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PROSPECTUS
November 25, 2013
A MAHARATNA COMPANY
NTPC LIMITED(A Government of India Enterprise)
Our Company was originally incorporated in New Delhi on November
7, 1975 under the Companies Act, 1956 ( Companies Act 1956) as a
private limited companyunder the name,National Thermal Power
Corporation Private Limited. For information on changes in our
Companysname and registered office, see Hi story and Certai n
Corporate Matters on page 7
Registered and Corporate Office:NTPC Bhawan, SCOPE Complex, 7,
Institutional Area, Lodhi Road, New Delhi 110 003Tel:(+91 11) 2436
0100; Fax:(+91 11) 2436 1018;Website:www.ntpc.co.in; Executive
Director & Company Secretary and Compliance Officer: Mr. A.K.
Rastogi; Tel: (+91 11) 2436 0071;Fax: (+91 11) 2436 0241;
E-mail:
[email protected]
THE PROMOTER OF OUR COMPANY IS THE PRESIDENT OF INDIA,ACTING
THROUGH THE MINISTRY OF POWER, GOVERNMENT OF INDIA (GOI)
(MOP)
PUBLIC ISSUE BY NTPC LIMITED (COMPANY OR ISSUER OR NTPC) OF
TAX-FREE SECURED REDEEMABLE NON-CONVERTIBLE BONDS OF FACE
VALUE OF 1,000 EACH, IN THE NATURE OF DEBENTURES HAVING TAX
BENEFITS UNDER SECTION 10(15)(iv)(h) OF THE INCOME TAX ACT, 1961,
AS
AMENDED (INCOME TAX ACT AND SUCH BONDS, BONDS), FOR AN AMOUNT
AGGREGATING UP TO 1,000 CRORE (BASE ISSUE SIZE) WITH AN
OPTION TO RETAIN OVERSUBSCRIPTION UP TO 750 CRORE FOR ISSUANCE
OF ADDITIONAL BONDS AGGREGATING TO A TOTAL OF UP TO 1,750
CRORE*, (ISSUE SIZE) IN FISCAL 2014 (ISSUE).
The Issue is being made under the Securities and Exchange Board
of India (Issue and Listing of Debt Securities) Regulations, 2008,
as amended (SEBI Debt Regulations) andpursuant to Notification No.
61/2013.F.No.178/37/2013-(ITA.I) dated August 8, 2013 issued by the
Central Board of Direct Taxes, Department of Revenue, Ministry of
Finance, GoI(MoF)(CBDT Notification), by virtue of powers conferred
on it under Section 10(15)(iv)(h) oftheIncome Tax Act.*In terms of
the CBDT Notification, our Company is authorized to raise a minimum
of 70.00% of the Issue Size, by way of public issue and during the
process of the public issue(s), our
Company may also, at its discretion, raise Bonds through private
placement route for an amount not exceeding 30.00% of the Issue
Size, wherein suitable amount shall be earmarked for
sovereign wealth funds , pension and gratuity funds. In case our
Company issues bonds through private placement route, the amount o
f oversubscription that may be retained through
public issue shall stand reduced accordingly. Our Company shall
ensure that bonds issued pursuant to the CBDT Notification through
public issue route and private placement route in
fiscal 2014 shall, in aggregate, not exceed `1,750 crore.
GENERAL RISKS
Investors are advised to read the risk factors carefully before
making an investment decision in relation to the Issue. For making
an investment decision, investors must rely on their own
examination ofour Company and the Issue, including the risks
involved. Specific attention is invited to Risk Factors on page 13
and Materi al Developments on page 122. This document has not been
and will notbe approved by any regulatory authority in India,
including the Securities and Exchange Board of India (SEBI), the
Reserve Bank of India (RBI), any registrar of companies or any
stock exchangein India.
ISSUERS ABSOLUTE RESPONSIBILITY
The Issuer, having made all reasonable inquiries, accepts
responsibility for and confirms that this Prospectus contains all
information with regard to the Issuer and the Issue which is
material in thecontext of the Issue that the information contained
in this Prospectus is true and correct in all material respects and
is not misleading in any material respect, that the opinions and
intentions expressedherein are honestly held and that there are no
other material facts, the omission of which makes this Prospectus
as a whole or any such information or the expression of any such
opinions or intentionsmisleading in any material respect.
CREDIT RATING
CRISIL Limited (CRISIL) has, by its letter (No.
VK/CGS/NTPCLTD/JUN13/90014) dated June 3, 2013, assigned a rating
of CRISIL AAA to the Bonds, and revalidated such rating by letter
(No.VK/NTPCL/SN26294) dated November 8, 2013. Instruments with this
rating are considered to have the highest degree of safety
regarding timely servicing of financial obligations and carry
lowest creditrisk. These ratings are not a recommendation to buy,
sell or hold securities, and investors should take their own
decision. These ratings are subject to revision or withdrawal at
any time by the assigningrating agency (ies) and should be
evaluated independently of any other ratings. Further, ICRA Limited
(ICRA)has, by its letter (No. D/RAT/2013-14/N3/2) dated July 16,
2013, assigned a rating of[ICRA] AAA (Stable) to the Bonds, and
revalidated such rating by letter (No. D/RAT/2013-14/N3/3) dated
November 8, 2013. Instruments with this rating are considered to
have the highest degree of
safety regarding timely financing of obligations and carry
lowest credit risk. For the rationale for these ratings, see
Annexure B Credit Rating.
PUBLIC COMMENTS
The Draft Prospectus dated November 15, 2013 was filed with BSE
Limited (BSE), being the Designated Stock Exchange, and the
National Stock Exchange of India Limited (NSE) (togetherStock
Exchanges) pursuant to Regulation 6(2) of the SEBI Debt Re
gulations. The Draft Prospectus was uploaded by the Stock Ex
changes on their respective websites, www.bseindia.com
andwww.nseindia.com, and was open for public comments for 7 Working
Days fro m the date of filing of the Draft Prospectus.
LISTINGThe Bonds are proposed to be listed on BSE and NSE. We
have obtained in-principle listing approvals for the Bonds by
letter (No. DCS/SP/PI-BOND/11/13-14) dated November 23, 2013 from B
SE andletter (No. NSE/LIST/222467-Q) dated November 25, 2013 from
NSE. The Designated Stock Exchange for the Issue is BSE.
LEAD MANAGERS
A. K. CAPITAL SERVICES LIMITED
30-39, Free Press House, 3rdFloor,
Free Press Journal Marg,215, Nariman Point, Mumbai 400 021Tel:
(+91 22) 6754 6500/6634 9300Fax: (+91 22) 6610 0594Email:
[email protected] Grievance
Email:[email protected]:
www.akcapindia.comContact Person: Mr. Mandeep Singh/Mr.
Lokesh SinghiCompliance Officer: Mr. Vikas AgarwalSEBI
Registration No.: INM000010411
AXIS CAPITAL LIMITED
1st Floor, Axis House, C-2 WadiaInternational Centre, P.B. Marg,
Worli,Mumbai 400 025Tel: (+91 22) 4325 2525Fax: (+91 22) 4325
3000E-mail: [email protected] Grievance
Email:[email protected]
Website: www.axiscapital.co.inContact Person: Mr. Akash
Aggarwal
Compliance Officer: Mr. M. NatarajanSEBI Registration No.:
INM000012029
ICICI SECURITIES LIMITED
ICICI Centre, H.T. Parekh Marg, Churchgate,Mumbai 400 020Tel:
(+91 22) 2288 2460Fax: (+91 22) 2282 6580Email:
[email protected] Grievance
Email:[email protected]:
www.icicisecurities.comContact person: Mr. Mangesh Ghogle/Mr.
SumitAgarwal
Compliance Officer: Mr. Subir SahaSEBI Registration No.:
INM000011179
KOTAK MAHINDRA CAPITAL
COMPANY LIMITED
27 BKC, 1st Floor, Plot No. C 27, G Block,Bandra Kurla Complex,
Bandra (East),Mumbai 400 051Tel: (+91 22) 4336 0000Fax: (+91 22)
67132447E-mail: [email protected] Grievance:
E-mail:[email protected];Website:
www.investmentbank.kotak.com
Contact Person: Mr. Ganesh RaneCompliance Officer: Mr. Ajay
VaidyaSEBI Registration Number: INM000008704
SBI CAPITAL MARKET
LIMITED
202, Maker Tower E, Cuffe ParadMumbai 400 005Tel: (+91 22) 2217
8300Fax: (+91 22) 2218 8332Email: [email protected]
Grievance Email:[email protected]:
www.sbicaps.comContact person: Ms. Shikh
Agarwal/Mr. Nithin KanugantiCompliance Officer: Mr.
BhaskChakrabortySEBI Registration No.: INM00000353
REGISTRAR TO THE ISSUE BOND TRUSTEE#
KARVY COMPUTERSHARE PRIVATE LIMITEDPlot No. 17 to 24, Vithalrao
Nagar, Madhapur, Hyderabad 500 081
Tel: (+91 40) 4465 5000;Fax: (+91 40) 2343 1551;E-mail:
[email protected]; Investor Grievance
Email:[email protected]; Website: http://karisma.karvy.com;
Contact Person: Mr. M. Murali Krishna; SEBI Registration Number:
INR000000221
IL&FS TRUST COMPANY LIMITEDThe IL&FS Financial Centre,
Plot C 22, G Block, Bandra Kurla Complex, Bandra (East), Mumbai 400
051
Tel: (+91 22) 2653 3908;Fax: (+91 22) 2653 3297;Email:
[email protected]; Investor Grievance
Email:[email protected]:
www.itclindia.com;
Contact Person: Senior Vice President; SEBI Registration No.:
IND000000452
ISSUE PROGRAMME**
ISSUE OPENS ON ISSUE CLOSES ON
DECEMBER 3, 2013 DECEMBER 16, 2013** The Issue shall remain open
for subscription from 10 A.M. to 5 P.M (Indian Standard Time).
during the period indicated above with an option for early
closure/extension as may be decided by the board of directors of
our Company or
duly constituted committee thereof,including the Committee of
the Board for Allotment and Post-Allotment Activities
ofNTPCssecurities and the Committee for Public Issue of Tax Free
Bonds(Board). In the event of suearly closure or extension of the
subscription list of the Issue, our Company shall ensure that
public notice of such early closure/extension is published on or
before such early date of closure or the Issue Closing Date, as
applicable, througadvertisement(s) in a t least one leading
national daily newspaper with wide circulation.
# IL&FS Trust Company Limited has by its letter dated
November 14, 2013, given its consent for its appointment as the
Bond Trustee and for its name to be included in this Prospectus and
in all subsequent communications sent to theBondholders.A copy of
this Prospectus shall be filed with the Registrar of Companies,
National Capital Territory of Delhi and Haryana (RoC), in terms of
Sections 56 and 60 of the Companies Act 1956 and corresponding
provisions of the CompanAct, 2013, to the extent notified and in
force (Companies Act 2013) along with endorsed/certified copies of
all requisite documents. For more information, see Material
Contracts and Documents for Inspection on page 186.
http://www.ntpc.co.in/http://www.ntpc.co.in/http://www.ntpc.co.in/mailto:[email protected]:[email protected]://www.bseindia.com/http://www.bseindia.com/http://www.bseindia.com/http://www.akcapindia.com/http://www.investmentbank.kotak.com/mailto:[email protected]:[email protected]://www.sbicaps.com/mailto:[email protected]:[email protected]:[%E2%97%8F]@ilfsindia.commailto:[%E2%97%8F]@ilfsindia.commailto:[%E2%97%8F]@ilfsindia.commailto:[email protected]:[email protected]://www.itclindia.com/http://www.itclindia.com/http://www.itclindia.com/http://www.itclindia.com/mailto:[email protected]:[%E2%97%8F]@ilfsindia.commailto:[email protected]://www.sbicaps.com/mailto:[email protected]:[email protected]://www.investmentbank.kotak.com/http://www.akcapindia.com/http://www.bseindia.com/mailto:[email protected]://www.ntpc.co.in/
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TABLE OF CONTENTS
SECTION I - GENERAL
........................................................
..............................................................
............... 3
DEFINITIONS AND ABBREVIATIONS
................................................................
............................................. 3CERTAIN CONVENTIONS,
USE OF FINANCIAL, INDUSTRY AND MARKET DATA AND CURRENCYOF
PRESENTATION
............................................................................................................................................
9FORWARD-LOOKING STATEMENTS
............................................................................................................
11
SECTION II - RISK FACTORS
.....................................................................................................................
.. 13
SECTION III - INTRODUCTION
...................................................................................................................
27
THE ISSUE
..........................................................................................................................................................
27SELECTED FINANCIAL INFORMATION
............................................................
........................................... 31
GENERAL INFORMATION
..............................................................
............................................................... ..
37CAPITAL STRUCTURE
..........................................................
..............................................................
............. 46OBJECTS OF THE ISSUE
..................................................................................................................................
50STATEMENT OF TAX BENEFITS
..............................................................
...................................................... 52
SECTION IV- ABOUT OUR COMPANY
............................................................
........................................... 56
INDUSTRY OVERVIEW
.........................................................
..............................................................
............. 56BUSINESS
...........................................................................................................................................................
59HISTORY AND CERTAIN CORPORATE MATTERS
.............................................................
........................ 70MANAGEMENT
.................................................................................................................................................
74PROMOTER
........................................................................................................................................................
88STOCK MARKET DATA FOR OUR EQUITY SHARES AND DEBENTURES
............................................. 89
DESCRIPTION OF FINANCIAL INDEBTEDNESS
.........................................................
................................ 91SECTION VLEGAL AND OTHER
INFORMATION .......................................................
...................... 102
OUTSTANDING LITIGATION
.........................................................
...............................................................
102MATERIAL DEVELOPMENTS
........................................................
...............................................................
122OTHER REGULATORY AND STATUTORY DISCLOSURES
..........................................................
........... 123
SECTION VIISSUE INFORMATION
..............................................................
......................................... 128
ISSUE STRUCTURE
................................................................
..............................................................
........... 128TERMS OF THE ISSUE
...........................................................
..............................................................
........... 133ISSUE PROCEDURE
........................................................................................................................................
149
SECTION VII - MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION
................................... 175
SECTION VIIIOTHER INFORMATION
........................................................
......................................... 186
MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION
...........................................................
186DECLARATION
............................................................
..............................................................
...................... 187
ANNEXURE AFINANCIAL INFORMATION
...........................................................
.............................. 188ANNEXURE BCREDIT RATING
ANNEXURE CCONSENT FROM THE BOND TRUSTEE
ANNEXURE DSTOCK MARKET DATA FOR OUR BONDS ON NSE
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SECTION I - GENERAL
DEFINITIONS AND ABBREVIATIONS
This Prospectus uses certain definitions and abbreviations
which, unless the context indicates or impliesotherwise, have the
meaning provided below. References to statutes, rules, regulations,
guidelines and policieswill be deemed to include all amendments and
modifications notified thereto.
Company Related Terms
Term Description
Issuer, NTPC, ourCompany or the Company
NTPC Limited, a company incorporated under the Companies Act
1956 and having itsregistered office at NTPC Bhawan, SCOPE Complex,
7, Institutional Area, Lodhi Road,New Delhi 110 003
We or us, our NTPC, together with its Subsidiaries and Joint
Ventures on a consolidated basis, unlessthe context otherwise
requires
Articles/Articles ofAssociation/AoA
Articles of association of our Company
Board/Board of Directors Board of directors of our Company or a
duly constituted committee thereof, includingthe Committee of the
Board for Allotment and Post-Allotment Activities of
NTPCssecurities and the Committee for Public Issue of Tax Free
Bonds
BRBCL Bhartiya Rail Bijlee Company LimitedEquity Shares Equity
shares of our Company of face value`10 each
Joint StatutoryAuditors/Auditors/IndependentAuditors
O.P. Bagla & Co. Chartered Accountants, K.K. Soni & Co.
Chartered Accountants, PKFSridhar & Santhanam, Chartered
Accountants, V. Sankar Aiyar & Co., CharteredAccountants,
Ramesh C. Agrawal & Co., Chartered Accountants and A.R. &
Co.,Chartered Accountants
Joint Venture(s) Our 21 joint venture companies (excluding PTC
India Limited, where our Companyholds nominal shareholding of 4.05%
of the issued, subscribed and paid-up equity sharecapital)as
referred to in Hi story and Certain Corporate Matters on page
70
KBUNL Kanti Bijlee Utpadan Nigam Limited
Memorandum/Memorandum ofAssociation/MoA
Memorandum of association of our Company
NHL NTPC Hydro Limited
Promoter The President of India, acting through the MoP
Registered Office Registered and corporate office of our Company
situated at NTPC Bhawan, SCOPEComplex, 7, Institutional Area, Lodhi
Road, New Delhi 110 003
RoC Registrar of Companies, National Capital Territory of Delhi
and Haryana
Scheme The scheme of amalgamation approved by the Board pursuant
to a resolution dated May10, 2012 for amalgamating NHL with our
Company
Subsidiaries (and each,individually, a Subsidiary)
Subsidiaries of our Company as referred to in History and
Certain Corporate Matterson page 70
Issue Related Terms
Term Description
2012 Circular Circular (No. CIR./IMD/DF-1/20/2012) dated July
27, 2012 issued by SEBI
AK Capital A. K. Capital Services Limited
Allotment Advice The communication sent to the Allottees
conveying the details of Bonds Allotted to theAllottees in
accordance with the Basis of Allotment
Allotment/Allot/Allotted Issue and allotment of Bonds to
successful Applicants pursuant to the Issue
Allottee A successful Applicant to whom Bonds are Allotted
pursuant to the Issue
Applicant A person who makes an offer to subscribe to the Bonds
pursuant to the terms and thisProspectus and Application Form for
the Issue
Application An application to subscribe to the Bonds offered
pursuant to the Issue by submission ofa valid Application Form and
payment of the Application Amount by any of the modesas prescribed
in this Prospectus
Application Amount Aggregate value of Bonds applied for, as
indicated in the Application Form
Application Form Form in terms of which an Applicant (including
the application form used by an NRIApplying on a non-repatriation
basis) shall make an offer to subscribe to Bonds andwhich will be
considered as the application for Allotment of Bonds in terms of
thisProspectus
Application Supported byBlockedAmount/ASBA/ASBA
The Application (whether physical or electronic) used by an ASBA
Applicant to makean Application authorising the SCSB to block the
Application Amount in a specifiedbank account maintained with such
SCSB
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Application
ASBA Account An account maintained with a SCSB which will be
blocked by such SCSB to the extentof the Application Amount
mentioned in the Application Form made in ASBA mode byan ASBA
Applicant
ASBA Applicant Any Applicant who applies for the Bonds through
the ASBA Process.
Axis Axis Capital Limited
Base Issue Size `1,000 crore
Basis of Allotment The basis on which the Bonds will be Allotted
to successful Applicants under the Issueand which is described in
Terms of the Issue Basis of A llotment on page 135
Bond Certificate(s) Certificate issued to Bondholder(s) pursuant
to Allotment, in case the Applicant hasopted for Bonds in physical
form based on the request from the Bondholders
Bond Trust Deed Trust deed to be executed between the Bond
Trustee and our Company
Bond Trustee Trustee for the Bondholders, in this case being
IL&FS Trust Company Limited
Bondholder(s) Any person holding Bonds and whose name appears on
the beneficial owners listprovided by the Depositories (in case of
Bonds held in dematerialized form) or whosename appears in the
Register of Bondholders maintained by our Company/the Registrarto
the Issue/any other agency designated by our Company for such
purpose (in case ofbonds held in physical form)
Bonds Tax-free secured redeemable non-convertible bonds in the
nature of debentures, of ourCompany of face value of`1,000 each,
having benefits under Section 10(15)(iv)(h) oftheIncome Tax Act,
proposed to be issued by our Company pursuant to this
Prospectus
Category I/QIBs PFIs, scheduled commercial banks, MFs registered
with SEBI, state industrialdevelopment corporations, Indian
bilateral and multilateral financial institutions,
insurancecompanies registered with the IRDA, Alternative Investment
Funds, subject to investmentconditions applicable to them under the
Securities and Exchange Board of India(Alternative Investment
Funds) Regulations, 2012, provident funds with a minimumcorpus
of`25 crore, pension funds with a minimum corpus of `25 crore, the
National
Investment Fund set up by resolution (F. No. 2/3/2005-DD-II)
dated November 23, 2005of the GoI, published in the Gazette of
India, insurance funds set up and managed by thearmy, navy, or air
force of the Union of India and insurance funds set up and
managedby the Department of Posts, India, subject to such being
authorized to invest in the Bonds.
With regard to Section 372A(3) of the Companies Act 1956, see
general circular (No.6/2013), dated March 14 , 2013 issued by the
MCA clarifying that in cases where the
effective yield on tax free bonds is greater than the prevailing
bank rate, there shall
be no violation of Section 372A(3) of the Companies Act 1956.
Category II/Corporates Companies falling within the meaning of
Section 2(20) of the Companies Act 2013,
limited liability partnerships, societies, funds, statutory
corporations, trusts, partnershipfirms in the name of their
respective partners, associations of persons, co-operativebanks,
regional rural banks and other legal entities constituted and/or
registered underapplicable laws in India that are authorized to
invest in Bonds by their respective
constitutional and/or charter documents, subject to compliance
with respective applicablelaws.
With regard to Section 372A(3) of the Companies Act 1956, see
general circular (No.6/2013), dated March 14 , 2013 issued by the
MCA clarifying that in cases where the
effective yield on tax free bonds is greater than the prevailing
bank rate, there shallbe no violation of Section 372A(3) of the
Companies Act 1956.
Category III/High Net Worth
Individuals
Resident individual investors (including HUFs applying through
their Kartas), and NRIs
Applying on non-repatriation basis only, who have applied for
Bonds for an amount morethan`10 lakh across all Series of Bonds in
the Issue
Category IV/Retail IndividualInvestors
Resident individual investors (including HUFs applying through
their Kartas), and NRIsApplying on non-repatriation basis only, who
have applied for Bonds for an amount lessthan or equal to`10 lakh
across all Series of Bonds in the Issue
CBDT Notification Notification No.
61/2013.F.No.178/37/2013-(ITA.I) dated August 8, 2013 issued by
theCentral Board of Direct Taxes, Department of Revenue, Ministry
of Finance, GoI
Collection Centres Collection Centres shall mean those branches
of the Bankers to the Issue that areauthorized to collect the
Application Forms (other than in respect of Applications madeunder
ASBA) as per the Escrow Agreement
Consolidated Certificate In case of Bonds applied for in
physical form or rematerialized Bonds held in physicalform, the
certificate issued by our Company to the Bondholder for the
aggregate amountof each of the Series of Bonds that are
rematerialized and/or held by such Bondholder
Consortium (each individually,
a member of the Consortium)
The Lead Managers and the Consortium Members
Consortium Agreement Consortium Agreement dated November 21,
2013 among our Company and theConsortium
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Consortium Members A.K Stockmart Private Limited, Kotak
Securities Limited and SBICAP SecuritiesLimited
Corporate Portion The portion of the Issue, constituting 25.00%
of the Issue which shall be available forallocation to Applicants
falling under Category II
Credit Rating Agencies CRISIL and ICRA
Coupon/Interest PaymentDate(s)
The dates on which interest/coupon on the Bonds shall fall due
for payment as specifiedin this Prospectus, which in case of the
first Coupon/Interest payment shall be the date
falling one year from Deemed Date of Allotment and, for
subsequent fiscals, shall be thesame date of such respective
fiscal. The last interest payment will be made on therespective
Redemption Dates/Maturity Dates for each Series of Bonds
Deemed Date of Allotment The date on which the Board approves
the Allotment of Bonds for the Issue or such dateas may be
determined by the Board and notified to the Designated Stock
Exchange. Allbenefits accruing in relation to the Bonds including
interest on Bonds shall be availablefrom Deemed Date of Allotment.
Actual Allotment of Bonds may occur on a date otherthan Deemed Date
of Allotment
Demographic Details The demographic details of an Applicant,
such as his/her address, bank account details,occupation and
PAN
Designated Branches Such branches of the SCSBs as shall collect
the Application Form used by ASBAApplicants, a list of which is
available
atwww.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediaries
or such otherwebsite as may be prescribed by SEBI from time to
time
Designated Date Date of instructions being given for Application
Amounts to be transferred from theEscrow Account(s) to the Public
Issue Account or the Refund Account, and theRegistrar to the Issue
issues instructions to the SCSBs for transfer of funds to the
PublicIssue Account or unblock such amounts as are liable to be
Refunded, as appropriate,following which the Board shall Allot the
Bonds to successful Applicants, provided thatApplication Amounts
received will be kept in the Escrow Account(s) up to this date
andour Company will have access to such funds only after creation
of adequate security forthe Bonds, or receiving final listing
approvals for the Bonds from the Stock Exchanges,whichever is
later
Designated Stock Exchange BSE
Direct Online ApplicationMechanism
Applications made through an online interface establishment and
maintained by theStock Exchanges enabling direct application by
investors to a public issue of their debtsecurities with an online
payment facility in terms of the 2012 Circular
DP ID Depository Participant ID
Draft Prospectus The draft prospectus dated November 15, 2013
filed by our Company with the StockExchanges, which was open for
public comments for 7 Working Days, in accordancewith SEBI Debt
Regulations
Escrow Account(s) Account(s) opened with the Escrow Collection
Bank(s), in whose favour Applicantsother than ASBA Applicants will
issue cheques or demand drafts in respect of theApplication Amount
when submitting Applications
Escrow Agreement Agreement dated November 22, 2013 entered into
by our Company, the Registrar to theIssue, the Lead Managers and
the Escrow Collection Bank(s) for collection of theApplication
Amounts and where applicable, Refunds of amounts collected
fromApplicants (other than ASBA Applicants) on the terms and
conditions thereof
Escrow Collection Bank(s) Banks that are clearing members and
registered with SEBI with whom the EscrowAccount will be opened, in
this case being Axis Bank Limited, HDFC Bank Limited,ICICI Bank
Limited, IDBI Bank Limited, IndusInd Bank Limited, Kotak
MahindraBank Limited and State Bank of India
High Net Worth IndividualPortion
The portion of the Issue, constituting 25.00% of the Issue which
shall be available forallocation to Applicants falling under
Category III
ICICI Securities ICICI Securities Limited
Issue Public issue by our Company of tax-free secured redeemable
non-convertible Bonds offace value of`1,000 each in the nature of
debentures having tax benefits under Section
10(15)(iv)(h) of the Income Tax Act, aggregating up to`1,000
crore with an option toretain oversubscription up to`750 crore for
issuance of additional Bonds aggregating to
a total of up to`1,750 crore*during fiscal 2014.
* In terms of the CBDT Notification, our Company is authorized
to raise a minimum of70.00% of the Issue Size, by way of public
issue and during the process of the publicissue(s), our Company may
also, at its discretion, raise Bonds through private
placement route for an amount not exceeding 30.00% of the Issue
Size, wherein suitableamount shall be earmarked for sovereign
wealth funds, pension and gratuity funds. In
case our Company issues bonds through private placement route,
the amount ofoversubscription that may be retained through public
issue shall stand reduced
accordingly. Our Company shall ensure that bonds issued pursuant
to the CBDT
http://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediaries
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Notification through public issue route and private placement
route in fiscal 2014 shall,
in aggregate, not exceed `1,750 crore.
Issue Agreement The agreement entered into on November 13, 2013,
between our Company and the Lead
Managers
Issue Closing Date December 16, 2013. The Issue shall remain
open for subscription from 10.00 A.M. to5.00 P.M. (Indian Standard
Time) during the Issue Period with an option for earlyclosure or
extension, as may be decided by the Board
Issue Opening Date December 3, 2013Issue Period The period
between the Issue Opening Date and the Issue Closing Date inclusive
of both
days, during which a prospective Applicant may submit their
Application Forms
Issue Size The aggregate limit of the Issue being`1,750
crore
Kotak Kotak Mahindra Capital Company Limited
Lead Managers AK Capital, Axis, ICICI Securities, Kotak and
SBICAP
Market Lot/Trading Lot One Bond
OCB or Overseas CorporateBody
A company, partnership, society or other corporate body owned
directly or indirectly tothe extent of at least 60.00% by NRIs
including overseas trusts, in which not less than60.00% of
beneficial interest is irrevocably held by NRIs directly or
indirectly andwhich was in existence on October 3, 2003 and
immediately before such date had takenbenefits under the general
permission granted to OCBs under the Foreign ExchangeManagement
Act, 1999. OCBs are not permitted to invest in the Issue
Portion The terms QIB Portion, Corporate Portion, High Net Worth
Individual Portion and
Retail Individual Investor Portion are individually referred to
as Portion andcollectively, referred to as Portions
Prospectus This prospectus dated November 25, 2013, filed by our
Company with the RoC, theStock Exchanges and SEBI, in accordance
with the provisions of the SEBI DebtRegulations
Public Issue Account Account opened with the Escrow Collection
Bank(s) to receive monies from the EscrowAccount(s) and the ASBA
Accounts, on the Designated Date
QIB Portion The portion of the Issue, constituting 10.00% of the
Issue which shall be available forallocation to Applicants falling
under Category I
Record Date Date falling 15 days prior to the relevant
Coupon/Interest Payment Date on whichinterest amount or the
Redemption Dates/Maturity Dates for each Series of Bonds onwhich
the Maturity Amount is due and payable under the terms of this
Prospectus. In theevent that the Record Date falls on a Saturday,
Sunday or a public holiday in New Delhior any other payment centre
notified in terms of the Negotiable Instruments Act, 1881,
the succeeding Working Day shall be considered as the Record
DateRedemption Amount orMaturity Amount
Amount repayable on the Bonds, comprising face value of the
Bonds, together withCoupon/Interest accrued at the applicable
Coupon/Interest Rate for each Series of Bondson the respective
Redemption Dates or Maturity Dates
Redemption Date or MaturityDate
The respective dates on which each Series of Bonds shall be
redeemed and RedemptionAmount shall be paid by our Company, at the
end of the respective tenure of such Seriesof Bonds
Refund Account Account opened with the Refund Bank from which
Refunds, if any, of the whole or anypart of the Application Amount
shall be made to Applicants other than ASBAApplicants
Refund Bank HDFC Bank Limited
Register of Bondholders Register of Bondholders (in case of
Bonds held in physical form) maintained by theIssuer in accordance
with the Companies Act and as detailed in Terms of the I ssue
Rights of Bondholders on page 143
Registrar Agreement Agreement dated November 14, 2013 entered
into between our Company and theRegistrar to the Issue, in relation
to the responsibilities and obligations of the Registrarto the
Issue pertaining to the Issue
Registrar to the Issue orRegistrar
Karvy Computershare Private Limited
Retail Individual InvestorPortion
The portion of the Issue, constituting 40.00% of the Issue which
shall be available forallocation to Applicants falling under
Category IV
SBICAP SBI Capital Markets Limited
Self Certified Syndicate Banksor SCSBs
The banks registered with SEBI under the Securities and Exchange
Board of India(Bankers to an Issue) Regulations, 1994 offering
services in relation to ASBA, a list ofwhich is available at
www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediariesor
such website as may be notified by SEBI from time to time. A list
of thebranches of the SCSBs where Application Forms will be
forwarded by such members ofthe Syndicate is available at
www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-
IntermediariesSeries of Bonds or Series Series of Bonds, which
are identical in all respects including but not limited to terms
and
conditions, listing and ISIN number and as further stated to be
each, an individual Series
http://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediarieshttp://www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediaries
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in this Prospectus
Specified Cities or SyndicateASBA Locations
Application centres at Mumbai, Chennai, Kolkata, Delhi,
Ahmedabad, Rajkot, Jaipur,Bengaluru, Hyderabad, Pune, Vadodara and
Surat where the members of the Syndicateshall accept Application
Forms under the ASBA process in terms of the SEBI Circular(No.
CIR/CFD/DIL/1/2011), dated April 29, 2011
Stock Exchanges BSE and NSE
Syndicate Collectively, the members of the Consortium and their
respective affiliatebrokers and
sub-brokers acting in relation to the IssueSyndicate ASBA ASBA
Applications through the members of the Consortium or Trading
Members of the
Stock Exchanges only in the Specified Cities
Tax-free Tax-free in the context of the Issue refers to tax
benefits under Section 10(15)(iv)(h) ofthe Income Tax Act
Trading Member Intermediaries registered with a Broker or a
Sub-Broker under the Securities andExchange Board of India (Stock
Brokers and Sub-Brokers) Regulations, 1992 and/or
with the Stock Exchanges under the applicable byelaws, rules,
regulations, guidelines,circulars issued by the relevant Stock
Exchanges from time to time
Tripartite Agreements Tripartite agreement dated September 3,
2004 between our Company, CDSL and theRegistrar to the Issue and
the tripartite agreement dated July 16, 2004 between ourCompany,
NSDL and the Registrar to the Issue
TRS Transaction registration slip
Trustee Agreement Trustee Agreement dated November 14, 2013,
between our Company and the Bond
TrusteeWorking Days All days excluding Sundays or a public
holiday in India or at any other payment centre
notified in terms of the Negotiable Instruments Act, 1881,
except with reference to IssuePeriod and Record Date, where Working
Days shall mean all days, excluding Saturdays,Sundays and public
holiday in New Delhi or at any other payment centre notified
interms of the Negotiable Instruments Act, 1881
Conventional and General Terms or Abbreviations
Term/Abbreviation Description/Full Form
Additional CIT Additional Commissioner of Income Tax
Alternative Investment Funds orAIFs
Alternative Investment Funds, as defined in and registered under
the Securities andExchange Board of India (Alternative Investment
Funds) Regulations, 2012
AS Accounting Standards issued by the Institute of Chartered
Accountants of IndiaAssistant CIT Assistant Commissioner of Income
Tax
Assistant CST Assistant Commissioner of Sales Tax
BSE BSE Limited
BTU British Thermal Unit
CDSL Central Depository Services (India) Limited
CESTAT Central Excise and Sales tax Appellate Tribunal
Commissioner CEST (A) Commissioner (Appeals), Customs, Central
Excise and Service Tax
CIT (A) Commissioner of Income Tax (Appeals)
Commissioner ST Commissioner of Sales Tax
Companies Act 2013 Companies Act, 2013, to the extent notified
by the MCA and in force as of the date ofthis Prospectus
Companies Act 1956 Companies Act, 1956 to the extent applicable
as of the date of this Prospectus
Companies Act Companies Act 1956, as superseded and substituted
by notified provisions of the
Companies Act 2013CRISIL CRISIL Limited
Debt Listing Agreement The debt listing agreement entered into
by our Company with BSE and NSE
Depository(ies) CDSL and NSDL
Depositories Act Depositories Act, 1996
Deputy CIT Deputy Commissioner of Income Tax
DIN Director identification number
DP/Depository Participant Depository Participant, as defined
under the Depositories Act
DRR Debenture Redemption Reserve
DTC Proposed Direct Taxes Code, as introduced in the Indian
Parliament in 2010
ECB External commercial borrowing
ERP Enterprise Resource Planning
FIIs Foreign Institutional Investors (as defined under the
Securities and Exchange Board ofIndia (Foreign Institutional
Investors) Regulations, 1995, as amended from time to time)
registered with the SEBIFinancial Year/fiscal/FY Period
commencing on April 1 of the immediately preceding calendar year
and ending
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Term/Abbreviation Description/Full Form
on March 31 of that particular calendar year
GoI or Government Government of India
HUF Hindu Undivided Family
ICRA ICRA Limited
IFRS International Financial Reporting Standards
IFSC Indian Financial System CodeIncome Tax Act Income Tax Act,
1961
India Republic of India
IRDA Insurance Regulatory and Development Authority
ITAT Income Tax Appellate Tribunal
JBIC Japanese Bank for International Co-operation (now known as
the Japanese InternationalCo-operation Agency)
JMFC Judicial Magistrate First Class
KYC Know-your-customerMF Mutual Fund
MoC Ministry of Coal, GoI
MoP Ministry of Power, GoI
MCA Ministry of Corporate Affairs, GoI
MICR Magnetic Ink Character Recognition
NECS National Electronic Clearing SystemNEFT National Electronic
Fund Transfer
NRI Non-Resident Indian
NRE Non-Resident External Account
NRO Non-Resident Ordinary Account
NSDL National Securities Depository Limited
NSE National Stock Exchange of India Limited
PAN Permanent Account Number
PFI Public Financial Institution, as defined under Section 2(72)
of the Companies Act 2013
PIL Public interest litigation
PPAs Power purchase agreements
RBI Reserve Bank of India
RIL Reliance Industries Limited
RTGS Real Time Gross Settlement
SEBI Securities and Exchange Board of India
SEBI Debt Regulations Securities and Exchange Board of India
(Issue and Listing of Debt Securities)Regulations, 2008
SEBI ICDR Regulations Securities and Exchange Board of India
(Issue of Capital and Disclosure Requirements)Regulations, 2009
Securities Act United States Securities Act, 1933
SLP Special leave petition
Supreme Court Supreme Court of India
TDS Tax deducted at source
VAT Value added tax
Technical and Industry Related Terms
Term Description2009-14 Regulations
Tariff regulations issued by the CERC for the period April 1,
2009 to March31, 2014
CEA Central Electricity Authority
CERC Central Electricity Regulatory Commission
IPMCS Integrated Project Management and Control System
IPP Independent power producer
PCC Pulverized Coal Combustion
SEB State electricity board
Tariff Policy Tariff policy issued by the CERC in January
2006
GCV Gross Calorific Value
Notwithstanding the foregoing, terms in Main Pr ovisions of the
Arti cles of Association, Statement of TaxBenefits on pages 175 and
52, respectively, and Annexure A - Financial I nformation, shall
have the
meanings given to such terms in these respective sections.
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CERTAIN CONVENTIONS, USE OF FINANCIAL, INDUSTRY AND MARKET DATA
AND
CURRENCY OF PRESENTATION
Certain Conventions
All references in this Prospectus to Indiaare to the Republic of
India and its territories and possessions.
Financial Data
The audited standalone and consolidated reformatted financial
statements of our Company as of and for thefiscal years ended March
31, 2013, 2012, 2011, 2010 and 2009 included in this Prospectus has
been prepared inaccordance with the requirements of Paragraph B(1),
Part II of Schedule II, and revised Schedule VI of theCompanies Act
1956 and the SEBI Debt Regulations. The statement of standalone
unaudited financial resultsfor the 6 months ended September 30,
2013 included in this Prospectus have been reviewed in accordance
withthe Standard on Review Engagements (SRE) 2410 - Review of
Interim Financial Information Performed by theIndependent Auditor
of the Entity specified by the ICAI and standards on auditing
issued by the Institute ofChartered Accountants of India.
In this Prospectus, any discrepancies in any table between the
total and the sums of the amounts listed are due to
rounding off. All decimals have been rounded off to 2 decimal
points.
Currently, the financial year of our Company commences on April
1 of the immediately preceding calendaryear, and ends on March 31
of that particular calendar year; accordingly, all references to a
particular financialyear, fiscal year, fiscalor FY, unless stated
otherwise, are to the 12 month period commencing on April 1of the
immediately preceding calendar year and ending on March 31 of that
particular calendar year.
The degree to which the financial statements included in this
Prospectus will provide meaningful information isentirely dependent
on the readers level of familiarity with Indian accounting
practices. Any reliance by personsnot familiar with Indian
accounting practices on the financial disclosures presented in this
Prospectus should,accordingly, be limited.
Currency and Unit of Presentation
In this Prospectus, references to `, Rs., Indian Rupees and
Rupees are to the legal currency of India andreferences to US$,
USD, and U.S. dollars are to the legal currency of the United
States of America andreferences to Euro and are to the legal
currency of the European Union. All references to JPY are
toJapanese Yen, the legal currency of Japan.
Industry and Market Data
Any industry and market data used in this Prospectus consists of
estimates based on reports compiled bygovernment bodies,
professional organizations and other external sources available in
the public domain. These
publications generally state that the information they contain
has been obtained from publicly available sourcesbelieved to be
reliable, but it has not been independently verified by us, its
accuracy and completeness is notguaranteed, and its reliability
cannot be assured. Although our Company believes that the industry
and market
data used in this Prospectus is reliable, it has not been
independently verified by us. The data used in thesesources may
have been reclassified by us for purposes of presentation. Data
from these sources may also not becomparable. The extent to which
the industry and market data presented in this Prospectus is
meaningfuldepends on the readers familiarity with and understanding
of the methodologies used in compiling such data.
Exchange Rates
The exchange rates of US$,and JPYas on September 30, 2013, March
31, 2013, 2012, 2011, 2010 and 2009are provided below:
Currency Exchange
Rate into
as on
September30, 2013
Exchange Rate
into as on
March 31, 2013#
Exchange Rate
into as on
March 31,
2012^
Exchange Rate
into as on
March 31, 2011
Exchange Rate
into as on
March 31, 2010
Exchange Rate
into as on
March 31, 2009
1 US$ 62.78 54.39 51.16 44.65 45.14 50.95
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Currency Exchange
Rate into
as on
September
30, 2013
Exchange Rate
into as on
March 31, 2013#
Exchange Rate
into as on
March 31,
2012^
Exchange Rate
into as on
March 31, 2011
Exchange Rate
into as on
March 31, 2010
Exchange Rate
into as on
March 31, 2009
1 84.67 69.54 68.34 63.24 60.56 67.48100 JPY 64.15 57.76 62.43
54.02 48.44 51.87
# March 31, 2013 and March 30, 2013 were Sunday and Saturday,
respectively, and March 29, 2013 was a holiday; hence, exchange
ratesfor the last working day of March 2013, i.e. March 28, 2013,
have been used.
^March 31, 2012 was a trading holiday; hence, exchange rates for
the last working day of March 2012, i.e., March 30, 2012, have
been
used.Source: www.rbi.org.in
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FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus that are not
statements of histo rical fact constitute forward-looking
statements. Investors can generally identify forward-looking
statements by terminology such as aim,anticipate, believe,
continue, could, estimate, expect, intend, may, objective, plan,
potential,project, pursue, shall, seek, should, will, would, or
other words or phrases of similar import.
Similarly, statements that describe our strategies, objectives,
plans or goals are also forward-looking statements.All statements
regarding our expected financial conditions, results of operations,
business plans and prospectsare forward-looking statements. These
forward-looking statements include statements as to our
businessstrategy, revenue and profitability, new business and other
matters discussed in this Prospectus that are nothistorical facts.
All forward-looking statements are subject to risks, uncertainties
and assumptions about us thatcould cause actual results to differ
materially from those contemplated by the relevant
forward-lookingstatement. Important factors that could cause actual
results to differ materially from our expectations include,among
others:
Our expansion and diversification plans are subject to a number
of risks and uncertainties, which mayresult in an adverse effect on
our business, financial condition and prospects.
Power projects generally have long gestation periods, and
subject us to various operational risks, whichmay result in an
adverse effect on our business, financial condition and
prospects.
We have significant fuel requirements and may not be able to
ensure availability of adequate fuel atcompetitive prices. Also, we
may not be able to ensure availability of sufficient amounts of
coal of thegrade, quality and specifications that we require in
order to operate our coal-based power stations, atcommercially
reasonable prices.
The power sector in India is highly regulated. For instance,
tariff regulations issued by the CentralElectricity Regulatory
Commission (CERC), may adversely affect our business, financial
conditionand prospects. Moreover, other regulatory matters and
changes in applicable law and policy mayadversely affect us.
Our power purchase agreements (PPAs) may expose us to certain
risks that may affect our business,financial condition and
prospects. Further, there is no assurance that we will be able to
sell poweroutside the long term PPAs and this could have an adverse
impact on our revenues.
State utilities account for a significant portion of our sales
of electricity generated from our directlyowned power stations, and
any change that adversely affects our ability to recover dues from
them mayadversely affect our financial position.
We are involved in a number of legal proceedings that may be
determined against us. Further,opposition from local communities
may adversely affect our business.
We have incurred significant indebtedness and may incur
substantial additional borrowings inconnection with our
business.
Failure to obtain or renew necessary regulatory approvals may
adversely affect our business, financialcondition and
prospects.
We are subject to various environmental, occupational, health
and safety and other laws, which maysubject us to increased
compliance costs that may have an adverse effect on our business,
financialcondition and prospects.
Our business, financial condition and prospects may be adversely
affected if we are unable to takeadvantage of certain tax benefits
or if there are adverse changes to the tax regime in the
future.
This Prospectus includes certain unaudited standalone financial
information, which has been subjectedto limited review, in relation
to our Company. Reliance on such information should, accordingly,
belimited.
Our Joint Statutory Auditors have included certain notes and
matters of emphasis in their reportsincluded in this Prospectus,
which should be considered carefully by prospective investors in
the Issue.
We have significant contingent liabilities, which may result in
an adverse effect on our business,financial condition and
prospects, to the extent that any such liabilities materialize.
Inability to attract and retain, or appropriately replace, our
key personnel and sufficient skilled workersmay adversely affect
our business, financial condition and prospects.
Other factors discussed in this Prospectus, including under Risk
Factors on page 13.
Additional factors that could cause actual results, performance
or achievements to differ materially include, butare not limited
to, those discussed under Business and Materi al Developments on
pages 59 and 122,
respectively. Although our Company believes that the
expectations reflected in such forward-looking statementsare
reasonable as of the date of this Prospectus, our Company cannot
assure investors that such expectations will
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prove to be correct. Given these uncertainties, investors are
cautioned not to place undue reliance on suchforward-looking
statements. If any of these risks and uncertainties materialize, or
if any of our underlyingassumptions prove to be incorrect, our
actual results of operations or financial condition could differ
materiallyfrom that described herein as anticipated, believed,
estimated or expected. All subsequent forward-lookingstatements
attributable to us are expressly qualified in their entirety by
reference to these cautionary statements.
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SECTION II - RISK FACTORS
You should carefully consider all the information in this
Prospectus, including the risks and uncertainties
described below, and under Business on page 59 and Annexure A -
Financial I nformation, before
making an investment in the Bonds. Additional risks and
uncertainties not known to us or that we currently
believe to be immaterial may also have an adverse effect on our
business, financial condition and prospects. If
any of the following or any other risks actually occur, our
business, financial condition and prospects may beadversely
affected and the price and value of your investment in the Bonds
could decline such that you may lose
all or part of your investment.
The financial and other related implications of risks concerned,
wherever quantifiable, have been disclosed in
the risk factors mentioned below. However, there are certain
risk factors where the effect is not quantifiable and
hence has not been disclosed in such risk factors. The numbering
of risk factors has been done to facilitate ease
of reading and reference, and does not in any manner indicate
the importance of one risk factor over another.
You should not invest in the Issue unless you are prepared to
accept the risk of losing all or part of your
investment, and you should consult your own tax, financial and
legal advisors about the particular
consequences of an investment in the Bonds.
Unless otherwise stated, our financial information used in this
section is derived from our consolidatedreformatted financial
information for fiscal 2013, 2012, 2011, 2010 and 2009 prepared in
accordance with
accounting standards generally accepted in India, and our
unaudited standalone financial information for
September 30, 2013.
RISKS RELATING TO OUR BUSINESS
1. Our expansion and diversif ication plans are subject to a
number of ri sks and uncertainti es, which may
resul t in an adverse effect on our business, fi nancial condi
tion and prospects.
Our growth strategy and expansion plans subject us to a number
of considerations, including thefollowing:
Our ability to finance capital expenditure for expansion,
including the management of newequipment and projects and the
maintenance and upgradation of existing equipment and projects,
issubject to a number of risks, contingencies and other factors,
including interest rates and availabilityand cost of borrowing.
Our ability to procure fuel at prices and terms acceptable to
us. In particular, estimates of coalreserves are subject to
assumptions and, if the actual amounts of such reserves are less
than estimatedor if the quality of the coal reserves is lower than
estimated or we are unable to commence plannedcaptive coal mining
activities for any other reason, we may not be able to implement
our expansion
plans.
Our ability to obtain licences under the Electricity Act, 2003,
including transmission licences,distribution licences and
electricity trading licences, and other environmental laws
(including mininglaws) and labour, health and safety laws.
Actual increases in demand for power as well as other services
and products offered by us, such as
our consultancy and other allied businesses, may not meet
anticipated demand based on which wehave planned our operations and
growth for any given periods, or the success or sustainability of
anyof our growth plans may be adversely affected by other industry
trends that we have been unable tocorrectly anticipate.
There may be potential adverse short-term effects on operating
results through increased costs orotherwise.
We may experience economic, political and social uncertainty or
volatility in the diverse regions inwhich we currently operate or
in which we plan to set up operation.
We may face challenges associated with recruitment and retention
of adequate skilled personnel aswell as possible diversion of
management time and focus and managing the realignment of
ourmanagement and administrative resources.
We may not be selected for projects that we may bid for in the
future, including as a result of other
entities being able to make a more competitive bid. We may face
increasing competition going forward, including from private sector
players, in our
current as well as planned business activities.
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We also expect that the execution of our growth strategy and new
power projects will place significantstrains on our management,
financial and other resources. Continued expansion increases the
challengesinvolved in financial and technical management,
recruitment, training and retaining sufficient skilledtechnical and
management personnel, and developing and improving our internal
administrativeinfrastructure. If we are unable to successfully
implement our business plan and growth strategy, we may
also be unable to meet the annual performance targets set by the
Government pursuant to the annualmemorandum of understanding which
we enter into with the Government. Any of these factors may havean
adverse effect on our business, financial condition and
prospects.
In particular, as we seek to diversify our operations, including
by way of forward and backwardintegration in the power sector and
by way of diversifying our fuel mix, we may be subject to a
numberof additional risks. Any new businesses that we may enter
into, may subject to a legal, regulatory, policyand business
environment that we are not currently familiar with, or may pose
significant challenges toour administrative, financial and
operational resources. The early stages and long gestation periods
ofnew businesses may make it difficult to predict their economic
viability. Therefore, there is no assuranceas to the timing and
amount of any returns or benefits that we may receive from new
business initiativesor new fuel sources that we are currently
exploring or developing.
2.
Power pr ojects general ly have long gestation periods, and
subject us to various operational r isks,which may resul t in an
adverse effect on our business, fi nancial condi tion and
prospects.
Power projects generally have long gestation periods, which may
entail a significant period of timebefore the economic viability of
a given project can be established and there may be substantial
capitaloutflow before we are able to realize expected benefits or
returns on our investment. Moreover, theconstruction, development
or operation of our power projects, coal mines or other facilities
may bedisrupted or affected by various factors that may be beyond
our control, including the following:
Our ability to acquire land depends on its ownership status, the
classification of land use and thewillingness of owners to sell or
lease their land. Acquisition of Government land may involve
anumber of difficulties relating to rehabilitation and resettlement
and provision of adequatecompensation, while diversion of forest
land would be subject to Government clearance.
We depend on independent contractors for construction,
installation, delivery and commissioning, aswell as the supply and
testing of key plant and equipment and other non-core aspects of
our business.We may only have limited control over the timing and
quality of services, equipment or supplies
provided by contractors as well as suppliers and vendors, and
any failure or delay in performance byany such persons or entities
could result in time and cost overruns for us.
We may experience geological difficulties during the execution
of construction projects, especiallyduring the development of
hydroelectric, oil and gas and coal mining projects. For example,
duringthe execution of our construction projects, we may discover
adverse rock strata or terrain, or trappedgases or trapped water
and our plant designs may be unsuitable for dealing with such
geology. Thesegeological factors may result in costs and time
overruns or cause us to determine that a planned
project or expansion is no longer economically feasible.
Mechanical failure and equipment shutdowns, explosions, fires,
natural disasters such as cyclonesand earthquakes, breakdown,
failure or substandard performance of equipment, improper
installation
or operation of equipment, accidents, transmission or
transportation interruptions, environmentaldisasters, significant
social or political disruptions including terrorism and labor
disputes or industrialaction may significantly affect our
operations.
Non-availability of fuel of desired quantity and quality may
significantly disrupt our operations orreduce our
profitability.
If such operational difficulties occur, our ability to supply
electricity to our customers or source coal oroil and gas may be
adversely affected. In the event any facility is significantly
damaged or forced toshut down for a significant period of time, our
business, financial condition and prospects may beadversely
affected.
In particular, many of our power stations are ageing and may
subject us to additional risks to the extentthat we may be required
to undertake renovation and modernization schemes involving
significantcapital expenditure.
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3. We have signi f icant f uel requi rements and may not be able
to ensure availabil ity of adequate fuel at
competi tive pri ces. Also, we may not be able to ensure
availabil ity of suff ici ent amounts of coal of the
grade, qual ity and specif icati ons that we requi re in order
to operate our coal-based power stations, at
commerci all y reasonable pri ces.
Availability of fuels at competitive prices is critical to our
business. Fuel costs represent our largest
expense, constituting 76.13% of our total expenses for fiscal
2013 on a standalone basis.Although wepurchase a significant part
of our fuel requirements, particularly coal and gas, under
long-term fuelsupply agreements, there is no assurance that our
suppliers will be able to satisfy their contractualcommitments,
particularly in relation to the grade and quality of coal that we
may require for ouroperations, or that alternative sources of
supply will be available to us on reasonable terms. In the eventour
contracted sources of fuel supply or other domestic sources of fuel
supply (for instance, through shortterm purchase agreements or
orders placed by us on the spot market) fall short for any reason,
or thegrade, quality and specifications of fuel available for
supply to us does not match our specifications andrequirements, we
may be required to explore alternative sources of fuel supply,
including for import offuels such as coal from other countries at
prices that may be significantly higher than the prices at whichwe
have historically sourced fuel for our power stations in the
past.
Further, domestic coal and gas allocations and gas prices are
currently determined by Government policy,
while coal prices are contractually set, which limits our
financial and operational flexibility to an extent.In the event
that coal and gas supplies or gas prices in India were to be
deregulated, there is no assurancethat we will be able to obtain
adequate supplies of coal and gas at competitive prices. Moreover,
theavailability and cost of fuels, including coal and gas, are
subject to volatility in world commoditymarkets, the level of
investment in exploitation of mine reserves in India and elsewhere,
the quality andgrade of coal and gas available in India and
elsewhere, and other factors that may be beyond our control.Any
constraints on sourcing adequate quantities of fuel at commercially
reasonable costs, and ofacceptable grade, quality or other
specifications, may adversely affect our business, financial
conditionand prospects.
The domestic demand for coal is expected to increase
significantly in the future, driven by significantcapacity addition
in the Indian power sector. High dependence on domestic coal could
therefore exposeus to potential price and availability risks. In
the event of a shortage of coal, not only will the
productivity of our coal-fired power stations be reduced but it
will also hinder the our expansion plans.We also source coal
through bilateral short term memoranda of understanding, through
imports andthrough e-auctions. However, there is no assurance that
such sources of coal will continue to be availableto us in the
future at reasonable prices or terms or at all.
With respect to gas, our use has been limited in the past due to
inadequate supply of domestic gas. Wehave arranged for the supply
of re-liquefied natural gas through long- and short-term contracts
to meet
part of its requirements. The short-term RLNG contracts are
agreed on a reasonable endeavors basiswith no obligation on our
part of such as ship-or-pay or, take-or-pay and no supply or pay
obligationon the part of the suppliers. However, due to high
re-liquefied natural gas prices, the off-take of power
bydistribution companies and beneficiaries and, consequently,
re-liquefied natural gas consumption have
been low. We estimate that we will require 16.39 million metric
standard cubic metres of gas per day infiscal 2014 to operate our
directly owned gas-fired power stations at a plant load factor
(which is a
measure equal to the percentage of capacity actually utilized)
of 85.00%. If we experience a shortage inthe supply of gas to our
gas-fired power stations, the productivity of those power stations
would bereduced. Although we are in the process of securing a
supply of gas for our projects at Kawas andGandhar, there is no
assurance that we will be able to secure an adequate supply of gas
for our currentgas-fired power stations or future gas-fired
projects. Our ability to secure adequate fuel supply for ourKawas
and Gandhar projects may also be affected by our dispute with
Reliance Industries Limited(RIL) on the sale and purchase agreement
for gas supply for those projects. For details, seeOutstanding L
iti gation on page 102.
Further, Ratnagiri gas power project, which is under operation
with one our 21 joint venture companies(excluding PTC India
Limited, where our Company holds nominal shareholding of 4.05% of
the issued,subscribed and paid-up equity share capital) (Joint
Ventures), Ratnagiri Gas and Power PrivateLimited, is facing
shortage of domestic gas supply from KG-D6 block. Any shortage of
this kind may
severally affect the solvency of the project and that of our
Joint Ventures.
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4. The power sector in I ndia i s highly regulated. For
instance, tari ff regulations issued by the CERC,
may adversely affect our business, fi nancial condi tion and
prospects. Moreover, other regulatory
matters and changes in appli cable law and pol icy may adversely
af fect us.
Our businesses are regulated by the central and state
governments in India, through a number of laws,rules, regulations
and policies applicable to the power sector in India.
For instance, we are significantly impacted by tariff policy
issued by the GoI and regulations anddirectives issued by the CERC.
The tariff policy issued in January 2006 (Tariff Policy) provides
thatall future requirements for power be procured through tariff
based competitive bidding by distributionlicensees, except in cases
of expansion of existing projects or where there is a state
controlled/owneddeveloper and where regulators will need to resort
to tariff determination based on norms provided thatexpansion of
generating capacity by private developers for this purpose be
restricted to one time additionof not more than 50.00% of the
existing capacity. For public sector projects, capacity addition of
all newgeneration and transmission projects shall be decided on the
basis of competitive bidding after January 6,2011, provided that a
developer of a hydroelectric project would have the option of
getting the tariffdetermined by the appropriate commission subject
to conditions specified in the Tariff Policy.Exemptions from the
competitive bidding route may be adopted in certain transmission
projects. TheGovernment has also issued competitive bidding
guidelines. Both central power sector utilities and
private sector developers are participating in the tariff based
bidding process for securing power projects,including coal-fired
ultra mega power projects.
In addition, the CERC has issued tariff regulations for the
period from April 1, 2009 to March 31, 2014(2009-14 Regulations),
under which return on equity is calculated on a pre-tax basis at a
base rate of15.50%, grossed up by the tax rate applicable for the
respective year. For projects commissioned on orafter April 1,
2009, there is additional return of 0.50% on a grossed up basis if
the new projects arecompleted within the timeline specified in the
2009-14 Regulations. In addition, under the 2009-14Regulations, we
can recover deferred tax liability only as and when it materializes
on our powergeneration business through our tariffs on power sold
up to March 31, 2009. Actual income tax paid andany deferred tax
liability created during fiscal 2010 to 2014 are not recoverable as
part of tariff. Recoveryof interest cost on debt and return on
equity for all power stations declared in commercial operation on
orafter April 1, 2009 will be based on a prescribed 70:30 debt to
equity ratio. Where equity employed is
greater than 30.00%, the amount of equity for determination of
tariff will be limited to 30.00%. Return onexcess equity can be
recovered on the same basis as recovery on the debt component.
Where equityemployed is less than 30.00%, the actual amount of
equity will be used for purposes of determination oftariff. In case
of existing power stations, recovery of interest costs on debt will
be based on the debt toequity ratio previously allowed by the CERC
for determination of tariff for the period ending March 31,2009.
Tariff regulations for the period April 1, 2014 to March 31, 2019
are yet to be notified by theCERC. There is no assurance that the
CERC will continue the present methodology for fixation of
tariffs.Further, for the period beyond March 31, 2019, the nature
of the tariff regulations may pose additionalrisks which presently
are not comprehensible.
Moreover, the regulatory framework in India continues to evolve
and there is a particular focus onincreasing private participation
in the future. For instance, competition in hydroelectric power is
likely toincrease in the future due to increased opportunities for
private investment in the market and the
hydroelectric potential in India, pursuant to the New Hydro
Policy 2008.Non-compliance with applicablelaws and regulations may
also lead to penalties, revocation of our permits and
registrations, or costlylitigation. Any significant legal or
regulatory change or uncertainty in the power sector may
adverselyimpact our business, financial condition and
prospects.
5. Our PPAs may expose us to certain risks that may affect our
business, financial condition and
prospects. Fur ther, there is no assurance that we wil l be able
to sell power outside the long term PPAs
and th is could have an adverse impact on our revenues.
Under our PPAs with our customers, which are generally state
utilities, our profitability is largely afunction of our ability to
operate our power projects at optimal levels in accordance with
minimum
performance standards that may be determined from time to time
by regulatory bodies and our ability tomanage our costs. Any
failure to meet such minimum performance standard or manage our
costs may
have an adverse effect on our business, financial condition and
prospects. Further, the PPAs haveinherent risks that may restrict
our operational and financial flexibility. For example, long-term
PPAs
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provide for sale of power to customers at tariffs and terms
determined by the regulator. Accordingly, ifthere is an
industry-wide increase in tariffs, we will not be able to take
advantage of increased tariffs ornegotiate satisfactory alternative
off-take arrangements. These limitations affect our ability to
enjoy the
benefits of an increased tariff rate that our competitors
selling power outside long-term PPAs mayotherwise enjoy.
In addition, in the event that PPAs are terminated prematurely,
or not renewed or extended after the initialterm expires and, if we
are unable to enter into purchase agreements with other customers,
this may havean adverse effect on our business, financial condition
and prospects. Further, as provided by the NationalElectricity
Policy 2005 (NEP), up to 15.00% of our new generating capacities
may be sold outsidelong term PPAs. We are not able to guarantee
that we will be able to sell outside the PPAs at better pricesor at
all. We may enter into short term off-take agreements or sell power
on a merchant basis to entities,including entities affiliated with
us. Such agreements may create additional variability in our
revenuesand could expose our business to risks of market
fluctuations in demand and price for power. If we areunable to
adapt our business model to sell power from our power stations
outside long term PPAs or sellthe power generated by our merchant
power stations, our business, financial results and prospects may
beadversely affected.
6. State util iti es account f or a signi fi cant portion of our
sales of electri city generated fr om our directly
owned power stations, and any change that adversely af fects our
abil ity to recover dues from themmay adversely af fect our f
inancial positi on.
The state-owned distribution companies and State Electricity
Boards (SEBs) are the largest purchasersof electricity generated
from our power stations. Some of these entities have had weak
credit histories inthe past and continue to operate under financial
constraints, due in part to the regulatory and policyconstraints
applicable to them in their respective states. Historically, we
have had significant problemsrecovering payments from the SEBs,
which, we believe, have been largely resolved due to
Governmentalintervention. However, any inability to adequately
enforce such customers ability to honor their offtakeobligations
towards us, or the escrow, letter of credit or other arrangements
entered into with the SEBs orany other change that adversely
affects our ability to recover dues from the SEBs or other state
utilities(for instance, due to state policy or regulatory
requirements that the state utilities may be subject to, orother
factors affecting the profitability, creditworthiness and
operations of such entities) may adversely
affect our business, financial condition and prospects.
7. We are involved in a number of l egal and other proceedings
and claims that may be determined
against us. Fur ther, opposit ion f rom local communi ties may
adversely affect our business.
In the ordinary course of our business, we, as well as our
Directors and officers, are involved in severallegal, regulatory,
arbitral and administrative proceedings and claims at various
levels of investigation oradjudication. These proceedings may
include criminal cases (including motor accident claims,
fatalaccident claims, dishonor of cheques, claims regarding theft
of goods, petitions for revision enforcementor quashing of orders
previously passed in relation to employment claims, etc.), public
interest litigation(PIL), appeals against tariff orders of the
CERC, civil suits, arbitral claims, taxes (including incomeand
sales tax) and other statutory levies (including royalty claims),
employment-related disputes, land-acquisition related disputes,
environmental disputes, claims regarding alleged defect in title of
properties,
trespass and claims for premium, rental and other payments in
respect of property owned, leased orotherwise used by us, etc. The
total claim, financial implication or amount of contingent
liability relatingto such proceedings as on the date of this
Prospectus is not ascertainable, including due to the monetaryclaim
against us not having been quantified in many instances, and may be
substantial. An adversedecision in any such proceeding may have an
adverse effect on our business, financial condition and
prospects. There is also no assurance that similar proceedings
will not be initiated against us in future.Further, should new
developments arise, such as a change in Indian law or rulings
against us by appellatecourts or tribunals, we may need to make
provisions in ourfinancial statements, which could increase
ourexpenses and liabilities.
In addition, the acquisition of land for our projects and
related rehabilitation and resettlementrequirements, as well as the
construction and operation of our projects or our fuel
diversification plans(including coal mining, hydroelectric,
renewable or nuclear power projects), may face opposition from
local communities or special interest groups due to the
perceived negative impact such activities mayhave on the
environment and community access to natural resources, or other
specific factors from time
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to time. Significant opposition by local communities, special
interest groups and other parties may delayproject implementation,
divert management focus and otherwise adversely affect our
business, financialcondition and prospects.
8. We have incurr ed signi fi cant indebtedness and may incur
substantial additi onal borr owings in
connection with our business.
As on March 31, 2013, we had total outstanding indebtedness of `
70,418.78 crore on a consolidatedbasis, including`22,426.41 crore
of secured loans. As on September 30, 2013, we had total
outstanding
indebtedness of`60,629.44 crore on a standalone basis, including
`10,125.64 crore of secured loans.Our substantial indebtedness and
restrictions imposed on us under current or future loan
arrangementsmay adversely impact our business, financial condition
and prospects in various ways, including thefollowing:
We may be required to dedicate a significant portion of our cash
flow towards repayment of debt,which will reduce availability of
cash flow to fund working capital, capital expenditures,
acquisitionsand other general corporate requirements.
We may be required to maintain certain financial ratios and
satisfy certain financial or othercovenants.
Because some of our borrowings are secured against our assets,
lenders may sell or take over thoseassets to enforce their
claims.
We may be required to obtain approval from our lenders,
regarding, among other things,reorganisation, amalgamation or
merger, incurrence of additional indebtedness, disposition of
assetsand expansion of our business, and no assurance can be given
that we will receive such approvals ina timely manner or at
all.
Our project costs may increase since we capitalize interest
during the construction of our facilities.
Moreover, our ability to meet our debt service obligations and
to repay outstanding borrowings willdepend primarily upon the cash
flow generated by our business over time, as well as our ability to
tap thecapital markets as a source of capital. If we fail to meet
our debt service obligations or financial or othercovenants under
our financing documents, our lenders could declare default and
cancel unutilizedfacilities, accelerate the maturity of our
obligations or enforce security, which may have an adverse effecton
our business, financial condition and prospects, particularly in
the event cross-default under multiplefinancing arrangements is
triggered. Further, in such event, the availability and cost of
future borrowingsmay be negatively impacted, with consequences that
may include increased finance charges, decreasedincome available to
fund future growth, decreased working capital and imposition of
restrictive covenantsunder financing arrangements.
9. Fail ure to obtain or r enew necessary regulatory approvals
may adversely af fect our business, fi nancial
conditi on and prospects.
In the ordinary course of our business, we as well as our
independent contractors and counterparties, arerequired to obtain
and, in several cases, renew, from time to time, various regulatory
approvals,including, for instance, consents from the state
pollution control boards in India to establish and operateour
projects and other facilities and for appropriate handling of
biomedical and other hazardous waste,discharge of waste water, as
well as registrations with relevant tax and labor authorities in
India. In
particular, several of our environmental, electrical
installation testing, wireless set and boiler-usage orgas-cylinder
storage, height clearance, structural design and stability and
other approvals across severalof our projects are scheduled to
expire in the ordinary course on December 31, 2013 or on other
dates inthe near future, and we have applied for or are in the
process of applying for renewals or extensions ofsuch approvals in
due course.
Failure to obtain and maintain or renew required approvals and
registrations may have an adverse effecton our business, financial
condition and prospects. Further, such approvals and registrations
may besubject to numerous conditions, including periodic reporting
or audit requirements, which may require usto undertake substantial
compliance-related expenditure and other procedures. Any actual or
alleged non-compliance with specified conditions may result in
suspension or cancellation of, or refusal to renew,required
approvals and registrations or imposition of penalties, which may
be significant, by the relevantauthorities. A suspension,
cancellation or refusal to extend required approvals and
registrations mayrequire us to cease production at some or all of
our facilities or to engage in time-consuming and costly
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administrative and/or legal proceedings in order to resolve such
issues, or may affect other aspects of ouroperations, which may
have an adverse effect on our business, financial condition and
prospects.
10. We are subject to various environmental , occupational,
health and safety and other laws, which may
subject us to increased compli ance costs that may have an
adverse ef fect on our business, f inancial
conditi on and prospects.
Our operations are subject to central, state and local laws and
regulations relating to the protection of theenvironment and
occupational health and safety, including those governing the
generation, handling,storage, use, management, transportation and
disposal of, or exposure to, environmental pollutants orhazardous
materials resulting from power projects as well as with respect to
the utilization of fly ash
produced in course of our generation and with respect to mining
operations conducted in India . Forinstance, we require approvals
under the Water (Prevention and Control of Pollution) Act, 1974 and
theAir (Prevention and Control of Pollution) Act, 1981, in order to
establish and operate our power projects,and will require
prospecting licences and, subsequently, mining leases in order to
commence prospectingand mining activities at the coal blocks
allocated to us.
In addition, in the ordinary course, we are subject to several
risks generally associated with powergeneration as well as coal
mining, including explosions, fires, mechanical failures,
accidents, discharges
of toxic or hazardous substances or gases and other
environmental risks. These hazards may causepersonal injury and
loss of life, environmental damage and severe damage to or
destruction of propertyand equipment. We may incur substantial
costs, including clean up or remediation costs, fines and civil
orcriminal sanctions, and third-party property damage or personal
injury claims, as a result of violations ofor liabilities under
environmental or health and safety laws or actual or alleged
noncompliance with
permits or registrations required at our facilities, or the
conditions imposed on us under such permits andregistrations.
Further, on the expiry or termination of any operating permits held
by us, including anymining licences granted to us in the future, we
may be required to incur significant costs to dismantle
anddecommission our operations and remove our equipment and
installations at such sites.
Moreover, environmental and health and safety laws, regulations
and policies, and the interpretation andenforcement thereof, are
subject to change and have tended to become stricter over time. In
particular, weexpect that the GoI, as well as the governments of
several nations worldwide, may be considering further
measures to achieve a significant reduction in carbon and
greenhouse gas emissions. Compliance withcurrent and future
environmental and health and safety laws, regulations and policies,
particularly at older
power stations, may require substantial capital expenditure. If
we fail, or are alleged to have failed, tocomply with such laws,
regulations and policies, we may be subject to significant fines,
penalties, costs,liabilities or restrictions on operations. In
certain cases, we may also be required to become involved incostly
and time-consuming legal or administrative proceedings in order to
resolve any such allegations orclaims that may arise against us, in
relation to compliance with applicable environmental and health
andsafety laws, regulations and policies, which may adversely
affect our business, financial condition and
prospects.
11. Our business, f inancial condit ion and prospects may be
adversely af fected i f we are unable to take
advantage of certain tax benefi ts or i f there are adverse
changes to the tax regime in the futur e.
Section 80-IA of the Income Tax Act provides that, subject to
certain conditions, 100.00% of the profitsfrom projects for
generation, distribution or transmission of power, which begin
generation or distributionof power before March 31, 2014, are
entitled for deduction from total income for 10 conse