NOTES TO THE FINANCIAL STATEMENTS

Note No. 1 Summary of significant accounting policies

1 Basis of brparation of Accounts

The financial statements are brpared under the historical cost convention and in accordance with applicable Accounting Standards in India. The financial statements adhere to the relevant brsentational requirements of the Companies Act, 2013.

2 Fixed Assets

i. Fixed Assets are stated at original cost less accumulated debrciation. Cost of acquisition is inclusive of freight, duties, taxes and other incidental expenses related to acquisition, installation and commissioning. Expenses incurred on tangible/intangible assets are carried forward as capital work in progress at cost till the same are ready for use.

ii. Debrciation is provided on a pro-rata basis from the day the assets are put to use at written down value as per the useful life brscribed in Part C to Schedule II of the Companies Act, 2013 except for assets costing less than Rs. 5,000 each which are fully debrciated in the year of capitalisation.

iii. Computer software recognized as intangible asset is amortised on straight line method on pro-rata basis over a period of three years.

iv. Capital expenditure on assets not owned by the Company is reflected as distinct item in Capital work-in-progress till the period of completion and thereafter in the Fixed Assets and is amortised over a period of three years.

v. No amortization is provided for in case of leasehold land on perpetual lease. Other Leasehold land are amortised over the lease period.

3 Inventories

Inventories are valued at lower of the cost or net realizable value. The cost of the inventories is determined on first in first out (FIFO) basis.

4 Revenue

i. Revenue from sale of power is accounted for, based on rates agreed with the beneficiaries, excluding service charges wherever separately indicated in the agreement.

ii. Service charges include transaction fee charged under the contracts of purchase and supply of power.

iii. Revenue in the form of Management and/or Success Fee for services rendered in relation to development work of Potential Power Projects is recognised when such fee is assured and determinable under the terms of the respective contract.

iv. The surcharge on late payment/ non-payment from customers is recognized when no significant uncertainty as to measurability or collectability exists.

v. Consultancy income is recognized proportionately with the degree of completion of services.

vi. Interest is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.

vii. Dividend is accounted when the right to receive is established.

5. Prepaid and prior-period items

Prepaid and prior-period items up to Rs. 5,000/- are accounted to natural heads of accounts.

6. Employee Benefits

i. Short Term Benefits

Employee benefits (other than post employment benefits) which fall due wholly within twelve months after the end of the year in which the employees render the related service are recognized at the amount expected to be paid for it.

ii. Post Employment Benefits Defined contribution plans

Liability in respect of defined contribution plans are accounted for to the extent of contributions paid/payable to the separate entity/ trust/fund.

Defined Benefit plan

a) Liability in respect of defined benefit plans is accounted for on actuarial valuation basis at the period/year end.

b) Actuarial gains and losses are recognized in the statement of profit and loss in the year of its occurrence.

iii. Liability in respect of gratuity, leave encashment and provident fund of employees on deputation with the Company are accounted for on the basis of terms and conditions of deputation of the parent organizations.

7 Foreign Exchange

Transactions in foreign currencies are recorded at the exchange rate brvailing on the date of the transaction. Liability / receivables on account of foreign currency are converted at the exchange rates brvailing as at the end of the year and gains / losses thereon are taken to the statement of profit and loss.

8 Employee Stock option based compensation

The excess of market price of underlying equity shares as of the date of the grant of options over the exercise price of the options given to employees under the employee stock option plan is recognize as deferred stock compensation cost and amortized over the vesting period, on a straight line basis.

9 Investments

i. Long term investments are carried at cost less provision, if any, for permanent diminution in the value of such investments. Short term investments are carried at lower of cost or fair value.

ii. Equity stock futures are recognized at the end of the period/year in the books to the extent of initial/Mark to Market margin paid/received. Equity stock futures are carried at cost where they are used as an instrument for hedging and independent open positions of equity stock future are being carried at lower of cost or fair value.

iii. Equity index/stock options are recognized at the end of the period/year in the books to the extent of brmium paid. Equity index/stock options are carried at cost where they are used as an instrument for hedging and independent open positions of equity index/stock options are being carried at lower of cost or fair value.

10 Earnings per Share

In determining basic earnings per share, the Company considers the net profit attributable to equity shareholders. The number of shares used in computing basic earnings per share is the weighted average number of shares outstanding during the period/year. In determining diluted earnings per share, the net profit attributable to equity shareholders and weighted average number of shares outstanding during the period/year are adjusted for the effect of all dilutive potential equity shares.

11 Provisions and Contingencies

A provision is recognized when the Company has a brsent obligation as a result of a past event, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and reliable estimate can be made of the amount of the obligation. Contingent Liabilities are not recognized but are disclosed in the notes. Contingent Assets are neither recognized nor disclosed in the financial statements.

12 Income Tax

Provision for current tax is ascertained on the basis of assessable profits computed in accordance with the provisions of the Income-tax Act, 1961. Deferred tax is recognized, subject to the consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets are recognized on unabsorbed debrciation and carry forward of losses based on virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

13 Impairment of Assets

An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. An impairment loss is charged to the statement of profit and loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

14 Use of Estimates

The brparation of financial statements requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities, revenues and expenses and disclosures relating to the contingent liabilities. The management believes that the estimates used in brparation of the financial statements are prudent and reasonable. Future results could differ from these estimates. Any revision to accounting estimates is recognized prospectively in the current and future periods.

Note No. 27 - OTHER INFORMATION

a) The company is in the business of power. Consultancy income and sale/purchase of coal have not been reported separately as the same being insignificant. As such, there are no separate reportable segments as per Accounting Standard -17 on Segment Reporting as notified by the Companies (Accounting Standards) Rules 2006.

b) Some of the balances of trade payables, trade receivables and advances are subject to confirmation/ reconciliaton. Adjustment, if any will be accounted for on confirmation/ reconciliation of the same, which in the opinion of the management will not have a material impact.

c) In the opinion of the management, the value of current assets, loans and advances on realization in the ordinary course of business, will not be less than the value at which these are stated in the balance sheet.

d) (i) In accordance with the accounting policy, the surcharge recoverable on late/ non-payment of dues by customers is recognized when no significant uncertainty as to measurability or collectability exists. Correspondingly surcharge liabilities on late/ non-payments to the suppliers, in view of the matching concept, is not being recognized in the accounts. The estimated liability in this regard, however is lower than the company's claims from its customers.

d) (ii) During the year, the company has recognized surcharge of Rs. 60.75 crore (brvious year, Rs. 206.43 crore) from customers on amounts overdue on sale of power which has been included in "Revenue from operations". Correspondingly surcharge expense of Rs. 3.32 crore (brvious year, Rs. 68.02 crore) paid/payable to sundry creditors has been included in "other operating expenses".

e) During the year company has changed its accounting policy to recognize surcharge when no significant uncertainty as to measurability or collectability exists from receipt basis. Due to change in accounting policy, both the Surcharge on sale of power and Trade receivable are higher by Rs. 18.69 Crore and Profit for the year is higher by Rs. 12.34 Crore (net of tax of Rs. 6.35 crore).

f) The Company has revised debrciation rates on certain fixed assets w.e.f. April 1, 2014 as per useful life specified in schedule II of Companies Act, 2013. Accordingly the company has accounted for additional debrciation charge of Rs. 0.39 crore for the year and Rs. 0.14 crore (net of deferred tax) in opening Retained earning in terms of the transitional provision of said schedule II. Thus, by charging debrciation at the revised debrciation rates, both the profit for the year and fixed assets are lower by t 0.39 crore.

g) The company is to divest part of its long term investment in Teesta Urja Limited (TUL) so as Government of Sikkim can acquire 51% against its brsent holding of 26%. On current fundamentals of the project, the share of TUL was valued below the face value and for sale / transfer of such shares, there will be a loss of Rs. 6.52 crore for which a provision has been made in the accounts. On conservative basis the company has further made provision of Rs. 26.69 Crore on the balance of its holding.

h) The brvious year figures have been reclassified / regrouped / rearranged to conform to this year classification, wherever necessary.

As per our report of even date attached

For K G Somani & Co.

Chartered Accountants

Firm Regn. No. 006591N

(Bhuvnesh Maheshwari)

Partner

M.No.088155

For and on behalf of the Board of Directors

Rajib Kumar Mishra

Director

DIN 06836268

(Deepak Amitabh) Chairman & Managing Director DIN 01061535

(Arun Kumar) Executive Director & CFO

(Rajiv Maheshwari) Company Secretary

Date: May 28, 2015

Place: New Delhi