repayment within next 12 years.

§ Debentures are secured on the property, plant and equipment and other assets of subsidiaries that operate power stations, allied services and by a pledge over the promoter's shareholding in equity capital of some of the subsidiaries.

     Long-term "project finance" loan contains certain restrictive covenants for the benefit of the facility providers and primarily requires the Group to maintain specified levels of certain financial ratios and operating results. The terms of the other borrowings arrangements also contain certain restrictive covenants primarily requiring the Group to maintain certain financial ratios. As of 31 March 2017, the Group has complied with the relevant significant covenants, while there are few financial ratios which are not met and management is in discussion with the lenders for addressing the same. However, these do not have any significant impact on the Group.

     The lenders are evaluating the strategic debt restructuring ('SDR') option; this will involve debt / equity swap or new equity investment in respect of SWPGL and VSLPPL.

     As at 31 March 2017, the Group has available US $ 479,852 of undrawn long term committed borrowing facilities.

     The fair value of borrowings at 31 March 2017 was US $ 3,865,832 (2016: US $ 3,323,802). The fair values have been calculated by discounting cash flows at prevailing interest rates.

 

8.     Other financial liabilities

			2017	2016
Current
Option premium payable			7,248		5,469
Foreign exchange forward contracts			388		629
			7,636		6,098
Non-Current
Option premium payable			12,040		17,065
Interest rate swaps			1,775		6,174
			13,815		23,239
Total			21,451		29,337

 

 

9.     Segment information

The Group has adopted the "management approach" in identifying the operating segments as outlined in IFRS 8. Management has analysed the information that the chief operating decision maker reviews and concluded on the segment disclosure.

For management purposes, the Group is organised into business units based on their services and has two reportable operating segments as follows:

· Power generating activities and

 

· Project development activities

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the Consolidated financial statements. Group financing (including finance costs and finance income) and income taxes are managed on a Group basis and are not allocated to operating segments. There is only one geographical segment as all the operations and business is carried out in India.

 

2017	Project development activities			Power generating activities	Reconciling / Elimination activities	Consolidated
Revenue
External customers	281			590,977	-	591,258
Inter-segment	2,674			-	(2,674)	-
Total revenue	2,955			590,977	(2,674)	591,258
Segment operating results	1,469			178,500	-	179,969
Unallocated operating expenses, net				.		(1,418)
Finance costs						(360,244)
Finance income						7,694
Loss before tax						(173,999)
Tax income						15,103
Loss after tax						(158,896)
Segment assets	5,084			4,634,084	(4,616)	4,634,552
Unallocated assets						300,745
Total assets						4,935,297
Segment liabilities	655			513,180	(4,616)	509,219
Unallocated liabilities						4,151,822
Total liabilities						4,661,041
Other segment information
Depreciation and amortisation	38			100,398	42	100,478
Capital expenditure	1			407,575	-	407,576
2016		Project development activities	Power generating activities		Reconciling / Elimination activities		Consolidated
Revenue
External customers		33	674,514		-		674,547
Inter-segment		3,293	-		(3,293)		-
Total revenue		3,326	674,514		(3,293)		674,547
Segment operating results		738	161,362		880		162,980
Unallocated operating expenses, net							(2,514)
Finance costs							(296,470)
Finance income							26,336
Loss before tax							(109,668)
Tax income							14,064
Loss after tax							(95,604)
Segment assets		18,396	4,057,522		(14,031)		4,061,887
Unallocated assets							282,118
Total assets							4,344,005
Segment liabilities		2,786	394,420		(14,031)		383,175
Unallocated liabilities							3,545,090
Total liabilities							3,928,265
Other segment information
Depreciation and amortisation		77	90,913		78		91,068
Capital expenditure		4	193,275		31		193,310

 

Notes to segment reporting:

(a)   Inter-segment revenues are eliminated on consolidation.

(b)   Profit / (loss) for each operating segment does not include finance income and finance costs of US $ 7,694 and              US $ 360,244 respectively (2016: US $ 26,336 and US $ 296,470 respectively).

(c)   Segment assets do not include deferred tax asset of US $ 167,951 (2016: US $ 141,327), financial assets and other investments US $ 103,144 (2016: US $ 99,923), short-term deposits with bank and cash US $ 7,163 (2016: US $ 8,551), and corporate assets US $ 22,487 (2016: US $ 32,317).

(d)   Segment liabilities do not include deferred tax US $ 45,429 (2016: US $ 37,596), current tax payable US $ 1,658 (2016: US $ 1,243), interest-bearing current and non-current borrowings US $ 3,865,832 (2016: US $ 3,323,802), derivative liabilities US $ 21,451(2016: US $ 29,337) and corporate liabilities US $ 217,452 (2016: US $ 153,112).

(e)   The Company operates in one business and geographic segment. Consequently no segment disclosures of the Company are presented.

(f)    Three customers in the power generating segment contributing revenues of US $ 461,763 accounted for 77.75%          (2016: Three customers in the power generating segment contributing revenues of US $ 473,844 accounted for 70.02% ) of the total segment revenue.

 

10.  Other operating income

     Other operating income comprises:

		Consolidated
		2017	2016
Income from management fees		94	226
Claims received / receivable1		94,805	893
Deferred revenue amortisation		117	115
Gain on disposal of property, plant and equipment, net		225	-
Other operating income		426	441
Total		95,667	1,675

        ¹ Claims received includes an amount of US $ 90,173 (2016: US $ Nil) relating to quality and price claim receivable from a Coal supplier (refer note 15 (b) (x)).

 

11.  Finance costs

      Finance costs comprise:

	Consolidated		Company
	2017	2016	2017	2016
Interest expenses on loans and borrowings 1	327,516	268,611	1,080	1,065
Other finance costs	21,376	16,577	1,737	1,576
Impairment of financial assets 2	-	170	-	-
Net loss on financial instrument at fair value through profit or loss 3	7,308	8,822	-	-
Foreign exchange loss, net	2,105	-	3,114	2,333
Net loss on held for trading financial assets
on disposal	-	2	-	-
on re-measurement	-	6	-	-
Unwinding of discounts	1,939	2,282	-	-
Total	360,244	296,470	5,931	4,974

¹Borrowing cost amounting to US $ 157,720 (2016: US $ 154,737) is capitalised during the year to property, plant and equipment at an effective interest rate of 14.80% (2016: 15.25%).

 

         ² Impairment of financial assets relates to available-for-sale financial asset of US $ Nil (2016: US $ 170).

 

         ³Net loss on financial instrument at fair value through profit or loss above relates to foreign exchange forward contracts, currency options and interest rate swap that did not qualify for hedge accounting.

 

12.  Finance income

      The finance income comprises:

			2017	2016
Interest income
bank deposits			4,511	11,508
loans and receivables and trade receivable			1,584	2,044
Dividend income			203	510
Net gain on held for trading financial assets
on disposal			30	-
on re-measurement			23	-
Unwinding of discount on security deposits			1,332	1,704
Foreign exchange gain, net			-	10,563
Reclassification adjustment in respect of available-for- sale instrument disposed			11	7
Total			7,694	26,336

 

13.  Tax income / (expense)

        The major components of income tax for the year ended 31 March 2017 and 31 March 2016 are:

	2017	2016
Current tax	(932)	(1,392)
Deferred tax	16,035	15,456
Tax income reported in the income statement	15,103	14,064

14.    Related party transactions

Name of the related party	Nature of relationship
K&S Consulting Group Private Limited	Group ultimate parent (GUP)
Sayi Power Energy Limited	Step-up holding
Sayi Energy Ventur Limited	Parent

 

     Key management personnel and their relatives (KMP):

Name of the KMP	Nature of relationship
T L Sankar	Chairman
S Kishore	Executive Director
K A Sastry	Executive Director
S R Iyer S R Iyer	Director
Vladimir Dlouhy	Director
Abhay M Nalawade	Director
Keith N Henry	Director
K V Krishnamurthy	Director of parent

    

The table below set out transactions with related parties that occurred in the normal course of trading.

Particulars	Consolidated							Company
	2017			2016				2017			2016
	Joint operations	Parent /  GUP	KMP	Joint  operations	Parent / GUP		KMP	Subsidiaries	Parent / GUP	KMP	Subsidiaries	Parent / GUP	KMP
Transactions1,2
Corporate support services fees	33	-	-	33	-		-	-	-	-	-	-	-
Interest income	523	-	-	515	-		-	-	-	-	-	-	-
Inter-corporate deposits and loans given	-	-	-	901	19		-	108	-	-	4,258	9	-
Inter-corporate deposits and loans refunded	-	-	-	447	164		-	489	-	-	17,633	35	-
Loans taken	458	12	-	272	430		-	1,926	12	-	17,152	27	-
Repayment of loan taken	114	10	-	-	10		-	86	10	-	993	10	-
Refund of share application money	-	-	-	-	16,498		-	-	-	-	-	16,498	-
Equity-settled share based payment	-	-	16	-	-		47	-	-	16	-	-	47
Managerial remuneration3	-	-	665	-	-		702	-	-	343	-	-	371
Balances1,2
Interest receivable	4,780	-	-	4,153		-	-	-	-	-	-	-	-
Loans and inter corporate deposits receivable	1,533	802	-	1,501		784	-	147,002	-	-	155,978	-	-
Loans payable	377	583	-	269		412	-	82,620	176	-	80,785	13	-
Other receivable	-	-	-	9		-	-	-	-	-	-	-	-
Other payable	2,785	-	-	2,408		165	-	-	-	-	-	165	-
Guarantees given	-	-	-	135		-	-	416,031	-	-	465,202	-	-
Managerial remuneration payable3	-	-	98	-		-	108	-	-	74	-	-	87

¹ The transactions with related parties are made at terms equivalent to those that prevail in arm's length transactions. Outstanding balances at the period end are unsecured, interest-bearing in case of loans and inter-corporate deposits and non-interest bearing in case of other loans and advances and settlement occurs in cash. For the year ended 31 March 2017, the Group has recorded          US $ 28 as impairment of receivables relating to amounts owed by related parties (2016: US $ 14,096). This assessment is undertaken each financial period through examining the financial position of the related party and the market in which the related party operates.

² The difference in the movement between the opening outstanding balances, transactions during the year and closing outstanding balances is on account of exchange adjustments, impact of business combination, provision / write off and conversion into equity.

³ Remuneration is net of share based payments and accrual towards Gratuity, a defined benefit plan, which is managed for the Group as a whole. However, the annual accrual of this liability towards key management personnel is not expected to be significant. There are no other long term benefits and termination benefits which are payable to the key management personnel.

 

15.  Commitments and contingencies

a.     Capital commitments

As at 31 March 2017, the Group is committed to purchase property, plant and equipment for US $ 1,247,291 (2016: US $ 1,467,098).

b.     Legal and other claim

As a part of the environment and activities of the Group, the Group is exposed to a number of litigation and claim matters which may significantly impact receivables or payables. No significant developments have occurred in respect of these matters during the year except disclosed below.

i.     SWPGL had filed a claim against Maharashtra State Electricity Distribution Company Limited (MSEDCL) towards recovery of the amount withheld against supply of energy under Power Purchase Agreement (including penalty on such amount) amounting to US $ 11,008 (2016: US $ 11,008). The facility required for generation of an agreed quantum of power was not ready as per an agreed schedule on account of unexpected factors beyond the control of the Group, the Group proposed to MSEDCL an arrangement to secure the energy from alternate supplies for the short quantity required to meet the obligation under the power purchase agreement. MSEDCL accepted the proposal and also confirmed that the energy supplied from alternate sources will also be subject to the tariff agreed under the power purchase agreement. However, after initial payments for the period April to June 2010, starting July 2010 to October 2010, MSEDCL did not settle the entire dues billed and the certain amounts were withheld without any explanation. The Group contended before Maharashtra Electricity Regulatory Commission (MERC) that since the energy supplied and billed was as per the terms agreed and the similar bills of earlier months were paid by MSEDCL, there is no cause to withhold the payments. However, MERC has dismissed the petition. The Group has filed an appeal before Appellate Tribunal for Electricity (APTEL) against the order of MERC and APTEL also rejected the appeal. The Group has filed an appeal before Honourable Supreme Court of India. During the year ended 31 March 2017 the group received an unfavorable ruling on a claim against a state body MSEDCL as it was concluded the claims if allowed were against public interest and accordingly group has impaired and written off the entire claim amount.

ii.     VSLPPL has receivables of US $ 7,952 (2016: US $ 7,787) from its consumers representing taxes including royalty, cess on clean energy, taxes on input fuel as well as double adjustments for the security deposit, transmission and SLDC charges and take or pay obligation which are disputed by the consumers. In addition, the customers have also raised demand towards supply or pay obligation which are disputed by the Group. The Group has an amount of US $ 6,508 access from such customers as redeemable preference and equity capital available for necessary setoffs.  Further, the Group contends that not only it has fulfilled the contractually guaranteed supplies but also the amounts claimed are as per the terms of the power purchase agreements. Aggrieved by the order of Arbitrator, civil and high court, the Group has preferred an appeal in Honourable Supreme Court. Pending outcome of the same, the Group based on the opinion of legal counsel believes that the final determination of the above dispute would be in favour of the Group and there would be no material impact on the financial statements.

iii.    The captive customers of the SWPGL has deducted from the sales invoices and paid an amount of US$ 9,300 towards Cross Subsidy Surcharge ('CSS') levied by MSEDCL for the financial year 2012-13 before ascertaining the captive status of the plant at the end of financial year which was against the express provisions of the Electricity Act 2003 read with the Electricity Rules, 2005. MERC asked SWPGL to pay CSS on ground of non-fulfilment of criteria of 51% supply to captive users as per Rule 3 of the Electricity Rules 2005. Aggrieved by the said order of the MERC, SWPGL has filed an appeal before the APTEL on the ground that the non-fulfilment of captive criteria by the SWPGL was attributed to the delay caused by MSEDCL in granting open access to captive customers. APTEL also rejected the appeal, aggrieved by this the Group has filed petition with Honourable Supreme Court of India. Pending adjudication of the same, the Group believes that there is a good chance of succeeding and hence no adjustment has been made in the consolidated financial statements. Pending final adjudication of the matter the Group has accrued necessary provision on a prudent basis.

 

iv.    KSK Mahanadi, the Group's largest thermal power generation plant with two units fully operational and balance units in various stages of construction and commissioning is engaged in the generation and supply of power to four state utilities of Andhra Pradesh, Telangana, Tamil Nadu and Uttar Pradesh under Case 1 competitive bid Power Purchase Agreement (PPA). The respective PPAs in addition to the agreed tariff payable for the power supplied contains specific provisions providing for tariff adjustment payment to the generator on account of Change in law.  The Change in law provision essentially provides reimbursement mechanism for all additional recurring or non-recurring expenditure incurred by the Generator towards new costs levied / incurred post the bidding point.  These claims under the PPA cover both (a) Claim on account of various statutory duties, levies and cess levied by Central or State Governments or its instrumentalities; and (b) linkage coal shortfall compensation with respective to Presidential Directive and Ministry of Power Notification to all Electricity Regulators in India. KSK Mahanadi has made claims pursuant to the above PPA provisions in excess of US $ 290,750, wherein claim pertaining to taxes amounts to       US $ 81,287 and claim on account of short supply of coal pursuant to the Presidential Directive amounts to US $ 209,463. However, notwithstanding its eligibility for the full claim as per the PPA, keeping in view the regulatory commitments by the Government instrumentalities, the necessary legal and administrative process that KSK Mahanadi has to pursue, on its internal evaluation of the facts and circumstances of the case on a prudent basis, KSK Mahanadi has recognised a portion of the claim aggregating to US $ 220,934 in the books of accounts until date, wherein US $ 77,472 pertains to the current year. KSK Mahanadi has in its notices to the utilities submitted that it qualifies for the composite scheme guidelines and hence Central Electrical Regulatory Commission (CERC) will be the relevant appropriate authority to adjudicate the matter. While in the earlier year, the claims were to be determined by the State Regulators, pursuant to a recent ruling by the Appellate Tribunal of Electricity (APTEL) with respect to multiple power producers, the jurisdiction of CERC has been reaffirmed. Based on the bid guidelines, the PPA provisions and the legal advice that KSK Mahanadi has obtained, Group has made necessary amendments in its claim petitions and filed before CERC. Based on the legal advice and recent ruling of Honourable Supreme Court of India in similarly placed power project, KSK Mahanadi is confident that the entire claim amount is  receivable.

v.     KSK Mahanadi has levied capacity charges and transmission charges to AP Discoms for the period from 16 June 2013 to 13 August 2013 amounting to US $ 13,463 (2016: US $ 13,183), on account of delayed fulfilment of obligation under the PPA. AP Discoms have rejected those claims and made the counter claim of US $ 3,637 (2016: US $ 3,562) for failure to furnish advance final written notice of commencement of supply of power as per the provision of PPA. The Group has preferred an appeal before APERC & TSERC for refund of amount collected by Discoms by encashment of bank guarantee. The Group's contention is that since the Discoms have failed to fulfil the obligation as per PPA, there is default on part of Discoms and the counter claim by Discoms is merely to negate the effect of KSK Mahanadi claim of capacity charges. Pending adjudication of the case, the Group believes that there is a good chance of succeeding before the regulatory commissions and hence no adjustment has been made in the consolidated financial statements.

vi.    The Company had made investment of US $ 16,184 (2016: US $ 15,848) in Athena Projects Private Limited ('APPL') for acquisition of 25% stake. APPL in turn holds substantial investment in Teesta III hydro project. On 16.07.2009, the parties entered into a MOU providing for transfer of interest in 68,400,000 shares of Teesta III in favour of KSK Energy Company Private Limited ('KECPL'). The arrangement envisaged APPL to complete certain corporate actions. Thereafter, as a final arrangement a share sale and purchase agreement dated 5 April 2010 was executed between KECPL and APPL promoters that provided for acquisition of entire shares of US $ 16,184 (2016: US $ 15,848) in one year's time. Upon same being not honoured KECPL filed the petition with National Company Law Tribunal ('NCLT'), Principal Bench, New Delhi which is currently pending. The aforesaid is the significant matter of minority protection and management believe that they have the good grounds for the favourable disposal of the case. Hence the Group continue to carry the investment in APPL at cost.

vii.   The Group had entered into coal supply agreement with Goa Industrial Development Corporation (GIDC) for sourcing coal from the identified coal block i.e., Garepelma-III coal block. However, pursuant to the Honourable Supreme Court Orders during August and September 2014, Garepelma-III was de-allocated from GIDC. GIDC has kept the group notified that is still pursuing with the Government for allocation of this mine under the new coal statute and also has filed a legal case before Honourable High Court of Delhi wherein interim relief is granted in favor of GIDC. At the same time the initial development of the Garepelma-III block was entrusted to Group by GIDC, wherein the Group has incurred all the cost relating to the development of mine. Government of India has promulgated the Coal Mines (Special Provisions) Ordinance, which provides for reimbursement of cost incurred towards land and mine infrastructure by new allottee. Accordingly GIDC has made the claim for US $ 40,844 for settlement before Nominated Authority appointed under the Ordinance by Ministry of Coal. During the year end, Government of India, Ministry of Coal has directed to pay towards cost of compensation for geological report to all the prior allottee and accordingly the Group has received US $ 4,624. Pending final adjudication of the case by Honourable High Court of Delhi or pending final settlement of the claim by the Nominated Authority, the management believes that the entire amount incurred by the Group is recoverable and accordingly the balance claim of US $ 36,220 has been reclassified under other receivable.

viii.  Other non-current assets include an amount of US $ 8,934 (2016: US $ 8,749) relating to Central Excise receivable from the excise departments by SWPGL. SWPGL is registered as SEZ unit.  A unit in SEZ is allowed to import goods (purchase from local market is also treated as import) without payment of Duty for the purpose of its authorised operations. The exemption from the payment of duties is provided under Section 26 of the SEZ Act, 2005. The excise duty refund claims were rejected by the department stating that there are no provisions of refund under the SEZ Act. The Company has filed an appeal with the CESTAT where in the CESTAT and the Large bench has mentioned that in respect of rebate on goods supplied from DTA to SEZ within India, the appeal would not lie to Appellate Tribunal under clause (b) of provision of Section 35(1) of Central Excise Act, however the Group has liberty to file revision application before Revisionary Authority, Government of India. Accordingly, the Company has filed a revisionary petition with Ministry of Finance, Department of Revenue. The Group is confident to receive the refund.

ix.    The Group has received claims for US $ 9,580 (2016: US $ 9,807) from Joint Director General of Foreign Trade (DGFT) towards the recovery of the duty drawbacks, earlier refunded. The Group had earlier made claims for the refund of the duties paid on the machinery and other items purchased for the construction of the power projects under the scheme of deemed export benefit, which were accepted and refunds were granted. The communications from the DGFT regarding the recovery of the duties paid are based on the interpretations by the Policy Interpretation Committee held on 15 March 2011. The Group contends that the above change in interpretation requires an amendment to the foreign trade policy to be legally enforceable in law. Since, no such amendment can be made with retrospective effect, the Group believes that outcome of the above dispute would be in favour of the Group and there would be no material impact on the financial statements and as such no provision for claim has been made.

x.     SWPGL has lodged a claim relating to quality and price on Western Coalfields Limited (WCL), the coal supplier for abuse of dominant position by WCL and Coal India Limited (CIL). Honourable Competition Commission of India ('Commission') has passed an order on 27 October 2014 in favour of the Group as far as price claim is concerned whereas for the quality claim, the Commission has referred to its earlier order dated 13 January 2014, of similar case which is presently pending at Competition Appellate Tribunal (COMPAT). WCL has preferred an appeal against the order of the Commission before the COMPAT wherein during the year ended 31 March 2017, COMPAT has upheld the order given by Commission against which WCL has preferred an appeal before the Honourable Supreme Court of India. The Group has filed a total claim of US $ 239,950 with COMPAT under provision 53N of The Competition Act, 2002. Further SWPGL has received a demand of US $ 11,737 from WCL towards short lifting of minimum quantity of coal which is also contested by the SWPGL on various grounds including of inferior quality & high price and as such has not been provided for. Consequent to reiterating and upholding, in entirety, the earlier favourable order of Hon'ble Competition Commission of India by COMPAT the Group has recognised a claim of US $ 90,173 during the year ended 31 March 2017. The Group believes that the final outcome of the above matters would be in favour of the group and company is confident that the entire amount is fully recoverable.

In addition, the Group is also subject to various other legal proceedings and claims which have arisen in the ordinary course of business including claims before various tax authorities. The Management does not reasonably expect that these legal proceedings, when ultimately concluded and determined, will have a material or adverse effect on the Group's results of operations or financial conditions. The Group has accrued appropriate provision wherever required.

 

16.  Financial  Instruments

      Carrying amounts versus fair values

 

     The fair values of financial assets and financial liabilities, together with the carrying amounts in the Consolidated statement of financial position are as follows:

 

	Carrying amount	Fair value	Carrying amount	Fair value
	2017	2017	2016	2016
Non-current financial assets
Trade and other receivables	2,717	2,717	2,593	2,593
Equity securities - available-for-sale	17,970	17,970	17,938	17,938
Loans and receivables	35,915	35,915	32,024	32,024
Derivative assets	40,297	40,297	45,872	45,872
Non-current bank deposits	9,079	9,079	4,994	4,994
Total non-current	105,978	105,978	103,421	103,421
Current financial assets
Trade and other receivables	457,018	457,018	367,139	367,139
Equity securities - held for trading	141	141	115	115
Debt securities-held for trading	5,269	5,269	5,062	5,062
Loans and receivables	152,846	152,846	44,446	44,446
Cash and short-term deposits	105,079	105,079	122,800	122,800
Total current	720,353	720,353	539,562	539,562
Total	826,331	826,331	642,983	642,983
Non-current financial liabilities
Trade and other payables	64,961	64,961	30,496	30,496
Loans and borrowings	3,267,005	3,267,005	2,700,202	2,700,202
Interest rate swaps	1,775	1,775	6,174	6,174
Option premium payable	12,040	12,040	17,065	17,065
Total non-current	3,345,781	3,345,781	2,753,937	2,753,937
Current financial liabilities
Trade and other payables	648,733	648,733	493,099	493,099
Loans and borrowings	598,827	598,827	623,600	623,600
Foreign exchange forward contract	388	388	629	629
Option premium payable	7,248	7,248	5,469	5,469
Total current	1,255,196	1,255,196	1,122,797	1,122,797
Total	4,600,977	4,600,977	3,876,734	3,876,734

     The fair values of financial assets and financial liabilities, together with the carrying amounts in the Company statement of financial position are as follows:

	Carrying amount	Fair value	Carrying amount	Fair value
	2017	2017	2016	2016
Non-current financial assets
Loans and receivables to subsidiaries	147,002	147,002	155,978	155,978
Total non-current	147,002	147,002	155,978	155,978
Current financial assets
Loans and receivables	87	87	-	-
Cash and short-term deposits	969	969	1,194	1,194
Total current	1,056	1,056	1,194	1,194
Total	148,058	148,058	157,172	157,172
Current financial liabilities
Trade and other payables	1,203	1,203	1,503	1,503
Loans and borrowings	118,921	118,921	115,798	115,798
Total current	120,124	120,124	117,301	117,301

 

Fair value hierarchy

The table below analyses recurring fair value measurements for financial assets and financial liabilities. These fair value measurements are categorised in to different levels in the fair value hierarchy based on the inputs to valuation techniques used. The different levels are defined as follows.

     • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

     • Level 2:  inputs other than quoted prices that is observable for the asset or liability, either directly or indirectly.

     • Level 3: valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

2017	Level 1	Level 2	Level 3	Total
Financial assets measured at fair value
Equity securities - available-for-sale	496	-	17,474	17,970
Equity securities - held for trading	141	-	-	141
Debt securities-held for trading	5,269	-	-	5,269
Derivative assets	-	40,297	-	40,297
Total	5,906	40,297	17,474	63,677
Financial liabilities measured at fair value
Interest rate swaps	-	1,775	-	1,775
Option premium payable	-	19,288	-	19,288
Foreign exchange forward contract	-	388	-	388
Total	-	21,451	-	21,451

 

 

The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting year during which the transfer has occurred. During the year ended 31 March 2017, there were no transfers between Level 1 and Level 2 fair value measurements.

Reconciliation of Level 3 fair value measurements of financial assets:

 

2017	Available-for-sale	Total
	Unquoted equities
Opening balance	17,429	17,429
Total gains or losses:
- in income statement	-	-
- in other comprehensive income
change in fair value of available for sale financial asset	(314)	(314)
foreign currency translation difference	359	359
Settlements	-	-
Transfers into level 3	-	-
Closing balance	17,474	17,474

     Total gains or losses for the year shown above, relates to available for sale securities held at the end of the reporting year

 

2016	Level 1	Level 2	Level 3	Total
Financial assets measured at fair value
Equity securities - available-for-sale	509	-	17,429	17,938
Equity securities - held for trading	115	-	-	115
Debt securities-held for trading	5,062	-	-	5,062
Derivative assets	-	45,872	-	45,872
Total	5,686	45,872	17,429	68,987
Financial liabilities measured at fair value
Interest rate swaps	-	6,174	-	6,174
Option premium payable	-	22,534	-	22,534
Foreign exchange forward contract	-	629	-	629
Total	-	29,337	-	29,337

 

 

During the year ended 31 March 2016, there were no transfers between Level 1 and Level 2 fair value measurements.

Reconciliation of Level 3 fair value measurements of financial assets:

 

31 March 2016	Available-for-sale	Total
	Unquoted equities
Opening balance	18,644	18,644
Total gains or losses:
- in income statement	2	2
- in other comprehensive income
change in fair value of available for sale financial asset	(159)	(159)
foreign currency translation difference	(1,004)	(1,004)
Settlements	(54)	(54)
Transfers into level 3	-	-
Closing balance	17,429	17,429

 

     Valuation techniques

     Level 2 fair values for simple over-the-counter derivative financial instruments are based on broker quotes. Those quotes are tested for reasonableness by discounting expected future cash flows using market interest rate for a similar instrument at the measurement date. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and counterparty when appropriate.

Level 3 fair values for equity securities-available for sale has been determined by using Comparable Company Analyses. This is a relative valuation technique which involves comparing that company's valuation multiples to those of its peers. The multiples consider for the valuation is price to book value which is then adjusted for differences that are directly related to the characteristics of equity instruments being valued such as discounting factor for size and liquidity etc.